Musselman v. Glass Works, LLC

• Decision Date: 15 September 2000
• Docket Number: Record No. 992887.
• Citation: 260 Va. 342,533 S.E.2d 919
• Parties: Peggy A. MUSSELMAN, Executor of the Estate of Robert C. Young, et al. v. The GLASS WORKS, L.L.C., et al.
• Court: Virginia Supreme Court

533 S.E.2d 919

260 Va. 342

Peggy A. MUSSELMAN, Executor of the Estate of Robert C. Young, et al. v. The GLASS WORKS, L.L.C., et al.

Record No. 992887.

Supreme Court of Virginia.

September 15, 2000.

Richard L. Derrico (Charles O. Cornelison; Copenhaver, Ellett, Cornelison & Derrico, on briefs), Roanoke, for appellants.

Edward A. Natt (Kristen K. Johnstone; Osterhoudt, Ferguson, Natt, Agee & Kidd, on brief), Roanoke, for appellees.

Present: All the Justices.

KEENAN, Justice.

In this appeal, we consider the issue whether the death of a party to a non-competition agreement, which was executed as part of the sale of a business, relieved the purchaser of the business of its obligation to make payments under the agreement.

The facts in this case are undisputed. In July 1995, The Glass Works, L.L.C. (Glass Works) entered into an Asset Purchase Agreement (the purchase agreement) with B & L Auto Glass & Mirror, Inc. (B & L Auto) and its principals, Robert C. Young, Peggy A. Musselman, and Marian L. Gray (collectively, the sellers). Under the purchase agreement, Glass Works purchased from the sellers, among other things, the inventory, equipment, and business name of B & L Auto in Roanoke.¹

In paragraph 2 of the purchase agreement, Glass Works agreed to pay B & L Auto a total purchase price of $515,000. As provided in that paragraph, the purchase price was payable as follows: $1,000 deposit, $114,000 cash at closing, $340,000 in the form of a secured promissory note to the sellers, and a total of $60,000 in payments to Young, Musselman, and Gray under three non-competition agreements.

The non-competition agreements were executed at the same time as the purchase agreement. Young agreed in his non-competition agreement with Glass Works (the noncompetition agreement) not to engage for five years in any business similar to that of B & L Auto as an owner, shareholder, employee, or consultant within a 100-mile radius of Roanoke. The non-competition agreement provided that "in consideration of [Young's] agreements," Glass Works would pay Young $615 per month for 60 months, for a total payment of $36,900. The principals of Glass Works, Lury W. Goodall, Jr., Charles C. Nimmo, and Michael E. Puckett, also executed a Guarantee Agreement, personally guaranteeing Glass Works' obligations under the purchase agreement, the promissory note, and the non-competition agreements.

After its purchase of the business in July 1995, Glass Works began making the monthly payments to Young under the non-competition agreement. When Young died on April 18, 1998, Glass Works stopped making the payments. Musselman qualified as executor of Young's estate and filed this breach of contract action against Glass Works, Goodall, Nimmo, and Puckett (collectively, the defendants), seeking recovery of the amounts allegedly due Young's estate under the noncompetition agreement.

Musselman alleged in her motion for judgment that the amount due under the noncompetition agreement was "part of the purchase price" for B & L Auto and, thus, did not abate when Young died. She also alleged that B & L Auto agreed to "separate the value for the Non-Competition Agreement out of the principal balance of the [promissory] note ... to allow [Glass Works], at its request, to report a lower `notes payable' for credit reporting purposes."

The parties submitted the case to the trial court on stipulated evidence. The trial court ruled that the purchase agreement was ambiguous because its initial declaration, that the purchase price was consideration for the sale of the specified business assets, conflicted with the purchase agreement's later recitation that the purchase price included consideration for the noncompetition agreements. The trial court concluded from this language that the parties intended "separate contracts and separate consideration for the non-competition agreements." The trial court held that the non-competition agreement was a personal service contract that terminated on Young's death, and that no further payments were due under the agreement. The court entered final judgment in favor of the defendants.

On appeal, Musselman argues that the payments due under the non-competition agreement were an integral part of the purchase price of B & L Auto's assets, which effectively represented payment for the good will of the business, and did not constitute consideration for a separate personal service contract. She asserts that Glass Works should not receive a lesser price for the business simply because Young agreed to accept monthly payments under the noncompetition agreement rather than a lump sum payment. Musselman also contends that since the non-competition agreement did not require Young to provide any personal service to Glass Works, but simply required him to refrain from competing with Glass Works, the agreement did not constitute a personal service contract that terminated on his death.

In response, the defendants contend that the non-competition agreement was a separate, personal service contract that required Glass Works to make payments only to Young, rather than to B & L Auto, and that Young's death prevented him from fully performing the contract. The defendants also assert that Young's estate is not entitled to further payment under the non-competition agreement because that agreement did not obligate Glass Works to continue making payments in the event of Young's death. We disagree with the defendants' arguments.

When a business transaction is based on more than one document executed by the parties, ...