Spectra-4, LLP v. Uniwest Commercial Realty, Inc.

• Decision Date: 04 June 2015
• Docket Number: Record No. 140892.
• Citation: 772 S.E.2d 290,290 Va. 36
• Parties: SPECTRA–4, LLP, et al. v. UNIWEST COMMERCIAL REALTY, INC.
• Court: Virginia Supreme Court

290 Va. 36

772 S.E.2d 290

SPECTRA–4, LLP, et al.

v.UNIWEST COMMERCIAL REALTY, INC.

Record No. 140892.

Supreme Court of Virginia.

June 4, 2015.

Stephen D. Charnoff (Rees Broome, on briefs), Tysons Corner, for appellants.

Sean Patrick Roche (Edward W. Cameron ; Cameron/McEvoy, on brief), Fairfax, for appellee.

Present: All the Justices.

Opinion

Opinion by Justice LEROY F. MILLETTE, JR.

In this appeal we determine to what extent implied-in-fact contracts encompass the terms of previously expired express contracts that were not executed by the parties to the implied-in-fact contracts.

I. FACTS AND PROCEEDINGS

Spectra–4 LLP and Spectet Limited Partnership, LLP are limited liability partnerships that individually own and lease neighboring commercial buildings in Reston, Virginia. This appeal arises out of a dispute over the management services provided for the commercial buildings.

1. History Of Management Services

Relevant to this appeal, three separate entities have provided the management services for the commercial buildings.

First, Jefferson/LBG, L.L.C. managed the commercial buildings from 1995 to 1997. Jefferson/LBG was organized in August 1995 and was owned in part by Suzanne O. Farr. Jefferson/LBG's management services were governed by two separate but materially identical Management Agreements, one for each commercial building. Spectra–4 and Jefferson/LBG executed the Management Agreement pertaining to the commercial building owned by Spectra–4, and Spectet and Jefferson/LBG executed the Management Agreement pertaining to the commercial building owned by Spectet. The corporate existence of Jefferson/LBG was automatically cancelled by the Virginia State Corporation Commission in December 1997 when it failed to pay its annual registration fee.

Second, Jefferson Commercial Real Estate Services, Inc. managed the commercial buildings from 1998 to 1999. Farr was also an owner of Jefferson Commercial, but despite their similar titles, Jefferson Commercial was a separate entity legally distinct from Jefferson/LBG. No new Management Agreements were executed to govern Jefferson Commercial's management services for the commercial buildings. Also, Jefferson Commercial did not transact any business with Jefferson/LBG.

Third, Uniwest Commercial Realty, Inc. managed the commercial buildings from 2000 until 2012. No new Management Agreements were executed to govern Uniwest's management services for the commercial buildings. Also, Uniwest did not transact any business with Jefferson/LBG. However, Uniwest did transact business with Jefferson Commercial. Uniwest and Jefferson Commercial executed an Asset Purchase Agreement in November 1999 in which Jefferson Commercial sold all of its assets, but no stock, to Uniwest.

2. Uniwest's Tenure In Providing Management Services

Jefferson Commercial notified Spectra–4 and Spectet that it added Uniwest “as partners” to its management services effective January 2000. At that time, Farr became Uniwest's president. Later, in 2002, Uniwest fired Farr from this position. Despite this change, Uniwest continued to provide management services for the commercial buildings until 2012.

In September 2012, Spectra–4 and Spectet notified Uniwest that they sought to “terminate[ ] the [M]anagement [A]greement[s] between Uniwest and [Spectra–4 and Spectet].” Uniwest responded that the termination was “invalid per the terms of the [Management] Agreement[s],” and stated that it would continue its management services until certain specified dates. Legal counsel then became involved, and after a series of letters sent back and forth, Uniwest's management services for both commercial buildings were terminated in October 2012. Following the termination of its management services, Uniwest withdrew $13,847.61 in premature termination fees from Spectra–4's operating accounts, and $22,605.72 in premature termination fees and $1,751.30 in copying costs from Spectet's operating accounts.

Uniwest withdrew these funds because it believed that it was entitled to such fees and costs upon what Uniwest considered to be Spectra–4's and Spectet's premature termination of Uniwest's management services. Uniwest's position was predicated upon its belief that the Management Agreements themselves dictated the contractual relationships between Spectra–4 and Uniwest, and between Spectet and Uniwest; or, alternatively, that the contractual relationships between the parties had incorporated the full terms of the Management Agreements. In contrast, Spectra–4 and Spectet believed that Uniwest's withdrawal of such fees and costs was impermissible. Spectra–4's and Spectet's position was predicated upon the belief that the Management Agreements did not govern Uniwest's management services; and that even if the Management Agreements did govern, Spectra–4 and Spectet had complied with the “just cause” termination clause of those agreements in terminating Uniwest's management services.

3. Judicial Proceedings

Upon learning that Uniwest had withdrawn additional fees and costs, Spectra–4 and Spectet filed separate Warrants in Debt against Uniwest in the General District Court of Fairfax County, alleging conversion. The cases were not consolidated, but a single trial was held and the district court awarded judgment in favor of Spectra–4 and Spectet.

Uniwest timely appealed to the Circuit Court of Fairfax County, and Spectra–4 and Spectet amended the complaints to include breach of contract claims. Once again, the cases were not consolidated but a single trial was held. After a bench trial the circuit court requested additional briefing on Uniwest's renewed motion to strike. Upon considering the parties' arguments and briefs, the circuit court entered judgment in favor of Uniwest and dismissed Spectra–4's and Spectet's claims with prejudice.

Spectra–4 and Spectet timely appealed to this Court.

II. DISCUSSION

Although we granted three assignments of error, we need only address the first assignment because our determination of the terms of the implied-in-fact contracts governing the parties' relationships resolves this appeal.¹ Jimenez v. Corr, 288 Va. 395, 404, 764 S.E.2d 115, 118 (2014).

Assignment of error 1 reads:

1. The trial court erred in holding that the implied-in-fact contracts between [Spectet and Spectra–4] and [Uniwest] “effectively incorporated the terms of the [Management Agreements]” and, thus, that [Uniwest] did not breach the implied-in-fact contracts by taking liquidated damages from [Spectet and Spectra–4] equal to six months' management fees and charging [Spectet] for copy costs.

A. Standard Of Review

“The question of whether [a valid] contract exists is a pure question of law, to which we apply a de novo standard of review.”

Mission Residential, LLC v. Triple Net Props., LLC, 275 Va. 157, 161, 654 S.E.2d 888, 890 (2008). Similarly, we review de novo the purely legal issues of what the terms of a contract are, and how those terms apply to the facts of the case. See Doctors Co. v. Women's Healthcare Assocs., 285 Va. 566, 571, 740 S.E.2d 523, 525 (2013).

B. The Contractual Agreements Governing Uniwest's Management Services For The Commercial Buildings

Parties may agree to an express contract, whether orally or written, to govern their course of dealing. See Virginia Iron, Coal & Coke Co. v. Odle, 128 Va. 280, 285, 105 S.E. 107, 108 (1920). In the absence of an express contract, an implied contract may exist. City of Norfolk v. Norfolk Cnty., 120 Va. 356, 363, 91 S.E. 820, 822 (1917). Two types of implied contracts are recognized in Virginia: implied-in-fact contracts and implied-in-law contracts. Id. Implied-in-fact contracts are no different from express contracts except that, instead of “all of the terms and conditions [being] expressed between the parties, ... some of the terms and conditions are implied in law from the conduct of the parties.” Hendrickson v. Meredith, 161 Va. 193, 200, 170 S.E. 602, 605 (1933). Implied-in-law contracts, or “quasi contracts,” establish liability “from an implication of law that arises from the facts and circumstances, independent of agreement or presumed intention.” Id. “In such cases, the promise is implied from the consideration received, [and] the legal duty imposed upon the defendant defines the contract.” Id.²

1. Express Contracts

The circuit court concluded that the Management Agreements—the express contracts executed by Spectra–4 and Jefferson/LBG, and by Spectet and Jefferson/LBG—did not govern the relationship between Spectra–4 and Uniwest, and between Spectet and Uniwest. On appeal, Uniwest argues that it succeeded to the Management Agreements, or that the Management Agreements were assigned to it, and thus the express contracts set forth in the Management Agreements directly governed Uniwest's management services. We disagree.

The circuit court concluded that the Management Agreements were cancelled when the State Corporation Commission automatically cancelled the corporate existence of Jefferson/LBG. See Moore v. Crutchfield, 136 Va. 20, 25, 116 S.E. 482, 483 (1923) ; Lucas v. Pittsburgh Life & Trust Co., 137 Va. 255, 271, 119 S.E. 109, 114 (1923) ; see also Martin v. Star Publishing Co., 126 A.2d 238, 243 (Del.1956) ; Solomon v. Greenblatt, 812 S.W.2d 7, 17 (Tex.Ct.App.1991) ; Wyoming–Indiana Oil & Gas Co. v. Weston, 43 Wyo. 526, 7 P.2d 206, 209–10 (1932). We need not decide whether that holding was correct because, regardless of the status of the rights and obligations under the Management Agreements as entered into by Spectra–4, Spectet, and Jefferson/LBG, those rights and obligations were never extended to either Jefferson Commercial or Uniwest.

Neither Jefferson Commercial nor Uniwest succeeded to or were assigned any rights and obligations created under the Management Agreements. See Layne v. Henderson, 232 Va. 332, 338, 351 S.E.2d 18, 22 (1986) (providing the plain meaning of “successor” in a contract); J. Maury Dove Co. v. New River Coal Co., 150 Va. 796, 827, 143 S.E. 317, 327 (1928) (setting...