Case Title: Spectra-4, LLP v. Uniwest Commercial Realty

Citation: 

Docket Number: 140892

State: virginia

Court: Virginia Supreme Court

Date: 2015-06-04T00:00:00Z

Document:
Present: All the Justices 
 
SPECTRA-4, LLP, ET AL. 
 
 
 
 
 
 
 
 
  OPINION BY 
v.  Record No. 140892 
 
   JUSTICE LEROY F. MILLETTE, JR.
 
                                    June 4, 2015 
UNIWEST COMMERCIAL REALTY, INC. 
 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Michael F. Devine, Judge 
 
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 
 
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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 
 
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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. 
 
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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. 
 
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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). 
                     
 
1 Assignment of error 2 pertained to whether Spectra-4 and 
Spectet waived their right to terminate management services 
under the Management Agreements' "just cause" termination 
clause. 
 
Assignment of error 3 pertained to whether Spectra-4 and 
Spectet could waive any portion of the Management Agreements by 
conduct, rather than by writing, despite the waiver-only-in-
writing clause in the Management Agreements. 
 
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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 
 
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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 
                     
 
2 An implied-in-law contract governing the subject matter 
at hand does not exist between Spectra-4 and Uniwest, and 
between Spectet and Uniwest, because as set forth below 
implied-in-fact contracts exist between these sets of parties.  
City of Norfolk, 120 Va. at 374, 91 S.E. at 825 ("The fiction 
of an [implied-in-law contract] will not be indulged in every 
case, but only where, in equity and good conscience, the duty 
to make such a promise exists."). 
 
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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, 7 P.2d 206, 209-10 (Wyo. 
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 forth 
the general rule of how a contractual obligation may be 
assigned).  Jefferson Commercial and Uniwest were not parties 
 
9 
to the Management Agreements, are entities legally distinct 
from Jefferson/LBG, did not merge with Jefferson/LBG, acquired 
no stock and no assets from Jefferson/LBG, and entered into no 
contracts with Jefferson/LBG.  Simply put, Jefferson Commercial 
and Uniwest were strangers to the Management Agreements when 
those express contracts were executed, and remained strangers 
to the Management Agreements even as Jefferson Commercial and 
Uniwest provided management services for the commercial 
buildings.  And although an asset purchase agreement was 
executed between Jefferson Commercial and Uniwest, Jefferson 
Commercial could not sell the Management Agreements to Uniwest 
because Jefferson Commercial never acquired an interest in 
those express contracts.3 
                     
 
3 These facts also establish why, contrary to Uniwest's 
arguments to the circuit court, this appeal does not implicate 
ratification or acceptance by performance. 
 
"Ratification is an adoption of a contract made on [a 
party's] behalf by [a third person] whom [the party] did not 
authorize, which relates back to the execution of the contract 
and renders it obligatory from the outset."  Reid v. Field, 83 
Va. 26, 33, 1 S.E. 395, 399-400 (1887).  Jefferson/LBG did not 
execute the Management Agreements on Uniwest's behalf.  Uniwest 
could not ratify contracts not entered into on its behalf. 
 
The doctrine of acceptance by performance stands for the 
proposition that "[t]he absence of an authorized signature does 
not defeat the existence of the contract" if a party's conduct 
denotes acceptance of an offer.  Galloway Corp. v. S.B. Ballard 
Constr. Co., 250 Va. 493, 505, 464 S.E.2d 349, 356 (1995).  As 
related to the Management Agreements, Spectra-4's and Spectet's 
offers were directed to Jefferson/LBG.  Uniwest could not 
accept – by writing or performance – an offer never made to it. 
 
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Thus, the Management Agreements were express contracts 
that governed only the relationship between Spectra-4 and 
Jefferson/LBG, and between Spectet and Jefferson/LBG.  The 
circuit court did not err in holding that the Management 
Agreements did not directly govern Uniwest's management 
services. 
2. 
Implied-In-Fact Contracts 
In the absence of an express contract between the parties 
governing a particular subject matter, an implied contract may 
exist.  County of Campbell v. Howard, 133 Va. 19, 54-55, 112 
S.E. 876, 886 (1922); Ellis & Myers Lumber Co. v. Hubbard, 123 
Va. 481, 502, 96 S.E. 754, 760 (1918).  Like an express 
contract, an implied-in-fact contract is created only when the 
typical requirements to form a contract are present, such as 
consideration and mutuality of assent.  City of Norfolk, 120 
Va. at 361-62, 91 S.E. at 821-22.  However, an implied-in-fact 
contract "is arrived at by a consideration of [the parties'] 
acts and conduct."  Id. at 362, 91 S.E. at 821. 
a. 
Existence Of The Implied-In-Fact Contracts 
The circuit court concluded that, between Spectra-4 and 
Uniwest, and between Spectet and Uniwest, implied-in-fact 
contracts governed Uniwest's management services for each 
commercial building.  This was not error. 
 
11 
The record reflects that, even though no oral or written 
agreement was executed between the parties, Uniwest provided 
Spectra-4 and Spectet management services for approximately 
twelve years.  For each commercial building, Uniwest provided a 
building manager, collected rent from tenants, addressed 
problems raised by tenants, oversaw building maintenance and 
engineering, and maintained an operating account from which it 
withdrew operating costs and paid itself a monthly fee for its 
services.  These actions establish that an implied-in-fact 
contract existed between Spectra-4 and Uniwest, and between 
Spectet and Uniwest, and that those implied-in-fact contracts 
governed Uniwest's management services. 
b. 
Terms Of The Implied-In-Fact Contracts 
The circuit court concluded that these implied-in-fact 
contracts "effectively incorporated" the previously expired, 
expressly created Management Agreements in their entirety for 
purposes of the implied-in-fact contracts' terms and 
conditions.  This was error. 
The threshold error in the circuit court's reasoning was 
the court's determination that mutuality of assent existed in 
light of its factual finding that Spectra-4, Spectet, and 
Uniwest held the "subjective belief" that they were operating 
under the entirety of the Management Agreements.  A meeting of 
the minds cannot exist simply because the parties independently 
 
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believe the exact same thing.  Instead, mutuality of assent 
exists by an interaction between the parties, in the form of 
offer and acceptance, manifesting "by word, act[,] or conduct 
which evince the intention of the parties to contract."  Green 
v. Smith, 146 Va. 442, 452, 131 S.E. 846, 848 (1926).  In other 
words, the parties' belief of what the agreement is must 
coincide with written or spoken words, if an express contract 
is to be formed; or must coincide with the parties' conduct, if 
an implied-in-fact contract is to be formed.  Id.; see also 
Joseph M. Perillo, 1 Corbin on Contracts § 1.19, at 55-58 (rev. 
ed. 1993) (making the point that the only difference between an 
express and implied-in-fact contract is the manner in which 
mutuality of assent is established). 
Accepting that belief must exist in tandem with words or 
actions is only a starting point.  With implied-in-fact 
contracts, the parties' conduct must also establish what the 
terms of the contract are.  See Hendrickson, 161 Va. at 200, 
170 S.E. at 605; City of Norfolk, 120 Va. at 361-62, 91 S.E. at 
821-22.  In limited circumstances, an implied-in-fact contract 
may encompass the totality of an express contract simply by way 
of the parties acting in a manner consistent with such an 
express contract.  But it is only when the parties to an 
express contract continue to act as if that contract is still 
operative even after it expires that the entirety of "the 
 
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material terms of the prior contract . . . survive intact" by 
way of a subsequently formed implied-in-fact contract.  Luden's 
Inc. v. Local Union No. 6 of the Bakery, Confectionery & 
Tobacco Workers' Int'l Union, 28 F.3d 347, 355-56 (3d Cir. 
1994). 
Importantly, the logic recognized in Luden's Inc. applies 
only to those specific circumstances:  when the same parties 
are engaged in the same course of dealing both during and after 
the expiration of the express contract.  Absent such 
circumstances, an implied-in-fact contract may include only the 
particular terms of a previously expired express contract which 
the parties' subsequent actions, embodying their mutuality of 
assent, specifically encompass.  See Green, 146 Va. at 452, 131 
S.E. at 848; City of Norfolk, 120 Va. at 361-62, 91 S.E. at 
821-22. 
The logic of Luden's Inc. does not apply to the factual 
circumstances of this case.  The previously expired express 
contracts in the form of the Management Agreements were between 
Spectra-4, Spectet, and Jefferson/LBG.  The implied-in-fact 
contracts were between Spectra-4, Spectet, and Uniwest.  
Jefferson/LBG and Uniwest are legally distinct parties.  
Consequently, Spectra-4, Spectet, and Uniwest could not simply 
act consistent with the Management Agreements in order for 
their implied-in-fact contracts to include the full terms of 
 
14 
the Management Agreements.  The implied-in-fact contracts 
included only the specific terms of the Management Agreements 
encompassed by the parties' conduct. 
Thus, on the present record no basis existed for the 
circuit court to hold that the implied-in-fact contracts 
permitted Uniwest to withdraw $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.  The record 
demonstrates that the implied-in-fact contracts incorporated 
only some provisions of the Management Agreements.  For 
example, evidence at trial established that Spectra-4 and 
Spectet not only permitted Uniwest to calculate their 
management fees in a manner consistent with the Management 
Agreements, but that the parties specifically referenced and 
relied upon Article 17.3 of the Management Agreements in order 
to recalculate Uniwest's management fees.  Thus, the implied-
in-fact contracts encompassed, among other terms, the terms and 
conditions of the Management Agreements relating to the 
calculation of the management fees. 
However, no evidence established that Spectra-4, Spectet, 
and Uniwest engaged in conduct supporting the conclusion that 
the implied-in-fact contracts encompassed those terms and 
conditions of the Management Agreements governing premature 
 
15 
termination fees.  The Management Agreements' liquidation 
clause was the only basis for Uniwest withdrawing premature 
termination fees from Spectra-4's and Spectet's operating 
accounts.  At most, evidence showed that Uniwest actually 
withdrew premature termination fees upon the termination of 
Uniwest's management services.  But as the circuit court 
recognized, "the parties only terminated [the implied-in-fact 
contracts] once.  And there[ is] no pattern of conduct of 
termination."  Further, Spectra-4 and Spectet did not acquiesce 
to Uniwest's withdrawal of funds, but consistently disputed it.  
Thus, on this record no conduct established a mutuality of 
assent that the implied-in-fact contracts encompassed the 
Management Agreements' liquidation clause.  Accordingly, 
Uniwest's withdrawal of $13,847.61 was not authorized by the 
implied-in-fact contract between Spectra-4 and Uniwest, and 
Uniwest's withdrawal of $22,605.72 was not authorized by the 
implied-in-fact contract between Spectet and Uniwest. 
Additionally, no evidence established that Spectra-4, 
Spectet, and Uniwest engaged in conduct so that the implied-in-
fact contracts encompassed terms and conditions permitting 
Uniwest to charge for copying costs.  Uniwest's Chief Financial 
Officer testified at trial that it withdrew $1,751.30 in 
copying costs from Spectet's operating accounts not based on 
the Management Agreements, but based only on "standard 
 
16 
procedure."  Also, the Management Agreements themselves 
permitted the "Agent" to "pay or reimburse itself for all 
expenses and costs of operating the Project."  However, 
Uniwest's Chief Financial Officer further testified that, while 
Uniwest would occasionally bill for "FedEx charges or something 
like that," she could not recall Uniwest ever charging Spectra-
4 or Spectet for copying costs.  No other evidence was 
introduced pertaining to Uniwest's history of charging for 
copying costs.  Thus, on this record no conduct established a 
mutuality of assent that the implied-in-fact contracts 
encompassed a term allowing Uniwest to charge copying costs.  
Accordingly, Uniwest's withdrawal of $1,751.30 was not 
authorized by the implied-in-fact contract between Spectet and 
Uniwest. 
III. CONCLUSION 
Uniwest provided management services for the commercial 
buildings owned by Spectra-4 and Spectet.  As between Uniwest 
and Spectra-4, and between Uniwest and Spectet, two separate 
implied-in-fact contracts existed.  These implied-in-fact 
contracts could, and did, encompass specific portions of 
previously expired express contracts executed by a different 
set of parties.  However, these implied-in-fact contracts did 
not include terms and conditions permitting Uniwest to withdraw 
 
17 
premature termination fees or copying charges from Spectra-4's 
and Spectet's operating accounts. 
We therefore reverse the circuit court's judgment that the 
implied-in-fact contracts permitted Uniwest's withdrawal of 
premature termination fees and copying charges from Spectra-4's 
and Spectet's operating accounts.  We vacate the circuit 
court's order dismissing Spectra-4's and Spectet's claims with 
prejudice and entering judgment in favor of Uniwest.  As 
Spectra-4 and Spectet have requested remand so that the circuit 
court may enter appropriate judgments, we remand this appeal to 
the circuit court for further proceedings consistent with this 
opinion. 
Reversed and remanded.