Case Title: Parr v. Alderwoods Group, Inc.

Citation: 

Docket Number: 032674

State: virginia

Court: Virginia Supreme Court

Date: 2004-11-05T00:00:00Z

Document:
Present:  Hassell, C.J., Lacy, Keenan, Koontz, Lemons, and 
Agee, JJ., and Russell, S.J. 
 
CHARLES D. PARR, SR., ET AL. 
 
v.  Record No. 032674     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
November 5, 2004 
ALDERWOODS GROUP, INC., ET AL. 
 
 
ALDERWOODS GROUP, INC., ET AL. 
 
v.  Record No. 032726 
 
CHARLES D. PARR, SR., ET AL. 
 
FROM THE CIRCUIT COURT OF THE CITY OF SUFFOLK 
Rodham T. Delk, Jr., Judge 
 
 
The dispositive issue in these consolidated appeals is 
whether certain contemporaneously executed contracts were 
integrated for purposes of determining the enforceability of 
provisions in some of the contracts after a party's default 
under one of the contracts. 
I.  FACTS 
 
For a number of years Charles D. Parr, Sr. and C.D. Parr, 
Inc. d/b/a Hill Funeral Home (Parr, Inc.) operated a funeral 
home business, the Hill Funeral Home, at 447 West Washington 
Street in Suffolk.  The property was owned by Hill Underwood 
Funeral Home, Inc. (Hill Underwood).  In 1995, Loewen Group 
International, Inc. (Loewen) negotiated with Parr and Parr, 
Inc. for the purchase of the Hill Funeral Home business.  The 
negotiations culminated in the execution of four agreements on 
 
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November 27, 1995 between Loewen's designated buyer Mullins 
Holding Company (Mullins)1, Parr, Parr, Inc., and Hill 
Underwood:  the More Formal Asset Purchase Agreement (Asset 
Purchase Agreement), the Non Competition Agreement (Non-
Compete Agreement), the Lease, and the Management Agreement.  
Pursuant to these agreements, Parr and Parr, Inc. sold the 
Hill Funeral Home business to Mullins.  Hill Underwood leased 
the Hill Funeral Home property to Mullins and filed in the 
deed records of the City of Suffolk a memorandum of lease 
containing a covenant restricting the use of the property as a 
funeral home by persons other than Mullins without Mullins' 
consent.  Parr began managing both the Hill Funeral Home and 
another funeral home in Suffolk, the Sidney F. Harrell Funeral 
Home, for Mullins. 
 
The relevant portions of the agreements follow.  The 
Asset Purchase Agreement provided that Mullins would purchase 
certain assets for a total price of $1,125,000.  The 
identified assets included "a leasehold interest . . . and a 
restrictive covenant (with the terms and conditions contained 
in the Lease described in Paragraph 10 hereof which is to be 
entered into contemporaneously herewith)" and "covenants of 
[Parr, Inc.] and [Parr] not to compete with the business of 
Buyer."  The purchase price included $100,000 payable under 
                     
1 Mullins was a wholly-owned subsidiary of Loewen. 
 
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identical provisions in both the Asset Purchase Agreement and 
the Non-Compete Agreement. 
 
Under Paragraph 8 of the Asset Purchase Agreement, Parr 
agreed to execute a management agreement with Mullins.  The 
provision contained the employment terms and annual salary 
under the Management Agreement and agreements by Parr and 
Parr, Inc. to execute a covenant not to compete with Mullins.  
The consideration and the duration of such covenant were also 
recited.  Paragraph 10 of the Asset Purchase Agreement set out 
the duration and conditions of the Lease, including a 
restrictive covenant that the leased property would not be 
used as a funeral home or service business except by Mullins 
or "its successors and assigns" without Mullins' written 
consent to the modification or termination of the restrictive 
covenant. 
 
The Non-Compete Agreement expressly provided that it was 
a condition of the Asset Purchase Agreement and that for ten 
years from the closing date of the Asset Purchase Agreement or 
three years following the date of termination of "any 
employment, management, or consulting relationship" with 
Mullins, neither Parr nor Parr, Inc. would engage in the 
funeral business within a 35-mile radius of the Hill Funeral 
Home.  As consideration, Mullins was to pay Parr and Parr, 
Inc. a total of $10,000 per year for ten years under terms 
 
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identical to those recited in and identified as an asset 
purchased in the Asset Purchase Agreement.  Paragraph 16 of 
the Non-Compete Agreement stated that a continuing default by 
Mullins under the Asset Purchase Agreement or note executed 
pursuant to that agreement, if not cured, was "deemed" to be a 
default of the Non-Compete Agreement. 
 
The Management Agreement provided that Parr would manage 
for Mullins both the Hill Funeral Home and the Sidney F. 
Harrell Funeral Home.  The Management Agreement allowed 
Mullins to terminate Parr for cause if he materially breached 
any warranty or covenant contained in the Asset Purchase 
Agreement.  The Management Agreement also contained the terms 
of a noncompetition agreement, the terms of which were 
identical to those contained in the Non-Compete Agreement and 
described in the Asset Purchase Agreement. 
 
The Lease, in addition to the various provisions defining 
the rights and responsibilities of the lessor and lessee, 
provided for an initial one-year term and five optional one-
year renewal periods, and specifying the rental payments, 
recited the restrictive covenant in language essentially 
identical to that contained in the Asset Purchase Agreement.2  
In Paragraph 15 of the Lease, Parr and Parr, Inc. guaranteed 
                     
2 The restrictive covenant is only applicable to the first 
floor of the 447 West Washington Street property. 
 
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the landlord's obligations, including its obligations under 
the restrictive covenant. 
 
In June 1999, Loewen filed for bankruptcy and, in 
November of that year, Mullins stopped making payments under 
the Asset Purchase and Non-Compete agreements.  Parr submitted 
his resignation to Mullins on September 21, 2001.  After the 
Lease ended by its terms in November 2001, Parr began to 
operate the Parr Funeral Home on the Hill Underwood property. 
II.  PROCEEDINGS 
 
On January 14, 2002, Mullins and Alderwoods Group, Inc.3 
(collectively "Alderwoods") filed a bill of complaint seeking 
a temporary and permanent injunction against Parr and Parr, 
Inc. (collectively "Parr") to prohibit them from competing 
with Alderwoods and operating a funeral home on the Hill 
Underwood property.4  Parr filed its answer asserting that 
Alderwoods materially breached the November 1995 agreements 
and, therefore, the noncompetition agreement was no longer in 
effect and the restrictive covenant should be declared null 
and void. 
                     
3 Loewen changed its name to Alderwoods Group, Inc. 
effective in January 2002. 
4 It appears from the record that Hill Underwood Funeral 
Home, Inc. no longer exists, but Parr and Parr, Inc. were 
guarantors of the landlord’s obligations pursuant to Paragraph 
15 of the Lease. 
 
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The trial court entered an order in January 2002 
temporarily enjoining Parr from competing with Alderwoods 
pursuant to the terms of the covenants not to compete in the 
Asset Purchase, Management, and Non-Compete agreements, and, 
subsequently, on Alderwoods' motion, held Parr in contempt for 
violating that temporary injunction.  Following a hearing on 
Parr's motion to set aside the temporary injunction, the trial 
court held that the four agreements, "although separate, 
should be regarded as and constructed as parts of one 
transaction and as if parts of one and the same instrument."  
The trial court found that Alderwoods defaulted its payment 
obligation under the Asset Purchase Agreement and that the 
default constituted "a default in the non-competition 
provisions of all of the sub-agreements as well."  Based on 
these findings, the trial court concluded that the likelihood 
that Alderwoods would succeed on the merits was "substantially 
diminished" and, accordingly, set aside the temporary 
injunction. 
A hearing on the permanent injunction was held on June 
27, 2003.  At this hearing Alderwoods sought to enforce the 
noncompetition provision contained in the Management Agreement 
and the restrictive covenant contained in the Lease. 
Alderwoods argued that these two contracts were separate 
contracts and, because Alderwoods had fulfilled its 
 
7
obligations under these non-integrated contracts, Parr should 
be required to comply with the noncompetition and restrictive 
covenants in those contracts.  Parr replied that because 
Alderwoods breached a provision of one of the contracts, it 
could not enforce any other provisions of the integrated 
contracts. 
As relevant here, the trial court reaffirmed its earlier 
holding that the Management Agreement and Asset Purchase 
Agreement were integrated and that Alderwoods' default 
precluded enforcement of the noncompetition provisions of the 
Management Agreement.  The trial court also found, however, 
that the restrictive covenant in the Lease was valid and 
enforceable against "the specific defendants" in this case and 
entered an order enjoining Parr from using the Hill Underwood 
property for a funeral business.  We granted the petitions for 
appeal filed by both Parr and Alderwoods.5 
In considering these consolidated appeals, we first note 
that Alderwoods did not assign error to the trial court's 
determination that it breached the Asset Purchase Agreement. 
Furthermore, there is no challenge to the trial court's 
determination that the breach of the Asset Purchase Agreement 
was also a breach of the Non-Compete Agreement.  Therefore, we 
                     
5 We granted an appeal to only two of Parr's three 
assignments of error. 
 
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consider only whether the Management Agreement and the Lease 
are integrated or separate and independent contracts. 
III.  DISCUSSION 
In Countryside Orthopaedics, P.C. v. Peyton, 261 Va. 142, 
541 S.E.2d 279 (2001), we recited the principles to be applied 
when considering whether separate documents should be treated 
as an integrated instrument.  "Where a business transaction is 
based on more than one document executed by the parties, the 
documents will be construed together to determine the intent 
of the parties," id. at 152, 541 S.E.2d at 284 (quoting 
Daugherty v. Diment, 238 Va. 520, 524, 385 S.E.2d 572, 574 
(1989)), and "[w]here two papers are executed at the same time 
or contemporaneously between the same parties in reference to 
the same subject matter, they must be regarded as parts of one 
transaction, and receive the same construction as if their 
several provisions were in one and the same instrument."  
Countryside, 261 Va. at 151, 541 S.E.2d at 284 (quoting Oliver 
Refining Co. v. Portsmouth Cotton Oil Refining Corp., 109 Va. 
513, 520, 64 S.E. 56, 59 (1909)); see Richmond Postal Credit 
Union, Inc. v. Booker, 170 Va. 129, 134, 195 S.E. 663, 665 
(1938).  When such contracts are construed as if the 
provisions were in a single instrument, the first party to 
materially breach the contract cannot enforce the provisions 
of the integrated contract.  A breach is material if it is "a 
 
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failure to do something that is so fundamental to the contract 
that the failure to perform that obligation defeats an 
essential purpose of the contract."  Countryside, 261 Va. at 
154, 541 S.E.2d at 285 (quoting Horton v. Horton, 254 Va. 111, 
115, 487 S.E.2d 200, 204 (1997)).  We now apply these 
principles to the contracts at issue. 
A.  The Management Agreement 
 
Alderwoods asserts that the Management Agreement is a 
contract separate and apart from the Asset Purchase Agreement 
because it is not ambiguous, it is separate and distinct in 
its subject matter and consideration, the obligations are not 
interrelated, and the cross-references in the contracts do not 
require integration of the agreements.6  Alderwoods suggests 
that unless the four agreements are part of a single 
transaction "courts should not read the writings together as 
one contract because the parties may have had more than one 
transaction in one day of the same general nature."  Hitachi 
Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 626 (4th Cir. 
1999). 
                     
6 At oral argument before this Court, Alderwoods also 
argued that because the Non-Compete agreement contained a 
cross-default provision, the absence of such a provision in 
the other agreements evidenced an intent that no cross-default 
existed among the other agreements.  Because Alderwoods raises 
this argument for the first time on appeal, we will not 
consider it.  Rule 5:25; see Faulknier v. Shafer, 264 Va. 210, 
218 n.6, 563 S.E.2d 755, 760 n.6 (2002). 
 
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Whether contemporaneously executed separate agreements 
should be construed as a single integrated contract depends on 
the facts of each case.  Here, the Management Agreement and 
Asset Purchase Agreement cross-referenced each other and 
certain provisions were recited in both agreements using 
identical language.  These references reflect the parties' 
knowledge and understanding of the interrelationship between 
the contracts and provide strong support for the proposition 
that the parties intended that the documents constitute a 
single transaction. 
Furthermore, while the four contracts identified discrete 
acts required of the parties, when considered as a whole, they 
show that the result and, therefore, presumably the purpose of 
the transaction was the elimination of competition between the 
funeral home interests held by Alderwoods and by Parr.  The 
transaction required Alderwoods' ownership of Parr's funeral 
business interests and Parr's management of Alderwoods' 
funeral business interests − the Hill Funeral Home and the 
Sidney F. Harrell Funeral Home.7  The provisions of the 
Management Agreement could not be performed without 
Alderwoods' acquisition of the Hill Funeral Home assets and a 
lease of the Hill Underwood property.  The purchase of the 
                     
7 The precise nature of Alderwoods' interest in the Sidney 
F. Harrell Funeral Home is not clear from this record. 
 
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Hill Funeral Home assets alone would not eliminate the 
competition by Parr without the noncompetition and restrictive 
covenant agreements.  The absence of any one of the agreements 
would frustrate the purpose of the transaction.  On this 
record, we conclude that the parties intended to effectuate a 
single transaction which required execution of all the 
agreements. 
 
Accordingly, the trial court did not err in concluding 
that the Management Agreement and the Asset Purchase Agreement 
were part of an integrated contract.  We will affirm the trial 
court's judgment holding the noncompetition provision of the 
Management Agreement was unenforceable because Alderwoods 
breached the Asset Purchase Agreement when it defaulted its 
payment obligations under that Agreement. 
B.  The Lease 
Parr asserts that the trial court erred in enforcing the 
restrictive covenant contained in the Lease because, like the 
Management Agreement, the Lease was part of an integrated 
contract.  Parr argues he was relieved of any obligation to 
comply with the restrictive covenant because of Alderwoods' 
default of the Asset Purchase Agreement.  Alderwoods replies 
that the Lease was a separate contract and not integrated with 
the other contemporaneously executed contracts, raising the 
same arguments put forth regarding the Management Agreement:  
 
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the Lease was not ambiguous; it was separate and distinct in 
its subject matter and consideration; the obligations were not 
interrelated; and the cross-references in the contracts did 
not require integration of the agreements.  Alderwoods, 
relying on Bayside Corp. v. Virginia Super Food Fair Stores, 
Inc., 203 Va. 908, 128 S.E.2d 263 (1962), also argues that 
because it had fully performed its obligations under the 
Lease, it was entitled to enforce the restrictive covenant in 
the Lease even though by its terms the Lease had expired.  
We reject Alderwoods' arguments that the Lease was a 
separate contract.  First, like the Management Agreement, 
there were significant cross-references between the Asset 
Purchase Agreement and the Lease.  The Asset Purchase 
Agreement listed the Lease as "an asset" purchased.  The 
material terms of the restrictive covenant in the Lease were 
also recited in the Asset Purchase Agreement.  And, as we have 
already discussed, the transaction's purpose of eliminating 
competition between Parr and Alderwoods' interests in the 
funeral home business could not be accomplished without 
execution of all four agreements.  Therefore, we hold that the 
Lease was not a separate contract but, like the Management 
Agreement, was integrated with the Asset Purchase Agreement.  
Assuming without deciding that the restrictive covenant in 
this case would be enforceable absent a breach of the 
 
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integrated contracts here, the restrictive covenant is not 
enforceable against Parr, because Alderwoods breached a 
material provision of the integrated contract. 
Neither the expiration of the lease nor our conclusion in 
Bayside require a different result.  The lease in Bayside 
included a provision prohibiting the landlord from leasing any 
space in a shopping center to a competitor of the lessee for 
three years after the lessee terminated the lease.  Bayside, 
203 Va. at 910, 128 S.E.2d at 265.  This Court enforced that 
provision even though the lease had been terminated, finding 
that the covenant was a reasonable personal covenant.  Id. at 
911, 128 S.E.2d at 266.  
In Bayside, unlike this case, neither the landlord nor 
the lessee defaulted under the lease.  The Bayside lease 
provided that the lessee could terminate the lease if the 
landlord failed to meet certain conditions.  Id. at 910, 128 
S.E.2d at 265.  The landlord failed to meet the conditions and 
the lessee terminated the lease.  Id.  The landlord's 
inability to meet the conditions was not a breach of the 
lease, but a circumstance which the parties anticipated and 
addressed by allowing the lessee to terminate the lease.  In 
the absence of a default or breach, a reasonable personal 
covenant contained in the lease was enforceable. 
 
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Like Bayside, the instant case involves an agreement 
restricting the use of the land as a term of the lease 
agreement.  Unlike Bayside, however, the instant case involves 
a breach or default by one of the parties which precluded the 
defaulting party from enforcing the remaining provisions of 
the integrated contract.  Consequently, Bayside is not the 
controlling precedent here. 
IV.  CONCLUSION 
Because we hold that Alderwoods' breach of the integrated 
contract relieved Parr of any obligation under the restrictive 
covenant, we need not address Parr's assignment of error 
challenging the trial court's holding that the restrictive 
covenant was a valid covenant. 
Accordingly, for the reasons stated, we will affirm that 
portion of the trial court's judgment holding that the 
covenants not to compete are unenforceable and we will reverse 
that portion of the trial court's judgment enforcing the 
restrictive covenant of the lease. 
 
 Affirmed in part, 
 
 reversed in part, 
 
and final judgment.