Title: Bennett v. Sage Payment Solutions, Inc.

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Kinser, C.J., Lemons, Goodwyn, Millette, and Mims, 
JJ., and Russell and Koontz, S.JJ. 
 
ROBERT P. BENNETT 
 
 
 
 
 
 
 
 
OPINION BY 
v.  Record No. 100199 
  
JUSTICE LEROY F. MILLETTE, JR. 
 
 
 
 
 
 
 
   June 9, 2011 
SAGE PAYMENT SOLUTIONS, INC. 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Jan L. Brodie, Judge 
In this appeal, the primary issue we consider is whether 
an employee’s repudiation of an employment agreement can be 
used by the employer as a defense against a breach of contract 
claim.  We hold that a party’s repudiation of future 
obligations under a contract, even after performance has begun, 
may constitute a defense to a breach of contract claim.  We 
also address issues concerning repudiation as a matter of law, 
amendment of the pleadings to conform to the evidence, and jury 
instructions. 
I. Facts and Proceedings Below 
 
In February 2008, Bennett was promoted to the position of 
President of Sage Payment Solutions, Inc. (“Sage”), and the 
parties entered into an Executive Employment Agreement 
(“Agreement”).  Under the Agreement, Bennett was to earn a 
yearly salary of $360,000.  The Agreement, which was for an 
initial term of one year with automatic renewals for successive 
one-year terms, also contained two other provisions relevant to 
this appeal.  The Agreement’s termination provision provided 
Bennett with severance benefits consisting of a year’s salary 
plus bonuses and other benefits unless Bennett resigned without 
“good reason” as defined in the Agreement or was terminated by 
Sage for good cause.  In addition, the Agreement contained a 
“non-competition” clause restricting Bennett’s employment for a 
period of twelve months after his employment ended. 
On June 7, 2008, following oral discussions with Sage 
about his compensation, Bennett wrote in an email to Sage that 
he would require increased compensation to the $1 million 
range, “or we agree to my transition out of the company.”  In 
that email, Bennett also stated that if his compensation 
demands could not be met, then 
we can work out a mutually agreeable transition plan.  
Perhaps the best approach would be to have me stay on 
in my current position or as a consultant while you 
are searching for or selecting a replacement from 
within.  In either event, I will want the clock 
running on any post termination restrictions listed 
in my employment agreement. 
 
When Sage did not meet his compensation demands, Bennett 
continued in the position of President but openly pursued other 
employment opportunities as he worked with Sage on this 
“mutually agreeable transition plan.”  Sage told Bennett that 
it considered his email to constitute a resignation, and not 
merely a request for a higher salary.  Bennett disagreed and 
stated that he considered Sage’s refusal of his compensation 
 
 
 
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demands to be a termination of his employment.  Bennett’s 
employment was ultimately terminated on September 30, 2008. 
Bennett filed a complaint against Sage seeking severance 
payments due under the Agreement.  On the third day of a jury 
trial, prior to the close of Bennett’s case-in-chief, Sage 
moved for leave to amend its pleadings to include a defense of 
repudiation.  Bennett objected, arguing that “[a]ccording to 
the definition of repudiation,” the facts of his performance do 
not support it, because Bennett continued to work and continued 
to perform his duties under the Agreement after he sent the 
June 7, 2008 email.  The circuit court, nonetheless, granted 
Sage’s motion to amend and submitted the issue of repudiation 
to the jury.  After the issue was submitted to the jury and the 
jury posed two questions concerning the instruction on 
repudiation,1 Bennett requested that the circuit court issue the 
jury an additional instruction to clarify the definition of 
repudiation.  The court refused to give such an instruction, 
                     
1 Jury Instruction N states: 
 
If you find that Mr. Bennett repudiated or 
rejected the Executive Employment Agreement by 
conditioning his performance of his duties on the 
Company’s acceptance of such changes beginning in May 
2008, then you may not find [Sage] liable for breach 
of contract for its subsequent rejection of his 
demand for severance pay. 
 
 
 
 
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stating that Bennett had agreed to the instructions that were 
previously given to the jury. 
After the jury returned its verdict in favor of Sage, 
Bennett moved to set aside the verdict, arguing that “the 
evidence does not support a finding that [he] clearly and 
unequivocally repudiated the entire performance of the 
contract.”  The circuit court denied Bennett’s post-trial 
motions, and he timely filed his appeal to this Court.   
II. Standard of Review 
We review this appeal under well-settled principles.  
“When parties come before us with a jury verdict that 
has been approved by the trial court, they hold the 
most favored position known to the law.  The trial 
court’s judgment is presumed to be correct, and we 
will not set it aside unless the judgment is plainly 
wrong or without evidence to support it.  We view the 
evidence and all reasonable inferences fairly 
deducible from it in the light most favorable to the 
prevailing party at trial.”  We review matters of law 
de novo. 
 
Syed v. ZH Technologies, Inc., 280 Va. 58, 68, 694 S.E.2d 625, 
631 (2010) (internal citations omitted). 
We review a circuit court’s grant or denial of a party’s 
motion for leave to amend its pleadings, based on a variance 
between the evidence and the pleadings, on an abuse of 
discretion standard.  We have explained: 
In a case of variance, Code § 8.01-377 gives a trial 
court the discretion to apply the foregoing rule 
reasonably either by permitting amendment of the 
pleadings (and possibly postponing the trial) or, in 
 
 
 
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lieu of amendment, by having the facts determined and 
rendering judgment, but only on the condition that no 
prejudice results.  While the statute is remedial in 
purpose and should be liberally construed, it should 
not be interpreted in a manner inconsistent with its 
plain language. 
 
Hensley v. Dreyer, 247 Va. 25, 30, 439 S.E.2d 372, 375 (1994) 
(citations omitted) (holding that “the trial court abused its 
discretion by concluding, in a manner inconsistent with the 
statutory language, that the variance ‘could not have 
prejudiced’” the appellant). 
 
Additionally, upon review of the substance of jury 
instructions given by a circuit court, 
our responsibility is to see that the law has been 
clearly stated and that the instructions cover all 
issues which the evidence fairly raises.  [A] 
litigant is entitled to jury instructions supporting 
his or her theory of the case if sufficient evidence 
is introduced to support that theory and if the 
instructions correctly state the law.  The evidence 
introduced in support of a requested instruction must 
amount to more than a scintilla. 
Williams v. Cong Le, 276 Va. 161, 166, 662 S.E.2d 73, 76 (2008) 
(internal citations and quotation marks omitted). 
III. Repudiation of a Contract 
Repudiation may be asserted as a valid defense to a breach 
of contract claim in Virginia.  The United States Court of 
Appeals for the Fourth Circuit, applying Virginia law, has 
recognized that 
in the case of a bilateral contract for an agreed 
exchange of performances, a repudiation of his duty 
by one of the parties terminates the duty of the 
 
 
 
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other.  It gives to the latter the legal privilege of 
refusing to render the return performance; if sued 
for such refusal, the plaintiff's repudiation is a 
good defense. 
 
WRH Mortgage, Inc. v. S.A.S. Assocs., 214 F.3d 528, 532 (4th 
Cir. 2000) (emphasis added) (citation and internal quotation 
marks omitted).  We agree with the holding in WRH Mortgage that 
repudiation may be used as a defense to a breach of contract 
claim. 
 
The question presented now becomes whether the court erred 
by allowing Sage to assert repudiation as a defense to 
Bennett’s breach of contract claim based on Bennett’s demand 
for increased compensation or his “transition out of the 
company,” after he had already begun performance under the 
Agreement.  While we acknowledge the line of Virginia cases 
that characterizes repudiation before performance is due under 
a contract as an anticipatory breach, we hold that repudiation 
may also apply to a contract that has been partially performed, 
when future obligations under the contract are repudiated.  See 
Lenders Financial Corp. v. Talton, 249 Va. 182, 189, 455 S.E.2d 
232, 236-37 (1995) (“[B]ecause defendant’s repudiation of this 
executory contract constitutes an anticipatory breach, 
plaintiff may sue on the contract without waiting for the time 
of defendant’s performance to arrive”); Link v. Weizenbaum, 229 
Va. 201, 203, 326 S.E.2d 667, 668-69 (1985) (holding that 
 
 
 
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although the defendant clearly repudiated before performance of 
the contract commenced, “his repudiation could not serve as the 
basis for a claim of breach of contract because his co-obligor 
did not join in the repudiation either expressly or by 
assent”). 
 
Our holding in this case is supported by our decision in 
Board of Supervisors of Fairfax County v. Ecology One, Inc., 
219 Va. 29, 245 S.E.2d 425 (1978).  In Ecology One, we applied 
an anticipatory breach theory to a factual scenario in which 
performance under a contract had already begun.  There, the 
contract for the construction of public streets and drainage 
facilities was formed in May 1973, and performance under that 
contract was underway as of October 1974 but an inspection 
revealed that the contractor’s “work had come to a complete 
halt” in the early months of 1975.  Id. at 31, 245 S.E.2d at 
427.  We held that the contractor had repudiated because it 
“abandoned its contract,” and we reversed the circuit court’s 
decision that the County had not made out a prima facie case 
for anticipatory breach.  Id. at 33-34, 245 S.E.2d at 428. 
 
In Ecology One, the contractor’s obligations required 
continuous performance over a period of time.  Id. at 31, 245 
S.E.2d at 426.  The evidence justified the jury’s conclusion 
that the contractor had abandoned the contract.  Id. at 33, 245 
S.E.2d at 428.  We stated that “the abandonment of a contract 
 
 
 
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will give rise to an action for anticipatory breach.”  Id.  In 
reaching this decision, we properly recognized that a party’s 
abandonment of his or her contractual duties under a continuous 
performance contract, after performance has commenced, 
constitutes an anticipatory repudiation.  The same result 
applies in this case. 
 
Our view is also supported by case law from the United 
States Supreme Court.  In Franconia Assocs. v. United States, 
536 U.S. 129 (2002), for example, the Supreme Court applied 
repudiation principles to a factual scenario in which a party 
repudiated after performance had commenced.  There, certain 
property owners agreed to devote a portion of their properties 
to low- and middle-income housing in exchange for low interest 
mortgage loans issued by the government.  Id. at 132-33.  The 
owners’ promissory notes allowed prepayment of the loans.  Id. 
at 133.  But a subsequent act of Congress placed permanent 
restraints on the prepayment of the owners’ loans.  Id.  The 
owners filed suit against the government arguing that the act 
“effected . . . a repudiation of their contracts.”  Id.  The 
Supreme Court agreed with the owners and held that the act 
“qualified as a repudiation of the parties’ bargain.”  Id. at 
133, 143.  In so holding, the Court stated that “the promisor’s 
renunciation of a ‘contractual duty before the time fixed in 
the contract for . . . performance’ is a repudiation.”  Id. at 
 
 
 
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143 (quoting 4A Corbin on Contracts § 959, at 855 (1951) 
(emphasis in original). 
 
The Restatement (Second) of Contracts also supports the 
view that a party may repudiate his or her contractual duties 
after performance has commenced.  Section 250 defines 
“repudiation” as: 
(a)  a statement by the obligor to the obligee 
indicating that the obligor will commit a breach that 
would of itself give the obligee a claim for damages 
for total breach . . . or 
(b)  a voluntary affirmative act which renders the 
obligor unable or apparently unable to perform 
without such a breach. 
 
Restatement (Second) of Contracts § 250 (1981).  Thus, the 
Restatement’s definition does not provide that repudiation must 
occur prior to the commencement of any performance under the 
contract. 
 
When a contract requires performance continuously for some 
period of time, a party’s renunciation of his or her 
contractual obligation may constitute a repudiation.  Arthur L. 
Corbin, 9 Corbin on Contracts § 954, at 738 (interim ed. 2002) 
(section entitled “Breach by Repudiation of Obligation”).  In 
such cases, the repudiation of the contractual obligation is 
“anticipatory with respect to the performances that are not yet 
due.”  Id. 
 
In sum, we hold that a party’s renunciation or abandonment 
of his or her contractual duties, after performance has 
 
 
 
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commenced under a contract requiring continuous performance, 
constitutes a repudiation, which may be treated by the party to 
whom the duty is owed as an anticipatory breach of the 
contract.  Therefore, the issue of Bennett’s alleged 
repudiation was properly before the jury. 
IV. Bennett’s Repudiation 
 
In his June 7, 2008 email to Sage, Bennett communicated 
his dissatisfaction with his salary: 
[W]hile I would enjoy recommitting to Sage, the 
inequity between my current compensation and what I 
think my value is on the outside is substantial.  
With that in mind, I am suggesting that either my 
compensation be altered to something more in line 
with my value, albeit discounted, or we agree to my 
transition out of the company. 
 
 
Bennett asserts that his communication with Sage was 
simply an invitation to negotiate, and that it clearly 
indicates his preference to stay with the company.  He argues 
that his language did not evince a clear and unequivocal 
repudiation of the Agreement covering the entire contract 
because he also agreed to stay on for a period of time while he 
transitioned out of the company.  But, while transitioning out 
of the company, he expected the twelve-month time frame 
restricting his employment under the non-competition clause, 
which he referred to as the “clock,” to be “running.” 
 
In response, Sage argues that there was ample evidence by 
which the jury could find that Bennett had repudiated the 
 
 
 
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contract.  According to Sage, testimony at trial included 
statements attributed to Bennett during a June 5th conversation 
that July 1, 2008 was his “drop dead date” for his departure 
and that he had effectively given notice of his resignation.  
Also, Sage argued that Bennett never suggested that there was a 
third alternative to his receiving a higher salary or leaving 
Sage.  Finally, Sage contends that Bennett never suggested that 
he would be willing to continue in his position at his current 
salary of $360,000 and that he suggested his own departure 
date. 
 
We have held that “[i]t is firmly established that for a 
repudiation of a contract to constitute a breach, the 
repudiation must be clear, absolute, unequivocal, and must 
cover the entire performance of the contract.”  Vahabzadeh v. 
Mooney, 241 Va. 47, 50, 399 S.E.2d 803, 805 (1991) (citations 
omitted); see also Restatement (Second) of Contracts § 250 
(repudiation entails a statement or “voluntary affirmative act” 
indicating that the promisor “will commit a breach” when 
performance becomes due). 
 
In this case, when Bennett told Sage, four months into his 
year-long contract, that he would leave the company unless his 
demand for increased compensation was met, the jury could have 
found that Bennett repudiated his obligation under the 
Agreement.  Bennett’s repudiation would have been anticipatory 
 
 
 
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with respect to the remainder of the time he agreed to serve as 
Sage’s president under the Agreement.  If Sage could not rely 
upon Bennett’s repudiation, it could not begin its search for 
his replacement until the day that Bennett simply failed to 
show up for work and notified Sage that he would no longer 
perform under the Agreement.  Because the Agreement required 
continuous performance over a period of time, when Bennett 
declared he would leave his position as president unless his 
compensation was increased, Sage was entitled to rely on 
Bennett’s repudiation and treat it as a breach. 
 
Therefore, we hold that the circuit court did not err in 
rejecting Bennett’s argument that he did not repudiate the 
contract as a matter of law, because he continued to perform 
his duties as he was attempting to negotiate his exit from the 
company.  Based on the evidence presented, the jury was 
entitled to conclude that Bennett’s refusal to consider any 
alternative other than almost tripling his salary and his 
demand that his post-termination non-compete obligations begin 
running immediately constituted a repudiation by Bennett of his 
future obligations under the one-year contract. 
V. Variance Between Evidence and Allegations 
 
Bennett contends that the circuit court abused its 
discretion by allowing Sage to amend its defensive pleadings to 
include a defense of repudiation.  We disagree. 
 
 
 
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In determining whether the circuit court erred by 
permitting Sage to include a defense of repudiation in its 
pleadings, the issue is whether Bennett was “prejudiced” by the 
amendment.  Code § 8.01-377.2  Furthermore, this Court has held: 
[w]e adhere to the principle that a court may not 
base a judgment or decree upon facts not alleged or 
upon a right, however meritorious, that has not been 
pleaded and claimed.  Every litigant is entitled to 
be told in plain and explicit language the 
adversary’s ground of complaint.  Like any other 
rule, however, this principle must be reasonably 
applied, keeping in mind that its purpose is to 
prevent surprise. 
 
 
In a case of variance, Code § 8.01-377 gives a 
trial court the discretion to apply the foregoing 
rule reasonably either by permitting amendment of the 
pleadings (and possibly postponing the trial) or, in 
lieu of amendment, by having the facts determined and 
rendering judgment, but only on the condition that no 
prejudice results.  While the statute is remedial in 
purpose and should be liberally construed, it should 
not be interpreted in a manner inconsistent with its 
plain language. 
 
Syed, 280 Va. at 71, 694 S.E.2d at 632 (internal citations 
omitted). 
 
Sage moved to amend its answer to include the defense of 
repudiation prior to the close of Bennett’s case-in-chief.  
                     
2 Code § 8.01-377, entitled “Remedy when variance appears 
between evidence and allegations,” states in relevant part: 
 
If, at the trial of any action, there appears to 
be a variance between the evidence and the 
allegations or recitals, the court, if it consider 
that substantial justice will be promoted and that 
the opposite party cannot be prejudiced thereby, may 
allow the pleadings to be amended. 
 
 
 
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According to Sage, the evidence presented during Bennett’s 
case-in-chief added support to its repudiation defense.  
Specifically, Sage notes that Bennett testified that he had not 
been involuntarily terminated by Sage, further evidencing that 
he instituted the termination of the Agreement.  The court 
granted Sage’s motion to amend, stating: 
I think the facts were both known to both sides that 
the argument is already pretty much laid out even 
already the way we have been proceeding and has been 
in the pleadings that I have seen.  In light [of the 
fact] that I don’t believe it is prejudicial I am 
going to allow the amendment at this point, to allow 
them to argue repudiation at this point. 
 
 
Bennett’s own testimony, offered during his case-in-chief, 
established facts which supported Sage’s repudiation defense.  
Substantial justice was promoted by instructing the jury how to 
properly frame the issues based on the evidence presented at 
trial.  Bennett’s argument that he was prejudiced by the 
amendment is without merit because the evidence supporting 
Sage’s repudiation defense was not only known to Bennett, but 
also offered by Bennett himself.  Therefore, we hold that the 
circuit court did not abuse its discretion in allowing Sage to 
amend its answer to include a repudiation defense. 
VI. Clarifying Instruction 
 
Bennett argues that the circuit court erred in refusing to 
give the jury an instruction to clarify the definition of 
repudiation.  We disagree. 
 
 
 
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As previously stated, although he objected to sending the 
issue of repudiation to the jury, Bennett did not object to 
Sage’s proposed jury instruction on repudiation.  Furthermore, 
when the jury asked for clarification about the instruction 
regarding repudiation, Bennett agreed that the circuit court 
should simply instruct the jury to rely on the plain language 
of the instruction.  Bennett waited until after the jury 
returned to deliberate to ask the court for a clarifying 
instruction regarding the definition of repudiation.  Under 
these facts, when Bennett agreed to the jury instruction given 
on repudiation, and only asked the court to issue a clarifying 
instruction after the jury returned to deliberate, we hold that 
the circuit court did not abuse its discretion in refusing to 
issue Bennett’s proposed clarifying instruction.  See E.I. 
DuPont De Nemours & Co. v. Snead, 124 Va. 177, 187, 97 S.E. 
812, 815 (1919) (holding it is not error for a circuit court to 
refuse an instruction after the jury has already been 
sufficiently instructed on that issue). 
VII. Conclusion 
 
For the reasons stated, we hold that the circuit court did 
not err in submitting the issue of repudiation to the jury, in 
allowing Sage to amend its pleading to include the defense of 
repudiation, in refusing to issue the jury a clarifying 
instruction, and in refusing Bennett's motion to set aside the 
 
 
 
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verdict.  Accordingly, we will affirm the judgment of the 
circuit court. 
Affirmed. 
 
 
 
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