Title: Golding v. Floyd

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT: Carrico, C.J., Lacy, Hassell, Keenan, Kinser, and 
Lemons, JJ., and Stephenson, S.J. 
 
 
BILLIE A. GOLDING, t/a GOLDING APPRAISAL COMPANY 
 
 
 
OPINION BY  
v.  Record No. 000142 
SENIOR JUSTICE ROSCOE B. STEPHENSON, JR. 
 
 
 
January 12, 2001 
ROBERT K. FLOYD, JR., ET AL. 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF ROANOKE 
Paul F. Sheridan, Judge Designate 
 
 
This appeal presents the question whether there exists 
between the parties to an underlying action at law a binding 
contract to settle the action. 
I 
 
The underlying law action involved the sale of an appraisal 
business.  Robert K. Floyd, Jr., and Richard J. Varney were to 
purchase the business through Floyd & Varney, L.L.C. 
(collectively, Floyd and Varney) from Billie A. Golding.  When 
the sale failed to transpire, Floyd and Varney opened their own 
appraisal business, and Golding filed suit. 
 
The parties agreed to mediate their dispute, and, on 
December 10, 1998, a mediation conference was conducted.  At the 
conclusion of the conference, the parties signed a handwritten 
document entitled "Settlement Agreement Memorandum" (the 
Memorandum).  The Memorandum contains 14 paragraphs, and the 
final paragraph reads as follows: 
 
14.  This memo of settlement agreement contains 
the highlights of the terms and conditions and the 
parties agree to execute is subject to execution of a 
formal agreement consistent with the terms herein. 
(Emphasis added.)  Thereafter, further negotiations failed, and 
a formal agreement was never executed. 
 
Floyd and Varney filed a motion to confirm the settlement 
agreement and to dismiss the action.  In response, Golding moved 
for summary judgment, contending that the Memorandum was not a 
binding agreement because, by its plain language, it was 
"subject to" the execution of a formal agreement. 
 
The trial court rejected Golding's contention and concluded 
that an evidentiary hearing was required in order to determine 
the intent of the parties.  Following an evidentiary hearing, 
the court ruled that a binding settlement had been reached when 
the parties signed the Memorandum.  Thereupon, the court 
dismissed Golding's action with prejudice.  We awarded Golding 
this appeal. 
II 
 
It is firmly established that, when the terms of a contract 
are clear and unambiguous, a court is required to construe the 
terms according to their plain meaning.  Bridgestone/Firestone 
v. Prince William Square, 250 Va. 402, 407, 463 S.E.2d 661, 664 
(1995); Foods First, Inc. v. Gables Associates, 244 Va. 180, 
182, 418 S.E.2d 888, 889 (1992); Winn v. Aleda Const. Co., 227 
 
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Va. 304, 307, 315 S.E.2d 193, 194-95 (1984).  "The guiding light 
. . . is the intention of the parties as expressed by them in 
the words they have used, and courts are bound to say that the 
parties intended what the written instrument plainly declares."  
Magann Corp. v. Electrical Works, 203 Va. 259, 264, 123 S.E.2d 
377, 381 (1962).  Thus, if the intent of the parties can be 
determined from the language they employ in their contract, 
parol evidence respecting their intent is inadmissible.  Amos v. 
Coffey, 228 Va. 88, 91-92, 320 S.E.2d 335, 337 (1984).  " 'An 
ambiguity exists when language admits of being understood in 
more than one way or refers to two or more things at the same 
time.' "  Id. at 92, 320 S.E.2d at 337 (quoting Renner Plumbing 
v. Renner, 225 Va. 508, 515, 303 S.E.2d 894, 898 (1983)). 
III 
 
Golding contends, inter alia, that, "[a]s a matter of law, 
the language in [the] Memorandum making [the] settlement 
'subject to execution of a formal agreement' clearly and 
unambiguously created a condition precedent and barred extrinsic 
evidence."  Floyd and Varney, on the other hand, contend that 
the words, "subject to execution of a formal agreement," do not, 
as a matter of law, mandate a finding that the Memorandum was 
non-binding.  They assert that the trial court correctly 
considered extrinsic evidence to discern the intent of the 
parties. 
 
3
 
Boisseau v. Fuller, 96 Va. 45, 30 S.E. 457 (1898), is 
strikingly similar to the present case.  In Boisseau, the 
parties signed a document respecting the leasing of certain 
property.  The document designated the property to be leased, 
the amount of rent to be paid, and the term of the lease.  
However, the last sentence of the document stated the following:  
"The above to be covered by a regular lease subject to approval 
by all parties."  Id. at 46, 30 S.E. at 457. 
 
We held, in Boisseau, that, due to the document's last 
sentence, there could not be a binding contract "until the 
formal writing, contemplated by the language used, has been 
prepared, approved, and executed, in accordance with the 
intention of the parties."  Id. at 48, 30 S.E. at 458.  In so 
holding, we stated the following: 
"It comes, therefore, to this, that where you have a 
proposal or agreement made in writing expressed to be 
subject to a formal contract being prepared, it means 
what it says; it is subject to and dependent upon a 
formal contract being prepared.  Where it is not 
expressly stated to be subject to a formal contract it 
becomes a question of construction whether the parties 
intended that the terms agreed on should merely be put 
into form, or whether they should be subject to a new 
agreement, the terms of which are not expressed in 
detail." 
Id. at 47, 30 S.E. at 458 (quoting Winn v. Bull, 7 Ch. Div. 29-
32); accord Manss-Owens Co. v. Owens & Son, 129 Va. 183, 196, 
105 S.E. 543, 547 (1921); Adams v. Hazen, 123 Va. 304, 320, 96 
S.E. 741, 745 (1918). 
 
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Since Boisseau and until the present case, we are unaware 
of any Virginia cases involving a writing that was expressly 
"subject to" the execution of a formal contract.  On the other 
hand, we have found binding agreements, both oral and written, 
where the parties' intention to be bound is objectively 
manifested even though a subsequent formal agreement is 
contemplated.  See, e.g., Snyder-Falkinham v. Stockburger, 249 
Va. 376, 457 S.E.2d 36 (1995); North American Mgrs. v. Reinach, 
177 Va. 116, 12 S.E.2d 806 (1941); Agostini v. Consolvo, 154 Va. 
203, 153 S.E. 676 (1930). 
 
In Snyder-Falkinham, we affirmed the trial court's finding 
that the plaintiff had orally agreed to a binding settlement, 
and we concluded that her intention to compromise had been  
objectively manifested.  249 Va. at 385, 457 S.E.2d at 41.  We 
reached this conclusion "even though [the] parties contemplated 
that a formal, written 'Mutual Release and Settlement Agreement' 
memorializing the compromise would be executed."  Id.  We also 
noted that "'the mere fact that a later formal writing is 
contemplated will not vitiate the agreement.'"  Id. (quoting 
Reinach, 177 Va. at 121, 12 S.E.2d at 808). 
 
The distinction between Snyder-Falkinham and the present 
case is apparent.  In Snyder-Falkinham, the parties had fully 
agreed, and the later formal writing was contemplated only as a 
mere formality.  In the present case, like Boisseau, the initial 
 
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writing was made subject to and was dependent upon the execution 
of a formal contract. 
IV 
 
We conclude, therefore, that the Memorandum in the present 
case is clear and unambiguous, and no extrinsic evidence is 
required, or even allowed, to ascertain the intention of the 
parties as objectively manifested.  Indeed, the Memorandum was 
amended before the parties signed it by striking the language, 
"the parties agree to execute" a formal agreement, and inserting 
in its place the language that the Memorandum "is subject to 
execution of" a formal agreement.  The execution of a formal 
agreement, therefore, was a condition precedent to the existence 
of a binding contract.  A formal contract was never executed; as 
a result, no contract exists. 
 
Thus, we hold that the trial court erred in finding the 
existence of a binding contract and in dismissing the underlying 
action.  Accordingly, we will reverse and vacate the trial 
court's judgment, reinstate Golding's cause of action, and 
remand the case for further proceedings. 
Reversed and remanded. 
 
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