Opinion ID: 1059643
Heading Depth: 1
Heading Rank: 4

Heading: the ownership case

Text: The defendants, Boyle, MacDonald, Tabor, The Boathouse Food Service Company, Cellar Door Productions, and Cellar Door Venues, argue that the chancellor erred in holding that Reid presented sufficient evidence to establish an enforceable contract. The defendants assert that Reid's purported contract was vague and lacked specificity. The defendants also contend that Reid failed to establish the parties to the contract and the type of ownership interest that had been promised to Reid. We disagree with these defendants. We have stated the following contract principles which are equally pertinent here: The law does not favor declaring contracts void for indefiniteness and uncertainty, and leans against a construction which has that tendency. While courts cannot make contracts for the parties, neither will they permit parties to be released from the obligations which they have assumed if this can be ascertained with reasonable certainty from language used, in the light of all the surrounding circumstances. This is especially true where there has been partial performance. McDaniel v. Daves, 139 Va. 178, 190, 123 S.E. 663, 666 [1924]; Phillips Petroleum Company v. Buster, 241 F.2d 178 [10th Cir.1957], cert. denied, 355 U.S. 816, 78 S.Ct. 18, 2 L.Ed.2d 33.... We have repeatedly said that in construing a contract, `[r]egard should be had to the intention of the parties, and such intention should be given effect. To arrive at this intention, regard is to be had to the situation of the parties, the subject matter of the agreement, the object which the parties intended to accomplish. A construction should be avoided if it can be done consistently with the tenor of the agreement, which would be unreasonable or unequal, and that construction which is most obviously just is to be favored as most in accordance with the presumed intention of the parties.' Seward v. American Hardware Co., 161 Va. 610, 625, 626, 171 S.E. 650, 659 [1933]; White v. Sayers, 101 Va. 821, 826, 45 S.E. 747, 749 [1903]. High Knob, Inc. v. Allen, 205 Va. 503, 507-08, 138 S.E.2d 49, 53 (1964). Accord W.J. Schafer Assoc. v. Cordant, Inc., 254 Va. 514, 519-20, 493 S.E.2d 512, 515 (1997); Allen v. Aetna Casualty & Surety, 222 Va. 361, 363-64, 281 S.E.2d 818, 819-20 (1981). Applying these principles, we hold Reid presented evidence which would permit the chancellor to ascertain, with reasonable certainty, from the language that the parties used and in light of all the surrounding circumstances, that Reid entered into an oral contract with Boyle and Cellar Door Venues and that pursuant to the terms of this contract, Boyle and Cellar Door Venues promised to give Reid a one-third interest in the value of Cellar Door Venues' leasehold interest in the amphitheater. Reid presented evidence of the following pertinent facts. Boyle exerted absolute control of Cellar Door Venues which owned the leasehold interest, and Boyle conducted the corporation's financial affairs with an air of informality. Boyle promised Reid that he would own one-third of the amphitheater project if Reid could bring his concept of an amphitheater in Virginia Beach to fruition. Boyle repeatedly assured Reid that Reid owned a one-third interest in the amphitheater project. As we have already stated, Boyle told Lyons, his friend for 35 years, that Reid owned an interest in the amphitheater project. Reid also partially performed this oral contract. Reid permitted approximately $88,000 of compensation that he ultimately received from Cellar Door Productions to fund the initial operational costs for Cellar Door Venues. Significantly, Reid signed a letter of credit and a guaranty which the City required before it would proceed with the construction of the amphitheater. Boyle and Cellar Door Venues admitted in their response to a request for admission that Reid's acts of signing the personal guaranty and letter of credit were above and beyond his job responsibilities as president of Cellar Door Productions. The chancellor was also certainly entitled to consider, as a surrounding circumstance, Boyle's history of giving employees, including Reid, ownership interests in corporations that Boyle controlled. The chancellor also considered the fact that Cellar Door Venues' primary asset was its leasehold interest with the City, and Boyle's statement to Reid that Boyle had an agreement that would confer an ownership interest to Reid in the amphitheater project, but that the lawyers [had] made it too complicated and that Boyle intended to return it to the lawyers for simplification.
The defendants observe that Reid had a written contract with Cellar Door Productions which contained the following provision:  Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between the Executive and the Company (or any of its affiliates) with respect to such subject matter. This Agreement may not be modified in any way unless by a written instrument signed by both the Company and the Executive. The defendants contend that even though Reid asserts that the oral contract for ownership of an interest in the amphitheater was a new deal between Boyle and Reid which was unrelated to the above-referenced provision in the employment agreement, the alleged oral contract addresses precisely the subject matter addressed by the [e]mployment [a]greement. Continuing, the defendants say that the amphitheater project was a business opportunity of the Cellar Door Companies pursued locally by Reid as president of Cellar Door Productions, that at the time of the alleged oral contract Cellar Door Venues did not yet exist, and any `new' deal between Boyle and Reid necessarily required alteration of Reid's [e]mployment [a]greement with [Cellar Door] Productions. Additionally, these defendants contend that the chancellor failed to articulate the burden of proof he applied in holding that Reid proved his oral contract claim. We disagree with defendants. We have held that a contract in writing may be modified by a new oral contract. In Zurich General Accident & Liability Ins. Co. v. Baum, 159 Va. 404, 409, 165 S.E. 518, 519 (1932), we stated: A contract in writing, but not required to be so by the statute of frauds, may be dissolved or varied by a new oral contract, which may or may not adopt as part of its terms some or all of the provisions of the original written contract.... Nor does it make any difference that the original written contract provided that it should not be substantially varied except by writing. This stipulation itself may be rescinded by parol and any oral variation of the writing which may be agreed upon and which is supported by a sufficient consideration is by necessary implication a rescission to that extent. Additionally, modification of a contract must be shown by clear, unequivocal and convincing evidence, direct or implied. Stanley's Cafeteria, Inc. v. Abramson, 226 Va. 68, 73, 306 S.E.2d 870, 873 (1983). We have also held that contracting parties, through a course of dealing, may evince a mutual intent to modify the terms of their contract. The circumstances surrounding the conduct of the parties must be sufficient to support a finding of mutual intention that the modification be effective and such intention must be shown by clear, unequivocal, and convincing evidence, direct or implied. Id. We hold that Reid established with clear, unequivocal, and convincing evidence that he and the defendants orally modified the written contract, and that they also modified the contract by their course of dealing. The facts contained in Part III.A. of this opinion, which we need not repeat, clearly demonstrate that Reid established by clear, unequivocal, and convincing evidence that Boyle, acting on behalf of himself and Cellar Door Venues, promised Reid that he would have a one-third interest in the amphitheater leasehold in return for Reid's efforts to bring the project to fruition. Furthermore, the evidence summarized in Part III.A. of this opinion clearly indicates that Reid and Cellar Door Productions modified the written contract by their course of dealing. The parties simply ignored the terms of the written employment agreement. For example, Cellar Door Productions never followed the terms of the written employment contract when determining the amount of compensation owed to Reid. The written contract was misplaced and when the various lawsuits were filed, the litigants did not even know which written contract was the so-called operative contract. In Mullins v. Mingo Lime & Lumber Co., 176 Va. 44, 50, 10 S.E.2d 492, 494 (1940), we stated that an agreement for service must be certain and definite as to the nature and extent of service to be performed, the place where and the person to whom it is to be rendered, and the compensation to be paid, or it will not be enforced. Here, the terms of the oral contract are certain and definite. Reid was required to perform the necessary services to make the amphitheater a reality, and the services were to be performed for Boyle and the corporations that he controlled in the Cellar Door Companies. The compensation that Reid was to receive was a one-third interest in the value of the amphitheater project, in this instance, the value of the leasehold that Cellar Door Venues acquired with the City.
The defendants argue, [h]ow was Reid to receive [an] `ownership interest' and what was it? [Cellar Door] Venues is a stock corporation, yet ... Boyle and Reid never discussed `stock' or `equity.' There is no evidence of an agreement by Boyle to convey 33% of Venues' shares to Reid, even though that was the only [a]mphitheater-related entity in which Boyle could have transferred ownership. The defendants also contend that the circuit court effectively treated Reid as if he were a shareholder of Venues who had a right to put his shares to the corporation upon his termination, at a price measured by the going concern value of the corporation. We find no merit in the defendants' contentions. The chancellor did not award Reid shares of stock in Cellar Door Venues; nor did the chancellor treat Reid as if he were a shareholder of [Cellar Door] Venues. Additionally, the chancellor did not award Reid one-third of the value of Cellar Door Venues. Rather, the chancellor merely enforced the terms of the contract that Boyle made with Reid. The chancellor made a finding of fact that Boyle gave Reid a one-third interest in the leasehold, and the chancellor determined the value of Reid's leasehold interest. We also observe that the defendants do not assert that Boyle lacked the legal authority to convey a corporate asset, in this instance a portion of the leasehold interest, to Reid.
The chancellor, in his judgment order, dismissed Reid's claim of unjust enrichment as moot because the chancellor held that Reid established that he had an oral contract for a one-third interest in the amphitheater lease with Boyle and Cellar Door Venues. However, the chancellor at Reid's request held in the alternative that the evidence was sufficient to support a claim for unjust enrichment. The defendants assert that the chancellor erroneously applied principles of equity. We need not consider the court's alternative holding because Reid prevailed on his breach of an oral contract claim. See Royer v. Board of County Supervisors, 176 Va. 268, 279-80, 10 S.E.2d 876, 881 (1940); accord Nedrich v. Jones, 245 Va. 465, 477, 429 S.E.2d 201, 207 (1993).
The defendants contend that the chancellor adopted a measure of damages... unsupported by the facts or by the testimony of the expert witnesses. Reid's business valuation expert testified that Cellar Door Venues had a value of $20,289,791, and the defendants' expert witnesses testified that Cellar Door Venues had a value of $10,567,000. Each of the expert witnesses described the methodologies he used to support his valuation. The defendants contend that the chancellor's holding that the value of Cellar Door Venues' leasehold interest in the amphitheater was $16,000,000 constitutes a compromise and is the functional equivalent of a compromise jury verdict. Reid asserts that the defendants may not raise this issue on appeal because they failed to make any objection in the circuit court to the methodology that the chancellor used in placing a value on the leasehold interest. Responding in their reply brief, the defendants state that the chancellor's purported error is not an error that could have been addressed as an evidentiary objection, as it is a defect in the reasoning process by which the court ... reached its result. We agree with Reid. Rule 5:25 states in relevant part: Error will not be sustained to any ruling of the trial court ... unless the objection was stated with reasonable certainty at the time of the ruling, except for good cause shown or to enable this Court to attain the ends of justice. The chancellor's determination that the leasehold interest had a value of $16,000,000 is a ruling within the intendment of Rule 5:25. The application of Rule 5:25 is not limited to evidentiary rulings. Rather, Rule 5:25 exists to protect the trial court from appeals based upon undisclosed grounds, to prevent the setting of traps on appeal, to enable the trial judge to rule intelligently, and to avoid unnecessary reversals and mistrials. Fisher v. Commonwealth, 236 Va. 403, 414, 374 S.E.2d 46, 52 (1988), cert. denied, 490 U.S. 1028, 109 S.Ct. 1766, 104 L.Ed.2d 201 (1989).
Gregory F. Lawson, who qualified as an expert witness on the subject of business valuation, testified on behalf of Reid that the value of Cellar Door Venues' leasehold interest in the amphitheater was $20,045,000. The defendants argue that the chancellor erred by admitting Lawson's testimony because they claim his testimony was speculative and lacked a proper evidentiary foundation. We disagree. We have reviewed Lawson's testimony in its entirety, and we hold that the chancellor did not abuse its discretion by admitting in evidence the challenged testimony.