Opinion ID: 1058054
Heading Depth: 2
Heading Rank: 1

Heading: FOA's Demurrers and Motion to Strike

Text: CSI argues that the circuit court erred by sustaining FOA's demurrers and motion to strike CSI's affirmative defense. CSI contends that because the Bylaws are one of the documents that governs the relationship established by the Management Agreement, the Bylaws are incorporated into the Management Agreement, giving CSI the right to invoke termination protections it claims are contained in the Bylaws. CSI claims FOA's termination of CSI was invalid because the Bylaws required FOA to obtain the affirmative vote of three-fourths of the unit owners prior to terminating the Management Agreement with CSI. Thus, according to CSI, the circuit court erred by ruling to the contrary and sustaining FOA's demurrers to its counterclaim and amended counterclaim and by striking CSI's claimed affirmative defense. FOA responds that the purpose of the reference to the Bylaws in the Management Agreement was not to incorporate the Bylaws into the Management Agreement so as to confer upon CSI termination rights contrary to those expressly stated in the Management Agreement, but rather to identify documents that CSI must be aware of and comply with in performing its duties. We agree with FOA. This Court reviews the circuit court's sustaining of a demurrer de novo. Hubbard v. Dresser, Inc., 271 Va. 117, 122, 624 S.E.2d 1, 4 (2006). In reviewing the granting of a motion to strike, this Court will consider the evidence and all reasonable inferences arising therefrom in the light most favorable to the appellant, resolving any doubt as to the sufficiency of the evidence in favor of the appellant. McGowan v. Lewis, 233 Va. 386, 387, 355 S.E.2d 334, 334 (1987). Because the Management Agreement references a separate writing, the Bylaws are construed as part of the Management Agreement for the purpose indicated. See W.D. Nelson & Co. v. Taylor Heights Dev. Corp., 207 Va. 386, 391, 150 S.E.2d 142, 146 (1966) (Writings referred to in a contract are construed as a part of the contract for the purpose and extent indicated.). Section 1 of the Management Agreement appoints CSI as FOA's agent, states that the term of such appointment is two years and specifies the compensation CSI is to receive. Section 2 of the Management Agreement states that the documents governing the relationship between FOA and CSI consist of the Management Agreement, the Virginia Condominium Act, the Association's Declaration, the Bylaws, Rules and Regulations, and Board of Directors Resolutions. Then, in the next section of the Agreement, Section 3, titled Responsibilities and Duties of the Agent, the Agent acknowledges that it has read, and is familiar with, the Condominium Act, Declaration, the Bylaws, the Rules and Regulations of the Association, and particularly with the duties and obligations of the Board of the Association. The Bylaws are not mentioned at any other place in the Management Agreement. Later in the Management Agreement, in Section 19, there is a separate section titled Termination, which states that the Management Agreement may be terminated by either party without cause upon ninety days written notice and that FOA can terminate the Management Agreement with cause upon thirty days written notice to CSI. The express language of the Management Agreement allows FOA to terminate CSI without a vote of FOA's members. Section 3 is the only section of the Management Agreement other than Section 2 that mentions the Bylaws, and Section 3 concerns Responsibilities and Duties of the Agent. When considering the Management Agreement as a whole, it does not appear that the purpose of the reference to the Bylaws was to incorporate the Bylaws into the Management Agreement as they related to the termination of the management agent; the term and method of termination of the management agent is explicitly stated in the Management Agreement without reference to the Bylaws. Instead, the indicated purpose of the reference to the Bylaws and other documents in Section 2 was to identify documents that CSI, as the management agent, needed to be aware of and comply with in performing its duties and responsibilities under the Management Agreement. To adopt CSI's argument concerning the Management Agreement would render express terms of the Management Agreement meaningless, including the two-year term and termination provisions. Indeed, CSI claimed as part of its damages in its counterclaim that it is entitled to the monthly management fee until the allegedly necessary vote is taken by FOA's members, making the two-year term stated in the Management Agreement meaningless and of no effect. [C]ontract language will not be treated as meaningless where it can be given a reasonable meaning. Ross v. Craw, 231 Va. 206, 214, 343 S.E.2d 312, 317 (1986). When two provisions of a contract seemingly conflict . . . they [should] be harmonized so as to effectuate the intention of the parties as expressed in the contract considered as a whole. Plunkett v. Plunkett, 271 Va. 162, 168, 624 S.E.2d 39, 42 (2006) (quoting Ames v. American Nat'l Bank of Portsmouth, 163 Va. 1, 39, 176 S.E. 204, 217 (1934)). FOA's interpretation of the purpose and intent of Section 2 of the Management Agreement, accepted by the circuit court, harmonizes the reference to the Bylaws with the express terms of the Management Agreement. CSI's interpretation of the Management Agreement, on the other hand, cannot be harmonized with the plain language of the Management Agreement. Furthermore, a specific provision of a contract governs over one that is more general in nature. Mutual Life Ins. Co. v. Hill, 193 U.S. 551, 558, 24 S.Ct. 538, 48 L.Ed. 788 (1904) (where there are two clauses in any respect conflicting, that which is specially directed to a particular matter controls in respect thereto over one which is general in its terms); see also Asphalt Roads & Materials Co. v. Commonwealth, 257 Va. 452, 460, 512 S.E.2d 804, 809 (1999) (Lacy, J., concurring) (specific section of the contract overrides the more general contract provisions). The reference to the Bylaws in the Management Agreement is generalthe Bylaws govern the Management Agreement. On the other hand, the provisions in the Management Agreement regarding the term of the Management Agreement and means of termination are specific. CSI's interpretation would allow the general reference to the Bylaws to control over the specific termination and term provisions, a result that is contrary to principles of contract interpretation. The circuit court did not err in sustaining FOA's demurrers and striking CSI's affirmative defense. The Management Agreement, although it referenced the Bylaws, did not require a three-fourths vote of the unit owners before FOA could terminate CSI as FOA's management agent.