Court Opinion

ID: 3205142
Source: CourtListenerOpinion
Date Created: 2016-05-19 19:00:55.565267+00
Date Added: 2024-06-11T10:11:36.531339
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 15-1547

MCG, INC.,

                Plaintiff - Appellant,

          v.

MGSJ HOLDINGS,    INC.;   MICHAEL   MOORE;   GARY   WARD;    STEVEN
MENDIETA,

                Defendants - Appellees.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. George L. Russell, III, District Judge.
(1:14-cv-03997-GLR)

Submitted:   February 29, 2016                Decided:      May 19, 2016

Before KING, DIAZ, and FLOYD, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Eric S. Lipsetts, ERIC LIPSETTS, P.A., Annapolis, Maryland, for
Appellant.   Lars H. Liebeler, LARS LIEBELER, PC, Washington,
D.C., for Appellees.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       MCG, Inc. (MCG) appeals the district court’s order granting

judgment     on    the     pleadings,       or       in   the     alternative,       summary

judgment, in favor of MGSJ Holdings, Inc. (Holdings), Michael

Moore, Gary Ward, and Steven Mendieta (collectively, Defendants)

in    this   civil       action    arising         out    of    an   alleged       breach    of

contract.     The district court held that MCG failed to fulfill a

condition precedent as required under the terms of an Investment

Agreement entered into by Mendieta, acting as the sole director

of    MCG,   and     Moore      and    Ward,        who   signed      as    principals       of

Holdings.      The district court also held that Mendieta, Moore,

and   Ward   later       cancelled       the       Investment        Agreement,      and    MCG

ratified its cancellation, so there was no breach.                                   We have

thoroughly reviewed the record and find that the district court

did not err in granting Defendants’ motion for judgment on the

pleadings,         or,     in      the      alternative,             summary       judgment.

Accordingly,       we     affirm      the   district           court’s     order    for     the

reasons set forth below.

                                               I.

       This court reviews “de novo a district court’s ruling on a

motion for judgment on the pleadings under Federal Rule of Civil

Procedure 12(c).”          Drager v. PLIVA USA, Inc., 741 F.3d 470, 474

(4th Cir. 2014).          A motion for judgment on the pleadings “should

only be granted if, after accepting all well-pleaded allegations

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in the plaintiff’s complaint as true and drawing all reasonable

factual inferences from those facts in the plaintiff’s favor, it

appears certain that the plaintiff cannot prove any set of facts

in support of his claim entitling him to relief.”                        Edwards v.

City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).

       Similarly, this court reviews de novo the district court’s

grant of summary judgment.             Spriggs v. Diamond Auto Glass, 242
F.3d 179, 183 (4th Cir. 2001).                 Summary judgment is appropriate

only    in   those     cases   where      the     pleadings,    affidavits,       and

responses to discovery “show that there is no genuine issue as

to any material fact and that the moving party is entitled to

judgment     as   a   matter   of   law.”        Fed.   R.   Civ.   P.   56(c);   see

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).                      A material

fact is one “that might affect the outcome of the suit under the

governing law.”        Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986).       A disputed fact presents a genuine issue “if the

evidence is such that a reasonable jury could return a verdict

for the nonmoving party.”           Id.

                                          II.

       In this case, the district court pronounced its findings

through a bench ruling during a hearing on Defendants’ motion

for judgment on the pleadings, or, in the alternative, summary

judgment.     The district court found that Mendieta, as director

of MCG, had “sole authority to contract, to bargain, [and] to

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negotiate    with        individual       entities.”        As    the    sole    director,

Mendieta    entered        into    an     Investment      Agreement      with    Ward     and

Moore,    and     MCG     failed     to    perform     a    condition         precedent     –

establishing       bank        accounts    with   two      specific       signers     –    as

required in that contract.                 And “the failure of MCG to fulfill

the terms of the agreement . . . prevented the formation of a

contract.       Because the ultimate basis for the contract was the

disbursement of the loan funds.”                  The district court therefore

concluded,        “the         condition     precedent          was     not     fulfilled,

regardless        of     the     circumstances       of    its        fulfillment,”       and

Holdings, Ward, Moore, and Mendieta did not breach the contract.

     The district court also addressed an additional argument

“that the ratification of the agreement compelled Holdings to

perform     under        the     contract.”       Again,         the     district     court

concluded that a contract did not exist because MCG did not

fulfill     the        condition    precedent.            The    court     alternatively

concluded that the Investment Agreement was a contract that,

once ratified, was impossible to perform because Mendieta had

resigned from MCG.

     On appeal, MCG argues the district court erred for several

reasons when it dismissed the complaint and granted Defendants’

motion.     MCG further argues the trial court improperly dismissed

its tort claims against Mendieta.                      Defendants argue that the

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“principle reason MCG’s claims fail is that MCG did not meet the

condition precedent set forth” in the Investment Agreement.

      In Maryland, * the interpretation of a contract is a question

of    law,   and    courts     interpret        contracts   objectively.       Nova

Research, Inc. v. Penske Truck Leasing Co., 952 A.2d 275, 283

(Md. 2008).        Contract interpretation therefore begins with the

plain meaning of the contractual terms.                 Storetrax.com, Inc. v.

Gurland, 895 A.2d 355, 367 (Md. Ct. Spec. App. 2006), aff’d, 915
A.2d 991 (Md. 2007).           Additionally, “[t]o prevail in an action

for     breach     of   contract,     a    plaintiff    must    prove   that     the

defendant owed the plaintiff a contractual obligation and that

the defendant breached that obligation.”                Taylor v. NationsBank,

N.A., 776 A.2d 645, 651 (Md. 2001).

      Here, the duty owed between MCG and Defendants, like most

contract cases, rests on the terms of the contract.                        In this

case, the duties owed are set forth in the Investment Agreement.

Among     other     things,     the       Investment    Agreement     included    a

provision that stated:            “As a condition of Investor providing

two   loans,     MCG    bank   accounts     [shall]    bear   two   signers    only,

Steve Mendieta and, as a backup, Jeff Wray.”                   The district court

      *The parties do not dispute that Maryland law controls the
Investment Agreement.

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relied on this provision when it determined that MCG failed to

fulfill a condition precedent.

      A condition precedent has been defined as a fact, other

than mere lapse of time, which, unless excused, must exist or

occur   before      a     duty    of    immediate      performance      of    a    promise

arises.       Chirichella v. Erwin, 310 A.2d 555, 557 (Md. 1973).

“Generally,        when    a     condition     precedent      is     unsatisfied,        the

corresponding contractual duty of the party whose performance

was conditioned on it does not arise.”                       Chesapeake Bank of Md.

v.   Monro    Muffler/Brake,           Inc.,   891 A.2d 384,    391-92       (Md.   Ct.

Spec. App. 2006) (internal quotation and citation omitted); see

also Laurel Race Course, Inc. v. Regal Const. Co., 333 A.2d 319,

327 (Md. 1975) (“It is fundamental that where a contractual duty

is subject to a condition precedent, whether express or implied,

there is no duty of performance and there can be no breach by

nonperformance until the condition precedent is either performed

or excused.”) (citations omitted).

      Because the Investment Agreement required MCG to establish

the bank accounts “as a condition” of the loan, Holdings, Ward,

and Moore were not obligated to make loans to MCG before such

bank accounts were established.                    Mendieta, Ward, and Moore then

decided      to    withdraw      from     investing     in    MCG,    or     cancel      the

contract.         The district court, therefore, did not err when it

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concluded that MCG failed to fulfill a condition precedent found

in the Investment Agreement.

       The    district         court   also    did    not        err    when     it    held       that

Mendieta, Ward, and Moore cancelled the Investment Agreement,

and MCG could not revive the contract after Mendieta resigned

from MCG and MCG appointed new directors.                               “At common law the

parties to a written contract have the right to rescind it by

mutual       consent,     even     though       there       is    no     provision           in   the

contract permitting them to do so.”                       Maslow v. Vanguri, 896 A.2d
408,   424     (Md.      Ct.    Spec.    App.       2006)    (internal          quotation         and

citation omitted).              “The parties to a contract may, either in

writing      or    orally,      release      themselves          from     its    obligations.”

Id. (citations omitted); see also Lemlich v. Bd. of Trs. of

Harford       Cmty.      Coll.,        385 A.2d 1185,           1189-90        (Md.    1978)

(discussing        how    a     contract      may    be     rescinded          through        mutual

agreement of the parties).                   “It has frequently been held that

the mutual assent requisite to rescind a contract need not be

express; it may be inferred from the conduct of the parties in

the light of the surrounding circumstances.”                               Maslow, 896 A.2d

at 425 (internal quotation and citation omitted).

       Here, the record shows Ward and Moore, along with Mendieta,

acting    as      the    sole    director      of    MCG,    decided        to    abandon,         or

rescind, the Investment Agreement.                    Mendieta notified the future

officers of MCG in writing about their decision to walk away

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from the deal, and Mendieta then resigned from MCG.                             MCG cannot

compel Holdings to perform under the Investment Agreement after

the parties agreed to cancel it.

      Additionally,       the       district       court    did    not    err       when    it

dismissed the tort claims against Mendieta.                       Although MCG relies

on Shapiro v. Greenfield, 764 A.2d 270, 278 (Md. Ct. Spec. App.

2000),    to   assert     that      the     district      court   applied       the   wrong

standard, that case analyzes the corporate opportunity doctrine.

In contrast, this is a breach of contract case that turns on the

fulfillment of a condition precedent, and the cancellation or

rescission of the Investment Agreement.                     Mendieta did not usurp

a   corporate       opportunity      when     he   simply    ended       the    Investment

Agreement and resigned from MCG.                     As a result, the district

court did not need to decide whether Mendieta’s departure was

fair and reasonable to the corporation.

      MCG’s       Articles     of     Incorporation         vested       Mendieta          with

authority      as   the   sole      director.        As    sole   director,         Mendieta

could negotiate and contract on MCG’s behalf.                            Mendieta could

also end business dealings on MCG’s behalf, as happened here.

See Dialist Co. v. Pulford, 399 A.2d 1374, 1378 n.3 (Md. Ct.

Spec. App. 1979) (explaining the nature of a rescission).                              As a

result,     the     district        court    did     not    err    when        it    granted

Defendants’ motion for judgment on the pleadings, or, in the

alternative, summary judgment.

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      Accordingly, the order of the district court is affirmed.

We   dispense   with   oral   argument   because    the   facts   and   legal

contentions     are   adequately   presented   in   the   materials     before

this court and argument would not aid the decisional process.

                                                                   AFFIRMED

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