Court Opinion

ID: 2754112
Source: CourtListenerOpinion
Date Created: 2014-11-21 17:12:54.473315+00
Date Added: 2024-06-11T11:26:21.611615
License: Public Domain

STATE OF WEST VIRGINIA

                          SUPREME COURT OF APPEALS

Everett Hannah,                                                                  FILED
Plaintiff Below, Petitioner                                                November 21, 2014
                                                                            RORY L. PERRY II, CLERK
                                                                          SUPREME COURT OF APPEALS
vs) No. 13-1328 (Kanawha County 12-C-915)                                     OF WEST VIRGINIA

Douglas Tate, individually and in his capacity as
President and Director of Alpha Technologies, Inc.;
Alpha Technologies, Inc., and OODA, LLC,
Defendants Below, Respondents

                              MEMORANDUM DECISION
       Petitioner Everett Hannah, by counsel Herschel H. Rose III and Steven R. Broadwater,
appeals the final order of the Circuit Court of Kanawha County, entered November 22, 2013,
granting respondents’ motion for summary judgment. Respondents Douglas Tate, Alpha
Technologies, Inc., and OODA, LLC appear by counsel Webster J. Arceneaux III, Mark A.
Sadd, James C. Stebbins, Sang Ah Koh, and Timothy J. LaFon.

       This Court has considered the parties’ briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds no substantial question of law and no prejudicial error. For these
reasons, a memorandum decision affirming the order of the circuit court is appropriate under
Rule 21 of the Rules of Appellate Procedure.

        Petitioner filed a complaint in the Circuit Court of Kanawha County in May of 2012,
asserting causes of action against Respondent Alpha Technologies and Respondent Tate, Alpha’s
president and director, for breach of contract, fraud, and tortious interference based on
petitioner’s assertion that petitioner and respondents reached an “agreement in principle” to form
a partnership to purchase “Building 6000” from Union Carbide Corporation.

       Petitioner testified in a deposition that, in March of 2012, he had been in negotiations
with Union Carbide for the purchase of Building 6000, when he learned that Respondent Alpha
had made an offer to purchase the same building.1 Petitioner directed his representative, David
Bailey, to contact respondent. Mr. Bailey met with Charlie Dennie of Alpha, and later with
Respondent Tate, on April 6, 2012. Petitioner alleges that the parties agreed at that meeting that
they would jointly purchase Building 6000, with petitioner paying half the deposit and half the

       1
         In fact, uncontroverted evidence shows that Union Carbide accepted respondents’ offer
to purchase Building 6000, and that those parties reached an oral agreement prior to the relevant
events described in the body of this decision.

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purchase price, and Respondent Alpha acting as managing partner. Mr. Bailey also testified in
deposition and provided his version of events. He said that during the April 6th meeting, Mr.
Bailey provided Mr. Dennie and Respondent Tate information about lease negotiations with
Hewlett-Packard, a tenant of Building 6000, and also provided information about the possibility
of erecting a gas well on the Building 6000 property. Mr. Bailey testified that before he provided
this information, he asked Respondent Tate to verify that the parties “had a deal,” and
Respondent Tate verified that they did and shook hands. Petitioner asserts that Mr. Bailey
considered the information he shared with Mr. Tate that day confidential. However, Mr. Bailey
testified that it was information that Alpha could have obtained upon agreeing to buy the
property.

        The following day, April 7, 2012, Mr. Bailey sent electronic mail correspondence to
attorney Kent George, with copies to petitioner, Mr. Dennie, and Respondent Tate. In that e-
mail, Mr. Bailey set forth preliminary details about his understanding of the “agreement in
principal[,]” proposed contractual terms, and asked that Mr. George draft a contract for the
parties. The same day, Respondent Tate replied:

       I appreciate your time and effort with regards to the discussion we had yesterday.
       I do however need to clarify that while I am very interested in discussing options
       with you we do not have an agreement in place at this time; rather we have only
       agreed to discuss possibilities and options for creating a partnership by which we
       could possibly move forward with.

       We must fully understand all conditions and establish terms before I would
       consider such a business agreement. I look forward to speaking with you next
       week as we begin our discussions.

        Mr. Bailey responded that he would propose a partnership agreement to Respondent Tate,
and Respondent Tate could “comment on specifics.” Respondent Tate testified that he and
petitioner had no further discussions and did not meet until almost three weeks later, at which
time Respondent Tate told petitioner that his participation was not needed for the Building 6000
project. In the meantime, Respondent Tate (on behalf of Respondent Alpha) signed a purchase
and sale agreement with Union Carbide on April 9, 2012, consummating an oral deal that those
parties had reached as early as March. Respondent Tate formed Respondent Ooda, LLC in May
of 2012, and assigned Alpha’s purchase rights of Building 6000 to it.

       Shortly after these events, petitioner filed his complaint in the Circuit Court of Kanawha
County. After discovery, respondents filed a motion for summary judgment, which the circuit
court granted by order entered on November 22, 2013. The court found that the parties’
agreement of partnership was “executory and conditional” and thus did not support the formation
of a partnership, and that petitioner’s asserted damages were only lost profits that were not
recoverable because petitioner never contributed financially to the partnership. The court further
found that the language of Mr. Bailey’s April 7 e-mail showed that conditions and terms of
partnership were not established. This appeal followed.

                                                2

        The instant case is before this Court on appeal from a circuit court order granting
summary judgment. It is well established that “[a] circuit court’s entry of summary judgment is
reviewed de novo.” Syl. Pt. 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994). In
conducting our plenary review, we are mindful that “[a] motion for summary judgment should be
granted only when it is clear that there is no genuine issue of fact to be tried and inquiry
concerning the facts is not desirable to clarify the application of the law.” Syl. Pt. 3, Aetna Cas.
& Sur. Co. v. Federal Ins. Co. of New York, 148 W. Va. 160, 133 S.E.2d 770 (1963). With these
standards in mind, we consider the three assignments of error raised by petitioner: (1) that the
circuit court erred when it determined that there was no genuine issue of fact with respect to
petitioner’s claim for breach of contract; (2) that the circuit court erred when it determined that
there was no genuine issue of fact with respect to petitioner’s claim for fraud; and (3) that the
circuit court erred when it determined that there was no genuine issue of fact with respect to
petitioner’s claim for tortious interference.

        It is undisputed that the parties did not agree on substantial terms of a partnership (though
petitioner avers that the major terms—division of payment of purchase price and assignment of
the role of “managing partner”—were addressed2), and that the parties reduced no agreement to
writing. Petitioner supports his first assignment of error—that the circuit court erred in
determining that there was no genuine issue of fact with respect to the breach of contract claim—
with the suggestion that a jury could find that the parties had entered an enforceable “preliminary
agreement” of partnership. Specifically, he argues the existence of a “Type II” preliminary
agreement.3 Such agreements are described as those which

       do not commit the parties to their ultimate contractual objective. Rather, they
       commit the parties to negotiate the open issues in good faith in an attempt to reach
       the contractual objective within the agreed framework. Under this duty to
       negotiate in good faith, a party is barred from renouncing the deal, abandoning the
       negotiations, or insisting on conditions that do not conform to the preliminary
       agreement.

       2
         Contrary to the assertion that this term was settled, Mr. Bailey stated in his electronic
mail to Mr. George that he “envision[ed] Alpha being the managing partner.”
       3
         The United States Court of Appeals for the Fourth Circuit has recognized that “West
Virginia law is silent as to whether it recognizes the second type [“Type II”] of binding
agreement, but following the modern trend in contract law, and many state courts that have
recognized the pragmatism and commercial necessity of recognizing such agreements, we
suspect that it would. We note that West Virginia recognizes that ‘in every contract there exists
an implied covenant of good faith and fair dealing.’ Harless v. First National Bank in Fairmont,
162 W.Va. 116, 246 S.E.2d 270, 274 (1978).” Burbach Broadcasting Co. of Delaware v. Elkins
Radio Corp., 278 F.3d 401, 409 (4th Cir. 2002). Inasmuch as the evidence contained in the record
on appeal does not establish circumstances that would persuade us to find the existence of a
preliminary agreement, we do not consider at this time whether this type of binding agreement is
consistent with our jurisprudence.

                                                 3

Burbach Broadcasting Co. of Delaware v. Elkins Radio Corp., 278 F.3d 401, 407 (4th Cir.
2002)(citations omitted).4 Burbach Broadcasting Co. set forth five factors for consideration in
determining whether such an agreement was formed: “1) the language of the agreement, 2) the
existence of open terms, 3) whether there has been partial performance, 4) the context of
negotiations, and 5) the custom of such transactions.” Id. (quoting Teachers Insurance and
Annuity Assoc. of America v. Tribune Co., 670 F. Supp. 491, 499-503 (S.D.N.Y.1987).)

        Considering these factors in the light most favorable to petitioner, and assuming we
recognized a Type II agreement, we conclude that a Type II preliminary agreement was not
formed. The only possible “language of the agreement” in this case is contained in the electronic
mail exchange between Mr. Bailey and Respondent Tate, and that exchange reveals numerous
open terms. There is no evidence of partial performance. The “negotiations” were conducted
subsequent to respondents’ offer to purchase Building 6000, and in the midst of their exchanging
drafts of agreement with Union Carbide. While the parties have offered no evidence concerning
the custom of transactions like this one, we do not hesitate to agree with respondents that “most
prudent businesspeople contemplating a $6.1 million real property transaction would insist on
any arrangement to be in writing[,]” as Respondent Tate insisted in his April 7 electronic mail
response to Mr. Bailey. Accordingly, under the circumstances presented in the appendix record
on appeal, there could be no preliminary agreement binding on the parties.

       4
         Petitioner also argues that a jury could have found in his favor regarding the existence
of a “Type I” preliminary agreement, one

       meant to be formalized at a later date. West Virginia law recognizes that where
       the parties have fully agreed upon all of the matters about which they are
       negotiating, and have fixed their reciprocal obligations and rights so that the same
       cannot thereafter be changed without mutual consent, there is a valid and binding
       contract, notwithstanding the parties may agree that these agreements and
       understandings shall be subsequently reduced to writing and signed by the parties.
       Brown v. Western Maryland Ry. Co., 92 W.Va. 111, 114 S.E. 457, 460 (1922).

Burbach, 278 F.3d at 408.We disagree. Under the circumstances presented in this case, there is
no possibility that a trier of fact could find that the parties “fixed their reciprocal obligations and
rights” to such a degree. This is particularly true in light of the factors set forth for consideration
in Burbach Broadcasting Co. to determine whether a Type I agreement was formed:

       1) whether there has been an express reservation of the right not to be bound in
       the absence of a writing, 2) whether there has been partial performance of the
       contract, 3) whether all of the terms of the alleged contract have been agreed
       upon, and 4) whether the agreement at issue is the type of contract that is usually
       committed to writing. Adjustrite Systems, Inc. v. GAB Business Services, Inc., 145
F.3d 543, 549 (2nd Cir. 1998); see also Restatement (Second) of Contracts § 27
       cmt. c (1981).

Id.
                                                  4

       Next we address petitioner’s second assignment of error, wherein he argues that there
was a genuine issue of fact with respect to his claim for fraud. In West Virginia, the essential
elements in an action for fraud are:

       (1) that the act claimed to be fraudulent was the act of the defendant or induced by
       him; (2) that it was material and false; that plaintiff relied upon it and was
       justified under the circumstances in relying upon it; and (3) that he was damaged
       because he relied upon it.

Syl. Pt. 1, Lengyel v. Lint, 167 W.Va. 272, 280 S.E.2d 66 (1981). Petitioner bases his fraud claim
on his characterization of Mr. Bailey’s having divulged “confidential” information (that he states
was “previously unknown” to respondents) in exchange for Respondent Tate’s assurance that the
parties “had a deal.” However, as the circuit court explained, Mr. Bailey’s testimony clarified
that the information that he provided was not actually confidential in nature. More importantly,
there is no evidence that petitioner was harmed by Mr. Bailey’s disclosure, because the evidence
contained in the appendix record on appeal shows that respondents had orally agreed to the
purchase of Building 6000 (and, in fact, had reviewed a draft of a purchase agreement) prior to
the meeting of Mr. Bailey, Mr. Dennie, and Respondent Tate. We find no error on this issue.

        Finally, in his third assignment of error, petitioner argues that there was a genuine issue
of fact regarding his claim for tortious interference. He asserts that respondents misrepresented
that they had an agreement to enter a partnership with him, causing him to cease negotiations for
the purchase of Building 6000 with Union Carbide. According to syllabus point 2 of Torbett v.
Wheeling Dollar Sav. & Trust Co., 173 W.Va. 210, 314 S.E.2d 166 (1983), the elements of a
prima facie case for tortious interference are: 1) existence of a contractual or business
relationship or expectancy; 2) an intentional act of interference by a party outside that
relationship or expectancy; 3) proof that the interference caused the harm sustained; and 4)
damages. We find that Respondent Tate’s electronic mail response to Mr. Bailey, sent one day
after the meeting of Mr. Bailey, Mr. Dennie, and Respondent Tate, unequivocally clarified that
the parties had not formed a partnership. This fact sufficiently negates any inference that
respondents engaged in an “intentional act” directed at interfering with petitioner’s expectation
of a relationship with Union Carbide. Moreover, petitioner cannot prove that he had an
understanding of partnership that detrimentally caused him to abandon his plan to purchase the
building as a sole investor in light of Respondent Tate’s clear disavowal.

       For the foregoing reasons, we affirm.
                                                                                        Affirmed.

ISSUED: November 21, 2014

CONCURRED IN BY:
Chief Justice Robin Jean Davis
Justice Brent D. Benjamin
Justice Margaret L. Workman
Justice Menis E. Ketchum
Justice Allen H. Loughry II

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