JTH Tax, Inc. v. Gregory Aime

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 17-1859

JTH TAX, INC., d/b/a Liberty Tax Service; SIEMPRETAX+ LLC,

Plaintiffs - Appellants,

v.

GREGORY AIME; WOLF VENTURES, INC., d/b/a Wolf Enterprises; AIME
CONSULTING, LLC; AIME CONSULTING, INC.,

Defendants - Appellees.

No. 17-1905

JTH TAX, INC., d/b/a Liberty Tax Service; SIEMPRETAX+ LLC,

Plaintiffs - Appellees,

v.

GREGORY AIME; WOLF VENTURES, INC., d/b/a Wolf Enterprises,

Defendants - Appellants,

and

AIME CONSULTING, LLC; AIME CONSULTING, INC.,

Defendants.

Appeal from the United States District Court for the Eastern District of Virginia, at
Norfolk. Henry Coke Morgan, Jr., Senior District Judge. (2:16-cv-00279-HCM-DEM)
Argued: May 10, 2018 Decided: August 8, 2018

Before TRAXLER and DIAZ, Circuit Judges, and Richard M. GERGEL, United States
District Judge for the District of South Carolina, sitting by designation.

Affirmed in part, vacated in part, and remanded with instructions by unpublished opinion.
Judge Diaz wrote the majority opinion, in which Judge Traxler joined in full and Judge
Gergel joined in part. Judge Gergel wrote a separate opinion dissenting in part.

ARGUED: Allison Jones Rushing, WILLIAMS & CONNOLLY LLP, Washington,
D.C., for Appellants/Cross-Appellees. William Ryan Snow, CRENSHAW, WARE &
MARTIN, P.L.C., Norfolk, Virginia, for Appellees/Cross-Appellants. ON BRIEF:
Bradley D. Masters, WILLIAMS & CONNOLLY LLP, Washington, D.C., for
Appellants/Cross-Appellees. David C. Hartnett, CRENSHAW, WARE & MARTIN,
P.L.C., Norfolk, Virginia, for Appellees/Cross-Appellants.

Unpublished opinions are not binding precedent in this circuit.

2
DIAZ, Circuit Judge:

Gregory Aime operated nine tax preparation businesses in the New York area

under franchise agreements with JTH Tax, Inc. and SiempreTax+ LLC (collectively,

“Liberty Tax”). But when the IRS suspended Aime’s electronic filing number, he could

no longer prepare tax returns for his customers. So Aime and Liberty Tax entered into a

contract by which Liberty Tax would purchase and assume control over Aime’s

businesses. The contract also provided Aime the option to buy back his businesses if he

could get a new filing number from the IRS by a certain date. As the buyback deadline

approached, Aime’s chances of securing a new number on time looked bleak, and so

Liberty Tax offered to extend the deadline of the buyback option until the end of the year.

Soon after, the relationship between Aime and Liberty Tax went south. The parties sued

one another in federal court, each claiming the other had breached their agreement.

After a bench trial, the district court awarded over two million dollars to Aime.

The damages included reimbursement for certain expenses Liberty Tax owed under the

contract and profits Aime lost because he was unable to repurchase his franchises.

Critical to the judgment was the district court’s holding that Aime could enforce Liberty

Tax’s promise to extend the buyback deadline. Both parties appealed: Liberty Tax asks

for vacatur of the judgment and Aime seeks judgment on his fraud claim and attorney’s

fees.

We discern no error in the district court’s decision to reject Aime’s fraud claim

and request for attorney’s fees. Nor do we do disturb the district court’s determination

that Liberty Tax is liable for breach of contract. But we conclude the court erred when it

3
determined that Aime was entitled to lost profits based on the purported extension of the

buyback deadline. Under relevant contract principles, the modification of the deadline

needed to be supported by independent consideration in order to be enforceable. No such

consideration was present here. Without that foundational block, the agreement to

modify cannot stand. We therefore affirm in part, vacate in part, and remand to the

district court with instructions to enter a new judgment consistent with this opinion.

I.

Liberty Tax offers tax preparation and filing services to customers through

franchise locations around the country. Gregory Aime (individually and through several

business entities) operated nine franchise businesses in the New York City area pursuant

to agreements with Liberty Tax. Among other things, the franchise agreements required

Aime to maintain an Electronic Filing Identification Number (an “EFIN”) from the IRS.

An EFIN authorizes a commercial tax preparer to file his customers’ tax returns

electronically, and is required by law.

In January 2016, the IRS revoked Aime’s EFIN based on suspected fraudulent

activity. The franchise agreements allowed Liberty Tax to terminate its relationship with

Aime because of the revocation, but Liberty Tax chose not to do so. Instead, Aime and

Liberty Tax entered into a new, superseding contract: a Purchase and Sale Agreement

(the “PSA”). Under the PSA, Liberty Tax agreed to purchase Aime’s franchise locations

for a total of $1,107,580.36. Aime also promised to work with his landlords to assign

leases for his franchise properties to Liberty Tax. In the meantime, Liberty Tax assumed

4
responsibility for all expenses and liabilities relating to Aime’s franchises, including rent

and utilities.

The PSA also included a buyback provision, which gave Aime the option to

repurchase the franchises from Liberty Tax before May 8, 2016, if he received a new,

valid EFIN by that time. A buyback of the franchises would occur “pursuant to a

separate purchase and sale agreement between the parties” and subject to Liberty Tax’s

“standard sales and approval process.” J.A. 704. If a buyback took place, Liberty Tax

was to pay Aime “the Adjusted Net Profits . . . from the operation of the Business from

the date of Closing through resale of the Business.” Id.

In April 2016, John Hewitt, President and CEO of Liberty Tax, met with Marie

Fletcher, a former employee of Aime’s whom Liberty Tax had hired and assigned to

oversee the Aime franchises. During the meeting, Fletcher and Hewitt discussed Aime’s

efforts to obtain a new EFIN. Fletcher told Hewitt that Aime would likely not be able to

meet the May 8 deadline, but that she anticipated Aime would secure an EFIN later in the

year. Hewitt told Fletcher that he would extend the buyback deadline in the PSA until

December 31. At Hewitt’s request, Fletcher later communicated the extension to Aime

by phone.

Several weeks later, Aime sent an email to Hewitt, in which he expressed his

understanding that Aime was “graciously allowing” him to extend the PSA until

December. J.A. 816. Aime asked what steps he should take to “move forward” with the

extension and asked to set up an in-person meeting with Hewitt. Id. About a week after

that, Aime sent a second email to Hewitt asking to speak with him about the buyback.

5
Aime asked whether Liberty Tax would “like to switch leases over and handle a buyout”

or if it would “extend [the PSA] and work things out with the buyback.” J.A. 736.

Hewitt did not respond to either email.

Meanwhile, Liberty Tax asked Aime to assign it the leases for his business

properties, as the PSA required. The parties were unable to agree on the terms of the

assignment and Aime eventually changed the entry code used to access some of his

properties, effectively locking out Liberty Tax. The relationship between Aime and

Liberty Tax continued to sour until Liberty Tax sued Aime in federal district court in

Virginia. 1 Liberty Tax claimed that Aime breached the franchise agreements when the

IRS suspended his EFIN, and that he breached the PSA by continuing to use Liberty Tax

assets and failing to assign his leases. Aime countersued, contending that it was Liberty

Tax that first breached the PSA by failing to pay or reimburse Aime for utilities and other

obligations relating to the franchise properties. Aime also claimed that Liberty Tax

committed fraud by offering a bogus extension on the buyback option while never really

intending to let Aime repurchase the franchises. In September 2016, amid the litigation,

Aime finally received a new EFIN.

The case proceeded to a bench trial, after which the district court issued its

findings and conclusions. The court concluded that Liberty Tax breached the PSA first

by failing to pay rent and expenses related to the Aime franchises. It also held that

1
The parties consented through the PSA to personal jurisdiction in Virginia and
also selected Virginia as the source of applicable substantive law.

6
Liberty Tax had extended the deadline for Aime to repurchase his franchises to

December 31. Thus, Aime was entitled to reimbursement for the franchise-related

expenses Liberty Tax had agreed to cover (less repayment for certain loans Liberty Tax

had made to Aime). Liberty Tax also owed Aime lost profits for his franchises, based on

the assumption that Aime, armed with a new EFIN, would have exercised his buyback

option and repurchased the businesses by December 31. All told, the court awarded

Aime $2,736,896.17 in damages. The court denied Aime’s fraud counterclaim, finding

that it was not sufficiently distinct from his breach of contract allegation, and denied his

request for punitive damages and attorney’s fees.

Both parties appealed. Liberty Tax claimed the district court erred in granting

judgment in favor of Aime. Liberty Tax also contends the court erroneously excluded

certain evidence at trial relating to its franchise sale and approval process. Aime asserts

the district court erred by denying his fraud claim and denying him attorney’s fees.

II.

Much of this appeal turns on the answer to a single question: did Liberty Tax

validly extend the buyback provision of the PSA from May 8 to December 31? If there

was a valid extension, then Liberty Tax wrongfully deprived Aime of the opportunity to

repurchase his franchises, and he’s entitled to the profits he would have otherwise

enjoyed. But if there was no extension, then Aime could not have bought back his

businesses because he didn’t obtain a new EFIN by the May 8 deadline.

7
 Liberty Tax argues that the offer to extend the deadline didn’t result in an

enforceable contract because there was no consideration, Aime didn’t accept the offer,

and the agreement needed to be in writing to satisfy Virginia’s statute of frauds. The

district court found the extension valid and enforceable. We review the district court’s

conclusions of law de novo. See Helton v. AT&T Inc., 709 F.3d 343, 350 (4th Cir. 2013).

Because we find the issue of consideration dispositive, our discussion begins and ends

there. 2

Under Virginia law, the existence of a contract must be proven by showing there

was “a complete agreement which requires acceptance of an offer, as well as valuable

consideration.” Dean v. Morris, 756 S.E.2d 430, 432–33 (Va. 2014) (internal quotation

marks omitted). Just as any option requires valuable consideration to be binding in the

first instance, see Johnson v. Virginia-Carolina Lumber Co., 163 F. 249, 251 (4th Cir.

1908), an extension of an option also requires “some new and sufficient consideration” to

support it. Cummins v. Beavers, 48 S.E. 891, 893 (Va. 1904).

“Virginia has long followed the ‘peppercorn’ theory of consideration,” under

which even the most picayune promise may be enough to make an agreement binding.

Sfreddo v. Sfreddo, 720 S.E.2d 145, 153 (Va. Ct. App. 2012). Consideration can take the

form of a benefit bestowed or a detriment endured. Brewer v. First Nat’l Bank of

Danville, 120 S.E.2d 273, 279 (Va. 1961). Even a “slight advantage” or a “trifling

2
Liberty Tax argued to the district court that the extension lacked consideration,
but the district court didn’t directly address the issue in its findings and conclusions.
Because the argument was raised below, it’s ripe for our de novo review.

8
inconvenience” can suffice. R.K. Chevrolet, Inc. v. Hayden, 480 S.E.2d 477, 480 (Va.

1997). Whatever the form, consideration is “the price bargained for and paid for a

promise.” Brewer, 120 S.E.2d at 279.

That bargained-for price is wholly absent here. The consideration on the part of

Liberty Tax is simple enough: Hewitt promised to extend the buyback deadline until

December 31. But a corresponding promise on Aime’s behalf is nowhere to be found.

The PSA imposed upon Aime a series of obligations, including selling his franchises to

Liberty Tax; indemnifying Liberty Tax from franchise-related liabilities arising prior to

the sale; and transferring office leases to Liberty Tax at its request. Those obligations

had nothing to do with the later extension of the buyback deadline: the PSA obligated

Aime to perform those promises, and so his duty to perform existed with or without the

revised deadline. See Seward v. New York Life Ins. Co., 152 S.E. 346, 350 (Va. 1930)

(“The general rule is that a new promise, without other consideration than the

performance of an existing contract in accordance with its terms, is a naked promise

without legal consideration therefor and unenforceable.”). And the fact that the

repurchase offer was simply an option means that Aime could have declined to buy back

his franchises and Liberty Tax would have no recourse at all. 3

3
Had Liberty Tax offered to sell Aime back his franchises on December 31, and
Aime agreed to purchase them on that date, there likely would have been reciprocal
promises sufficient to bind one another. See Major v. Price, 84 S.E.2d 445, 448 (Va.
1954). But “an option given without a consideration . . . is simply an offer to sell, and
can be withdrawn at any time before acceptance.” Cummins, 48 S.E. at 893.

9
 Aime points to three possible forms of consideration. First, Aime argues that he

paid for certain expenses and utilities relating to the franchises and a call center when the

obligation to pay was Liberty Tax’s and not his. Second, Aime says, he continued to pay

rent for the franchises beyond the May 8 deadline contained in the PSA. Finally, Aime

contends that he made additional efforts to secure a new EFIN, and that had there not

been an extension offered by Liberty Tax, Aime would have had no reason to invest his

time and money pursuing his application.

Liberty Tax cavils a bit with these assertions. But even assuming they’re all true,

and that Aime had no independent obligation to perform them, none of these acts can

serve as consideration for the simple reason that there’s no evidence in the record that

they were bargained for. Hewitt didn’t ask Aime—directly, or even through Fletcher—to

perform any of those tasks in exchange for the deadline extension, nor did Aime offer to

do so.

Aime claims that it was obvious and foreseeable that he would undertake those

actions in light of the deadline extension—and he’s right. Certainly an extension of the

deadline would induce Aime to continue his work to obtain a new EFIN so that he could

reacquire his franchises. Certainly Liberty Tax knew that. But even so, foreseeable

inducement does not constitute consideration. Instead, that argument sounds in another

contract-related theory: the doctrine of promissory estoppel.

Promissory estoppel consists of “(1) a promise, (2) which the promisor should

reasonably expect to cause action by the promisee, (3) which does cause such action, and

(4) which should be enforced to prevent injustice to the promisee.” Mongold v. Woods,

10
677 S.E.2d 288, 292 (Va. 2009) (internal quotation marks omitted); see also Restatement

(Second) of Contracts § 90(1) (1981). Aime didn’t argue promissory estoppel here, and

for good reason: Virginia doesn’t recognize the claim. See Mongold, 677 S.E.2d at 292

(“[P]romissory estoppel is not a cognizable cause of action in Virginia.”); see also W.J.

Schafer Assocs. v. Cordant, Inc., 493 S.E.2d 512, 515–16 (Va. 1997) (recognizing same

and explicitly “declin[ing] to create such a cause of action”). Thus, we can’t enforce

Liberty Tax’s promise based solely on Aime’s reliance upon it, no matter how reasonable

or foreseeable that reliance may have been.

Our dissenting colleague suggests that we “presume[] that the Virginia Supreme

Court’s rejection of the doctrine of promissory estoppel implicitly overrules” a series of

cases that purportedly recognize “that where the formalities of a contract are present

(offer and acceptance), consideration will be found to be present where a promise

foreseeably induces the promisee to act to his detriment and to the benefit of the

promisor.” Dissent at 20. But we don’t conclude that the cited cases are no longer good

law; we simply read them differently. Though Virginia law may not be pellucid on this

point, we view the parties’ conduct in those cases as amounting to a reciprocal exchange

of promises (even if attenuated)—which is what is lacking here.

For example, in Looney v. Belcher, 192 S.E. 891 (Va. 1937), the bank officers

expressly promised Vandyke to “secur[e] and guarantee[] any loss which might accrue to

him on account of” his deposits with the bank in exchange for his promise not to move

his money elsewhere. Id. at 163; see also id. at 166 (guaranty made “in consideration of

the said Fred Vandyke making these deposits with said bank”). And Dulany Foods, Inc.

11
v. Ayers, 260 S.E.2d 196 (Va. 1979) and Twohy v. Harris, 72 S.E.2d 329 (Va. 1952) are

based on the well-recognized rule that in the context of at-will employment, an

employee’s continued work can serve as adequate consideration to make a change in the

terms of her employment (or some other promise) enforceable. See Dulany Foods, 260

S.E.2d at 200–01 (noting it wasn’t material “whether [the employees] continued to work

because they relied upon the promise of severance pay” because “such a promise

amounts to an offer, which, if accepted by performance of the service, fulfills the legal

requirements”); Twohy, 72 S.E.2d at 336 (describing the case as one where one party

“makes a promise conditioned upon the doing of an act by another”). All told, we see the

cases cited by our dissenting colleague not as overruled, but simply incongruous to the

facts before us.

The offer to extend the deadline lacks consideration, the cornerstone of contract.

Without it, Hewitt’s offer to extend the deadline was in effect a gratuitous promise, and

one a court can’t enforce. The district court erred in doing so, and therefore we must

vacate the judgment below to the extent it relied on the validity of the deadline extension.

Because the agreement to modify lacked the essential ingredient of consideration, we

need not decide whether Aime validly accepted the offer, or whether the statute of frauds

required that the agreement be reduced to a writing. 4

4
Liberty Tax also says that the district court abused its discretion in excluding
certain evidence relating to its sales and approval process. In short, Liberty Tax argues
that because the PSA appears to condition the buyback option on Liberty Tax’s “standard
sales and approval process,” J.A. 704, Liberty Tax’s promise to participate in the
buyback was in effect illusory because it was completely subject to the whims and
(Continued)

12
 III.

Aime contends the district court erred in refusing to grant judgment on his fraud

claim. According to Aime, Liberty Tax fraudulently induced him to enter into the PSA

while never intending to abide by its terms. Aime says Liberty Tax never planned to pay

the franchise expenses, nor was it ever going to sell him back his franchises (EFIN or

not). The district court, however, concluded that the allegations of that claim were not

sufficiently distinct from Aime’s claims for breach of contract and breach of the implied

covenant of good faith and fair dealing. Thus, the court explained, the claim was barred

by the independent tort doctrine.

Under Virginia law, fraud in the inducement occurs when a party to a contract

makes “a false representation of a material fact, constituting an inducement to the

contract, on which” the other party “had a right to rely.” George Robberecht Seafood,

Inc. v. Maitland Bros. Co., 255 S.E.2d 682, 683 (Va. 1979) (internal quotation marks

omitted). But the independent tort doctrine provides that “an action based upon fraud

must aver the misrepresentation of present pre-existing facts, and cannot ordinarily be

predicated on unfulfilled promises or statements as to future events,” lest “every breach

of contract . . . be made the basis of an action in tort for fraud.” Abi-Najm v. Concord

Condominium, LLC, 699 S.E.2d 483, 490 (Va. 2010) (quoting Lloyd v. Smith, 142 S.E.

363, 365 (Va. 1928)).

discretion of Liberty Tax. We need not resolve the issue given our conclusion that the
deadline extension is unenforceable for want of consideration.

13
 It’s true that an “action in tort for deceit and fraud may sometimes be predicated

on promises which are made with a present intention not to perform them,” when the

fraud is based not on “the breach of the agreement to perform, but the fraudulent intent.”

Id. (quoting Boykin v. Hermitage Realty, 360 S.E.2d 177, 178 (Va. 1987)). In such a

case, fraud arises because the “state of the promisor’s mind at the time he makes the

promise is a fact” and if the promisor represents his state of mind “as being one thing

when in fact his purpose is just the contrary, he misrepresents a then existing fact.” Id.

This isn’t such a case.

The record here doesn’t show a material misrepresentation made by Liberty Tax

before entering into the PSA with Aime. Liberty Tax’s mischief came later. As Aime

points out, the district court did state that Liberty Tax “never had any intention of

recognizing Mr. Aime’s right to repurchase the business.” J.A. 693. But taken as a

whole, the court’s findings and conclusions—supported by the record and consistent with

its judgment—explain the court’s belief that Liberty Tax, upon entering into the PSA,

didn’t take its obligations under the contract seriously. See, e.g., J.A. 694 (“[T]hey

simply looked upon the purchase and sale agreement as a piece of paper that they could

do with as they please, which, in fact, is what they did.”). Avoiding contractual

responsibilities may be lamentable, but it does not a fraud claim make. We therefore

affirm the district court’s decision to reject Aime’s claim of fraud. 5

5
And as the district court correctly noted, absent a viable fraud claim, Aime isn’t
entitled to attorney’s fees.

14
 IV.

Finally, we briefly address the issue of remedy. Our decision doesn’t affect the

district court’s conclusion that it was Liberty Tax that breached the PSA first by failing to

pay or reimburse certain expenses related to the Aime franchises. Any damages flowing

from that breach should remain, whether incurred before or after the May 8, 2016

buyback deadline. But as we’ve explained, the court erred in finding that Liberty Tax

and Aime validly extended the PSA’s buyback option, and so Aime wasn’t entitled to

damages resulting from Liberty Tax’s refusal to sell back his former franchises. On

remand, the district court should enter appropriate damages consistent with those

principles.

AFFIRMED IN PART, VACATED IN PART,
AND REMANDED WITH INSTRUCTIONS

15
GERGEL, District Judge, concurring in part and dissenting in part:

I respectfully dissent. I find my disagreement with my able colleagues in the

majority turns on a narrow, but defining issue: where parties have entered into an

agreement in which there is an offer and acceptance, can the promisor’s foreseeable

inducement of the promisee to act to his detriment and to the promisor’s benefit in

reliance upon a promise constitute valuable consideration under Virginia law? After a

careful review of Virginia case law, I conclude that such foreseeable induced reliance

constitutes valuable consideration, making the agreement between the parties an

enforceable contract.

I.

The defendants below (hereafter referred to collectively as “Aime”) operated nine

separate franchise locations in the New York City area under a franchise agreement with

plaintiffs (hereafter referred to collectively as “Liberty Tax”). In January 2016, the

Internal Revenue Service revoked Aime’s Electronic Filing Identification Number

(“EFIN”), which was required for Aime to file tax returns on behalf of its clients. This

created an imminent crisis for both franchisor and franchisee which threatened to bring

about the collapse of a viable and valuable business enterprise. To maintain the ongoing

operations of the franchises, Liberty Tax purchased the businesses under an Agreement

of Purchase and Sale (the “Agreement”), with the proviso that Aime would have the

option to buy back the businesses if Aime had the EFIN restored by May 8, 2016. The

Agreement provided that Liberty Tax would be responsible for all expenses of the

businesses after the Agreement was executed on January 21, 2016.

16
 The Agreement created powerful incentives for Aime to do what it could to

maintain the viability of the businesses while it pursued the reinstatement of the EFIN.

Any net profit made during the period from the sale of the businesses to Liberty Tax until

the buyback would be paid to Aime in the event it was able to repurchase the businesses.

In the event Aime was unable to buy back the businesses, the purchase price to be paid by

Liberty Tax to Aime would be reduced by any net losses suffered before the payoff date

of May 15, 2016.

Aime, although not required under the Agreement to pay ongoing business

expenses after January 21, 2016, continued to pay for rent, utilities, a call center, and a

central processing center in the hope of maintaining the viability of the business

operations while efforts were made to restore the EFIN. On April 8, 2016, a district

manager for Liberty Tax, Marie Fletcher, met with the CEO of Liberty Tax, John Hewitt,

concerning the status of Aime’s efforts to have the EFIN restored. Fletcher testified at

trial that she informed Hewitt that Aime would not be able to meet the May 8, 2018

deadline in the Agreement, but that the EFIN would likely be reinstated by October 2016.

Hewitt then told Fletcher that he would extend the buyback provision of the Agreement

until December 31, 2016, and authorized her to inform Aime of that decision. That same

day she informed Gregory Aime, the principal in the businesses, of Hewitt’s agreement to

extend the deadline.

Aime then responded in a foreseeable way by continuing to support the ongoing

expenses of the businesses after the May 8, 2016 deadline. Gregory Aime testified that

had he not been promised the extension of the deadline by Liberty Tax until December

17
31, 2016, he would have immediately ceased financially supporting the businesses after

May 8th.

The trial court, which tried the case without a jury, found the testimony of Fletcher

“credible” and “unrebutted.” The lower court noted that in pretrial motions, Liberty Tax

denied the meeting between Fletcher and Hewitt had occurred and contended that Hewitt

never promised to extend the buyback deadline. Hewitt did not appear at the trial, and

the trial court found that Hewitt’s course of conduct entitled Aime to a missing witness

adverse inference. The trial court further found that Hewitt’s conduct reflected the fact

that he never intended to allow Aime to repurchase its businesses and was essentially

stringing it on to keep the franchises operating. Additionally, Fletcher testified that

Liberty Tax offered to cover her expenses in a different case if she would not show up to

testify for Aime in this action. The trial court ultimately found that the offer by Liberty

Tax to extend the deadline until December 31, 2016 was accepted by Aime and that the

parties had an enforceable contract. The lower court awarded actual damages to Aime of

$2,736,896.17, for damages arising from Liberty Tax’s breach of contract.

II.

The critical issue in this appeal turns on whether there was consideration to

support the offer made by Liberty Tax on April 8, 2016 to extend the buyback deadline

that was subsequently accepted by Aime. There is no question there must be new

consideration to support the extension. The majority, while recognizing that Liberty

Tax’s promise to extend the buyback deadline would induce “obvious and foreseeable”

actions by Aime, concludes that Aime’s claim “sounds in . . . promissory estoppel,”

18
which the Virginia Supreme Court has clearly rejected as a freestanding equitable cause

of action. W.J. Schafer Associates, Inc. v. Cordant, Inc., 493 S.E.2d 512, 515–16 (Va.

1997).

While the majority is undoubtedly correct in recognizing the Virginia Supreme

Court’s firm rejection of the doctrine of promissory estoppel, there is a long line of

Virginia cases extending over decades that recognizes that where an offer has been made

and accepted, consideration may be found where the promisee was induced to act by the

promise to his detriment and to the benefit of the promisor. United Masonry Inc. of Va.

v. Riggs Nat’l Bank, 357 S.E.2d 509, 513–14 (Va. 1987) (“Sufficient consideration exists

if the promisee is induced to . . . to do something that he is not legally bound to do or

refrains from doing anything he has a legal right to do, or if the promisee acts in reliance

upon the waiver to his detriment”); Dulany Foods, Inc. v. Ayers, 260 S.E.2d 196, 200–

201 (Va. 1979) (“Ample authority sustains the view that such a promise [of an employer

to pay severance pay to employees] amounts to an offer, which, if accepted by

performance of the service, fulfills the legal requirements of a contract”); Brewer v. First

Nat’l Bank of Danville, 120 S.E.2d 273, 279–80 (Va. 1961) (Where a party, “relying in

part on the promise of the corporation to pay her the weekly salary for life, gave up her

positions as president and director of the corporation” and sold her stock at a fraction of

the value, the party had an enforceable contract for the payment of her weekly salary);

Twohy v. Harris, 72 S.E.2d 329, 335–36 (Va. 1952) (Where an employer promised an

employee stock if the employee stayed with the company, and the employee remained

with the company and performed his services for seven years, “[i]t is well settled that a

19
contract made under such circumstances is supported by valuable consideration”);

Looney v. Belcher, 192 S.E. 891, 893 (Va. 1937) (Where a bank customer refrained from

withdrawing his funds upon a guaranty of the bank officers to protect him against any

loss, “[t]here can be no question about the presence of a consideration sufficient to

support the guaranty bond . . . .”); Richmond Eng’g and Mfg. Corp. v. Loth, 115 S.E.

774, 787 (Va. 1923) (A promise by the owner of a building to pay the subcontractors if

they continued on the job after the contractor became insolvent “was adequate

consideration to support the promise, ‘though it has been but a peppercorn’”).

The majority presumes that the Virginia Supreme Court’s rejection of the doctrine

of promissory estoppel implicitly overrules this line of cases addressing when induced

reliance may constitute consideration under Virginia law. This, I believe, overreads the

Virginia Supreme Court’s ruling in W.J. Schafer and misapprehends the origins and

principles that underlay the United Masonry line of cases. Virginia adheres to the

“peppercorn” theory of consideration, in which even the most minimal thing of value

constitutes sufficient consideration. Sfreddo v. Sfreddo, 720 S.E.2d 273, 279 (Va. Ct.

App. 2012). Consistent with this broad interpretation of consideration, Virginia courts

have long recognized that where the formalities of a contract are present (offer and

acceptance), consideration will be found to be present where a promise foreseeably

induces the promisee to act his detriment and to the benefit of the promisor. This legal

principle, adopted in United Masonry and other Virginia cases going back nearly a

century, sounds in the common law, not in equity.

20
 Promissory estoppel, which Virginia clearly rejects, is an equitable cause of action

that seeks to enforce a promise where not to do so would create an injustice. Under

promissory estoppel, there is no requirement of offer and acceptance, simply a promise

which foreseeably induces a person to act to his detriment. Mongold v. Woods, 677 S.E.

2d 288, 292 (Va. 2009). The recognition of this cause of action has been promoted in the

First and Second Restatement of Contracts, Section 90(1). Some, including the Virginia

Supreme Court, have viewed such a cause of action as conceptually unmoored and

potentially creating an avalanche of litigation on the slimmest of evidence.

In rejecting the equitable cause of action of promissory estoppel in W.J. Schafer,

the Virginia Supreme Court did not suggest in any way that it was intending to overrule

the United Masonry line of cases. This Court has previously and wisely held that “[a]

subsequent decision cannot, by mere implication, be held to overrule a prior case unless

the principle is directly involved and the inference clear and impelling.” Kestler v. Board

of Trustees of North Carolina Local Gov’t Employees’ Retirement System, 48 F. 3d 800,

804 (4th Cir. 1995), quoting Cole v. Cole, 51 S.E. 2d 491, 494 (N.C. 1949).

The majority further asserts that the United Masonry line of cases is “simply

incongruous to the facts before us.” While each of these cases arises out of a set of

circumstances not factually identical to the matters presented here, this body of case law

consistently stands for the proposition that where parties have had a meeting of the minds

on offer and acceptance, sufficient consideration will be found to be present where it is

foreseeable that the promise will induce the promisee to act to his detriment and to the

benefit of the promisor. The bargained for exchange is inferred to be present from the

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foreseeable consequences of the promise since it is to be anticipated that the promise will

induce the promisee to act, producing the required consideration to make the agreement

an enforceable contract.

The trial court found that Liberty Tax offered to extend the buyback deadline in

the Agreement from May 8, 2016 until December 31, 2016 and that Aime accepted that

offer. The trial court further found that after May 8, Aime continued to pay for utilities

and other services for the businesses, which Gregory Aime and Ms. Fletcher testified

would not have been done but for the promise made by Liberty Tax. There is ample

record evidence to support these findings. The majority recognizes that Liberty Tax’s

promise to extend the deadline for the buy back until December 31, 2016 induced

“obvious and foreseeable” actions by Aime, including the continued payment of business

expenses after May 8, 2016 that would have never occurred but for Liberty Tax’s

promise. I believe the United Masonry line of cases remains good law in Virginia and

provides ample support to find the presence of valuable consideration under these facts,

making the agreement an enforceable contract. * I would, consequently, affirm the lower

court’s finding that Aime had an enforceable contract to extend the buyback deadline.

*
Although state trial court decisions are not controlling precedent, I find it
instructive that the Loudoun County Circuit Court in Cardinal Bank v. Britt Construction,
Inc., held that while promissory estoppel is not recognized in Virginia, “detrimental
reliance may serve as the basis for consideration in the case of a lien waiver.” 68 Va. Cir.
520, 2004 WL 2877385, at *2 (Va. Cir Ct. 2004) (citing United Masonry, 357 S.E.2d at
513–14).

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 III.

Liberty Tax further argues that even if the offer to extend the deadline for the

buyback included acceptance and consideration, the agreement is unenforceable due to

the Statute of Frauds. It is well settled under Virginia law that the Statute of Frauds

applies “only if both parties to an oral contract are incapable of performing their

contractual obligations within one year of the contract’s formation.” Blue Sky Travel &

Tours, LLC v. Al Tayyar, 606 Fed. App’x 689, 694 (4th Cir. 2015) (emphasis in the

original) (citing Silverman v. Bernot, 239 S.E.2d 118, 121 (Va. 1977)). Since the oral

agreement, reached in April 2016 and modifying an agreement made in January 2016,

simply extended the deadline to exercise the buyback option until December 31, 2016,

the contract was fully performable within one year. I agree with the trial court that the

Statute of Frauds does not bar enforcement of this agreement.

Further, Liberty Tax would be equitably estopped from asserting the Statute of

Frauds under these circumstances. Virginia law recognizes that a party may be equitably

estopped from asserting the Statute of Frauds where (1) a material fact was falsely

represented or concealed; (2) the representation was made with the knowledge it was

false; (3) the party receiving the representation was unaware it was false; (4) the

representation was intended to be relied upon; (5) the other party was induced to act; and

(6) the other party was misled to his injury. Boykins Narrow Fabrics Corp. v. Weldon

Roofing and Sheet Metal, 266 S.E.2d 887, 890 (Va. 1980). The lower court’s findings

and the record before this Court fully support each of the elements of equitable estoppel,

barring Liberty Tax from asserting this defense.

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 IV.

I concur in the majority’s affirmance of the lower court’s decision denying

judgment on the fraud claim and in awarding damages to Aime for Liberty Tax failing to

reimburse Aime for expenses incurred after January 21, 2016, as mandated in the

Agreement. I would affirm the decision of the lower court in all respects. Since that

conclusion is not shared by my colleagues, I respectfully dissent.

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