PRESENT: Carrico, C.J., Lacy, Hassell, Keenan, Kinser, and
Lemons, JJ., and Stephenson, S.J.
BILLIE A. GOLDING, t/a GOLDING APPRAISAL COMPANY
OPINION BY
v. Record No. 000142 SENIOR JUSTICE ROSCOE B. STEPHENSON, JR.
January 12, 2001
ROBERT K. FLOYD, JR., ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF ROANOKE
Paul F. Sheridan, Judge Designate
This appeal presents the question whether there exists
between the parties to an underlying action at law a binding
contract to settle the action.
I
The underlying law action involved the sale of an appraisal
business. Robert K. Floyd, Jr., and Richard J. Varney were to
purchase the business through Floyd & Varney, L.L.C.
(collectively, Floyd and Varney) from Billie A. Golding. When
the sale failed to transpire, Floyd and Varney opened their own
appraisal business, and Golding filed suit.
The parties agreed to mediate their dispute, and, on
December 10, 1998, a mediation conference was conducted. At the
conclusion of the conference, the parties signed a handwritten
document entitled "Settlement Agreement Memorandum" (the
Memorandum). The Memorandum contains 14 paragraphs, and the
final paragraph reads as follows:
14. This memo of settlement agreement contains
the highlights of the terms and conditions and the
parties agree to execute is subject to execution of a
formal agreement consistent with the terms herein.
(Emphasis added.) Thereafter, further negotiations failed, and
a formal agreement was never executed.
Floyd and Varney filed a motion to confirm the settlement
agreement and to dismiss the action. In response, Golding moved
for summary judgment, contending that the Memorandum was not a
binding agreement because, by its plain language, it was
"subject to" the execution of a formal agreement.
The trial court rejected Golding's contention and concluded
that an evidentiary hearing was required in order to determine
the intent of the parties. Following an evidentiary hearing,
the court ruled that a binding settlement had been reached when
the parties signed the Memorandum. Thereupon, the court
dismissed Golding's action with prejudice. We awarded Golding
this appeal.
II
It is firmly established that, when the terms of a contract
are clear and unambiguous, a court is required to construe the
terms according to their plain meaning. Bridgestone/Firestone
v. Prince William Square, 250 Va. 402, 407, 463 S.E.2d 661, 664
(1995); Foods First, Inc. v. Gables Associates, 244 Va. 180,
182, 418 S.E.2d 888, 889 (1992); Winn v. Aleda Const. Co., 227
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Va. 304, 307, 315 S.E.2d 193, 194-95 (1984). "The guiding light
. . . is the intention of the parties as expressed by them in
the words they have used, and courts are bound to say that the
parties intended what the written instrument plainly declares."
Magann Corp. v. Electrical Works, 203 Va. 259, 264, 123 S.E.2d
377, 381 (1962). Thus, if the intent of the parties can be
determined from the language they employ in their contract,
parol evidence respecting their intent is inadmissible. Amos v.
Coffey, 228 Va. 88, 91-92, 320 S.E.2d 335, 337 (1984). " 'An
ambiguity exists when language admits of being understood in
more than one way or refers to two or more things at the same
time.' " Id. at 92, 320 S.E.2d at 337 (quoting Renner Plumbing
v. Renner, 225 Va. 508, 515, 303 S.E.2d 894, 898 (1983)).
III
Golding contends, inter alia, that, "[a]s a matter of law,
the language in [the] Memorandum making [the] settlement
'subject to execution of a formal agreement' clearly and
unambiguously created a condition precedent and barred extrinsic
evidence." Floyd and Varney, on the other hand, contend that
the words, "subject to execution of a formal agreement," do not,
as a matter of law, mandate a finding that the Memorandum was
non-binding. They assert that the trial court correctly
considered extrinsic evidence to discern the intent of the
parties.
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Boisseau v. Fuller, 96 Va. 45, 30 S.E. 457 (1898), is
strikingly similar to the present case. In Boisseau, the
parties signed a document respecting the leasing of certain
property. The document designated the property to be leased,
the amount of rent to be paid, and the term of the lease.
However, the last sentence of the document stated the following:
"The above to be covered by a regular lease subject to approval
by all parties." Id. at 46, 30 S.E. at 457.
We held, in Boisseau, that, due to the document's last
sentence, there could not be a binding contract "until the
formal writing, contemplated by the language used, has been
prepared, approved, and executed, in accordance with the
intention of the parties." Id. at 48, 30 S.E. at 458. In so
holding, we stated the following:
"It comes, therefore, to this, that where you have a
proposal or agreement made in writing expressed to be
subject to a formal contract being prepared, it means
what it says; it is subject to and dependent upon a
formal contract being prepared. Where it is not
expressly stated to be subject to a formal contract it
becomes a question of construction whether the parties
intended that the terms agreed on should merely be put
into form, or whether they should be subject to a new
agreement, the terms of which are not expressed in
detail."
Id. at 47, 30 S.E. at 458 (quoting Winn v. Bull, 7 Ch. Div. 29-
32); accord Manss-Owens Co. v. Owens & Son, 129 Va. 183, 196,
105 S.E. 543, 547 (1921); Adams v. Hazen, 123 Va. 304, 320, 96
S.E. 741, 745 (1918).
4
Since Boisseau and until the present case, we are unaware
of any Virginia cases involving a writing that was expressly
"subject to" the execution of a formal contract. On the other
hand, we have found binding agreements, both oral and written,
where the parties' intention to be bound is objectively
manifested even though a subsequent formal agreement is
contemplated. See, e.g., Snyder-Falkinham v. Stockburger, 249
Va. 376, 457 S.E.2d 36 (1995); North American Mgrs. v. Reinach,
177 Va. 116, 12 S.E.2d 806 (1941); Agostini v. Consolvo, 154 Va.
203, 153 S.E. 676 (1930).
In Snyder-Falkinham, we affirmed the trial court's finding
that the plaintiff had orally agreed to a binding settlement,
and we concluded that her intention to compromise had been
objectively manifested. 249 Va. at 385, 457 S.E.2d at 41. We
reached this conclusion "even though [the] parties contemplated
that a formal, written 'Mutual Release and Settlement Agreement'
memorializing the compromise would be executed." Id. We also
noted that "'the mere fact that a later formal writing is
contemplated will not vitiate the agreement.'" Id. (quoting
Reinach, 177 Va. at 121, 12 S.E.2d at 808).
The distinction between Snyder-Falkinham and the present
case is apparent. In Snyder-Falkinham, the parties had fully
agreed, and the later formal writing was contemplated only as a
mere formality. In the present case, like Boisseau, the initial
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writing was made subject to and was dependent upon the execution
of a formal contract.
IV
We conclude, therefore, that the Memorandum in the present
case is clear and unambiguous, and no extrinsic evidence is
required, or even allowed, to ascertain the intention of the
parties as objectively manifested. Indeed, the Memorandum was
amended before the parties signed it by striking the language,
"the parties agree to execute" a formal agreement, and inserting
in its place the language that the Memorandum "is subject to
execution of" a formal agreement. The execution of a formal
agreement, therefore, was a condition precedent to the existence
of a binding contract. A formal contract was never executed; as
a result, no contract exists.
Thus, we hold that the trial court erred in finding the
existence of a binding contract and in dismissing the underlying
action. Accordingly, we will reverse and vacate the trial
court's judgment, reinstate Golding's cause of action, and
remand the case for further proceedings.
Reversed and remanded.
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