SHALLOWBAG BAY DEVELOPMENT COMPANY, LLC, Plaintiff-Appellant, v.
THE CURRITUCK ASSOCIATES - RESIDENTIAL PARTNERSHIP, Defendant-
Appellee
2. Compromise and Settlement--motion to enforce settlement agreement--meeting of
minds--statute of frauds--doctrine of frustration of purpose
The trial court did not err by granting appellee's motion to enforce the parties' settlement
agreement regarding the purchase of property, because: (1) a valid offer was made and accepted
in the correspondence between the parties, thus showing the parties reached a meeting of the
minds; (2) the statute of frauds does not require all of the provisions of the contract to be set out
in a single instrument and a memorandum is sufficient if the contract provisions can be
determined from separate but related writings; (3) in the instant case, the correspondence
identified the parties, the purchase price, and the property to be sold; (4) sufficient evidence
existed to support the trial court's determination that appellants' counsel had the authority to
bind his clients and appellants have not rebutted the presumption that their counsel acted on their
behalf; and (5) assuming arguendo that a water shortage would destroy the value of the property
included in the settlement agreement, appellants have not reasonably protected themselves by the
terms of the settlement agreement, it was unconvincing to argue that appellants could not
reasonably foresee a condition in 2002 that they had prepared for in 1996, and there was no
implied condition to the contract that a changed condition would excuse performance in order for
the doctrine of frustration to apply.
Judge HUNTER dissenting.
POYNER & SPRUILL, L.L.P., by J. Nicholas Ellis, Esq., for
appellee.
RAGSDALE LIGGETT P.L.L.C., by George R. Ragsdale and Walter L.
Tippett, Jr., for appellants.
TIMMONS-GOODSON, Judge.
In separate appeals, Shallowbag Bay Development Company,
L.L.C. (Shallowbag) and Ray E. Hollowell, Jr. (Hollowell)
(collectively, appellants) appeal the trial court order
dismissing their claims. Prior to argument, the appeals were
consolidated pursuant to N.C.R. App. P. 40 (2004). After reviewing
the merits of the consolidated appeal, we affirm the trial court's
order.
The facts and procedural history pertinent to the instant
appeal are as follows: In February 1996, The Currituck Associates-
Residential Partnership (appellee) and appellants entered into a
contract whereby appellee would sell appellants a 9.2 acre parcel
of property located in Currituck County (the contract). The
parcel was located within The Currituck Club (Currituck Club) a
Planned Unit Development in Currituck County. Portions of
Currituck Club had previously been developed by appellee.
Appellants planned to name the parcel Windswept Ridge Villas
(Windswept Ridge) and construct ninety-six residential
condominium units on it.
The contract contemplated a six-year take down of seven pieces of the property designated pads by the parties. On 20
March 1997, the parties closed the sale of the first pad. After
two modifications of the contract, the parties closed the sale of
the second pad on 12 January 1999. On 1 September 1999, the
parties closed the purchase of the third pad. However, the parties
failed to close the sale of the fourth pad, which was contemplated
for Fall 2000.
On 30 April 2001, appellee notified Hollowell that appellants
were in default under the contract. On 1 June 2001, appellee filed
a Complaint against Hollowell and requested that the trial court
declare that Hollowell materially breached the [contract] and
[appellee] is therefore discharged from further obligations
thereunder or, in the alternative, for a declaration of the rights
and duties of the parties under the [contract][.] Hollowell filed
an Answer and Counterclaim on 20 September 2001, claiming that
appellee had breached the contract and requesting damages and
specific performance of the terms of the contract. That same day,
Shallowbag Bay filed a Complaint against appellee, alleging the
same breach and requesting the same remedies as Hollowell's Answer
and Counterclaim.
Appellee initiated discovery in the litigation and the parties
scheduled witness depositions for Summer and Fall 2002. On 28
August 2002, appellants' counsel extended a settlement offer to
appellee, whereby appellants would close on the remaining pads by
15 January 2002 for an agreed upon price. In a letter dated 30
August 2002, appellee's counsel responded to the offer and accepted
many of its terms. Appellee also proposed that it have an optionto repurchase the third pad if appellants failed to close the
purchase of pads four through six by 15 January 2003. On 30 August
2002, appellants' counsel sent appellee's counsel a letter
accepting appellee's proposal. Appellants suggested that the only
issue preventing the parties from settling their claims was the
marketing of the condominiums after purchase.
On 3 September 2002, appellee's counsel confirmed via email
that an agreement between the parties had been reached regarding
appellants' marketing of Windswept Ridge. The email also stated
that in view of our settlement, please permit this e-mail to
confirm [that] the depositions scheduled for later this week will
not take place. On 6 September 2002, appellee's counsel sent an
email to appellants' counsel, attaching a Mutual Release and
Settlement Agreement that outlined the parties' agreement.
On 2 October 2002, appellee's counsel solicited appellants'
comments regarding the Mutual Release and Settlement Agreement.
Appellants' counsel responded that he had hoped to have the draft
purchase agreement in place for attachment to his response, but
that he would nevertheless forward the settlement agreement to
[appellee's counsel] [on 3 October 2002] with or without [the
comments]. On 3 October 2002, appellants' counsel sent appellee's
counsel an email describing his changes to the initial draft of
the settlement agreement. Attached to the email was a copy of the
redlined changes. The email stated that appellants' counsel
must reserve the right to supplement or change [his] comments
after [Hollowell's] review. The email outlined the revised
document and noted that appellant would like to have a full blownpurchase contract replace a portion of the Mutual Release and
Settlement Agreement that concerned the purchase of pads four
through six. On 16 October 2002, appellee's counsel responded to
appellants' email and outlined various points to discuss
concerning the agreement.
At appellants' request, Quible and Associates, P.C. (Quible)
prepared data regarding Currituck Club's water system in November
2002. After reading Quible's report, appellants became concerned
about the supply of potable water in Currituck Club. After
appellants' counsel notified appellee's counsel about these
concerns, the parties began communications regarding the execution
of a storm water management easement and deed.
On 16 December 2002, appellee's counsel sent appellants'
counsel an email inquiring whether the deal [was] going to close
by Jan. 15. Appellee's counsel indicated that he was starting to
have [] doubts that [appellants] [were] going to purchase Pads 4-
6. On 23 December 2002, appellants' counsel sent appellee's
counsel a draft contract outlining the terms of a Purchase
Agreement. Appellee's counsel responded with two emails on 23
December 2002. The first email included comments on the Purchase
Agreement. The second email contained the following statements:
The parties have a settlement. [Appellants]
cannot now come up with some issues to try
to back out of the agreement.
I hope we're not getting to this point, but I
do want to make sure your client realizes that
this agreement will be enforced.
The parties did not close the purchase of pads four through
six by 15 January 2003. Instead, their counsel continued tonegotiate terms of the storm water easement and deed. In Spring
2003, appellants became increasingly concerned about the adequacy
of the potable water available to Currituck Club, as well as legal
issues surrounding Currituck Club's water supplier. On 7 March
2003, appellee informed appellants that if they did not close the
purchase of pads four through six by 21 March 2003, it would
exercise its option to repurchase pad three.
The parties failed to close the purchase of pads four through
six by 21 March 2003, and on 4 April 2003, appellee filed a Motion
to Enforce Settlement Agreement in Dare County Superior Court. In
an order filed 22 May 2003, the trial court concluded that the
parties had reached an agreement in September 2002 that satisfied
the requirements of the statute of frauds. The trial court then
granted appellee's motion to enforce the settlement agreement, and
it ordered that appellee be given sixty days to exercise its option
to repurchase pad three. The trial court also dismissed
appellants' claims with prejudice and taxed attorneys' fees and
costs against appellants. It is from this order that appellants
appeal.
On 3 September 2002, appellants' counsel sent appellee's
counsel an email stating:
I received your message and am pleased that we
have reached an agreement. Please permit this
email to confirm that Mr. Hollowell will hirean inside marketing agent/broker to handle
sales of the villas and will not engage the
services of an independent, third-party
brokerage company. The remaining terms of the
settlement agreement are consistent with those
stated in our recent series of correspondence.
Further, in view of our settlement, please
permit this email to confirm the depositions
scheduled for later this week will not take
place. . . .
On 6 September 2002, appellee's counsel sent the following
email to appellants' counsel:
Here's the Mutual Release and Settlement
Agreement I've drafted. Please contact me
ASAP and let me know if any changes are
necessary. If not, I'll have duplicate
originals executed by our folks and you can
have [appellant] do the same.
Based upon these communications, the trial court concluded
that a valid settlement agreement existed between the parties on 6
September 2002.
Appellants first contend that the trial court erred in finding
that the parties had reached a meeting of the minds. We disagree.
If supported by competent evidence, a trial court's findings
of fact are conclusive on appeal. Hill v. Town of Hillsborough, 48
N.C. App. 553, 558, 269 S.E.2d 303, 306 (1980). [M]utual assent
and the effectuation of the parties' intent is normally
accomplished through the mechanism of offer and acceptance.
Snyder v. Freeman, 300 N.C. 204, 218, 266 S.E.2d 593, 602 (1980).
In the instant case, the 28 August 2002 letter established
appellants' willingness to revisit settlement options and their
attempt to enter into a new agreement. The letter concluded by
acknowledging its status as an offer. In appellee's response to
this letter on 30 August 2002, appellee's counsel acknowledged apossibility of settlement between the parties, accepted all but one
of appellants' offered terms, and proposed an additional term. In
his response sent the same day, appellants' counsel acknowledged
that the parties were very near agreement, and immediately
accepted the additional term proposed by appellee. Appellants'
counsel then discussed his client's position on the sole matter
remaining in dispute, and he invited appellee's counsel to call
him with a response as early as that afternoon. In the email sent
to appellee's counsel on 3 September 2002, appellants' counsel
stated that he was pleased that [the parties] [had] reached an
agreement. The email confirm[ed] that the sole matter
remaining in dispute on 30 August 2002 had been settled, and, in
view of [the] settlement, it confirm[ed] the depositions
scheduled for later [that] week w[ould] not take place. Thus, a
valid offer was made and accepted in the correspondence between the
parties. Therefore, we conclude the correspondence sufficiently
supports the trial court's finding that the parties reached a
meeting of minds.
While a meeting of the minds is essential to form an agreement
between the parties, a contract is nugatory and void for
indefiniteness if it leaves any material portions open for future
agreement. Boyce v. McMahan, 285 N.C. 730, 734, 208 S.E.2d 692,
695 (1974). Defendants contend the agreement in the instant case
is null and void because no final writing was ever executed by the
parties. However, noting that the statute of frauds does not
require all of the provisions of the contract to be set out in a
single instrument[,] our Supreme Court has stated that [t]hememorandum . . . is sufficient if the contract provisions can be
determined from separate but related writings. Hines v. Tripp,
263 N.C. 470, 474, 139 S.E.2d 545, 548 (1965); N.C. Gen. Stat. §
22-2 (2003). We conclude the correspondence in the instant case
was sufficient to satisfy the requirements of Hines.
The 28 August 2002 letter from appellants' counsel to
appellee's counsel contained the purchase price of pads four
through six as well as the date by which the purchase must have
been closed. Both the 28 August 2002 letter and appellee's 30
August 2002 reply contained a sufficient description of the land to
be sold. Each correspondence made clear that appellants were the
buyers and appellee was the seller. Thus, the correspondence
identified the parties, the purchase price, and the property to be
sold. These are the essential elements of the contract. Yaggy
v. B.V.D. Co., 7 N.C. App. 590, 600, 173 S.E.2d 496, 503, cert.
denied, 276 N.C. 728 (1970). Therefore, we conclude that the trial
court did not err in finding that the terms of the settlement
agreement could be determined from the correspondence between the
parties' attorneys.
Appellants also contend that because the settlement agreement
in the instant case was agreed to by their counsel it was not
signed by the party to be charged therewith, and therefore
violates the statute of frauds. N.C. Gen. Stat. § 22-2. We
disagree.
[T]he statute [of frauds] expressly recognizes that the
writing which it requires may be signed by an agent, and it has
long been established that the authority of the agent to do so neednot be in writing. Yaggy, 7 N.C. App. at 600-01, 173 S.E.2d at
503. Nevertheless, [s]pecial authorization from the client is
required before an attorney may enter into an agreement discharging
or terminating a cause of action on the client's behalf. Harris
v. Ray Johnson Constr. Co., 139 N.C. App. 827, 829, 534 S.E.2d 653,
655 (2000). However, there is a presumption in North Carolina in
favor of an attorney's authority to act for the client he professes
to represent. Id. Thus, [o]ne who challenges the actions of an
attorney as being unauthorized has the burden of rebutting this
presumption and proving lack of authority to the satisfaction of
the court. Id.
In the instant case, as detailed above, the correspondence
between counsel commenced with appellants' counsel making an offer
on appellants' behalf, after first noting that he had revisited
settlement options with appellants and that appellants were
willing to settle[.] Hollowell was copied via facsimile and U.S.
mail on each correspondence letter sent to appellee's counsel,
including the 28 August 2002 letter opening negotiations and the 30
August 2002 letter stating that [w]e have reviewed your letter and
are very near agreement. Thus, we conclude sufficient evidence
exists in the instant case to support the trial court's
determination that appellants' counsel had the authority to bind
his clients. Furthermore, appellants have not rebutted the
presumption that their counsel acted on their behalf. Therefore,
we hold that the trial court did not err in making its conclusion
that the settlement agreement in the instant case was a valid
contract. Appellants maintain that the potential problems with the
supply of water for Currituck Club ruined the value of the property
they were to purchase under the settlement agreement. Appellants
assert that because their purpose in purchasing the property was
frustrated, the settlement agreement should be rescinded even if we
conclude it is valid. However, assuming arguendo that a water
shortage would destroy the value of the property included in the
settlement agreement, we nevertheless decline to rescind the
contract in the instant case.
The doctrine of frustration of purpose operates as a defense
to a contract only if the frustrating event was not allocated to
the complaining party by the terms of the contract and was not
reasonably foreseeable to the party. Brewer v. School House, Ltd.,
302 N.C. 207, 211, 274 S.E.2d 206, 209 (1981). The
doctrine . . . is based upon the fundamental premise of giving
relief in a situation where the parties could not reasonably have
protected themselves by the terms of the contract against
contingencies which later arose. Faulconer v. Wysong & Miles Co.,
155 N.C. App. 598, 601, 574 S.E.2d 688, 691 (2002) (quoting 17 Am.
Jur. 2d Contracts § 401 (1964)).
In the instant case, we conclude appellants could have
reasonably protected themselves by the terms of the settlement
agreement. As appellants admit in their brief, [t]he 1996
Contract provided protections to Appellants in the form of a
representation that adequate water treatments [sic] facilities were
present or would be constructed and a certain level of water and
sewer capacity would be available. However, appellants chose notto seek such protection by adding a similar provision to the
settlement agreement, although the settlement agreement concerned
the same property and parties as the 1996 Contract. We are
unconvinced that appellants could not reasonably foresee a
condition in 2002 that they had prepared for in 1996. Furthermore,
for the doctrine of frustration to apply, there must be an implied
condition to the contract that a changed condition would excuse
performance. Id. at 602, 574 S.E.2d at 691. After reviewing the
correspondence between the parties, including the Mutual Release
and Settlement Agreement, we conclude no such condition exists in
the instant case. Therefore, we hold that the trial court did not
err in enforcing the settlement agreement.
Affirmed.
Chief Judge MARTIN concurs.
Judge HUNTER dissents.
HUNTER, Judge, dissenting.
Since the parties did not reach a meeting of the minds and
create an executed document setting out the terms of the settlement
agreement, I disagree with the majority's conclusion that the trial
court properly granted the Motions To Enforce Settlement Agreement,
and therefore, I respectfully dissent.
I disagree with the trial court's findings and conclusions
that there was a settlement agreement between the parties on 6
September 2002. For our appellate review, the findings were not
supported by competent evidence. Hill v. Town of Hillsborough, 48
N.C. App. 553, 558, 269 S.E.2d 303, 306 (1980). Likewise, [t]he
conclusions of law drawn by the trial court from its findings offact are fully reviewable de novo by the appellate court. Mann
Contr'rs, Inc. v. Flair with Goldsmith Consultants-II, Inc., 135
N.C. App. 772, 775, 522 S.E.2d 118, 121 (1999) (citing Humphries v.
City of Jacksonville, 300 N.C. 186, 187, 265 S.E.2d 189, 190
(1980)).
Here, the trial court's conclusions are not sufficiently
supported by competent evidence. Appellee filed a breach of
contract suit against appellants on 1 June 2001 and appellants
filed a counter lawsuit against appellee on 20 September 2001.
Before these cases were heard, the parties engaged in extensive
negotiations to settle their contested claims. Appellee eventually
filed motions to enforce the terms of the negotiations, which were
granted by the trial court.
Courts should be extremely cautious in determining that
parties have entered into a settlement agreement when the only
evidence is multiple correspondence and documents exchanged between
their counsel, but no documents signed by the parties which
formalize the agreement. Here, the parties' counsel, through e-
mails and letters, constantly stated that execution of a
settlement agreement was a provision to settling their claims.
All terms were never completely agreed upon, and even if they were,
the parties never signed a document finalizing the agreement.
For a valid contract to exist, the parties must have a meeting
of the minds concerning material terms. Chappell v. Roth, 353 N.C.
690, 548 S.E.2d 499 (2001). In that case, our Supreme Court
opined:
The mutually agreeable release was part of
the consideration, and hence, material to thesettlement agreement. The parties failed to
agree as to the terms of the release, and the
settlement agreement did not establish a
method by which to settle the terms of the
release. Thus, no meeting of the minds
occurred between the parties as to a material
term; and the settlement agreement did not
constitute a valid, enforceable contract.
Id. at 693, 548 S.E.2d at 500.
As in Chappell, there was no meeting of the minds in the case
now before us. The parties' correspondence shows that negotiations
and revisions of the settlement documents went before and beyond 6
September 2002. The evidence tends to show through the
correspondence that both parties' counsel had agreed on (1) the
numbered items that appellants proposed on 28 August 2002, (2)
appellee's suggested buy-back clause of Pad 3 proposed on 30
August 2002, and (3) appellant's marketing capabilities on 3
September 2002. However, the parties never agreed to all of the
terms of the final document, and its execution was a material fact
and condition to the parties having an agreement.
In contrast, in Bank v. Wallens and Schaaf v. Longiotti, 26
N.C. App. 580, 217 S.E.2d 12 (1975), this Court opined that
reference to a more complete document does not necessarily indicate
that material portions of the agreement have been left open for
future negotiations. It could mean only that immaterial matters,
which are of no consequence, will be added to complete the
agreement. Id. However, in the case before us, the final document
was material to their agreement. The parties' counsel made changes
to it until 7 March 2003, in order for the agreement to be executed
and finalized at closing, which never occurred.
Starting on 25 February 2002 with appellee's counsel offeringto settle with an execution of a settlement agreement, the
parties began to show their intent not to be bound until they
executed a settlement agreement. Appellants' willingness to settle
on 28 August 2002 was based on termination of the current contract
(and its modifications) and the execution of a new agreement[.]
Appellee did not object to that requirement in its 30 August 2002
e-mail response and counsel stated [he was] going to refer to
[appellants'] August 28, 2002 letter to [him] because that
contain[ed] the most recent settlement parameters.
Then, on 3 September 2002, appellants' counsel stated in an
email that he was pleased that [they had] reached an
agreement. . . . The remaining terms of the settlement agreement
[were] consistent with those stated in [their] recent series of
correspondence. That recent series of correspondence included
both parties agreeing that they wanted the execution of a
settlement agreement, a mutual release and a non-disparagement
clause. In response to appellants' counsel's e-mail, on 6
September 2002, appellee's counsel sent an e-mail with an attached
Mutual Release and Settlement Agreement, and he asked to be
notified if any changes were necessary.
The evidence also tends to show that in the 2 September 2002
e-mail to appellee's counsel, appellants' counsel stated in view
of [the] settlement, please permit [that] e-mail to confirm the
depositions scheduled for later [that] week [would] not take
place. On 23 December 2002, appellee's counsel stated [t]he
parties ha[d] a settlement. [Appellant could not] now come up with
some 'issues' to try to back out of the agreement. Nevertheless,these statements do not undermine both parties' expressed desire to
have an executed contract and their continuous negotiations to
finalize their agreement by executing a document setting it out.
After 6 September 2002, the parties continued to negotiate in
correspondence dated 2 October 2002, 3 October 2002, 16 October
2002, 26 November 2002, 2 December 2002, 16 December 2002, 19
December 2002, 23 December 2002, 3 January 2003, 8 January 2003, 14
January 2003, 7 March 2003 and 24 March 2003. On 2 October 2002,
appellee's counsel asked for comments on the Settlement Agreement
so [they could] keep [the] settlement moving towards
finalization. On 11 November 2002, the parties began to have
additional communication involving appellants' concerns about the
potable water system in the Currituck Club. On 8 January 2003,
appellants' counsel stated his client had deposited money in the
trust account for use in closing the transaction contemplated by
[their] settlement negotiations in the event a settlement [was]
ever reached. Because of the water supply concerns, a stormwater
easement was included on 14 January 2003 as an additional document
to finalize the agreement, which did not exist on 6 September 2002.
On 7 March 2003, appellee's counsel offered:
[I]f [appellants did] not desire to sell back
Pad 3 to [appellee], but prefer[ed] to retain
it, that would be satisfactory. . . . [He]
believe[d they could] conclude the settlement
by simply having documents executed that
relieve[d appellants] from any obligation to
purchase Pads 4-6 and relieve[d appellee] of
any obligations to sell [appellants] Pads 4-6.
This email shows that appellee was offering terms different from
what the parties had negotiated by 6 September 2002. Furthermore,
as late as 24 March 2003, appellee's counsel sent an e-mail inresponse to a telephone conversation with appellants' counsel the
previous week. It suggested that appellants had proposed different
terms to replace the previous negotiations, including that
appellants did not intend to buy Pads 4-6 and wanted to sell to
appellee their two condos in the Currituck Club. These last
communications between appellee and appellants indicate that the
parties were still negotiating the terms of the contract. By 24
March 2003, over twenty-eight weeks after 6 September 2002, they
had not entered into a formalized agreement.
In addition, as found in Hines v. Tripp, 263 N.C. 470, 139
S.E.2d 545 (1965), the statute of frauds does not require all of
the provisions of the contract to be set out in a single
instrument. Id. at 474, 139 S.E.2d at 548. However, a contract
is nugatory and void for indefiniteness if it leaves any
material portions open for future agreement. Boyce v. McMahan,
285 N.C. 730, 734, 208 S.E.2d 692, 695 (1974). The facts of the
case sub judice show that even if the statute of frauds' written
requirements for entering into a valid contract for land were
satisfied, these parties never agreed to be bound by any
contractual terms until they executed the finalized agreement or
signed other binding documents. As further proof, the following
clause was included in each draft of the proposed settlement
agreement: 13. COUNTERPARTS: This Settlement Agreement may be
executed in multiple counterparts and shall be binding upon all
parties when a counterpart has been signed by all parties hereto
and for all intents and purposes as if all of the parties had
signed a single document. (Emphasis added.) The parties never signed separate documents nor did they sign
this agreement and thus, were not bound by any of the settlement
agreement negotiations at any time.
Therefore, I disagree with the majority because the parties
contemplated the execution of a settlement agreement to finalize
their negotiations and did not on 6 September 2002 have the present
intent to be bound by any terms. I would hold that the trial court
erred in granting the Motions to Enforce Settlement Agreement and
I would let the lawsuits proceed accordingly.
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