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GOLDING v. FLOYD, et al.

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FLOYD, et al.

January 12, 2001

Record No. 000142

PRESENT: Carrico, C.J., Lacy, Hassell, Keenan,
Kinser, and Lemons, JJ., and Stephenson, S.J.





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.


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

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.


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 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
v. Renner, 225 Va. 508, 515, 303 S.E.2d 894,
898 (1983)).


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.

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
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).

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 writing was made subject to and was dependent
upon the execution of a formal contract.


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

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.