Filed: Feb. 03, 2009
Latest Update: Feb. 12, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 07-1820 In Re: BNX SYSTEMS CORPORATION, Debtor. - BNX SYSTEMS CORPORATION, Plaintiff – Appellee, v. WORLDWIDE INVESTIGATIONS AND RESEARCH, INCORPORATED, Defendant – Appellant, and JOHN NARDOLILLI, Defendant. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:07-cv-00494-CMH; BK-05-15902-RGM; AP-06- 01141-RGM) Argued: December 3, 2008 Dec
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 07-1820 In Re: BNX SYSTEMS CORPORATION, Debtor. - BNX SYSTEMS CORPORATION, Plaintiff – Appellee, v. WORLDWIDE INVESTIGATIONS AND RESEARCH, INCORPORATED, Defendant – Appellant, and JOHN NARDOLILLI, Defendant. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:07-cv-00494-CMH; BK-05-15902-RGM; AP-06- 01141-RGM) Argued: December 3, 2008 Deci..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-1820
In Re: BNX SYSTEMS CORPORATION,
Debtor.
-----------------------------------
BNX SYSTEMS CORPORATION,
Plaintiff – Appellee,
v.
WORLDWIDE INVESTIGATIONS AND RESEARCH, INCORPORATED,
Defendant – Appellant,
and
JOHN NARDOLILLI,
Defendant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Claude M. Hilton, Senior
District Judge. (1:07-cv-00494-CMH; BK-05-15902-RGM; AP-06-
01141-RGM)
Argued: December 3, 2008 Decided: February 3, 2009
Before WILKINSON, DUNCAN, and AGEE, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Steven Ellison, BROAD & CASSEL, West Palm Beach,
Florida, for Appellant. Kevin M. O’Donnell, HENRY, O’DONNELL,
DAHNKE & WALTHER, P.C., Fairfax, Virginia, for Appellee. ON
BRIEF: Stephen C. Piepgrass, TROUTMAN & SANDERS, L.L.P.,
Richmond, Virginia, for Appellant.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
The issue in this case is whether parol evidence may be
offered to prove a term not expressly stated in an integrated
contract. The bankruptcy court and district court declined to
admit the evidence. We affirm.
I.
The parties in this case, BNX Systems Corporation (“BNX”)
and Worldwide Investigations and Research, Inc. (“Worldwide”),
jointly submitted two proposals to provide computer based
authentication services to Citibank. While Citibank considered
their proposals, Worldwide and BNX engaged in lengthy
negotiations over how to distribute the possible Citibank
revenues amongst themselves. During these discussions, on March
22, 2002, they signed a written Memorandum of Understanding
(“MOU”) which provided an intended distribution of estimated
software, services, training, and maintenance revenues.
Months later, on December 10, 2002, Citibank accepted one
of their proposed projects and agreed to purchase software
licenses and services from BNX and Worldwide in the “Agreement
for Citipass.” Soon thereafter, on December 26, 2002, BNX and
Worldwide executed the contract at issue in this case: the
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Disbursal of Proceeds Agreement (“DPA”). * The DPA provided a
detailed “Split Schedule” allocating the estimated revenues from
the Citipass project, and it expressly superseded BNX’s and
Worldwide’s prior negotiations.
BNX and Worldwide each provided services to Citibank
pursuant to the Agreement for Citipass. They split the Citipass
revenues in accordance with the DPA: each party received its
percentage of software revenues and was paid for the
professional services that it individually provided to Citibank.
BNX, however, did not become profitable. On December 8, 2005,
BNX filed for protection under Chapter 11 of the Bankruptcy Code
in the U.S. Bankruptcy Court for the Eastern District of
Virginia.
During the course of the bankruptcy proceedings, Worldwide
filed various proofs of claim against BNX. At issue in this
appeal is proof of claim #17 where Worldwide claimed it was owed
$1,625,294.29 pursuant to an agreement between the parties that
Worldwide would receive 15% of all fees for professional
services rendered by BNX as a commission (or override) for
Worldwide’s role in securing the deal –- a sort of finder’s fee.
Worldwide admitted that the 15% override was not expressly
*
The DPA states that it “is made as of this 13th day of
December, 2002,” but Worldwide’s CEO testified, and BNX agrees,
that it was not signed until December 26, 2002.
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stated in the DPA, but sought to prove that the parties had
agreed to the override by presenting the following extrinsic
evidence: statements made by BNX officials, various email
exchanges between the parties, and the MOU which provided that
Worldwide’s professional services fees would equal 15% of BNX’s
fees.
The bankruptcy court ruled that this extrinsic evidence was
inadmissible under the parol evidence rule because the terms of
the DPA were clear, they did not include a 15% override for
Worldwide, and the DPA was an integrated agreement. The court
therefore granted summary judgment to BNX on claim #17.
Worldwide appealed to the U.S. District Court for the Eastern
District of Virginia which affirmed “on the sound reasoning” of
the bankruptcy court. JA 628. Worldwide appeals the district
court’s decision, and we review the grant of summary judgment de
novo. See In re French, 499 F.3d 345, 351 (4th Cir. 2007).
II.
Virginia law governs the DPA by express provision in the
agreement. The Virginia Supreme Court has emphasized that the
parol evidence rule “has nowhere been more strictly adhered to
in its integrity than in Virginia.” Jim Carpenter Co. v. Potts,
495 S.E.2d 828, 832 (Va. 1998) (quoting Pulaski Nat’l Bank v.
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Harrell, 123 S.E.2d 382, 387 (Va. 1962)). In explaining the
parol evidence rule the court stated:
In Virginia, no general rule seems to be better
settled than that, in controversies between two
parties to a contract, parol evidence of prior or
contemporaneous oral negotiations or stipulations is
inadmissible to vary, contradict, add to, or explain
the terms of a complete, unambiguous, unconditional,
written instrument.
Godwin v. Kerns, 17 S.E.2d 410, 412 (Va. 1941); see also Va.
Elec. and Power Co. v. N. Va. Reg’l Park Auth.,
618 S.E.2d 323,
326-27 (Va. 2005) (quoting Godwin).
This rule prohibits exactly what Worldwide attempts to do
here. Worldwide seeks to admit evidence of negotiations that
took place prior to the execution of the DPA to prove that it is
entitled to 15% of BNX’s professional services fees as an
override. This evidence is inadmissible.
By its own terms, the DPA is a complete and integrated
written agreement: it “contains the entire agreement among the
Parties relating to the subject matter herein” and supersedes
prior negotiations “including without limitation the MOU.” The
alleged 15% override is nowhere to be found in the DPA. As
BNX’s counsel put it, “[the DPA] does not make that specific
statement,” and “the document does not say on its face this
particular language.” Supplemental JA 24.
In fact, the alleged 15% override directly contradicts the
unambiguous terms of the DPA. With respect to the allocation of
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professional services fees, the DPA provides that each party
will receive a “professional services prepayment” due when the
agreement is executed and states:
Each Party will then have their professional services
hours approved by Citibank. [BNX] will be the billing
party and each Party will be compensated for approved
hours at the actual amount billed, less a credit for
their prepayment amount above, as follows: [lists
daily rates for various professional services]
Worldwide’s claimed 15% override contradicts the clear statement
that “each party will be compensated for approved hours at the
actual amount billed.”
Worldwide argues that this allocation of professional
services fees is ambiguous and therefore the evidence is
admissible to explain its meaning. See, e.g., Prospect Dev. Co.
v. Bershader, 515 S.E.2d 291, 296 (Va. 1999) (an integration
clause does not bar parol evidence to explain ambiguities in a
contract). This is simply an attempt to create ambiguity where
none exists. The attempt fails because the provision has a
plain meaning and “[p]arol evidence cannot be used to first
create an ambiguity and then remove it.” Cohan v. Thurston,
292
S.E.2d 45, 46 (Va. 1982). Moreover, Worldwide’s claim that this
contract term is ambiguous is belied by the fact that Worldwide
itself performed in accordance with the plain meaning of the
contract, rather than the meaning it now asserts. Worldwide
claims the MOU represents the true agreement between the
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parties, but Worldwide did not share its professional services
fees with BNX as it would have been required to do under the
distribution percentages embodied in the MOU. The proffered
evidence is therefore inadmissible to prove the claimed 15%
override because it contradicts the unambiguous terms of the
DPA.
Worldwide argues that the evidence is admissible to explain
various other ambiguities that it identifies in the DPA. These
arguments fail because even when a contract is ambiguous, parol
evidence is not admissible to “contradict or vary the terms” of
the written contract. Prospect Dev. Co., 515 S.E.2d at 296. To
cover its bases, Worldwide also argues that the evidence is
admissible under all of the other exceptions to the parol
evidence rule listed in Shevel’s, Inc. v. Southeastern
Associates, Inc.,
320 S.E.2d 339, 343 (Va. 1984). These claims
also fail. First, even if the exceptions for partially
integrated agreements or independent collateral agreements
applied, the evidence would not be admissible because these
exceptions do not allow parol evidence that is “inconsistent
with the written contract” or that would “contradict or vary”
the terms of the contract.
Id. Second, the evidence is not
admissible under the exceptions for fraud or mistake because
there is not sufficient evidence to support a finding of fraud
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or mistake. Moreover, Worldwide did not raise the issue of
fraud in its original proof of claim.
For these reasons, the judgment of the district court is
AFFIRMED.
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