Exception in release of claims for an identified securities option contract ineffective where option contract was never signed; express reference in the agreement to a nonexistent option contract did not create an ambiguity permitting parole evidence regarding the intended option and was treated as an unenforceable agreement to agree. North Am. Rescue Prods., Inc. v. Richardson, No. 27475, 2015 WL 80900 (S.C. Jan. 7, 2015).
Two independent corporations were each owned by different individual sole stockholders. The individual stockholders agreed to a business relationship that contemplated the transfer to each individual of shares of the other individual’s corporation. Subsequently the parties signed a termination agreement ending the relationship and providing for mutual cross-releases of all claims between the individuals and their respective corporations. The release provision expressly excepted from the release and preserved “that certain, separate option agreement dated 15 Dec. 2004” pursuant to which one of the individuals (the “Optionee”) purportedly had an option to buy 7.5% of the shares in the corporation owned by the other individual. Although the referenced option agreement apparently was drafted, it was never signed. Two years after the execution of the termination agreement, the Optionee sought to exercise the option referenced in the termination agreement, even though both parties agreed that no option agreement dated December 15, 2004 was ever executed. The Optionee argued that the termination agreement was part of a three-part oral agreement whereby the prior cross-ownership relationship was to be terminated, a new option agreement was to be executed granting the Optionee an option to purchase 7.5% of the individual’s stock of the other individual’s corporation, and, the Optionee was to donate certain funds to a charity chosen by the other individual.
The South Carolina Supreme Court overturned a jury verdict that allowed the Optionee to purchase shares pursuant to the purported option agreement, holding that the termination agreement unambiguously ended any right the Optionee had to buy the stock. The court held that no right to purchase stock survived the termination agreement notwithstanding the reference to an option agreement that was never executed. The court ruled that parole evidence that the parties intended to execute the option agreement in the future was not admissible because there was no ambiguity in the termination agreement. In doing so, the court noted that it would “decline to hold a provision mentioning a nonexistent document can defeat the plain language of an agreement.” The court essentially found that the reference to the future option agreement was an “agreement to agree” and thus not enforceable.
The court also rejected the Optionee’s separate claim based on a promissory estoppel theory. It concluded that the termination agreement severed all agreements and undertakings between the parties prior to the termination agreement and therefore precluded any promissory estoppel claim that arose prior to that agreement. Furthermore, evidence that the other individual after the signing of the termination agreement made a statement to the Optionee that he intended on “getting this done” did not support the trial court’s ruling that the other individual made an “unambiguous promise” to Optionee, as necessary to support a promissory estoppel claim.