Hitachi Credit v. Signet Bank ( 1999 )


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  •                                                Filed:      February 17, 1999
    
                           UNITED STATES COURT OF APPEALS
    
                               FOR THE FOURTH CIRCUIT
    
    
                                    Nos. 97-2753(L)
                                     (CA-96-815-3)
    
    
    
    Hitachi Credit America Corporation,
    
                                                         Plaintiff - Appellee,
    
                versus
    
    
    Signet Bank, etc., et al,
                                                      Defendants - Appellants.
    
    
    
                                       O R D E R
    
    
    
         The court amends its opinion filed January 19, 1999, as
    
    follows:
         On page 5, footnote 2, line 2 -- the word "related" is
    
    corrected to read "relate."
    
         On    page   8,    first   full   paragraph,   line    4   --   "December
    
    Assignment Agreement" is corrected to read "Assignment Agreement."
    
         On page 13, second full paragraph, line 8 -- the words
    "qualifier ‘to the’; that the ‘any similar ....’" are corrected to
    
    read "qualifier ‘to the best’ and that the ‘any similar ....’"
                                   - 2 -
    
    
    
    
        On page 16, second full paragraph, lines 3 and 15 -- the
    
    phrase "Assignment Agreement" is corrected to read "December
    Assignment Agreement."
    
        On page 18, first full paragraph, line 12 -- the phrase
    
    "Assignment Agreement" is corrected to read "December Assignment
    
    Agreement."
    
        On page 24, second full paragraph, line 3 -- the words
    
    "alleged that Hitachi" are corrected to read "that Hitachi."
    
        On page 24, footnote 9, lines 17-18 -- the cross-reference to
    
    "See ante at 20" is deleted.
    
        On page 27, first paragraph, line 3 -- the cross-reference to
    "see ante at 17-23" is deleted.
    
                                           For the Court - By Direction
    
    
    
    
                                            /s/ Patricia S. Connor
                                                     Clerk
    PUBLISHED
    
    UNITED STATES COURT OF APPEALS
    
    FOR THE FOURTH CIRCUIT
    
    HITACHI CREDIT AMERICA
    CORPORATION,
    Plaintiff-Appellee,
    
    v.
                                                                     No. 97-2753
    SIGNET BANK, formerly known as
    Signet Bank/Virginia; SIGNET
    LEASING AND FINANCIAL
    CORPORATION,
    Defendants-Appellants.
    
    HITACHI CREDIT AMERICA
    CORPORATION,
    Plaintiff-Appellant,
    
    v.
                                                                     No. 97-2754
    SIGNET BANK, formerly known as
    Signet Bank/Virginia; SIGNET
    LEASING AND FINANCIAL
    CORPORATION,
    Defendants-Appellees.
    
    Appeals from the United States District Court
    for the Eastern District of Virginia, at Richmond.
    James R. Spencer, District Judge.
    (CA-96-815-3)
    
    Argued: October 27, 1998
    
    Decided: January 19, 1999
    
    Before MURNAGHAN and WILLIAMS, Circuit Judges, and
    MOON, United States District Judge for the Western District of
    Virginia, sitting by designation.
    Affirmed in part, reversed in part and remanded by published opinion.
    Judge Williams wrote the opinion, in which Judge Murnaghan and
    Judge Moon joined.
    
    _________________________________________________________________
    
    COUNSEL
    
    ARGUED: Murray Hardison Wright, WRIGHT, ROBINSON,
    OSTHIMER & TATUM, Richmond, Virginia, for Appellants. Brian
    Alan Sher, ROSS & HARDIES, Chicago, Illinois, for Appellee. ON
    BRIEF: Jonathan S. Geldzahler, David E. Boelzner, Paul D. Anders,
    WRIGHT, ROBINSON, OSTHIMER & TATUM, Richmond, Vir-
    ginia, for Appellants. Daniel P. Hogan, Sean M. Sullivan, ROSS &
    HARDIES, Chicago, Illinois; John H. O'Brion, Jr., COWAN &
    OWEN, P.C., Richmond, Virginia, for Appellee.
    
    _________________________________________________________________
    
    OPINION
    
    WILLIAMS, Circuit Judge:
    
    Signet Bank and Signet Leasing and Financial Corporation (collec-
    tively Signet) appeal the district court's grant of summary judgment
    in favor of Hitachi Credit America Corporation on Hitachi's two
    breach of contract claims against Signet. Hitachi cross-appeals the
    district court's dismissal of its fraud claims against Signet, refusal to
    grant Hitachi attorneys' fees and costs in collateral litigation with
    third parties, and calculation of pre- and postjudgment interest on
    Hitachi's monetary award on the breach of contract claims. We agree
    with the district court that summary judgment was proper on Hitachi's
    breach of contract claims and that Hitachi was not entitled to attor-
    neys' fees and costs in collateral litigation with third parties. We con-
    clude that the district court erred in dismissing Hitachi's fraud claims
    and in calculating pre- and postjudgment interest on Hitachi's mone-
    tary award. We therefore affirm in part, reverse in part, and remand
    with instructions to reinstate Hitachi's fraud claims and to recalculate
    pre- and postjudgment interest on Hitachi's monetary award in a man-
    ner consistent with this opinion.
    
                         2
    I.
    
    A.
    
    This case arises from a fraudulent loan scheme perpetrated by
    Edward J. Reiners, a former employee of Philip Morris Companies,
    Inc. In the fall of 1993, Reiners met with representatives of Nelco,
    Ltd., a computer leasing firm located in Richmond, Virginia, to dis-
    cuss the acquisition of computer and communications equipment for
    Philip Morris. Reiners had previously dealt with Nelco on behalf of
    Philip Morris. At the fall 1993 meeting, Reiners convinced the Nelco
    representatives that Philip Morris had selected him as Chief Opera-
    tions Officer for a secret off-shore research and development project
    titled "Project Star" that needed to lease large quantities of computer
    equipment from Nelco. Shortly thereafter, Richard Nelson, the presi-
    dent and owner of Nelco, met with representatives of Signet, Nelco's
    primary lender, to discuss possible funding of "Project Star." As proof
    of Reiners's authority to represent Philip Morris, Nelson provided
    Signet with the "Incumbency Certificate" Reiners had given him,
    which appeared to confirm Reiners's claimed status as Chief Operat-
    ing Officer of Philip Morris.
    
    Supposedly to protect the secrecy of Project Star, Reiners required
    Signet to sign a "Confidentiality Agreement." This agreement
    required Signet to hold all information concerning Project Star in the
    strictest confidence and to deal exclusively with Reiners as Philip
    Morris's representative for the project. Reiners explained that the
    project was so secret that if anyone contacted Philip Morris to inquire
    about Project Star, Philip Morris would deny that the project existed
    and would even deny that Reiners was employed by Philip Morris.
    Signet signed the Confidentiality Agreement on November 12, 1993.
    Nelco signed the Confidentiality Agreement soon thereafter. On
    November 18, 1993, Nelco and Reiners (purportedly acting on Philip
    Morris's behalf) signed a "Master Equipment Lease" (the "Master
    Lease") setting forth the general terms of an equipment lease arrange-
    ment between Nelco, and, ostensibly, Philip Morris.
    
    On November 18, 1993, Reiners and Nelson met with Signet offi-
    cials. At that meeting, Reiners described Project Star. According to
    Reiners, Project Star was a confidential off-shore research and devel-
    
                        3
    opment project being conducted by Philip Morris through a corporate
    subsidiary known as Worldwide Regional Exports ("WRE"). The pur-
    pose of the project was to study the long-term effects of smoking and
    to develop alternative tobacco products, including "smokeless" ciga-
    rettes. Reiners stated that each of Philip Morris's five overseas Project
    Star research centers would require large amounts of sophisticated
    computer and communications equipment, including an estimated $25
    million worth of equipment in the first year alone. In order to finance
    the acquisition of the equipment Philip Morris needed pursuant to the
    Master Lease agreement, Reiners, through Nelco, requested loans
    from Signet.
    
    In reality, each of Reiners's representations was false and made
    with fraudulent intent. Project Star was completely fictitious. Reiners
    was not employed in any capacity by Philip Morris and, according to
    Philip Morris, had no authority to represent or bind Philip Morris. The
    Incumbency Certificate and the authenticity signature on it were for-
    geries. WRE was not affiliated with Philip Morris. Reiners knew that
    no computers or communications equipment would be procured. Nev-
    ertheless, on the basis of Reiners's representations, in November 1993
    Signet entered into the first of several secured loans to Nelco for the
    purchase of computer equipment to be leased pursuant to the Master
    Lease (the "Credit Facility"). Each loan to Nelco was secured by,
    inter alia, all of the computer equipment, lease payment streams, and
    other proceeds associated with the Master Lease (the "Collateral").
    
    The fraud proceeded in the following manner.1 Nelco was to pur-
    chase computers from CCS, Inc., a New York computer reseller and
    Reiners's co-conspirator in the scheme, and lease the computers to
    Philip Morris. Pursuant to this plan, Signet Bank (and later, other
    banks) disbursed funds directly to CCS, which was then supposed to
    ship the computers to the various project sites for use by Philip Mor-
    ris. In exchange for the funds, CCS provided the banks with invoices
    showing that large quantities of equipment had been purchased and
    shipped to Philip Morris and also provided "Certificates of Accep-
    tance" from Philip Morris. In fact, both the invoices and Certificates
    of Acceptance were forged and no computers were ever purchased or
    _________________________________________________________________
    
    1 These facts are drawn from United States v. Reiners, 
    934 F. Supp. 721
    , 722 (E.D. Va. 1996), and the Joint Appendix at 590-91.
    
                         4
    delivered. Instead, Reiners, with CCS's complicity, diverted the loan
    proceeds for his personal benefit, including investment of the funds
    in real estate, stocks, and other securities.
    
    Other banks soon became ensnared in Reiners's fraudulent scheme.
    Faced with requests for increased funding by Nelco, beginning in
    1995 Signet syndicated portions of the loans made under the Credit
    Facility. Banks that purchased a participation in the Project Star
    Credit Facility from Signet included NationsBank, N.A., Bank of
    Montreal, and CoreStates Bank, N.A. In late November 1995, Gil
    Kennedy, a Vice President in the Syndication Department of Signet
    Leasing, had a discussion with Brian Riordan, a Vice President of
    Hitachi.2 Kennedy told Riordan that Signet was in the process of syn-
    dicating participation in a $250 million lease financing for Nelco for
    the purchase of computers and related equipment involving what
    Kennedy described as an "A" rated confidential lessee. Kennedy fur-
    ther stated that Signet was interested in selling a portion of its Nelco
    financing facility to Hitachi, but that he could not disclose the identity
    of the lessee until Hitachi signed a Confidentiality Agreement.
    
    After some negotiations, on or about December 6, 1995, Hitachi
    signed a Confidentiality Agreement. Kennedy then informed Riordan
    that the lessee was Philip Morris and that the transactions between
    Nelco and Philip Morris were part of a highly secret offshore cigarette
    development project initiated in 1993. The Confidentiality Agreement
    prevented Hitachi from investigating the role of Philip Morris in the
    underlying transaction. Riordan therefore requested a meeting with
    Signet to obtain more details about the proposed financing transac-
    tion.
    
    On December 14, 1995, Riordan and William Besgen, Executive
    Vice President of Hitachi, attended a meeting in New York with rep-
    resentatives of Signet and Nelco. Present at the meeting were Ken-
    _________________________________________________________________
    
    2 The discussion of the negotiations between Hitachi and Signet leading
    up to Hitachi's approval of the loan assignment relate to Hitachi's fraud
    claims. Because the fraud claims were dismissed by the district court
    pursuant to Rule 12(b)(6), we accept as true all of Hitachi's well-pleaded
    allegations and view the complaint in the light most favorable to Hitachi.
    See Mylan Lab., Inc. v. Matkari, 
    7 F.3d 1130
    , 1134 (4th Cir. 1993).
    
                         5
    nedy, Nelson, and Connie Mooney, a Vice President of Signet Bank.
    Mooney informed Riordan and Hitachi that (1) Nelco was a "good
    customer" and that Signet had provided Nelco with $65 million in
    financing for the Philip Morris leases since the inception of Project
    Star in 1993; (2) Signet had provided financing to Nelco for a number
    of other leases with Philip Morris unrelated to the secret project; (3)
    Philip Morris had given its approval for Hitachi's proposed involve-
    ment in the Nelco financing; (4) Signet was confident that Reiners
    was authorized to act on behalf of Philip Morris; and (5) Signet would
    obtain and provide to Hitachi an Incumbency Certificate from Philip
    Morris acknowledging that Reiners was authorized to enter into
    research project lease transactions on behalf of Philip Morris. Mooney
    also informed Besgen and Riordan that Philip Morris chose to main-
    tain its secret facilities offshore in order to avoid U.S. government
    scrutiny and interference. In response to a request from Besgen and
    Riordan for a copy of a Philip Morris resolution authorizing the
    research project, Mooney stated that Philip Morris would not provide
    an authorizing resolution because of the secret nature of the research
    project. Mooney reasserted that Signet was confident that Philip Mor-
    ris had properly authorized the lease transactions.
    
    On or about December 18, 1995, Riordan informed Kennedy that
    Hitachi was interested in being involved in financing lease transac-
    tions between Nelco and Philip Morris. Riordan also noted that
    Hitachi was only interested in financing leases involving "investment
    grade" lessees, such as Philip Morris, and that Hitachi would not pro-
    vide financing to Nelco, directly or indirectly, unless Philip Morris
    was the lessee on the underlying leases. Riordan asked Kennedy and
    Mooney to confirm again that Philip Morris was the obligor on the
    underlying leases with Nelco. Mooney again confirmed that Philip
    Morris was the obligor on those leases, and was directly and primarily
    liable for all lease payments due under the leases.
    
    During the course of negotiations, Signet informed Hitachi that the
    underlying lease transactions were in the name of or would involve
    a purported Philip Morris subsidiary, WRE. Prior to entering any
    agreement with Signet, Riordan requested a Dun & Bradstreet report
    on WRE. Dun & Bradstreet was unable to provide a report or any
    information regarding WRE, prompting Riordan to inform Signet that
    Hitachi would require a written statement from Philip Morris describ-
    
                        6
    ing WRE and its purpose as a condition of Hitachi's providing financ-
    ing for Project Star. In late December 1995, Reiners provided a letter
    to Nelson on Philip Morris letterhead that described WRE as an entity
    established by Philip Morris and the U.S. government to implement
    Project Star (the "Original WRE Letter"). After receiving the Original
    WRE Letter, Mooney instructed Nelson to obtain a new letter from
    Reiners deleting any reference to the involvement of the U.S. govern-
    ment in Project Star, because the Original WRE Letter "would raise
    more questions than it would answer." (J.A. at 43.) Reiners thereafter
    provided to Nelson a second letter on Philip Morris letterhead (the
    "Revised WRE Letter"), which was identical to the Original WRE
    Letter except that it omitted the reference to the U.S. government's
    involvement in Project Star. Mooney provided the Revised WRE Let-
    ter to Hitachi on December 28, 1995. Neither Mooney nor anyone
    else at Signet gave Hitachi a copy of the Original WRE Letter or oth-
    erwise disclosed to Hitachi this alleged government involvement in
    Project Star.
    
    Unbeknownst to Hitachi, Signet also internally had raised ques-
    tions regarding Reiners's purported authority to act for Philip Morris.
    In October 1993, Reiners had submitted an "Authorization Certifi-
    cate" purportedly executed by Philip Morris Chairman Michael Miles.
    Signet questioned many aspects of this document. Specifically, Moo-
    ney noted that the signature on the Authorization Certificate -- "Mike
    Miles" -- was significantly different from the signature of "Michael
    A. Miles" on the Philip Morris annual report. Signet also noted that
    George R. Lewis, Vice President and Treasurer, rather than Michael
    Miles, had previously signed loan documents on behalf of Philip Mor-
    ris. Signet subsequently rejected the Authorization Certificate. Signet
    did not provide Hitachi with a copy of the Authorization Certificate.
    Signet also did not disclose to Hitachi that Reiners had submitted the
    Authorization Certificate in 1993 and that Signet had rejected the cer-
    tificate.
    
    Hitachi approved the loan transaction on December 21, 1995. Dur-
    ing the negotiation of the Assignment Agreement between Hitachi
    and Signet, Hitachi's outside counsel, James Scantling, informed Sig-
    net's attorney, Brian Murphy, that Hitachi required a representation
    from Signet in the Assignment Agreement that Philip Morris was the
    lessee. Murphy used a Signet form agreement to prepare the Assign-
    
                        7
    ment Agreement. On December 28, 1995, Murphy prepared a revised
    draft of the Assignment Agreement, which incorporated comments
    received from Scantling and Mooney (the "Revised Draft"). The
    Revised Draft included a new section, labeled § 2(e), which provided
    in relevant part:
    
              To the best knowledge of the Assignor, the Master Equip-
              ment Lease Number 1991 dated November 18, 1993 (the
              "Master Lease") between the Borrower, as "Lessor", and
              Philip Morris Companies, Inc., a Virginia corporation, as
              "Lessee" . . . is in full force and effect.
    
    (J.A. at 870.) Section 2(n) of the Assignment Agreement defined "As-
    signor's knowledge, and any similar reference" as the actual knowl-
    edge of certain Signet officers. (J.A. at 872.) Murphy understood the
    term "best knowledge" in § 2(e) would be defined by § 2(n).
    
    On December 29, 1995, Mooney informed Riordan that Diane
    McAdams, Philip Morris's assistant secretary, was on vacation and
    unable to execute the Incumbency Certificate from Philip Morris as
    required by § 5(g) of the Assignment Agreement. Riordan
    stated that he did not want to wait to close the loan, and agreed to
    accept, in lieu of the Incumbency Certificate, a letter from Signet stat-
    ing that if Signet did not send the Incumbency Certificate to Hitachi
    by a certain date, then Signet would buy back the transaction from
    Hitachi. A letter dated December 29, 1995, drafted by Mooney and
    faxed to Riordan (the "Repurchase Agreement") provided:
    
              Signet Bank will provide an executed Certificate of
              Incumbency from Philip Morris Companies, Inc., for the
              Nelco lease transaction by January 16, 1996. If this docu-
              ment is not delivered to you by that date, we agree to repur-
              chase the transaction from Hitachi in the amount of
              $12,364,893.80.
    
    (J.A. at 97.)
    
    Following these reassurances from Signet, the loan assignment
    transaction proceeded forward. On December 29, 1995, Nelco exe-
    
                         8
    cuted a Promissory Note (the "December Note") in favor of Signet in
    the original principal amount of $12,305,729.35 and a Security
    Agreement (the "December Security Agreement") to secure repay-
    ment of the December Note. The Security Agreement granted to Sig-
    net a security interest in specific collateral including: (1) a master
    lease dated November 18, 1993 between Nelco, as lessor, and Philip
    Morris, as lessee (the "Master Lease"), to the extent it applied to lease
    schedule no. 68; (2) lease payments payable to Nelco by Philip Morris
    under the Master Lease and lease schedule no. 68; (3) the equipment
    described in lease schedule no. 68; and (4) all proceeds of the forego-
    ing. On the same day, Hitachi entered into the Assignment Agreement
    with Signet (the "December Assignment Agreement"). The December
    Assignment Agreement provided that Signet agreed to sell and
    Hitachi agreed to buy all of Signet's "rights, obligations, title and
    interest" in the December Note, the December Security Agreement,
    and the collateral described therein. (J.A. at 81.) Hitachi paid Signet
    the sum of $12,364,893.80 as the purchase price under the December
    Assignment Agreement.
    
    On January 5, 1996, Signet delivered to Hitachi a document that
    was represented as an Incumbency Certificate executed by Philip
    Morris. After receiving the certificate, Riordan sent the executed
    December Assignment Agreement to Signet on January 11, 1996. On
    January 31, 1996, Nelco executed a second Promissory Note (the
    "January Note") in favor of Signet in the original principal amount of
    $12,272,655.26 and a second Security Agreement (the "January
    Security Agreement") to secure repayment of the January Note.
    Hitachi entered into a second Assignment Agreement with Signet on
    January 31, 1996 (the "January Assignment Agreement") for a pur-
    chase price of $12,325,461.95. The terms of the January Assignment
    Agreement were identical to the terms of the December Assignment
    Agreement.
    
    On March 19, 1996, Signet informed Hitachi that Reiners was not
    an employee or officer of Philip Morris and was not authorized to act
    on Philip Morris's behalf, that the signature on the Incumbency Cer-
    tificate was a forgery, and that Philip Morris denied that it was a party
    to the Master Lease or other lease agreements described in the docu-
    ments between Nelco, Signet, and Hitachi. On March 26, 1996,
    Hitachi notified Signet that Signet had failed to comply with the terms
    
                         9
    of the Repurchase Agreement, because it had failed to provide an
    Incumbency Certificate from Philip Morris. Pursuant to the terms of
    the Repurchase Agreement, Hitachi demanded that Signet repurchase
    Hitachi's interest in the December Note, the December Security
    Agreement, and the Collateral described in the December Security
    Agreement. By letter dated March 29, 1996, Signet informed Hitachi
    that Signet would not repurchase Hitachi's interest in the subject
    loans and loan documents.
    
    B.
    
    On May 24, 1996, Hitachi brought this diversity action in United
    States District Court for the Eastern District of Virginia against Signet
    Bank alleging, inter alia, actual and constructive fraud, breach of the
    Repurchase Agreement, and breach of § 2(e) of the Assignment
    Agreements.3 Concurrent with its action against Signet, Hitachi par-
    ticipated in collateral litigation resulting from the fraud perpetuated
    by Reiners. Between March 1996 and June 1997, Hitachi and its
    attorneys participated in a bankruptcy proceeding involving Nelco,
    with the purpose of pursuing possible recovery of the amounts due on
    the Hitachi loans. Between September 1996 and February 1997,
    Hitachi, Signet, and the other Project Star lenders negotiated a series
    of agreements with the U.S. government relating to the allocation
    among the lenders of funds seized by the government following the
    discovery of the fraud.4
    
    The district court dismissed various counts of Hitachi's Complaint
    and Amended Complaint against Signet in its decisions of December
    3, 1996 and May 12, 1997. On cross motions for summary judgment
    on the two remaining claims, breach of the Repurchase Agreement
    and breach of § 2(e) of the Assignment Agreements, the district court
    granted Hitachi's motion for summary judgment on July 21, 1997. In
    _________________________________________________________________
    
    3 In its Amended Complaint, Hitachi added Signet Leasing and Finan-
    cial Corporation as a defendant.
    
    4 On or about June 5, 1996, Reiners pleaded guilty to bank fraud in vio-
    lation of 18 U.S.C.A. § 1344 (West Supp. 1998) and to money launder-
    ing in violation of 18 U.S.C.A. § 1956(a)(1)(A)(i) (West Supp. 1998).
    Reiners also agreed to an order of forfeiture of the proceeds of his fraud-
    ulent scheme.
    
                         10
    the July 21 Order, the district court directed Hitachi to file a brief on
    the subject of damages. On November 14, 1997, the district court
    issued a final order awarding Hitachi attorneys' fees and costs for its
    litigation, but denying recovery of these fees and costs related to the
    criminal forfeiture proceeding and the Nelco bankruptcy. The district
    court also awarded Hitachi prejudgment interest on the balance of the
    loans at the rates set in the Assignment Agreements and postjudgment
    interest on the balance of the loans at the statutory rate of nine per-
    cent. Signet appeals the district court's granting of Hitachi's motion
    for summary judgment. Hitachi cross-appeals the district court's dis-
    missal of Hitachi's fraud claims, its partial denial of costs and fees,
    and its calculation of the appropriate pre- and postjudgment interest.
    
    II.
    
    We turn first to Signet's appeal from the district court's grant of
    summary judgment in Hitachi's favor on Hitachi's breach of contract
    claims. This Court reviews a grant of summary judgment de novo.
    See Higgins v. E.I. DuPont de Nemours & Co., 
    863 F.2d 1162
    , 1167
    (4th Cir. 1988). Summary judgment is appropriate only if there are no
    material facts in dispute and the moving party is entitled to judgment
    as a matter of law. See Celotex Corp. v. Catrett, 
    477 U.S. 317
    , 322
    (1986) (citing Fed. R. Civ. P. 56(c)). As a federal court sitting in
    diversity, we must apply the choice of law rules of the forum state --
    in this case, Virginia. See Klaxon Co. v. Stentor Elec. Mfg. Co., 
    313 U.S. 487
    , 496-97 (1941). Virginia law looks favorably upon choice
    of law clauses in a contract, giving them full effect except in unusual
    circumstances. See Tate v. Hain, 
    25 S.E.2d 321
    , 324 (Va. 1943). Sec-
    tion 9(c) of the Assignment Agreements explicitly calls for the appli-
    cation of Virginia law in the interpretation of "[t]his Agreement and
    the rights and obligations of the parties hereunder . . . including all
    matters of construction, validity and performance." (J.A. at 91.) We
    therefore apply Virginia law in our review of Hitachi's breach of con-
    tract claims.
    
    A.
    
    Signet first argues on appeal that the district court erred in granting
    Hitachi's motion for summary judgment on Hitachi's claim that Sig-
    net breached § 2(e) of the Assignment Agreements when it turned out
    
                         11
    that Philip Morris was not a party to the underlying lease transaction
    and the Master Lease between Nelco and Philip Morris was not in full
    force and effect. Under Virginia law, courts adhere to the "plain
    meaning" rule in interpreting and enforcing a contract. "`[W]here an
    agreement is complete on its face, is plain and unambiguous in its
    terms, the court is not at liberty to search for its meaning beyond the
    instrument itself. . . . This is so because the writing is the repository
    of the final agreement of the parties.'" Berry v. Klinger, 
    300 S.E.2d 792
    , 796 (Va. 1983) (quoting Globe Co. v. Bank of Boston, 
    140 S.E.2d 629
    , 633 (Va. 1965)) (alteration and omission in original). In
    interpreting a contract, a court should read the contract as a single
    document and give meaning to every clause where possible. See
    Berry, 300 S.E.2d at 796. Such an interpretation gives effect to the
    "presumption that the parties have not used words aimlessly." Winn
    v. Aleda Constr. Co., 
    315 S.E.2d 193
    , 195 (Va. 1984).
    
    With these principles in mind, we turn to the language of the
    Assignment Agreements. Section 2 of the Assignment Agreements
    states, in relevant part, that:
    
              In order to induce the Assignee [Hitachi] to enter into this
              Agreement and purchase the Loan Documents, the Assignor
              [Signet] makes the following representations and warranties:
    
              ...
    
              (e) To the best knowledge of the Assignor, the Master
              Equipment Lease Number 1991 dated November 18, 1993
              (the "Master Lease") between the Borrower, as "Lessor",
              and Philip Morris Companies, Inc., a Virginia corporation,
              as "Lessee" (the "Lessee"), as supplemented by Supplemen-
              tary Schedule No. 68 (the "Supplementary Schedule") dated
              November 16, 1995 (the Master Lease and Supplementary
              Schedule being herein collectively referred to as the
              "Lease") is in full force and effect on the date hereof, the
              Lessee has not prepaid any installment of rent due under the
              Lease, the Lease has not been amended and neither the Bor-
              rower nor the Lessee is in default under the Lease.
    
    (J.A. at 82-83.) Hitachi argues that § 2(e) is a warranty that Philip
    Morris was a party to the underlying lease transaction and the Master
    
                         12
    Lease between Nelco and Philip Morris was in full force and effect.
    To recover for breach of warranty under Virginia law, Hitachi has the
    burden of showing (1) the existence of a warranty and (2) a breach.
    See Collier v. Rice, 
    356 S.E.2d 845
    , 847 (Va. 1987). It is undisputed
    that Philip Morris was not a party to the underlying lease transaction
    and the Master Lease between Nelco and Philip Morris was not in full
    force and effect. The determinative issue therefore is whether Signet
    represented and warranted in § 2(e) that Philip Morris was a party to
    the underlying lease transaction and the Master Lease between Nelco
    and Philip Morris was in full force and effect.
    
    Whether § 2(e) is a warranty and representation turns on the mean-
    ing of the clause "To the best knowledge of the Assignor." Under Vir-
    ginia law, courts should not resort to extrinsic evidence to interpret
    a contract where the contract language is plain and unambiguous. See
    Berry, 300 S.E.2d at 796. We therefore turn first to the language of
    the Assignment Agreements to see if it expressly defines this clause.
    Section 2(n) of the Assignment Agreements defines "Assignor's
    Knowledge" in the following manner:
    
              For the purposes of this Section 2, any reference to "Assign-
              or's knowledge", and any similar reference, shall mean the
              actual knowledge of the President or any Vice President of
              the Assignor or any other officer of the Assignor having
              responsibility for the administration of the Note that is the
              subject of the representation or warranty to which such ref-
              erence relates.
    
    (J.A. at 85 (emphasis added).)
    
    The only references to "Assignor's knowledge" and similar refer-
    ences in § 2 are "best knowledge of the Assignor" in § 2(b) and
    § 2(e), and "Assignor's knowledge" in § 2(k). Because a court should
    read a contract as a whole and give meaning to every clause if possi-
    ble, see Berry, 300 S.E.2d at 796, we must import the definition in
    § 2(n) into § 2(e) if the clause "any similar reference" in § 2(n) is to
    have any meaning. Signet argues that any interpretation of § 2(e) must
    take into account the qualifier "to the best" and that the "any similar refer-
    ence" of § 2(n) refers only to "knowledge of the Assignor" and not
    "best knowledge of the Assignor." Thus, Signet argues that the substi-
    
                         13
    tution of the definition in § 2(n) transforms § 2(e) into a warranty and
    representation that to the best actual knowledge of the specified Sig-
    net officials, the lease is in full force and effect. In contrast, Hitachi
    argues that "any similar reference" refers to the clause "best knowl-
    edge of the Assignor," transforming § 2(e) into a warranty and repre-
    sentation that the specified Signet officials have actual knowledge
    that the lease is in full force and effect.
    
    We agree with the district court that a plain reading of the Assign-
    ment Agreements mandates Hitachi's interpretation. Absent any refer-
    ence in the Assignment Agreements as to what the clause "to the best"
    means, we believe that the most straightforward interpretation of "any
    similar reference" in § 2(n) is that it refers to "best knowledge of the
    Assignor" in § 2(e). Because we agree that the interpretation of § 2(e)
    is plain and unambiguous, we need not consider Signet's parol evi-
    dence of merger & acquisition and banking treatises. See Berry, 300
    S.E.2d at 796. Although the language of § 2(e) could have been
    drafted in a more direct, declaratory manner like the other warranties
    in § 2, "[h]owever inartfully it may have been drawn, the court cannot
    make a new contract for the parties, but must construe its language
    as written." Berry, 300 S.E.2d at 796. The district court, therefore,
    correctly held that Signet warranted in § 2(e) that the underlying lease
    transaction was in full force and effect and that Philip Morris was a
    party to the Master Lease.
    
    Signet also argues that (1) a finding of warranty in § 2(e) is incon-
    sistent with the disclaimer in § 2(m) and the shifting of the loan risk
    to Hitachi in § 3; (2) it is only liable for breach of § 2(e) upon proof
    that one of the specified officers had actual knowledge of fraud; and
    (3) the Philip Morris reference in § 2(e) merely identifies the lease
    being discussed and sorts out the function of the parties to the transac-
    tion. We find all of these arguments to be unpersuasive. First, § 2(m)
    disclaims liability for warranties and representations, "except as set
    forth in this section 2." (J.A. at 84.) It, therefore, by its terms, does
    not apply to § 2(e). Section 3 shifts the risk of the transaction to
    Hitachi, but only regarding the financial condition of the parties
    involved in the lease. This section does not shift the risk to Hitachi
    regarding whether the underlying lease transaction is actually in effect
    and whether Philip Morris is a party to the Master Lease.
    
                         14
    Signet's second and third arguments run afoul of the plain language
    of § 2(e). Signet's desired interpretation of § 2(e) -- that is it is only
    breached if Signet's President or a Vice President knew that the
    underlying lease was not in full force and effect or that Philip Morris
    was not a party to the lease -- is a tortured reading of the section. Had
    Signet wanted that interpretation, it could have drafted that section to
    begin, "The Assignor is without knowledge." Finally, we believe that
    the reference to Philip Morris, which included its full corporate name
    and state of incorporation, unequivocally warranted that the lease
    between the borrower and Philip Morris was in full force and effect.
    Signet's argument that the reference to "Philip Morris" in § 2(e)
    merely identified the lease being discussed and sorted out the function
    of the parties on each transaction is not plausible in light of the fact
    that the lease is already identified by its execution date and document
    number.
    
    We conclude that § 2(e), when read in conjunction with the defini-
    tion in § 2(n), demonstrates that Signet warranted that it possessed
    actual knowledge that the underlying lease transaction was in full
    force and effect and that Philip Morris was a party to the Master
    Lease. Signet breached that warranty because the underlying lease
    transaction was not in full force and effect and Philip Morris was not
    a party to the Master Lease. The district court correctly granted
    Hitachi's motion for summary judgment on its claim for breach of
    § 2(e) of the Assignment Agreements.
    
    B.
    
    Signet next argues on appeal that the district court erred in granting
    summary judgment to Hitachi on Hitachi's claim that Signet breached
    the Repurchase Agreement when Signet delivered to Hitachi an
    Incumbency Certificate that turned out to be forged. Signet's argu-
    ment takes two forms. First, Signet argues that the Repurchase Agree-
    ment is not a separate contract, but is subsumed within the terms of
    the December Assignment Agreement. In the alternative, Signet
    argues that even if the Repurchase Agreement is deemed to be a con-
    tract, § 2(m) of the December Assignment Agreement effectively dis-
    claims the validity of the Incumbency Certificate. We address these
    arguments in turn.
    
                         15
    Signet first argues that the Repurchase Agreement is not a contract
    independent of the December Assignment Agreement, and therefore,
    the Incumbency Certificate is subject to the disclaimer of validity of
    loan-related documents in § 2(m). Because the Repurchase Agree-
    ment and Assignment Agreement are separate instruments, we are
    confronted with the issue of whether to read them together as one
    contract. "A contract may be contained in several instruments," and
    they may be read together as one instrument "[i]f made at the same
    time and in relation to the same subject matter." D.H. Pritchard, Con-
    tractor, Inc. v. Nelson, 
    147 F.2d 939
    , 942 (4th Cir. 1945); accord Bott
    v. N. Snellenburg & Co., 
    14 S.E.2d 372
    , 374 (Va. 1941); see also
    Daugherty v. Diment, 
    385 S.E.2d 572
    , 574 (Va. 1989) ("Where a
    business transaction is based upon more than one document executed
    by the parties, the documents will be construed together to determine
    the intent of the parties; each document will be employed to ascertain
    the meaning intended to be expressed by the others."). To construe
    two instruments as one, reference in one instrument to the other need
    not be explicit; "it is sufficient if it is fairly traceable." Texas Co. v.
    Northup, 
    153 S.E. 659
    , 662 (Va. 1930). Until it appears that the sev-
    eral writings are part of a single transaction, either from the writings
    themselves or by extrinsic evidence, courts should not read the writ-
    ings together as one contract because the same parties may have had
    more than one transaction in one day of the same general nature. See
    Bailey v. Hannibal & St. Joseph R.R. Co., 
    84 U.S. 96
    , 108 (1873).
    
    Hitachi concedes that the execution of the December Assignment
    Agreement depended upon Signet's execution of the Repurchase
    Agreement. Moreover, it is undisputed that the December Assignment Agree-
    ment and the Repurchase Agreement bore the same date (December
    29, 1995) and concerned the same subject matter (the assignment of
    the loan from Signet to Hitachi). As the case law indicates, however,
    a court is not required to construe two documents as one contract just
    because they are executed at the same time and concern the same sub-
    ject matter. The court must give effect to the intent of the parties. See
    American Realty Trust v. Chase Manhattan Bank, N.A., 
    281 S.E.2d 825
    , 831 (Va. 1981). The parties dispute their intent in executing the
    Repurchase Agreement. Signet argues that the sole purpose of the
    Repurchase Agreement was to extend the time within which Signet
    was required to provide the Incumbency Certificate promised in
    § 5(g) of the December Assignment Agreement. Hitachi argues that the Repur-
    
                         16
    chase Agreement warranted that Signet would deliver an Incumbency
    Certificate from Philip Morris, and that it was a necessary guarantee
    because the certificate would be delivered after Hitachi had per-
    formed its obligations under the December Assignment Agreement
    and released the funds.
    
    We agree with the district court that the key to the intent of the par-
    ties lies in the plain language of the Repurchase Agreement. See
    Berry, 300 S.E.2d at 796. The Repurchase Agreement expressly states
    that "Signet Bank will provide an executed Certificate of Incumbency
    from Philip Morris." (J.A. at 97.) We believe that this language indi-
    cates that the Repurchase Agreement dealt with a distinct buyback
    transaction, and thus, constituted an agreement separate from the
    December Assignment Agreement. Although general rules of con-
    struction should not be applied mechanically to thwart the intent of
    the contracting parties, American Realty Trust, 281 S.E.2d at 831, we
    agree that there is ample evidence to support this conclusion. As the
    district court noted, the Repurchase Agreement did not refer to the
    December Assignment Agreement or, more specifically, to § 5(g) of
    that agreement. Moreover, reading the December Assignment Agree-
    ment and Repurchase Agreement together as one document would
    lead to the absurd result that the latter, which the parties executed in
    order for the transaction to go forward, is subject to the disclaimer of
    § 2(m) in the former. See id. (holding as unreasonable the view that
    the parties intended that one section of an instrument executed by the
    parties would render meaningless another instrument executed by the
    parties). We conclude that the Repurchase Agreement is a separate
    agreement that warranted that Signet would provide an Incumbency
    Certificate from Philip Morris.
    
    On appeal, Signet also argues that the Repurchase Agreement is
    not a separate and independent contract that modifies the December
    Assignment Agreement because it referenced the "Nelco lease trans-
    action" in the December Assignment Agreement, and it was a unilat-
    eral promise not supported by consideration. We find these arguments
    unpersuasive. First, Virginia law does not favor declaring contracts
    void for indefiniteness, and courts will not "permit parties to be
    released from the obligations which they have assumed if this can be
    ascertained with reasonable certainty from language used, in the light
    of all the surrounding circumstances." High Knob, Inc. v. Allen, 138
    
                        
    17 S.E.2d 49
    , 53 (Va. 1964). We believe that the term "Nelco lease trans-
    action," when construed in light of the surrounding circumstances,
    including the negotiations between Signet and Hitachi and the
    December Assignment Agreement, is sufficiently complete and defi-
    nite for the Repurchase Agreement to be valid and enforceable. Sec-
    ond, it is clear to us that the Repurchase Agreement was supported by
    consideration. The Repurchase Agreement was a bargained-for
    exchange in which Signet agreed to provide an Incumbency Certifi-
    cate from Philip Morris, and in return, Hitachi agreed to release the
    funds it promised under the December Assignment Agreement before
    reviewing the certificate. Because the Repurchase Agreement is a sep-
    arate contract, it is not subject to the requirement in § 9(d) of the
    December Assignment Agreement that an amendment be executed by
    both parties.5
    
    In the alternative, Signet argues that even assuming that the Repur-
    chase Agreement is a separate contract, it constitutes a limited modifi-
    cation to the December Assignment Agreement that simply extends
    the time in which Signet had to deliver the Incumbency Certificate.
    Because the Repurchase Agreement is a limited modification, the
    argument continues, the Incumbency Certificate is still subject to the
    disclaimer of validity of loan-related documents in § 2(m). We do not
    find this argument compelling. We agree with the district court that
    the Repurchase Agreement is more than a limited modification; it
    plainly and unambiguously promises an Incumbency Certificate from
    Philip Morris. Moreover, we agree with the district court that reading
    the December Assignment Agreement and Repurchase Agreement as two sepa-
    rate contracts removes "Signet's contention that the disclaimers in
    Assignment Agreement § 2(m) apply to the Repurchase Agreement."
    (J.A. at 171.) There is no similar disclaimer in the Repurchase Agree-
    ment, and we will not read one into it. See Bridgestone/Firestone, Inc.
    _________________________________________________________________
    
    5 Section 9(d) of the Assignment Agreements provides:
    
              Entire Agreement. This agreement constitutes the entire agree-
              ment between the parties with respect to the subject matter
              hereof and thereof and shall not be amended or altered in any
              manner except by a document in writing executed by both par-
              ties.
    
    (J.A. at 91.)
    
                        18
    v. Prince William Square Assocs., 
    463 S.E.2d 661
    , 664 (Va. 1995)
    ("The law will not insert by construction, for the benefit of a party,
    an exception or condition which the parties omitted from their con-
    tract by design or neglect.").
    
    We conclude that the Repurchase Agreement was an agreement
    separate from the December Assignment Agreement that Signet
    breached when it delivered to Hitachi an incumbency certificate that
    was not executed by Philip Morris. The district court properly granted
    Hitachi's motion for summary judgment on this claim.
    
    III.
    
    We next turn to Hitachi's cross-appeal.6 On cross-appeal, Hitachi
    first argues that the district court improperly dismissed its claims for
    fraud against Signet pursuant to Rule 12(b)(6). At the outset, we note
    that "Virginia law recognizes the separate tort of fraud, even where
    the parties have agreed to a contract," City of Richmond v. Madison
    Management Group, Inc., 
    918 F.2d 438
    , 446-47 (4th Cir. 1990), and
    a plaintiff may recover damages for both fraud and breach of contract,
    see id. at 457. We review a district court's dismissal of a claim under
    Rule 12(b)(6) de novo. See Mylan Lab., Inc. v. Matkari, 
    7 F.3d 1130
    ,
    1134 (4th Cir. 1993). Generally, where a cause of action arises in tort,
    Virginia applies the law of the state where the tortious conduct or
    injury occurred. See Jones v. R.S. Jones & Assocs., 
    431 S.E.2d 33
    , 34
    (Va. 1993) (stating that lex loci delicti is settled rule in Virginia).
    Where a choice of law clause in the contract is sufficiently broad to
    encompass contract-related tort claims such as fraudulent inducement,
    other courts have honored the intent of the parties to choose the appli-
    cable law. See In re Allegheny Int'l, Inc., 
    954 F.2d 167
    , 178 (3d Cir.
    1992); Moses v. Business Card Express, Inc., 
    929 F.2d 1131
    , 1139
    (6th Cir. 1991). We believe that the choice of law language of § 9(c)
    in the Assignment Agreements indicates that the parties intended to
    cover more than merely contract claims. Thus, pursuant to § 9(c) and
    _________________________________________________________________
    
    6 We address only the issues Hitachi briefed on its cross-appeal. See
    Canady v. Crestar Mortgage Corp., 
    109 F.3d 969
    , 973-74 (4th Cir.
    1997) (holding that issues raised in notice of appeal but not briefed on
    appeal are deemed waived).
    
                         19
    recognizing the close relationship of the tort claims to the contract,
    this Court will apply Virginia law to Hitachi's fraud claims.
    
    Hitachi alleges in its Amended Complaint that the representations
    and material omissions that Signet made to Hitachi during the course
    of the loan transaction negotiations constituted fraudulent inducement
    to enter the Assignment Agreements. To prevail on an actual fraud
    claim under Virginia law, a plaintiff must prove by clear and convinc-
    ing evidence "(1) a false representation, (2) of a material fact, (3)
    made intentionally and knowingly, (4) with intent to mislead, (5) reli-
    ance by the party mislead, and (6) resulting damage to the party mis-
    led." Evaluation Research Corp. v. Alequin, 
    439 S.E.2d 387
    , 390 (Va.
    1994). Virginia law also recognizes an action for fraud where misrep-
    resentations are made without specific fraudulent intent but made
    with reckless abandon and disregard for the truth. See Bradley v.
    Tolson, 
    85 S.E. 466
    , 467 (Va. 1915). Constructive fraud differs only
    in that the misrepresentation of material fact is not made with the
    intent to mislead, but is made innocently or negligently; the plaintiff
    must still prove the other elements of actual fraud -- reliance and det-
    riment -- by clear and convincing evidence. See Evaluation Research
    Corp., 439 S.E.2d at 390.
    
    Under Virginia law, a concealment or omission of a material fact
    may also give rise to a claim of actual fraud. Although silence does
    not constitute fraud in the absence of a duty to disclose, cf. Norris v.
    Mitchell, 
    495 S.E.2d 809
    , 812-13 (Va. 1998), "[c]oncealment of a
    material fact by one who knows that the other party is acting upon the
    assumption that the fact does not exist constitutes actionable fraud,"
    Allen Realty Corp. v. Holbert, 
    318 S.E.2d 592
    , 597 (Va. 1984). For
    purposes of an action for fraud, concealment, whether by word or
    conduct, may be the equivalent of a false representation because it
    always involves deliberate nondisclosure designed to prevent another
    from learning the truth. See Van Deusen v. Snead , 
    441 S.E.2d 207
    ,
    209 (Va. 1994). Moreover, a party's willful nondisclosure of a mate-
    rial fact that he knows is unknown to the other party may evince an
    intent to practice actual fraud. Id.
    
    It is not enough for a plaintiff in a fraud action to show that it acted
    to its detriment in response to the defendant's false representation or
    concealment of a material fact. "In order to prove reliance, a plaintiff
    
                         20
    must demonstrate that its reliance upon the representation was reason-
    able and justified." Meridian Title Ins. Co. v. Lilly Homes, Inc., 
    735 F. Supp. 182
    , 185 (E.D. Va. 1990) (interpreting Virginia law), aff'd,
    
    934 F.2d 319
     (4th Cir. 1991). The touchstone of reasonableness is
    prudent investigation. A plaintiff cannot claim that its reliance was
    reasonable and justified when it makes a partial inquiry, with full
    opportunity of complete investigation, and elects to act upon the
    knowledge obtained from the partial inquiry. See Harris v. Dunham,
    
    127 S.E.2d 65
    , 71-72 (Va. 1962). Moreover,
    
              [I]f false representations are made regarding matters of fact,
              and the means of knowledge are at hand and equally avail-
              able to both parties, and the party, instead of resorting to
              them, sees fit to trust himself in the hands of one whose
              interest it is to mislead him, the law, in general, will leave
              him where he has been placed by his own imprudent confi-
              dence.
    
    Horner v. Ahern, 
    153 S.E.2d 216
    , 219 (Va. 1967) (quoting Costello
    v. Larsen, 
    29 S.E.2d 856
    , 858 (Va. 1944)). The cases in Virginia are
    clear, however, that "one cannot, by fraud and deceit, induce another
    to enter into a contract to his disadvantage, then escape liability by
    saying that the party to whom the misrepresentation was made was
    negligent in failing to learn the truth." Nationwide Ins. Co. v.
    Patterson, 
    331 S.E.2d 490
    , 492 (Va. 1985). A buyer may therefore
    recover for fraud if the seller does or says anything to divert the buyer
    "from making the inquiries and examination which a prudent man
    ought to make." Horner, 153 S.E.2d at 219.
    
    In its Amended Complaint, which incorporated by reference the
    original fraud allegations in its Complaint, Hitachi alleges that it rea-
    sonably relied to its detriment on the untrue statements that Signet
    made to Hitachi regarding the purported transactions between Nelco
    and Philip Morris. In the Amended Complaint, Hitachi also alleges
    that Signet made representations to Hitachi regarding the purpose and
    nature of Project Star and the purported authority of Reiners to act on
    behalf of Philip Morris with knowledge of their falsity, or reckless
    indifference to their truth or falsity. Hitachi also alleges that Signet
    deliberately concealed and omitted material facts regarding the pur-
    ported involvement of the U.S. government in Project Star and Sig-
    
                         21
    net's doubts as to Reiners's authority to act on behalf of Philip
    Morris. Hitachi also claims that Signet intended for Hitachi to rely on
    these representations and omissions. Finally, Hitachi alleges in the
    Amended Complaint that it relied on these representations and omis-
    sions and thereby was induced to enter the Assignment Agreements
    to its detriment.
    
    The only element of Hitachi's fraud causes of action that Signet
    questions is whether Hitachi's reliance on Signet's allegedly false
    representations and omissions of material fact was reasonable and jus-
    tified. Signet argues that §§ 2(m) and 3 of the Assignment Agree-
    ments allocate to Hitachi the responsibility of learning about the
    underlying transaction and disclaim Hitachi's reliance on any infor-
    mation provided by Signet. In general, a contractual disclaimer of
    reliance is not a prophylactic against a claim of fraud. "While . . . con-
    tracting parties may waive their contractual rights and disclaim or
    limit certain liabilities, a `false representation of a material fact, con-
    stituting an inducement to the contract, on which the purchaser had
    a right to rely, is always ground for rescission of the contract by a
    court of equity'" or an action for damages in a court of law. George
    Robberecht Seafood, Inc. v. Maitland Bros. Co., 
    255 S.E.2d 682
    , 683
    (Va. 1979) (quoting Wilson v. Carpenter, 
    21 S.E. 243
    , 244 (Va.
    1895)). Thus, a buyer can show that a contract of sale was induced
    by the seller's fraud, even though the written contract contains cove-
    nants waiving warranties or disclaiming or limiting liabilities. See id.
    
    We have previously held, however, that under Virginia law reli-
    ance on a false representation is not justified where the relying party
    fails to undertake a prudent investigation and specifically disclaims
    reliance on that very representation in a contract. In Hoover Univer-
    sal, Inc. v. Brockway Imco, Inc., 
    809 F.2d 1039
     (4th Cir. 1987), a
    buyer purchased a machine after reviewing documentation describing
    the machine that, unbeknownst to seller and buyer, was erroneous.
    See id. at 1041-42. The buyer brought an action for fraudulent induce-
    ment against the seller, arguing that the erroneous description was a
    "substantial motivating factor" in purchasing the machine. Id. at 1043.
    Not only did the buyer fail to inspect the machine closely, the sales
    contract the buyer signed provided that the buyer would "inspect" and
    "become familiar" with the machine. Id. at 1041, 1044. We affirmed
    the district court's grant of summary judgment in favor of the seller
    
                         22
    on the ground that the buyer's "clear failure to fulfill the duty of
    inspection imposed by both the operation of law and contract" pre-
    cluded its effort to assert reliance on the handout. Id. at 1044. Based
    on Hoover and cases from our sister circuits that reached the same
    conclusion in similar factual situations,7 the district court concluded
    that Hitachi expressly warranted and represented that it would con-
    duct its own investigation of the underlying lease, and Signet
    expressly disclaimed any statements by the Borrower or the authentic-
    ity of any of the documents related to the loan.
    
    We conclude that the district court erred. Hitachi was reasonable
    and justified in relying on Signet's representations and omissions
    regarding the purpose and nature of Project Star and the purported
    authority of Reiners to act on behalf of Philip Morris. First, Hitachi
    conducted a prudent investigation under the circumstances. The Con-
    fidentiality Agreement Hitachi signed at the start of the negotiations
    with Signet prevented a full investigation into the truth of Signet's
    representations.8 Moreover, Signet's concealment of the purported
    involvement of the U.S. government in Project Star prevented Hitachi
    from making inquiries that might have led to the truth. In spite of
    these impediments, Hitachi attempted to investigate the underlying
    transaction, as evidenced by its request to Signet for an authorizing
    resolution from Philip Morris and its request to Dun & Bradstreet for
    a report on WRE. Hitachi was simply unable to discover the fraud by
    gathering information from sources other than Signet. Under these
    circumstances, as alleged, Hitachi conducted a prudent investigation
    and was justified in relying on Signet's representations.
    _________________________________________________________________
    
    7 See Banque Arabe et Internationale v. Maryland Nat'l Bank, 
    57 F.3d 146
    , 156 (2d Cir. 1995); Bank of the West v. Valley Nat'l Bank, 
    41 F.3d 471
    , 477-78 (9th Cir. 1994); First Fin. Fed. Sav. & Loan Ass'n v. E.F.
    Hutton Mortgage Corp., 
    834 F.2d 685
    , 687-88 (8th Cir. 1987).
    
    8 The Confidentiality Agreement specifically stated that Hitachi was
    entitled to rely on the representation that Reiners was an authorized
    Philip Morris representative. The Confidentiality Agreement also pre-
    vented Hitachi from contacting Philip Morris to discuss Project Star.
    Moreover, Reiners represented that if anyone contacted Philip Morris to
    inquire about Project Star, Philip Morris would deny that Reiners was a
    Philip Morris employee.
    
                        23
    Second, unlike the buyer in Hoover, Hitachi did not contractually
    disclaim reliance on the representations claimed to be fraudulent.
    Reading Hoover in conjunction with George Robberecht, we con-
    clude that a buyer can recover for fraudulent inducement not only
    where the contract contains a general disclaimer of warranties and lia-
    bilities, but also where the contract contains specific disclaimers that
    do not cover the allegedly fraudulent contract-inducing representa-
    tions. Sections 2(m) and 3(e)-(i) of the Assignment Agreements con-
    tain disclaimers by Signet and warranties by Hitachi regarding only
    the financial condition or statements of Nelco and Philip Morris and
    the financial risks of the transaction. By their plain terms, the dis-
    claimers of liability do not extend Hitachi's obligations to include
    ascertaining the validity of the underlying transaction and are insuffi-
    ciently specific to render Signet immune from the alleged fraud that
    induced the contract.
    
    We conclude that Hitachi has affirmatively alleged all of the ele-
    ments of constructive and actual fraud on the part of Signet and
    that Hitachi did not disclaim reliance on Signet's alleged
    fraudulent misrepresentations and omissions of material fact that
    induced Hitachi to enter the Assignment Agreements.9 Because
    _________________________________________________________________
    
    9 We do not believe that the Supreme Court of Virginia's recent deci-
    sion in Richmond Metropolitan Auth. v. McDevitt Street Bovis, Inc. 
    1998 WL 774505
     (Va. Nov. 6, 1998), changes our analysis. In that case, the
    Supreme Court of Virginia held that a breach of a contractual duty does
    not give rise to a claim for constructive or actual fraud. See Richmond
    Metropolitan Auth., 
    1998 WL 774505
     at *3. The Supreme Court of Vir-
    ginia concluded, however, that its decision did not apply to cases of fraud
    in the inducement. See id. at *4 ("The present case is not one of fraud
    in the inducement."). This conclusion is consistent with the distinction in
    Virginia law between a statement that is false when made (which is
    fraud) and a promise that becomes false only when the promisor later
    fails to keep his word (which is breach of contract). See Colonial Ford
    Truck Sales, Inc. v. Schneider, 
    325 S.E.2d 91
    , 94 (Va. 1985). In this case,
    Hitachi's fraud claims do not rest on a breach of the duties that Signet
    undertook in the Assignment Agreements; rather, they concern alleged
    misrepresentations and omissions of material fact that Signet made in
    order to induce Hitachi to sign the Assignment Agreements.
    Under Virginia law, Hitachi has stated claims for constructive and
    actual fraud.
    
                        24
    Hitachi can prove a set of facts that, if believed, would support its
    fraud claims and would entitle it to relief, the district court erred in
    dismissing these claims. See Mylan Lab., 
    7 F.3d 1130
    , 1134 (4th Cir.
    1993). We therefore reverse the district court's dismissal of Hitachi's
    fraud claims and remand to the district court with instructions to rein-
    state these claims.
    
    IV.
    
    Hitachi next argues on cross-appeal that it was entitled to attor-
    neys' fees and costs it incurred in collateral litigation involving the
    Nelco bankruptcy and the criminal forfeiture proceeding. The district
    court refused to award Hitachi attorneys' fees and costs for these two
    proceedings, concluding that there was no cause and effect relation-
    ship between Signet's breach of § 2(e) and each proceeding. This
    Court reviews a district court's decision to award attorneys' fees for
    abuse of discretion. See Carroll v. Wolpoff & Abramson, 
    53 F.3d 626
    ,
    628 (4th Cir. 1995). We apply Virginia law to determine whether an
    award of attorneys' fees and costs to Hitachi is warranted. See
    Culbertson v. McCall Coal Co., 
    495 F.2d 1403
    , 1405-06 (4th Cir.
    1974).
    
    In general, absent a contractual or statutory provision to the con-
    trary, a prevailing party cannot recover attorneys' fees and expenses
    from a losing party. See Mullins v. Richland Nat'l Bank, 
    403 S.E.2d 334
    , 335 (Va. 1991). Where a defendant's "breach of contract has
    forced the plaintiff to maintain or defend a suit with a third person,"
    however, Virginia law provides that the plaintiff may recover the
    counsel fees and court costs incurred by him in that suit, provided
    those expenditures "are reasonable in amount and reasonably
    incurred." Hiss v. Friedberg, 
    112 S.E.2d 871
    , 876 (Va. 1960) (the
    "Hiss rule"). The employment of counsel must be a "direct and neces-
    sary consequence" of the defendant's breach of contract. Id. at 876-
    77. If the damages that result from defendant's breach are consequen-
    tial rather than direct, they are not compensable. See Long v.
    Abbruzzetti, 
    487 S.E.2d 217
    , 219-20 (Va. 1997). Parties may also
    allocate attorneys' fees and costs via an indemnity clause in a con-
    tract. See Chesapeake & Potomac Telephone Co. v. Sisson & Ryan,
    Inc., 
    362 S.E.2d 723
    , 728-29 (Va. 1987).
    
                        25
    Hitachi argues that it is entitled to recover attorneys' fees and costs
    pursuant to § 8(a) of the Assignment Agreement.10 Hitachi also argues
    that it is entitled to recover attorneys' fees and costs pursuant to the
    Hiss rule. The issue we must resolve, therefore, is whether Hitachi's
    expenses arose out of or were related to Signet's breach of the
    Assignment Agreements or the Repurchase Agreement so as to impli-
    cate § 8(a) or whether the expenses were a direct and necessary con-
    sequence of Signet's breach so as to implicate Virginia common law.
    We address the Nelco bankruptcy and the criminal forfeiture proceed-
    ing in turn.
    
    The direct cause of the Nelco bankruptcy was Nelco's fragile
    financial condition, for which Hitachi explicitly assumed responsibil-
    ity in §§ 3(e) and (h) of the Assignment Agreements. We agree with
    the district court that Hitachi had access to all relevant financial infor-
    mation but failed to investigate adequately Nelco's financial strength.
    Signet's breach of § 2(e) and of the Repurchase Agreement caused
    Hitachi's expenditures in the Nelco bankruptcy proceeding only in the
    sense that Hitachi might not have entered the transaction in the first
    place but for the breach. The district court did not abuse its discretion
    in concluding that Hitachi's attorneys' fees and costs did not "arise
    out of" or "result from" Signet's breach.11 Hitachi's expenditures also
    were not a direct and necessary consequence of Signet's breach.
    _________________________________________________________________
    
    10 Section 8(a) of the Assignment Agreements provides in relevant part:
    
              Indemnity. Each party hereto shall upon the other party's
              demand pay and assume liability for, and indemnify, protect,
              defend, save and keep harmless such other party, on an after tax
              basis, from any and against any and all liabilities, obligations,
              losses, damages, settlements, claims, actions, suits, penalties,
              costs and expenses (including, without limitation, reasonable
              fees and expenses of counsel) of whatsoever kind and nature
              which shall at any time or from time to time be imposed upon,
              incurred by or asserted against such other party in any way relat-
              ing directly or indirectly to, or arising out of, (i) any inaccuracy
              or other breach of any representation or warranty made by a
              party under this Agreement or in any other document, instrument
              or certificate delivered by it pursuant to this Agreement.
    
    (J.A. at 90.)
    
    11 Although the district court only addressed Signet's breach of § 2(e),
    we believe that its reasoning applies to Signet's breach of the Repurchase
    Agreement as well.
    
                        26
    The direct cause of the criminal forfeiture proceeding was Rei-
    ners's fraud. Although we disagree with the district court's reasoning
    that Hitachi assumed the risk of Reiners's fraud, we
    agree with the district court's ultimate conclusion. We believe, as
    stated above, that Signet's breach of § 2(e) and of the Repurchase
    Agreement caused Hitachi's expenditures in the criminal forfeiture
    proceeding only in the sense that Hitachi might not have entered the
    transaction in the first place but for the breach. The district court did
    not abuse its discretion in holding that Hitachi's attorneys' fees and
    costs were not caused by Signet's breach. Hitachi's expenses also did
    not "arise out of" or "relate to" Signet's breach.
    
    Accordingly, we conclude that the district court did not abuse its
    discretion when it denied Hitachi attorneys' fees and costs in connec-
    tion with the criminal forfeiture proceeding and Nelco bankruptcy.
    We therefore affirm the district court on the issue of attorneys' fees
    and costs.
    
    V.
    
    Finally, Hitachi argues on cross-appeal that the district court mis-
    calculated the pre- and postjudgment interest due on its monetary
    award.12 The district court awarded Hitachi prejudgment interest at
    the rates set in the Assignment Agreements -- 6.55% on the balance
    of the December loan and 6.35% on the balance of the January loan.
    The district court awarded Hitachi postjudgment interest of nine per-
    cent on the balance of the combined loans in accordance with the Vir-
    ginia Code. These rulings are matters of law that this Court reviews
    de novo. See In re Pucci Shoes, Inc., 
    120 F.3d 38
    , 41 (4th Cir. 1997).
    
    A.
    
    Virginia law governs the award of prejudgment interest in a diver-
    sity case. See United States v. Dollar Rent A Car Systems, Inc., 712
    _________________________________________________________________
    
    12 In its November 17, 1997 Order, the district court awarded Hitachi
    the net outstanding balance of its loan in the amount of $6,340,340.00,
    attorneys' fees and costs for the Hitachi Litigation (this case) in the
    amount of $608,950.26, and attorneys' fees and costs in the amount of
    $32,280.19 for the Signet Declaratory Judgment Action.
    
                         
    27 F.2d 938
    , 940 (4th Cir. 1983). With regard to such an award, the Vir-
    ginia Code provides in pertinent part that "[i]n any action at law or
    suit in equity, the verdict of the jury, or if no jury the judgment or
    decree of the court, may provide for interest on any principal sum
    awarded, or any part thereof, and fix the period at which the interest
    shall commence." Va. Code Ann. § 8.01-382 (Michie 1992). Whether
    prejudgment interest should be awarded under § 8.01-382 is a matter
    within the sound discretion of the district court. See Hannon Arm-
    strong & Co. v. Sumitomo Trust & Banking Co., 
    973 F.2d 359
    , 369
    (4th Cir. 1992); Dairyland Ins. Co. v. Douthat, 
    449 S.E.2d 799
    , 801
    (Va. 1994). The district court held that Hitachi was entitled to pre-
    judgment interest on the outstanding balance of the Project Star loans,
    and Signet has not appealed that determination. The only issue for us
    to resolve, therefore, is whether the district court applied the correct
    prejudgment interest rate.
    
    With regard to the correct prejudgment interest rate, the Virginia
    Code provides in relevant part that
    
              The judgment rate of interest shall be an annual rate of nine
              percent, except that a money judgment entered in an action
              arising from a contract shall carry interest at the rate law-
              fully charged on such contract, or at nine percent annually,
              whichever is higher. Interest at the judgment rate, where no
              rate is provided by contract, shall apply to [] prejudgment
              interest pursuant to § 8.01-382.
    
    Va. Code Ann. § 6.1-330.54 (Michie 1993) (emphasis added).
    According to the statute, when a district court makes an award of pre-
    judgment interest, it should award the higher of nine percent or the
    rate set in the contract. The rates set in the Assignment Agreements
    -- 6.55% in the December Assignment Agreement and 6.35% in the
    January Assignment Agreement -- were clearly lower than nine per-
    cent. The district court erred as a matter of law in not awarding
    Hitachi prejudgment interest of nine percent. We therefore remand the
    case to the district court with instructions to award Hitachi prejudg-
    ment interest of nine percent on the balance of both loans.
    
    B.
    
    Federal law, rather than state law, governs the calculation of post-
    judgment interest in diversity cases. See Forest Sales Corp. v.
    
                        28
    Bedingfield, 
    881 F.2d 111
    , 113 (4th Cir. 1989). The applicable federal
    statute provides in relevant part that
    
              Interest shall be allowed on any money judgment in a civil
              case recovered in a district court. . . . Such interest shall be
              calculated from the date of the entry of the judgment, at a
              rate equal to the coupon issue yield equivalent (as deter-
              mined by the Secretary of the Treasury) of the average
              accepted auction price for the last auction of fifty-two week
              United States Treasury bills settled immediately prior to the
              date of the judgment.
    
    28 U.S.C.A. § 1961(a) (West 1994). The district court erred as a mat-
    ter of law both in applying state law and in applying the statutory rate
    only on the balance of the loans rather than the entire judgment. We
    therefore remand the case to the district court with instructions to cal-
    culate the proper rate of postjudgment interest on Hitachi's entire
    money judgment pursuant to 28 U.S.C.A. § 1961.
    
    VI.
    
    In sum, we affirm the district court's grant of summary judgment
    in favor of Hitachi on Hitachi's breach of contract claims and the dis-
    trict court's refusal to award Hitachi attorneys' fees and costs for col-
    lateral litigation with third parties. We reverse the district court's
    dismissal of Hitachi's fraud claims and the district court's calculation
    of pre- and postjudgment interest on Hitachi's monetary award. We
    remand this case to the district court with instructions to reinstate
    Hitachi's fraud claims and to calculate and award pre- and postjudg-
    ment interest in a manner consistent with this opinion.
    
    AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
    
                         29
    

Document Info

DocketNumber: 97-2753

Filed Date: 2/17/1999

Precedential Status: Precedential

Modified Date: 9/22/2015

Authorities (33)

Bailey v. Railroad Co. , 84 U.S. 96 ( 1873 )

Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487 ( 1941 )

Celotex Corporation v. Myrtle Nell Catrett, Administratrix ... , 477 U.S. 317 ( 1986 )

ruth-m-culbertson-of-the-will-of-william-m-culbertson-jr-deceased , 495 F.2d 1403 ( 1974 )

Hoover Universal, Inc. v. Brockway Imco, Inc., Hoover ... , 809 F.2d 1039 ( 1987 )

Forest Sales Corporation v. Walter Bedingfield, Rufus ... , 881 F.2d 111 ( 1989 )

johnny-w-moses-and-frances-g-moses-v-business-card-express-inc-a , 929 F.2d 1131 ( 1991 )

26 Collier bankr.cas.2d 663, Bankr. L. Rep. P 74,447 in Re ... , 954 F.2d 167 ( 1992 )

hannon-armstrong-company-formerly-known-as-eden-hannon-company-v , 973 F.2d 359 ( 1992 )

mylan-laboratories-incorporated-v-raj-matkari-dilip-shah-raju-vegesna , 7 F.3d 1130 ( 1993 )

bank-of-the-west-a-california-banking-corporation , 41 F.3d 471 ( 1994 )

Susan J. Carroll v. Wolpoff & Abramson , 53 F.3d 626 ( 1995 )

Johnnie A. Canady Nancy Canady v. Crestar Mortgage ... , 109 F.3d 969 ( 1997 )

In Re Pucci Shoes, Incorporated, Debtor. Raymond A. Yancey ... , 120 F.3d 38 ( 1997 )

Norris v. Mitchell , 495 S.E.2d 809 ( 1998 )

Long v. Abbruzzetti , 487 S.E.2d 217 ( 1997 )

BRIDGESTONE v. Prince William Square Assoc. , 463 S.E.2d 661 ( 1995 )

Colonial Ford Truck Sales v. Schneider , 325 S.E.2d 91 ( 1985 )

Nationwide Ins. Co. v. Patterson , 331 S.E.2d 490 ( 1985 )

Van Deusen v. Snead , 441 S.E.2d 207 ( 1994 )

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