Schafer v. Barrier Island Station, Inc.

In July 1984, three married couples (plaintiffs) (together, Schafer) signed contracts to purchase condominiums from Barrier Island Station, Inc. (Barrier Island) (defendant) as part of a real estate development in North Carolina. Before the specified closing date, Barrier Island was expected to execute agreements to repurchase the condominiums under certain conditions. The parties initially thought that the development would consist of four buildings, two of which would contain time-sharing units. Barrier Island decided, however, that it wanted all four buildings to contain time-sharing units. Barrier Island added a provision to the original repurchase agreements that required owners to approve all four buildings for time sharing (time-share provision). Schafer opposed the provision. Over months, Schafer’s attorney, Starkey Sharp, exchanged correspondence with Barrier Island’s transactional attorney, Crouse Gray. Barrier Island, through its principals Shaver and Lancaster, informed Gray that there was “no deal” if the repurchase agreements did not include the time-share provision. Nevertheless, on September 13, 1984, Gray sent a letter to Sharp that stated in part: “I have been advised that the principals of [Barrier Island] have already talked with the sales agent who called your clients to advise that [Barrier Island] would agree to abide by the original repurchase agreements” without a time-share provision. The condominium deal closed without any repurchase agreements being executed. In all prior matters represented by Gray, Barrier Island signed or executed contracts through its principals, not its attorney. Three years later, Schafer demanded that Barrier Island repurchase the condominiums, relying on Gray’s last letter. Schafer sued Barrier Island, which argued that it never executed the original repurchase agreements. A jury found in favor of Schafer, based in part on testimony from Gray that he believed he would have conferred with his client before sending the September letter. Barrier Island’s principals denied that they had authorized the execution of or executed the repurchase agreement. The court entered judgment in favor of Schafer, and Barrier Island appealed.