Opinion
NO. 2012 CA 1073
02-15-2013
STEPHEN J. WILLIAMS v. FERRY HOLDING, LLC
Harry J. Philips, Jr. Marc S. Whitfield Baton Rouge, Louisiana and Martin S. Triche Napoleonville, Louisiana and James D. Dasso Jeffrey A. Soble Chicago, Illinois Attorneys for Defendant/Appellant, Ferry Holding, LLC Christopher H. Riviere Eric L. Trosclair Thibodaux, Louisiana Attorneys for Plaintiff/Appellee, Stephen J. Williams
NOT DESIGNATED FOR PUBLICATION
On Appeal from the
17th Judicial District Court,
In and for the Parish of Lafourche,
State of Louisiana
Trial Court No. 117240
The Honorable John E. LeBlanc, Judge Presiding
Harry J. Philips, Jr.
Marc S. Whitfield
Baton Rouge, Louisiana
and
Martin S. Triche
Napoleonville, Louisiana
and
James D. Dasso
Jeffrey A. Soble
Chicago, Illinois
Attorneys for Defendant/Appellant,
Ferry Holding, LLC
Christopher H. Riviere
Eric L. Trosclair
Thibodaux, Louisiana
Attorneys for Plaintiff/Appellee,
Stephen J. Williams
BEFORE: GU1DRY, CRAIN, AND THERIOT, JJ.
CRAIN , J.
Ferry Holding, LLC (Ferry) appeals the granting of a motion for summary judgment in favor of Stephen J. Williams (Williams) and a denial of a motion for summary judgment filed on behalf of Ferry in a proceeding to enforce a promissory note. For the reasons that follow, we reverse and render summary judgment in favor of Ferry, dismissing the claims of Williams.
FACTS AND PROCEDURAL HISTORY
On February 16, 2010, Ferry executed a promissory note payable to Williams in the principal amount of $4,000,000.00 (Williams Note). The Williams Note was consideration for a loan in the same amount from Williams to Ferry. The loan proceeds provided a portion of the funds used by Ferry to purchase thirteen offshore vessels from Graham Gulf, Inc. On the same date, Ferry executed another promissory note, that one payable to Ferry Holding Corporation (FHC) in the principal amount of $16,000,000.00 (FHC Note). The consideration for the FHC Note was a loan in that amount from FHC to Ferry and represented the balance of the funds necessary for the purchase of the offshore vessels. Other than the principal amounts owed, the terms of the Williams Note and the FHC Note (collectively, Notes) are identical.
Ferry and FHC are related entities. FHC owns an 80% interest in Ferry through a series of intermediate entities. More specifically, FHC owns an 80% interest in International Offshore Services, LLC (IOS), which owns International Pipeliner, LLC (International Pipeliner), which, in turn, owns Ferry. Williams, by virtue of his 20% ownership interest in IOS, owns a 20% interest in Ferry.
Williams and FHC formed Ferry for the purpose of acquiring and operating the offshore vessels. The loans advanced to Ferry by FHC and Williams were in proportion to their respective ownership interests in the new entity. The acquisition of the vessels exhausted the entirety of the funds provided by the loans, as the total amount paid by Ferry at the closing of the transaction was $20,000,000.00.
Also on February 16, 2010, Ferry executed a "Senior Revolving Promissory Note" in favor of International Pipeliner which created a line of credit for Ferry with International Pipeliner in the maximum amount of $1,500,000.00 (Pipeliner Line of Credit).
The Williams Note provides that the principal amount of the indebtedness shall be paid in a single payment on August 16, 2012. Interest accrued at the annual rate often percent and was payable "annually on each anniversary of the date of this Note." Pursuant to that provision, the first interest payment under the Williams Note in the amount of $400,000.00 would have been due on February 16, 2011; however, the Williams Note contains the following three paragraphs, appearing in bold print, which is the source of the dispute between the parties:
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS NOTE, NO PAYMENT OR PREPAYMENT OF PRINCIPAL OR INTEREST HEREUNDER MAY BE MADE:Paragraphs (a) and (b) above will be referred to hereinafter, respectively, as the "Line of Credit Provision" and the "Concurrent Payment Provision".
(a) IF PRIOR TO OR IMMEDIATELY AFTER GIVING EFFECT TO SUCH PAYMENT OR PREPAYMENT, ANY AMOUNTS REMAIN OUTSTANDING UNDER THAT CERTAIN SENIOR REVOLVING PROMISSORY NOTE DATED AS OF EVEN DATE HEREWITH BY MAKER IN FAVOR OF INTERNATIONAL PIPELINER, LLC, A DELAWARE LIMITED LIABILITY COMPANY, IN THE MAXIMUM PRINCIPAL AMOUNT OF $1,500,000; AND
(b) UNLESS, CONCURRENTLY THEREWITH, MAKER MAKES A PRO RATA PAYMENT OR
PREPAYMENT IN RESPECT OF THAT CERTAIN PROMISSORY NOTE OF EVEN DATE HEREWTIH BY MAKER IN FAVOR OF FERRY HOLDING CORPORATION, A DELAWARE CORPORATION, IN THE ORIGINAL PRINCIPAL AMOUNT OF SIXTEEN MILLION DOLLARS ($16,000,000) (THE 'FERRY HOLDINGS NOTE'), SUCH PRO RATA PAYMENT TO BE CALCULATED BASED ON THE OUTSTANDING PRINCIPAL AMOUNTS OF THIS NOTE AND THE FERRY HOLDINGS NOTE.
Ferry did not make an interest payment on February 16, 2011. As a result, Williams forwarded a "Notice of Default" to Ferry that purported to accelerate all payments due under the Williams Note, including the principal amount of $4,000,000.00 plus interest at the default rate of 16% as provided in the note. Thereafter, Williams filed the instant suit against Ferry seeking to recover the principal amount of the note, plus interest and attorney's fees.
Ferry initially responded to the suit by filing a peremptory exception of no cause of action and a dilatory exception of prematurity, asserting that the Line of Credit Provision and the Concurrent Payment Provision created suspensive conditions to the repayment of the note that had not been fulfilled. The trial court denied and dismissed both exceptions explaining, in part:
There is no evidence before the Court on the issue of whether or not any suspensive conditions have been met, whether or not they are, in fact, suspensive conditions.A judgment was signed in accordance with that ruling on May 26, 2011.
Following discovery by both parties, Williams and Ferry filed motions for summary judgment on November 8, 2011 and December 1, 2011, respectively. In support of his motion for summary judgment, Williams offered the Williams Note, the notice of default, his own affidavit attesting that Ferry had made no payments under the note, and excerpts of the deposition of Jarod Richard, the comptroller for IOS. Ferry relied upon Answers to Requests for Admission, the deposition of Williams, an affidavit of Scott McCarthy (a senior vice president of FHC's parent company, Platinum Equity Advisors, LLC), and excerpts from the deposition of Jarod Richard.
The evidence presented in support of the motions for summary judgment established the following:
1. On February 16, 2010, Ferry executed the Williams Note, the FHC Note, and the senior revolving promissory note necessary to establish the Pipeliner Line of Credit;
2. As of February 16, 2011, the first anniversary of the Notes, the accrued interest on the Williams Note was $400,000.00, and the accrued interest on the FHC Note was $1,600,000.00;
3. As of February 16, 2011, Ferry owed no amount on the Pipeliner Line of Credit;
4. As of February 16, 2011, Ferry had "less than $500,000.00 in available funds" for operating expenses; and
5. Ferry has made no payments on either the Williams Note or the FHC Note.
Williams argued to the trial court that Ferry's failure to make an interest payment on the Williams Note on February 16, 2011 constituted a default which resulted in the acceleration of all sums due under that note. Ferry countered that no default had occurred because payment under the Williams Note was conditioned upon the Line of Credit Provision and the Concurrent Payment Provision which conditions were not fulfilled. More specifically, Ferry argued that the Line of Credit Provision is a suspensive condition that prevents Ferry's payment obligation from arising unless and until Ferry has sufficient available funds to make the payment without drawing on the Pipeliner Line of Credit. Ferry also argued that the Concurrent Payment Provision was a suspensive condition that prevents the payment obligation from arising unless and until Ferry made a pro rata payment on the FHC Note.
The trial court concluded that the Line of Credit Provision prevented Ferry from using the Pipeliner Line of Credit to make the interest payment on the Williams Note. However, the trial court further concluded that the provision did not permit Ferry to withhold payment "if business is not doing well . . . or if we don't want to pay, we don't have to pay." Addressing the Concurrent Payment Provision, the trial court ruled that the failure to make a payment to another creditor, FHC, could not be used as a defense to the obligation to make a payment to Williams, particularly when the other creditor is a parent corporation of Ferry.
Finding no basis for withholding the first interest payment, the trial court held that Ferry defaulted on the Williams Note and granted a summary judgment for the full amount of the note plus interest, costs and attorney's fees. For the same reasons, the trial court denied Ferry's motion for summary judgment. A judgment was signed on January 17, 2012. Ferry filed a motion for new trial that was denied by the trial court by judgment signed on March 23, 2012.
The judgment reserved the determination of the amount of the attorney's fees award for a subsequent hearing, and the judgment awarding attorney's fees is the subject of a companion appeal, Williams v. Ferry Holding, LLC, 2012-1074, decided this same date.
Ferry filed this suspensive appeal asserting that the trial court erred in granting Williams' motion for summary judgment and denying Ferry's motion for summary judgment, and that the trial court erred in denying Ferry's motion for new trial.
Given the nature of the cross motions for summary judgment, a review of the granting of the motion for summary judgment filed on behalf of Williams and the denial of the motion for summary judgment filed on behalf of Ferry is appropriate on appeal. Board of Supervisors of Louisiana State University v. Louisiana Agr. Finance Authority, 07-0107 (La. App. 1 Cir. 2/8/08), 984 So. 2d 72, 78, fh. 1.
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LAW AND ANALYSIS
The issue presented is whether Ferry's failure to make a payment on the Williams Note on February 16, 2011 constituted a default under the terms of the note. Williams argues that at least a partial payment on the Williams Note had to be made. Ferry contends that it is not obligated to pay anything unless, without drawing on the line of credit, Ferry has sufficient funds on hand to pay the full amount otherwise due to both Williams and FHC. Resolution of the issues presented requires that we interpret the language in the Williams Note.
First, the Williams Note contains a choice of law provision directing that the note "shall be construed in accordance with and governed by the laws of the State of Delaware." It is well established that where parties stipulate the state law governing the contract, Louisiana's conflicts of law principles require that the stipulation be given effect, unless there is statutory or jurisprudential law to the contrary or public policy considerations justify the refusal to honor the contract as written. La. Civ. Code art. 3540; Barnett v. American Const Hoist, Inc., 11-1261 (La. App. 1 Cir. 2/10/12), 91 So. 3d 345, 349.
Pursuant to the choice of law provision, the substantive law of Delaware governs the interpretation and enforcement of the Williams Note; however, the procedural law of Louisiana governs the appropriateness of a summary judgment and the standard of review applicable to the trial court's granting of the summary judgment. Mendoza v. Grey Wolf Drilling Co., L.P., 46,438 (La. App. 2 Cir. 6/22/11), 77 So. 3d 18, 21, writ denied, 11-1918 (La. 11/14/11), 75 So. 3d 943.
A motion for summary judgment is a procedural device used to avoid a full-scale trial when there is no genuine issue of material fact. All Crane Rental of Georgia, Inc. v. Vincent, 10-0116 (La. App. 1 Cir. 9/10/10), 47 So. 3d 1024, 1027, writ denied, 10-2227 (La. 11/19/10), 49 So. 3d 387. Summary judgment is properly granted if the pleadings, depositions, answers to interrogatories, and admissions, together with affidavits, if any, show that there is no genuine issue of material fact and that the mover is entitled to judgment as a matter of law. La. Code Civ. Pro. art. 966.B(2). Summary judgment is favored and designed to secure the just, speedy, and inexpensive determination of every action. La. Code Civ. Pro. art. 966.A(2).
Appellate courts review evidence de novo under the same criteria that govern the trial court's determination of whether a summary judgment is appropriate. All Crane, 47 So. 3 at 1027. On a motion for summary judgment, the burden of proof is on the mover. La. Code Civ. Pro. art. 966.C(2). If, however, the mover will not bear the burden of proof at trial on the matter that is before the court on the motion, the mover's burden does not require that all essential elements of the adverse party's claim, action, or defense be negated. Instead, the mover must point out to the court that there is an absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. Thereafter, the adverse party must produce factual evidence sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial. If the adverse party fails to meet this burden, there is no genuine issue of material fact, and the mover is entitled to summary judgment as a matter of law. La. Code Civ. Pro. art. 966.C(2); All Crane, 47 So. 3d at 1027.
In ruling on a motion for summary judgment, the court's role is not to evaluate the weight of the evidence or to determine the truth of the matter but, instead, to determine whether there is a genuine issue of triable fact. All Crane, 47 So. 3d at 1027. A court cannot make credibility decisions on a motion for summary judgment. Id. In deciding a motion for summary judgment, the court must assume that all of the witnesses are credible. Id. Factual inferences reasonably drawn from the evidence must be construed in favor of the party opposing the motion, and all doubt must be resolved in the opponent's favor. Id. Whether a particular fact in dispute is "material" for summary judgment purposes is viewed in light of the substantive law applicable to the case. Richard v. Hall, 03-1488 (La. 4/23/04), 874 So. 2d 131, 137.
Ferry contends that the Line of Credit Provision and the Concurrent Payment Provision are conditions precedent under Delaware law that preclude any obligation to make an interest payment under the Williams Note unless and until a full interest payment can be made to both note holders from available funds and without the need to borrow funds on the Pipeliner Line of Credit. According to Ferry, if those conditions precedent are not met on the due date, the nonpayment of the interest payment at that time is not an event of default. On the other hand, Williams asserts that the Line of Credit Provision requires only that Ferry give priority to the payment of the Pipeliner Line of Credit. According to Williams' interpretation, if no sums are due on the Pipeliner Line of Credit, then Ferry is obligated to use any available funds to make at least a partial payment on the Williams Note and the failure to make any payment is a default.
The law of Delaware defining conditions precedent is set forth in Munro v. Beazer Home Corp., 2011 WL 2651910 (Del. Com. PL, 6/23/11), as follows:
Express language in a contract that qualifies a promise to perform upon the happening of a stated event creates what is known as a condition precedent. A condition precedent is an event that, although not certain to occur, must occur before performance under a contract becomes due. Courts interpret language such as 'if,' 'as soon as,' or 'provided that' as the express creation of a condition.Munro, 2011 WL 2651910, at pg. 5 (citing 17A Am. Jur. 2d Contracts § 455, and Restatement (Second) of Contracts § 224 (1981), footnotes omitted). See also In re NextMedia Group, Inc., 09-144063 (D. Del. 11/5/10), 440 B.R. 76, 80.
Whether a provision in a contract constitutes a condition precedent depends on the intention of the parties, and the court must first look to the contractual language and also to the circumstances surrounding its execution to determine that intent. American Original Corp. v. Legend, Inc., 689 F. Supp. 372, 378 (D. Del. 1988); Reserves Development LLC v. R.T Properties, L.L.C., 2011 WL 4639817, 6 (Del. Super. 9/22/11); W & G Seaford Associates, L.P. v. Eastern Shore Markets, Inc., 714 F. Supp. 1336, (D. Del. 1989). Thus, the existence of a condition precedent to performance must be ascertained from the intent of the parties, guided by the parties' choice of language. Global Energy Finance LLC v. Peabody Energy Corp., 2010 WL 4056164, 24 (Del. Super. 10/14/10).
When interpreting contracts, courts give priority to the parties' intentions as reflected in the four corners of the agreement and must construe the agreement as a whole, giving effect to all provisions therein. Riverbend Community, LLC v. Green Stone Engineering, LLC, 236, 2012 (Del. Supr. 10/17/12), 55 A. 3d 330, 334-335. When the contract is clear and unambiguous, courts will give effect to the plain-meaning of the contract's terms and provisions. Osbom ex rel. Osborn v. Kemp, 545, 2009 (Del. Supr. 3/25/10), 991 A.2d 1153, 1159-60.
Applying these rules of interpretation, we find that the language in the Line of Credit Provision clearly and unambiguously reflects the parties' intent to create a condition precedent that suspends the obligation to make the interest payment unless and until Ferry has sufficient funds to make the payment in full without drawing on the Pipeliner Line of Credit.
The phrase "NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS NOTE" in the Williams Note is a declaration that the disputed provisions control over any other terms and conditions in the Williams Note. The note then confirms that "NO PAYMENT OR PREPAYMENT OF PRINCIPAL OR INTEREST HEREUNDER MAY BE MADE . . .IF . . ." (Emphasis supplied). The use of the word "IF" reflects the intent to create a condition precedent to a payment under the Williams Note. Munro, 2011 WL 2651910, at pg. 5; In re NextMedia Group, Inc., 440 B.R. at 80.
The language of the disputed Line of Credit Provision then identifies the condition precedent that qualifies the promise to perform under the note: "PRIOR TO OR IMMEDIATELY AFTER GIVING EFFECT TO SUCH PAYMENT OR PREPAYMENT, ANY AMOUNTS REMAIN OUTSTANDING UNDER" the Pipeliner Line of Credit. This phrase specifically sets forth the parties' intent to permit Ferry to withhold a payment if prior to or immediately after the payment a balance is owed on the Pipeliner Line of Credit.
After the "PRIOR TO" phrase recited above, the language of the note continues with the phrase "OR IMMEDIATELY AFTER GIVING EFFECT TO SUCH PAYMENT OR PREPAYMENT" any amounts remain outstanding on the Pipeliner Line of Credit. This phrase requires consideration of whether Ferry would have to draw on the Pipeliner Line of Credit to make the interest payment on the Williams Note and the concurrent payment to FHC. If so, the Williams Note explicitly declares that no payment may be made.
Williams argues on appeal that Ferry had sufficient funds to permit a partial interest payment without drawing on the line of credit and points out that nothing in the Notes prohibits a partial payment. Typically, a partial payment or payment of less than the amount due under a promissory note is considered an event of default. Williams takes the contrary position, that a partial payment is required to avoid a default. The language of the Williams Note does not support that argument.
To recover, Williams must prove an "Event of Default" under the Williams Note, which would include evidence of Ferry's "failure . . . to make payment when due and payable under this Note." The amount due for the February 16, 2010 interest payment was defined as 10% of the outstanding principal. Nowhere does the Williams Note contain a provision requiring a partial payment when that full payment cannot be made. Without such a provision, the failure of Ferry to make a permissive partial payment is not a default under the Williams Note.
We construe the Concurrent Payment Provision to obligate Ferry to make proportionate payments concurrently to both Williams and FHC when any payment is due. Under the Williams Note, if no payment is due, the Concurrent Payment Provision is not triggered. The provision protects both Williams and FHC by ensuring that neither receives a payment in preference to the other. However, it does not permit Ferry to refrain from paying one note holder when a payment is due simply because Ferry elects not to pay the other note holder. The Concurrent Payment Provision is not a condition precedent but an obligation that must be fulfilled in applying the Line of Credit Provision.
On February 16, 2011, Ferry was obligated to make an interest payment to Williams in the amount of $400,000.00 and a concurrent pro-rata interest payment to FHC in the amount of $1,600,000.00, only if Ferry could make those payments and maintain a zero balance on the Pipeliner Line of Credit. The undisputed evidence established that on that date Ferry had "less than $500,000.00 in available funds" for operating expenses. While no funds were owed on the Pipeliner Line of Credit at that time, the undisputed evidence also established that Ferry would have been required to draw on the line of credit to make the interest payments to Williams and FHC totaling $2,000,000.00. Ferry did not have sufficient funds to make those payments in accordance with the terms of the Williams Note. Consequently, we find that Ferry did not default on the Williams Note by failing to tender an interest payment on February 16, 2011.
CONCLUSION
For the foregoing reasons, we reverse the judgment of the trial court granting the motion for summary judgment in favor of Stephen J. Williams and denying the motion for summary judgment filed on behalf of Ferry Holding, LLC. We render summary judgment in favor of Ferry Holding, LLC and dismiss the claims of Stephen J. Williams at his cost. Costs of this appeal are also assessed to Stephen J. Williams.
REVERSED AND RENDERED.