Opinion ID: 22187
Heading Depth: 3
Heading Rank: 2

Heading: Beychok as a Creditor of Creative Development

Text: 37 Differing with the district court, we hold as a matter of law that, whether read in a vacuum or in context of the entire 1986 Agreement, the above quoted contractual provision neither transferred to Beychok the old promissory note that Creative Development had given to the bakeries in connection with acquisition of the bread depots nor created a new debt owed by Creative Development to Beychok. First,only the bakeries, as payee and holder of the old promissory note, had the legal capacity to transfer it, yet there is no record evidence, much less any provision in the agreement, reflecting such a transfer by the bakeries. Conversely, Creative Development was the maker of the old note, not the payee or the holder, so it had no legal capacity to transfer the note. In fact, the 1986 Agreement states that it expressly extinguished the obligation, which under Louisiana law voids the note as well. Thus, neither the bakeries nor Creative ever purported to transfer or assign the old Creative Development note to Beychok. 38 Second, there is neither record evidence nor any language in the 1986 Agreement to indicate that a new or replacement note was made by Creative when that agreement was executed. There is simply no evidence that a new note was issued and made payable either to Beychok or to Bearer, then delivered to Beychok. 39 Absent express transfer or assignment of the old note or creation and delivery of a new note, only the above quoted language of the 1986 Agreement itself remains as a potential candidate for evidencing the creation or acknowledgment of debt owed by Creative Development to Beychok or the transfer or assignment to Beychok of an old debt owed by Creative to the bakeries. Yet absolutely nothing in that provision sounds in debt. Elsewhere in the 1986 Agreement the parties correctly employed such terms as indebtedness, loan, debt, and obligation, and did so with the professional facility we would expect of learned counsel who drafted it, thereby confirming the understanding of these terms and concepts by the parties and their scrivener. Unlike other portions of the 1986 Agreement, the particular provision that we now review for ambiguity employs none of these terms of indebtedness. In fact, none of the traditional objective indicia of a loan or credit relationship are anywhere to be found in the subject provision. 34 Notably, there is (1) no reference to a promissory note representing the purported loan or credit obligation, (2) no maturity date for the purported loan, (3) no provision for repayment of the purported loan, (4) no specification of a rate of interest or a way to calculate it, (5) no reference to a due date or payment on demand, and (6) no provision concerning default. Perhaps most significantly, the subject provision of the 1986 Agreement contains no stipulation that, in the event of termination or liquidation of the purported debt, assets of that partnership would be paid to Beychok as a creditor in preference to monies due to its partners. The complete absence of these objective indicators of a debtor-creditor relationship far outweighs the subjective testimonial evidence proffered by Creative ---- and relied on by the trial court ---- to support the contention that the transaction's purpose was to convey an old creditor's interest or create a new one. 35 40 Furthermore, were we to have found ambiguity and considered extrinsic evidence, we would be compelled to observe the presence of four sworn documents, executed respectively by Jack Rome, Beychok and Rome, the bakeries' bankruptcy counsel, and Wolf Baking's comptroller, each of which was prepared for admission in various bankruptcy proceedings, and all of which uniformly state that Beychok was either a partner in or an owner of Creative Development. This is far too uniform and consistent to be explained away by press of the lawyers' business. As a minimum, this independent sworn documentation would cast serious doubt on the subjective, self-serving testimonial evidence relied on by Creative and the district court to support the conclusion of debt, and would further support our conclusion that the 1986 Agreement was not intended to transfer a note to Beychok or to create a debtor-creditor relationship between Beychok and the partnership. 36 It follows inescapably that, like membership in Creative Development, debt too must be eliminated as the type of consideration that Beychok received in the transaction memoralized by the 1986 Agreement. 41