Opinion ID: 774014
Heading Depth: 2
Heading Rank: 1

Heading: Landmark's Claims

Text: 12 When the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals. Winstar, 518 U.S. at 895 (internal citation omitted). [W]hen one party to a contract repudiates that contract, the other party 'is entitled to restitution for any benefit that he has conferred on' the repudiating party 'by way of part performance or reliance.' Mobil Oil Exploration & Prod. Southeast, Inc. v. United States, 530 U.S. 604, 608 (2000) (citing Restatement (Second) of Contracts §§ 373 (1979)). Restitution is available to a private party to remedy a contract breach or repudiation by the government. Id. at 623-24. 13 The idea behind restitution is to restore--that is, to restore the non-breaching party to the position he would have been in had there never been a contract to breach. Glendale, 239 F.3d at 1380. Thus, restitution restores to the non-breaching party the net loss that he suffered as a result of his performance under the contract. With respect to the Assistance Agreement, that would be accomplished by awarding Landmark the value of its property conveyed [under the contract] less the reasonable value of any counter-performance received by Landmark from the government. John D. Calamari & Joseph M. Perillo, The Law of Contracts §§ 15-4, at 651 (3d ed. 1987). 14
15 According to the express terms of the Assistance Agreement, Landmark was required to make an initial contribution in the amount of not less than $20,000,000 to the Resulting Association [Dixie] as of the Acquisition Date. To satisfy this requirement, Landmark made an initial contribution of real estate and cash. Landmark presented evidence at trial, which the court found persuasive, indicating that the value of this initial contribution was $21,458,571. 2 The trial court awarded Landmark restitution, and alternatively reliance damages, for the full value of its initial contribution. 16
17 There are two alternative measures of relief in restitution. The first is the value of the benefits received by the defendant due to the plaintiff's performance. The second is the cost of the plaintiff's performance, which includes both the value of the benefits provided to the defendant and the plaintiff's other costs incurred as a result of its performance under the contract. See Acme Process Equip. Co. v. United States, 347 F.2d 509, 530 (Ct. Cl. 1965), rev'd on other grounds, 385 U.S. 138 (1966) (As the best means of restoring the status quo ante, cost of performance is often used.). 18 The government argues on its cross-appeal that the trial court's calculation of the award was improper because it was based upon the value of the benefits that the government received from Landmark's performance under the contract. The government argues that, under Acme, an award against the government can only be based upon the cost of performance standard. We find nothing in Acme to support the government's position, and even assuming, arguendo, that this court's predecessor had so held in Acme, that holding was overruled by Mobil Oil. There, the Court held that the plaintiffs were entitled, under restitution, to repayment of the benefits they conferred upon the government in performance of the contract. Mobil Oil, 530 U.S. at 2438 ([T]he Government must give the companies their money back.). In any event, the government's argument is irrelevant with respect to Landmark's initial contribution because the amount of the award would be identical under either standard. 19
20 The government also argues that any award to Landmark should have been limited to $20 million, as that was the minimum initial contribution that would constitute performance under the contract. The trial court rejected this argument, holding that the terms of the contract are unambiguous in that no ceiling was placed on the initial contribution, but rather it was specified to be not less than $20 million, and that if the parties had intended for performance to be limited to $20 million they would not have included the phrase not less than. Landmark, 46 Fed. Cl. at 266-67. 21 The proper interpretation of a contract is a question of law, which we review de novo. Exxon Mobil Corp. v. United States, 244 F.3d 1341, 1353 (Fed. Cir. 2001). We agree with the court's interpretation of the Assistance Agreement on this point. The Agreement required Landmark to make an initial contribution. Landmark's initial contribution complied with the Agreement's requirement that its value be not less than $20,000,000. Further, there is nothing in the Agreement to indicate any intent of the parties for that portion of the initial contribution beyond $20 million to be deemed anything other than an undivided part of the initial contribution. Because the Agreement's provisions are clear and unambiguous, they must be given their plain and ordinary meaning. Alaska Lumber & Pulp Co., Inc. v. Madigan, 2 F.3d 389, 392 (Fed. Cir. 1993). Thus, the entirety of Landmark's $21.5 million initial contribution constitutes performance under the Agreement, and the trial court properly refused to limit the award to $20 million. 22
23 Because the purpose of restitution is to restore the plaintiff to its status quo ante, the award to the plaintiff must be reduced by the value of any benefits that it received from the defendant under the contract, so that only the actual, or net, loss is compensated. See Restatement (Second) of Contracts §§ 384, cmt. a (A party who seeks restitution of a benefit that he has conferred on the other party is expected to return what he has received from the other party.). The government argues that the trial court erred in refusing to offset Landmark's award by the $26.3 million in dividends that Landmark received from Dixie prior to the government's 1989 breach of the Agreement. The trial court denied offset based upon its factual finding that the government did not establish that any benefits that plaintiffs obtained in the form of dividends from Dixie Savings and Loan can be attributed to the government. Landmark, Order at 1 (April 5, 2000). We afford the trial court's findings of fact considerable deference, disturbing them only if they are shown to have been clearly erroneous. Hendler v. United States, 175 F.3d 1374, 1378 (Fed. Cir. 1999). A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). The government has not shown this finding to be clearly erroneous. The government's actions were simply not relevant to the dividends, which were generated as a result of Landmark's performance under the contract in managing Dixie. Thus, because the government was not responsible for the dividends paid by Dixie to Landmark, offset would not be proper. 24
25 Landmark appeals the trial court's denial of award for the use value of the initial contribution from the time of contribution until the government's payment of the judgment. The remedy of restitution may include compensation for lost use value where necessary to restore the plaintiff to its status quo ante by providing compensation for the use of the subject matter for the period during which [it] was deprived. Restatement of Restitution §§ 157(1), cmt. a. The trial court denied Landmark's claim for use value because it found Landmark's evidence unconvincing. Specifically, the trial court stated that: 26 Landmark did not prove that it lost a specific amount of money from not having the use of the property that it contributed to Dixie in 1982. To award damages under Landmark's use value theories, we would be required to engage in a series of speculative assumptions that are not permitted in these circumstances. We could not establish at trial how Landmark would have profited from use of the parcels of real estate that it contributed to Dixie in 1982. Expert testimony that Landmark offered for this purpose was not convincing, and we were left with the need to engage in improper speculation. For this reason, we must deny Landmark recovery for use value. 27 Landmark, 46 Fed. Cl. at 270. Landmark argues on appeal that, because a plaintiff is not required to prove the exact amount of its loss in order to be entitled to compensation, the trial court improperly denied recovery for use value on the ground that Landmark did not prove that it lost a specific amount of money. While it is well settled that recovery cannot be denied on the ground that a non-breaching plaintiff failed to prove the amount of its loss with utter precision, the trial court did not deny recovery solely, if at all, on this basis. As quoted above, the trial court found that Landmark's evidence did not even establish how it would have profited from use of the initial contribution. On appeal, Landmark has failed to point to any evidence to indicate that the court's finding was clearly erroneous. Instead, Landmark argues that the trial court improperly applied the standard of proof for an award of lost profits. However, Landmark has provided no indication of how the use value would have been anything other than the profits that the initial contribution would have generated outside the contract--which the trial court found that Landmark had failed to prove. Thus, Landmark has failed to show that the denial of an award for use value was improper. 28 We hold, therefore, that the trial court's award was sufficient restitution. Thus, we need not consider the trial court's alternative award of the same amount as reliance damages. 29
30 In addition to the initial contribution, the Assistance Agreement also required that Landmark make, for a period of five years from the acquisition date, additional contributions to Dixie of cash or real estate as necessary to maintain Dixie's net worth at an amount not less than 3% of total liabilities. This duty was specified in section 3(f) of the Agreement, which states: 31 LANDMARK further agrees that, as a continuing condition to the obligations of the [FSLIC] to perform any executory duty under this Agreement, (1) LANDMARK, for a five-year period following the Acquisition Date, will contribute such additional capital to . . . [DIXIE] at such times and in such amounts as is needed to maintain . . . [DIXIE'S] net worth . . . at an amount not less than three percent (3%) of . . . [DIXIE'S] total liabilities. 32 Thus, section 3(f) obligated Landmark to make additional contributions only if necessary to maintain Dixie's net worth at not less than 3% of total liabilities. So long as Dixie's net worth was not less than 3% of its total liabilities, Landmark was under no obligation to make additional contributions. 33 In 1983, Landmark contributed essentially all of its assets to Dixie. The trial court found that Landmark made the 1983 contribution for business reasons unrelated to any duty of performance under the Assistance Agreement. Landmark, 46 Fed. Cl. at 269. This finding is well supported by the evidence before the trial court, including a 1983 letter from Landmark's President, Gerald Barton, to Landmark's Board of Directors. In the letter, Barton advocated the contribution of essentially all of Landmark's assets to Dixie because it would significantly increase the net profit on the later sale of the assets. Barton stated that Landmark's assets included a great deal of understated value, i.e., unrealized profit, and thus--after Landmark contributed the assets to Dixie--[i]f these assets were sold in Dixie, 40 percent less tax would be paid on that profit. While Barton also indicated that the contribution would improve the financial stability of Dixie by increasing its net worth, he stated that the contribution would increase Dixie's net worth ratio to above 11 percent, almost four times that required under section 3(f) of the Assistance Agreement. 34 It is undisputed that the Assistance Agreement did not require Landmark to make the additional contribution in 1983. Landmark, however, argues on appeal that since it had the right to make additional contributions under the contract, such an additional contribution qualifies as performance under the contract, entitling Landmark to restitution. The law is well settled, however, that in order to be compensable as restitution, the plaintiff's contribution must have been made in performance of its contractual obligations. Tangfeldt Wood Prods., Inc. v. United States, 733 F.2d 1574, 1577 (Fed. Cir. 1984) (where the plaintiff performed the work for its own purposes and convenience . . . restitution is not owing). Landmark argues that a voluntary contribution made in effectuating the spirit of the contract, i.e., managing Dixie responsibly, should be compensated. In each of the cases relied upon by Landmark in support of this argument, however, the plaintiff had discharged another party's unperformed contractual obligations in order to protect its own interests. See First Nat'l City Bank v. United States, 212 Ct. Cl. 357, 369 (1977) (One who pays another's debt to protect his own rights and interests is not ordinarily considered a volunteer.); N. Star Alaska Housing Corp. v. United States, 30 Fed. Cl. 259, 272 (1993) (allowing restitution where plaintiff discharged defendant's obligation which was expressly set forth in the contract). Critically then, in both cases, restitution was awarded to compensate the plaintiff for performance of a contractual obligation. In the instant appeal, conversely, Landmark's 1983 contribution did not constitute performance of a contractual obligation. Thus, the decisions cited by Landmark are not applicable. 35 Landmark alternatively argues that the 1983 contribution constitutes performanceunder the contract because Dixie's net worth would have slipped below 3% of its liabilities sometime in 1985 had the contribution not been made in 1983. Thus, Landmark argues that it is entitled to restitution for the 1983 contribution because it inevitably would have been required under the contract. Whether this is true or not, Landmark has provided no authority for the proposition that a party's action, which did not constitute performance of a contractual obligation at the time of the act, can later be transformed into the performance of a contractual obligation when the condition precedent to that party's contractual duty occurs after the act. A volunteer cannot later be deemed to have acted pursuant to a duty that did not exist at the time of the act. By definition, if a contractual duty is subject to a condition precedent, that condition must be satisfied before the duty arises. 36 Landmark also argues that the 1983 contribution should be deemed required performance under section 17 of the Assistance Agreement, entitled continuing cooperation. 3 Landmark argues that because it was subject to this best efforts clause, its 1983 contribution cannot be deemed voluntary. The trial court rejected this argument, based upon its determination that this section establishes nothing more than a general obligation on the part of the parties to cooperate with one another. Landmark, 46 Fed. Cl. at 269. Landmark relies upon Lebanon Chemical Corp. v. United States, 5 Cl. Ct. 812 (1984), for support. Lebanon is clearly distinguishable, however. In a settlement agreement with the government, Lebanon agreed to retrieve its recently-banned pesticides from its customers and transport them to disposal sites which the government agreed to designate by a specified date. Id. at 816. Because the government failed to designate the disposal sites by the specified date, the plaintiff incurred expenses for temporarily storing the pesticides until the government performed. Although the settlement agreement did not address storage costs, the court allowed recovery because the costs were incurred as a direct result of Lebanon's performance in satisfaction of its duty under the contract to put forth its best efforts to achieve the stated result of transporting the pesticides to the government within the allotted time. Id. at 817. Thus, the court allowed recovery in Lebanon on the basis of the best efforts clause where the contract was otherwise silent as to whether the plaintiff's actions were required under the contract. 37 Here, however, the Assistance Agreement is not silent on that point. Section 3(f) expressly provides the sole condition under which Landmark was required to make additional contributions, and it is undisputed that this condition did not obtain in 1983. It is well established that when interpreting a contract, a specific provision will dominate a general provision. See, e.g., Hills Materials Co. v. Rice, 982 F.2d 514, 517 (Fed. Cir. 1992) (Where specific and general terms in a contract are in conflict, those which relate to a particular matter control over the more general language.). Thus, because the express language of section 3(f) provides that Landmark was not under a duty to make the 1983 contribution, the general duty to cooperate contained in section 17 cannot be interpreted to create such a duty. 38 Finally, Landmark argues that the 1983 contribution constitutes performance under the Assistance Agreement because it was made in response to the concerns of federal regulators about conflicts of interest between Dixie and Landmark's other subsidiaries. Landmark's President, Gerald Barton, testified before the trial court that federal regulators had informed Dixie that a conflict of interest would exist so long as Landmark was pursuing property development activity both within, and independently from, Dixie. The alleged concern was that Landmark would retain the most attractive real estate investments for itself, while funneling less attractive investments to Dixie. 39 The trial court found that Landmark had not made the 1983 contribution because of the regulators' concerns about conflicts of interest. Even if Landmark could show that this finding of fact was clearly erroneous, however, the error would have been harmless. Landmark provided no evidence that it was obligated to contribute its real estate assets to Dixie. There was no evidence that the regulators directed Landmark as to how the conflicts of interest should be eliminated. Landmark was always free to eliminate any concerns about conflicts of interest by simply selling its real estate assets to a third party. 4 40 Since the 1983 contribution was not required under the contract, it does not constitute performance of a contractual obligation, and therefore the trial court correctly denied restitution. 41
42 The trial court awarded the FDIC, as Dixie's successor in interest, $17.7 million in restitution for the contribution Dixie made to St. Bernard in 1986. On appeal, Landmark argues that this restitution award should have been made to it, not to the FDIC, because the assets contributed by Dixie to St. Bernard were previously owned by Landmark. Landmark did not seek restitution at trial in connection with the 1986 transaction between Dixie, the government, and St. Bernard. Thus, this issue does not appear to be properly before us on appeal. See, e.g., Braun, Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 821 (Fed. Cir. 1992) (In view of Waring's unexplained failure to raise the issue before the district court, we see no reason to depart from the general rule that issues may not be raised for the first time on appeal.). In any event, Landmark's argument is not persuasive. During Dixie's existence, it and Landmark were always separate corporations. Landmark contributed assets to Dixie in 1982 in exchange for stock in Dixie. At that point Landmark no longer owned the assets, Dixie did. In 1986, Dixie contributed the assets to St. Bernard. Thus, the only party with a possible claim against the government is Dixie, not Landmark. To allow Landmark recovery would be to disregard the separate corporate existence of Landmark and Dixie. Landmark has provided no reason, let alone any basis in precedent, for this court to reverse the trial court for having failed to do so, especially since Landmark did not request such relief at trial. 5
43 Landmark also appeals the trial court's denial of compensation for the 1983 contribution under a theory of reliance damages. The purpose of reliance damages is to compensate the plaintiff for loss caused by reliance on the contract. Restatement (Second) of Contracts §§ 344(b). In order to be recoverable as reliance damages, however, plaintiff's loss must have been foreseeable to the party in breach at the time of contract formation. See Restatement (Second) of Contracts §§ 351(1) (Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.). Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) in the ordinary course of events, or (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. Restatement (Second) of Contracts §§ 351(2). In order to be entitled to reliance damages, a plaintiff must prove that both the magnitude and type of damages were foreseeable. See 5 Arthur Corbin, Corbin on Contracts, §§ 1012 at 88 (1964) ([In order to have been foreseeable] the injury that occurs must be one of such a kind and amount as a prudent man would have realized to be a probable result of his breach.); see also Restatement (Second) of Contracts, §§ 351, cmt. a (The mere circumstance that some loss was foreseeable, or even that some loss of the same general kind was foreseeable, will not suffice if the loss that actually occurred was not foreseeable.). 44 The trial court found that the 1983 contribution was not foreseeable. The 1983 contribution was comprised of $3.3 million worth of real estate, and 100% of the stock of Unique Golf Concepts, Inc., a subsidiary of Landmark with substantial real estate assets and a value of approximately $31.5 million. The trial court did not distinguish between the real estate and stock components of the 1983 contribution in finding that the entire contribution was not reasonably foreseeable. Further, in its principal brief on appeal, Landmark states that [t]here is no valid theoretical distinction between the $3 million [real estate] contribution or the 1983 [stock] contribution. Thus, we will review the trial court's finding that the 1983 contribution as a whole was not foreseeable, without considering whether the real estate or stock components of that contribution, considered separately, would have been foreseeable. 45 In finding that the 1983 contribution was not foreseeable, the trial court stated: 46 The government was aware that Landmark was in the property development business, but it had no reason to foresee that Landmark would contribute essentially all of its assets to Dixie. It could not foresee at the time of contracting that a breach of the Assistance Agreement would cause Landmark to lose its entire business. 47 Landmark, 46 Fed. Cl. at 270. Foreseeability is a question of fact. Climatic Rainwear Co., Inc. v. United States, 115 Ct. Cl. 520, 533 (1950). Landmark argues that its contribution was foreseeable because section 17 of the Assistance Agreement provides that [i]t is the purpose of this Agreement to provide a means by which . . . [Dixie] may be provided with property development and loan opportunities. Further, Landmark points to a letter sent prior to contract formation from Landmark's counsel to the government's representative. In this letter, Landmark stated that: 48 As we discussed, it is probable that, from time to time, Landmark will contribute additional real estate to [Dixie], whether it needs additional net worth or not. In this regard, we understand that there would be no limit to the amount of real estate that could be contributed to [Dixie] for capital purposes. 49 While the letter indicates that the government was on notice that Landmark intended to possibly contribute real estate to Dixie beyond that required under the contract, it fails to provide any indication of the certainty or magnitude of any additional contribution. In the letter, Landmark did assert its understanding that there would be no limit to the amount of real estate that could be contributed, but this provides no insight into the actual magnitude of the additional contribution Landmark might make. The issue of foreseeability is admittedly close in this case. However, we are not left with the definite and firm conviction that the magnitude of the 1983 contribution was foreseeable at the time of contract formation. United States Gypsum Co., 333 U.S. at 395. Thus, Landmark has failed to show that the trial court's finding that the 1983 contribution was not foreseeable was clearly erroneous. Thus, we will not disturb the trial court's denial of reliance damages.