Opinion ID: 774014
Heading Depth: 4
Heading Rank: 2

Heading: Restitution for Landmark's 1983 contribution to Dixie

Text: 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