Court Opinion

ID: 67261
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:19:38+00
Date Added: 2024-06-11T17:20:53.720989
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                            July 27, 2009

                                       No. 08-30857                    Charles R. Fulbruge III
                                                                               Clerk

DAVON GROUP LTD

                                    Plaintiff - Appellant-Cross-Appellee
v.

SYD DYER, JR, Medical Doctor; NATIONAL COMMUNICATIONS INC;
NATIONAL COMMUNICATIONS LLC

                                    Defendants - Appellees-Cross-Appellants

                   Appeals from the United States District Court
                       for the Western District of Louisiana
                             USDC No. 2:07-CV-1976

Before BARKSDALE, DeMOSS, and STEWART, Circuit Judges.
PER CURIAM:*
       In this diversity action, Davon Group, Ltd. (“Davon Group”) seeks to hold
Syd Dyer, Jr. (“Dyer”) personally liable for repayment of $879,785 based on a
loan agreement whereby Davon Group loaned this amount to Dyer. The district
court held that Dyer was not personally liable, the due-on-sale clause was
unenforceable to impose personal liability on Dyer, and Davon Group must
accept the collateral and cancel the note. We affirm.

       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
                                     No. 08-30857

      I.     Background
      National Communications, Inc. (“NCI”) was formed in 1996 as a Louisiana
corporation. Davon Group and other shareholders owned stock in NCI. Effective
December 1998,1 Davon Group, Dyer, and NCI entered into a loan agreement
whereby Davon Group loaned $879,785 to Dyer. Dyer executed a promissory
note in favor of Davon Group for the sum of the loan, which identified shares of
common stock of NCI as collateral. The loan agreement provides that upon a
NCI merger, Dyer “shall be obligated to pay in full any unpaid balance of
accrued interest and principal of the Note” to Davon Group, and if payment is
not made, the NCI merger “shall be null and void ab initio.”
      Regarding personal liability, the loan agreement states that
      [t]he Purchaser will repay the Indebtedness to each Seller according
      to the reading, tenor and effect of the Note to such Seller and this
      Agreement, and will do and perform every act required of Purchaser
      by this Agreement, the Note and the Stock Pledge Agreement to
      which such Seller is a party, at the time or times and in the manner
      specified; provided, however, that anything in this Agreement, or in
      the Stock Pledge Agreement or any other agreement to which any
      Seller is a party to the contrary notwithstanding, Purchaser shall
      have no personal liability to Seller for any Indebtedness. No Seller
      shall have recourse to Purchaser, or to any of Purchaser’s assets
      other than the Collateral, for the payment of the Indebtedness to
      Seller. (Emphasis added.)
      In April 2005, NCI merged into National Communications, L.L.C. (“NCL”),
a Louisiana limited liability company. Davon Group sought to enforce the
promissory note personally against Dyer. Dyer contends that the parties agreed
that there would never be personal liability against him. The parties filed cross
motions for summary judgment.

      1
         The loan agreement is dated March 11-12, 1999, but it was made effective December
31, 1998. The promissory note is dated March 12, 1999.

                                            2
                                   No. 08-30857

      The district court held that the contracts made clear that Davon Group
has no recourse to Dyer or his assets other than the collateral, and Dyer has no
personal liability. The district court therefore held that the Davon Group could
not enforce the promissory note personally against Dyer; Dyer was entitled to
specific performance, requiring Davon Group to accept return of the stock and
cancel the note; and the merger between NCI and NCL triggered the due-on-sale
clause, but the clause was unenforceable pursuant to the provision of the
agreement providing that Dyer shall have no personal liability. Both parties
appeal.
      II.    Discussion
      We review a district court’s grant of summary judgment de novo. LeMaire
v. La. Dep't of Transp. & Dev., 480 F.3d 383, 386 (5th Cir. 2007). Summary
judgment is appropriate when “the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to
any material fact and that the movant is entitled to judgment as a matter of
law.” F ED. R. C IV. P. 56(c). We also review the interpretation of contracts de
novo. Texaco Exploration & Prod., Inc. v. AmClyde Engineered Prods., Inc., 448
F.3d 760, 777 (5th Cir. 2006). Under Louisiana law, “[e]ach provision in a
contract must be interpreted in light of the other provisions so that each is given
the meaning suggested by the contract as a whole.” L A. C IV. C ODE A NN. art.
2050. “When the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in search of the parties’
intent.” L A. C IV. C ODE A NN. art. 2046.
      The parties clearly set forth their intent that Dyer shall have no personal
liability with the following language in the contract: “provided, however, that
anything in this Agreement, or in the Stock Pledge Agreement or any other
agreement to which any Seller is a party to the contrary notwithstanding,
Purchaser shall have no personal liability to Seller for any Indebtedness.” See

                                             3
                                    No. 08-30857

Gilbert v. Evan, 822 So. 2d 42, 46 (La. Ct. App. 2002) (“This agreement exists
‘Notwithstanding the above’ which means, if the conditions are met, that this
provision supercedes all of the earlier above provisions . . . .”); see generally
Cisneros v. Alpine Ridge Group, 508 U.S. 10, 18 (1993) (“[T]he use of such a
‘notwithstanding’ clause clearly signals the drafter’s intention that the
provisions of the ‘notwithstanding’ section override conflicting provisions of any
other section.”). “[A] clearer statement is difficult to imagine.” Cisneros, 508
U.S. at 18 (internal quotation and citations omitted). We therefore affirm the
district court’s judgment as it relates to Dyer having no personal liability for the
debt.
         Dyer argues that the district court erred in finding that the merger
triggered the due-on-sale clause because the parties agreed that the merger was
a nullity. Dyer nonetheless agrees that the district court correctly held that the
due-on-sale clause was unenforceable because of the provision providing that
Dyer shall have no personal liability. We need not reach the question whether
the due-on-sale clause was triggered, as the only result would be to impose
personal liability on Dyer. Because we hold that Dyer has no personal liability
under the parties’ agreements, we affirm the district court’s judgment on this
issue.
         The district court also held that Dyer was entitled to specific performance,
requiring Davon Group to accept return of the stock and cancel the note. Davon
Group argues that the subject stock no longer exists because of the merger. The
parties, however, agreed that any NCI merger “shall be null and void ab initio,”
and in the event of a purported merger, Davon Group had “the right to seek and
obtain rescission of the transaction in any court of competent jurisdiction.”
Despite language potentially rendering the merger a nullity, it does not appear
that Davon Group ever sought the remedies available under the agreement.
Davon Group construes the merger as valid, and it seeks to rely on such merger

                                           4
                                  No. 08-30857

to argue that the NCI stock is destroyed. See CDI Corp. v. Hough, 9 So. 3d 282,
287 (La. Ct. App. 2009) (“Contracts have the effect of law for the parties.” (citing
L A. C IV. C ODE A NN. art. 1983)). Even if we were to accept Davon Group’s
argument that the stock was destroyed, Dyer still would not be personally liable
for the debt, as discussed supra.       Davon Group’s sole remedy on appeal,
therefore, is to accept the return of the stock. We affirm the district court’s
judgment on this issue.
      III.   Conclusion
      For the foregoing reasons, we affirm the district court’s judgment.

                                         5