Cerilli v. Newport Offshore, Ltd.
| Decision Date | 03 July 1992 |
| Docket Number | No. 91-414-A,91-414-A |
| Citation | 612 A.2d 35 |
| Parties | Benedetto A. CERILLI v. NEWPORT OFFSHORE, LTD. Allan M. SHINE, Receiver of Newport Harborfront Investors v. NEWPORT OFFSHORE, LTD. |
| Court | Rhode Island Supreme Court |
This case comes before us on appeals by PC & J Contracting Co., Inc., and Harold L. Schein from rulings made by a justice of the Superior Court in respect to two controversies arising in the course of administering the above-entitled receivership proceedings. We affirm the rulings of the trial justice. The facts underlying the subject controversies insofar as pertinent to the appeals will be set forth under the heading applicable to each controversy.
THE PURCHASE OF ASSETS BY PC & J CONTRACTING CO., INC.
PC & J Contracting Co., Inc. (PC & J), made an offer to the coreceivers, Allan M. Shine and Milton Stanzler, to purchase all the assets of the receivership including assets subject to security interests. The offer that was made and accepted by the coreceivers and approved by the Superior Court provided in part as follows:
(After offering to purchase all the right, title, and interest held by the receivers free and clear of any and all liens and encumbrances in and to all of the assets, the offer then referred specifically to security interests.)
In addition to the foregoing portion of the offer, PC & J also offered to pay $995,000 toward payment of the unsecured indebtedness of the corporation, coreceivers' fees, and certain other advances that had been made. This offer was made at a public auction and was accepted by the Superior Court on October 19, 1990.
After the offer had been accepted and approved by the court, the Superior Court justice presiding in the county of Newport scheduled a hearing on November 7, 1990, to determine the amounts due and owing to the secured creditors named in the offer. The secured creditor concerning whom this controversy arose was Moneta Capital Corporation (Moneta). The trial justice determined that as of the date of the hearing the balance of secured indebtedness owed to Moneta (exclusive of a claimed 3 percent prepayment premium) was $836,063.28. He postponed decision until a later time on the question of the prepayment premium as well as attorneys' fees claimed by Moneta. 1 At this hearing PC & J attempted to reduce Moneta's secured claim by eliciting evidence that the value of the secured assets that included a 725-ton floating drydock, assignment of a contract with the Maritime Administration for berthing a vessel, and a Maritime Administration lease for berthing of three liquified natural gas tankers was less than the amount of the claimed balance due on two promissory notes.
The trial justice declined to receive evidence of the value of this collateral on the ground that the terms of the offer were clear and unambiguous and did not contemplate the reduction of amounts due and owing by a revaluation of the collateral. The trial justice commented as follows:
PC & J argues that this ruling constituted an error of law since the terms "secured indebtedness" and "acquired assets" and "security interests and/or liens" were terms of art readily defined in the law and implicitly required the valuation of the collateral in order to determine whether Moneta was undersecured.
The coreceivers have joined in the brief filed by Moneta and take the position that the trial justice was correct in declining to reduce the amount of Moneta's claim on the basis of a revaluation of the collateral assets.
PC & J argues that the requirement of restricting a lienholder/receiver to the value of the security assets is supported by the Federal Bankruptcy Act, 11 U.S.C. § 506(a) (1989), which provides in pertinent part as follows:
"An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to set off under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to setoff is less than the amount of such allowed claim."
Moneta argues that § 506 of Title 11 of the Bankruptcy Code is not applicable and certainly not controlling in respect to a state-receivership proceeding. It argues further that the terms "security indebtedness" and "security interests and/or liens" are not defined as terms of art by the Rhode Island Commercial Code, G.L.1956 (1985 Reenactment) chapter 9 of title 6A. Nor indeed, Moneta asserts, do those sections shed any light on the disputed definition of these terms. Our examination of the pertinent Rhode Island statutes leads us to the conclusion that the terms in question are not defined by Rhode Island statutes (as contended by PC & J) and that they therefore do not constitute terms of art in the sense of PC & J's restrictive gloss. We further note that Black's Law Dictionary fails to give any definition of "secured party" or "security interest" save in the most general sense, nor do any of these nonspecific definitions support the arguments asserted by PC & J. 2
Consequently in our opinion the trial justice considered the terms of the offer in accordance with the plain everyday meaning that would be ascribed to those terms by the coreceivers. This conclusion is in accordance with the usual rules of construction applied to contract language. Unless plain and unambiguous intent to the contrary is manifested, words used in contract language are assigned their ordinary meaning. Westinghouse Broadcasting Co. v. Dial Media, Inc., 122 R.I. 571, 410 A.2d 986 (1980). The trial justice considered the language clear and unambiguous. We agree with this interpretation; clear and unambiguous language set forth in a contract is controlling with respect to the parties' intent and governs the legal consequence of the contract's provisions. See, e.g., Elias v. Youngken, 493 A.2d 158 (R.I.1985); Dudzik v. Leesona Corp., 473 A.2d 762 (R.I.1984); Chapman v. Vendresca, 426 A.2d 262 (R.I.1981).
In order to support a highly specialized interpretation of this offer and acceptance, PC & J engages...
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