Fairfield Development Co. v. Jackson

• Citation: 438 So.2d 664
• Decision Date: 20 September 1983
• Docket Number: Nos. 15593-C,15594-CA,s. 15593-C
• Parties: FAIRFIELD DEVELOPMENT COMPANY, Plaintiff-Appellant, v. Vessie L. JACKSON, Defendant-Appellee-Appellant.
• Court: Court of Appeal of Louisiana (US)

Page 664

438 So.2d 664

FAIRFIELD DEVELOPMENT COMPANY, Plaintiff-Appellant, v. Vessie L. JACKSON, Defendant-Appellee-Appellant.

Nos. 15593-CA, 15594-CA.

Court of Appeal of Louisiana,

Second Circuit.

Sept. 20, 1983.

Rehearing Denied Oct. 20, 1983.

Smitherman, Lunn & Chastain by W. James Hill, III, Shreveport, for plaintiff-appellant.

S.P. Davis, Shreveport, for defendant-appellee-appellant.

Before PRICE, HALL and SEXTON, JJ.

SEXTON, Judge.

Plaintiff sued defendant to obtain specific performance of defendant's obligation to assign and pledge certain security interests to plaintiff. Defendant filed a peremptory exception of no cause of action, and the trial court sustained the peremptory exception, dismissing plaintiff's claims. Plaintiff filed a second suit against defendant seeking payment of an amount owed by defendant under contract. Defendant filed a dilatory exception of prematurity, and the trial court sustained the dilatory exception, dismissing plaintiff's claim. Plaintiff has appealed the judgment rendered against it in both suits, and both of plaintiff's appeals have been consolidated herein. We affirm and amend the trial court's judgment in sustaining the peremptory exception of no cause of action in the first suit; we reverse the trial court's judgment in sustaining the dilatory exception of prematurity in the second suit.

Plaintiff in this cause is Fairfield Development Company (hereinafter referred to as Fairfield), a Louisiana partnership domiciled in Shreveport, Louisiana. Defendant herein is Vessie L. Jackson, a resident of Shreveport. Plaintiff and defendant entered into a contract on November 2, 1981. This contract defined the parties' legal relationship, and created the reciprocal obligations from which the suits treated in this appeal arose.

The contract entered into by the parties contemplated that Fairfield and Jackson would form two separate partnerships. The first of these partnerships was Northside Villa Limited Partnership, 50.1% of which was to be owned by Jackson, and 49.9% of which was to be owned by Fairfield. The second partnership, Bayou Galion Limited Partnership, was to be identically constituted, with Jackson owning a 50.1% share, and Fairfield owning a 49.9% share. The purpose of both partnerships was the sponsorship and development of housing subdivisions: the Northside Villa Limited Partnership was to develop the Northside Villa housing project in Shreveport, and the Bayou Galion Limited Partnership was to develop the Bayou Galion housing project in Mer Rouge, Louisiana. In sum, plaintiff Fairfield and defendant Jackson were to form two separate partnerships, with each partnership designed to sponsor a separate development; defendant was to own a majority interest, and plaintiff a minority interest, in each of the partnerships.

The contract entered into by the parties acknowledged that the bulk of the financing needed for the two development projects would be provided by a loan from HUD. The contract provided that the balance of the needed financing not obtained from HUD would be provided by Fairfield under two distinct finance arrangements.

The contract provided, with respect to the first of these financing arrangements, that Fairfield would make loans of $10,000 and $45,000 to Jackson. Under the terms of the contract, these two loans were to be secured by the pledge to Fairfield of the assignments of Jackson's majority interest in both Northside Villa and Bayou Galion partnerships.

Under the second financing arrangement contained in the contract, Fairfield obligated itself to make indeterminate advances to the two partnerships for developmental costs exceeding the loan obtained from HUD. The contract provided that Jackson would be liable for his 50.1% share of these advances. The contract provided that Jackson syndicate and sell a sufficient portion of his interests in both partnerships to repay his 50.1% share of the advances made by Fairfield. The contract further mandated that Jackson sell sufficient additional partnership interests to repay the $10,000 and $45,000 loans made by Fairfield to Jackson. Under the terms of the contract, the proceeds of the syndication were to be deposited in a special escrow account. This escrow account was to be used to repay the loans and advances made by Fairfield, with Jackson entitled to any remaining balance.

Plaintiff Fairfield filed a suit for specific performance on September 20, 1982, alleging that Jackson had breached the security agreement contained in the contract, by failing to pledge assignments of his (Jackson's) interests in the two partnerships as security for the $45,000 and $10,000 loans. Defendant Jackson filed a peremptory exception of no cause of action, and in a judgment filed February 7, 1983, the trial court sustained defendant's peremptory exception and dismissed plaintiff's suit.

On December 6, 1982, plaintiff Fairfield filed a second suit against Jackson seeking $89,264.30--Jackson's 50.1% share of the advances made by Fairfield for development costs. Jackson filed a dilatory exception of prematurity, and in a judgment filed February 11, 1983, the trial court sustained the dilatory exception, dismissing plaintiff's suit. Fairfield's appeals from the two judgments rendered against it will be separately treated in this opinion.

I.

Plaintiff's suit for specific performance of defendant's

obligation to pledge assignments of his interests

in both partnerships

In its petition for specific performance, plaintiff alleged that it had loaned $10,000 to Jackson, and that it had tendered a loan of $45,000 to Jackson which Jackson had refused. Plaintiff further alleged that while Jackson had pledged to Fairfield an assignment of his interest in Bayou Galion Limited Partnerships, he had refused--after several oral and written demands--to pledge to Fairfield an assignment of his interest in Northside Villa Limited Partnership. Fairfield urged in its petition, as a legal conclusion, that Jackson was civilly obligated under the terms of their contract to pledge assignments of his interests in both Northside Villa and Bayou Galion limited partnerships to secure the $10,000 and $45,000 loans made by Fairfield to Jackson. It is undisputed that plaintiff has repaid the $10,000 loan. Plaintiff therefore prayed that the court order Jackson to execute a pledge to Fairfield of an assignment of his interest in Northside Villa Limited Partnership.

In its petition, Fairfield cited a single provision of its contract with Jackson. Fairfield claimed that this provision contractually obligated Jackson to pledge to Fairfield an assignment of Jackson's interest in Northside Villa Limited Partnership. This provision of the contract, quoted in the petition, provided that:

FDC has loaned Jackson $10,000.00, which loan is represented by a sixty (60) day note dated October 30, 1981. If a firm commitment and financing is obtained for Northside Villa, and deemed adequate by both parties, FDC will loan Jackson an additional $45,000.00. The two above amounts will be secured by a note and mortgage on real property as well as the assignment of Jackson's interest in the Limited Partnerships as security.

The peremptory exception of no cause of action is appropriately sustained when, assuming the truth of plaintiff's allegations, plaintiff's petition has not stated a cause of action for which relief may be given under the applicable substantive law. Frain as Tutrix of Beason v. State Farm Insurance Co., 421 So.2d 1169 (La.App. 2d Cir.1982); Millette Enterprises, Inc. v. State Division of Administration, et al., 417 So.2d 6 (La.App. 1st Cir.1982). In adjudging the propriety of the peremptory exception of no cause of action, it is crucial to note that "[n]o evidence may be introduced at any time to support or controvert the objection that the petition fails to state a cause of action." LSA-C.C.P. Art. 931. Thus, the question of whether plaintiff has stated a cause of action is to be decided on the face of plaintiff's petition. Adserv Corp. v. Lincecum, 385 So.2d 432 (La.App. 1st Cir.1980); Johnson v. Edmonston, 383 So.2d 1277 (La.App. 1st Cir.1980).

The obligation to provide security for a separate obligation is accessory in nature, while the obligation guaranteed by this security is considered principal. If the principal or secured obligation is satisfied, the accessory obligation to provide security for that principal obligation is by its very nature extinguished. An accessory obligation may not exist without the coexistence of the principal obligation to which it lends support. Therefore, the extinction of the principal obligation simultaneously extinguishes the accessory or security obligation. See LSA-C.C. Arts. 1771, 2205, 3035, 3076, 3284 and 3285; Louis Werner Saw Mill Co. v. White, 16 So.2d 666 (La.App. 2d Cir.1942), reversed on other grounds, 205 La. 242, 17 So.2d 264 (1944); Comment, Tilting Against Windmills: A Solidary Rejoinder, 41 La.L.Rev. 1279 (1981).

Applying this law to the facts alleged in plaintiff's petition, it is apparent that plaintiff has not stated a cause of action. Plaintiff relies on the above quoted contractual provision to establish Jackson's obligation to pledge an assignment of Jackson's interest in Northside Villa Limited Partnership. However, it is clear from this critical contractual language that this pledge was intended to secure only the $45,000 and $10,000 loans made by Fairfield to Jackson. This is clear insofar as the contract explicitly refers to these two loans, and then states immediately thereafter, in the next sentence of the contract, that "The two above amounts will be secured by ... assignments of Jackson's interest in limited partnerships as security."

Thus, under the express terms of the contract, the assignments of Jackson's interests in the limited partnerships were intended to secure only the two aforementioned loans of $45,000 and $10,000. The obligation to assign his...