Floyd v. Segars, 76-2910

• Decision Date: 08 May 1978
• Docket Number: No. 76-2910,76-2910
• Parties: William David FLOYD, Plaintiff-Appellee Cross-Appellant, v. Kelly S. SEGARS, Defendant-Appellant Cross-Appellee. Kelly S. SEGARS et al., Plaintiffs-Appellants Cross-Appellees, v. William David FLOYD et al., Defendants-Appellees Cross-appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1018

572 F.2d 1018

William David FLOYD, Plaintiff-Appellee Cross-Appellant, v. Kelly S. SEGARS, Defendant-Appellant Cross-Appellee.

Kelly S. SEGARS et al., Plaintiffs-Appellants Cross-Appellees, v. William David FLOYD et al., Defendants-Appellees Cross-appellants.

No. 76-2910.

United States Court of Appeals Fifth Circuit.

May 8, 1978.

Douglas C. Wynn, Greenville, Miss., Fred M. Bush, Jr., Tupelo, Miss., for defendant-appellant cross-appellee.

James E. Price, Corinth, Miss., for Wm. Floyd.

Appeals from the United States District Court for the Northern District of Mississippi.

Before TUTTLE, MORGAN, and CLARK, Circuit Judges.

CHARLES CLARK, Circuit Judge:

This appeal, arising under our diversity jurisdiction, grows out of a suit and counter suit for breach of contract, governed by Mississippi law. The plaintiff and cross-appellant, William David Floyd, entered into a series of agreements with the appellants and cross-appellees, Dr. Kelly S. Segars, Horizon Broadcasting, Inc., and Horizon Radio, Inc., for the operation of radio stations in Iuka and Cleveland, Mississippi. Following trial to the court, the district court found that Segars breached his written contract with Floyd. The district judge denied each party damages, but ordered specific performance by Segars of a written contract to transfer to Floyd 25% Of the shares of Horizon Broadcasting, in addition to 20% That Floyd already held. On appeal, Segars challenges the district court's finding that he breached his written contract with Floyd. Both Floyd and Segars contend that the district court erred in ordering specific performance and in failing to award damages for other alleged injuries. Finding no error, we affirm the judgment of the district court.

Floyd had considerable expertise in the operation of radio stations; Segars had money. In 1969, Floyd and Segars began negotiations to purchase radio station WVOM in Iuka, Mississippi, from E. C. Holtsford. Holtsford agreed to finance $48,750 of the $70,000 purchase price, with the balance to be paid in cash. Arrangements were made to borrow the down payment from First American National Bank in Nashville, Tennessee (First American). Segars and Floyd entered into a written contract under which Segars, if successful in purchasing WVOM, would transfer the assets to a corporation, Horizon Broadcasting. This corporation would issue 80% Of its stock to Segars and 20% To Floyd and would assume the indebtedness created by the purchase of WVOM. Segars and Floyd agreed to pledge all of the Horizon Broadcasting stock to First American until repayment of the down payment loan. Segars agreed to assign an additional 25% Of the total authorized stock of Horizon Broadcasting to Floyd when the total initial purchase price of the radio station was repaid from radio station profits, so that Segars would own 55% Of the total authorized stock and Floyd would own 45%. The contract also provided that if either party desired to sell his stock, the other party would have an opportunity to purchase the shares at an agreed upon price or at a price set by two qualified appraisers, one selected by each party. Floyd agreed to be manager of the radio station and to "conduct the business of said radio station in a business-like manner and . . . give sufficient of his time to the operation of the same to insure said manner of operation."

Following approval of the purchase by the Federal Communications Commission (FCC), Segars alone executed a note to Holtsford, and both Segars and Floyd executed a note in the amount of $22,500 to First American. The stock of the corporation and additional stock in First American pledged by Segars secured the loan from First American. Soon thereafter, Segars and Floyd incorporated and organized Horizon Broadcasting. Segars conveyed his interest in WVOM to Horizon Broadcasting, along with his interest in an FM Construction Permit for a second station in Iuka.

Horizon Broadcasting employed Floyd from February 1970 until June 29, 1974. Segars, as president of Horizon Broadcasting, negotiated Floyd's salary with him from time to time during this period. The parties never made a written contract for Floyd's employment. Floyd and Segars also joined forces to set up a short-lived recording operation and an entertainment complex known as Funland, which operated a drive-in theater in Belmont, Mississippi, and a skating rink and golf course in Iuka.

In 1972, without an amendment in writing of their original contract, Segars and Floyd began negotiations for the purchase of twin AM/FM radio stations in Cleveland, Mississippi, WDSK and WDLT. Horizon Broadcasting made the purchase through a newly created subsidiary, Horizon Radio, Inc. First American loaned the $26,000 down payment on the $135,000 purchase price. Both Segars and Floyd signed the loan agreement, secured primarily by Segars' Iuka Bank stock. Horizon Radio signed a note to the seller of the Cleveland stations, Tony Conguista, for the $109,000 balance.

Around January 1974, Floyd, acting independently of Segars and Horizon Broadcasting, investigated the acquisition for himself of radio station KSEY in Seymour, Texas. In his application to the FCC, Floyd stated that he would serve as "President and General Manager (Full-time)" and that his wife would serve as "Assistant Station Manager (Full-time)" of KSEY. Segars learned of Floyd's involvement with the Texas station and confronted him with it. Following a conversation the contents of which are in dispute, Segars discharged Floyd.

Segars contends that when quizzed about the Texas operation, Floyd made extortionate demands and threatened to move to Texas if those demands were not met, thus committing an anticipatory breach of his written contract. The district court found that "the underlying concern of Dr. Segars was that since he was to be excluded from the Texas radio venture and Floyd was 'holding out on him,' so to speak, he, Segars, decided to act without further ado, and that he did." The district court also found that, despite what Floyd later stated in the FCC application, he was on the job managing the Iuka and Cleveland stations at the time Segars discharged him. Additionally, the district court found that "Dr. Segars was also motivated by a feeling that any activity by Floyd unrelated to or disassociated from the Iuka and Cleveland, Mississippi, radio stations was harmful to his Dr. Segars' financial interest and jeopardized his potential liability, which was considerable." Because prior to Floyd's discharge the management of both the Iuka and Cleveland stations was progressing in an orderly manner, operations had been sound, equities had been accumulating on behalf of both owners, and Floyd, like Segars, had been "on the hook personally," the district court concluded that Segars acted without a factual basis for cause in terminating the contract and thus exposed himself to liability.

Floyd filed suit for the dollar value of 45% Of the shares of Horizon Broadcasting and money damages to compensate him for the loss of the opportunity to manage the radio stations and to receive a salary. Segars, Horizon Broadcasting, and Horizon Radio cross-claimed, alleging that Floyd committed an anticipatory breach of contract by entering into arrangements for the purchase of the Seymour, Texas, radio station. Also, Segars sought return of the 20% Of Horizon Broadcasting stock initially issued to Floyd under the written contract. Horizon Broadcasting and Horizon Radio sought damages for Floyd's alleged defalcations as manager.

Following a trial to the court, the district court denied damages to each party but ordered specific performance of the contract by the transfer of 25% Of the stock in Horizon Broadcasting to Floyd as soon as the purchase prices were repaid from profits. The court fixed July 1, 1984, as the outside date by which such performance was to be rendered based on Segars' testimony and the operating experience of the stations to date. The district court awarded no damages for what Segars alleged was Floyd's "chiseling" of the corporation. From this judgment, the parties now appeal.

The district court correctly found that two contracts were involved in the transactions here. The...