Investors Associates Ltd. v. B.F. Trappey's Sons Inc.

• Citation: 500 So.2d 909
• Decision Date: 07 January 1987
• Docket Number: No. 85-996,85-996
• Parties: INVESTORS ASSOCIATES LTD. Plaintiff-Appellee, v. B.F. TRAPPEY'S SONS INC. Defendant-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 909

500 So.2d 909

INVESTORS ASSOCIATES LTD. Plaintiff-Appellee, v. B.F. TRAPPEY'S SONS INC. Defendant-Appellant.

No. 85-996.

Court of Appeal of Louisiana,

Third Circuit.

Jan. 7, 1987.

Writ Denied Feb. 20, 1987.

Barham and Churchill, John F. Whitney, and Mack E. Barham and Gary J. Elkins, New Orleans, for defendant-appellant.

Gibbens and Blackwell, John Blackwell, New Iberia, Poindexter, Bowers and Tynan, Dale W. Poindexter, New Orleans, for plaintiff-appellee.

Before DOUCET, LABORDE and KNOLL, JJ.

KNOLL, Judge.

B.F. Trappey's Sons, Inc. (Trappey's) appeals the judgment of the trial court granting Investors Associates, Ltd. (Investors) $67,792 for Trappey's breach of a contractual warranty provision. The trial court concluded that Trappey's breached a condition of its contract with Investors by selling Trappey's corporation to General Wiltz Segura and Perry Segura without first securing an agreement with the purchaser to pay a success fee to Investors for identifying a suitable acquisition candidate. The Seguras were dismissed on a motion for summary judgment prior to trial on the merits and this judgment has not been appealed. Trappey's contends that the trial court erred in holding: (1) that the contract provided for a success fee for Investors' assistance in the identification of a buyer, and in holding Investors even gave such assistance; (2) that Trappey's had an affirmative duty to bring Investors and the prospective purchaser together, and that it breached that contractual duty; and (3) that Trappey's was liable for damages where Investors proved that if the contract's warranty provision had been observed, any success fee would have been paid and where there was no competent evidence of the gross purchase price on which to base a damage award. We reverse.

FACTS

Trappey's and Investors entered into a written agreement drafted by Investors on September 29, 1982, which provided in pertinent part:

"By this letter, B.F. Trappey's Sons, Inc., hereby engages Investors Associates, Ltd. to assist our company in the establishment of a satisfactory banking relationship and the identification of a suitable acquisition candidate in regard to the sale or merger of Trappey's. Investors Associates shall be retained on an exclusive basis to accomplish the above goals subject to the limitations set forth below.

* * *

* * *

The scope of your [Investors] engagement shall include, but not be limited to the following areas:

* * *

* * *

3. Seek out potential acquisition/merger candidates and assist Trappey's in obtaining the highest and best terms for the eventual sale or merger of the company. The conclusion of the sale or merger of the company to a prospect identified by Investors Associates shall represent the successful completion of this task regardless of the date of closing such transaction.

However, it is understood that ongoing negotiations for the sale of Trappey's to Joan of Arc Inc., Thomas J. Lipton, Inc. or a local investor group who wish to remain anonymous, are not included in this agreement and any eventual sale agreement with any of these companies is to be concluded by Trappey's on an independent basis and is exclusive of this agreement.

* * *

* * *

Investors Associates shall ... earn a success fee in consideration of the identification of a suitable acquisition/merger candidate.

* * *

* * *

Upon receipt and acceptance of a satisfactory letter of intent to acquire Trappey's or to enter into a merger agreement with Trappey's, a fee equal to 1% of the gross purchase price up to $6,700,000 and 2% of the gross purchase price in excess of $6,700,000 shall be due and payable from the acquiring party or merger partner to Investors Associates.

* * *

* * *

During the term of this engagement, Trappey's agrees to reimburse all out of pocket expenses incurred by Investors Associates and commencing October 1, 1982, to pay a per diem of $500 for travel time and on site consultation with Trappey's. The per diem for travel time and on site consultation shall be a total of $500 for each day that travel or on site consultation is performed by employees of Investors Associates and shall apply regardless of the number of Investors Associates' employees who engage in said activities on any given day. Trappey's hereby warrants that no financial commitment or letter of intent resulting from your effort can be entered into or accepted unless or until the above success fees have been paid. * * * "

Subsequent to the signing of its contract, Investors toured Trappey's physical plants in New Iberia and Lafayette, examined Trappey's financial records and prepared a financial report for presentations to potential buyers. In connection with the acquisition of Trappey's, Investors unsuccessfully met with prospective buyers in New Orleans, Chattanooga and New York. Though the record does not establish the total amount paid, Trappey's reimbursed Investors' for expenses and paid it a $500 per diem in connection with its efforts to identify a buyer; these payments were part of the consideration provided by the contract and were not at issue.

In late October 1982 Trappey's corporate officials and representatives of Investors held an informal meeting at a New Iberia country club to see if a local buyer could be found. General Wiltz Segura attended that meeting, but testified that this gathering did not influence his later decision to acquire Trappey's. Shortly thereafter a more formal meeting, again conducted to see if a local acquisition candidate existed, was held at the People's Bank in New Iberia. Approximately 15 local businessmen attended, including General Segura and his brother, Perry Segura; personnel from Investors were present to participate in any discussions which arose, and they had prepared materials on leveraged corporate buy-outs.

Subsequent to the People's Bank meeting the Seguras developed an interest in Trappey's. The Seguras hired A.A. Harmon and Company, an accounting firm, to review the corporate books and the physical plant so that they could formulate an offering price for the Trappey's stock. Harmon's field accountants, Terrell LeGlue and John McGraft, met with Jack Blenderman, Trappey's president, and Thomas Schmidt, Trappey's comptroller, examined Trappey's financial records and then recommended to the Seguras a top price per share of $295.

On November 23, 1982, Trappey's shareholders were faced with competing purchase offers from Joan of Arc and the Seguras. After bidding competition, a majority of Trappey's stockholders accepted the Seguras' top offer of $290 per share to purchase the company.

Shortly after Trappey's acquisition by the Seguras Investors made demand on Trappey's for payment of a success fee in the amount of $67,792. Trappey's and the Seguras declined to pay the fee contending that Investors did not identify the Seguras as potential corporate purchasers.

CONTRACT INTERPRETATION

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. LSA-C.C. Art. 2046; Kalmn, Inc. v. Walker Louisiana Properties, 488 So.2d 340 (La.App. 3rd Cir.1986). The aim of contract interpretation is the discernment of a compatible meaning to all provisions of an agreement. Farrell v. Hodges Stock Yards, Inc., 343 So.2d 1364 (La.1977). Louisiana contracts are to be interpreted in light of the common intent of the parties, and in light of all of the provisions, so that each provision is given the meaning suggested by the contract as a whole. LSA-C.C. Arts. 2045 and 2050; Pogo Producing Co. v. Sea Robin Pipeline Co., 493...