MAPP CONST., LLC v. SOUTHGATE PENTHOUSES

• Decision Date: 26 February 2010
• Docket Number: No. 2009 CA 0850.,2009 CA 0850.
• Citation: 29 So.3d 548
• Parties: MAPP CONSTRUCTION, LLC v. SOUTHGATE PENTHOUSES, LLC; R.W. Day Development, LLC; Robert W. Day; Janice E. Day; and Lionsway, LLC.
• Court: Court of Appeal of Louisiana — District of US

29 So.3d 548

MAPP CONSTRUCTION, LLC v. SOUTHGATE PENTHOUSES, LLC; R.W. Day Development, LLC; Robert W. Day; Janice E. Day; and Lionsway, LLC.

No. 2009 CA 0850.

Court of Appeal of Louisiana, First Circuit.

October 23, 2009.

Rehearing Denied November 18, 2009.

Writ Denied February 26, 2010.

Todd Hebert, Jodi Bauer, R. Gray Sexton, Daniel Crocker, Scott E. Frazier, Eric A. Kracht, Baton Rouge, LA, James T. Guglielmo, Opelousas, LA, for Plaintiff/Appellee, MAPP Construction, LLC.

Phillip W. Preis, Charles M. Gordon, Jr., Crystal D. Burkhalter, Caroline D. Preis, Baton Rouge, LA, for Defendants/Appellants, Southgate Penthouses LLC; R.W. Day Development LLC; Robert W. Day; Janice E. Day; and Lionsway LLC.

Before WHIPPLE, HUGHES, and WELCH, JJ.

WHIPPLE, J.

In this suit arising out of a Settlement Agreement and Release and two related promissory notes, defendants appeal from two judgments. The first judgment was rendered following a limited trial and declared the common intent and agreement of the parties with regard to certain language in the Settlement Agreement and Release and one of the promissory notes. The second judgment granted the motion for partial summary judgment filed by plaintiff, MAPP Construction, LLC ("MAPP"), and therein: (1) ordered that defendant, Southgate Penthouses LLC, pay the unpaid balance on the two promissory notes; (2) ordered that defendants, Robert Day and Janice Day, execute certain documents related to their business, Lionsway LLC, to effectuate a change in ownership; and (3) recognized that defendants, R.W. Day Development LLC and Robert W. Day, are guarantors of the debt of Southgate Penthouses LLC. For the following reasons, we affirm in part and reverse in part.

FACTS AND PROCEDURAL HISTORY

On August 21, 2003, MAPP, as general contractor, entered into two written contracts with owners, Southgate Residential Towers LLC and Southgate Penthouses LLC, for the construction of a large apartment complex and penthouses located on Nicholson Drive in Baton Rouge, Louisiana. The contracts were valued at $31,192,532.00 and $4,964,687.00 respectively. On that same date, Southgate Penthouses LLC and MAPP also entered into a "Fee Agreement," wherein Southgate Penthouses LLC agreed to pay MAPP the sum of $500,000.00 for the redemption of MAPP's interest in Southgate Residential Towers LLC.

On June 14, 2004, Southgate Penthouses LLC and MAPP also entered into a contract for the performance of specified change orders valued at $4,593,560.63 ("the Change Order Contract"). Thereafter, on February 3, 2005, to resolve a dispute over the actual value of certain change orders (identified as CPR Nos. 1-129), MAPP and Southgate Penthouses LLC entered into an "Agreement in Principal sic."¹ Later, on August 22, 2005, MAPP and Southgate Penthouses, LLC entered into a "Settlement Agreement and Release," which formalized their resolution of the dispute over the enumerated change orders and superseded the Agreement in Principal.²

Pursuant to paragraph number 1 of the Settlement Agreement and Release, Southgate Penthouses LLC agreed to pay MAPP the sum of $5,000,000.00 "minus an amount to be determined for backcharges," in full settlement of all of MAPP's claims for "additional compensation under any contract or agreement with Southgate Penthouses LLC, and Southgate Residential Towers LLC," including CPR Nos. 1-129. (Emphasis added). Attached to the Settlement Agreement and Release was a list of backcharges, which the Southgate defendants contended should be applied as a credit against the settlement amount and the value of which the parties agreed to negotiate in good faith.

The Settlement Agreement and Release further provided as follows:

The parties hereby acknowledge that this Agreement is executed to avoid any additional negotiation or litigation arising out of or in any way involving the change orders, except as to the amount and validity, if any, of the claimed backcharges referenced in Paragraph No. 1. MAPP represents that Note # 1 represents a novation of its earlier claims for change orders through the Effective Date, and that any action by MAPP to collect on such claimed backcharges shall be to file a suit and claim on Note # 1 and to assert and enforce any and all conventional and legal security rights that might exist, including but not limited to those referenced herein.

The Settlement Agreement and Release also recognized that certain credits might exist for other claims by Southgate Penthouses LLC that were not included in the negotiated settlement amount. Specifically, it provided that the release and the calculation of the amount due excluded any claims relating to various lawsuits that had been filed, claims relating to certain alleged construction defects, any future warranty claims, and claims for additional compensation for CPR Nos. 130 and above. Pursuant to the Settlement Agreement and Release, these excluded amounts were to be separately negotiated by the parties, and if they were unable to agree, the parties agreed to submit the disputed issues to arbitration, as provided in the construction contracts.

Nonetheless, while the Settlement Agreement and Release provided that the above disputed issues and sums were specifically excluded from the calculation of the amount due, the Settlement Agreement and Release further provided as follows:

Should an arbitrator determine that additional amounts are due, such amounts shall increase the Settlement Amount by Southgate Penthouses LLC, or if awarded consistent with the HUD Contract, then Southgate Residential Towers LLC. Should an arbitrator determine that credits are due, such amounts shall decrease the Settlement Amount. The arbitrator, or court, shall determine if such credits reduce the settlement amount, or is sic to be considered as a payment under paragraph 4.³

(Emphasis added).

On the same date that the Settlement Agreement and Release was executed, Southgate Penthouses LLC also executed a promissory note ("Promissory Note No. 1") in favor of MAPP for the principal sum of $5,000,000.00 plus interest, "which is equivalent to the Settlement Amount" as defined in the Settlement Agreement and Release, "less all payments of principal previously paid to MAPP in accordance with the Settlement Agreement, less such additional credits as are provided for in the Settlement Agreement." (Emphasis added). Promissory Note No. 1 set forth a payment schedule whereby Southgate Penthouses LLC agreed to make consecutive monthly installments, "until the total amount of principal and interest is paid in full." Promissory Note No. 1 also contained a Default and Acceleration clause that provided as follows:

MAPP shall have the right, at its option, to declare this Note to be in default and to insist upon immediate payment (to accelerate the maturity) of this Note if MAKER fails to make any payment due under this Note as and when due, and such failure continues for a period of fifteen (15) days following receipt by MAKER of written notice of default from MAPP.

Additionally on that date, Southgate Penthouses LLC executed a second promissory note ("Promissory Note No. 2") in favor of MAPP in the principal sum of $500,000.00, representing the balance owed to MAPP under the Fee Agreement. This note was non-interest bearing and provided that Southgate Penthouses LLC would make consecutive monthly payments on the note, beginning after the total amount of principal and interest was paid on Promissory Note No. 1, "until the total amount of principal is paid in full." Promissory Note No. 2 also contained a Default and Acceleration clause, providing as follows:

MAPP shall have the right, at its option, to declare this Note to be in default and to insist upon immediate payment (to accelerate the maturity) of this Note if MAKER fails to make any payment due under this Note as and when due, and such failure continues for a period of ten (10) days or more.

Subsequent to the execution of the Settlement Agreement and Release and the two promissory notes, Southgate Penthouses LLC became delinquent on several payments on Promissory Note No. 1 and ultimately failed to make any further payments on the note subsequent to the December 2005 payment. Accordingly, MAPP sent written notice to Southgate Penthouses LLC and the alleged guarantors of the note that the note was in default and that payment of the note had been accelerated.

When Southgate Penthouses LLC failed to pay, MAPP instituted this suit in July 2006, seeking, inter alia, to recover from Southgate Penthouses LLC the full balance due on Promissory Note No. 1, with interest and attorney's fees of 25% of the principal and interest due, and the $500,000.00 balance due on Promissory Note No. 2, with interest and attorney's fees of 25% of the principal and interest due.⁴ MAPP further sought: (1) judgment against R.W. Day Development LLC in the amount of $2,500,000.00, pursuant to a Continuing Guaranty Agreement; (2) judgment against Robert Day in the amount of $1,000,000.00, pursuant to an alleged personal guaranty agreement; and (3) a mandatory injunction commanding Robert and Janice Day to execute documents to effect a transfer of 100% of their combined interest in Lionsway LLC to MAPP, pursuant to certain terms in the Settlement Agreement and Release. Defendants filed an answer, raising numerous defenses.⁵

Thereafter, MAPP filed a motion for partial summary judgment, contending that, as a matter of law, it was entitled to judgment in its favor: (1) ordering payment of the balance of the two promissory notes; (2) issuing a mandatory injunction requiring Robert Day and Janice Day to execute documents to effectuate a transfer in membership ownership of Lionsway LLC to MAPP; (3) recognizing the continuing guaranty agreement of R.W. Day Development LLC and rendering judgment against it, pursuant to the agreement, in the amount of $2,500,000.00, with interest; and (4) recognizing the personal guaranty of ...