Mumblow v. Monroe Broadcasting, Inc.

• Decision Date: 28 February 2005
• Docket Number: No. 03-31013.,03-31013.
• Parties: Stephen P. MUMBLOW, Plaintiff-Appellant, v. MONROE BROADCASTING, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

401 F.3d 616

Stephen P. MUMBLOW, Plaintiff-Appellant, v. MONROE BROADCASTING, INC., Defendant-Appellee.

No. 03-31013.

United States Court of Appeals, Fifth Circuit.

February 28, 2005.

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Erich Phillip Rapp (argued), Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, Baton Rouge, LA, for Plaintiff-Appellant.

Robert L. Cabes (argued), Steven Joseph Dupuis, Jr., Milling, Benson & Woodward, Lafayette, LA, for Defendant-Appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before SMITH and GARZA, Circuit Judges, and VANCE,^* District Judge.

VANCE, District Judge:

Stephen P. Mumblow appeals the trial court's decision to apply Louisiana law to this case and its dismissal of his claim as premature. Because the trial court properly chose to apply Louisiana law to this case but made clearly erroneous findings of fact, we AFFIRM in part, REVERSE in part, and REMAND the matter for further proceedings consistent with this opinion.

I. FACTS AND PROCEEDINGS BELOW

Appellant Stephen Mumblow, a New York resident, was the president of Communications Corporation of America, a Louisiana corporation, from September 1998 until January 2002. Thomas Galloway is the principal shareholder and Chairman of CCA, and D. Wayne Elmore is an officer, director and shareholder of CCA. Gregory Todd Boulanger is the controller of CCA. Mumblow did not own stock in CCA. He agreed with CCA that after three years with CCA, he would be entitled to ten percent of the net proceeds upon the sale of the company.

Monroe Broadcasting is a Louisiana corporation that operates a television station in Monroe, Louisiana. Monroe is owned by Charles Chatelain and Dr. Paul Azar. None of the principals of CCA holds a position with Monroe. In late 1997, Galloway, as the head of CCA, acquired other broadcasting properties from Chatelain. As part of that deal, Chatelain required Galloway to indemnify him and Azar against the financial risk of owning and operating Monroe and to assume financial responsibility for Monroe. That arrangement was eventually memorialized in a "put/call" agreement that gave Galloway the right to buy, and Monroe the right to call upon Galloway to buy, Monroe for a price that was the sum of Monroe's debts and liabilities. CCA also entered a consulting arrangement with Monroe under which it provided daily operational services to Monroe.¹ CCA was never paid for its services. Rather, Monroe regularly issued notes in CCA's favor, reflecting the amount owed for the services.

Chase Manhattan Bank loaned CCA money. In October 2000, Chase required Galloway to stop drawing his salary from CCA because of CCA's weakened financial condition. At the time, Galloway had contributed over one million dollars to Monroe for its daily operations. Mumblow suggested to Elmore that they advance their salaries from CCA to Monroe to ease the burden on Galloway. On October 31, 2000, Mumblow began advancing his salary checks, in the amount of $14,000 per month, to Monroe.²

In June 2000, the principals of Monroe, with the assistance of Galloway, Elmore and Mumblow, arranged a working capital infusion for Monroe by refinancing its existing indebtedness through a loan from Whitney Bank. Whitney required an additional two million dollars in collateral for the loan. Mumblow originally agreed to put up $500,000, but he withdrew his offer shortly before the loan closed. Galloway made up the difference. The $10,000,000 loan agreement, which included an additional $1,000,000 line of credit, became final in December of 2000. Mumblow continued to turn over his salary checks to Monroe until August 15, 2001. Other than the cancelled checks, no documents exist to memorialize Mumblow's loan. Monroe's financial statements show the payments as notes payable under the category of long-term liabilities. Mumblow stopped working for CCA in January of 2002.

On or about December 21, 2001, Mumblow demanded repayment of the loan. Monroe refused to repay Mumblow. On January 18, 2002, Mumblow sued Monroe on the loan in the United States District Court for the Western District of Louisiana. The parties consented to a trial by Magistrate Judge C. Michael Hill. After a bench trial, the court found that (1) Louisiana law governs the choice of law determination; (2) Louisiana law applies to the transactions, and the transactions constitute a loan; (3) under applicable Louisiana law, the loan is subject to an implied suspensive condition that suspends Mumblow's right to demand repayment until Monroe's assets are either sold or merged; and (4) Mumblow's demand for repayment is premature because the suspensive condition has not matured. The court entered judgment in favor of Monroe and dismissed the action. Mumblow timely appeals.

II. STANDARD OF REVIEW

We review choice of law questions de novo. Adams v. Unione Mediterranea Di Sicurta, 220 F.3d 659, 674 (5th Cir.2000). We review the trial court's findings of fact and inferences deduced therefrom for clear error. Jarvis Christian Coll. v. Nat'l Union Fire Ins. Co., 197 F.3d 742, 745 (5th Cir.1999). We review the legal conclusions the trial court reached based upon factual data de novo. Id. at 746.

III. DISCUSSION

A. Choice of Law

In diversity cases, we apply the law of the forum state to determine which state's law applies. Woodfield v. Bowman, 193 F.3d 354, 359 n. 7 (5th Cir.1999). Here, the forum state is Louisiana, and we would ordinarily apply its choice of law provisions.

We have previously held, however, that "[i]f the laws of the states do not conflict, then no choice-of-law analysis is necessary," and we simply apply the law of the forum state. Schneider Nat'l Transp. v. Ford Motor Co., 280 F.3d 532, 536 (5th Cir.2002); W.R. Grace & Co. v. Cont'l Cas. Co., 896 F.2d 865, 874 (5th Cir.1990) (when the substantive decisional law of all relevant jurisdictions is the same, a court need not "go through the motions" of making a choice of law); see also Travelers Ins. Co. v. McDermott, Inc., No. CIV.A. 01-3218, 2003 WL 21999354, at *7 (E.D.La. Aug.22, 2003) (when the laws of Louisiana and Connecticut are in harmony, no choice-of-law analysis is necessary). Here, the parties assert that the two states with an interest in the transaction are New York and Louisiana. Mumblow, in challenging the trial court's determination that the loan is subject to a suspensive condition, argues that New York contract law, unlike Louisiana contract law, would render the suspensive condition found by the trial court unenforceable.

We conclude, however, that the controlling issue in this matter is whether there is substantial evidence to support the trial court's determination that Monroe's repayment obligation is conditioned on the sale or merger of Monroe's assets. See discussion, infra, at Part III.B. Thus, we first consider whether the substantive contract law of New York and Louisiana conflicts on the issue of the interpretation of oral contracts and the evidence used to determine their terms, including terms that suspend the existence of a party's obligation until the occurrence of a condition (known as a condition precedent under New York law and a suspensive condition under Louisiana law). See Southern States Masonry, Inc. v. J.A. Jones Constr. Co., 507 So.2d 198, 204 n. 15 (La.1987) (citing City of New Orleans v. Tex. and Pac. Ry. Co., 171 U.S. 312, 334, 18 S.Ct. 875, 43 L.Ed. 178 (1898)). Because we conclude that the substantive contract law of New York and Louisiana is in harmony on these issues, no choice of law analysis is necessary, and we apply Louisiana law.

The law of New York and Louisiana is in agreement on the following principles of contract interpretation that are relevant to the issue under review. First, both states' laws and jurisprudence, in the absence of a writing, look to the parties' intent to determine the terms of an oral agreement, including whether a condition was part of the agreement. Compare Ferrer v. Samuel, 192 Misc.2d 533, 746 N.Y.S.2d 242, 243 (N.Y.Dist.Ct.2002) (noting that courts, in interpreting an oral agreement, "typically look to the objective intent manifested by the parties at the time they contracted"), with La. Civ.Code art. 1768 ("Conditions may be either expressed in a stipulation or implied by the law, the nature of the contract, or the intent of the parties."), and La. Civ.Code art. 2045 ("Interpretation of a contract is the determination of the common intent of the parties."). Second, both states' laws and jurisprudence require the party who relies on the condition to suspend his obligation to prove that the condition was part of the agreement. Compare Abacus Real Estate Fin. Co. v. P.A.R. Constr. and Maint. Corp., 115 A.D.2d 576, 496 N.Y.S.2d 237, 238 (N.Y.App.Div.1985) (requiring defendants who asserted that their obligation was subject to an oral condition precedent to prove the condition was part of the agreement), with Sam's Style Shop v. Cosmos Broad. Corp., 694 F.2d 998, 1004 (5th Cir.1982) (finding that Louisiana law requires one who relies on a suspensive condition to prove the existence of the condition). Third, under both states' laws and jurisprudence, courts avoid construing an agreement as subject to a condition suspending the existence of an obligation, unless there is clear evidence of the parties' intent to include such a condition in the agreement. Compare Unigard Sec. Ins. Co. v. North River Ins. Co., 79 N.Y.2d 576, 581, 584 N.Y.S.2d 290, 594 N.E.2d 571 (1992), with Southern States Masonry, Inc., 507 So.2d at 201 (stating that Louisiana courts avoid construing contractual provisions as suspensive conditions whenever possible), and Hampton v. Hampton, Inc., 713 So.2d 1185, 1190 (La.Ct.App.1998) (stating that Louisiana courts find a suspensive condition only when the express language of the contract compels such a construction) (emphasis added). Because there is no apparent conflict between the law of New York and...