National Hygienics, Inc. v. Southern Farm Bur. Life Ins. Co.

• Citation: 707 F.2d 183
• Decision Date: 13 June 1983
• Docket Number: No. 82-4157,82-4157
• Parties: NATIONAL HYGIENICS, INC., Plaintiff-Appellant, v. SOUTHERN FARM BUREAU LIFE INSURANCE CO., et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 183

707 F.2d 183

NATIONAL HYGIENICS, INC., Plaintiff-Appellant, v. SOUTHERN FARM BUREAU LIFE INSURANCE CO., et al., Defendants-Appellees.

No. 82-4157.

United States Court of Appeals, Fifth Circuit.

June 13, 1983.

Betty A. Morgan, Robert H. Weaver, Jackson, Miss., for plaintiff-appellant.

James B. Persons, Biloxi, Miss., Stanford E. Morse, Jr., Gulfport, Miss., William C. Walker, Jr., Univ. of Miss. Law Center, University, Miss., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Mississippi.

Before RANDALL and HIGGINBOTHAM, Circuit Judges, and McDONALD ^*, District Judge.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This appeal is from a summary judgment in a diversity case granted by a magistrate. Finding a genuine issue of material fact we reverse and remand for trial.

In 1971 a group of doctors in Biloxi, Mississippi established Coastal Professional Association. Members of that group also established Gulf Limited Partnership to operate a clinic in Biloxi for the practice of Coastal's doctors. Most partners in Gulf were shareholders in Coastal. In January 1975 Southern Farm Bureau Life Insurance Company and Central Life Assurance Company loaned Gulf approximately $2.4 million for the construction of the clinic. The loan was secured by a deed of trust on the clinic, an assignment of Gulf's lease with Coastal, and the personal guaranty of the doctors of Coastal to pay their pro rata share of the annual lease payment.

During the latter part of 1975 Coastal became delinquent in its lease payments to Gulf and Gulf in turn became delinquent in its loan payments to Southern and Central. Southern, Central, and Gulf then modified their agreement in January 1976 by reducing Gulf's monthly loan payments. Coastal's lease payments were reduced in proportion.

In July 1976, the general partner of Gulf, Bobby Bell, requested that Coastal pay an additional $1,000 to Gulf. Coastal refused. Bell then advised Coastal by letter dated July 19, 1976, that Gulf could no longer afford to run the Medical Center Building Complex and would be closing it down. The letter stated that Gulf planned to close the clinic because Coastal could not make the $1,000 payment:

July 19, 1976

Dr. Harrell S. Pace, M.D.

President

Coastal Medical Center, P.A.

P.O. Box 4080

Biloxi, Mississippi 39531

Dear Dr. Pace:

I very much regret receiving your letter of July 12, 1976. In this letter you informed me that the C.M.C.P.A. could not approve a $1,000 payment toward the debt to the GLPF.

Since there were no details or explanations given or offered in this letter, I must assume that the P.A. either does not have the funds or simply does not wish to make the payment.

The G.L.P.F. based on your decision, can no longer afford to operate the Medical Center Building Complex.

As of the July payments, I will with-hold, making any further payments on the building mortgage or lease payments to Litton Industries.

I recommend a meeting between the Board of Directors of the C.M.C.P.A. and myself to discuss the consequences of action by the G.L.P.F. which will close the medical center building.

It is with deep regret that I feel this action must be taken but I see no plausible reason for the continuance of these struggles.

Sincerely yours,

/s/ Robert W. Bell

Robert W. Bell as

General Partner, GLPF

Shortly after receiving the letter Coastal arranged a meeting with Southern. Bell was not told of the meeting and did not attend. There is a dispute as to whether any arrangements were made at this meeting for Coastal to deal directly with Southern and Central and eliminate Gulf and Bell altogether. This much is clear: at the meeting Coastal discussed the letter from Bell and suggested to Southern that Gulf would make no further payments on the loan. Coastal also advised Southern that its physicians wanted to remain in the building.

On the first business day following the meeting, Coastal's attorney informed Central of its meeting with Southern. Three days later, on August 5, 1976, Southern and Central exercised their right of assignment of the lease and directed Coastal's payment to them. On January 5, 1977, Central and Southern foreclosed on the building. Central and Southern then purchased the building at the foreclosure sale. In March of 1977 the clinic was sold to the Coastal Company, a general partnership drawn from shareholders of Coastal Professional Association.

Throughout this period, National Hygienics was prosecuting a suit against Gulf filed in 1974 in a Mississippi state court. In July 1979, over two years after the foreclosure and sale of the building, the state court suit was settled through entry of an "Agreed Decree and Assignment of Assets." The decree released the general partners of Gulf from any personal liability and awarded National Hygienics $300,000. Gulf then had only $21,000 in tangible assets. The decree assigned to National Hygienics all of Gulf's tangible and intangible assets, including its claims against Coastal, Southern, and Central, except for 20 percent of any net recovery by National against Coastal, Southern, and Central.

As assignee, National filed this diversity action claiming: (1) unlawful interference by Coastal with the mortgagor-mortgagee relationship between Gulf and Central and Southern; (2) unlawful interference by Southern and Central with the lease between Coastal and Gulf; and (3) conspiracy to interfere with and injure the business of Gulf by Coastal, Southern, and Central. All parties consented to trial before a magistrate. The magistrate granted summary judgment to the defendants, finding that: (1) Coastal had standing to contest the assignment from Gulf to National; (2) the assignment was invalid because the general partner (Bell) had acted in violation of Mississippi partnership law; (3) Coastal, Southern, and Central were privileged to proceed in the manner they did regardless of injury to Gulf; (4) there was no unlawful or improper motive in either Coastal's, Southern's, or Central's actions and hence no unlawful conspiracy to interfere with the partnership's business. National appeals this judgment.

We pause to note the standard of review. In reviewing summary judgment we must consider the record in the light most favorable to the party opposing the motion. If there is a genuine issue of fact which could cause the dispute to reasonably be resolved in favor of the party opposing the summary judgment, the judgment cannot stand. Marshall v. Victoria Transportation Co., 603 F.2d 1122, 1123 (5th Cir.1979). With this standard in mind we turn to analysis of this case. We apply Mississippi law here, a largely predictive exercise.

"Standing" to Challenge the Assignment

National argues that Coastal has no "standing" to contest the validity of the assignment from Gulf to National. This argument is without merit. National must prove the validity of the assignment on which it sues. "Unless the defendants admit the assignment under which the plaintiff claims, it is incumbent upon the plaintiff to prove a valid assignment in order to show that he has a cause of action." 6 Am.Jur.2d Assignments Sec. 136 (1963).

It does not necessarily follow that Coastal may challenge the assignment on any ground:

If, however, the assignment is effective to pass legal title, the debtor cannot defend by interposing matters or objections which merely affect the validity of the assignment as between the assignee and assignor or render it voidable at the latter's election, or the election of his creditor. The debtor cannot question the motive or purpose underlying the assignment, or introduce a defense that the assignee occupied a fiduciary relationship to the assignor. Also, various other defenses have been held not available to the debtor.

6A C.J.S. Assignments Sec. 115 (1975). This language, while somewhat obscure and circular, suggests that a defendant may object to the formal validity of an assignment, but not otherwise. Coastal's objections are not formal: it contends that Bobby Bell lacked authority to bind Gulf Limited Partnership.

We have no Mississippi case law on point. In the absence of controlling authority we will decline to reach the question of Coastal's "standing," because, as will be seen below, we conclude in any event that the assignment is valid as a matter of law.

Validity of the Assignment

Coastal claims that the assignment is invalid because Gulf's general partner, Bell, was acting beyond the scope of his authority. Specifically, Coastal contends that Bell violated three subsections of Sec. 79-13-19 the Mississippi Uniform Limited Partnership Act.

The three subsections allegedly violated provide:

(1) A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners, except that without the written consent or ratification of the specific act by all the limited partners, a general partner or all of the general partners have no authority to:

* * *

(b) Do any act which would make it impossible to carry on the ordinary business of the partnership.

(c) Confess a judgment against the partnership.

(d) Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose.

Miss.Code Ann. Sec. 79-13-19. We will treat Coastal's contentions seriatim.

(a) Confession of Judgment

Mississippi has no cases to guide our inquiry into whether Bell's assignment was a confession of judgment. The magistrate reasoned that it was a "consent judgment" and that this was equivalent to a confession judgment. This was error. Although both have the same preclusive effect, Guthrie v. Guthrie, 266 Miss. 190, 84 So.2d 158, 161 (Miss.1955), a consent judgment is in the nature of a bilateral contract as to what the decision should be, while a confession of judgment involves a unilateral concession by the defendant that plai...