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MKM, L.L.C. v. Rebstock Marine Transportation

September 07, 2000

MKM, L.L.C.
V.
REBSTOCK MARINE TRANSPORTATION, INC. AND REBCO MARINE, INC.



Appealed from the 17th Judicial District Court in and for the Parish of Lafourche, Louisiana Trial Court No. 81719 Honorable John J. Erny, Jr., Judge

Before: Leblanc And Pettigrew, JJ. and Kline, * J. Pro Tem. * Judge William F. Kline, Jr., retired, is serving as judge pro tempore by special appointment of the Louisiana Supreme Court.

The opinion of the court was delivered by: Pettigrew, J.

This is a suit for declaratory judgment filed by plaintiffs who seek to determine their rights pursuant to a marine contract. The trial court determined that the contract was valid, enforceable, and had not been breached by plaintiffs. From this judgment, defendants now appeal. We affirm.

FACTS

In late 1995, the offshore oil industry was experiencing a significant downturn and many supply vessels were not working. Raymond Rebstock ("Mr. Rebstock") was the president and majority stockholder of two corporations, each of which owned a 110-foot utility vessel. Rebstock Marine Transportation, Inc. ("Rebstock Marine") was the owner of the M/V ELEANORA, which had not worked since March 1995. Rebco Marine, Inc. ("Rebco") was the owner of the M/V BOB R., described as a rusting, inoperable hulk that had been recovered and towed to dry dock after having been partially sunk in February 1993. The M/V BOB R. remained idle at dry dock while Rebco litigated with the vessel's hull insurer that had denied coverage for losses incurred as a result of the sinking.

In December 1995, Mr. Rebstock was approached by Tony Bruce ("Mr. Bruce") who inquired whether Mr. Rebstock would be interested in leasing or possibly selling the M/V ELEANORA. On December 22, 1995, Mr. Rebstock, appearing on behalf of Rebstock Marine and Rebco, met with Messrs. Wiley Falgout ("Mr. Falgout"), Mr. Bruce and Aldon Wahl ("Mr. Wahl"), partners of MKM, L.L.C. ("MKM") (collectively referred to as "plaintiffs"), at the office of their then- attorney, Wayne LeBouef ("Mr. LeBouef"). *fn1 During the course of the meeting, Mr. Rebstock, unaided by legal counsel, negotiated the terms of an agreement with plaintiffs regarding the M/V ELEANORA and the M/V BOB R. Mr. LeBouef then proceeded to reduce to writing the agreement reached by the parties.

At the December 22, 1995 meeting, Mr. Rebstock (as president of Rebstock Marine and Rebco) and Mr. Falgout (as agent and CEO of MKM) signed a document styled, OPTION AGREEMENT ON PROPOSED "LEASE WITH OPTION TO PURCHASE" ON THE M/V "ELEANORA" AND OPTION AGREEMENT ON PROPOSED PURCHASE OF THE M/V "BOB R." Over the next several days, the parties executed a succession of similar agreements culminating in an agreement dated December 28, 1995.

The document ultimately signed by Mr. Rebstock and Mr. Falgout on December 28, 1995, was styled, LEASE WITH OPTION TO PURCHASE ON THE M/V "ELEANORA" AND OPTION AGREEMENT ON PROPOSED PURCHASE OF THE M/V "BOB R." The December 28, 1995 agreement acknowledged receipt of one hundred dollars cash consideration, and provided for the lease by MKM of the M/V ELEANORA (now the M/V COMMANDER) from Rebstock Marine for a period of sixty (60) months, at a charter hire rate of $2,500.00 per month. During the term of the lease, MKM was given the exclusive option to purchase the M/V ELEANORA from Rebstock Marine for $140,000.00, less the charter hire payments made as of that date. The agreement further provided as follows:

Contingent Right to Purchase M/V "Bob R.". Prospective seller Rebco Marine, Inc. acknowledges that Lessee has additionally expressed an interest in the possible purchase of another vessel, specifically the M/V "Bob R.," Official Number 631077, for the sum of $50,000. Various issues involving said vessel are currently in litigation which has to date been favorable to prospective seller Rebco Marine, Inc., specifically an affirming of a favorable trial court decision by the Louisiana First Circuit Court of Appeal. The defendant insurer has applied to the Louisiana Supreme Court via writ of certiorari. Should said litigation be finally and definitively resolved in favor of prospective seller Rebco Marine, Inc. and Rebco Marine, Inc. be able to deliver a clear and merchantable title to Lessee, including a release of said vessel from its existing Community Bank of Lafourche mortgage, Lessee shall have sixty (60) days from receipt in writing from Rebco Marine, Inc., via certified mail, of final favorable disposition of the aforementioned litigation and Rebco Marine, Inc.'s providing Lessee with the requisite current U.S. Coast Guard Form CG- 1332 ("General Index or Abstract of Title") to purchase the M/V "Bob R[.]" for the sum of $50,000. Lessir [sic] warrants and represents that Community Bank of Lafourche agrees to release the M/V "Bob R.," Official Number 631077, from any and all of prospective seller's then indebtedness with said bank upon the bank's receipt of the aforementioned $50,000 purchase price.

Subsequent to the execution of the December 28, 1995 agreement, the offshore oil industry experienced enormous growth due to an oil boom. As a result, utility vessels such as the M/V ELEANORA and M/V BOB R. were in great demand. Correspondingly, the charter hire rate said vessels could generate increased dramatically. MKM took possession of the M/V ELEANORA and began making monthly lease payments to the bank in accordance with the agreement.

In late 1996 or early 1997, plaintiffs met with Mr. Rebstock and advised him that they intended to exercise their option to purchase the M/V BOB R. for $50,000.00. Mr. Rebstock purportedly indicated that he was going to try to avoid the agreement to transfer title of the M/V BOB R. Thereafter, Mr. Rebstock undertook the extensive repairs necessary to refurbish the M/V BOB R., which until this time, had been incurring docking and storage charges at Allied Shipyard in Larose, Louisiana. On March 13, 1997, MKM received correspondence from Rebstock Marine and Rebco alleging that MKM was in default of the agreement for failure to make its lease payments on the M/V ELEANORA by the 10th of the month. Rebstock Marine and Rebco further demanded the return of the M/V ELEANORA and maintained that MKM was precluded from exercising its option to purchase the M/V ELEANORA and the M/V BOB R. due to this alleged breach. Rebstock Marine and Rebco also issued a Notice of Default and Termination of Lease Agreement and Options to Purchase based upon MKM's purported failure to make its lease payment timely. Later, MKM received correspondence from the bank returning its March 12, 1997 lease check "at the direction of Rebstock." Nevertheless, MKM continued to forward its monthly payments to the bank; however, these payments were returned each month.

On March 19, 1997, MKM filed a Petition for Declaratory Judgment seeking to enforce the terms and conditions of the December 28, 1995 "Lease With Option To Purchase on the M/V 'ELEANORA' and Option Agreement on Proposed Purchase of the M/V 'BOB R'" contract between MKM and Rebstock Marine and Rebco.

The insurance litigation relative to the earlier sinking of the M/V BOB R. was ultimately concluded in December 1997. See Rebco Marine, Inc. v. Homestead Insurance Company, 96-1975 (La. App. 1 Cir. 12/29/97), 706 So.2d 508. Nevertheless, neither Mr. Rebstock nor Rebco provided plaintiffs with written notice of the favorable disposition of the insurance litigation.

ACTION OF THE TRIAL COURT

Rebstock Marine and Rebco answered the instant suit and filed a reconventional demand seeking cancellation of the lease agreement, return of the M/V ELEANORA and damages as a result of MKM's default. Thereafter, MKM filed a Motion For Summary Judgment or, in the alternative, motion for Temporary Restraining Order and Preliminary Injunction enjoining defendants and their representatives from seizing, repossessing or in any way affecting the operation of the M/V ELEANORA prior to the disposition of this matter.

Prior to the scheduled hearing on MKM's motion, Rebstock Marine and Rebco filed a peremptory exception raising the objection of no right of action and asserting that MKM could not maintain the instant suit for the reason that it was not a legal entity. *fn2 A Second Supplemental and Amended Petition for Declaratory Judgment was subsequently filed on behalf MKM on July 17, 1997, and all references to petitioner, "MKM, L.L.C." were changed to "Wiley J. Falgout, Aldon G. Wahl, Jr. and Tony G. Bruce, d/b/a MKM L.L.C." The trial judge later denied MKM's motion for summary judgment.

On September 10, 1997, Rebstock Marine and Rebco filed a third party demand against Gulf Tran, Inc. ("Gulf Tran"), the operator of the M/V ELEANORA. Rebstock Marine and Rebco later filed a third amended reconventional demand averring that Rebstock Marine and Rebco were under no legal obligation to sell the M/V BOB R. to anyone, and in the alternative, and only in the event that Rebstock Marine and Rebco are ordered to sell the M/V BOB R. for $50,000.00 or for any other sum, then and in that event, Rebstock Marine and Rebco set forth a claim in the amount of $650,000.00 for all sums expended in repairing and refurbishing the vessel.

Following the trial of this matter, the trial court granted plaintiffs' request for declaratory judgment, and held that the December 28, 1995 agreement had not been breached by plaintiffs and was valid and enforceable. The trial court further held that the agreement granted plaintiffs the right to purchase the M/V BOB R. for the sum of $50,000.00, and that Rebco was obligated to deliver clear title to the vessel. The trial court also determined that Rebco had breached the contract by failing to convey the M/V BOB R.

The trial court similarly upheld the provisions of the agreement insofar as they applied to Rebstock Marine and its lease to plaintiffs of the M/V ELEANORA. The judgment of the trial court dismissed the third party demand against Gulf Tran, and reconventional demand for reimbursement of monies spent repairing or refurbishing the M/V BOB R. filed by Rebstock Marine and Rebco. From this judgment, Rebstock Marine and Rebco now appeal.

At the outset of their brief to this court, Rebstock Marine and Rebco assert that during the pendency of this appeal, the parties were able to reach a "tentative agreement" relative to the lease of the M/V ELEANORA. Accordingly, all issues in this appeal relate to the prospective purchase of the M/V BOB R. All references to the M/V ELEANORA contained herein are included solely for the sake of clarity and elucidation of the remaining issues involving the M/V BOB R. Rebstock Marine and Rebco concede that although Rebstock Marine has no ownership interest in the M/V BOB R., it nevertheless technically remains a party to this litigation.

ASSIGNMENTS OF ERROR

In connection with their appeal in this matter, defendants Rebstock Marine and Rebco assign the following errors for consideration by this court:

1. Whether the district court erred in failing to declare the "contingent agreement on the possible purchase" of the M/V BOB R[.] null and void pursuant to Civil Code Article 1770 because it contained a suspensive condition which depended upon the whim of the "prospective seller", Rebco Marine, Inc., and its president, Raymond Rebstock.

2. In the alternative, whether the contingent agreement on possible purchase of the M/V BOB R[.] was ambiguous, and the intent of the parties unclear, therefore requiring that the "agreement" should be interpreted against the principals of MKM, whose lawyer drafted the agreement.

3. Further in the alternative, whether the contingent agreement on possible purchase of the M/V BOB R[.], was revoked by Mr. Rebstock prior to suspensive conditions being met.

4. Further in the alternative, whether the district court erred in dismissing defendants' Third Amended Reconventional Demand, which resulted in unjust enrichment of the plaintiffs, who will receive a vessel now worth $845,500, for only $50,000, and without any accounting for the sum of $575,046.51, which has been spent by defendants to refurbish the vessel.

5. Further in the alternative, whether the district court erred in ordering specific performance in plaintiff's action for declaratory judgment, where specific performance is not an appropriate remedy in a declaratory judgment action, and where specific performance deprived defendants of any accounting for the large sum of money ($575,046.51) which they expended refurbishing the M/V BOB R.

DISCUSSION

The Louisiana Constitution of 1974 provides that the appellate jurisdiction of the courts of appeal extends to both law and facts. La. Const., art. V, § 10(B). A court of appeal may not overturn a judgment of a trial court absent an error of law or a factual finding that is manifestly erroneous or clearly wrong. See Stobart v. State, Department of Transportation and Development, 617 So.2d 880, 882, n.2 (La. 1993). When the court of appeal finds that a reversible error of law or manifest error of material fact was made in the trial court, it is required to redetermine the facts de novo from the entire record and render a judgment on the merits. Rosell v. ESCO, 549 So.2d 840, 844, n.2 (La. 1989).

In their first assignment of error, Rebstock Marine and Rebco assert that the district court erred in failing to declare the "contingent agreement on the possible purchase" of the M/V BOB R. to be null and void pursuant to Civil Code Article 1770, because it contained a suspensive condition that depended upon the whim of the "prospective seller", Rebco, and its president, Raymond Rebstock. Louisiana Civil Code Article 1770 provides:

A suspensive condition that depends solely on the whim of the obligor makes the obligation null.

A resolutory condition that depends solely on the will of the obligor must be fulfilled in good faith.

In their brief to this court, Rebstock Marine and Rebco argue that any option granted to plaintiffs under the terms of the agreement could not be exercised unless and until plaintiffs received written notice via certified mail from Rebco of final, favorable disposition of the pending insurance litigation. Rebstock Marine and Rebco contend that the decision to issue said notice depended solely upon the whim of Mr. Rebstock in the event he wished to sell the M/V BOB R. at that point. Accordingly, Rebstock Marine and Rebco ague that the issuance of notice at the sole discretion or whim of Mr. Rebstock rendered the obligation null pursuant to Article 1770.

By way of response, plaintiffs argue that the option to purchase the M/V BOB R. did not contain a suspensive condition dependent solely upon the whim of Rebco. Plaintiffs assert that the option to purchase was conditioned only upon the successful resolution of the litigation involving the M/V BOB R. and the ability of Rebco to transfer clear ...


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