Filed: Apr. 27, 2011
Latest Update: Feb. 22, 2020
Summary: Case: 10-41063 Document: 00511458697 Page: 1 Date Filed: 04/27/2011 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED April 27, 2011 No. 10-41063 Lyle W. Cayce Clerk REGIONS EQUIPMENT FINANCE CORPORATION, Plaintiff-Appellee v. AT 2400, Official Number 530775, her engines, tackle, furniture, apparel, appurtenances, etc., in rem; AT 1400, Official Number 279236, her engines, tackle, furniture, apparel, appurtenances, etc., in rem; ACCU I
Summary: Case: 10-41063 Document: 00511458697 Page: 1 Date Filed: 04/27/2011 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED April 27, 2011 No. 10-41063 Lyle W. Cayce Clerk REGIONS EQUIPMENT FINANCE CORPORATION, Plaintiff-Appellee v. AT 2400, Official Number 530775, her engines, tackle, furniture, apparel, appurtenances, etc., in rem; AT 1400, Official Number 279236, her engines, tackle, furniture, apparel, appurtenances, etc., in rem; ACCU II..
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Case: 10-41063 Document: 00511458697 Page: 1 Date Filed: 04/27/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 27, 2011
No. 10-41063 Lyle W. Cayce
Clerk
REGIONS EQUIPMENT FINANCE CORPORATION,
Plaintiff-Appellee
v.
AT 2400, Official Number 530775, her engines, tackle, furniture, apparel,
appurtenances, etc., in rem; AT 1400, Official Number 279236, her engines,
tackle, furniture, apparel, appurtenances, etc., in rem; ACCU III, Official
Number 514466, her engines, tackle, furniture, apparel, appurtenances, etc., in
rem; AT 3010, Official Number 1080340, her engines, tackle, furniture, apparel,
appurtenances, etc., in rem; AT 3014, Official Number 1086811, her engines,
tackle, furniture, apparel, appurtenances, etc., in rem; AT 3008, Official Number
1080268, her engines, tackle, furniture, apparel, appurtenances, etc., in rem;
ACCU VII, Official Number 520332, her engines, tackle, furniture, apparel,
appurtenances, etc., in rem; AT 1401, Official Number 295706, her engines,
tackle, furniture, apparel, appurtenances, etc., in rem; ACCU XI, Official
Number 536661, her engines, tackle, furniture, apparel, appurtenances, etc., in
rem; ACCUMARINE TRANSPORTATION, LP, in personam,
Defendants-Appellants
Appeal from the United States District Court
for the Eastern District of Texas
Before WIENER, BENAVIDES, and STEWART, Circuit Judges.
WIENER, Circuit Judge:
Plaintiff-Appellee Regions Equipment Finance Corporation (REFCO) sued
Defendant-Appellant Accumarine Transportation, L.P. (“Accumarine”), in
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No. 10-41063
personam, and also sued a number of Accumarine’s vessels, Defendants-
Appellants AT 2400, AT 1400, ACCU III, AT 3010, ACCU VII, ACCU XI, in rem,
for breach of contract. The suit is based on Accumarine’s failure to make
payments due on four promissory notes held by REFCO and on Accumarine’s
default on loan agreements to cover those notes. Accumarine does not dispute
REFCO’s allegations of breach of contract but asserts defenses of promissory and
equitable estoppel. The district court granted REFCO’s motion for summary
judgment, determining that Accumarine’s defenses are not assertable under
Alabama law and that there remains no genuine issue of material fact that
Accumarine has breached its contract with REFCO. We affirm on the basis that
Accumarine may not assert its defenses pursuant to the specific provisions of the
contract, under either maritime law or Alabama law.
I. FACTS & PROCEEDINGS
A. Facts
REFCO is an Alabama corporation that entered into a loan agreement
with Accumarine in 2007 on some of Accumarine’s vessels. The agreement was
amended three times, with each of the subsequent agreements supported by a
separate promissory note requiring monthly payments of equal amounts and a
final balloon installment of principal and interest due in 2012. The Third
Amended Loan Agreement (the “Agreement”) was secured by a First Preferred
Fleet Mortgage (the “Preferred Mortgage”), which encumbered four of
Accumarine’s vessels for which the loan had been granted.
Accumarine has not made a principal payment under the Agreement since
December 2008 and has not made an interest payment since June 2009. At the
time that Accumarine defaulted under the Agreement, some of the Agreement’s
guarantors were in default under a separate loan with REFCO (the “Dunhill
Note”).
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No. 10-41063
Accumarine alleges—and REFCO disputes—that the guarantors sought
to negotiate the Dunhill Note and Accumarine’s debts simultaneously with
REFCO, but that REFCO refused to do so and instead required the guarantors
to negotiate the Dunhill Note first. Accumarine claims that REFCO promised:
(1) REFCO would not take action on Accumarine’s debt to REFCO if the Dunhill
Note was resolved first, and (2) REFCO would notify Accumarine before taking
any action on Accumarine’s loan. Accumarine also asserts that it relied on these
oral promises when it postponed efforts to find an investor to whom Accumarine
could sell the Preferred Mortgage.
Accumarine does not dispute that it has (1) failed to pay the monthly
installments as scheduled, (2) not provided the required financial statements,
and (3) incurred competing liens—each of which constitutes an act of default
under the Agreement
B. Proceedings
On April 14, 2010, REFCO filed suit against Accumarine, in personam,
and against the vessels encumbered by the Preferred Mortgage, in rem. REFCO
filed a motion for summary judgment, contending that it had established that
Accumarine was in default under the Agreement and that the Preferred
Mortgage gave rise to a preferred mortgage lien against Accumarine’s vessels in
the amount of the indebtedness. In response, Accumarine contended that
REFCO was estopped from enforcing the Preferred Mortgage and collecting the
notes under principles of promissory and equitable estoppel, based on the alleged
oral promises made by REFCO to Accumarine’s guarantors.
The district court entered an order granting REFCO’s motion for summary
judgment, ruling that Alabama law applied to the contractual dispute and that
Alabama’s Statute of Frauds barred evidence of REFCO’s alleged oral promises
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No. 10-41063
to Accumarine, which were the only bases of Accumarine’s affirmative defenses.
Accumarine timely filed a notice of appeal, challenging the district court’s
summary judgment disposition.
II. ANALYSIS
A. Standard of Review
We review a district court’s summary judgment disposition de novo,
applying the same legal standards as the district court.1 The district court
appropriately grants a motion for summary judgment “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” 2
B. The Agreement Preempts the Conflicts-of-Law Issue
At the outset, we consider the Agreement’s “ENTIRE AGREEMENT”
clause relating to amendments, which states in full:
Section 9.10 ENTIRE AGREEMENT: AMENDMENT. THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS
REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY
NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO.
THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES
HERETO. The provisions of this Agreement and the other Loan
Documents to which Borrower or any Guarantor is a party may be
amended or waived only by an instrument in writing signed by the
parties hereto.3
1
United States v. Caremark, Inc., 634 F.3d 808, 814 (5th Cir. 2011) (citation omitted).
2
FED . R. CIV . P. 56(a).
3
(capitalization and emphasis in original).
4
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The district court acknowledged this clause only when it applied Alabama law,
explaining that even if Accumarine could assert the defenses of promissory and
equitable estoppel here, those defenses would fail under Alabama’s reasonable
reliance test because “Accumarine’s reliance on [REFCO’s] promises could not
be reasonable, in light of [this clause of the Agreement].” Before we even reach
the conflict-of-laws issue, however, we read this clause as specifically controlling
the discrete issue on appeal, i.e., whether Accumarine may assert estoppel
defenses to breach of contract based on alleged oral amendment of the
Agreement.
Accumarine contends that the “no oral modification” clause is not
enforceable because “contracting parties may undo their agreements.” Although
this proposition was true under “traditional common law,” as Accumarine duly
cites, today this common law rule is not always followed. The D.C. Circuit has
noted that “[i]n modern times the common law rule has been discarded in broad
areas,” including by the Uniform Commercial Code (UCC).4 The D.C. Circuit
further explained, in the context of a collective bargaining agreement, that the
UCC rule should apply instead of the traditional common law rule when: (1) the
parties are “sophisticated,” (2) the agreement is the “product of substantive
negotiations between intensely interested parties, usually advised by specialized
counsel,” and (3) there is no “fear that either party may have missed the fine
print or somehow been taken advantage of in agreeing that there shall be no oral
modifications.”5 Notably, the D.C. Circuit ultimately concluded:
4
Martinsville Nylon Employees Council Corp. v. N.L.R.B., 969 F.2d 1263, 1267 (D.C.
Cir. 1992) (quoting U.C.C. § 2-209(2)) (internal citations omitted).
5
Id. See also id.:
The drawback of the common law rule is that it denies to all contracting parties,
no matter how sophisticated, the ability to decide for themselves whether to
restrict the manner in which their agreement may be modified. The UCC rule,
on the other hand, enables those parties who mutually value certainty in their
5
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We need not finally choose today between the common law and UCC
rules concerning no-oral-modification clauses, however, because the
[agreement] before us also contains an “entire agreement” clause.
Whatever the ultimate merits of the common law rule denying effect
to the no-oral-modification clause, by including the entire agreement
clause the parties here made clear beyond doubt their intention not
to be bound to any informal arrangement to which they might
voluntarily adhere during the term of their [agreement]. In effect,
each told the other: “If you want anything else, you’ll have to get it
in writing,” and to this both agreed.6
Here, the “entire agreement” clause itself includes the “no oral
modification” clause, which provides that the Agreement “may be amended or
waived only by an instrument in writing signed by the parties hereto.” In
addition, there are two reiterations: (1) “THIS AGREEMENT . . . MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF . . . SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO” and
(2) “THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES
HERETO.” There is no doubt about the parties’ intention not to be bound by
future oral promises purporting to amend the Agreement.
First, under existing maritime law, there is not a clear answer to whether
this combination “entire agreement” and “no oral modification” clause is
necessarily unenforceable. It is true that maritime law allows oral modifications
for maritime employment contracts, which may be valid even if made orally in
their entirety.7 But, without exception, a preferred ship mortgage contract, like
relations to have it; under the UCC rule, moreover, no one has to agree to rule
out oral modifications nor, having so agreed, are the parties precluded from
executing a mutually agreeable modification.
6
Id. at 1268 (emphasis added).
7
See Kossick v. United Fruit Co., 365 U.S. 731, 734 n.4 (1961).
6
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the one in the instant case, must be in writing to be valid.8 Accordingly, the D.C.
Circuit’s criteria apply more fittingly in the ship mortgage context than in the
maritime employment context: Both parties here are sophisticated companies;
the Agreement and Preferred Mortgage were the product of substantial
negotiations, with the negotiated loans aggregating more than $20 million; and
there is no fear that Accumarine may have missed the fine print or somehow
been taken advantage of in agreeing that the Agreement and Preferred
Mortgage could not be modified orally.
Second, under Alabama law, the Agreement’s “no oral modification” clause
would be enforceable. The Alabama Supreme Court has enforced such clauses
in the past.9 The Alabama Supreme Court has also enforced “entire agreement”
clauses by applying “[g]eneral canons of contract construction” and concluding
that “because [the parties] expressly stated that the [contract] constitutes the
‘entire agreement’ between them, we will enforce the plain meaning of those
words by treating the [contract] as the entire agreement between the parties.” 10
8
See 46 U.S.C. § 31321 (“A bill of sale, conveyance, mortgage, assignment, or related
instrument, whenever made . . . must be filed with the Secretary to be valid . . . .”).
9
See Pavco Indus. Inc. v. First Nat’l Bank of Mobile, 534 So. 2d 572, 576 (Ala. 1988):
[Plaintiff borrowers] argue that [the defendant bank’s] assurances became part
of the contract and that it was therefore a breach of contract to fail to comply
with those assurances. The fatal flaw in this argument, however, is that the
note included the following provision: “This agreement shall be changed only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.” Thus, there can be no oral
modification of the written note and security agreement.
(citing Williams v. Ford Motor Credit Co., 435 So. 2d 66 (Ala. 1983)).
10
See Ex parte Conference America, Inc., 713 So. 2d 953, 956 (Ala. 1998). See also
Homes of Legend, Inc. v. McCollough,
776 So. 2d 741, 746 (Ala. 2000) (“Under general Alabama
rules of contract interpretation, the intent of the contracting parties is discerned from the
whole of the contract.”).
7
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As this clause is enforceable under both maritime and Alabama law, we
need not decide the choice-of-law issue. Rather, we hold that the Agreement’s
“entire agreement” clause defeats Accumarine’s defenses of promissory and
equitable estoppel.
III. CONCLUSION
For the foregoing reasons, we affirm the district court’s order granting
summary judgment in favor of REFCO.
AFFIRMED.
8
