Quantam Varde Asset Fund LLC v. Zuffle , 73 F. App'x 672 ( 2003 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
August 18, 2003
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
_________________________ Clerk
No. 02-31134
SUMMARY CALENDAR
_________________________
QUANTAM VARDE ASSET FUND LLC
Plaintiff - Appellee
v.
TIM TYLER ZUFFLE; Et Al
Defendants
TIM TYLER ZUFLE; DIANE REED ZUFLE
Defendants - Appellants
______________________________________________________________________________
On Appeal from the United States District Court for the
Eastern District of Louisiana, New Orleans Division
(90-CV-2058)
______________________________________________________________________________
Before REYNALDO G. GARZA, HIGGINBOTHAM, and BENAVIDES, Circuit Judges.
REYNALDO G. GARZA, Circuit Judge:1
In this appeal we are asked to review a district court’s decision granting summary
judgment in favor of Quantum Varde Asset Fund, LLC (“Quantum”), on its motion to revive a
judgment against Tim Tyler Zufle and Diane Reed Zufle. For the following reasons, we affirm the
1
Pursuant to 5th Cir. R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5th Cir. R.
47.5.4.
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district court’s decision.
I. FACTUAL & PROCEDURAL BACKGROUND
In December of 1998, Silent Partner, Inc. (“SPI”), obtained two loans from Bankers Trust
of Louisiana, N.A. The loans were, in principal, for $282,000.00 and $100,500.00. Appellants
Tim Tyler Zufle and Diane Reed Zufle endorsed promissory notes for the loans, binding
themselves, in solido, with SPI for the repayment of the financial obligations.
Not unlike many of its temporal counterparts, the Louisiana bank failed and was placed
into receivership. Thereafter, the Federal Deposit Insurance Corporation (“FDIC”) was appointed
liquidator, and when the borrower defaulted on the loan, the FDIC brought suit on the notes. The
parties entered into a consent judgment (“1991 Judgment” or “Judgment”) before the case was
tried, which resulted in judgment being entered in favor of the FDIC, and against the Zufles, for
the amount allegedly due on one of the two notes, which equaled $227,820.00, plus accrued
interest of $36,616.53, plus subsequently accruing interest.2
According to the Appellee, the FDIC assigned the 1991 Judgment to the Reliant Group
(“Reliant”) in June of 1997. Appellee further alleges that in November of 1998, it was assigned
Reliant’s interest in the Judgment. On May 17, 2000, Quantum filed a motion to be substituted as
party plaintiff in order to enforce the Judgment. That motion was granted by the district court.
On February 16, 2001, Quantum filed suit in the district court to revive the Judgment.
Although Mr. Zufle was served, Quantum could not locate Mrs. Zufle for service. It was later
established that the Zufles had divorced and that Mrs. Zufle had left the state.
2
Tim Zufle had been the Chief Executive Officer of SPI, which was not a party to the
consent judgment because it had declared bankruptcy.
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After Mr. Zufle filed an answer, Quantum moved for summary judgment. Mr. Zufle
opposed the motion on the grounds that the judgment had prescribed, or, alternatively, that
Quantum did not have the legal right to recover the judgment because it had not acquired
anything more than a promissory note. Judge Sear granted Quantum’s motion for summary
judgment and revived the 1991 Judgment, finding that, based on the language of the transfer and
assignment documents, the FDIC had assigned its interest in the 1991 Judgment to Reliant, and
that Reliant had subsequently assigned that same Judgment interest to Quantum.
Mr. Zuffle then attempted to appeal the district court’s decision to this Court. However,
that appeal was dismissed for lack of jurisdiction, given that judgment had not yet been rendered
against Mrs. Zufle.
At around the same time, Mrs. Zufle was located in Texas. After being served, Mrs. Zufle
filed a motion to dismiss, raising essentially the same defenses as had her ex-husband. After the
motion was denied, Mrs. Zufle filed her answer and Quantum moved for summary judgment. The
matter was transferred to Judge Sarah Vance, who granted Quantum’s motion and entered a final
judgment which revived the 1991 Judgment as to both defendants, who have since filed timely
notice of their appeal.
II. DISCUSSION
On appeal, Appellants argue that a clear and unambiguous interpretation of the relevant
documents establishes that the 1991 Judgment was never transferred from its original holder, the
FDIC. As a result, the Appellants aver that Quantum did not have standing to revive the 1991
Judgment. In addition, because the ten-year period for reviving a judgment under Louisiana law
has now expired, Appellants claim that any further attempt to revive the judgment should be
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barred.3
A. Standard of Review
We review a grant of summary judgment de novo, applying the same standards as the
district court. Performance Autoplex II Ltd. v. Mid-Continent Casualty Co., 322 F.3d 847, 853
(5th Cir. 2003). Summary judgment should be granted if there is no genuine issue of material fact
for trial and the moving party is entitled to judgment as a matter of law. Id.Appellants did not offer any summary judgment evidence of their own in response to
Quantum’s motion. Rather, their position was –and continues to be– that the documents relating
to the alleged transfer of the 1991 Judgment speak for themselves, and that said documents
demonstrate that Quantum was not assigned any interest in the 1991 Judgment. Resolution of this
appeal therefore turns on whether or not the summary judgment evidence submitted by Quantum
demonstrates that it was the owner of the 1991 Judgment sought to be revived.
B. Applicability of New York Law
The 1997 Assignment and Bill of Sale between the FDIC and Reliant expressly provides
that it shall be governed by and construed in accordance with New York law. The district court
correctly determined, and the parties agree, that New York law will govern the interpretation of
3
The district court found, and we agree, that Quantum filed its complaint before the
judgment prescribed. See LA. CIV. CODE ANN. art. 3501 (West 2002); LA. CODE CIV. PROC.
ANN. art. 2031 (West 2002). Thus, Louisiana law regarding the prescription of judgments would
only be pertinent to this appeal if, for some reason, it is determined that Quantum was not the
proper party to attempt to revive the 1991 Judgment. See LA. CODE CIV. PROC. ANN. art. 2031
(West 2002)(requiring that a party have an interest in the judgment at issue in order to bring an
action to revive it). For the reasons set out in the following portions of this opinion, we have
determined that Quantum was an “interested party” in relation to the 1991 Judgment, and,
therefore, the application of Louisiana law pertaining to the prescription of judgments is of no
consequence.
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the 1997 documents. See N.Y. Oblig. Law § 5-1401. Because the resolution of this appeal hinges,
for the most part, on the proper interpretation of the 1997 transfer documents, when appropriate
we will turn to the laws of New York for guidance.
C. Appellants’ Arguments Regarding the Alleged Transfer of the 1991 Judgment
The crux of the Appellants’ appeal is their argument that the documents presented by
Quantum show that the attempted initial transfer of the 1991 Judgment from the FDIC to Reliant
was unsuccessful, and that, therefore, Reliant could not and did not transfer the Judgment to its
alleged successor, Quantum.
As previously noted, the initial –alleged– transfer of the 1991 Judgment took place in
1997. The 1997 Assignment and Bill of Sale identifies and references the partnership agreement
used to create Reliant, and incorporates certain definitions found in that earlier agreement. Exhibit
“A” of the 1997 Assignment and Bill of Sale between the FDIC and Reliant refers to an asset
labeled “Silent Partner, Inc.” The book value of the asset is listed as $264,436.70.
Appellants argue that, because the documents detailing the transfer of various assets from
the FDIC to Reliant refer only to “Silent Partner, Inc.,” all that was intended to be transferred was
the underlying promissory note and not the Judgment. In support of this argument, Appellants
point out that there is no judgment against Silent Partner, Inc. –because it was in bankruptcy– and
further note that there is no mention of either the Zufles or the 1991 Judgment in the 1997
Agreement. In other words, Appellants allege that the only thing transferred from the FDIC to
Reliant was an interest in a now defunct promissory note.
Quantum counters that the FDIC’s assignment of the Judgment to Reliant, and Reliant’s
subsequent assignment of the same to Quantum, were both properly documented. More
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specifically, Quantum asserts that the transfer documents reflect the parties’ intent to transfer the
“asset” known as the “Silent Partner” asset, which included the promissory note executed by
Silent Partner and the consent judgment rendered against the Zufles based on that note. Put
another way, Quantum’s position is that use of the term “Silent Partner” when referring to the
asset at issue was merely a label for the bundle of interests related to the promissory note, which
included the interest in the 1991 Judgment.
(1.) The 1997 Transaction. According to the Assignment and Bill of Sale between the
FDIC and Reliant, the 1997 transaction included the transfer of “all of the Seller’s right, title and
interest, if any, in and to the ‘JDC’ and ‘Small Balance Assets’ (as such terms are defined in the
Contribution Agreement) listed on Exhibit A attached hereto.”
The Contribution Agreement incorporates the definitions of the terms “JDC” and “Small
Balance Assets” used in the Agreement of Limited Partnership (“Partnership Agreement”), which
created Reliant. The Partnership Agreement defines the term “JDC” as, “Collectively, Judgments,
Deficiencies and Charge Offs.” Furthermore, the term “Judgment” is defined as, “The right to
receive a sum of money in payment of an obligation created by a court order, writ or decree which
is evidenced by an official certificate of such court.” The term “Assets” means “Any JDCs and
Small-Balance Assets which are to be contributed to the Partnership by the Limited Partner on the
Closing Date pursuant to the Contribution Agreement and any JDCs and Small-Balance Assets
which may be contributed to the Partnership by the Limited Partner subsequent to the Closing
Date pursuant to the Contribution Agreement.” Additionally, Small-Balance Assets” are “The
right to receive from any Person a sum of money in payment of an obligation of such Person
(whether secured in whole or in part by collateral other than real estate or unsecured), which right
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may not be characterized as a Judgment, Deficiency or Charge-off.”
The district court found that the asset at issue fell within the “JDC” category. The district
court also determined that the reference to “Silent Partner” in the 1997 Agreement was not
intended to limit the nature of the transfer from the FDIC to Reliant, but rather was “merely a
descriptive term used to describe the asset, which by 1997 unequivocally consisted of a judgment
against the endorsers of the original Silent Partner note.” F.D.I.C. v. Zufle, 2001 WL 1602139, at
*2 (E.D.La. Dec 13, 2001). We agree with the district court’s conclusion.
(2.) New York Law. New York law pertaining to the interpretation of contracts is similar
to that of most states, including Louisiana. One New York court has commented that:
The interpretation of a written agreement is within the province of the court and, if the
language of the agreement is free from ambiguity, its meaning may be determined as a
matter of law on the basis of the writing alone without resort to extrinsic evidence.
Hickman v. Saunders, 228 A.D.2d 559, 560, 645 N.Y.S.2d 49, 50 (N.Y. Sup. Ct. 1996). New
York law also clarifies that “[a] contract is not deemed ambiguous unless ‘it is reasonably
susceptible [to] more than one interpretation, and a court makes this determination by reference
to the contract alone.’” Banque Arabe v. Maryland National Bank, 57 F.3d 146, 152 (2d Cir.
1995)(quoting Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525, 527 (2d Cir. 1990)).
Although no particular form or language is required to create an assignment under New
York law, there is a need for some “act or words” that manifest an intent to assign. Property
Asset Management, Inc. v. Chicago Title Insurance Co., Inc., 173 F.3d 84, 87 (2d Cir. 1999); see
also Miller v. Wells Fargo Bank International Corp., 540 F.2d 548, 557 (2d Cir. 1976)(“Any act
or words are sufficient which show an intention of transferring the chose in action to the assignee,
when the assignor is divested of all control and right to cause of action and the assignee is entitled
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to control it and receive its fruits”).
For purposes of determining whether the contract is ambiguous, we ignore –for the
moment– the fact that each party espouses a different interpretation of its terms and look solely to
the contract itself.
According to the terms of the 1997 Assignment and Bill of Sale, the FDIC transferred to
Reliant, “all of the [FDIC’s] right, title and interest, if any, in and to the ‘JDC’ and ‘Small Balance
Assets’ . . . listed on Exhibit A.” The chosen language would seem, clearly, to suggest an
intention to transfer any and all interests related to a given asset. As previously mentioned, the
relevant “asset” referenced in the 1997 Agreement is listed under the asset name “Silent Partner
Inc” and is listed as having a book value of $ 264,436.53.4
As the district court noted, the agreement between the FDIC and Reliant does not
expressly limit itself to the promissory note, nor does it contain an express reservation of the 1991
Judgment in favor of the FDIC. In the case of In re 24-52 44th Street, Long Island City, 26
N.Y.S. 2d 265 (N.Y. Sup. Ct. 1941), the assignees of a bond sought to collect from the bond’s
guarantors. The guarantors argued that when the bond had been assigned without an express
statement that the guarantee was included in the assignment, the bond became divested of the
guarantee. The court disagreed, noting that under New York law, the assignment of a principal
obligation generally carries with it all related rights, even those not referred to in the assignment.
The assignees’ argument was further strengthened by the fact that the assignor had not reserved
its rights against the guarantor.
According to New York law, any act or words are sufficient to accomplish an assignment
4
We note that the book value of the asset is the same amount as the 1991 Judgment.
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when the assignor is divested of all control and right to a cause of action and the assignee is
entitled to control it and receive its fruits. Miller, 540 F.2d at 557. We find that the 1997 transfer
documents are unambiguous and demonstrate a clear intent to divest the FDIC of any control or
rights related to the Silent Partner asset in favor of Reliant.
Furthermore, because the FDIC’s intent, as made manifest by the contractual language,
was to transfer any and all interests related to SPI, the 1991 Judgment would seem to have
necessarily been included in the transfer. The FDIC clearly owned the 1991 Judgment at the time
of the transfer, and if, as seems clear by the contract’s terms, the FDIC intended to divest itself of
all control and interest in the right to its cause of action, then the assignment to Reliant was
proper and enforceable against the Zufles. See Miller, 540 F.2d at 557; Coffey v. Roe, 277 N.Y.S.
2d 743, 52 Misc. 2d 1003 (N.Y. Sup. Ct. 1967).
Given the preceding discussion, we find that the 1997 transfer documents are
unambiguous and manifest an intent to assign all of the FDIC’s interests and rights related to the
SPI asset, including the right to enforce the 1991 Judgment, to Reliant. See Property Asset
Management, Inc., 173 F.3d at 87; In re 24-52 44th Street, 26 N.Y.S. 2d at 270.
We add that our decision is also consistent with the general trend in New York toward adopting
principles of free assignability of claims. Banque Arabe, 57 F.3d at 153.
(3.) The 1998 Transaction. Appellants’ main contention, as previously noted, is that
Quantum could have, at best, purchased from Reliant only what Reliant had purchased from the
FDIC. Although we have rejected appellants’ argument that the only interest purchased by Reliant
was a promissory note, for the sake of clarity we turn, briefly, to examine the nature of the 1998
transfer between Reliant and Quantum.
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In their briefs, Appellants suggest that the 1998 transfer documents refer to a “judgment”
against SPI, which, according to appellants, never existed. While it is true, as far as this Court can
tell, that no judgment against SPI exists, any argument by Appellants that the transfer from
Reliant to Quantum did not entail the 1991 Judgment due to the language used in the 1998
transfer documents is without merit.
According to the Bill of Sale and Assignment of Assets, the 1998 transaction assigned “all
of [Reliant’s] right, title and interest in and to each of the Assets identified on the computer disk
labeled Exhibit A.” The record includes a print out from the disk, which references an asset
labeled “Silent Partner, Inc.” The transfer balance is listed as $264,436.53, which is both the
amount of the 1991 Judgment as well as the value attributed to the asset referenced in the initial
transfer from the FDIC to Reliant. Furthermore, the print out lists the asset “type” as a
“judgment.” To suggest, as appellants appear to do, that this reference to a judgment in the exact
amount as the 1991 Judgment refers to some non-existent judgment against SPI is untenable
–particularly given our conclusion that the 1997 transaction included the 1991 Judgment.5
(4.) Propriety of Affidavits Showing the Parties’ Intent. Appellants also argue that
affidavits from representatives of the FDIC and Quantum, which were submitted in an attempt to
clarify the parties’ “intent,” were improper, and should not have been relied upon by the district
court. See Allen v. West-Point Pepperwill, Inc., 933 F. Supp. 261 (S.D.N.Y. 1996), reversed on
other grounds, Krumme v. WestPoint Stevens, Inc., 238 F.3d 133 (2d Cir. 2000).
5
Although our determination regarding the intent of the parties to the 1997 transaction
was based on the language of the documents and New York law, we note, only in passing, that
use of the label “judgment” to refer to the asset in the 1998 transaction seems to strengthen the
appellee’s claim –and our conclusion– that the FDIC and Reliant understood the 1997 transaction
to include the 1991 Judgment.
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According to appellants, because the transfer documents were unambiguous, no extrinsic
evidence should have been allowed to clarify the parties’ contractual intent. Because we have
determined that, standing alone, the transfer documents indicated intent to transfer the 1991
Judgment, a determination regarding the propriety of the affidavits is unnecessary. Furthermore, it
should be noted that the district court’s decision did not depend on said extrinsic evidence.
III. CONCLUSION
For the foregoing reasons, the decision of the district court rendering summary judgment
in favor of Quantum and reviving the 1991 Judgment as to Appellants Tim Tyler Zufle and Diane
Reed Zufle is AFFIRMED.
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