Playboy Enterprises, Inc. v. Javier Sanchez-Campuz

Case: 11-41006 Document: 00512164497 Page: 1 Date Filed: 03/05/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 5, 2013
No. 11-41006 Lyle W. Cayce
Clerk
PLAYBOY ENTERPRISES, INCORPORATED,
Plaintiff–Appellee,
v.
JAVIER SANCHEZ-CAMPUZANO, Individually and as agent of Grupo Siete
S.A., Incorporated; SPORTS TIME, INCORPORATED; GROUP SEVEN
COMMUNICATIONS,
Defendants–Appellants.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 7:01-CV-226
Before REAVLEY, PRADO, and OWEN, Circuit Judges.
PER CURIAM:*
This appeal involves the declaration of rights and enforcement of a
guaranty agreement. Appellee, Playboy Enterprises Inc. (PEI), brought suit in
district court to enforce a guaranty agreement against Appellants, Javier
Sanchez-Campuzano (Sanchez), Sports Time, Inc., and Group Seven
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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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Communications. The district court granted summary judgment, holding that
the agreement is enforceable and Sanchez is personally liable. We affirm.
I
PEI sought a declaration in the district court that Sanchez, Grupo Siete
S.A., Grupo Siete S.A. de C.V., Grupo Siete Comunicaciones, S.A. de C.V., Paul
Siegel, Sports Time, Inc, and Group Seven Communications were required to
guaranty the performance of obligations under a License Agreement between
PEI and Editorial Caballero, S.A. de C.V. (EC). The district court dismissed
Grupo Siete S.A., Grupo Siete S.A. de C.V., Grupo Siete Comunicaciones, S.A.
de C.V., and Paul Siegel. No one has appealed these dismissals. The only
remaining Appellants are Sanchez, Sports Time, Inc., and Group Seven
Communications.
PEI entered into a License Agreement with EC and Grupo Siete
International, Inc. (GSI) to publish a Spanish language version of Playboy
magazine in Mexico and to distribute it in Mexico and the United States.
Sanchez is the owner and president of EC. Before entering into the License
Agreement, PEI required a Guaranty Agreement from EC’s parent company,
Grupo Siete S.A., and GSI’s parent company, Sports Time, Inc. Both parties
obliged.
The Guaranty Agreement is in letter form, addressed to PEI, and states:
In order to induce you to enter into a License Agreement (a copy of
which is annexed hereto) between yourselves as licensor and
Editorial Caballero, S.A. (“Caballero”) as licensee, for a Mexican
language edition of PLAYBOY Magazine (the “Foreign Edition”), the
undersigneds hereby guarantee, without any limitation of any kind,
the performance of Caballero of all of the terms and conditions of
said License Agreement and, therefore, undertake to be responsible
to you, jointly and severally with Caballero for all liabilities of
Caballero arising out of its obligations under or in connection with
said License Agreement or by reason of any breach thereof; and
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This guarantee and agreement shall remain in full force and may be
called upon by you without your being required to commence any
proceedings of any nature against Caballero.
The letter was dated September 10, 1996 and was signed on November 7, 1996
by Sanchez as president of “Grupo Siete S.A., Inc.” and by Siegel as chairman of
“Sports Time, Inc.”
In 2001, PEI sued Appellants to enforce the Guaranty Agreement and
moved for partial summary judgment and declaratory relief. The district court
abated the action pending resolution of an appeal in Texas state court
concerning the rights and obligations of PEI, EC, and GSI under the License
Agreement. After two trials, the state court action resulted in a final judgment
in which the jury returned a verdict relieving PEI of liability and finding that
EC had breached the License Agreement and had committed fraud against PEI.
After final judgment was entered in state court, the district court granted
PEI’s motion for partial summary judgment and declaratory relief, holding that
the Guaranty Agreement is an absolute guaranty under which Sanchez, Sports
Time, Inc., and/or Group Seven Communications are required to perform or
ensure performance of EC and to jointly and severally indemnify PEI for all
liabilities in connection with EC’s breach of the License Agreement. Appellants
appeal the district court’s judgment on multiple grounds.
II
The district court construed the Guaranty Agreement as an absolute
guaranty and held that Appellants were responsible for EC’s liabilities to PEI
arising under or in connection with EC’s breach of the License Agreement.
Appellants claim that summary judgment was improper because both the
Guaranty Agreement and License Agreement are ambiguous in multiple ways.
Appellants also rely on several contract defenses to claim that the underlying
3
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License Agreement is unenforceable, thus rendering the Guaranty Agreement
a nullity.
A
The Guaranty Agreement references a license agreement and states that
a copy of that agreement is attached to the Guaranty Agreement. However,
nothing is attached to the original or to any authentic copy of the Guaranty
Agreement. Appellants claim that this, along with conflicting dates within the
Guaranty Agreement and the License Agreement relied upon by PEI, creates an
ambiguity as to what document or iteration of the License Agreement was
actually guaranteed.
Although the type-written dates are different on the agreements—the
Guaranty Agreement is dated September 10, 1996, and the License Agreement
is dated November 1, 1996—as noted by the district court, the uncontroverted
evidence reveals that Sanchez signed the License Agreement on November 7,
1996 and that Sanchez and Siegel signed the Guaranty Agreement in one
another’s presence on the same date.
“The essential terms of a guaranty agreement are (1) the parties involved,
(2) a manifestation of intent to guaranty the obligation, and (3) a description of
the obligation being guaranteed.”1 The description of the obligation does not
have to include all of the terms of the underlying agreement; as long as the
underlying agreement is identifiable, the guaranty is enforceable.2 Here, the
Guaranty Agreement identifies the licensor and licensee to the underlying
agreement, identifies the parties acting as guarantors, manifests an intent to
1
Material P’ships, Inc. v. Ventura, 102 S.W.3d 252, 261 (Tex. App.—Houston [14th
Dist.] 2003, pet. denied).
2
See id. (holding that a guaranty agreement describing the obligation as “all
outstandings and liabilities of [debtor] with [creditor] as well as future shipments” identified
the essential terms of the underlying agreement).
4
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guaranty the License Agreement, and describes the subject of the License
Agreement. Additionally, throughout the litigation, the parties relied on the
same License Agreement and offered no facts to suggest that there could be a
different agreement fitting the same description. Thus, notwithstanding
differing dates and the failure to attach the License Agreement, no ambiguity
exists as to what agreement was being guaranteed.
B
Appellants also argue that the Guaranty Agreement is ambiguous because
the License Agreement includes GSI, but the Guaranty Agreement only seeks
to enforce the License Agreement against EC, leaving EC susceptible to liability
for GSI’s actions. Similarly, Appellants claim that because PEI argued in the
state court trial that GSI breached the License Agreement, there is a fact issue
as to whether the Guaranty Agreement has even been triggered by EC.
The district court correctly rejected both of these arguments. At no time
has PEI attempted to enforce the Guaranty Agreement for anything other than
EC’s obligations and liabilities to PEI. Consequently, the district court’s order
was only directed at enforcement of the License Agreement against EC, and the
district court held it need not address any alleged ambiguity concerning GSI.
PEI has not mentioned the liabilities of GSI nor does the Guaranty Agreement
require that GSI breach anything.
We also agree with the district court that the argument that the Guaranty
Agreement has not been triggered is without merit. The agreement guarantees
“the performance of Caballero [EC] of all of the terms and conditions of said
License Agreement.” Appellants admitted before the district court that EC
breached the License Agreement. Thus, by Appellants’ own admission, there is
no question that the Guaranty Agreement has been triggered.
C
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The Guaranty Agreement states it is “without limitation of any kind” and
“may be called upon by [PEI] without . . . being required to commence any
proceedings of any nature against [EC].” The district court held that the
language of the Guaranty Agreement “unambiguously created an absolute or
unconditional guaranty under Texas law . . . contingent upon EC’s default under
the License Agreement and not upon any other condition.” We agree.
When a guaranty is unqualified and expresses no conditions to trigger the
payment or performance, it is an “absolute guaranty.”3 The Guaranty
Agreement fits this description—it negates any limitations and specifically
states that it may be called upon without having to take any actions against EC.
As correctly stated by the district court, the general rule is that an absolute
guaranty imposes liability on the guarantor even if the underlying obligation
cannot be enforced against the principal.4 Indeed, “in [the] case of an absolute
guaranty, no demand upon the principal debtor is necessary . . . and the Breach
of the principal’s contract to pay the sum promised ipso facto imposes upon the
guarantor a complete liability.”5
This interpretation is significant for several reasons. First, as discussed
above, Appellants claim that PEI’s attempt to enforce the License Agreement
against GSI in the state court trial bars PEI’s enforcement of the Guaranty
Agreement against Appellants. Appellants have cited no support for such a
proposition, and the Guaranty Agreement states that PEI may enforce the
performance of EC against Appellants without commencing any actions against
3
Universal Metals & Mach., Inc. v. Bohart, 539 S.W.2d 874, 877 (Tex. 1976).
4
See id. (absolute guarantors of promissory note were liable to holder even though the
signature of the purported maker was forged); Houston Sash & Door Co., Inc. v. Heaner, 577
S.W.2d 217, 222 (Tex. 1979) (guarantor could not interpose usury defense of principal debtor);
see also U.S. v. Little Joe Trawlers, Inc., 776 F.2d 1249, 1252 (5th Cir. 1985).
5
Universal Metals & Mach., Inc., 539 S.W.2d at 878 (quoting El Paso Bank & Trust
Co. v. First State Bank, 202 S.W. 522, 524 (Tex. Civ. App.—El Paso 1918, no writ)).
6
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EC. Second, Appellants rely on multiple contract defenses to the License
Agreement to argue that the Guaranty Agreement is unenforceable. However,
even if there are contract defenses that EC may assert, they are not available to
Appellants as absolute guarantors.6
Appellants reject this interpretation, vaguely claiming that the language
of the Guaranty Agreement is not clearly unconditional and is subject to
multiple defenses. However, they fail to discuss any language to support this
position, make no attempt to articulate their own interpretation, and cite no
contrary case law. The agreement created an absolute guaranty, rendering the
underlying contract defenses that EC may assert unavailable to Appellants.
D
Appellants also claim that a supposed “Renegotiated Payment Plan
Agreement” changed the terms of the License Agreement by extending payment
dates, thus discharging any guarantors from liability. In Texas, if the creditor
and principal debtor vary the terms of their contract in any material degree, a
new contract has been formed upon which the guarantor is not obligated or
bound.7 Defenses based on changes to the underlying obligation and thus
changes to the guaranty agreement are termed suretyship defenses.8 “A
suretyship defense is an affirmative defense, and the burden of proving a change
rests on the guarantor.”9 “The suretyship defenses arise by operation of law, and
absent an express waiver, even an absolute and unconditional guarantor may
6
Id.; see also Farmers & Merchs. State Bank of Krum v. Reece Supply Co., 79 S.W.3d
615, 619 (Tex. App.—Eastland 2002, pet. denied) (holding absolute guarantor could not assert
defenses of offset and failure of consideration for the underlying contract).
7
McKnight v. Va. Mirror Co., 463 S.W.2d 428, 430 (Tex. 1971).
8
U.S. v. Vahlco Corp., 800 F.2d 462, 466 (5th Cir. 1986).
9
Id. (citing Crimmins v. Lowry, 691 S.W.2d 582, 585 (Tex. 1985)).
7
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assert them.”10 Whether a guaranty is unconditional “has nothing to do with
whether the guarantor waives asserting the suretyship defenses; the two are
simply not related.”11
On appeal, Appellants merely state that “[i]nasmuch as . . . PEI
renegotiated the terms and conditions of the License Agreement when it entered
into the Renegotiated Payment Plan Agreement, this material change in the
terms of the so-called guarantee was sufficient to release and discharge any
guarantors from any liability or other responsibility as a matter of law.”
Appellants fail to articulate why the parties agreeing to pay amounts that were
already due under the contract is a material change. As the district court stated,
“broad and conclusory allegations that PEI materially changed the terms of the
License Agreement by entering into the Renegotiated Payment Plan Agreement
do not defeat summary judgment.”
III
Sanchez claims that the district court should have dismissed PEI’s claims
against him because he was never personally served. Sanchez admits that he
received service, but claims that such service violated Rule 4 of the Federal
Rules of Civil Procedure, the Inter-American Convention on the Service of
Documents, the Hague Convention, the Foreign Sovereign Immunities Act, and
Mexican law and sovereignty. Rather than address the substance of his service
argument, Sanchez merely states, “[t]his issue [has] been extensively briefed
before the Trial Court . . . . Such prior briefing is incorporated herein by
reference.” “A litigant’s failure to provide legal or factual analysis results in
10
Id. (citing Shepherd v. Eric Schuster Corp., 424 S.W.2d 693, 696-97 (Tex.
App.—Houston [14th Dist.] 1968, writ ref’d n.r.e.)).
11
Id.
8
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waiver.”12 By failing to address his arguments in the body of his brief, Sanchez
has waived his claim of insufficient service.
IV
Sanchez signed the Guaranty Agreement as, “Javier Sanchez, President,”
and the words “Grupo Siete S.A., Inc.” are printed above his signature. When
PEI filed suit in federal court to enforce the Guaranty Agreement against Grupo
Siete S.A., Inc., Sanchez responded that rather than being an actual entity,
Grupo Siete S.A., Inc. merely “refer[red] to a trademark, image, brand, or trade
name of the Sanchez family.” Sanchez then argued that he signed the Guaranty
Agreement in his capacity as President of EC, the company that had entered into
the License Agreement with PEI.
The district court found no genuine issue of material fact as to whether
Sanchez signed in his individual capacity because Sanchez admitted that Grupo
Siete S.A., Inc. does not exist, and, under Texas law, “an agent who executes a
contract on behalf of a fictitious principal is [] personally liable on the contract
for failure to accurately disclose his principal.”13 The district court also rejected
Sanchez’s argument that he signed on behalf of EC because such a construction
would render the Guaranty Agreement a nullity—treating the guarantor and the
borrower as the same entity would negate the purpose of a guaranty.
On appeal, Sanchez argues that the Guaranty Agreement cannot be
enforced against him individually because (1) Illinois law should have been
applied, and (2) there is a fact issue as to whether PEI knew that Sanchez signed
on behalf of EC.
12
N.W. Enters. Inc. v. City of Houston, 352 F.3d 162, 183 n.24 (5th Cir. 2003); see also
SEC v. Banner Fund Int’l, 211 F.3d 602, 613 (D.C. Cir. 2000) (holding that the defendant
waived an argument for improper service under the Hague Convention for inadequate briefing
on appeal).
13
Stacy v. Energy Mgmt. Grp. Ltd., Inc., 734 S.W.2d 149, 150 (Tex. App.—Houston [1st
Dist.] 1987, no writ).
9
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A
Before the district court, Sanchez briefed Texas law in his response to
PEI’s motion for summary judgment. In a single footnote, Sanchez stated that
“Inasmuch as the Licensing Agreement specifies that Illinois law applies, it
stands to reason that Illinois law also applies to the Guaranty Agreement.”
However, Sanchez argued in the same footnote that “the common law of both
Texas and Illinois follow the same general rules.” He then reiterated that Texas
and Illinois law are the same by citing a single Illinois case at the end of a string
citation of Texas cases. Now, on appeal, Sanchez argues that the district court
should have applied Illinois law to the Guaranty Agreement.
Recognizing that its jurisdiction was based on diversity, the district court
correctly held that it must apply the substantive law of the forum state in
determining the rights and obligations of the parties to the Guaranty
Agreement.14 Thus, Texas choice-of-law rules apply in this case.15 However,
before the court undergoes a choice-of-law analysis, it should first determine if
the laws are in conflict.16 If the result would be the same under the laws of
either jurisdiction, there is no need to resolve the choice-of-law question.17 This
is because Texas courts presume that other states’ laws are the same as its own;
thus, the party advocating the use of a different state’s laws bears the burden of
rebutting that presumption.18 Although federal courts must take judicial notice
of the laws of every state, Texas choice-of-law rules place the burden on Sanchez
14
Lockwood Corp. v. Black, 669 F.2d 324, 327 (5th Cir. 1982).
15
See id.
16
SAVA gumarska in kemijska industria d.d. v. Advanced Polymer Scis., Inc., 128
S.W.3d 304, 314 (Tex. App.—Dallas 2004, no pet.).
17
Id. (citing Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 419 (Tex. 1984)).
18
See Excess Underwriters at Lloyd’s, London v. Frank’s Casing Crew & Rental Tools,
Inc., 246 S.W.3d 42, 53 & n.5 (Tex. 2008).
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to show how the application of Illinois law compels a result different from what
Texas law would yield.19
With the exception of one footnote, Sanchez applied Texas law in his
briefing before the district court. More importantly, Sanchez agreed with PEI
in the district court that the applicable Illinois and Texas laws were the same.
Now, for the first time on appeal, Sanchez argues that the district court should
have applied Illinois law but still fails to brief a choice-of-law analysis, does not
discuss the differences between the two jurisdictions’ laws, and reiterates that
his position is also meritorious under Texas law.
Unlike Texas law, Illinois law would not rule out the possibility that
Sanchez signed the Guaranty Agreement on behalf of EC, the same party
against whom the License Agreement would be enforced.20 However, Sanchez
neither cites this applicable Illinois law, nor does he explain the differences
between the jurisdictions’ laws. Conversely, he claimed below that the results
would be the same under either jurisdiction’s laws.
Absent some “manifest injustice,” parties are generally bound by their
theories of law argued in the district court.21 “If ‘manifest injustice’ only meant
that application of another jurisdiction’s law would yield a different result, then
choice of law issues could always be raised first on appeal.”22 Sanchez has not
shown manifest injustice. Because Sanchez represented to the district court that
the applicable Texas and Illinois laws are the same, failed then and now to
undergo a choice-of-law analysis, and makes no effort to articulate the difference
19
Id.; see also Kucel v. Walter E. Heller, 813 F.2d 67, 74 (5th Cir. 1987).
20
See Addison State Bank v. Nat’l Maint. Mgmt., Inc., 529 N.E.2d 30, 32-33 (Ill. App.
Ct. 1988).
21
Am. Int’l Trading Corp. v. Petroleos Mexicanos, 835 F.2d 536, 540 (5th Cir. 1987).
22
Id.
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between the laws on appeal, Sanchez has waived his choice-of-law argument and
is bound by his position below.23
B
All parties agree that “Grupo Siete S.A., Inc.” is not an actual entity. PEI
asserts that this fact only strengthens its claim that Sanchez should be held
individually liable because, under Texas law, an agent that executes a contract
on behalf of a fictitious principal is personally liable on the contract. Conversely,
Sanchez argues that evidence was presented to the trial court that PEI knew
that Sanchez intended to sign the Guaranty Agreement on behalf of EC, not
Grupo Siete S.A., Inc. Sanchez points to the affidavit of his son, Marco Sanchez,
stating that “my dad . . . in my presence, told Robert O’Donnell, who, at the time,
was the Senior Vice-President of International Publishing for PEI, that they
were only agreeing to sign the Guaranty Agreement in their representative
capacities for EC and Sports Time, Inc.” The district court held that there was
no genuine issue of material fact regarding whether Sanchez identified the true
principal for whom he was acting when he signed the Guaranty Agreement.
1
Sanchez points to affidavits claiming that the parties knew he intended to
sign the agreement on behalf of EC, not in his individual capacity nor on behalf
of Grupo Siete S.A., Inc., and relies on a Texas Uniform Commercial Code (UCC)
provision that states “[w]ith respect to any other person, the representative is
liable on the instrument unless the representative proves that the original
parties did not intend the representative to be liable on the instrument.”24
Despite relying on this UCC provision, Sanchez concedes in his brief that “the
23
Fruge v. Amerisure Mut. Ins. Co., 663 F.3d 743, 747 (5th Cir. 2011) (per curiam)
(“Failure to raise an argument before the district court waives that argument, including an
argument for choice-of-law analysis.”).
24
Tex. Bus. & Com. Code Ann. § 3.402(b)(2) (West 2012).
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Guarantee Agreement is arguably not a negotiable instrument such that the
above-quoted UCC provision does not directly apply.” Indeed, “[a] guaranty
agreement is not a negotiable instrument, and is not governed by the provisions
of the Texas UCC.”25
Regardless, in Eubank v. First National Bank of Bellville,26 a Texas Court
of Appeals addressed the same argument Sanchez makes and squarely rejected
it. In Eubank, a bank brought suit against guarantors of a corporation’s note
and was granted summary judgment against the guarantors.27 On appeal, the
guarantors argued that they were not individually liable for the note because
they signed in their capacity as officers of the same corporation that secured the
note.28 The court rejected this as contrary to the definition of a guaranty
agreement, which is “an undertaking by a third person to another to answer for
the payment of a debt, incurred by a named person, in the event that the named
person fails to pay.”29 Further, it held that “a written collateral undertaking
given to secure a corporate debt will be rendered meaningless if the primary
debtor is found to be the only party liable under it.”30 The court also rejected the
guarantor’s evidence that the parties understood he was signing on behalf of the
corporation securing the note because one’s “subjective belief of the purpose of
the guaranty agreement cannot contradict the intent of the parties expressed
25
Material P’ships, Inc. v. Ventura, 102 S.W.3d 252, 260 (Tex. App.—Houston [14th
Dist.] 2003, pet. denied).
26
814 S.W.2d 130 (Tex. App.—Corpus Christi 1991, no pet.).
27
Eubank, 814 S.W.2d at 131.
28
Id. at 133.
29
Id. (citing Dann v. Team Bank, 788 S.W.2d 182, 183 (Tex. App.—Dallas 1990, no
writ)).
30
Id.
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within the four corners of the document.”31 Several other Texas courts of appeals
have come to the same conclusion.32
2
Finally, Sanchez claims that because the parties understood he was
signing on behalf of a non-existent entity, he is not personally liable. As the
district court articulated, Texas law clearly rejects this argument. “[A]n agent
does not escape liability by purporting to act for a nonexistent principal.”33
Instead, “one who contracts as an agent in the name of a nonexistent or fictitious
principal, or a principal without legal status or existence, renders himself
personally liable on the contracts so made.”34 “This is true even though the
agent has disclosed a principal but has failed to disclose the true principal.”35
Texas law rejects Sanchez’s signing the Guaranty Agreement on behalf of
the same entity signing the Licensing Agreement and provides no protection for
signing on behalf of a fictitious principal. Thus, the district court was correct to
hold Sanchez personally liable.
* * *
For the foregoing reasons, we AFFIRM the district court’s judgment.
31
Id. at 134.
32
See, e.g., Material P’ships, Inc. v. Ventura, 102 S.W.3d 252, 263-64 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied) (Frost, J., concurring); Am. Petrofina Co. of Tex.
v. Bryan, 519 S.W.2d 484, 486-87 (Tex. App.—El Paso 1975, no writ).
33
Carter v. Walton, 469 S.W.2d 462, 471 (Tex. App.—Corpus Christi 1971, writ ref’d
n.r.e.).
34
Id. (internal quotation marks omitted); see also Stacy v. Energy Mgmt. Grp. Ltd.,
Inc., 734 S.W.2d 149, 150 (Tex. App.—Houston [1st Dist.] 1987, no writ) (“[A]n agent who
executes a contract on behalf of a fictitious principal is also personally liable on the contract
for failure to accurately disclose his principal.”).
35
Sw. Bell Media, Inc. v. Trepper, 784 S.W.2d 68, 71 (Tex. App.—Dallas 1989, no writ).
14