“Quote Unquote”
January 8, 2016 § 1 Comment
“The woods were silent until the first squeak of cricket, followed by young frogs in the creek below and the rising drone of cicadas. He inhaled the heavy scent of summer earth, a loamy musk that settled over him like a caul. He was home.” — Chris Offutt in The Good Brother
“I fancied I could smell the Mississippi, which for me is southern America in a liquid form, signifying fried catfish, roasting ears dipped in butter, and watermelon in the cool of the evening, washed down with corn liquor and accompanied by the blues.” — Alan Lomax in The Land Where the Blues Began
“They have thundered past now and crashed silently on into the dusk; night has fully come. Yet he still sits at the study window, the room still dark behind him. The street lamp at the corner flickers and glares, so that the bitten shadows of the unwinded maples seem to toss faintly upon the August darkness. From a distance, quite faintly, he can hear the sonorous waves of massed voices from the church: a sound at once austere and rich, abject and proud, swelling and falling in the quiet summer darkness like a harmonic tide.” — William Faulkner in Light in August
Rules for Interpreting a Contract
January 5, 2016 § Leave a comment
Only yesterday we discussed the importance of clarity in drafting agreements for your clients. What the parties were thinking and believed at the time is of no consequence in interpreting a contract unless the court first finds that the language is ambiguous. Only then can the court delve into what went into and what was behind the drafting.
In the case of Gibbs v. Moody, decided December 1, 2015, the COA, by Judge Carlton, quoted at ¶ 13 from Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So.2d 748, 751-753 (Miss. 2003), to lay out the process the trial court is required to follow:
The primary purpose of all contract construction principles and methods is to determine and record the intent of the contracting parties. In contract construction cases[,] a court’s focus is upon the objective fact—the language of the contract. A reviewing court is concerned with what the contracting parties have said to each other, not some secret thought of one not communicated to the other. A reviewing court should seek the legal purpose and intent of the parties from an objective reading of the words employed in the contract to the exclusion of parol or extrinsic evidence. The reviewing court is not at liberty to infer intent contrary to that emanating from the text at issue.
This Court has set out a three-tiered approach to contract interpretation. Legal purpose or intent should first be sought in an objective reading of the words employed in the contract to the exclusion of parol or extrinsic evidence. First, the “four corners” test is applied, wherein the reviewing court looks to the language that the parties used in expressing their agreement. We must look to the “four corners” of the contract whenever possible to determine how to interpret it. When construing a contract, we will read the contract as a whole, so as to give effect to all of its clauses. Our concern is not nearly so much with what the parties may have intended, but with what they said, since the words employed are by far the best resource for ascertaining the intent and assigning meaning with fairness and accuracy. Thus, the courts are not at liberty to infer intent contrary to that emanating from the text at issue. On the other hand, if the contract is unclear or ambiguous, the court should attempt to harmonize the provisions in accord with the parties’ apparent intent. Only if the contract is unclear or ambiguous can a court go beyond the text to determine the parties’ true intent. The mere fact that the parties disagree about the meaning of a contract does not make the contract ambiguous as a matter of law.
Secondly, if the court is unable to translate a clear understanding of the parties’ intent, the court should apply the discretionary “canons” of contract construction. Where the language of an otherwise enforceable contract is subject to more than one fair reading, the reading applied will be the one most favorable to the non-drafting party. Finally, if the contract continues to evade clarity as to the parties’ intent, the court should consider extrinsic or parol evidence. It is only when the review of a contract reaches this point that prior negotiation, agreements[,] and conversations might be considered in determining the parties’ intentions in the construction of the contract. Of course, the so-called three-tiered process is not recognized as a rigid “step-by-step” process. Indeed, overlapping of steps is not inconceivable.
I reiterate: If you intend for your contract to say a particular thing, then include language that expressly says that particular thing. Just because you can draw an inference from your draftsmanship does not mean that a judge — or anyone else — will draw the same inference. And unless a judge rules that the language is ambiguous, the door to your thought processes and what you intended remains locked.
Say What You Mean and Mean What You Say
January 4, 2016 § 2 Comments
Lee and Leslie Voulters were divorced from each other in 2004 on the sole ground of irreconcilable differences. The divorce judgment incorporated their PSA, which provided that Lee would pay Leslie lump-sum alimony in the sum of $1.08 million at the rate of $10,000 a month until paid in full. He also agreed to maintain a policy of life insurance on his life with a benefit of $1.08 million, with Leslie as beneficiary.
When Leslie filed a contempt action in 2013 charging Lee with missing some lump-sum payments and with failing to provide proof of life insurance, Lee counterclaimed, asking the court to interpret the PSA that the purpose of the life insurance was to protect Lee’s payment of lump-sum alimony, and that the obligation would terminate when the lump-sum alimony was paid in full.
Spoiler alert: There is no provision in the PSA that links the life insurance requirement to the lump-sum-alimony requirement.
Here are the pertinent parts of the agreement:
LUMP SUM ALIMONY/SPOUSAL SUPPORT
Lee shall pay spousal support to Leslie, in the form of lump sum alimony, the total sum of $1,080,000.00, payable in monthly installments of $10,000.00 each for a period of nine years. Such payments for support shall be due and payable by automatic bank transfer from Lee’s checking or other account directly into Leslie’s checking account, commencing on the fifth day of April, 2004, and shall so continue for one hundred and seven consecutive months thereafter. Lee’s obligation to pay such support to Leslie shall be fully vested upon the entry of a Final Judgment of Divorce in this cause, and shall not be modifiable. Lee’s obligation to pay such support shall not terminate upon Leslie’s death or remarriage, nor shall it terminate upon Lee’s death. However, despite the conventional definition of lump sum alimony[,] . . . these payments by Lee to Leslie under this Agreement shall be taxable to Leslie, and deductible by Lee, for state and federal income tax purposes.
LIFE INSURANCE
Lee agrees to maintain life insurance on his own life in an amount not less than one million, eighty thousand dollars ($1,080,000.00), naming Leslie as primary beneficiary thereon. Proof of such insurance coverage shall be furnished to Leslie within fifteen (15) days following the date of execution of this Agreement. Furthermore, Lee shall direct his insurance carrier to provide coverage information to Leslie at least twice a year if requested by Leslie.
. . . .
EFFECT OF AGREEMENT
. . . .
The respective rights and obligations of the parties hereunder are deemed independent and may be enforced independently irrespective of any of the other rights and obligations set forth herein. This Agreement contains the entire understanding of the parties, who hereby acknowledge that there have been and are no representations, warranties, covenants, or understandings other than those expressly set forth herein.
RELEASE AND WAIVER
Subject to the provisions of this Agreement, each party has released and forever discharged . . . his or her heirs, legal representatives, Executors, Administrators, and assigns . . . from all causes of action, claims, right or demands . . . in law or in equity . . . except . . . causes of action for divorce or separation action now pending . . . . Each party releases, waives, and relinquishes any and all rights . . . to share in the estate of the other party upon the latter’s death . . . . (Emphasis added.)
Both parties offered testimony about their intent in negotiating the language into the agreement. Lee argued that the agreement was ambiguous because it had no termination date. Leslie argued that she negotiated it for support, which she needed because her estate was meager in comparison to Lee’s.
One question before I tell you how the chancellor ruled: do you see anywhere in that language quoted above any link between the life insurance obligation and the lump-sum alimony?
The chancellor ruled that the agreement was unambiguous, and that it did require Lee to maintain the life insurance regardless of the status of the lump-sum payments. Lee appealed.
On December 8, 2015, the COA affirmed in Voulters v. Voulters. The opinion by Judge Barnes includes a nice recitation of the law of contract interpretation, life insurance and insurable interests, and even attorneys fees in contempt actions and on appeal. I definitely commend it to your reading.
What I want to focus on here is this: If you want your agreement to mean a particular thing, then make sure there is language in it that says that particular thing. Remember that when the judge is called on to interpret a contract, she is bound by the language within the four corners of the document, and she may not accept parol evidence to vary or “explain what the parties meant” by those terms unless she first finds the agreement to be ambiguous. Just because Lee did not include a termination date for his life insurance obligation, that did not render the agreement ambiguous. It rendered instead the meaning that it had no termination date. In other words, it meant exactly what it did and did not say.
Be careful in your draftsmanship. Take time to make sure it says exactly what your client needs it to say. I think I was saved a hundred times or more by the simple practice of drafting the agreement and setting it aside for at least a day. I would then pick it up and read it afresh, often catching something that could be read two ways, or was simply not clear enough to do the job. Sometimes I would imagine myself to be another person altogether, looking at it as an outside observer. Anything to get an objective perspective.
Remember that some day someone entirely unconnected with the negotiations and the emotion of the divorce case is going to be reading your work with absolutely none of the knowledge that you had when you drafted it. It may be a judge, or it may be another lawyer having to represent your client, or — heaven forbid — a lawyer looking for a cause of action against you. That’s why it’s critical when you draft an agreement to give some thought and care to the words, phrases, and language construction that you use. That’s what your client is paying you for: to have absolutely no more trouble out of this matter after the final judgment is entered.
Reprise: Getting Out While the Getting’s Good
December 30, 2015 § Leave a comment
Reprise replays posts from the past that you might find useful today.
WHEN IT COMES TIME TO BAIL OUT
July 28, 2011 § 4 Comments
Sometimes it happens that you find it necessary to withdraw from representing a client. Maybe an ethical dilemma has reared its head. Or perhaps you and your client have developed irreconcilable differences. Or it could be that your client has not met the terms of the employment contract as to cooperation or payment or in some other way.
Once you have entered an appearance in a case, you are in it until the court lets you out. You may not avoid responsibility simply by not participating further. So when the need arises, how can you make an effective exit?
Uniform Chancery Court Rule (UCCR) 1.08 provides: “When an attorney makes an appearance for any party in an action, the attorney will not be allowed to withdraw as counsel for the party except upon written motion and after reasonable notice to the client and opposing counsel.”
In other words, it’s not good enough to get an agreed order signed by counsel opposite and present it to the judge. Nor is it adequate to get your client to sign off on an order.
Here is what you have to do, step by step:
- File a motion to withdraw. Set out a general statement of your reason without compromising the interest of your client in the litigation.
- File the motion and send a copy of it with certificate of service to opposing counsel and the client.
- Notice the motion for hearing.
- If your client and opposing counsel will sign an agreed order allowing you to withdraw, present it to the court for entry.
- If either your client or opposing counsel, or both, object, hold a hearing and ask the court to rule on your motion.
Several caveats:
- If the case is set for trial, most chancellors will allow you to withdraw only in the most urgent and exigent circumstances.
- No chancellor will allow you to withdraw if to do so will seriously prejudice your client.
- You may not withdraw in any probate matter unless there is an attorney who will substitute for you. UCCR 6.01 requires that the fiduciary retain an attorney, unless the fiduciary is a licensed attorney.
- Be general in stating a reason. Okay: “The undersigned attorney and the plaintiff have differences of opinion about handling this case that can not be resolved.” Not okay: “My client has filed three bar complaints against me and has retained counsel to sue me for malpractice, and I have reason to believe he is concealing assets from the court.”
- Don’t include any language in your order that absolves you of any responsibility for anything you did in the case, or approves everything you did; that’s overreaching. You may state that you are relieved of all further responsibility from and after the date of the order allowing withdrawal.
- Many chancellors will not permit you to withdraw if the only basis is non-payment of fees. Their rationale is that you took on a professional duty to represent the client when you entered an appearance, and that duty is higher than your desire to be paid.
Beam to MSSC
December 29, 2015 § 6 Comments
Chancellor Dawn Beam of Sumrall was appointed yesterday to fill Justice Randy Pierce’s soon-to-be-vacated seat on the MSSC. Her appointment is effective February 15, 2016. She will have to stand for election in November, 2016, as mentioned in yesterday’s post.
Beam’s appointment continues the role of a chancellor on the high court. Pierce was a chancellor before his appointment to the MSSC.
The Jackson Clarion-Ledger’s article on the appointment and Judge Beam’s background are at this link. (You may encounter paywalls and annoying pop-ups and “surveys”)
From this Blog’s perspective, Judge Beam’s appointment is a major positive, since she is a top-notch chancellor, and knowledge of chancery practice and equity sometimes seems a mystery to appellate judges.
I only wish chancellors were not just a token one-seat allocation on each court. A huge portion of Mississippi trial-court practice is in our chancery courts. It’s where most Mississippians experience their everyday contact with our courts — in custody, divorce, probate, property, contract, commitment, and many other issues — that are what chancellors deal with on a regular basis.
And yet, it’s the big-money PI lawyers — defense and plaintiff — and felony-level criminal lawyers, who claim “legitimacy” and elbow aside chancery at the appellate level. That does not exactly serve most Mississippians at the grass-roots level.
We need more chancery representation on the MSSC and COA. Only those who have practiced in chancery court really understand our procedures and how equity operates. So I applaud Judge Beam’s appointment. She will do a superb job on the third floor of the Gartin Justice Building. I only wish we had one more — or a couple more — to give her a little more support.
Maxwell to MSSC
December 28, 2015 § 1 Comment
Reshaping of the MSSC is continuing with the appointment of Judge Jimmy Maxwell of the COA to the high court seat being vacated by Justice David Chandler. The appointment to the North Mississippi District seat, is effective January 1, 2016. Maxwell will have to run in a judicial election in November, 2016.
Chandler’s resignation earlier this month, to assume leadership of the state’s troubled foster-care program, created the vacancy to which Maxwell is appointed. Only the timing is surprising. It was widely known that Justice Chandler did not intend to run again when his term ended in 2016. Multiple sources said that Maxwell intended to run for Chandler’s seat if he did not run again.
One soon-to-be-vacant MSSC seat remains to be filled. Justice Randy Pierce is stepping aside to take over leadership of the Mississippi Judicial College, effective February 1, 2016.
Maxwell’s appointment will in turn mean a vacancy on the COA that will have to be filled from District One, which is the northeastern area of the state.
The Jackson Clarion-Ledger’s article on Judge Maxwell’s appointment is at this link. (You might encounter a paywall and annoyances like pop-ups and “surveys”)
A previous post on changes to the MSSC is here.
All of the 2015 judicial appointees, at both appellate and trial levels, will have to stand for election in 2016. This latest round of appointments, along with previous appointments and other appellate races that are expected to be contested, will make for an interesting judicial election cycle in 2016.
December 21, 2015 § 4 Comments
Taking a holiday break.
I wish all of you a Merry Christmas, Happy Hannukah, Joyous Kwanzaa, or just a few days off work.
Next post December 28, 2015.
How Will You Measure Your Life?
December 18, 2015 § 2 Comments
Lawyers are driven to accomplish. We are ambitious and goal-driven. Sometimes in pursuing lofty goals, though, we can lose sight of the opportunities we have to make a difference. The importance of making a difference in your own little slice of the universe is something about which I have posted here previously.
Here is a Ted Talk with Harvard Business School Professor Clay Christensen that offers some insight into what really counts and what will ultimately be the measure of your life.
Thanks to Attorney Michael Grace
Equity Shines Through
December 16, 2015 § 9 Comments
Just when you thought equity was moribund (okay, I confess that it’s more me than you), along comes a case where the appellate court looks over the masterful equitable remedy crafted by a thoughtful chancellor and says, “Job well done.”
That’s what happened in the MSSC case Scafidi, et al. v. Hille, decided December 10, 2015, which involved division of the parties’ interests in several businesses inherited jointly by siblings Gerald Scafidi and Jo Ann Scafidi Hille. The facts are complicated, and the proceedings were convoluted, but the gist of it is that the chancellor ordered what amounted to an equitable distribution of the corporations and real property so as to divide them fairly between the brother and sister. Gerald appealed raising many issues that were addressed in detail in the 44-page opinion by Justice Waller. For our purposes, though, we will look at how the court dealt with Gerald’s argument that the relief granted by the chancellor was improper:
¶60. We now turn to the relief granted by the chancellor. In an action to judicially dissolve a corporation, a chancellor does not have to order a dissolution, even if grounds such as oppression or deadlock are met. This is because the general view in Mississippi is that “[d]issolution is an extraordinary remedy to be sparingly administered in exceptional cases only.” Capitol Toyota, Inc. v. Gervin, 381 So. 2d 1038, 1039 (Miss. 1980). However, “if the strife among the participants has been so long and bitter that the former relationships of congeniality and trust cannot be re-established [like Jo Ann and Gerald’s case], there is little left that an unhappy shareholder can do except . . . bring about the dissolution of the business.” F.H. O’Neal & R. Thompson, O’Neal’s Close Corporations § 9.04 (3d ed. 1971). “But the more common relief in modern cases . . . is to provide relief alternative to dissolution.” Id. at § 9.25. Mississippi’s corporate dissolution statute states that “[n]othing contained in this section shall diminish the inherent equity powers of the court to fashion alternative remedies to judicial dissolution.” Miss. Code Ann. § 79-4-14.34 (i) (emphasis added).
¶61. Contrary to Gerald’s assertion, the chancellor did not dissolve the corporations. Instead, he fashioned an alternative remedy to this problem. The chancellor found that the source of funds for the $180,000 Gerald used to purchase the minority shareholders’ interest in the Trailer Park and the Restaurant corporations came from the corporations themselves. Those shares were purchased with funds equitably owned by both Jo Ann and Gerald. So Gerald’s purchase was for the benefit of both parties. The chancellor then disregarded the shares purchased by Gerald and considered Jo Ann and Gerald to be equal shareholders in the Restaurant and the Trailer Park. After equalizing their interests in the corporations, the chancellor ordered that the property lines be modified by survey to reflect that Jo Ann and Gerald owned fifty-percent of the land upon which the Trailer Park and the Campground were situated.
¶62. The Amended Final Judgment from which Gerald appeals states “that the Court divides, partites, and equitably separates the parties by granting each full ownership of separate companies . . . .” He then granted Jo Ann full ownership of the Trailer Park, and Gerald full ownership of the Campground. The chancellor ordered “that each of the parties is to execute the necessary documents, including deeds, bills of sale and stock certificates to accomplish the directions of the court.” Nowhere in the Amended Final Judgment does the chancellor mention “dissolution.” The chancellor did quite the opposite when he fashioned an alternative remedy to dissolution, which he had full authority to do under Section 79-4-14.34 (i) of the Mississippi Code.
¶63. Since the chancellor did not order a direct dissolution of the corporations, Gerald’s argument that this “equitable distribution” method violates the method provided by the Mississippi Legislature in Section 79-4-14.05 to dissolve a corporation and distribute its assets among its shareholders according to their interests is without merit.
¶64. We cannot locate any precedent in which a chancellor has granted this exact, or even similar, relief. However, we note that “[i]t is not necessary that some exact precedent be found for extending relief in a given situation.” Griffith’s Mississippi Chancery Practice § 35 (2000 ed.) (citing Miller v. Doxey, 1 Miss. 329, 333 (1829)). If a certain form of “relief is clearly requisite and a practical remedy may be applied, such remedy is not to be denied because that remedy has never been applied in just that manner to that exact state of case.” Id. The question for this Court to decide, then, is whether the relief granted here is an appropriate remedy under Mississippi Code Section 79-4-14.34(i), which states “[n]othing contained in this section shall diminish the inherent equity powers of the court to fashion alternative remedies to judicial dissolution.” Although little caselaw addresses Mississippi’s alternative-remedy provision, substantial precedent supports the chancellor’s broad powers to provide an equitable solution in cases such as this. See, e.g., In re Hardin, 158 So. 3d at 346.
¶65. Other jurisdictions offer guidance as to appropriate remedies to resolve disputes among dissenting shareholders in a close corporation. Some courts have resorted to remedies listed by statute, while others have fashioned remedies not specifically mentioned in a statute. O’Neal’s Close Corporations at § 9.35 …
After reviewing some of those statutory provisions from other states, the court concluded:
¶67. After reviewing these alternative remedies, and in light of all the particular factual circumstances of this case, we find that granting full ownership in the respective separate corporations operated individually by Gerald and Jo Ann was a practical, fair, and just remedy to resolve the dispute. A chancellor’s remedial powers have long been “marked by plasticity.” Griffith’s Mississippi Chancery Practice § 35 (citing Hall v. Wood, 443 So. 2d 834, 843 (Miss. 1983)). “Equity jurisdiction permits innovation that justice may be done.” Id. If ever a case needed the innovation allowed by equity jurisdiction, it is this one. Considering that nothing “shall diminish the inherent equity powers of the court to fashion alternative remedies to judicial dissolution,” Miss. Code Ann. § 79-4-14.34 (i), we find that the chancellor did not abuse his discretion in fashioning this alternative remedy.
I’m proud to see the high court recognizing the unique problem-solving capability of chancery court. Innovation and flexibility to achieve a just, equitable outcome are what equity is all about.
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