Petula Associates, Ltd. v. Dolco Packaging Corp. , 70 F. App'x 165 ( 2003 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
July 7, 2003
Charles R. Fulbruge III
Clerk
FOR THE FIFTH CIRCUIT
_______________________
No. 02-10740
_______________________
PETULA ASSOCIATES, LTD.,
Plaintiff-Counter Defendant-Appellee
v.
DOLCO PACKAGING CORPORATION,
Tekni-Plex, Inc., successor by merger
Defendant-Counter Claimant-Appellant
______________________
Appeal from the United States District Court
for the Northern District of Texas
(3:96-CV-3216-P)
______________________
Before JONES and BENAVIDES, Circuit Judges, and KAZEN, Chief District Judge.1
KAZEN, Chief District Judge:*
1
Chief Judge of the Southern District of Texas, sitting by designation.
* 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 R. 47.5, the court has determined that this opinion should not be published and is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.
1
This appeal is a sequel to our decision in Petula Associates, Ltd. v. Dolco Packaging
Corp., 240 F.3d 499 (5th Cir. 2001) (“Petula I”). The prior opinion recites all the pertinent facts
as they existed at that time. In essence, on August 1, 1996, Dolco exercised an option to
purchase property which it was leasing from Petula. This action triggered arguments about
several closing details, primarily centered on the question of how to calculate the “fair market
value” of the property. Petula claimed that the value of the existing lease should be included in
the appraisal; Dolco disagreed. Litigation ensued, and the district court ruled in Dolco’s favor,
holding that the lease should not be included in the valuation of the property. Based on that
ruling, a new appraisal was made on June 18, 1998. Dolco then requested a closing date for the
sale.
Unfortunately, another dispute arose, as Petula argued that Paragraph 43(D) of the lease
enabled it to tender the property subject to its first lien mortgage. Both sides returned to district
court on that issue. At that time, Dolco also asked for an equitable accounting, claiming credit
for rent it had paid since 1996, on the theory that Petula was at fault for delaying the closing.
The district court again ruled in favor of Dolco, holding that Petula could not transfer the
property subject to the lien because it did not have positive equity in the property. The district
court granted Dolco’s request for an equitable accounting for back rent, but fixed the starting
point at July 18, 1998. The court reasoned that this date would have been the proper closing date
after the appraisal of June 18, 1998, and essentially held Petula responsible only for improperly
delaying that closing date. The district court also awarded attorneys’ fees to Dolco.
After this ruling, the parties pursued the appeal, which led to Petula I. However, they also
took a significant step in connection with the proposed appeal by negotiating and signing a
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“Stipulation and Standstill Agreement,” dated November 30, 1999. The intent of the agreement
was explicit: “The parties desire to preserve their appellate rights, yet avoid disputes during and
after appeal.” The agreement recited that Dolco was entitled to receive, as of that time, equitable
accounting in the sum of $529,284.00. The parties also agreed on the amount of reasonable
attorneys’ fees to be paid to Dolco, as ordered by the district court. The agreement provided
that, beginning December 1, 1999 and throughout the pendency of the appeal, Dolco was relieved
of its obligation to pay the base monthly rent. Further, if the judgment were not reversed, Dolco
would pay to Petula at closing the purchase price minus the accounting. The agreement then
contained the following provision which is now the subject of dispute:
“8. If the award to Dolco for an Accounting is reversed, then Dolco will pay to Petula
(in lieu of the interest described in the preceding paragraph) back base rent under
the Lease from December 1, 1999 until closing of the transfer of the Property.”
In Petula I, we expressly “reversed” the district court on the key valuation issue and held
that the term “fair market value,” contained in Paragraph 28 of the lease, would include the value
of the lease agreement. Therefore, the appraisal of June 18, 1998, which excluded the value of
the lease, “was incorrect as a matter of law,” 240 F.3d at 505, and Petula could not have been in
default for failing to close at that time. This conclusion necessarily destroyed the underpinnings
of the equitable accounting award. We further concluded that Dolco obviously was no longer
entitled to attorneys’ fees on the valuation issue, although it did prevail on the claim that Petula
could not attempt to transfer the property subject to the first mortgage lien, if the value of the
mortgage exceeded the equity in the property. We summarized our holdings as follows:
“Accordingly, we vacate the district court’s award to Dolco of an equitable accounting
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and attorneys’ fees, without prejudice to the district court’s ability on remand to reinstate
a portion of the award for attorneys’ fees related solely to the cost of litigating the first
lien mortgage issue.” 240 F.3d at 505.
We then remanded to the district court “for judgment consistent with this opinion.” Id.The opinion in Petula I was filed on February 12, 2001. One would have expected that
the opinion, combined with the parties’ “Standstill Agreement,” would have facilitated a rapid end
to this litigation, which began in November of 1996. Unfortunately, such was not the case.
Instead, the parties resumed quarreling in district court.
This time, Dolco again sought an equitable accounting, but on different grounds. Dolco
again claimed entitlement to an offset in the purchase price for all rent it had paid under the lease
since the time it exercised the option to purchase in 1996. The new theory was that, since the
June 1998 valuation was determined in part by capitalizing the rents due under the lease, it would
be inequitable for Petula to receive the higher sale price and also keep the past paid rent. Petula
responded by invoking the Standstill Agreement. The district court held that Dolco’s new
accounting theory was different from its original theory, that Texas law supports the general
proposition of equitable accounting, and that Petula I did not foreclose this new theory. The
district court further held, however, that the new dispute was squarely governed by Paragraph 8
of the Standstill Agreement, and that the parties were bound by that agreement. We agree.
Dolco argues that nothing in the Standstill Agreement constitutes a waiver of its
“substantive rights” to an equitable accounting. Underlying this argument is the rather strained
claim that Petula I did not “reverse” the prior award of an equitable accounting but only “vacated”
it. Dolco then cites cases for the proposition that a vacatur and a reversal are distinct concepts
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for res judicata and collateral estoppel purposes. We do not find these authorities relevant here.
Under Texas law, a stipulation is a binding contract between the parties and the court.
See Fed. Lanes, Inc. v. City of Houston, 905 S.W.2d 686, 689 (Tex. App. 1995); First Nat’l
Bank v. Kinabrew, 589 S.W.2d 137, 142 (Tex. App. 1979); Westridge Villa Apartments v.
Lakewood Bank & Trust Co., 438 S.W.2d 891, 895 (Tex. App. 1969). Indeed, Dolco does not
challenge the validity of the Standstill Agreement as such, but only its meaning. The
interpretation of a written contract is controlled by the intention of the parties to it. See Jim
Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 330 (Tex. 1984). And, “[l]anguage
should be given its plain grammatical meaning unless it definitely appears that the intention of the
parties would thereby be defeated.” Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529 (Tex.
1987) (citing Fox v. Thoreson, 398 S.W.2d 88, 92 (Tex. 1966)); see also Mark K. Glasser &
Keith A. Rowley, On Parol: The Construction and Interpretation of Written Agreements and the
Role of Extrinsic Evidence in Contract Litigation, 49 Baylor L. Rev. 657, 761 (1997).
Furthermore, “[i]n the usual case, the instrument alone will be deemed to express the intention of
the parties for it is objective, not subjective, intent that controls.” City of Pinehurst v. Spooner
Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968).
Language should be given its “plain grammatical meaning.” In Texas, courts look to
dictionaries to deduce the plain meaning of a term. See Albertson’s, Inc. v. Sinclair, 984 S.W.2d
958, 960 (Tex. 1999); Boykin v. State, 818 S.W.2d 782, 786 (Tex. Crim. App. 1991); Morgan
Bldgs. and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871, 880 n.16 (Tex. App. 2003);
Hunter v. State, 92 S.W.3d 596, 601-02 (Tex. App. 2002). Black’s Law Dictionary defines
“reversal” as “[a]n appellate court’s overturning of a lower court’s decision.” Black’s Law
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Dictionary 1320 (7th ed. 1999). Similarly, Webster’s defines “reversal” as “an act or the process
of reversing: as . . . a change or overthrowing of some legal proceeding or judgment.” Webster’s
Third New International Dictionary 1943 (1981).
This court in Petula I indisputably reversed the original equitable accounting when it
reversed the valuation theory upon which it was based. The case was returned to the district
court “without prejudice” only as to the award of attorneys’ fees. This reversal triggered
Paragraph 8 of the Stipulation Agreement, in which Dolco unambiguously agreed to pay Petula
back rent. Dolco’s argument that the Stipulation Agreement does not expressly prohibit a new
and different equitable accounting theory violates the clearly expressed intent of the Agreement,
namely to avoid new disputes after appeal.
The district court correctly observed that “the parties themselves altered their rights and
responsibilities for the sale through the Stipulation and Standstill Agreement. Although Dolco
now claims that the result of the Agreement leads to an inequitable result2, Dolco knew or should
have known the risks it took in entering into such an agreement.”
The judgment is AFFIRMED.
2
We do not imply that the result dictated by Paragraph 8 is necessarily inequitable. As noted by the
district court, the result now sought by Dolco is basically the same prescribed in the Standstill Agreement if Petula
I would have affirmed the original district court ruling. Moreover, Paragraph 8 does not require Dolco to pay any
interest to Petula on the amount of the purchase price between 1996 and closing.
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