Callou Corporation v. 3600 Alvar, LLC et al
Filing
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ORDER & REASONS that Plaintiff's 33 Cross-Motion for Summary Judgment is DENIED and Defendants' 30 Motion for Summary Judgment is GRANTED. Signed by Judge Eldon E. Fallon on 9/27/13. (dno, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CALLOU CORPORATION
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versus
3600 ALVAR, LLC, et al.
CIVIL ACTION
No. 13-45
SECTION “L” (4)
ORDER & REASONS
Before the Court are two motions: (1) Defendant's Motion for Summary Judgment (Rec.
Doc. 30) filed by Defendants 3600 Alvar LLC. ("Alvar") and Aggregate & Recycled Material
LLC. ("Aggregate"); and (2) Plaintiff's Motion for Summary Judgement (Rec. Doc. 30) filed by
Callou Corporation ("Callou"). The Court has reviewed the briefs and the applicable law and
now issues this Order and Reasons.
I.
BACKGROUND
This case arises out of the alleged sale of 20,000 tons of processed recycled concrete.
According to Plaintiff, on March 19, 2010, Plaintiff entered into an agreement ("the Agreement")
with Clifford Smith ("Smith") whereby Plaintiff would loan Smith $20,000. Plaintiff alleges that
to secure payment of this loan, Smith granted Plaintiff ownership of 20,000 tons of processed
recycled concrete. (Rec. Doc.1 at 3). The relevant portion of the agreement reads "in
consideration of Callou writing $20,0000 for deposit on said equipment, Smith transfers
immediately to Callou 20,000 tons of processed recycled concrete. Callou will have the choice
of Smith's locations from which to take the concrete such as Smith's Almonaster or Alvar yards
in New Orleans...." (Rec. Doc. 1-1). In addition to this transaction, Plaintiff claims that on
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March 23, 2010, Plaintiff and Smith entered into a separate Promissory Note for $9,600. The
promissory note states that "[i]n the event this note is not paid by April 1, 2010, then Payee, at
his option can take 800 tons of 610 rock at the Almonaster Yard." (Rec. Doc. 1-2). On
November 16, 2011, Plaintiff filed a UCC-1 Financing Statement in the office of St. Tammany
Parish Recorder. On the financing statement, Plaintiff lists itself as the "creditor" and Smith as
the "debtor." (Rec. Doc. 1-3). Plaintiff described the collateral as "20,000 tons of processed
recycled concrete." Plaintiff never retrieved the concrete.
On May 10, 2012, Smith filed for Bankruptcy. Defendant Aggregate purchased certain
concrete and rock aggregate from trustee of Smith's bankruptcy estate. (Rec. Doc. 1-4).
According to Plaintiff, this concrete is currently located on Defendant Alvar's property.
In its complaint, Plaintiff claims that it has both "ownership and a lien on 20,800 tons [of]
Rock." (Rec. Doc. 1 at 3). Plaintiff is seeking a declaratory judgment holding that it is the
owner of 20,000 tons of rock as well as authority to immediately remove the rock from
Defendant's property. (Rec. Doc. 1 at 4).
II.
PRESENT MOTIONS
On August 20, 2013, Defendants filed a Motion for Summary Judgment (Rec. Doc. 30)
asking that the Court find that Plaintiff is not the owner of 20,000 tons of concrete located on
Defendants' property. First, Defendants argue that the Agreement granted a security interest in
the concrete to Plaintiff, not ownership. (Rec. Doc. 30-1 at 4). Next, Defendants argue that if
the Agreement is a contract for sale, rather than a loan, it is invalid for several reasons. First,
Defendants claim that there was no agreement on a set price, one of the necessary elements of a
sale under Louisiana law. LA. CIV. CODE. art. 2439. Second, Defendants argue that the alleged
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purchase price–a $20,000 loan–was disproportionate to the value of the concrete, which Plaintiff
alleges to be $520,000. (Rec. Doc. 5-1). Lastly, Defendants argue that ownership did not
transfer because the concrete was never weighed. See LA. CIV. CODE. art. 2458 ("When things
are sold by weight, tale, or measure, ownership is transferred between the parties when the seller,
with the buyer's consent, weighs, counts or measures the things."). Since Plaintiff never weighed
the 20,000 tons of concrete, Defendants argue that ownership was never transferred. (Rec. Doc.
30-1 at 8).
On September 10, 2013, Plaintiff filed its own Motion for Summary Judgment (Rec. Doc.
33) reiterating that it is the owner of 20,000 tons of concrete located on Defendants' property.
Plaintiff attached a sworn affidavit of Smith, which states that he agreed "to deliver 20,000 tons
of recycled concrete to Callou Corporation, said recycled concrete was held, and owned by
Callou Corporation at 3650 Alvar Street, New Orleans, Louisiana." (Rec. Doc. 33-2). Plaintiff
claims that there exists no genuine issue of material fact as to the ownership of the concrete.
(Rec. Doc. 33 at 1).
III.
LAW AND ANALYSIS
A.
Standard
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment as a matter of law." Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56 (c)). When considering a
motion for summary judgment, the district court “will review the facts drawing all inferences
most favorable to the party opposing the motion.” Reid v. State Farm Mut. Auto. Ins. Co., 784
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F.2d 577, 578 (5th Cir. 1986). "On cross-motions for summary judgment, [a court] review[s]
each party's motion independently, viewing the evidence and inferences in the light most
favorable to the nonmoving party." Ford Motor Co. v. Tex Dep't of Transp., 264 F.3d 493, 498
(5th Cir. 2001). The court must find “[a] factual dispute [to be] ‘genuine’ if the evidence is such
that a reasonable jury could return a verdict for the nonmoving party [and a] fact [to be]
‘material’ if it might affect the outcome of the suit under the governing substantive law.” Beck v.
Somerset Techs., Inc., 882 F.2d 993, 996 (5th Cir. 1989) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)).
B.
The Agreement
The Louisiana Civil Code explains that when a court is called to interpret a contract, its
job is to determine "the common intent of the parties." See Greenwood 950, L.L.C. v.
Chesapeake Louisiana, L.P., 683 F.3d 666, 668 (5th Cir. 2012); LA. CIV. CODE. art. 2045. "The
interpretation of an unambiguous contract is a matter of law..." S. Natural Gas Co. v. Pursue
Energy, 781 F.2d 1079, 1081 (5th Cir. 1986). "When the words of a contract are clear and
explicit and lead to no absurd consequences, no further interpretation may be made in search of
the parties' intent." LA. CIV. CODE. art. 2046. Furthermore, when interpreting a contract,
"nontechnical words in a contract must be given their generally prevailing meaning, and each
contract provision must be interpreted in light of the other provisions so that each is given the
meaning suggested by the contract as a whole." Greeenwood 950, L.L.C., 683 F..3d at 669.
"But a contract is ambiguous when, inter alia, its 'written terms are susceptible to more
than one interpretation,' when 'there is uncertainty as to its provisions,' or when 'the parties' intent
cannot be ascertained from the language used.'" Greenwood 950, L.L.C., 683 F.3d at 668. In
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such a case, extrinsic evidence is admissible. Id. "[T]he interpretation of an ambiguous contract
through extrinsic evidence of the parties' intent is a matter of fact." S. Natural Gas Co., 781 F.2d
at 1081.
1.
The Language of the Agreement
This case turns on the interpretation of the Agreement between Plaintiff and Smith.
Plaintiff claims that, by the Agreement, Smith transferred full ownership of 20,000 tons of
concrete to the Plaintiff. Defendants, on the other hand, contend that this was a loan agreement
and that Plaintiff only received a security interest in the 20,000 tons of concrete.
The Court first looks within "the contract's four corners" to determine the parties' intent.
See Greenwood 950, L.L.C., 683 F.3d at 668. The unambiguous language contained in the
Agreement indicates that the parties jointly intended for the Agreement to transfer total
ownership of the 20,000 tons of concrete to the Plaintiff. The Agreement stated that Plaintiff
will assist Smith in financing a piece of equipment. In consideration for a $20,000 "deposit" for
said equipment, "Smith transfers immediately to Callou 20,000 tons of processed recycled
concrete." (Rec. Doc. 1-1). The Court finds that this language is clear and unambiguous.
Even if the language in the contract were ambiguous, the Court's examination of the
extrinsic evidence of the parties' intent leads to the same conclusion. In a sworn affadavit, Smith
states that he "signed an agreement to deliver 20,000 tons of recycled concrete to Callou
Corporation...Callou Corporation is the owner of 20,000 tons of recycled and processed
concrete, which was held at 3650 Alvar Street, New Orleans, Louisiana...." (Rec. Doc. 33-2). In
its complaint and Motion for Summary Judgment, Plaintiff Callou states the same intent. Both
parties to the Agreement agree that their intent was to transfer full ownership of the 20,000 tons
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of concrete.
C.
Transfer of Ownership
Having found that the intent of the parties was to transfer ownership to Plaintiff of 20,000
tons of concrete, the Court must now decide whether the transfer was successful. Defendants
argue that if the Agreement did intend to transfer ownership of the concrete, then it was an
invalid sale agreement. Defendants explain that "[i]n the event the Agreement is characterized
as a sale agreement, ownership did not transfer because the object of the sale was never weighed
by the parties." (Rec. Doc. 30-1 at 7). The Court agrees.
Under Louisiana law, a "[s]ale is a contract whereby a person transfers ownership of a
thing to another for a price in money. The thing, the price, and the consent of the parties are
requirements for the perfection of a sale." LA. CIV. CODE. art. 2439. Generally, "[o]wnership is
transferred between the parties as soon as there is agreement on the thing and the price is fixed,
even though the thing sold is not yet delivered nor the price paid." LA. CIV. CODE. art. 2456.
However, the rule regarding transfer of ownership is different when the thing sold is "sold by
weight." See LA. CIV. CODE. 2458. Instead, "[w]hen things are sold by weight, tale, or measure,
ownership is transferred between the parties when the seller, with the buyer's consent, weighs,
counts or measures the things." Id. On the other hand, "[w]hen things, such as goods or
produce, are sold in a lump, ownership is transferred between the parties upon their consent,
even though the things are not yet weighed, counted or measured." Id.
The Louisiana Supreme Court elaborated on this provision in Kohler v. Huth
Construction Co. 168 La. 827 (1929). In that case, the Court determined that the sale of coal
had not yet been completed when the barge holding the coal sank. The Court explained that
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"[t]he case here falls squarely under the first article [of art. 2458]. The coal was not sold in a
lump at a price for the whole, but the quantity sold was to be determined by weight or measure,
and the price was to be $8 per ton...." Id. at 829-30.
Admittedly, the present case is distinguishable from Kohler because the concrete was
sold at a lump price, not a price per ton. However, the Court does not find that this changes the
fact that the concrete was sold "by weight" under art. 2458. In Mobile Machinery & Supply
Company v. York Oilfield Salvage Company, the Louisiana Supreme Court found that a sale of
pipe was a "lump" sale and was therefore completed before the weighing of the pipe took place.
In reaching this conclusion, the Court explained that "what the defendant intended to buy and
what the plaintiff intended to sell was all the one-inch pipe in these kilns." 171 So. 872, 873
(1937). Distinguishing this case from Kohler, the Court explained that "[t]he sale of the pipe
was in lump and no weighing, counting or measuring was contemplated in order to complete the
sale or fix the price." Id. at 874. The Court emphasized that the "the seller did not know the
quantity of pipe in the kilns any better than did the purchaser." Id. at 873. This was not a sale
"by weight" it was a sale of all of the pipe that the seller in his possession.
In the present case, unlike in Mobile Machinery, weighing was necessary to complete the
transfer. The Agreement provided for immediate transfer of 20,000 tons of concrete but the
Plaintiff was allowed to make up this amount by taking it from any one of Smith's several yards.
(Rec. Doc. 1-1). There was no designated pile or specific yard that contained only the 20,000
tons of concrete that was to be transferred to Plaintiff. There was no container, like in Mobile
Machinery, that contained all of Plaintiff's concrete. Instead, Plaintiff needed to go to the yards,
weigh 20,000 tons of concrete, and separate it from the rest of Smith's concrete in order to
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determine what belonged to it. Alternatively, Smith could have weighed the concrete, separated
it, and delivered it to Plaintiff as was done in the past. (Rec. Doc. 30-10, Request for Admission
No. 4) ("Clifford Smith delivered concrete to Plaintiff on numerous occasions.").
The Court finds the explanation provided by Professor Saul Litvinoff in the Louisiana
Civil Treatise, The Law of Obligations, particularly instructive. Professor Litvinoff explains that
"when the thing on which the parties are contracting is not individualized but is something that
must be segregated from a mass of things of the same kind, as in a sale by weigh, tale or
measure, the obligation of the seller is one to do until the time the thing of things are
individualized." 1 SAUL LITVINOFF, OBLIGATIONS § 1.4 (5 Louisiana Civil Law Treatise, 2d ed.
2008) (citing LA. CIV. CODE. art. 2458). This is exactly the type of transaction that is present
here. The Agreement purported to give Plaintiff ownership of 20,000 tons of concrete that had
to be weighed and segregated from masses of concrete that Smith owned, located at several
different locations. Plaintiff states that "Clifford Smith delivered concrete to Plaintiff on
numerous occasions. However, Plaintiff admits Clifford Smith did not deliver the 20,000 tons of
concrete that is the subject of the claims made in this litigation." (Rec. Doc. 30-10 at 2). Neither
Plaintiff nor Smith weighed the concrete, therefore, ownership never transferred.
Although neither party discusses the possibility that the Agreement represents a transfer
of ownership other than a sale, therefore not being bound by the requirements of sale by contract
under LA. CIV. CODE. art. 2439, the Court finds it helpful to discuss this option as well. LA. CIV.
CODE. art. 518 states that "ownership of a movable is voluntarily transferred by a contract
between the owner and the transferee that purports to transfer the ownership of the movable."
According to this provision, Smith could have transferred ownership of the concrete without a
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valid sale contract. However, the Code goes on to explain that "[u]nless otherwise provided, the
transfer of ownership takes place as between the parties by the effect of the agreement and
against third persons when the possession of the moveable is delivered to the transferee." LA.
CIV. CODE. art. 2439. It is undisputed that Plaintiff never took possession of the concrete. (Rec.
Doc. 30-10 at 1, Request for Admission No. 1). Therefore, ownership could not have been
transferred under LA. CIV. CODE. art. 518.
IV.
Conclusion
For the forgoing reasons, IT IS ORDERED that Defendants' Motion for Summary
Judgment (Rec. Doc. 30) is GRANTED.
IT IS FURTHER ORDERED that Plaintiff's Cross-Motion for Summary Judgment (Rec.
Doc. 33) is DENIED.
New Orleans, Louisiana, this 27th day of September, 2013.
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UNITED STATES DISTRICT JUDGE
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