Wellman v. Tufail

136 So. 3d 51, 2014 WL 1503876
CourtLouisiana Court of Appeal
DecidedFebruary 6, 2014
DocketNo. 2012-CA-1173
StatusPublished
Cited by2 cases

This text of 136 So. 3d 51 (Wellman v. Tufail) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wellman v. Tufail, 136 So. 3d 51, 2014 WL 1503876 (La. Ct. App. 2014).

Opinions

MADELEINE M. LANDRIEU, Judge.

|! This appeal arises from a dispute between the plaintiffs, Herbert C. Wellman, Jr. and Craig E. Collier (‘Wellman/Col-lier”), and the defendant, Mr. Mohammad Tufail, over the sale of stock of a corporation. The principal asset of the corporation was a lease of commercial property on Decatur Street in the French Quarter, out of which the corporation operated a specialty food store. The lessor/landlord of the Decatur Street property was the French Market Corporation (“FMC”); the lessee/tenant was the corporation, Cookery N’Orleans Style, Ltd. (“Cookery”).

Soon after the sale of the stock from Mr. Wellman/Mr. Collier to Mr. Tufail, the FMC alleged that the sale was a violation of the lease agreement between it and Cookery. This litigation between Mr. Wellman/ Mr. Collier and Mr. Tufail ensued.1

The current appeal arises from two separate judgments: The first judgment was rendered on February 6, 2012 after the trial court heard several motions, two |2of which were motions for summary judgment. The trial court designated this judgment as final pursuant to Louisiana Code of Civil Procedure article 1915(B). The second judgment was rendered on May 21, 2012 after a trial on the issue of damages. Mr. Wellman and Mr. Collier now appeal both judgments. For the reasons that follow, we find that there are no material facts in dispute. After a de novo review of the record, we reverse both judgments of the trial court.

FACTS AND PROCEEDINGS BELOW

Cookery was incorporated in 1977. At that time, it entered into a lease agreement with the FMC, an entity created by the New Orleans City Council to manage and administer the city-owned French Market. The lease agreement was for property located at 812 Decatur Street. This 1977 lease expired, and Cookery as Tenant and the FMC as Landlord entered into a second Amended and Restated Lease Agreement in 1997 for the same property, out of which Cookery continued to operate its store.

[53]*53Two years after the 1997 lease became effective, the day-to-day manager of the store, Mrs. Elaine Collier, decided to retire. Mr. Wellman/Mr. Collier advertised for a new manager of the store, and Mr. Tufail responded.

In April of 1999, Mr. Wellman/Mr. Collier and Mr. Tufail negotiated and executed a document entitled “Management Agreement with Agreement to Purchase Stock Between Cookery N’Orleans Style, Ltd., Owner/Lessee and Mohammad Tu-fail, Manager” (“Management Agreement”). The Management Agreement, executed in the office of Mr. Tufail’s lawyer, was signed by all parties and witnessed by their attorneys. It included the parties’ agreement that Mr. |sTufail, in addition to managing the store, would purchase all the corporate stock of Cookery.

Prior to executing the Management Agreement, Mr. Wellman/Mr. Collier provided Mr. Tufail with copies of the 1977 and 1997 leases. Understanding the lease to be the principal asset of the corporation, Mr. Tufail hired counsel to discuss the proposed Management Agreement with the lessor, the FMC. After doing so, Mr. Tufail’s counsel, David Oestricher, advised Mr. Tufail that the FMC believed the lease prohibited the proposed Management Agreement. According to stipulated facts, the FMC advised Mr. Tufail that it would approve the Management Agreement between him and Mr. Wellman/Mr. Collier only if the agreement accorded the FMC the right to renegotiate the lease. Neither Mr. Tufail nor Mr. Wellman/Mr. Collier were willing to allow the FMC to renegotiate the lease, each believing that a renegotiated lease would be on terms less favorable to Cookery.

Mr. Tufail then retained new counsel, Mr. David Maraldo, who advised Mr. Tu-fail that, in his legal opinion, neither the proposed Management Agreement nor the proposed sale of the stock was prohibited by the lease. Satisfied with this advice, Mr. Tufail entered into the Management Agreement and proceeded with the stock purchase.

The Management Agreement, negotiated and prepared by Mr. Tufail’s counsel, provided that the principal object of the agreement was the management of the retail business operated by the corporation pursuant to the 1997 lease. The parties agreed on a purchase price of $215,000, payable by Mr. Tufail in the form of $100,000 cash plus a promissory note in favor of Mr. Wellman/Mr. Collier for the remainder. It was clearly understood between the parties that the lease was the |4primary asset of the corporation, with the corporeal assets of the business (merchandise and inventory) being valued at approximately $25,000.

An essential consideration in the negotiations between Mr. Wellman/Mr. Collier and Mr. Tufail was security for the promissory note. To that end, Mr. Tufail proposed and Mr. Wellman/Mr. Collier accepted a pledge of the stock of the corporation as security. Thus, the Management Agreement provided that in the event Mr. Tufail defaulted on the note, the stock of Cookery would revert to Mr. Wellman and Mr. Collier.

Finally, the Management Agreement provided: that a termination of the lease •without payment of the promissory note would be a breach of the agreement; that the removal of any property within the leased premises would be considered “an act of bad faith and immediate default without cure ... ”; and, that Mr. Tufail had an obligation to notify Mr. Well-man/Mr. Collier of any notice of default of the lease by the landlord. In the event of notice of default, the Management Agreement granted Mr. Wellman/ Mr. Collier [54]*54the right to “cure for the corporation” any-alleged default.

The Management Agreement was executed on April 30, 1999 and became effective that day. Pursuant to its terms, Mr. Tufail immediately deposited $100,000, the cash portion of the purchase price, into his lawyer’s trust account. As a condition of the sale going through, Mr. Tufail’s attorney demanded that the lease between the FMC and Cookery be amended to correct an apparently inadvertent error in the corporate name of the lessee, Cookery. After the lease was so amended, Mr. Wellman and Mr. Collier transferred the stock certificates to Mr. Tufail, and Mr. Tufail authorized his attorney to tender to them the $100,000 he had been holding in escrow. Mr. Tufail then began paying the monthly | ¿installments on the promissory note as provided for in the Management Agreement.

Mr. Tufail paid on the note beginning in June of 1999 and continued paying through August of 2000. Even though the promissory note was a personal obligation of Mr. Tufail’s, each monthly installment was paid by check from the account of Cookery N’Orleans Style, Inc., with the last of the payments being made on August 1, 2000. The September installment was paid late and returned by Mr. Wellman/Mr. Collier. Prior to August, a few other payments had been made late, and Mr. Tufail had missed a few payments, as well. For instance, a check dated January 2000 had been returned by the bank for non-sufficient funds.

Following the receipt of the January, 2000 NSF check, Mr. Wellman and Mr. Collier, through their attorney, had sent a letter to Mr. Tufail advising him that they would no longer accept late payments on the promissory note and would pursue their rights on the note in the event future payments were not made in accordance with its terms.

By this time, the FMC, having learned about the existence of the Management Agreement, had notified Cookery that it was in default of its lease. In a letter to its lessee in November, 1999, the FMC gave notice that the sale of Cookery stock to Mr.

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136 So. 3d 51, 2014 WL 1503876, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wellman-v-tufail-lactapp-2014.