Perry v. Wolaver

United States Court of Appeals
For the First Circuit

Nos. 06-2270, 06-2271

PETER P. PERRY and MICHAEL T. BORDICK,

Plaintiffs, Appellants/Cross-Appellees,

v.

JOHN H. WOLAVER and BARBARA J. WOLAVER,

Defendants, Appellees/Cross-Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Gene Carter, U.S. District Judge]

Before

Boudin, Chief Judge,

Campbell, Senior Circuit Judge,

and Howard, Circuit Judge.

Kevin J. Beal, with whom Peter J. Brann and Brann & Isaacson,
were on brief, for appellants/cross-appellees.
David C. Johnson, with whom George J. Marcus, Dale D. Wengler
and Marcus, Clegg & Mistretta, P.A. were on brief, for
appellee/cross-appellants.

October 26, 2007
 HOWARD, Circuit Judge. This case involves the sale of

a business which went awry. Plaintiff-sellers Peter P. Perry and

Michael T. Bordick (we will refer to them hereafter collectively as

“Perry”) brought this action against defendant-buyers John and

Barbara Wolaver (“the Wolavers”) seeking to enforce various default

provisions under the relevant agreements. The district court

granted summary judgment largely in favor of the Wolavers, and both

sides appealed.

I.

The basic facts are essentially undisputed. Perry sought

to sell two businesses, Perry Transport, LLC and Perry Transport

Logistics Services, LLC (“the companies”), and the Wolavers agreed

to purchase the companies. The parties signed a letter of intent

which outlined the essential terms of the transaction and

acknowledged that Perry would retain the cash and certain personal

vehicles (as well as certain liabilities) from the companies after

sale. The parties closed on the transaction on February 27, 2004,

and they executed several agreements, which are the focus of this

dispute. The Purchase and Sale Agreement (“PSA”) provided for a

purchase price of $715,000, with $400,00 to be paid in cash at

closing and the balance provided by a promissory note (“Note”) for

$315,000. Further, the PSA provided for an adjustment of the

actual sale price after closing to reflect changes in the net

assets on the balance sheet between year-end and the date of

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closing. This purchase price adjustment (“PPA”), which the parties

were required to agree upon within 30 days of closing, would be

determined as follows:

(a) . . . The Purchase Price shall be
adjusted (i) upward by the excess, if any, of
the total value of the assets net of
liabilities on the books of [the companies] as
of the Closing Date (the “Net assets”) exceeds
Three Hundred Sixty-Six Thousand Nine Hundred
Fifty-Six Dollars ($366,956) (the “Baseline
Amount”), or (ii) downward by the excess, if
any, of the Baseline Amount over the Net
Assets . . . .

The Note required the Wolavers to pay Perry $6,163.36 on

the first of every month until March 1, 2009, when the remaining

balance was due. The Note provided for a range of consequences if

the Wolavers failed to make payments as scheduled, including late

fees1 and increased interest.2 The most significant sanction under

the Note, however, was acceleration of principal:

If any installment under this Note is not paid
within fifteen (15) days of its due date or

1
“If Borrowers fail to deliver to Holders any installment
hereunder, including but not limited to the Balloon Payment, within
fifteen (15) days of its due date, a five percent (5.00%) late fee
shall be assessed and added to the outstanding amounts due under
this Note.”

2
“The principal balance of this Note outstanding from time to
time shall bear interest at a fixed rate equal to six and one-half
percent (6.5%) per annum. A default interest rate (“Default Rate”)
of twelve percent (12%) per annum shall accrue from the date of
default by Borrowers in the obligations under this Promissory
Note.” (Emphasis in original.)

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 Borrowers fail to perform any of the terms,
agreements, covenants or conditions contained
in the Pledge Agreement and/or Commercial
Lease Agreement between these same parties,
and/or a certain Promissory Note from [the
Wolavers] to Holders in the amount of
$107,748.43, all of near or even date
herewith, or other instruments given as
security for this Note, not cured within any
applicable cure period, a Default shall be
deemed to have occurred under this Note, and
then, or at any time thereafter during the
continuance of any such Default, the entire
unpaid balance of the Note together with any
interest accrued thereunder, shall, at the
election of the Holders, and without Notice of
such election and without Demand or
Presentment, become immediately due and
payable, and the principal balance together
with any interest accrued thereunder shall
thereafter bear the simple interest at the
Default Rate until paid. The failure of the
Holders to promptly exercise their rights to
declare the indebtedness remaining unpaid
hereunder to be immediately due and payable or
the acceptance of one or more installments
from any person shall not constitute a waiver
of any of Holders’ rights while any Default
continues nor a waiver of Holders’ rights in
connection with any subsequent Default. The
Holders may exercise this option to accelerate
during any Default by the undersigned
regardless of any prior forbearance. . . .
(Emphasis in original).

Under “Additional Terms,” Perry also reserved broad rights to

modify the Note’s terms, including reducing the payments, extending

the term, or otherwise modifying the Note’s provisions. The Note

in turn was secured by the Pledge and Security Agreement

(“Pledge”).

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 The Pledge gave Perry a security interest in 100% of the

membership units of the companies. The Pledge also contained what

the parties have characterized as a “cure provision,” which

required Perry to provide “fifteen (15) days prior written notice

to” the Wolavers after a default before utilizing any remedy under

the Pledge. The most significant default under the Pledge was

“failure to pay any of the obligation secured hereby [the Note]

when due not cured within any applicable cure period . . . .” The

most significant remedy under the Pledge was the transfer of

ownership of the membership units back to Perry.

In late March, Perry’s broker calculated the PPA, but he

disregarded the formula provided for in the PSA. The broker

instead recalculated the assets (not including cash and cash

equivalents) and liabilities as of year-end and closing, determined

the change in each, and concluded that there was an increase in net

assets of $41,151. The broker’s error was not noticed at the

time, and the parties accepted this figure and entered into an oral

agreement for the Wolavers to pay off the PPA in monthly

installments to Perry.3

For approximately a year, all went smoothly. However, in

early 2005, the Wolavers discovered the error in the calculation of

the PPA and concluded that a proper calculation would have resulted

3
To date, the Wolavers have paid $26,852.82 under the oral
agreement.

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in a substantial reduction in purchase price. The parties began

negotiating the matter.

During the negotiations, the Wolavers paid both the April

and May 2005 payments after the 15-day grace period each month, and

neither payment included late fees or the increased default-rate

interest. Perry accepted these payments without comment. However,

when the June payment did not arrive on time, Perry sent a notice

letter, dated June 27, 2005, stating that the Wolavers were in

default under the Note: "because [the Wolavers] failed to make

[their] June 1, 2005 [payment] on a timely basis.” The notice

letter also advised that:

Interest on that note is now increased to
twelve percent (12%) per annum, the default
interest provided in the note. Additionally,
you now owe late fees for that note for the
months of March, April, May and June as the
note provides.

Lastly, the notice letter cautioned that:

your default of your obligations on the
promissory note also constitute [sic] a
default of the Pledge and Security Agreement
dated February 27, 2004, securing the
promissory note. This letter shall serve as
your fifteen (15) day notice to cure under
that Agreement. Your failure to cure within
the cure period will trigger all of my
clients’ rights to the membership interests in
both limited liability companies.

(emphasis in original).

Further negotiation yielded a ten-day extension to the

cure period, and the Wolavers tendered the June and July checks

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within the extended cure period. But Perry did not cash them

because they failed to include late fees and default-rate interest.

Instead, Perry sent a default letter dated July 26, 2005, notifying

the Wolavers that the extended cure period had expired and that

Perry was accelerating the note and demanding immediate payment.

Shortly thereafter, Perry brought this action in district

court claiming breaches of the Note, oral agreement, and Pledge and

seeking reformation of the PSA. The Wolavers counterclaimed,

seeking a declaratory judgment that the PPA was overstated and that

they were not in breach or default of the Note. They also sought

recision of the oral agreement and reformation of the Note. Both

sides moved for partial summary judgment.

The district court first held that Perry had waived

interest and late fees for the April and May payments. The court

further concluded that the Note and Pledge ought to be read

together and that the “cure” period in the Pledge was incorporated

into the Note. The court then held that the Wolavers had cured the

defaults under the Note by tendering their June and July payments

within the extended cure period, cutting off Perry’s right to

accelerate the Note or claim remedies under the Pledge. As to

default-rate interest and late fees for the June and July payments,

the court stated that these penalties were intended to be added to

the principal and not paid with the late installments.

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 In addition, the district court recalculated the PPA,

using the formula provided in the PSA. Significantly, the district

court excluded the cash and other assets to be distributed to Perry

held by the companies at closing in determining net assets at the

time of sale.4 The district court concluded that the Wolavers were

entitled to a revised PPA of $48,276 in their favor (plus the

return of their prior payments on the oral agreement). The

district court denied summary judgment as to the remaining claims

and denied the Wolavers' motion for attorney’s fees. The parties

then settled the remaining claims so the district court could enter

final judgment, and this appeal followed.

II.

Perry argues that the district court erred in holding

that the Wolavers were not in default of the Note and that the

court grossly miscalculated the PPA. On cross-appeal, the Wolavers

contend that the district court erred in denying their motion for

attorney’s fees. We reject each of the claims.

"We review a district court's grant of summary judgment

de novo, viewing the facts in the light most favorable to the

nonmovant." Hodgkins v. New England Telephone Co., 82 F.3d 1226,

1229 (1st Cir. 1996). Summary judgment is warranted "if the

pleadings, depositions, answers to interrogatories, and admissions

4
In effect, the district court utilized the companies’ balance
sheet as it appeared a few days post-closing after the distribution
to Perry.

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on file, together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law." Fed. R. Civ. Pro.

56(c). ”We may affirm a summary judgment decision on any basis

apparent in the record.” Uncle Henry’s Inc. v. Plaut Consulting

Co., 399 F.3d 33, 41 (1st Cir. 2005).

Under Maine law, the interpretation of a contract’s

unambiguous terms is a question of law for the court, and we review

this determination de novo. Crowe v. Bolduc, 365 F.3d 86, 95 (1st

Cir. 2004). Contracts should be interpreted to give effect to the

parties’ intentions expressed by the writing, considering the

subject matter, purpose, and object of the contract. Id. at 95.

Further, a contract should “be interpreted so as to give force to

all its provisions.” Id. at 97. Moreover, if the parties enter

into multiple contracts at the same time to complete a single

transaction, “the contracts ought to be construed together.” Id.

at 95.

A. Breach of the Note

Perry asserts four grounds for his argument that the

Wolavers were in default of the Note, entitling him to accelerate

payment of the principal. First, he argues that the Note

“automatically” accelerated with the first late payment in April.

Second, Perry asserts that there was no waiver of late fees or

default-rate interest for the April and May payments; moreover, in

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light of the “no waiver” clause, Perry could accelerate the Note

based on these continuing defaults. Third, he maintains that there

is no right to cure under the Note, and the Note did not

incorporate the “cure” provision in the Pledge. Fourth, even if

there was a right to “cure” under the Note, the Wolavers failed to

do so because their June and July payments failed to include

default-rate interest. Perry also says that as a consequence of

that default, the Wolavers were also in default on the Pledge,

triggering the remedies therein. We examine these contentions in

turn and find all of them lacking.

Perry’s assertion that the late April payment

automatically (and with no “notice” required5) accelerated the

principal is a nonstarter. This position is expressly contradicted

by the Note, which makes accelerating the principal merely an

option Perry could affirmatively elect in the event of a default.

Moreover, Perry’s own conduct makes it obvious that Perry did not

accelerate the Note or believe that the Note had been automatically

5
Perry emphasizes that no “notice,” "demand" or “presentment”
is required to invoke the Note’s default provisions. Indeed, Perry
insists that all communications with the Wolavers about the default
under the Note were essentially gratuitous. Perry’s rigidly
literalist position confuses legal “notice” and practical business
communication. For example, given that Perry had the option of
accelerating the Note in the event of a default, how would a
defaulting debtor know the option was being exercised (and payment
due) in the absence of a communication from Perry? Further, how
would a hypothetical debtor know that a mailed payment arrived
after the fifteenth of the month, thereby potentially invoking the
default interest rate, if Perry did not so inform the debtors?

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accelerated in April. Notably, Perry’s notice letter only sought

default-rate interest and late fees as a sanction for the late

payments. There was no hint that Perry anticipated anything other

than the continuation of installment payments.

Perry’s claim that default-rate interest was not waived

for the April and May payments is also refuted by the record.

Perry’s notice letter specifically provided that default-rate

interest was triggered by the late June payment, not before.

Significantly, the notice letter explicitly sought late fees as the

only sanction for the tardy April and May payments.6 In addition,

Perry’s reliance on the “non-waiver” provision is misdirected.

Under the Note, a forbearance by Perry regarding a default does not

waive Perry’s right to any remedy under the Note during any

continuing or subsequent default. That, however, is beside the

point. The real issue is whether Perry could choose to excuse a

specific default and waive the penalty for that specific default.

On that score, Perry had that power – under both the default clause

and the broadly worded additional powers clause - and exercised it

for the late April and May payments.

Perry next claims that there is no right to cure in the

Note and no such right could be imported from the Pledge. This

6
On appeal, Perry appears to have conceded that late fees would
need not be included with a late payment, but instead would be
added to principal.

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contention also does not bear scrutiny. As noted by the district

court, the relevant documents were collectively directed to

accomplishing the sale of the companies, and thus properly

construed together under Maine law. See Crowe, 365 F.3d at 95.

The conclusion that the documents were intended to be interrelated

is buttressed by the fact that both the Note and Pledge expressly

refer to each other, and events under one trigger consequences

under the other.7

Further, a full and fair reading of the Note’s language

indicates that there is a right to cure defaults under the Note.

For example, the Note’s default clause includes the qualification,

“not cured within any applicable cure period,” strongly suggesting

that defaults need not be fatal. The default clause also includes

such phrases as “while any Default continues” and “during any

Default” language which anticipates that defaults can be remedied.

Moreover, the Pledge expressly provides that a default would

include “failure to pay any of the obligation [Note] secured hereby

when due not cured within any applicable cure period . . . .”

While it is conceivable that this is a conditional catchall

provision, we will not rush to such an interpretation, which would

7
For example, the Note provides: “The indebtedness evidenced
by this Note is secured by a Pledge Agreement of the Borrowers’
membership interest in [companies], as well as guarantees by those
limited liability companies, and reference is made thereto for
additional rights as to the acceleration of the indebtedness
evidenced by this Note.” (Emphasis added.)

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render the language surplusage if defaults under the Note are

incurable. See Crowe, 365 F.3d at 97 (contracts must be

interpreted to avoid rendering terms meaningless, nonsensical, or

mere surplusage). In addition to the linguistic problems with

Perry’s position, there is a logical one as well. The only default

that triggered the Pledge was the default on the Note, and the only

way to cure the default under the Pledge was to cure the default

under the Note. But, if defaults under the Note are incurable, we

are at a loss to understand to what cure the June 27, 2005, notice

letter refers. Accordingly, we reject Perry's argument on this

issue as well.

Lastly, Perry claims that, even if the Wolavers had the

opportunity to cure, they failed to do so because the tendered June

and July payments did not include interest at the default rate,

which was “automatically” triggered by the late April payment. We

have already rejected this thesis about the April payment. In

addition, the district court noted that there was no default

because, like late fees, the default-rate interest was to be added

to the principal balance, not the individual monthly payments.

Moreover, pursuant to Perry’s own decree in the notice letter, the

default-rate was not activated until June 27, 2005 (the date of the

notice letter). But the notice letter simultaneously triggered the

cure period, which, as noted above, permits any defaults under the

Note to be remedied. All these approaches lead to the same

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conclusion: the Wolavers cured the defaults by tendering the June

and July payments within the extended cure period, and therefore

Perry had no basis for invoking the acceleration clause.

The parties concede that the agreements are not models of

clarity. At the end of the day, we are left with the district

court’s reading of the agreements, which is plausible, and Perry’s

interpretation, which is not. Because “there is no room for any

reasonable difference of opinion as to the meaning” of the

agreements, Crowe, 365 F.3d at 97 (emphasis in original), the

district court’s holding stands. See, e.g., Global Naps, Inc. v.

Verizon New England, Inc., et al., 2007 WL 2994613, at *5 (1st Cir.

Oct. 16, 2007) (affirming interpretation where, faced with cloudy

contract language and a contingency that the parties may not have

fully thought through, the decision could be squared with the

language of the contract and no linguistic solution offered by the

appellants was more obviously correct).

B. Calculation of PPA

Perry also argues that the district court erred by

calculating the PPA using a comparison date other than the closing

date in contravention of both the PSA and the parties'

expectations. Perry also asserts that the excluded cash and other

assets were assets of the companies on the closing date, and

therefore should be included in the net asset amount for purposes

of calculating the PPA. We reject this challenge.

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 The district court’s asserted shift of the “closing date”

to February 29, 2004,8 for purposes of the calculation is not

important. The real question is whether the calculation of the PPA

should include the cash and other assets9 to be retained by Perry

after the sale as assets of the companies for purposes of

determining the net assets “at closing.” The district court

excluded these assets from the calculation. Whether this exclusion

is characterized as doing the calculation at the date of ultimate

distribution of the assets to Perry (instead of the actual closing

date) or simply excluding these assets from the closing day assets

because they were not assets of the companies (as they belonged to

Perry) or whether these assets were deemed offset on the balance

sheet by a liability to Perry is of no real consequence. The only

issue is whether the decision to exclude the assets was proper.

In the end, there is no dispute that the assets were

intended to be distributed to Perry shortly after closing and would

thus not inure to the benefit of the Wolavers. Further, because

the PSA provided that the Wolavers were purchasing the assets

belonging to the companies, and the disputed assets belonged to

Perry, the district court was correct to exclude these assets from

8
The only difference of any consequence in the financial
statements on the competing dates is the presence or absence of the
cash assets distributed to Perry.
9
The record indicates that personal vehicles and the like would
also leave with Perry.

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the PPA calculation. It would make no commercial sense for the

Wolavers to “purchase” cash that they would never receive –

particularly when they had arranged for a separate loan from Perry

to provide working capital for the companies to replace the cash

that was distributed. Moreover, Perry’s position, if accepted,

could lead to illogical results. For example, if all assets even

technically possessed by the companies on the closing date were

included in the calculation, the Wolavers would be charged for the

value of Perry’s personal vehicles parked on the premises at

closing, even though Perry would be driving them away immediately

thereafter. Similarly, Perry’s argument that an “apples to apples”

comparison would require excluding the cash from the December 31,

2003 balance sheet for the PPA calculation is also unpersuasive.

As the district court noted, there is no indication that this was

the parties’ intent, and the PPA is specifically designed to

account for such changes in the balance sheet between year-end and

closing. We discern no error in the district court’s calculation.10

10
Lastly, Perry also claims that the district court committed
reversible error by permitting the Wolavers to file their response
to Perry’s motion for summary judgment approximately 7 days late.
Counsel for the Wolavers stated that he had failed to receive a
timely electronic notice of the motion, but conceded that he had
received all other such notices in the case. Perry’s essential
thesis is that the Wolavers’ reason for being late smacked of
simple inattentiveness by counsel, which does not constitute
“excusable neglect” to excuse a late filing.
“Under the excusable neglect rubric, courts are permitted,
when appropriate, to accept late filings caused by inadvertence or
mistake.” Bennet v. City of Holyoke, 362 F.3d 1, 5 (1st Cir.
2004). Whether a given error is excusable “has a significant

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C. Attorney’s Fees

In their cross-appeal, the Wolavers argue that the

district court erred in denying their motion for attorney’s fees

under the indemnity provision of the PSA.11 They argue that the

duty to properly calculate the PPA was an “obligation” Perry

assumed prior to closing and failed to meet. Alternatively, they

posit that miscellaneous errors in the financial statements

equitable component and must give due regard to the totality of the
relevant circumstances.” Bennet, 362 F.3d at 5. Moreover, we
generally defer to the district court’s broad discretion in
assessing such case management decisions. See Perez-Cordero v.
Walmart Puerto Rico, 440 F.3d 531, 533-34 (1st Cir. 2006).
The district court, while somewhat dubious of the adequacy of
counsel’s excuse, nonetheless concluded that the filing would be
allowed. The court was persuaded by the following factors: (1)
the Wolavers had not missed any previous deadlines; (2) the
Wolavers had responded promptly upon learning of their error; (3)
there was no hint of bad faith or intent to delay, and (4) there
was no prejudice to Perry because the same issues and evidence were
already before the court. In light of the district court’s
thorough consideration of all the circumstances, we see no abuse of
discretion.
11
“Sellers shall indemnify Buyers and hold Buyers harmless from
and against any and all claims, losses, liabilities or expenses,
including reasonable attorneys’ fees, which may be asserted against
or incurred by Buyers or [companies] as a result of obligations
incurred by Sellers or [companies] on or prior to Closing, or
arising from any act or omission of Sellers or [companies] and
their agents, servants, and employees on or prior to Closing except
for those liabilities disclosed in [companies’] balance sheets
delivered to Buyers at Closing. Sellers shall also indemnify
Buyers and hold Buyers harmless from and against all claims brought
under workers’ compensation or other laws where the facts giving
rise to such claim occurred on or prior to the Closing Date. . . .”

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provided by Perry, which Perry warranted were accurate, also

justify attorney’s fees. These contentions each have fatal flaws.12

First, the calculation of the PPA (and the subsequent

agreement regarding its payment) did not occur prior to or at

closing. The Wolavers attempt to blunt this fundamental truth by

maintaining that the closing did not “really” take place until the

PPA was calculated. However, the calculation of the PPA was

defined in the PSA as, and understood by all parties to be, a post-

closing event. Moreover, calculating the PPA was a mutual

obligation of the parties, and, as calculated by the district

court, the PPA was a benefit (not an undisclosed liability) to the

Wolavers.

Second, as to the alleged inaccuracies in the financial

statements as a basis for attorney’s fees, the Wolavers also face

an insuperable problem. These claims were settled. The Wolavers

riposte that the right to seek attorney’s fees based upon these

claims was preserved in the settlement, with the provision:

This stipulation shall not be construed as a
waiver of (a) the Defendants’ ability to
assert claims for certain balance sheet
adjustments and for attorney’s fees against
the Plaintiffs pursuant to the terms of the
February 27, 2004 Purchase & Sale Agreement,
(b) the Plaintiffs’ ability to defend against
said claims, or (c) of any party’s ability to

12
Perry now argues that the Wolavers' request for fees came too
late in the district court, but Perry waived this procedural
argument by failing to raise it below.

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 advance any argument on appeal permitted by
applicable law or court rule.

This language, however, is more naturally read as being directed to

the primary dispute – what assets were to be included on the

balance sheet for purposes of calculating PPA – because no other

balance sheet claims were “asserted” or “defended.” Moreover,

there is a more fundamental problem with the Wolavers' position.

Because these financial statement claims were resolved by

settlement, the district court would have no basis for assessing

the presence and significance of any alleged errors and therefore

would be unable to determine the propriety and amount of any

potential award of fees.

For the reasons stated above, the judgment of the

district court is affirmed. Each side shall bear their own costs.

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