Assured Guaranty Corp. v. Madison County Ex Rel. Board of Supervisors
693 F. App'x 287
| 5th Cir. | 2017Background
- Madison County and Parkway East (a Mississippi special-purpose district) entered a Contribution Agreement when Parkway East issued $27.77M special-assessment bonds in 2005; County agreed to advance bond payments under certain conditions.
- Section 3: (Part 1) County will advance funds if Parkway East fails to levy/collect sufficient special assessments and County is satisfied with Parkway East’s performance; (Part 2) immediate reimbursement from tax-sale proceeds; (Part 3) Parkway East must reimburse the County for advances within two years, regardless of funding source.
- Parkway East defaulted on bond payments beginning in 2011; County advanced payments four times but stopped in 2013, asserting Parkway East had failed to reimburse within two years and thus the County’s duty to advance ceased.
- Assured Guaranty (successor to the bond insurer Radian) sued the County as a third-party beneficiary, seeking a declaration that the County must continue advancing funds for the life of the bonds irrespective of Parkway East’s two-year reimbursement requirement.
- The district court held the two-year reimbursement was not a condition precedent and ordered the County to pay Assured; the County appealed.
Issues
| Issue | Plaintiff's Argument (Assured) | Defendant's Argument (County) | Held |
|---|---|---|---|
| Whether Part 3 (two-year reimbursement) is a condition precedent to the County’s duty to advance payments under Part 1 | Part 3 is separate, syntactically and spatially distinct from Part 1 and is not a condition precedent; County’s duty continues for life of the bonds | Part 3 is one of the "covenants, agreements and obligations" referenced in Part 1; County’s obligation to advance is conditioned on Parkway East reimbursing within two years | Reversed district court: Part 3 is a condition precedent; County’s duty to advance is conditioned on Parkway East’s performance, including reimbursement within two years |
| Effect of the phrase "provided that" and scope of "covenants, agreements and obligations" in Part 1 | The conditional clause should be read narrowly and not encompass post-closing covenants like reimbursement | "Provided that" creates a condition referencing all covenants in the Contribution Agreement, including post-closing promises | Court held the conditional language unambiguously covers all covenants in the agreement, including Part 3 |
| Meaning and effect of the "notwithstanding the above" clause introducing Part 3 | "Notwithstanding the above" carves Part 3 out of Part 1’s condition and thus makes reimbursement independent | "Notwithstanding" does not carve Part 3 out unless Part 3 actually conflicts with Parts 1–2; Part 3 conflicts only with Part 2, not Part 1 | Court held "notwithstanding the above" does not remove Part 3 from Part 1’s conditioning language |
| Whether the Amortization Approval Certificate or quasi-estoppel prevent County from asserting dissatisfaction with Parkway East’s performance | The Certificate (signed at closing) shows County accepted performance of the district’s covenants and estops County from claiming nonperformance later | Certificate only references covenants performed/satisfied at closing; quasi-estoppel doesn’t apply because County couldn’t have represented satisfaction with future obligations not yet performable | Court rejected estoppel argument: Certificate related to closing-time satisfaction and did not bar County from later challenging Parkway East’s post-closing performance |
Key Cases Cited
- Fireman’s Fund Ins. Co. v. Murchison, 937 F.2d 204 (5th Cir.) (standard of review for summary judgment)
- Clardy Mfg. Co. v. Marine Midland Bus. Loans Inc., 88 F.3d 347 (5th Cir.) (contract ambiguity and review standards)
- Tupelo Redevelopment Agency v. Abernathy, 913 So.2d 278 (Miss.) (Mississippi tiered approach to contract interpretation)
- Avakian v. Citibank, N.A., 773 F.3d 647 (5th Cir.) (construing contemporaneous documents as one instrument)
- Cisneros v. Alpine Ridge Group, 508 U.S. 10 (U.S. Supreme Court) (effect of "notwithstanding"/trumping language)
- Adams v. Baptist Mem'l Hosp.-Desoto, Inc., 965 So.2d 652 (Miss.) (interpretation of "notwithstanding" in Mississippi law)
- S. Ry. Co. v. Anderson & Fuller, 130 So. 743 (Miss.) (give effect to all contract provisions)