     Case: 14-20014         Document: 00512839207          Page: 1     Date Filed: 11/17/2014




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT


                                         No. 14-20014                        United States Court of Appeals
                                                                                      Fifth Circuit

                                                                                    FILED
JEFFREY C. BAILEY; RIG-UP SERVICES, L.L.C.,                                 November 17, 2014
                                                                               Lyle W. Cayce
                 Plaintiffs - Appellants                                            Clerk

v.

SHIRLEY BAILEY; ROGER BAILEY; BAILEY CONSULTING, L.L.C.; RIG-
UP ELECTRICAL SERVICES, INCORPORATED,

                 Defendants - Appellees


                      Appeal from the United States District Court
                           for the Southern District of Texas
                                USDC No. 4:12-CV-1711


Before JOLLY and JONES, Circuit Judges, and AFRICK*, District Judge.
PER CURIAM:**
       This is an appeal from a declaratory judgment that interprets the terms
of a contract. We REVERSE and REMAND.

                                      I. Background

       Roger and Shirley Bailey owned Rig-Up Electrical Services, Inc.
(“Electrical”), an Arkansas corporation with a home office in Arkansas and a



       *   District Judge of the Eastern District of Louisiana, 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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                                     No. 14-20014
satellite location in Texas. Jeffrey Bailey, their son, was Vice President and
Chief Operations Officer of the Texas location. Jeffrey approached Roger and
Shirley with interest in purchasing certain assets of Electrical on behalf of a
business he was starting under the name Rig-Up Services, L.L.C. (“Services”).
After some negotiation, the parties executed a contract, entitled Asset
Purchase Agreement, containing the terms of the asset sale.
      Shortly thereafter, Roger and Shirley Bailey discovered that Electrical
had withheld certain funds from its employees’ paychecks to pay the IRS but
had not transferred those monies to the IRS. The outstanding liability for the
unpaid taxes was more than one million dollars. Each party vigorously argues
that, under the terms of the Asset Purchase Agreement, the other is liable for
paying the IRS the withheld taxes and the associated fines and penalties.
      Services and Jeffrey Bailey (collectively “the plaintiffs”) sued Roger
Bailey, Shirley Bailey, and Electrical (collectively “the defendants”), seeking a
declaratory judgment that the plaintiffs had no obligation to pay the
delinquent taxes. After discovery, the plaintiffs moved for summary judgment,
requesting a declaratory judgment in their favor. The defendants opposed that
motion, arguing that (1) the plaintiffs were liable for the tax liability under the
plain language of the Agreement or (2) alternatively, the Agreement was
unenforceable because Jeffrey Bailey induced it through fraud.
      The district court found Jeffrey Bailey individually responsible for the
delinquent tax bill. 1 The district court did not address the defendants’ fraud
argument. The plaintiffs filed a motion to reconsider, which the district court
denied. The plaintiffs appealed, and we REVERSE and REMAND.




      1  The district court reasoned that Jeffrey Bailey was responsible for the liability
because the amounts withheld from employees were a “debt,” the Agreement provided that
Services was liable for “accounts payable,” and “accounts payable” are a type of debt.
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                                       No. 14-20014
                                   II. Discussion 2

       This appeal turns on the plain language of the Asset Purchase
Agreement. 3 Under the Agreement, Electrical is the “Seller,” and Services is
the “Buyer.”      The Agreement memorializes an asset sale:                 Electrical sold
specified Texas assets to Services but retained its Arkansas assets.
Specifically, the Agreement provides that Services assumes and takes title to
certain assets “subject to the liabilities and obligations of [Electrical] listed on
Schedule 2.3.” The Agreement then states that Services “does not assume and
is not in any way liable or responsible for any liabilities or obligations of
[Electrical] which are not listed on Schedule 2.3.” Schedule 2.3 lists four
assumed liabilities, only one of which is argued to be relevant here.
Specifically, Schedule 2.3 states that Services assumes liability for “[a]ll
accounts payable of [Electrical].” Thus, under the Agreement’s plain language,
Services is liable for accounts payable and nothing more.
       So, the question becomes:            Whether withheld taxes are “accounts
payable.” They are not. In common business parlance, accounts payable are
balances owed to a creditor on a current account. 4 The Agreement does not
provide any indication that the parties intended any meaning for “accounts
payable” other than this generally recognizable definition.                 Moreover, the
Agreement specifically defines “withholding tax” as a “tax,” which confirms




       2 We review a court’s grant of summary judgment de novo. Royal v. CCC & R Tres
Arboles, L.L.C., 736 F.3d 396, 400 (5th Cir. 2013).
       3 The parties agree that Texas law governs this contract-interpretation dispute.

Cf. Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.
1995) (providing legal principles for contract interpretation in Texas).
       4 See, e.g., Merriam-Webster’s Collegiate Dictionary 8 (11th ed. 2003); Webster’s Third

New Dictionary of the English Language Unabridged 13 (Philip Babcock Gove ed., 1993); The
Random House Dictionary of the English Language 10 (1966); see also Black’s Law Dictionary
19 (9th ed. 2009).
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                                       No. 14-20014
that the parties gave the withheld taxes their generally understood meaning,
not a non-standard meaning such as “accounts payable.”
       Because the withheld taxes are not “accounts payable,” the Agreement
provides that Electrical is liable for that tax liability. The district court erred
when it concluded that the Agreement made Jeffrey Bailey individually liable
for those taxes. 5

                                  III. Conclusion

       For the reasons above, we REVERSE the district court’s grant of
declaratory judgment in favor of the defendants. We note that the district
court did not address the defendant’s argument that the Agreement was
induced through fraud and REMAND for further proceedings not inconsistent
with this opinion.
                                                         REVERSED and REMANDED.




       5 On appeal, the defendants make several arguments that they did not raise in their
briefs in the district court. Having failed to raise these arguments in the district court, they
may not do so on appeal. See Raj v. Louisiana State Univ., 714 F.3d 322, 330 (5th Cir. 2013)
(citing FDIC v. Mijalis, 15 F.3d 1314, 1326–27 (5th Cir. 1994)).
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