Opinion
No. 2005 CA 0253.
May 8, 2009.
APPEALED FROM THE NINETEENTH JUDICIAL DISTRICT COURT, IN AND FOR THE PARISH OF EAST BATON ROUGE STATE OF LOUISIANA SUIT NUMBER 512,396 HONORABLE TIMOTHY E. KELLY, JUDGE.
David M. Cohn, Baton Rouge, LA, Counsel for Plaintiff/Appellee, AmSouth Bank.
J. Marvin Montgomery, Baton Rouge, LA, Counsel for Defendant/Third-Party, Plaintiff/Appellant, Darlene S. Ransome.
Ronald S. Haley, Jr., Peter Carmichael, Baton Rouge, LA, Counsel for Third-Party, Defendant/Appellee, National Compensation Control, Systems, Inc.
Michael H. Piper, Baton Rouge, LA, Counsel for Third-Party, Defendant/Appellee, Ralph W. Theriot.
BEFORE: WHIPPLE, McCLENDON, AND WELCH, JJ.
This matter is before us on appeal by defendant, Darlene S. Ransome, from a judgment dismissing her third-party claims and granting declinatory exceptions raising the objections of lis pendens. For the following reasons, we affirm the judgment of the trial court dismissing Ransome's third-party claims, but amend it to sustain the peremptory exception raising the objection of res judicata.
FACTUAL AND PROCEDURAL BACKGROUND
The instant appeal comes before this court following remand to the trial court. In remanding this case back to the trial court, we noted that the record "contain[ed] no evidence of or pleadings from the other alleged pending suits preclud[ing] any meaningful review of the trial court's judgment by this court." Accordingly, this court "remand[ed] [the case] to the trial court . . . to allow the petitions . . . relied upon by exceptors, as well as any other relevant pleadings, to be entered into the record." Following remand, the parties consented to have all filings related to Al J. Ransome, et al. v. Joe A. Terrell , et al. , 19th JDC Docket No. 460,543, consolidated with Darlene S. Ransome, et al. v. Joe A. Terrell , et al. , 19th JDC Docket No. 487,560, which are maintained by the clerk of court for the Nineteenth Judicial District Court (19th JDC), entered into the underlying record.
The parties also agreed to have all filings related to Darlene S. Ransome, et al. v. National Compensation Control Services, Inc., et al. , 19th JDC Docket No. 510,151 entered into the record.
To recapitulate the pertinent facts, on October 1, 2003, AmSouth Bank filed the present suit in the 19th JDC against Unemployment Compensation Control Systems, LLC (UCCS) to recover $23,080.67 allegedly due under a credit agreement. Darlene Ransome (Ransome), one of the owners of UCCS, was also named as a defendant based on a guarantee she executed in connection with the credit agreement. Ransome answered the suit and filed a cross-claim against UCCS, complaining that it failed to pay the debt allegedly owed AmSouth Bank and that it improperly sold, through its court-appointed receiver, Ralph Theriot (Theriot), contracts with clients and resulting proceeds that had been pledged to secure the loan to AmSouth. She also filed a third-party demand against National Compensation Control Services, Inc. (NCCS), the corporation that purchased UCCS's assets, and Theriot (individually, and in his capacity as receiver). Ransome alleged that she was entitled to recover from NCCS any amount she was obligated to pay AmSouth due to NCCS's failure to pay the AmSouth loan because NCCS knew or should have known that the contracts it purchased were pledged as security for that debt. She asserted that NCCS's ownership interest in those contracts was not superior to AmSouth's recorded security interest in them.
At the time suit was filed, UCCS had become Former 5353, LLC, but we will continue to refer to the entity as UCCS for clarity and for consistency with our prior opinion.
Ransome also complained that Theriot sold UCCS's client contracts to NCCS, despite knowing that they were pledged to secure the AmSouth loan, and then failed to pay the AmSouth debt out of the sale proceeds. She further alleged that since NCCS was owned by Joe Terrell, who also owned 50% of UCCS, the sale constituted "an improper distribution of assets to one owner in preference to creditors and the other owner."
NCCS and Theriot each filed a declinatory exception raising the objection of lis pendens asserting that there was a prior consolidated suit on the same transaction between the same parties pending in the 19th JDC in another division, namely Al J. Ransome, et al. v. Joe A. Terrell , et al. , Docket No. 460,543, consolidated with Darlene S. Ransome, et al. v. Joe A. Terrell , et al. , 19th JDC Docket No. 487,560 (hereinafter referred to as the "receivership suits"). Therein, the trial court signed a judgment, ex parte, on November 29, 2002, authorizing Theriot, as the court-appointed receiver, to sell UCCS's assets to NCCS. The court also approved the sale of the assets of Unemployment Compensation Control Systems of Mississippi, LLC (UCCSMS) and Compensation Specialties, LLC (CS), two other companies in which Ransome held an ownership interest, to NCCS. The trial court further ordered that a rule nisi be issued, directing Ransome to show cause why the judgment should not be vacated and set aside. Following a hearing, the trial court signed a judgment on December 30, 2002, maintaining the original judgment and authorizing the sale of the three companies' assets.
In further support of its exception, NCCS also relied on another suit pending in the 19th JDC, namely Darlene S. Ransome, et al. v. National Compensation Control Services, Inc., et al. , Docket No. 510,151. However, Ransome's counsel, at oral argument before this court, indicated that this suit has been abandoned.
One of the main reasons for the trial court's initial approval ex parte was based on the fact that the Internal Revenue Service had agreed to a settlement amount arising from back taxes owed by the companies, but the sale had to occur promptly to meet requisite IRS deadlines.
The rule nisi was also issued to Ransome's husband, Al Ransome, who had a management interest in the companies.
Ransome subsequently filed writs with this court, which were denied. Thereafter, Ransome filed a devolutive appeal with this court seeking to enjoin the sale from taking place. While the appeal was pending, the sale of the companies' assets to NCCS was completed. Accordingly, this court dismissed the appeal as moot inasmuch as it was "impossible for this court to undo what has already been done or to afford practical relief." Ransome v. Terrell, 2003-1214, 2003-1215, p. 6 (La.App. 1st Cir. 4/2/2004) (unpublished). This court's decision thereafter became final and definitive pursuant to La. Code of Civ. P. art. 2166A, as no party applied to this court for rehearing or filed an application to the Louisiana Supreme Court for a writ of certiorari.
Ransome claimed that the appeal therein was not rendered moot by the subsequent sale because she was not appealing the denial of an injunction to prevent a sale, but rather seeking a reversal of the trial court's judgments and a declaration that the purchase agreement was null and void. Despite Ransome's contentions, this court found that Ransome was clearly seeking to enjoin the sale.
The trial court also rendered two additional judgments in the receivership suits that were not subject to the prior appeal. On July 16, 2003, the trial court, after receiving and approving the final statement of the receiver, discharged Theriot. Ransome subsequently filed an objection to the final accounting and an additional motion to vacate the trial court's judgment approving the final statement. In support of her motion to vacate, Ransome alleged that the receiver breached his fiduciary duty by failing to ensure that all debts were paid when the pledged assets were sold to NCCS. She further alleged that NCCS failed to assume certain loans, including the AmSouth loan, even though it received the collateral securing those loans. Thereafter, on October 6, 2003, the trial court signed another judgment, denying Ransome's motion to vacate the trial court's July 16, 2003 judgment. Neither the July 16, 2003 judgment nor the October 6, 2003 judgment were appealed.
Likewise, the trial court discharged Theriot's surety, United States Fidelity Guaranty Company.
On June 14, 2004, following a hearing in the case sub judice, the trial court granted the exceptions raising the objection of lis pendens of both NCCS and Theriot (hereinafter "exceptors"), stating:
[I]t's clear to the court that all of this does arise out of the same transaction or occurrence, which is the receivership matter. The parties are the same. I'm going to, therefore, grant the lis pendens on both parties' part. A written judgment followed and Ransome filed the instant appeal, raising as her sole assignment of error that the trial court erred in granting the exceptions of lis pendens and dismissing her third-party demand.
DISCUSSION
Louisiana Code of Civil Procedure article531 provides, "When two or more suits are pending in a Louisiana court or courts on the same transaction or occurrence, between the same parties, in the same capacities, the defendant may have all but the first suit dismissed by excepting thereto as provided in Article 925." The party filing the exception of lis pendens has the burden of proving the facts necessary for the exception to be sustained. Robinson v. Robinson, 474 So.2d 46, 48 (La.App. 3rd Cir. 1985). When the grounds to support the declinatory exception do not appear on the face of the petition, citation, or return, evidence may be introduced to support the exception. La. Code of Civ. P. art. 930. No evidence was introduced at the hearing on the exception of lis pendens. However, the trial court, in considering the exception, could properly take judicial notice of the relevant facts with regard to the receivership suits that were filed in the 19th JDC. La. Code Evid. art. 201. Because the requirement to establish the exception raising the objection of lis pendens conforms to the requirements of res judicata, a court must determine whether a judgment in the first-filed suit would bar the claims asserted in the subsequent suit. Newman v. Newman, 96-1062, pp. 4-5 (La.App. 1st Cir. 3/27/97), 691 So.2d 743, 745.
Ransome alleges that the exception was improperly granted because the receivership suits were no longer pending at the time of the June 14, 2004 hearing on the exception raising the objection of lis pendens in the case sub judice. Instead, Ransome notes, the judgment in the receivership suits became final on May 3, 2004, when no party filed a writ of certiorari to seek review of this court's ruling in Ransome v. Terrell, 2003-1214, 2003-1215, p. 6 (La.App. 1st Cir. 4/2/2004). Ransome notes that despite having knowledge that the receivership suits were no longer pending, the exceptors did not amend their pleadings to plead the peremptory exception raising the objection of res judicata prior to the June 14, 2004, hearing. As such, Ransome argues that the trial court erred in granting the exception raising the objection of lis pendens.
Because the receivership suits were no longer pending at the time of the hearing in the case sub judice, we recognize that the exception of lis pendens was not applicable herein with respect to the receivership suits. Nonetheless, we find the exception raising the objection of res judicata applies herein and is dispositive. Although the exceptors did not amend their pleadings to specifically plead the exception of res judicata based upon the receivership suits, we note that this court can notice the exception of res judicata on its own motion. La. Civ. Code art. 927(B), as amended by 2008 La. Acts No. 824, § 1. Moreover, even where an exception of lis pendens is properly granted by a trial court at the time of the hearing, when the other case is no longer pending at the time the appellate court reviews the ruling on lis pendens, the appellate court must determine whether the judgment in the prior case is res judicata with respect to the latter case. Acadian Gas Pipeline Sys. v. Bourgeois, 2004-0578, p. 9 (La.App. 5th Cir. 11/30/04), 890 So.2d 634, 639, writ denied, 2004-3203 (La. 3/11/05), 896 So.2d 69. Because the requirements for lis pendens conform to the requirements of res judicata and the parties have had ample opportunity to address the requisite elements, we will consider the trial court's ruling based upon the principles governing the exception raising the objection of res judicata, which we raise herein.
However, we note that the suit referenced in footnote 3 above was still pending at the time the trial court considered the exception.
The res judicata statute, La.R.S. 13:4231, provides as follows:
Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment.
(2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and the judgment bars a subsequent action on those causes of action.
(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.
Louisiana Revised Statute 13:4231 embraces the broad usage of the phrase "res judicata" to include both claim preclusion (res judicata) and issue preclusion (collateral estoppel). Diamond B Constr. Co. v. Dep't of Transp. and Dev., 2002-0573, p. 9 (La.App. 1 Cir. 2/14/03), 845 So.2d 429, 435. As noted therein:
Under claim preclusion, a res judicata judgment on the merits precludes the parties from relitigating matters that were or could have been raised in that action. Under issue preclusion or collateral estoppel, however, once a court decides an issue of fact or law necessary to its judgment, that decision precludes relitigation of the same issue in a different cause of action between the same parties. Thus, res judicata used in the broad sense has two different aspects: 1) foreclosure of relitigating matters that have never been litigated but should have been advanced in the earlier suit; and 2) foreclosure of relitigating matters that have been previously litigated and decided.
2002-0573 at pp. 9-10, 845 So.2d at 435-436.
Under La.R.S. 13:4231, a second action is precluded when all of the following criteria are satisfied: (1) the judgment is valid, (2) the judgment is final, (3) the parties are the same, (4) the cause or causes of action asserted in the second suit existed at the time of final judgment in the first litigation, and (5) the cause or causes of action asserted in the second suit arose out of the transaction or occurrence that was the subject matter of the first litigation. Stogner v. Allbritton, 2006-1863, p. 6 (La.App. 1st Cir. 6/8/07), 965 So.2d 408, 412.
As discussed above, it is undisputed that there is a valid and final judgment in the receivership suits. Ransome asserts, however, that the remaining elements necessary for res judicata are not met herein. Ransome contends that the exceptors have not proven that the receivership suits and the instant third-party demand are between the same parties. Ransome notes that while Theriot and NCCS are named defendants in the instant third-party demand, neither Theriot nor NCCS were named parties in the receivership suits. Moreover, Ransome alleges that the receivership suits were brought in a derivative capacity, whereas she filed the instant third-party demand in her individual capacity as guarantor of the credit agreement. Accordingly, Ransome concludes that the two suits are not between the same parties.
First, with regard to Theriot, we note that he was the court-appointed receiver and participated throughout the course of the receivership proceedings in that capacity. Similarly, in the instant third-party demand, Ransome has challenged Theriot's actions as receiver. Because the receivership proceedings afforded Ransome the opportunity to raise any issues she had with the receiver, the instant third-party demand is precluded if the other elements of res judicata are met.
Next, while NCCS's participation in the receivership proceedings was limited, we note NCCS purchased the assets of UCCS, which was a named defendant in the receivership proceedings. Although res judicata requires an "identity of parties," this requirement can be satisfied when a privy of one of the parties is involved. Burguieres v. Pollingue, 2002-1385, p. 8 n. 3 (La. 2/25/03), 843 So.2d 1049, 1054 n. 3. In its broadest sense "privity" is the mutual or successive relationship to the same right of property, or such an identification in interest of one person with another as to represent the same legal right. Five N Company, L.L.C. v. Stewart, 2002-0181, p. 16 (La.App. 1st Cir. 7/2/03), 850 So.2d 51, 61. In connection with the doctrine of res judicata, a "privy" is "one who, after the commencement of the action, has acquired an interest in the subject matter affected by the judgment through or under one of the parties, as by inheritance, succession, purchase or assignment." Id. citing Black's Law Dictionary1200 (6th ed. 1990). Accordingly, NCCS, by virtue of its purchase of UCCS's assets, is UCCS's privy and the two share the same capacity or status as parties herein.
Moreover, although Ransome asserts that the receivership suits were only derivative in nature, we note that she filed suit therein "individually and derivatively." As is evidenced by the pleadings she filed in connection with the receivership proceedings, nothing precluded Ransome from raising any issue she had with the receiver and/or UCCS/NCCS in the context of the receivership proceedings. Accordingly, we find that the res judicata requirement of identity of the parties has been met.
Ransome also urges that the exceptors have failed to show that the instant third-party demand arises from the "same transaction or occurrence" as the receivership suits. Ransome asserts that the transaction or occurrence giving rise to the receivership suits was a deadlock in management, which dealt with the internal affairs of UCCS and the two other companies. Ransome avers that the case sub judice, by contrast, arises from the credit agreement between UCCS and AmSouth Bank. Ransome argues that the factual groupings giving rise to the receivership suits and the case sub judice are not related in time, space, origin or motivation. Ransome concludes that the fact that the instant case arises out of separate transactions that occurred within the receivership proceedings does not cause the suits to arise from the same transaction or occurrence.
Despite Ransome's assertion that the instant third-party demand does not arise out of the same transaction or occurrence as the receivership suits, we note that the issues raised in the third-party demand were addressed in connection with the receivership proceedings, as evidenced by Ransome's motion to vacate the trial court's July 16, 2003, judgment. We note that in objecting to the final accounting in the receivership suits, Ransome alleged that the receiver breached his fiduciary duty by failing to ensure that all debts were paid when the pledged assets were sold to NCCS. Additionally, Ransome alleged that although NCCS received the collateral securing the loan, it had not assumed the loan. Rather, Ransome noted that the receiver listed the AmSouth debt as a UCCS obligation in his final report. Despite Ransome's objection, the trial court nonetheless approved the final accounting, thereby allowing NCCS to purchase UCCS's assets without assuming the AmSouth debt. Notably, Ransome did not seek appellate review of that ruling.
Although this court could not afford Ransome any practical relief in the prior appeal in the receivership suits because the relief sought was injunctive in nature and the assets had already been sold, the trial court had not yet accepted the receiver's final statement or accounting. After accepting the receiver's statement ex parte, Ransome filed a motion to vacate the trial court's judgment wherein she made the referenced allegations. Although the trial court denied Ransome's motion to vacate, Ransome never sought review of the trial court's ruling.
In the instant third-party demand, Ransome is again requesting that the trial court determine whether NCCS was allowed to purchase UCCS's assets without assuming the AmSouth debt and whether Theriot, as receiver, negligently, improperly, or willfully transferred UCCS's assets without paying the company's debts, including the AmSouth loan. However, Ransome is precluded from relitigating these issues which were addressed in the receivership suits.
CONCLUSION
For the foregoing reasons, the trial court's judgment dismissing appellant's third-party claims against Ralph Theriot and National Compensation Control Services, Inc. is affirmed, but on an alternative basis. The judgment is specifically amended to provide that the exception of res judicata, rather than the exception of lis pendens, applies herein and is sustained. Costs of this appeal are assessed against appellant, Darlene Ransome.
AFFIRMED AS AMENDED.
McCLENDON, J., concurs and assigns reasons.
I respectfully concur in the result. I further note that the majority does not discuss whether the amendment to LSA-C.C.P. art. 927B, effective January 1, 2009, may be applied retroactively. However, the result would be the same.