Capital One, N.A. VS Service Door & Millwork, L.L.C., Michael S. Marks, Edgar S. Milton, IV and Ralph Fletcher
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NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2011 CA 0691 CAPITAL ONE N A VERSUS SERVICE DOOR K L MILLWORK LLC MICHAEL S MARKS EDGAR S MILTON IV AND RALPH L FLETCHER NOV DATE OF JUDGMENT 9 2011 ON APPEAL FROM THE TWENTYTHIRD JUDICIAL DISTRICT COURT NUMBER 90 DIV A PARISH OF ASCENSION 726 STATE OF LOUISIANA HONORABLE RALPH TUREAU JUDGE Patrick Johnson Counsel for Plaintiff Appellee Brent Wyatt New Orleans Louisiana Capital One N A Robert W Barton Counsel for Thirdparty Defendants Appellees Baton Rouge Louisiana Robert W McBride and Masonite Corporation DBA Louisiana Millwork Counsel for Anne Brunett DefendantsThirdparty Plaintiffs Appellants Baton Rouge Louisiana Service Door Ralph L Fletcher Millwork Ralph L Fletcher and Ralph L Fletcher Properties EXXXXXa BEFORE WHIPPLE KUHN AND GUIDRY JJ Disposition AFFIRMED IN PART REVERSED IN PART AND REMANDED KUHN J Appellants Service Door Millwork LLC Service Door Ralph L Fletcher Fletcher and Ralph L Fletcher Properties LLC Fletcher Properties appeal a judgment sustaining an exception of lis pendens and dismissing their thirdparty demands against appellees Robert W Masonite Corporation DBA Louisiana Millwork McBride McBride and Louisiana Millwork Appellants argue the district court erred because the two lawsuits at issue are based on completely different causes of action and involve different parties For the following reasons we affirm the district court judgment in part reverse it in part and remand FACTS AND PROCEDURAL BACKGROUND On October 21 2008 Louisiana Millwork filed a suit on open account in Calcasieu Parish against Service Door and Ralph Fletcher The petition alleges that Louisiana Millwork provided services and sold building materials to Service Door on an open account basis the terms of which included a written credit agreement and that Service Door failed to pay 136 due on the account 12 092 despite amicable demand It further alleges that Fletcher personally guaranteed the obligations of Service Door Subsequently Capital One N Capital One filed a suit on a promissory A note and commercial guaranty in Ascension Parish against Service Door Fletcher and Fletcher Properties The petition alleges that Service Door has refused despite amicable demand to pay the principal sum of 485 due on a 23 250 1 The suit also named Edgar Milton IV and Michael Marks as defendants According to the briefs filed by appellants and appellees Milton and Marks subsequently filed for bankruptcy protection and their debts were discharged in bankruptcy 2 promissory note executed by Fletcher and others on behalf of Service Door The petition further alleges that Fletcher executed a commercial guaranty in which he personally obligated himself for the indebtedness of Service Door to Capital One In response the defendants filed answers and recoventional demands against Capital One Additionally Service Door Fletcher and Fletcher Properties each separately filed a thirdparty demand against Louisiana Millworks and McBride claiming damages due to breach of contract material misrepresentations detrimental reliance and unfair debt collection acts Specifically appellants alleged that McBride as an employee and part owner of Louisiana Millworks encouraged the start up of Service Door and promised that Louisiana Millwork would extend credit to it for ninety days before payment was due for goods and services purchased The alleged purpose of the ninetyday credit period was to allow the new business to go through three monthly billing cycles to collect from its customers before being required to pay Louisiana Millwork It is further alleged in the thirdparty petitions that after Service Door began operations McBride advised them that after talking to the coowners of Louisiana Millwork interestfree credit could be extended to Service Door for only sixty days rather than ninety According to the petitions the invoice received from Louisiana Millwork after Service Door first order actually only allowed it s twenty seven days of interestfree credit after which large amounts of interest became due The petitions allege that Service Door was never able to get into a firm financial position due to the alleged material misrepresentations by McBride and breach of contract by Louisiana Millwork and was forced to go out of business They further allege that McBride made the misrepresentations in an 3 attempt to generate additional business for Louisiana Millwork so that he could sell his interest in Louisiana Millwork for greater gain Additionally in his thirdparty petition Fletcher alleges that had he known that Louisiana Millwork would not extend ninety days credit he never would have invested in or participated in the formation of Service Door In its petition Service Door also alleges it never would have been formed if Fletcher and the other investors had known that Louisiana Millwork would not extend ninetydays credit In its third party petition Fletcher Properties additionally alleges that it sustained a loss of rental revenue from the premises it formerly leased to Service Door as a result of that business demise In response to the third party demands McBride and Louisiana Millwork filed a declinatory exception raising the objection of lis pendens arguing that the demands arose from the same transaction or occurrence as the suit on open account filed by Louisiana Millwork in Calcasieu Parish Following a hearing the district court agreed and sustained the exception of lis pendens judgment in accordance with that ruling was signed A written In its written reasons for judgment the district court stated A comparison of the third party demands filed herein and the suit filed by Masonite Millwork in Calcasieu Parish establish Louisiana sic that Louisiana Millwork sued Service Door and Ralph Fletcher in the Calcasieu lawsuit for the exact same business transaction now raised in the third party demand in the Ascension lawsuit by Ralph Fletcher Fletcher Properties and Service Door Both suits involve the same parties and the same transaction or occurrence As such the declinatory exception of lis pendens is proper Upon lodging of the appellate record in this matter this Court determined that the district court judgment was defective in that it lacked proper decretal 4 language disposing of andor dismissing the claims of petitioners This Court ex proprio motu issued an order remanding this matter to allow the district court to sign an amended judgment containing proper decretal language On August 2 2011 the district court signed an amended judgment complying with this order LAW Under La C art 531 when two or more suits are pending in Louisiana P 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 filing a declinatory exception raising the objection of lis pendens See La C art P 3 925A Since the requirements for establishing lis pendens conform to the requirements of res judicata the test for lis pendens is whether a final judgment in the first suit would be res judicata in the subsequently filed suit See Martin v ANR Pipeline Company 11 0751 p 5 La App 1st Cir 8 11 23 3d So Newman v Newman 96 1062 pp 45 La App 1st Cir 3 691 97 27 2d So 743 745 Under La R 13 res judicata bars relitigation of a subject matter S 4231 arising from the same transaction or occurrence as a previous suit In determining whether this requirement is met the crucial inquiry is not whether the second suit is based on the same cause of action as the first suit but whether the second suit asserts a cause of action that arises out of the same transaction or occurrence that 2 Prior to the amendments to Louisiana res judicata law that became effective in 1991 a judgment in a prior suit precluded a second suit only if it involved the same parties the same S cause of action and the same object of demand as the prior suit However under La R 13 4231 as amended res judicata now bars relitigation of a subject matter arising from the same transaction or occurrence as a previous suit See Leon v Moore 981792 p 4 La App 1 st Cir 99 1 4 731 So 502 504 writ denied 991294 La 7 747 So 20 2d 99 2 2d 5 2d was the subject matter of the first suit See Leon 98 1792 at p 4 731 So at 504 An identity of parties exists whenever the same parties their successors or others appear so long as they share the same quality as parties Mandalay Oil Gas L v Energy Development Corporation 01 0993 pp 16 17 La App C 1st Cir 8 880 So 129 140 writ denied 04 2426 La 1 893 04 4 2d 05 28 2d So 72 Thus the jurisprudence does not require that the parties in the two lawsuits be physically identical as long as they share the same quality as parties Welch v Crown Zellerbach Corporation 359 So 154 156 La 1978 Jensen 2d Construction Company v Department of Transportation and Development 542 2d So 168 171 La App 1st Cir writ denied 544 So 408 La 1989 2d In considering whether an identity of parties existed for res judicata purposes the Louisiana Supreme Court stated in Mandalay 01 0993 at p 19 880 So at 142 2d that the preclusive effect of a judgment binds the parties to the action as well as those nonparties who are deemed privies ofthe parties in circumstances where the nonparty sinterests were adequately represented by a party to the action who may be considered the virtual representative of the nonparty because the interests of the party and the nonparty are so closely aligned LIS PENDENS In their first assignment of error appellants thirdparty plaintiffs Service Door Fletcher and Fletcher Properties argue that the district court erred in sustaining the exception of lis pendens because 1 the causes of action in the two suits are completely different and 2 the parties in the two suits are not the same ON In arguing that the two suits involve entirely different types of litigation and causes of action appellants point to the fact that the Calcasieu suit is a suit on an open account while the Ascension suit is an action on a promissory note and bank credit line However this argument is flawed in that it compares the principal demand made by Capital One in the Ascension suit to the demands made in the Calcasieu suit even though the exception of lis pendens is directed only at the thirdparty demands made in the Ascension suit Thus the proper analysis is to compare only the thirdparty demands made in the Ascension suit with those made in the Calcasieu suit See United General Title Ins Co v Casey Title Ltd 01 600 p 8 La App 5th Cir 10 800 So 1061 106566 01 30 2d When a comparison of the demands in the Calcasieu suit is made to the third party demands in the Ascension suit it is clear that even though the causes of action are different all of the demands arise out of the open account credit agreement between Louisiana Millwork and Service Door In the Calcasieu suit Louisiana Millwork is seeking to recover sums allegedly due on the open account At the same time the third party plaintiffs Service Door Fletcher and Fletcher Properties are seeking damages in the Ascension suit based on an alleged breach of contract misrepresentations detrimental reliance and unfair debt collection practices that are all related to the same open account and credit agreement Accordingly the district court correctly concluded that the requirement that the two suits be based on the same transaction or occurrence was met in this case Appellants further argue that the requirement of an identity of parties is not present because the parties in the Calcasieu and Ascension suits are different In particular they note that neither Capital One McBride nor Fletcher Properties all 7 parties in the Ascension lawsuit are parties in the Calcasieu suit Accordingly appellants contend the exception of lis pendens was improperly sustained As we have already noted the proper analysis in the instant case is to compare the third party demands in the Ascension suit to the demands in the Calcasieu suit Thus appellant sarguments regarding Capital One are meritless since Capital One is not a party involved in the thirdparty demands but only in the principal demand in the Ascension suit Another flaw in appellant argument is the contention that Fletcher s Properties is an additional party included in the thirdparty demands although it is not a party in the Calcasieu suit In fact a review of the pleadings filed in the Ascension suit reflects that each of the appellants filed a separate third party petition in which he or it was the sole named thirdparty plaintiff Therefore Fletcher Properties is not a party to the respective thirdparty demands filed by either Service Door or Fletcher Accordingly McBride is actually the only additional party in the thirdparty demands filed by Service Door and Fletcher who was absent from the Calcasieu suit Nevertheless even though McBride was not physically a party to the Calcasieu suit this fact alone does not necessarily defeat the exception of lis pendens It is not essential that the parties in the two suits be physically identical as long as they share the same quality as parties Jensen 542 So at 171 2d Welch 359 So at 156 2d In Jensen this Court held that where parties shared 3 Accordingly the only parties in Service Door thirdparty demand are Service Door McBride s and Louisiana Millwork the only parties in Fletcher thirdparty demand are Fletcher McBride s and Louisiana Millwork the only parties in Fletcher Properties thirdparty demand are Fletcher Properties McBride and Louisiana Millwork identical interests in the lawsuit the physical absence of one of the parties in the first lawsuit does not preclude an identity of parties For example in Bowman v Liberty Mut Ins Co 149 So 723 726 La 2d App 1 st Cir 1963 this Court held that an identity of parties existed where even though an employee was not named as a party in the prior suit his employer was so named In reaching this conclusion this Court noted that the allegations upon which relief was sought against the employer were based on the employee s negligence while acting within the scope of his employment Similarly in Louisiana Cotton Assn Workers Compensation Group Self Insurance Fund v TriParish Gin Co Inc 624 So 461 464 La App 2d Cir 1993 the Second 2d Circuit held that the identities of two employees were virtually merged into one with the identity of their employer where there were no allegations that the employees acted outside the scope of their employment so as to render their capacity anything other than that of employees See also Middleton v Parish of Jefferson 97 324 pp 78 La App 5th Cir 1 707 So 454 457 writ 98 14 2d denied 98 0403 La 3 716 So 896 an identity of persons existed 98 27 2d between a corporation and its president In the instant case an examination of the pertinent petitions reveals that while he was not a party in the Calcasieu suit McBride shared an identity of interests with Louisiana Millwork The basis of the Calcasieu suit was an open account credit agreement that the appellants allege McBride was instrumental in negotiating in his capacity as an employee and co owner of Louisiana Millwork Therefore his interests in upholding the validity of that credit agreement and enforcing its terms are identical to that of Louisiana Millwork In fact appellants 7 allegations against McBride are made against him in his capacity as an employee and coowner of Louisiana Millwork Given these circumstances we believe the interests of McBride and Louisiana Millwork are so closely aligned that an identity of parties exists between them for purposes of lis pendens Therefore the district court properly sustained the exception of lis pendens as to the thirdparty demands filed in the Ascension suit by Service Door and Fletcher who are also parties in the Calcasieu suit arising from the same open account credit agreement However we find that the district court erred in dismissing Service Door s and Fletcher thirdparty demands without providing that the dismissals were s without prejudice The function of a declinatory exception is to decline the jurisdiction of the court but it does not tend to defeat the action La C art P 923 Dupre v Floyd 02 0153 p 3 La App 1st Cir 1 845 So 370 02 20 2 2d 371 Hence a dismissal with prejudice is generally contrary to the underlying rationale of a declinatory exception since such an exception should not defeat the action Dupre 02 0153 at pp 3 4 845 So 370 at 371 Furthermore we note 2d that counsel for both appellants and appellees acknowledged at oral arguments before this Court that the dismissals herein should have been without prejudice Accordingly the district court judgment will be amended to provide for dismissal without prejudice of the thirdparty demands of Service Door and Fletcher An entirely different situation is presented with respect to the thirdparty demand filed in the Ascension suit by Fletcher Properties which is not a party to the suit pending in Calcasieu Parish In addition to being a nonparty to the Calcasieu suit no showing was made that Fletcher Properties is a privy of any of the parties to that suit or that its interests are so closely aligned with any of those 10 parties that it should be considered the same party for lis pendens purposes Accordingly since an identity of parties was not established the district court erred in sustaining the exception of lis pendens with respect to the thirdparty demand of Fletcher Properties RULE 9 VIOLATION 5 In their second assignment of error appellants contend the district court violated Rule 9 of the Uniform Rules of District Court by preparing and signing 5 the judgment sustaining the exception of lis pendens prior to the October 6 2010 hearing held on the exception Appellants also attempt to attach significance to the fact that the judgment was incorrectly dated 2009 instead of 2010 Initially we note that since the exception of lis pendens was not filed until June 2010 the inclusion of the 2009 date on the judgment was an obvious typographical error and as such is of no moment Further the record does not support appellant sassertion that the district court violated Rule 9 5 The record reveals that the district court rendered judgment immediately following argument of counsel and also handed out its reasons for judgment at that time In doing so the district court specifically noted that counsel had raised no arguments other than those contained in their memoranda However even though the court clearly prepared a judgment and written reasons based on the arguments made in s counsel memorandums prior to the hearing there is no indication the court signed the judgment before hearing arguments and determining that counsel had 5 nothing new to present at the hearing Moreover Rule 9 provides that if a judgment is not immediately signed upon its rendition a party who later presents a proposed judgment to the court must first circulate that judgment to all parties at 11 least three working days prior to its presentation to the court Thus Rule 9 5 imposes an obligation upon the parties rather than upon the district court In any event we believe this assignment of error is moot due to the fact that as previously noted the district court signed an amended judgment in this case on August 2 2011 CONCLUSION For the above reasons the portion of the district court judgment sustaining the exception of lis pendens and dismissing the thirdparty demands of Fletcher and Service Door is hereby amended to provide that the dismissals shall be without prejudice and as amended that portion of the judgment is affirmed However the portion of the district court judgment sustaining the exception of lis pendens and dismissing the third party demand of Fletcher Properties is hereby reversed and this matter is remanded to the district court for further proceedings consistent with this opinion Onehalf of the costs of this appeal are to be paid by Fletcher and Service Door and the other onehalf of the costs are to be paid by McBride and Louisiana Millwork AFFIRMED IN PART AS AMENDED REVERSED IN PART AND REMANDED 12
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