Opinion
2023 CW 0313 2023 CA 0530
11-15-2023
ASSET INTEGRITY MANAGEMENT SOLUTIONS v. Cary A. BOURGEOIS and G.E.C., Inc.
Keely Y. Scott, Leigh F. Groves, Kirk A. Patrick, Matthew A. Rogers, Baton Rouge, Louisiana, Counsel for Appellants/Relators Defendants—G.E.C., Inc. and Cary A. Bourgeois Barbara L. Irwin, Timothy E. Pujol, Ashley D. Tadda, Landyn A. Gautreau, Gonzales, Louisiana, Counsel for Appellee/Respondent Plaintiff—Asset Integrity Management Solutions, L.L.C.
Appealed from the Twenty-Third Judicial District Court, Parish of Ascension • State of Louisiana, Docket Number 123346 • Division A, The Honorable Jason D. Verdigets, Presiding Judge
Keely Y. Scott, Leigh F. Groves, Kirk A. Patrick, Matthew A. Rogers, Baton Rouge, Louisiana, Counsel for Appellants/Relators Defendants—G.E.C., Inc. and Cary A. Bourgeois
Barbara L. Irwin, Timothy E. Pujol, Ashley D. Tadda, Landyn A. Gautreau, Gonzales, Louisiana, Counsel for Appellee/Respondent Plaintiff—Asset Integrity Management Solutions, L.L.C. Before: Welch, Holdridge, and Wolfe, JJ.
WELCH, J.
2In this matter involving a motion to redeem a litigious right and to set the price of redemption, defendants appeal and seek supervisory review of the trial court’s judgment that granted defendants’ redemption motion and set the price of redemption at $5 million. For the following reasons, we affirm in part, reverse in part, and remand. We deny the supervisory writ application as moot.
Defendants sought both a declaration that a sale of a redemptive right had occurred and requested that the trial court set the price of redemption.
FACTS AND PROCEDURAL HISTORY
This litigation began on September 27, 2018, when Asset Integrity Management Solutions, L.L.C. ("AIMS") filed suit against defendants, Cary A. Bourgeois and G.E.C., Inc., and alleged tort claims, including professional negligence and malpractice, arising from a project undertaken by the Greater New Orleans Expressway Commission to improve the guard rails on the Causeway Bridge. Defendants filed an answer, disputing liability and asserting affirmative defenses to AIMS’s tort allegations.
During discovery, defendants learned that on December 20, 2019, all of AIMS’s assets—including the litigious right to the instant lawsuit—had been seized by its secured lender, PDB Financial Company, L.L.C. ("PDB"), after AIMS defaulted on certain loan obligations. On December 31, 2019, PDB sold all of AIMS’s seized assets to AIMS Composites, L.L.C. ("Composites") in a Bill of Credit Sale (Installment) for the price of $5 million. Also on December 31, 2019, Composites executed an Installment Note in favor of PDB for the amount of $5 million. The Installment Note provided that Composites was required to pay $35,821.55 per month to PDB, beginning on February 1, 2020. Defendants later 3discovered that AIMS instituted Chapter 7 bankruptcy proceedings on April 13, 2021.
The "Notice of Seizure" bears the date December 20, 2018, but the correct date is December 20, 2019.
See In Re Asset Integrity Management Solutions, Case No, 21-31262 (Bankr. S.D. Texas).
Through September 2022, defendants conducted discovery to learn information regarding the seizure of AIMS’s assets by PDB, and then PDB’s sale of AIMS’s assets to Composites. On October 10, 2022, defendants conducted the corporate deposition of AIMS, as well as the deposition of AIMS’s owner and manager, W. Christopher Beary.
In response to interrogatories, AIMS stated that it was wholly owned by BMD Holding Company, L.L.C. and that the majority owner of BMD throughout its history was W. Christopher Beary.
Thereafter, on October 25, 2022, defendants filed a motion to set the price of a redemption right, wherein they asked the trial court to declare that a sale of a litigious right had occurred and to set a price for that redemptive right. More specifically, defendants sought a judgment decreeing that the sale of AIMS’s assets from PDB to Composites included the sale of a litigious right and sought a determination as to actual price paid for the litigious right. Defendants argued that the trial court should set the actual price paid to redeem this litigation at $0 because the payments made by Composites on the Installment Note were paid to PDB—Composites paid nothing to AIMS for AIMS’s assets. Alternatively, defendants argued that the maximum amount that could be owed to redeem this litigation was the actual amount paid by Composites to PDB on the $5 million Installment Note: $375,821.55. However, because Composites acquired $3,075,069.83 of AIMS’s valued hard assets (61.50%), and $1,924,930.17 in non-valued soft assets 4(38.50%), defendants argued the trial, court should apportion the amount Composites paid ($375,821.55) by the percentage of the total amount of the soft assets purchased (38.50%). Therefore, defendants argued that the actual price paid to redeem this litigation should total $144,691.30.
Defendants also filed a motion for summary judgment, seeking a dismissal of AIMS’s claims on liability. As will be discussed infra, the trial court granted defendants’ motion for summary judgment. That judgment is the subject of the related appeal, 2023-CA-0531.
In their redemption motion, defendants incorrectly calculated the total amount of AIMS’s valued hard assets as $3,075,069.74, when the actual number is $3,075,069.83. See FN 18, infra. Accordingly, the percentage of valued hard assets is 61.50%, not 62.59%.
In their redemption motion, defendants incorrectly calculated the total amount of AIMS’s non-valued soft assets as $1,924,931.00, when the actual number is $1.924,930.17. See FN 18, infra. Accordingly, the percentage of valued hard assets is 38.50%. not 37.41%.
In their redemption motion, defendants incorrectly calculated this amount as $140,594.87, based on the calculation errors discussed in FNs 6 and 7, supra. The actual number is $144,691.30.
AIMS opposed defendants’ redemption motion. AIMS argued that the redemption price should be set at $5 million, which AIMS contended was the actual price paid for the transfer of its assets.
Prior to the filing of defendants’ redemption motion, AIMS filed a motion for partial summary judgment, seeking to bar defendants from raising the defense of litigious redemption. As will be discussed infra, the trial court denied AIMS’s motion for partial summary judgment. That interlocutory ruling is the subject of a supervisory writ application, 2023-CW-0296, which is not at issue in this appeal.
Initially, AIMS argued that Texas law applied to defendants’ redemption motion and that any potential right of redemption was extinguished by the "forced" sale exception to La. C.C. art. 2652. In the alternative, AIMS argued that if Louisiana law applied, the redemption price should be set at $5 million. We pretermit discussion of the choice of law issue and "forced" sale exception as those issues are not within the scope of the assignment of error raised by defendants in this appeal.
Following a hearing on defendants’ redemption motion, the trial court took the matter under advisement. On January 3, 2023, the trial court signed a judgment granting defendants’ redemption motion by determining that there was the sale of a litigious right and setting the price of redemption. The judgment decrees, "this was the sale of a litigious right and [the court] sets the price of redemption at five million dollars ($5,000,000.00)." The trial court issued written reasons for its judgment.
Defendants now appeal the trial court’s January 3, 2023 judgment that granted their motion to redeem a litigious right and set the price of redemption at $5 million. In their sole assignment of error on appeal, defendants argue that the trial court erred by setting the redemption price at $5 million.
Defendants filed a motion for devolutive appeal on February 2, 2023. The trial court signed an order of appeal on February 6, 2023, notice of which was transmitted by the clerk of court to the parties on February 7, 2023.
5In a supervisory writ application referred to this appellate panel, 2023-CW- 0313, filed by defendants out of an abundance of caution, defendants seek review of the trial court’s January 3, 2023 judgment, arguing that the trial court erred in setting the price of redemption for the sale of a litigious right at $5 million, and that the trial court’s judgment should be reversed.
See Asset Integrity Management Solutions, L.L.C. v. Cary A. Bourgeois and G.E.C., Inc., 2023-0313 (La. App. 1st Cir. 9/18/23) (unpublished writ action).
In the related appeal, 2023-CA-0531, Asset Integrity appeals the trial court’s January 3, 2023 judgment that granted summary judgment in favor of defendants and dismissed all of Asset Integrity’s claims, with prejudice. Also, in a supervisory writ application referred to that appellate panel, 2023-CW-0296, Asset Integrity seeks review of the trial court’s January 3, 2023 judgment that denied its motion for partial summary judgment. See Asset Integrity Management Solutions, L.L.C. v. Cary A. Bourgeois and G.E.C., Inc., 2023-0296 (La. App. 1st Cir. 6/2/23) (unpublished writ action). For purposes of consideration and submission only, this court consolidated the supervisory writ applications, 2023-CW-0296 and 2023-CW-0313. See Asset Integrity Management Solutions, L.L.C. v. Cary A. Bourgeois and G.E.C., Inc., 2023-0296, 2023-0313 (La. App. 1st Cir. 5/16/23) (unpublished writ actions).
LITIGIOUS REDEMPTION
[1] Louisiana Civil Code article 2652 provides a mechanism to a defendant in a pending lawsuit by which to end that suit when the plaintiff assigns or sells the claim to another person for a price. The defendant, or debtor, may extinguish the claim by paying the assignee the price that the assignee of the claim paid to get it. The debtor is said to redeem the claim asserted against him, and the process is therefore known as litigious redemption. See Dian Tooley-Knoblett and David Gruning, "Litigious rights," 24 La. Civ. L. Treatise, Sales § 14:4 (Nov. 2023 Update). The purpose of the Louisiana litigious redemption statute is to prevent unnecessary litigation by reducing the ability of third parties to buy and sell legal claims for profit. See Regions Bank v. Norris Rader of Lafayette, Inc., 2003-1665 (La. App. 3rd Cir. 7/14/04), 879 So.2d 904, 905 (citing Clement v. Sneed Brothers, 238 La. 614, 116 So.2d 269, 272 (1959)); CHS, Inc. v. Plaquemines Holdings, L.L.C., 735 F.3d 231, 235 (5th Cir. 2013) (citing Smith v. Cook, 189 La. 632, 180 So. 469, 470 (1937)).
[2] 6Louisiana Civil Code article 2642 provides, in pertinent part, that "[a]ll rights may be assigned, with the exception of those pertaining to obligations that are strictly personal." A strictly personal obligation is one "when its performance can be enforced only by the obligee, or only against the obligor." La. C.C. art. 1766. A litigious right is transferable by assignment pursuant to La. C.C. art. 2652. George v. Progressive Waste Solutions of La., Inc., 2022-01068 (La. 12/9/22), 355 So.3d 583, 587 n.4. The sale of litigious rights is governed by La. C.C. art. 2652, which provides:
When a litigious right is assigned, the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment, with interest from the time of the assignment.
A right is litigious, for that purpose, when it is contested in a suit already filed.
Nevertheless, the debtor may not thus extinguish his obligation when the assignment has been made to a co-owner of the assigned right, or to a possessor of the thing subject to the litigious right.
[3–5] For the purposes of litigious redemption, there must exist a suit and contestation on the same. Martin Energy Co. v. Bourne, 598 So.2d 1160, 1162 (La. App. 1st Cir. 1992). A right transferred after suit is instituted and an answer filed thereto, and before the judgment therein is final, is a litigious right, since there is a suit and contestation thereon. Nationstar Mortgage, LLC v. Unopened Succession of Michael Frederick Kehoe, 2021-0192 (La. App. 1st Cir. 11/1/21), 2021 WL 5356078, at *4 (unpublished), writ denied, 2021-01785 (La. 1/26/22), 332 So.3d 83. Additionally, if there are two or more persons litigating against the debtor, and one of them assigns his claim to another, the debtor may not redeem. La. C.C. art. 2652. Furthermore, the debtor may not redeem if the assignment was made to a "co-owner of the assigned right, or to a possessor of the thing subject to the litigious right." La. C.C. art. 2652.
[6] 7A debtor does not have an absolute right to redeem a litigious right. To be released, the debtor must pay the "real price of the transfer," whatever that price may be. Charrier v. Bell, 380 So.2d 155, 156 (La. App. 1st Cir. 1979), writ denied, 382 So.2d 165 (La. 1980). Louisiana Civil Code article 2652 requires that there be a "price in fact," i.e., "the price the assignee paid for the assignment, with interest from the time of the assignment." If the creditor should transfer his claim without setting a price, "it is not clear why litigious redemption should apply." See Tooley-Knoblett and Craning, "Litigious rights," 24 La. Civ. L. Treatise, Sales § 14:4.
[7, 8] If a litigious right is transferred with non-litigious rights in a lump sum transaction, an apportionment must be made in order to determine the amount of redemption. Martin Energy Co., 598 So.2d at 1163; Slocum-Stevens Insurance Agency, Inc. v. International Risk Consultants, Inc., 27,353 (La. App. 2nd Cir. 12/11/95), 666 So.2d 352, 357, writ denied, 96-0102 (La. 3/8/96), 669 So.2d 399. Moreover, the law does not require that the actual price paid for the litigious right be equal to the value of the right transferred. Martin Energy Co., 598 So.2d at 1163 (citing Caldarera v. O’Carroll, 551 So.2d 824, 825-27 (La. App. 3rd Cir. 1989), writ denied, 556 So.2d 60 (La. 1990)).
[9, 10] Louisiana jurisprudence further requires that the debtor act promptly in redeeming the litigious right. Conrad v. Swiss Chalet Picnic Grounds & Catering Service, 96-606 (La. App. 5th Cir. 12/30/96), 686 So.2d 1055, 1059, writ denied, 97-0299 (La. 3/21/97), 691 So.2d 87. Comment (b), Official Revision Comments—1993, to La. C.C. art. 2652 states, "a party seeking to redeem a litigious right that has been transferred must be prompt in making his intention known." See Clement, 116 So.2d at 271; Charrier, 380 So.2d at 156. A person may not fight the case on its merits until it is apparent that the case is lost and, at the last moment, exercise redemption. Martin Energy Co., 598 So.2d at 1163.
[11, 12] 8The granting of a motion for litigious redemption is analyzed under the manifest error standard of review, see Martin Energy Co., 598 So.2d at 1163-64, while the scope of appellate review for legal issues is to determine whether the trial court’s decision is legally correct. An appellate court owes no deference to the legal conclusions of the trial court if the trial court’s decision is based on an erroneous application of law rather than on a valid exercise of discretion. Voisin v. International Companies & Consulting, Inc., 2005-0265 (La. App. 1st Cir. 2/10/06), 924 So.2d 277, 279-80, writ denied, 2006-1019 (La. 6/30/06), 933 So.2d 132.
In Resell v. ESCO, 549 So.2d 840, 844 (La, 1989), the Louisiana Supreme Court set forth the standard of review of factual findings as follows:
It is well settled that a court of appeal may not set aside a trial court’s or a jury's finding of fact in the absence of ’'manifest error" or unless it is "clearly wrong," and where there is conflict in the testimony, reasonable evaluations of credibility and reasonable inferences of fact should not be disturbed on review, even though the appellate court may feel that its own evaluations and inferences are as reasonable…. Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be manifestly erroneous or clearly wrong. [Internal citations and footnote omitted.]
DISCUSSION
Applying the legal principles governing litigious redemption to the facts of the instant case, we must determine whether the trial court erred in setting the redemption price at $5 million. In their sole assignment of error, defendants argue that the trial court committed legal error by setting the redemption price of the litigious right at $5 million. Defendants argue that the redemption price should be limited to the price actually paid by Composites to AIMS for the assignment. Alternatively, defendants argue the redemption price should be the apportioned percentage of the amount actually paid by Composites to AIMS for the assignment.
The record shows that in 2015, AIMS, a Texas limited liability company, borrowed approximately $10 million from First NBC Bank through certain promissory notes. These loans were secured by substantially all of AIMS’s assets 9and were personally guaranteed by AIMS’s majority owner and manager, Mr, Beary, and Mr. Beary’s law firm, Beary & Oakes, L.L.C. ("B&O"). These promissory notes were made payable to First NBC Bank and were thereafter assigned by the Federal Deposit Insurance Corporation ("FDIC"), as Receiver for First NBC Bank, to OSPrin II, L.L.C. ("OSPrin") on October 18, 2017.
Mr, Beary is the owner of B&O.
OSPrin is not a party to this suit.
On October 22, 2019, Mr. Beary formed PDB, a Louisiana limited liability company. Mr. Beary is the majority owner and manager of PDB. On October 25, 2019, OSPrin assigned the aforementioned loans, secured by substantially all of AIMS’s assets, to PDB.
On December 19, 2019, the Texas limited liability company Composites was formed. Mr. Beary is also the majority owner and manager of Composites.
On December 20, 2019, PDB issued a notice of seizure to AIMS and seized substantially all of AIMS’s assets after AIMS defaulted on its loan obligations to PDB.
Again, we note that the "Notice of Seizure" bears the date December 20, 2018, but the correct date is December 20, 2019.
On December 31, 2019, though a Bill of Credit Sale (Installment), PDB sold substantially all of AIMS’s seized assets to Composites. The purported total purchase price for all of AIMS’s assets was $5 million, "together with the assumption of certain liabilities" (none of the "certain liabilities" were enumerated in the bill of sale). Composites executed an Installment Note in favor of PDB in the amount of $5 million. The Installment Note provided that Composites was required to pay $35,821.55 per month to PDB, beginning on February 1, 2020.
10Attached to the Bill of Credit Sale (Installment) were various schedules listing all of AIMS’s assets sold by PDB to Composites. These assets included "hard" assets, such as inventory, deposit accounts, accounts receivable, and equipment. AIMS’s assets also included "soft" assets, such as contract rights, intellectual property, and claims and causes of action.
Schedule A(1) Inventory, valued at $1,270,801,59; Schedule A(2) - Equipment, valued at $108,603.35; Schedule A(3) - Contract Rights, no dollar value assigned; Schedule A(4) - Deposit Accounts and Prepaid Expenses, valued at $193,299.89; Schedule A(5) Intellectual Property, no dollar value assigned; Schedule A(6) - Accounts Receivable, valued at $1,502,365.00; Schedule A(7) - Claims and Causes of Action, no dollar value assigned; and Schedule A(8) - Excluded Assets, listed as " None ."
Included in Schedule A(7) - Claims and Causes of Action was the litigious right comprising the instant lawsuit: "All claims against G.E.C., Inc., including those pending in the 23rd Judicial District Court for the Parish of Ascension, State of Louisiana," and "All claims against Cary A. Bourgeois, including those pending in the 23rd Judicial District Court for the Parish of Ascension, State of Louisiana." Schedule A(7) - Claims and Causes of Action did not list a monetary value for any of the identified claims and causes of action included in the asset sale.
Composites paid the first installment payment to PDB in February, and thereafter made only two other payments to PDB, for a total of $375,821.55 paid towards Composites’ $5 million obligation under the Installment Note. According to the record, the remaining installment payments were deferred due to the effects of the COVID-19 pandemic.
Sale of Litigious Rights
[13] We agree with the trial court that the sale of litigious rights occurred. A suit existed—the instant lawsuit was filed on September 27, 2018, by AIMS against defendants. AIMS raised tort claims, including professional negligence and malpractice claims. And, the suit was contested by defendants, who filed answers thereto, disputing liability and asserting affirmative defenses to AIMS’s tort 11allegations. See Martin Energy Co., 598 So.2d at 1162; Nationstar Mortgage, LLC, 2021 WL 5356078, at *4. After the filing of the suit and contestation thereof, AIMS’s debt— secured by substantially all of its assets, including the litigious right to the instant lawsuit—was assigned by the FDIC to OSPrin, and later assigned by OSPrin to PDB. PDB foreclosed on AIMS’s debt and seized substantially all of its assets. PDB then sold substantially all of AIMS’s assets to Composites for the price of $5 million. Included in that sale was the litigious right to the instant litigation.
Price of Redemption
[14] The issue before this court is whether the trial court erred in determining that $5 million was the "real price of the transfer" of the litigious right, i.e., "the price the assignee paid for the assignment, with interest from the time of the assignment." See La. C.C. art. 2652; Charrier, 380 So.2d at 156. In its written reasons for setting the price of redemption at $5 million, the trial court stated:
This Court finds that the real transfer price of five million dollars ($5,000,000) is the price of redemption. In Louisiana, the sale of a litigious right is governed by Louisiana Civil Code article 2652. This code article provides that a defendant may have himself released by paying the transferee the real price of the transfer, with interest from its date. According to Louisiana jurisprudence and statutory language, the party wishing to be released must pay the real price of the transfer, and in this matter that is five million dollars. Here, Composites executed a $5,000,000.00 promissory note to PDB as consideration for the sale of AIMS’ as
sets, and this is the real transfer price. Although defendants assert that the transfer price ranges anywhere from zero ($0) through the amount paid to date on the note, this is incorrect under Louisiana law. Defendants assert that $357,821.55 is the transfer price, however, this is the amount [paid] to PDB as of today as payments are temporarily deferred due to the effects of COVID-19. Louisiana Civil Code [a]rticle 2652 does not contemplate the real price as the price paid as of today, but the real price/total price. Here, there is a $5,000,000.00 promissory note executed by Composites to PDB for all assets belonging to AIMS, including all rights to this litigation. [Footnote omitted.]
12There is no question that the litigious right to the instant lawsuit was transferred as an "unvalued" asset in the sale from PDB to Composites. The schedules attached to the Bill of Credit Sale (Installment) did not list a monetary value for any of the identified claims and causes of action included in the asset sale. From the evidence submitted in support of and in opposition to the defendants’ redemption motion, it is impossible to ascertain what price Composites paid to PDB for the transfer of the litigious right. Of the $5 million purchase price, only $3,075,069.83 of the total assets were valued, leaving $1,924,930.17 in unvalued assets. As discussed supra, if a litigious right is transferred with non-litigious rights in a lump sum transaction, an apportionment must be made in order to determine the amount of redemption. Martin Energy Co., 598 So.2d at 1163; Slocum-Stevens Ins. Agency, Inc., 666 So.2d at 357 (Emphasis added). For these reasons, we find that the trial court erred in failing to apportion the litigious and non-litigious rights when it decreed that the real transfer price of five million dollars ($5,000,000) was the price of redemption.
As discussed in FNs 6, 7, and 18, supra, 61.50% of AIMS’s "hard" assets were valued, while 38.50% of AIMS’s "soft" assets were not valued.
[15] As this court has previously stated, the trial court is the appropriate forum to receive evidence and resolve issues regarding the sale of litigious rights. Osprin, LLC v. Leggett, 2021-0653 (La. App. 1st Cir. 5/19/22), 342 So.3d 906, 907. Therefore, we must remand this matter to the trial court for the limited purpose of determining the actual price paid for the transfer of the litigious right in order that defendants may elect, if they desire, to redeem the litigation pursuant to La. C.C. art. 2652. We again note that the law does not require that the actual price paid for the litigious right be equal to the value of the right transferred. Martin Energy Co., 598 So.2d at 1163.
13 CONCLUSION
[16] Accordingly, we remand this matter to the trial court for the limited purpose of adducing evidence to determine the actual price paid for the transfer of the litigious right at issue in order to determine the amount of redemption pursuant to La. C.C. art. 2652. As our Supreme Court recognized in Clement, we have a "duty to obviate any undue delay in the hearing of the appeal which may be sustained as a result of the remand." Clement, 116 So.2d at 272. Thus, we instruct the trial court to complete the remand within ninety days after all appeal delays have expired from this judgment to ensure that the remand does not cause the parties to lose their docket preference or to suffer unnecessary delay in any potential future appeals. See, e.g., Clement, 116 So.2d at 272; Regions Bank, 879 So.2d at 906. DECREE
We affirm the portion of the trial court’s January 3, 2023 judgment that granted a motion filed by defendants-appellants, Cary A. Bourgeois and G.E.C, Inc., to redeem a litigious right. We reverse the portion of the trial court’s January 3, 2023 judgment that set the price of redemption at $5 million. We remand this matter to the trial court with instructions that it hold a hearing within ninety days after all appeal delays have expired from this judgment, so that the trial court may adduce evidence to determine the amount necessary for defendants-appellants, Cary A. Bourgeois and G.E.C, Inc., to redeem the litigious right pursuant to La. C.C. art. 2652, should they so choose. We deny the supervisory writ application, 2023-CW-0313, filed by defendants-relators, Cary A. Bourgeois and G.E.C, Inc., as moot. All costs of this appeal are assessed to plaintiff-appellee-respondent, Asset Integrity Management Solutions, L.L.C.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH INSTRUCTIONS; WRIT DENIED AS MOOT.