Opinion
2018 CA 0544
02-14-2019
JOHN W. DAVIS, CPA, LLC v. FAMILY HEALTH CENTERS, INC. D/B/A CHANNELL DRUGS
Randall A. Smith J. Geoffrey Ormsby Reagan R. Wilty New Orleans, Louisiana Attorneys for Plaintiff/Appellee, John W. Davis Glen Galbraith Hammond, Louisiana Attorney for Defendants/ Appellants, Family Health Centers, Inc.; Samuel and Patricia Magee; Michael and Connie Tinnerello; Albany Pharmacy, L.L.C.; Dutchtown Pharmacy, LLC; Channel Shopping Center, L.L.C.; Channel Shopping Center No. 2, L.L.C.; Wet Gulch, L.L.C.; Dry Gulch, L.L.C.; SMPS, Inc.; MTCS, Inc.; Secesh, LLC; and Children First Kid Med, LLC
NOT DESIGNATED FOR PUBLICATION On Appeal from the 21st Judicial District Court In and for the Parish of Tangipahoa State of Louisiana
Trial Court Number 2008-0001268 Honorable Robert H. Morrison, III, Judge Presiding Randall A. Smith
J. Geoffrey Ormsby
Reagan R. Wilty
New Orleans, Louisiana Attorneys for Plaintiff/Appellee,
John W. Davis Glen Galbraith
Hammond, Louisiana Attorney for Defendants/ Appellants,
Family Health Centers, Inc.; Samuel
and Patricia Magee; Michael and
Connie Tinnerello; Albany Pharmacy,
L.L.C.; Dutchtown Pharmacy, LLC;
Channel Shopping Center, L.L.C.;
Channel Shopping Center No. 2,
L.L.C.; Wet Gulch, L.L.C.; Dry
Gulch, L.L.C.; SMPS, Inc.; MTCS,
Inc.; Secesh, LLC; and Children First
Kid Med, LLC BEFORE: GUIDRY, THERIOT, AND PENZATO, JJ. PENZATO, J.
This is an appeal from a trial court judgment, as amended and supplemented, finding that John Davis possesses a 49% ownership interest in Secesh, LLC ("Secesh"), ordering Samuel Magee to transfer $1,365,732.00 to Secesh, and dissolving Secesh.
FACTS AND PROCEDURAL HISTORY
This case arises out of a long-term business relationship between Mr. Magee and Mr. Davis. In 1982, Family Health Centers, Inc. ("Family Health"), which was solely owned by Mr. Magee and his wife Patricia, began operating Channell Drugs, a pharmacy located in Hammond, Louisiana. Through the years, Mr. Magee's business expanded to include other pharmacies and real estate developments. Beginning in 1982, Mr. Davis, a certified public accountant, began performing accounting work for Mr. Magee and his businesses. From 1982 until October of 2007, Mr. Davis was the only accountant that Mr. Magee used for his personal and business matters. During that time, Mr. Davis became involved in the ownership of some of Mr. Magee's business ventures.
In 2007, Mr. Magee began to plan for his eventual retirement and employed an outside accounting firm to assist in the consolidation of his business operations. During that process, a number of discrepancies were identified in the financial records of the businesses. In November of 2007, Mr. Magee fired Mr. Davis as a result of the irregularities that were discovered.
The State Board of Certified Public Accountants of Louisiana ("Board") revoked Mr. Davis's license based upon a finding of dishonesty, fraud, and professional incompetence in connection with the accounting work he performed for Mr. Magee and the Magee entities.
In 2008, John W. Davis, CPA, LLC ("Davis LLC"), filed a petition against Family Health for a declaratory judgment recognizing that the two entities had formed a partnership with respect to the operation of Channell Drugs and for an award of any amounts owed to it as a result of that partnership. Family Health filed several exceptions in response to the petition, including a peremptory exception raising the objection of no right of action, wherein it alleged that Davis LLC did not enter into the partnership described in the petition, because the limited liability company did not exist at the time the alleged partnership was formed. Thereafter, Family Health filed an answer and incidental demands to the petition. In that same pleading, Michael Tinnerello, Mr. and Mrs. Magee, and the following entities asserted a petition to intervene: SMPS, Inc., Albany Pharmacy, L.L.C., Dutchtown Pharmacy, L.L.C., Channel Shopping Center, L.L.C. (No. 1 and No. 2), Wet Gulch, L.L.C., Dry Gulch, L.L.C., and MTCS, Inc. Relevant herein, pursuant to the petition for intervention, the intervenors sought to add several more defendants to the suit, including Secesh and Mr. Davis, and sought the judicial dissolution of Secesh, a limited liability company of which Mr. Magee and Mr. Davis were members. By a first amending and supplemental petition, Davis LLC added additional plaintiffs to the action, including Mr. Davis individually, and named additional defendants to the action, including most of the intervenors and Secesh. Also in the amended petition, Mr. Davis sought a declaration from the court that he possessed a 57.22727% ownership in Secesh.
We observe that these actions by the intervenors were improper, as it is well settled that an intervenor takes the proceedings as he finds them. IberiaBank v. Live Oak Circle Development, L.L.C., 2012-1636 (La. App. 1 Cir. 5/13/13), 118 So. 3d 27, 32. Adding additional claims and parties to a pending action is not permitted by way of intervention. See Leger v. Kent, 2001-2241 (La. App. 4 Cir. 4/24/02), 817 So. 2d 305, 309; Wallace v. Nathan, 96-119 (La. App. 5 Cir. 7/30/96), 678 So. 2d 595, 598.
Following a trial regarding the various business relationships between the parties and a resulting judgment signed on April 20, 2017, the parties successfully mediated all claims other than those related to Secesh. This appeal concerns only the trial court's rulings related to Secesh.
The only intervenor not named was Channel Shopping Center, No. 2 L.L.C.
On September 15, 2014, the plaintiffs filed a fourth amending and supplemental petition alleging that Mr. Davis and Mr. Magee had entered into an agreement to own and operate a pharmacy in Ascension Parish, Louisiana, and in furtherance thereof, Mr. Magee purchased a tract of land in Ascension Parish, Louisiana, for the construction of a shopping center ("Ascension Parish property"). The plaintiffs alleged that Secesh was formed pursuant to an agreement between Mr. Davis and Mr. Magee that the Ascension Parish property, together with the shopping center to be constructed thereon, would be transferred to Secesh. The plaintiffs further alleged that following completion of the building and improvements in July 2006, Secesh, as lessor, executed leases with the following tenants of the shopping center, Dutchtown Pharmacy, LLC, Triangle Venture Associates, Inc., and Randall T. Pierce, RTP Sports Nutrition, Inc. and/or Pierce Nutrition, LLC ("Smoothie King"). However, in October of 2009, the plaintiffs claimed Mr. Magee had all rental payments diverted to himself. The plaintiffs prayed that Mr. Davis be awarded damages for what they alleged were Mr. Magee's fraudulent actions and prayed for legal interest in connection therewith.
Mr. Davis and Mr. Magee each owned a ¼ share of Dutchtown Pharmacy, LLC.
At trial, however, Mr. Magee testified that Secesh did not lease property to Triangle, because Secesh did not own the property that Triangle leased.
The matter eventually proceeded to a trial on the merits. As to Secesh, the evidence showed that in September of 2005, Mr. and Mrs. Magee acquired the Ascension Parish property for $632,883.24. Mr. Davis testified that he was given power of attorney by Mr. and Mrs. Magee to purchase the Ascension Parish property for the purpose of placing it in two Roth IRAs owned by Mr. and Mrs. Magee, with a 50% undivided interest in each. Shortly after the land was purchased, Secesh was formed. Mr. Davis proposed that he become a 50% owner of Secesh, and during the construction of the shopping center, Mr. Davis paid $600,000.00. Once the shopping center was complete, Secesh entered into leases with Dutchtown Pharmacy and Smoothie King, also located in the shopping center. Secesh received rental payments from Dutchtown Pharmacy and Smoothie King until 2010, at which time Mr. Magee began personally accepting the rental payments.
The Board concluded that the use of Roth IRAs in the manner implemented by Mr. Davis is considered to be abusive tax shelters by IRS Regulations and guidelines, subjecting those entities and their investors to serous risks of adverse action by the IRS.
Mr. Davis testified that the business purpose of Secesh was to own the Ascension Parish property and the associated leases. In contrast, Mr. Magee testified that Secesh was not formed to own the Ascension Parish property; it was simply an entity formed to share in the profits received from the leases on the Ascension Parish property.
Following trial, the trial court issued reasons for judgment on February 3, 2017. With regard to Secesh, the trial court accepted Mr. Magee's testimony that Secesh was formed to share in the profits received from lease payments from tenants, finding it significant that no instrument translative of title was ever confected. There was evidence that Secesh received rental payments and was listed as lessor in leases. The trial court found that Mr. Magee terminated the leases, including that to Dutchtown Pharmacy. With regard to Mr. Magee's contention that ownership of Secesh by the parties' Roth IRAs would have been illegal, the trial court found that while it might have resulted in tax consequences, it did not void the agreement. The trial court concluded that Mr. Davis is the owner of a 49% share in Secesh and that Secesh is entitled to the net rentals from the Ascension Parish property, at the rental values originally negotiated. The trial court further concluded that, having made the original agreement and accepting Mr. Davis's contribution, Mr. Magee could not unilaterally terminate the leases.
A judgment in accordance with the trial court's reasons was signed on April 20, 2017. In relevant part, the April 20, 2017 judgment declared that Mr. Davis possesses a 49% ownership interest in Secesh; denied Mr. Davis's claim for breach of fiduciary duty by Mr. Magee for failure to transfer title of immovable property; ordered Mr. Magee to pay Secesh net rentals from the Ascension Parish property at the rental values originally negotiated; ordered that the leases on the Ascension Parish property remain in effect with Secesh as lessor; and denied Mr. Davis's claim for the return of $600,000.00 in capital.
Following the rendition of the April 20, 2017 judgment, the parties entered into mediation and all claims were settled except for those related to Secesh. Thereafter, both Mr. Davis and Mr. Magee filed motions for new trial based upon the failure of the April 20, 2017 judgment to include the dollar amount that Mr. Magee was ordered to pay to Secesh. A hearing was held on the motions for new trial, and on August 22, 2017, the trial court issued supplemental reasons for judgment. The trial court found that based upon the evidence introduced at trial regarding the rentals from the Ascension Parish property, Mr. Magee received rental income through the date of trial that was due to Secesh in the amount of $1,365,732.00. The trial court further found that the parties were in agreement that Secesh should be dissolved and therefore ordered its dissolution or liquidation.
The motion for new trial, as well as the motion for appeal, was filed by Family Health, the intervening parties, Connie Tinnerello, and Secesh. However, as Mr. Magee is the only party aggrieved by the trial court's judgments, we refer to the movers and appellants as simply "Mr. Magee." We further note that although Secesh is included as a party in this appeal, Mr. Magee argues in his brief that the trial court was "manifestly wrong" in awarding damages to Secesh.
A judgment was signed on October 25, 2017, ordering that Mr. Magee transfer $1,365,732.00 to Secesh; that thereafter, Secesh be dissolved or liquidated by a mutually agreed upon liquidator; that as a part of the dissolution/liquidation proceedings, the capital contribution of Mr. Davis of $600,000.00 be recognized; and that no disbursements from the Secesh account be made without prior court approval. Mr. Magee appealed the October 25, 2017 judgment and "the earlier April 26, 2017 judgment, to any extent it has not been superseded by the later judgment." Mr. Davis answered the appeal, seeking a modification of the October 25, 2017 judgment so as to specifically provide for an award of legal interest from the date of judicial demand.
RULE TO SHOW CAUSE
On April 26, 2018, this court, ex proprio motu, issued a rule to show cause order indicating the following apparent defects in the appeal: (1) no signed motion and order of appeal in the record relating to the April 20, 2017 judgment; (2) no definitive ruling on the two motions for new trial that were filed in relation to the April 20, 2017 judgment; and (3) to the extent that the October 25, 2017 judgment could be construed as granting, in part, one of the motions for new trial, the trial court did not sign an amended judgment incorporating any modifications to the April 20, 2017 judgment.
In response, the parties filed a joint motion to correct and/or supplement the record, which was denied by this court on July 23, 2018. On the same date, this court issued an interim order remanding the case to the trial court for the following limited purposes: (1) to allow the parties to submit an amended judgment to the trial court to sign that clearly states the relief granted by the April 20, 2017 judgment as amended pursuant to the partial new trial; (2) to allow the parties to obtain concrete rulings on their respective motions for new trial; and (3) to allow the parties to obtain an order of appeal correctly specifying the judgment on appeal. The rule to show cause was referred to this panel as the panel to which the appeal is assigned.
On August 6, 2018, the trial court signed an "Amending and/or Supplemental Judgment," which granted both motions for new trial and amended the April 20, 2017 judgment to order that Mr. Magee transfer $1,365,732.00 to Secesh. The August 6, 2018 judgment further ordered that the April 20, 2017 judgment be amended and/or supplemented to order that Secesh be dissolved after the transfer of the $1,365,732.00, and, as part of the dissolution/liquidation proceeding, the $600,000.00 capital contribution of Mr. Davis be recognized, with all other decrees of the April 20, 2017 judgment remaining the same. A revised order of appeal was signed granting Mr. Magee an appeal of the judgments signed on August 6, 2018, October 25, 2017, and April 20, 2017. The appellate record was supplemented with the amended judgment and order of appeal. We find that the August 6, 2018 judgment and the amended order of appeal address the issues raised in this court's show cause order. Therefore, we dismiss the rule to show cause and maintain the appeal.
ASSIGNMENTS OF ERROR
Mr. Magee sets forth the following assignments of error:
1. The trial court erred by enforcing a contract based on an oral promise to transfer real estate.
2. The trial court erred by enforcing a contract where there was no meeting of the minds.
3. The trial court erred in enforcing an oral contract with value greater than $500.00 based on the testimony of one witness with no independent corroborating circumstances.
4. The trial court erred by enforcing a contract, the object of which was neither determined nor determinable.
STANDARD OF REVIEW
A court of appeal may not set aside a trial court's finding of fact in the absence of manifest error or unless it is clearly wrong. Under the manifest error standard, in order to reverse a trial court's determination of fact, an appellate court must review the record in its entirety and (1) find that a reasonable factual basis does not exist for the finding, and (2) further determine that the record establishes that the fact finder is clearly wrong or manifestly erroneous. Kushi Healthcare, L.L.C. v. St. James Behavioral Health Hosp., Inc., 2015-0007 (La. App. 1 Cir. 6/5/15), 174 So. 3d 1192, 1197.
DISCUSSION
In his first assignment of error, Mr. Magee contends that a contract as alleged by Mr. Davis whereby Mr. Magee would transfer the Ascension Parish property to Secesh, would be null because a contract transferring immovable property must be in writing. In his third assignment of error, he asserts that the Louisiana Civil Code's requirements for proving an oral contract to transfer real estate were not met.
The April 20, 2017 judgment denied Mr. Davis's claim regarding the transfer of the title to the Ascension Parish property to Secesh. The trial court accepted Mr. Magee's testimony that Secesh was formed to receive rental payments. After a thorough review of the record, we find no manifest error in the trial court's conclusion. Thus, these assignments of error are without merit.
In his second assignment of error, Mr. Magee argues that because there was no "meeting of the minds" as to the ownership of the Ascension Parish property, there can be no contract.
A contract is formed by consent of the parties established through offer and acceptance that may be made orally, in writing, or by action or inaction that under the circumstances is clearly indicative of consent. La. C.C. art. 1927. However, where there is no "meeting of the minds" between the parties, there is no consent, and thus, no enforceable contract. Key Office Equip., Inc. v. Zachary Community School Bd., 2015-1412 (La. App. 1 Cir. 4/15/16), 195 So. 3d 54, 60, writ denied, 2016-0841 (La. 6/17/16), 192 So. 3d 772.
In this case, the testimony reveals that Mr. Davis approached Mr. Magee with an offer to purchase a 50% ownership in Secesh. Mr. Davis paid and Mr. Magee accepted $600,000.00 for Mr. Davis's ownership interest. Mr. Magee acknowledged that he received from Mr. Davis $600,000.00 and that Mr. Davis is a 50% owner in Secesh. Thus, it is clear that there was an enforceable contract regarding Mr. Davis's ownership interest in Secesh. The trial court concluded that Mr. Davis possessed a 49% ownership interest in Secesh. As noted above, the trial court further accepted Mr. Magee's testimony as to the ownership of the Ascension Parish property, an issue distinct from the enforceable contract regarding the parties' ownership interest in Secesh. Finding no manifest error in the trial court's conclusion, we find this assignment of error to be without merit.
At the trial of this matter, evidence was introduced as to the funds expended for acquisition of the Ascension Parish property and the cost of constructing the shopping center thereon. The trial court's determination that Mr. Davis's capital contribution of $600,000.00 entitled him to a 49% ownership interest in Secesh (rather than the 50% interest acknowledged by Mr. Magee) is not challenged by either party on appeal. --------
In his final assignment of error, Mr. Magee contends that the contract regarding Secesh is unenforceable because it is not possible to determine how long Secesh was entitled to collect rent on the Ascension Parish property. Mr. Magee acknowledged that Secesh was a limited liability company of which Mr. Magee and Mr. Davis were members. The formation and operation of limited liability companies in Louisiana is governed by La. R.S. 12:1301, et seq. A limited liability company may conduct business for any lawful purpose. La. R.S. 12:1302. A limited liability company is authorized to conduct business until its dissolution. See La. R.S. 12:1334.
The trial court found that the purpose of Secesh was to share in the profits received from lease payments from tenants of the Ascension Parish property at the rental values originally negotiated, which is a lawful purpose. The trial court further ordered the judicial dissolution of Secesh. After a thorough review of the record, we find no manifest error in the trial court's conclusion. Thus, this assignment of error is without merit.
ANSWER TO APPEAL
In his answer to the appeal Mr. Davis argues that the trial court erred in failing to include legal interest in its award of $1,365,732.00 to Secesh. However, Mr. Davis is not the proper party to assert this claim. As Secesh has not answered the appeal, and this issue was not raised in the appeal purportedly taken on behalf of Secesh, we decline to modify the trial court judgment in this regard. See La. C.C.P. art. 2133.
CONCLUSION
For the foregoing reasons, the judgment of April 20, 2017, as amended and supplemented by the judgment of August 6, 2018, is affirmed. All costs of this appeal are assessed against Samuel Magee.
AFFIRMED.