Opinion
NO. 23-CA-417
05-29-2024
Judith PETIT v. Phyllis PETIT
COUNSEL FOR PLAINTIFF/APPELLEE, JUDITH PETIT, Martha J. Maher, New Orleans COUNSEL FOR DEFENDANT/APPELLANT, PHYLLIS PETIT AND LE PETIT CAFE EARTH SCHOOL, INC., James M. Garner, Ryan O. Luminais, New Orleans
ON APPEAL FROM THE FIRST PARISH COURT, PARISH OF JEFFERSON, STATE OF LOUISIANA, NO. 172-402, DIVISION "A", HONORABLE MARK J. DOHERTY, JUDGE PRO TEMPORE, PRESIDING
COUNSEL FOR PLAINTIFF/APPELLEE, JUDITH PETIT, Martha J. Maher, New Orleans
COUNSEL FOR DEFENDANT/APPELLANT, PHYLLIS PETIT AND LE PETIT CAFE EARTH SCHOOL, INC., James M. Garner, Ryan O. Luminais, New Orleans
Panel composed of Judges Fredericka Homberg Wicker, Jude G. Gravois, and Stephen J. Windhorst
GRAVOIS, J.
1Phyllis Petit appeals a trial court judgment in favor of her sister, Judith Petit. The judgment ordered Phyllis to return $11,418 to Judith and dismissed Phyllis’ reconventional demand against Judith. We are called to answer two issues in this appeal: Did the trial court legally err when it dismissed Phyllis’ reconventional demand against Judith after finding her prescribed claim against Judith could not be used as a defense to Judith’s claims against her? Also, was the trial court manifestly erroneous or clearly wrong when it found Phyllis liable to Judith for breach of contract and conversion? Our answer is "no" on both counts. We affirm.
PROCEDURAL STATUS AND FACTS FOUND AT TRIAL
On January 25, 2022, plaintiff, Judith Petit, sued her sister, Phyllis Petit, for breach of contract and conversion of funds. Judith alleged she and Phyllis entered into a verbal contract in August 2019, whereby Phyllis agreed to hold $11,418 for Judith. Judith, a recovering alcoholic, did not feel comfortable managing the money. Phyllis has since refused to return the money. Judith acknowledged in the petition that in September 2019, she was employed at Phyllis’ business, Le Petit Cafe Coffee House, and was arrested for theft of less than $1,000. She pled guilty and paid Phyllis restitution of $1,000, plus all fines, costs, and probation fees.
In response to Judith’s suit, Phyllis filed an answer, affirmative defenses, and a reconventional demand against Judith and her son, Arthur Loyacano, Jr., for breach of contract and conversion. Phyllis alleged Judith helped manage and operate the cafe from 2016 until September 2019, when she was arrested. During that time, Judith and Arthur would come to the cafe in the middle of the night and take money from the register and the video poker machines. Phyllis claimed Judith breached her duty and obligation owed as an employee and took approximately $90,000 from her and her business.
Le Petit Cafe Earth School, Inc. was also named as a plaintiff-in reconvention.
2Trial of the matter took place on March 14, 2023. Hylton Petit, Jr., Judith and Phyllis’ brother, testified that sometime in either 2005 or 2006, he agreed to manage $350,000 for Judith, money she had received in settlement of an automobile accident claim. Judith was not confident in handling this money herself. Get- ting "aggravated" with the duties of managing the money, Hylton returned the balance of Judith’s funds—$11,418—to her by check on August 21, 2019. He then observed both Judith and Phyllis endorse the check. A copy of the check was admitted into evidence at trial.
Judith testified she wanted to keep the last of her settlement money "in a safe place." Phyllis verbally agreed to hold the money for her. They did not discuss where Phyllis would keep the money or any details regarding her management of the money.
Judith worked for Phyllis off and on from 1994 or 1995 until she was arrested for theft in September 2019. Judith admitted to taking between $500 and $600 from Phyllis’ business in the thirty days prior to her arrest. She testified she went to the cafe a few times in the middle of the night and took $40 each time. She was under the influence of alcohol at the time. She paid $1,000 in restitution and completed probation. After being arrested, she tried to ask Phyllis for her money back, but could not get in touch with her. Phyllis has not returned any of the $11,418 to Judith.
Phyllis testified she received a check for $11,418 from Judith and deposited the money into one of her accounts. She and Judith did not have a written agreement detailing how the funds were to be managed or distributed. Phyllis understood she was holding the money so Judith would not give it to her son, Arthur, who had a drug problem. Phyllis stated Judith asked her for the money back, but she did not return the money because Judith had been stealing money from her "constantly every day and night." On September 21, 2019, Judith was arrested after Phyllis discovered the register at the cafe was short $300. The next day, Phyllis reviewed surveillance videos from the cafe and observed Judith and Arthur going into the cafe after hours on multiple occasions and taking cash from the register. She observed 3Judith go in 26 times and take money between September 7, 2019 and September 20, 2019. After watching the videos, Phyllis had Judith arrested again. Phyllis determined $90,000 was taken based on the cafe’s tax returns from 2016 through 2021 and the sales growth after Judith was arrested.
Because the videos did not show the date and time they were taken, the trial court did not accept them as evidence.
In her post-trial memorandum, Judith argued Phyllis did not prove Judith stole $90,000 from her, but even if she had, Phyllis’ case was prescribed since she discovered the theft in September 2019 and did not file her reconventional demand until 2022. Phyllis asserted in response her claims against Judith can be used as defenses of offset and/or recoupment pursuant to La. C.C.P. art. 424.
In open court on April 12, 2023, the trial court orally dismissed the reconventional demand and ordered Phyllis to return the $11,418 to Judith. A written judgment with reasons to this effect was signed that same day. Subsequent to the filing of this appeal, this Court remanded the matter to the trial court with an order to amend the judgment to include the necessary decretal language. On April 10, 2024, the court signed an amended judgment in favor of Judith, awarding her $11,418 and dismissing the reconventional demand.
In separate reasons for judgment, the court found it was uncontroverted the $11,418 belongs to Judith and Phyllis took possession of the money at Judith’s request. The court stated under La. C.C.P. art. 1041, because Phyllis’ claim against Judith was prescribed at the time Judith filed suit, it could not be used as an offset against Judith’s claims against Phyllis. The Court pretermitted consideration of whether Phyllis proved Judith’s alleged thefts from her over the period from 2016-2019.
On appeal, Phyllis argues the trial court legally erred when it found the claims in her reconventional demand cannot be used as defenses in this case. She asserts La. C.C.P. art. 424 allows a party to use a prescribed obligation as a defense. She also argues the trial 4court legally erred by finding her liable for breach of contract and conversion.
Applicability of Louisiana Code of Civil Procedure art . 424
Phyllis first argues the trial court committed legal error when it found the prescribed obligation in her reconventional demand could not be used as a defense to Judith’s petition. She contends La. C.C.P. art. 424 expressly allows for such, and La. C.C.P. art.1041 does not trump Article 424 as the trial court found. Phyllis argues Article 1041 serves a different purpose and the two code articles can and do co-exist.
[1, 2] In its reasons for judgment, the trial court acknowledged Article 424 allows a prescribed obligation to be used as a defense, but found the prescribed claim can only be so used as long as the claim was not barred at the time the initial claim was filed, as stated in Article 1041. Article 1041 provides, in pertinent part: "An incidental demand is not barred by prescription or peremption if it was not barred at the time the main demand was filed and is filed within ninety days of date of service of main demand …" Because Phyllis’ claim of theft or conversion was long prescribed at the time Judith filed her petition, we conclude it does not meet the criteria of Article 1041, and thus, Article 1041 is not applicable herein.
Although an appeal is taken from a final judgment and not from the trial court's reasons for judgment, an appellate court may consider the reasons for judgment in determining whether the trial court committed a legal error. See Winfield v. Dih, 01-1357 (La. App. 4 Cir. 4/24/02), 816 So.2d 942, 948.
Nevertheless, even though Article 1041 is not applicable, Article 424 may still be applicable. Article 424 provides, in pertinent part:
A person who has a right to enforce an obligation also has a right to use his cause of action as a defense.
Except as otherwise provided herein, a prescribed obligation arising under Louisiana law may be used as a defense if it is incidental to, or connected with, the obligation sought to be enforced by the plaintiff. …
(Emphasis added.
In Dixie Bldg. Materials Co., Inc. v. Bob L. Whittington & Associates, Inc., 588 So.2d 78 (La. 1991), the plaintiff, the seller of building materials, sued the homeowner for payment of concrete mix provided to the homeowner’s subcontractor. In response, the homeowner filed a reconventional demand asserting the seller was the manufacturer and was liable for the defective concrete. The trial court dismissed the reconventional demand, and on appeal, the seller filed an exception of prescription. This Court sustained the exception and found the reconventional demand was not filed within one year from date of discovery or within the ninety-day statutory period under Article 1041 (previously La. C.C.P. art. 1067). The Louisiana Supreme Court in a per curium opinion reversed. The court found though the reconventional demand was not filed within 90 days of service of the main demand under Article 1041, "[Article] 424 allows a prescribed obligation to be used as a defense if it is incidental to, or connected with, the obligation sought to be enforced by the plaintiff." Because the claim for defective concrete in the reconventional demand was incidental to the main demand for payment of the concrete, it could be used as a defense.
[3] Additional jurisprudence has acknowledged pursuant to Article 424, a prescribed obligation can be used as a defense if it is incidental to, or connected with, the obligation sought to be enforced by the plaintiff. See Lamar Contractors, LLC v. SRF Grp, Consulting, LLC, 22-212 (La. App. 5 Cir. 2/1/23), 358 So.3d 885, 890, writ denied, 23-298 (La. 5/23/23), 360 So.3d 1262; Hennessey Const. Corp. v. Halpern, 06-1099 (La. App. 4 Cir. 1/31/07), 952 So.2d 739, 741. Therefore, we conclude the trial court legally erred by pretermitting the application of Article 424 because Phyllis’ claim was prescribed at the time Judith’s suit was filed.
[4] Nevertheless, for Article 424 to be applicable, the prescribed obligation being used as a defense must be "incidental to, or connected with, the obligation sought to be enforced by the plaintiff." In Peyton Place, Condo. Associates, Inc. v. Guastella, 08-365 (La. App. 5 Cir. 5/29/09), 18 So.3d 132, 145, this Court discussed this requirement:
6La. C.C.P. art. 424 is based upon Article 20 of the Louisiana Code of Practice of 1870, which is in turn based on the Roman law maxim quae temporalia sunt ad agendum perpetua sunt ad excipiendum ("things which are temporary for the purposes of attack are permanent for the purposes of defense"). La. C.C.P. art. 424 cmts. (a)-(b). There is a considerable paucity of reported Louisiana cases interpreting this clause of La. C.C.P. art. 424 (or Article 20 of the Louisiana Code of Practice), and many of the reported cases are extremely old.
For example, in Girod v. His Creditors, 2 La. Ann. 546 (1847), the Louisiana Supreme Court noted:
The claim of the executors of Nicholas Girod is in the nature of a reconventional demand, tending to establish compensation, and affecting in no manner the rights of the insolvent under the judgment of the Supreme Court of the United States. Reconventional demands are not exceptions within the meaning of the rule Quae temporalia, as contended by the appellants. If the laws of prescription could be evaded, by thus disguising principal demands, those laws would become in most cases inoperative. The only exceptions to which the rule Quae temporalia applies, are those which are attached to the action and inseparable from the demand. They must, in the language of commentators, be visceral .
Other cases similarly' required a "visceral connection" between the obligation sued on by plaintiff and the prescribed obligation interposed as a defense. See, e.g., Chadwick v. Menard, 104 La. 38, 28 So. 933 (1900); Roper v. Monroe Grocer Co., 171 La. 181, 129 So. 811 (1930); Rapides Grocery Co. v. Clopton, 171 La. 632, 131 So. 734 (1930); Wolff v. Warden, 141 So. 821 (La. App. 1932).
(Emphasis in original.)
In Peyton, this Court found no "visceral connection" between the main demand and the reconventional demand based on the evidence presented. Id. at 145. There, a condominium association filed suit against three defendants alleging they were liable for unpaid condominium fees, late fees, and attorney’s fees. The defendants reconvened, claiming they were owed past due rent under the lease of a party room and recreational room located in the condominium complex and the rent claims should be treated as an offset on the past due condominium fees. Id. at 138. This Court found the claims were not incidental to or connected with each other, noting the lease of the property did not provide any mention of an offset, the past due condominium fees did not involve the rooms associated with the past 7due rent fees, and the only evidence of an intended offset was the defendant’s self-serving testimony. This Court concluded there was not sufficient evidence to find a visceral connection between the claims. Id. at 146.
[5] In the present case, we likewise conclude, based on the evidence presented, there is no visceral connection between Phyllis’ claim regarding Judith’s alleged theft or conversion of $90,000 and Judith’s claim for breach of contract, conversion, and the return of her $11,418. These claims are simply not "incidental to, or connected with" each other. The claim regarding Judith’s theft from the cafe is not inseparable from or attached to Judith’s claim for the return of her money. Both sisters confirmed Phyllis agreed to hold the money for Judith so it could be "kept safe." Sometime later, it was discovered Judith was taking money from the cafe. Judith admitted she was arrested, pled guilty, and paid the court-ordered restitution. Phyllis stated at trial she did not return Judith’s $11,418 because Judith consistently stole money from her. Phyllis’ own self-serving testimony that she personally intended to use the $11,418 as an offset to the alleged theft is not sufficient evidence to find these claims are "incidental to, or connected with" each other.
Therefore, although Article 424 allows in certain circumstances for a prescribed claim to be used as a defense to an obligation sought to be enforced, because Phyllis’ alleged claim is not "incidental to, or connected with" Judith’s claims, we conclude Article 424 is not applicable in the present case. As such, the trial court properly concluded that Phyllis’ alleged claim against Judith could not be used as an offset against Judith’s claims against Phyllis.
Judith’s claim for conversion and breach of contract
Phyllis also argues the trial court erred in finding her liable for conversion and breach of contract. She asserts she cannot be found liable for conversion since Article 424 allows for a "legal excuse" to be asserted as a defense, and exercising her legal right under Article 424 to withhold payment to Judith cannot be wrongful. Additionally, Phyllis argues the trial court did not find any contract existed between 8the parties, and even so, Judith did not establish Phyllis breached any terms thereof. Nevertheless, based on La. C.C. art. 2053, she argues the trial court erred in not considering the equity and conduct of the parties.
La. C.C. art. 2053 provides:
A doubtful provision must be interpreted in light of the nature of the contract, equity, usages, the conduct of the parties before and after the formation of the contract, and of other contracts of a like nature between the same parties.
[6–11] Conversion is an intentional tort and consists of an act in derogation of the plaintiff’s possessory rights. Dileo v. Horn, 15-684 (La. App. 5 Cir. 3/16/16), 189 So.3d 1189, 1198. The tort of conversion is committed when one wrongfully does any act of dominion over the property of another in denial of or inconsistent with the owner’s rights. Any wrongful exercise or assumption of authority over another’s goods, depriving him of the possession, permanently or for an indefinite time, is a conversion. Louisiana civil law conversion is committed when any of the following occurs: 1) possession is acquired in an unauthorized manner; 2) the chattel is removed from one place to another with the intent to exercise control over it; 3) possession of the chattel is transferred without authority; 4) possession is withheld from the owner or possessor; 5) the chattel is altered or destroyed; 6) the chattel is used improperly; or 7) ownership is asserted over the chattel. BridgePoint Healthcare Louisiana, LLC v. St. Theresa Specialty Hosp., L.L.C., 21-612 (La. App. 5 Cir. 5/11/22), 342 So.3d 120, 124. The intent required for conversion is not necessarily that of conscious wrongdoing, but rather an intent to exercise a dominion or control over an item in a manner inconsistent with the plaintiff’s rights. Although a party may have rightfully come into possession of another’s goods, the subsequent refusal to surrender the goods to one who is entitled to them may constitute conversion. Dileo, supra.
[12] In civil cases, the appropriate standard for appellate review of factual determinations is the manifest error-clearly wrong standard, which precludes the setting aside of a trial court’s finding of fact 9unless that finding is clearly wrong in light of the record reviewed in its entirety. Palmisano v. Ohler, 16-160 (La. App. 5 Cir. 12/7/16), 204 So.3d 1134, 1137; Stobart v. State through Dept. Transp. and Dev., 617 So.2d 880, 882 (La. 1993).
[13] The record confirms Phyllis agreed to manage Judith’s $11,418. Both parties admitted such at trial, Hylton observed both Judith and Phyllis endorsing the check, and the check was accepted into evidence at trial. It is undisputed Phyllis did not return Judith’s money. She admitted at trial Judith asked her to return the money, but she did not do so because Judith allegedly stole money from her. Based on the evidence presented at trial, we conclude the trial court did not commit manifest error and was not clearly wrong in its finding in favor of Judith on her conversion and breach of contract claims against Phyllis and in ordering Phyllis to return the $11,418 to Judith.
DECREE
The judgment under review is affirmed.
AFFIRMED