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SOUTHEAST HOLDINGS, LLC v. Assad MOUHAFFEL
The defendant, Assad Mouhaffel, appeals a summary judgment of the Twenty-First Judicial District Court granted in favor of the plaintiff, Southeast Holdings, LLC (Southeast Holdings). For the following reasons, we reverse and remand.
FACTS AND PROCEDURAL HISTORY
Southeast Holdings, a limited liability company formed in the state of Montana, purchased three tracts of land (the property) in Livingston Parish on April 19, 2006. Bryan Addington, one of the members of Southeast Holdings, had written consent of the other members to purchase two of the three tracts. Meeting minutes of April 13, 2006 also reflected Mr. Addington's authority, with the minutes being signed by Southeast Holdings members Mr. Addington, Kevin Thibodeaux, and Charles “Chuck” Wilson. On January 29, 2007, Southeast Holdings mortgaged the property to Landmark Bank, secured by a promissory note in the amount of $351,962.66 and personally guaranteed by Mr. Addington, Chuck Wilson, and member Michael Wilson.
Southeast Holdings alleges it purchased the property with the intent of commercial development. On December 15, 2008, Chuck and Michael Wilson filed a plat map into the Livingston Parish conveyance records indicating such intent of commercial development. On December 27, 2011, Michael Wilson entered into a contract with T&T Construction on behalf of Southeast Holdings for construction on the property. On February 14, 2012, Harry Williams filed a lien on the property for labor and expenses related to construction on the property. Mr. Williams subsequently filed suit against Southeast Holdings in Livingston Parish in a matter not related to the instant appeal.
On June 26, 2015, a mortgage dated May 29, 2015 was recorded in Livingston Parish, which purported that Southeast Holdings, as mortgagor, issued a promissory note to Mr. Mouhaffel, as mortgagee, in the amount of $480,000. The property was encumbered as collateral to secure the note. Mr. Addington had signed on behalf of Southeast Holdings. Mr. Mouhaffel filed a petition for executory process against Southeast Holdings on September 30, 2015, in which he alleged that Southeast Holdings was indebted to him for $480,000 but defaulted in payment of the promissory note. Mr. Mouhaffel also recorded a notice of lis pendens against the property on October 27, 2015.
On the same date, Mr. Addington, purportedly acting on behalf of Southeast Holdings, executed a cash sale of the property “for sufficient consideration” to Mr. Mouhaffel.1 On November 16, 2015, Mr. Mouhaffel filed the cash sale into the Livingston Parish conveyance records. Meeting minutes dated October 25, 2015 were also filed with the cash sale, indicating that Mr. Addington was authorized to sign on behalf of Southeast Holdings as the sole member and manager.
On September 7, 2016, Mr. Addington was indicted for mail fraud, aggravated identity theft, and forfeiture allegation 2 in the United States District Court, Middle District of Louisiana. The indictment alleged that Mr. Addington operated various entities such as Addington Investment Services, Bryan L. Addington Financial, SAL Financial Services, and DBR Holdings, LLC (DBR). It was further alleged that Mr. Addington, through these entities, solicited and obtained over $3.5 million from numerous investors through fraudulent investment schemes that usually involved real estate.
On November 14, 2016, Southeast Holdings filed a petition to annul and set aside the mortgage and cash sale, and strike all related documents from the public records. In the petition, Southeast Holdings claimed that the property was fraudulently sold to Mr. Mouhaffel by Mr. Addington, who misrepresented he was the sole member of Southeast Holdings. Southeast Holdings further claimed that it never had any business dealings with Mr. Mouhaffel, and that the other members of Southeast Holdings discovered the fraudulent sale in March of 2016 when Landmark Bank advised that a second lien on the property existed in Mr. Mouhaffel's name. Southeast Holdings further alleged that none of the filings relating to the property at issue indicated it was ever a sole-member company.
Southeast Holdings claimed that Mr. Mouhaffel's business dealings with the property involved Mr. Addington only, who was holding himself out to be a financial advisor. Southeast Holdings allegedly never received any payments from Mr. Mouhaffel for any reason, which it claims is indicated by the cash sale and mortgage Mr. Mouhaffel filed into the public records. Southeast Holdings also claimed that the meeting minutes attached to the cash sale that were signed by Mr. Addington are a fraudulent document. As such, Southeast Holdings avers that the cash sale, mortgage, and all attached documents filed by Mr. Mouhaffel are null and void and should be stricken from the public records.
On October 2, 2020, Mr. Mouhaffel filed a motion for partial summary judgment, in which he claimed that Southeast Holdings cannot meet its burden of proving fraud. Southeast Holdings in turn filed a motion for summary judgment on October 14, 2020, in which it alleged that Mr. Addington had been sentenced to federal prison for the charges under his indictment. Mr. Addington had approached Mr. Mouhaffel for $480,000 so that his business entity DBR could develop the property. Mr. Mouhaffel then allegedly wired $480,000 to DBR, but the money never reached Southeast Holdings. Thus, Southeast Holdings requested summary judgment to annul the sale of the property to Mr. Mouhaffel, along with the related mortgage and attached documents.
A hearing was held on both parties’ motions. In a judgment signed on January 22, 2021, the trial court granted Southeast Holdings’ motion for summary judgment and denied Mr. Mouhaffel's motion for partial summary judgment. The trial court further ordered that the mortgage and associated promissory note in favor of Mr. Mouhaffel, as well as the cash sale of the property to Mr. Mouhaffel, be declared null. The trial court also ordered that the documents be stricken from the public records. Mr. Mouhaffel suspensively appealed the judgment.
ASSIGNMENTS OF ERROR
Mr. Mouhaffel raises the following assignments of error:
1. The trial court erred in granting Southeast Holdings’ motion for summary judgment, as the claim “lack of consideration” on which the motion and judgment were based is not a valid legal premise in Louisiana.
2. The trial court erred in granting Southeast Holdings’ motion for summary judgment, as the record showed more than sufficient “cause” for the transfer at issue.
3. The trial court erred in granting Southeast Holdings’ motion for summary judgment, as an issue of fact exists regarding the authority and ability of the purported sole member of Southeast Holdings to direct the limited liability company, as he previously testified he was not and never been a member of Southeast Holdings.3
4. The trial court erred in denying Mr. Mouhaffel's motion for partial summary judgment as Southeast Holdings admitted in its deposition pursuant to La. C.C.P. art. 1442 that it had no evidence of fraud.
STANDARD OF REVIEW
Appellate courts review the granting of a summary judgment motion de novo. Hutchinson v. Knights of Columbus, Council No. 5747, 2003-1533 (La. 2/20/04), 866 So.2d 228, n. 2. In their de novo review, appellate courts use the same criteria that govern the district court's determination of whether summary judgment is appropriate. Hutchinson, 866 So.2d at n. 2. Because our review of a summary judgment is de novo, we will review the merits of the trial court's ruling, including the issue of fraud, in determining whether the pleadings and evidentiary showing made by the parties disclose disputed material facts which preclude summary judgment. See Tyson v. Brentley Marchand, 2014-1767 (La. App. 1 Cir. 6/5/15), 2015 WL 3548159, *2 (unpublished).
An obligation cannot exist without a lawful cause. La. C.C. art. 1966. Cause is the reason why a party obligates itself. La. C.C. art. 1967. Comment (c) to Article 1967 explains that cause is not the same as consideration; that is, the reason why a party binds himself need not be to obtain something in return. Louisiana does not follow the common law tradition that requires consideration to effect an enforceable contract. Rather, the mere will of the parties will bind them, without what a common law court would consider to be consideration to support a contract, so long as the parties have a lawful “cause.” The cause need not have any economic value. Aaron & Turner, L.L.C. v. Perret, 2007-1701 (La. App. 1 Cir. 5/4/09), 22 So.3d 910, 915, writ denied, 2009-1148 (La. 10/16/09), 19 So.3d 476.
In the instant case, it is unnecessary for us to determine whether “lack of consideration” is a valid legal premise in Louisiana, as long as we are able to find cause in the contractual relationship between Mr. Mouhaffel and Mr. Addington. If there is an issue of material fact whether as to Mr. Mouhaffel and Mr. Addington, purportedly acting on behalf of Southeast Holdings, willfully bound themselves by the cash sale and mortgage that was executed between them, summary judgment would not be appropriate.
According to Mr. Mouhaffel's deposition, which was introduced in its entirety for the motion for summary judgment, he and Mr. Addington had business dealings prior to the execution of the cash sale and mortgage. In early 2015, Mr. Addington advised Mr. Mouhaffel of a land deal involving the property at issue in this appeal. According to Mr. Mouhaffel, Mr. Addington stated he owned the property and wanted to develop it very quickly for commercial use, so he would need money right away to do so. Mr. Addington assured Mr. Mouhaffel that he would see a short-term turnaround on his investment. Mr. Mouhaffel stated he fully trusted Mr. Addington at that time, and wired him $480,000 to invest in developing the property.
Mr. Mouhaffel testified in his deposition that he initially thought the property was owned by Mr. Addington's company, DBR. Mr. Addington showed Mr. Mouhaffel the plat map, which contained plans for a commercial development on the property. A few months after Mr. Mouhaffel wired the $480,000 to Mr. Addington, Mr. Mouhaffel's attorney advised him that the property was actually owned by Southeast Holdings. When Mr. Mouhaffel questioned Mr. Addington about the ownership of the property, Mr. Addington stated that DBR was actually developing the land for Southeast Holdings. Mr. Mouhaffel then told Mr. Addington that Southeast Holdings should appear on the mortgage and promissory note, and the documents were duly executed.
Mr. Mouhaffel acknowledged that he never paid any money directly to Southeast Holdings, but instead wired the $480,000 to the order of DBR. When Mr. Mouhaffel did not receive payment on his promissory note, he filed suit against Mr. Addington, DBR, and Southeast Holdings on August 28, 2015 in the Fourth Judicial District Court. In the lawsuit, Mr. Mouhaffel alleged fraud against Mr. Addington. Mr. Mouhaffel discovered that Mr. Addington was not a licensed or registered financial advisor, as he had represented to Mr. Mouhaffel at that time. Mr. Mouhaffel testified he also learned at that time of other fraudulent activities by Mr. Addington. However, Mr. Mouhaffel was clear that at the time he wired the $480,000 to DBR, it was his understanding that DBR owned the property, and that Mr. Addington was the sole owner of
Although Mr. Mouhaffel had sued Mr. Addington for defaulting on the promissory note, he nevertheless executed the cash sale of the property to him from Southeast Holdings on October 27, 2015, five days after obtaining a judgment against Mr. Addington. Mr. Mouhaffel testified that he did not sign the cash sale. The cash sale itself contains a handwritten slash in Mr. Mouhaffel's signature line.4 However, Mr. Mouhaffel also testified that rather than foreclosing on the property, he agreed with Mr. Addington, who was purportedly acting on behalf of Southeast Holdings, to have the property transferred to him. Mr. Mouhaffel also understood at the time of executing the cash sale that there was a mortgage in favor of Landmark Bank on the property.
Despite Mr. Addington's apparent dishonesty in his dealings with Mr. Mouhaffel, at the time the mortgage and cash sale were executed, Mr. Mouhaffel and Mr. Addington exhibited cause, or a willingness to be bound by the contracts. Allegations of fraud aside, Mr. Addington approached Mr. Mouhaffel with the apparent intent to invest money in a commercial land development for the property that Mr. Addington purported was owned by DBR. Mr. Mouhaffel agreed to the investment in the hope that he would receive a quick return on his investment. To that end, Mr. Mouhaffel and Mr. Addington bound themselves by executing a collateral mortgage on the property. Mr. Mouhaffel wired $480,000 to DBR, Mr. Addington's company that supposedly owned the property, and Mr. Addington tendered a promissory note in favor of Mr. Mouhaffel. Despite Mr. Addington signing on behalf of Southeast Holdings and not DBR as mortgagor, Mr. Mouhaffel nevertheless recorded the mortgage in the Livingston Parish public records.
As to the cash sale, Mr. Mouhaffel testified that there was an agreement between himself and Mr. Addington that he would be transferred the property in lieu of foreclosure. Although Mr. Mouhaffel made allegations of fraud against Mr. Addington in another lawsuit, the record shows he had a willingness to contract with Mr. Addington when the cash sale was executed. Despite the cash sale's vague slash in Mr. Mouhaffel's signature line, his deposition testimony is clear that he intended to enter into the cash sale with Mr. Addington.
We find no issue of material fact from the record that the mortgage and cash sale regarding the property at issue exhibit lawful cause, which is essential to the existence of a valid contract. However, another vital element of a valid contract is consent. A contract is formed by the consent of the parties established through offer and acceptance. La. C.C. art. 1927. Fraud is one of the listed vices of consent in the Louisiana Civil Code. See La. C.C. art. 1948. Fraud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. La. C.C. art. 1953.
In the instant case, Southeast Holdings claims in its petition that the collateral mortgage and cash sale of the property executed by Mr. Mouhaffel are null due to fraud on the part of Mr. Addington. A summary judgment is rarely appropriate for a determination based upon subjective facts such as knowledge. Smith v. Our Lady of the Lake Hosp., Inc., 93-2512 (La. 7/5/94), 639 So.2d 730, 751; Carter v. BRMAP, 591 So.2d 1184, 1189 (La. App. 1 Cir. 1991). If the record discloses disputed issues of fact concerning the allegation of fraud, summary judgment is precluded.
Southeast Holdings submitted into evidence in support of its motion for summary judgment two certificates of authority, each granting to Mr. Addington the authority on behalf of Southeast Holdings to purchase or lease immovable property, borrow money, execute promissory notes, and sell the property of Southeast Holdings. Furthermore, the certificates grant Mr. Addington the authority to individually, without the permission of the other members, purchase and sell property on behalf of Southeast Holdings. The collateral mortgage and cash sale in favor of Mr. Mouhaffel are signed by Mr. Addington as a member of Southeast Holdings; however, he is not designated as the sole member on either document.
From the face of the two documents, Mr. Addington appears to have acted within his aforementioned authority as a member of Southeast Holdings. The only document that purports Mr. Addington as being the sole member of Southeast Holdings is the meeting minutes that were filed with the cash sale. Southeast Holdings alleges in its petition that the meeting minutes are fraudulent. The deposition testimony of Michael Wilson contradicts the purported authority held by Mr. Addington, in that he stated Mr. Addington did not have the authority to sell the property without the other members’ knowledge.5 He further testified that he had no knowledge of the discussions or dealings between Mr. Addington and Mr. Mouhaffel. He neither knew if Southeast Holdings had executed a written document revoking the certificate of authority and Mr. Addington's authority thereunder. He further testified that the meeting minutes in question were “probably” fraudulent, but admitted he had no evidence on the motion for summary judgment to prove they were fraudulent.
A fact is material if it potentially insures or precludes recovery, affects a litigant's ultimate success, or determines the outcome of the legal dispute. Hines v. Garrett, 2004-0806 (La. 6/25/04), 876 So.2d 764, 765-66. A genuine issue is one as to which reasonable persons could disagree; if reasonable persons could reach only one conclusion, there is no need for trial on that issue and summary judgment is appropriate. Id., at 766. The general rule is that courts entertaining a motion for summary judgment are not to decide credibility issues. Id., at 769.
In the instant case, there are stark contradictions concerning the authority Mr. Addington had at the time he executed the mortgage and cash sale with Mr. Mouhaffel. The documents in the record purport that Mr. Addington had the authority to act on behalf of Southeast Holdings. There is no dispute whatsoever that he was given the authority in the certificates of authority, and he used that authority in the initial sale of the property to Southeast Holdings. Southeast Holdings makes the subjective assertion that Mr. Addington did not have the authority to subsequently mortgage and sell the property to Mr. Mouhaffel. Despite the numerous allegations of Mr. Addington's fraudulent acts and his subsequent imprisonment, no revocation by Southeast Holdings of his authority exists in the record. In order for a trial court or an appellate court to decide whether Mr. Addington had authority on behalf of Southeast Holdings to mortgage and sell the property to Mr. Mouhaffel, it would require a credibility determination which is not appropriate for summary judgment. See The Shaw Group v. Kulick, 2004-0697 (La. App. 1 Cir. 4/8/05), 915 So.2d 796, 801, writ denied., 2005-1205 (La. 11/28/05), 916 So.2d 148. The trial court therefore erred in granting summary judgment in favor of Southeast Holdings since issues of material fact still exist in the instant case.
Lastly, Mr. Mouhaffel assigns as error the trial court's denial of his motion for partial summary judgment. The denial of a motion for summary judgment is a preliminary matter in the course of the action, and thus is an interlocutory judgment that is not appealable and cannot be certified as such. Beverly Construction, L.L.C. v. Wadsworth Estates, L.L.C., 2019-0909 (La. App. 1 Cir. 2/21/20), 297 So.3d 1, 3. An interlocutory judgment is appealable only when expressly provided by law, but the denial of a motion for summary judgment may be reviewed in conjunction with other appealable issues for the sake of judicial economy. MP31 Investments, LLC v. Harvest Operating, LLC, 2015-0766 (La. App. 1 Cir. 1/22/16), 186 So.3d 750, 755. Since we find that the trial court erred in granting summary judgment in favor of Southeast Holdings and will remand the matter for further proceedings, we pretermit discussion of this assignment of error.6
The summary judgment of the Twenty-First Judicial District Court granted in favor of Southeast Holdings, LLC, is reversed, and this matter is remanded for further proceedings. All costs related to this appeal are assessed to Southeast Holdings, LLC.
REVERSED AND REMANDED.
I respectfully disagree with reversing the summary judgment rendered in favor of Southeast Holdings, LLC. Based on the evidence presented, I agree with the trial court that there are no genuine issues of material fact and, as a matter of law, Southeast Holdings, LLC, is entitled to summary judgment declaring null the sale of the property and the associated documents. I disagree that the summary judgment evidence requires any credibility determination as indicated by the majority. I further disagree with the majority's refusal to consider the denial of Mr. Mouhaffel's motion for partial summary judgment after reversing the summary judgment in favor of Southeast Holdings, LLC. See La. Code Civ. P. arts. 968, 1841, and 2083; Sigur v. Municipal Employees’ Retirement Systems of Louisiana, 2021-0790 (La. App. 1st Cir. 3/4/22), 341 So.3d 632, 636, writ denied, 2022-00747 (La. 9/7/22), ––– So.3d ––––; Waterworks District No. 1 of DeSoto Parish v. Louisiana Department of Public Safety & Corrections, 2016-0744 (La. App. 1st Cir. 2/17/17), 214 So.3d 1, 3 n.1, writ denied, 2017-0470 (La. 5/12/17), 219 So.3d 1103; Crowe v. Bio-Medical Application of Louisiana, LLC, 2014-0917 (La. App. 1st Cir. 6/3/16), 208 So.3d 473, 479-80 n.6, writ denied, 2017-0502 (La. 5/12/17), 219 So.3d 1106; MP31 Investments, LLC v. Harvest Operating, LLC, 2015-0766 (La. App. 1st Cir. 1/22/16), 186 So.3d 750, 755.
For these reasons, I dissent.
1. The October 27, 2015 cash sale contains some minor inconsistencies in the property descriptions of the tracts that differ from the property descriptions in the April 19, 2006 cash sale. For instance, in the 2006 Tract 1 description, the tract is designated as “Tract 1” on the plat map; however, the 2015 Tract 1 description designates the tract as “Tract 2” on the plat map. Despite this and other minor inconsistencies, the locations and dimensions of all the tracts are the same in each cash sale.
2. See 18 U.S.C. §§ 981(a)(1)(C), 1028(A), 1341; 28 U.S.C. § 2461(c).
3. This assignment of error appears to be a misstatement because there is no summary judgment evidence in the record that Mr. Addington made such a statement. However, we will still review this assignment of error regarding whether Mr. Addington had authority to act as he did on behalf of Southeast Holdings.
4. Based on other documents in the record, Mr. Mouhaffel's signature does not resemble a slash.
5. Due to poor health, Chuck Wilson was unable to participate in a deposition.
6. We recognize that Mr. Mouhaffel filed the motion for appeal within thirty days of the mailing of the notice of judgment, and that the appeal with respect to the denial of the motion for partial summary judgment could be converted into an application for supervisory writ. See Uniform Rules-Courts of Appeal, Rule 4-3. However, due to our ruling and the reasons given above, we decline to exercise that discretion. See Stelluto v. Stelluto, 2005-0074 (La. 6/29/05), 914 So.2d 34, 39.
Holdridge, J. dissents for reasons assigned by J. Wolfe. Hester, J. concurs Wolfe, J. dissents with reasons.
Response sent, thank you
Docket No: 2021 CA 1176
Decided: September 16, 2022
Court: Court of Appeal of Louisiana, First Circuit.
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