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The CADLE COMPANY, II, INC. v. Roger D. LINDER and General Miles Biggs, Jr. a/k/a G. Miles Biggs, Jr.
The plaintiff, The Cadle Company II, Inc. (“Cadle”), appeals a judgment in favor of the defendants, Roger D. Linder and General Miles Biggs, Jr. a/k/a G. Miles Biggs, Jr., sustaining their peremptory exception raising the objection of res judicata and dismissing Cadle's suit on a promissory note. We reverse the judgment of the trial court and issue this memorandum opinion in compliance with Uniform Rules—Courts of Appeal, Rule 2-16.1(B).
On November 3, 2017, Cadle commenced this suit on a promissory note against Mr. Linder and Mr. Biggs. According to the allegations of Cadle's petition, it is the holder in due course of a promissory note dated March 30, 2016, payable to the order of First NBC Bank, executed by Destin Resources LLC (“Destin”) and Reserves Management, L.C. (“Reserves”) in the principal amount of $3,900,000.00, bearing interest at the rate of 6% per annum.1 Destin and Reserves defaulted on the March 30, 2016 promissory note. However, both Mr. Linder and Mr. Biggs individually executed a commercial guarantee on March 30, 2016, whereby they each guaranteed payment of all obligations owed to First NBC Bank by Destin and Reserves under the March 30, 2016 promissory note.
Cadle further alleged in its petition that although the March 30, 2016 promissory note was made payable to the order of, and the guarantees of Mr. Linder and Mr. Biggs were in favor of, First NBC Bank, Cadle was the holder of the note and entitled to enforce the guarantees of Mr. Linder and Mr. Biggs because: (1) First NBC Bank was ordered closed and the Federal Deposit Insurance Corporation (“FDIC”) was confirmed as receiver; (2) effective September 28, 2017, the FDIC assigned and sold the March 30, 2016 promissory note and its collateral, including the guarantees of Mr. Linder and Mr. Biggs, to Cadle; and (3) the March 30, 2016 promissory note was endorsed to the order of Cadle. Therefore, Cadle sought to enforce the guarantees executed by Mr. Linder and Mr. Biggs and to collect on the March 30, 2016 promissory note.
Mr. Linder and Mr. Biggs each filed an answer with affirmative defenses and a reconventional demand, and thereafter, the parties proceeded to conduct discovery and engage in other pre-trial practices. On two separate occasions—May 31, 2018 and January 27, 2020—Cadle filed a motion for summary judgment, seeking judgment against Mr. Linder and Mr. Biggs for the amounts owed on the March 30, 2016 promissory note pursuant to the guarantees. Both motions for summary judgment were denied and this Court denied Cadle's supervisory writ applications seeking review of those interlocutory judgments. See The Cadle Company, II, Inc. v. Linder, 2019-0996 (La. App. 1st Cir. 9/18/19), 2019 WL 4464394(unpublished writ action), 2019 WL 4464394; The Cadle Company, II, Inc. v. Linder, 2020-0681 (La. App. 1st Cir. 10/12/20), 2020 WL 6019641(unpublished writ action), 2020 WL 6019641; see also The Cadle Company, II, Inc. v. Linder, 2019-0282 (La. App. 1st Cir. 7/22/19), 2019 WL 3284898(unpublished writ action), 2019 WL 3284898.
On the same date that this Court denied Cadle's application for supervisory writs on its second motion for summary judgment—October 12, 2020—Mr. Linder and Mr. Biggs filed a peremptory exception raising the objection of res judicata. The basis of the objection was that “an identical action ha[d] been concluded between the same parties” in federal court; namely, those proceedings entitled “The Cadle Company II, Inc. v. Crescent Bank & Trust, Consolidated Reserves Company, L.C., Roger D. Linder, G. Miles Biggs, Jr., Louisiana General Oil Company, and Linder Energy Company,” docket number 20-cv-01260, United States District Court for the Eastern District of Louisiana (“the federal suit”).
Among other things, attached to Mr. Linder and Mr. Biggs memorandum in support of their objection of res judicata were copies of Cadle's original complaint in the federal suit, an order and reasons issued by the presiding judge in the federal suit, and a judgment dismissing Cadle's claims in the federal suit. According to these attachments, the federal suit was filed by Cadle on April 22, 2020, which was approximately two and a half years after Cadle commenced this suit against Mr. Linder and Mr. Biggs. The federal suit involved Cadle's claims for damages based on conversion and unjust enrichment, which were asserted against a bank and several corporate defendants, including Destin and Reserves, as well as Mr. Linder and Mr. Biggs, as the owners and/or shareholders of the corporate defendants. Cadle claimed that the collateral securing approximately $120,000,000.00 in debt owed by certain corporate entities, including Destin and Reserves, to First NBC Bank (and thus to Cadle), had been converted by the defendants, when some of the corporate defendants made insider payments to the other corporate defendants and the bank.2 The attachments also reflect that Cadle's claims based on conversion were dismissed on the basis of prescription, its claims based on unjust enrichment were dismissed for failure to state a cause of action, and a judgment dismissing the federal suit in its entirety was signed on September 8, 2020.
In the objection of res judicata, Mr. Linder and Mr. Biggs argued that although the suit on the March 30, 2016 promissory note and the federal suit asserted different theories of recovery against Mr. Linder and Mr. Biggs for money owed by Destin and Reserves to First NBC Bank, and thus to Cadle, both suits involved the same transaction or common nucleus of operative facts—Cadle's efforts to collect the debt owed to First NBC Bank and to Cadle. In opposition to the objection of res judicata, Cadle maintained that its federal suit for damages based on conversion and unjust enrichment was completely unrelated to the instant action on the March 30, 2016 promissory note, it did not involve the same case or controversy, did not involve a common nucleus of operative facts, did not determine any of the facts, was decided on purely legal issues, and had no impact on the suit on the note. While Cadle did not dispute that Mr. Linder and Mr. Biggs were parties to the federal suit and that there was a final judgment in the federal suit, Cadle pointed out that Mr. Linder and Mr. Biggs were not parties to both suits in the same capacities—the instant suit was brought against Mr. Linder and Mr. Biggs as guarantors of the March 30, 2016 promissory note, whereas the federal suit was brought against Mr. Linder and Mr. Biggs as the owners and/or shareholders of certain corporate entities, including Destin and Reserves. Additionally, Cadle pointed out that the two suits neither involved the same “transaction or occurrence” nor arose from the same “common nucleus of operative facts”—this suit involved the March 30, 2016 promissory note and guarantees executed by Mr. Linder and Mr. Biggs for that promissory note, whereas the federal suit involved the transfer (or alleged conversion) of collateral from Destin and Reserves.
After a hearing on January 20, 2021 at which no evidence from either party was submitted,3 the trial court took the matter under advisement. Thereafter, on February 1, 2021, the trial court issued reasons for judgment, finding that “[t]he parties in both cases [were] identical” and that “[b]oth lawsuits [arose] out of the same transaction or occurrence” because “[a]ll of the acts of which Cadle complained in both lawsuits [were] alleged to have resulted from, and were integrally related to, the First NBC [Bank] debts which Cadle purchased and is now trying to collect.” Therefore, the trial court sustained the objection of res judicata. A judgment in accordance with the trial court's written reasons for judgment, which dismissed Cadle's suit was signed on March 18, 2021. From this judgment, Cadle appeals.
Based on our de novo 4 review of the record, we find that the trial court improperly sustained Mr. Linder's and Mr. Biggs’ objection of res judicata and dismissed Cadle's suit on the March 30, 2016 promissory note. Res judicata bars re-litigation of a subject matter arising from the same transaction or occurrence as a previous suit between the same parties. See Avenue Plaza, L.L.C. v. Falgoust, 96-0173 (La. 7/2/96), 676 So.2d 1077, 1079; see also La. R.S. 13:4231. Louisiana Revised Statutes 13:4231 sets forth the general principles regarding res judicata and it provides as follows:
Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment
(2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and the judgment bars a subsequent action on those causes of action.
(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.
The Louisiana Supreme Court has also emphasized that all of the following elements must be satisfied in order for res judicata to preclude a second action: (1) the judgment is valid; (2) the judgment is final; (3) the parties are the same; (4) the cause or causes of action asserted in the second suit existed at the time of final judgment in the first litigation; and (5) the cause or causes of action asserted in the second suit arose out of the transaction or occurrence that was the subject matter of the first litigation. Burguieres v. Pollingue, 2002-1385 (La. 2/25/03), 843 So.2d 1049, 1053. The parties are the same for the purposes of res judicata only when they appear in the same capacities in both suits. Burguieres, 843 So.2d at 1054.5
Herein, while Mr. Linder and Mr. Biggs were parties to the federal suit and there was a valid final judgment rendered in the federal suit, we find that Mr. Linder and Mr. Biggs were not parties to both suits in the same capacities. The suit herein was brought against Mr. Linder and Mr. Biggs in their capacities as personal guarantors of the March 30, 2016 promissory note executed by Destin and Reserves. The federal suit was brought against Mr. Linder and Mr. Biggs in their capacities as the owners and/or shareholders of certain corporate entities, including Destin and Reserves. Moreover, we also find that the two suits do not arise out of the same “transaction or occurrence.” This suit arises out of the personal guarantees executed by Mr. Linder and Mr. Biggs on the March 30, 2016 promissory note, the default on the note by Destin and Reserves, and Cadle's attempt to collect on that note based on those personal guarantees, whereas the federal suit involved the transfer and alleged conversion of collateral that secured numerous promissory notes, including the March 30, 2016 promissory note, by certain corporate entities, including Destin and Reserves, and the liability of the corporate owners/shareholders, including Mr. Linder and Mr. Biggs, for that alleged conversion. For these reasons, we find that the trial court erred in sustaining Mr. Linder'sand Mr. Biggs’ objection of res judicata and in dismissing Cadle's suit on the promissory note.
For all of the above and foregoing reasons, the March 18, 2021 judgment of the trial court, sustaining the peremptory exception raising the objection of res judicata filed by Mr. Linder and Mr. Biggs and dismissing Cadle's suit on the March 30, 2016 promissory note is reversed. All costs of this appeal are assessed to the defendants/appellees, Roger D. Linder and General Miles Biggs, Jr. a/k/a G. Miles Biggs, Jr.
1. The March 30, 2016 promissory note also contained specific terms for payment, which according to the petition, were changed pursuant to a Change in Terms Agreement dated March 23, 2017. The terms of payment are not relevant to any issues on appeal.
2. More specifically, Cadle alleged that Lindor Oil Company, A Partnership (“Lindor Oil”), which had filed for bankruptcy, was an oil and gas operator that held proceeds from production wells owned by Destin and Reserves. Cadle claimed that, as successor to First NBC Bank, it held liens on those proceeds to secure the debts of Destin and Reserves, which totaled $120,000,000.00. Cadle also claimed that notwithstanding these liens, Lindor Oil made a series of payments from those proceeds to Consolidated Reserves Company, L.C. (“Consolidated”) under the guise of “loans” and that Consolidated used those funds to make payments on a loan from Crescent Bank & Trust (“Crescent Bank”). Lindor Oil, Destin, Reserves, and Consolidated were all owned and/or controlled by Mr. Linder and Mr. Biggs, and the loans to Consolidated by Crescent Bank were guaranteed by Mr. Linder and Mr. Biggs and were secured by their personal assets. Cadle alleged that Mr. Linder and Mr. Biggs, acting on behalf of Lindor Oil and in concert with Consolidated and Crescent Bank, diverted Cadle's collateral to benefit themselves and Crescent Bank, with whom Mr. Linder and Mr. Biggs had a close relationship. Cadle further alleged that in an attempt to “fleece” Lindor Oil's creditors and First NBC Bank, Mr. Linder and Mr. Biggs also made significant partnership distributions to two other entities they controlled—Louisiana General Oil Company (“Louisiana General”) and Linder Energy Company (“Linder Energy”), who were the two shareholders of Lindor Oil. Therefore, Cadle sought to recover damages for the wrongful conversion of its collateral and for unjust enrichment from Consolidated, Crescent Bank, Louisiana General, and Linder Energy, as well as Mr. Linder and Mr. Biggs as the owners and/or shareholders of Consolidated, Louisiana General and Linder Energy.
3. The burden of proving the facts essential to support the objection of res judicata is on the party pleading the objection. Union Planters Bank v. Commercial Capital Holding Corp., 2004-0871 (La. App. 1st Cir. 3/24/05), 907 So.2d 129, 130. However, no evidence was introduced at the hearing on January 20, 2021. As noted above, copies of the plaintiff's original complaint, the presiding judge's order and reasons, and the judgment of dismissal from the federal suit were attached to Mr. Linder's and Mr. Biggs’ memorandum in support of the objection of res judicata, but these documents were not introduced into evidence. Evidence not properly and officially offered and introduced cannot be considered, even if it is physically placed in the record. Cyprian v. Tangipahoa Parish School System, 2021-0238 (La. App. 1st Cir. 11/16/21), 332 So.3d 689, 691, citing Denoux v. Vessel Management Services, Inc., 2007-2143 (La. 5/21/08), 983 So.2d 84, 88. Furthermore, documents attached to memoranda do not constitute evidence. Cyprian, 332 So.3d at 691; Denoux, 983 So.2d at 88-89. Therefore, absent any evidence from which to review the trial court's judgment, the trial court's judgment must be reversed and the matter remanded for an evidentiary hearing. See Cyprian, 332 So.3d at 691-692; see also White v. Cox Operating, LLC, 2016-0901 (La. App. 4th Cir. 4/5/17), 229 So.3d 534, 538-539.However, in this case, the record reflects that in lieu of an evidentiary hearing, the matter was submitted based on the argument of counsel, the memoranda filed by the parties on the objection, and the exhibits that were attached to the memoranda. Notably, there is no dispute as to any of the facts set forth in either party's memoranda or the exhibits that were attached to the memoranda. See Russell v. Conroy, 2015-1719 (La. App. 1st Cir. 6/3/16), 2016 WL 3127075, *2 n.6.; Morgan v. Morgan, 2016-0964 (La. App. 1st Cir. 2/17/17), 212 So.3d 1235, 1237. In fact, both parties relied on the same facts and exhibits in arguing their case. Since we find for the reasons detailed herein, that the essential elements of res judicata have not been established by the exhibits relied on by the parties in their memoranda, in the interest of judicial economy to avoid a remand wherein the same result would be reached by the trial court, we reverse the trial court's judgment on this legal basis, rather than on the procedural basis of Mr. Linder's and Mr. Biggs’ failure to meet any evidentiary burden on their objection.
4. The res judicata effect of a prior judgment is a question of law that is reviewed de novo. Pierrotti v. Johnson, 2011-1317 (La. App. 1st Cir. 3/19/12), 91 So.3d 1056, 1063.
5. On appeal, both parties suggest that federal res judicata law is applicable in determining the res judicata effect of the dismissal of the federal suit. However, all of the cases cited by both parties involve a determination of the res judicata effect of a federal court's judgment on a subsequent second suit (or in a simultaneously filed suit). In this case, we are presented with the issue of a federal court's judgment of dismissal, which was the subsequent second suit, serving as the basis of a plea of res judicata to preclude the continuation of the first suit, which was pending and ongoing in a Louisiana state court. Thus, we find Louisiana res judicata law is applicable. Nevertheless, we note that the analysis of res judicata under Louisiana law and under federal law is the same. See Griffin v. BSFI Western E & P, Inc., 2000-2122 (La. App. 1st Cir. 2/15/02), 812 So.2d 726, 730 n.2.
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Docket No: 2021 CA 1361
Decided: August 24, 2022
Court: Court of Appeal of Louisiana, First Circuit.
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