SETTOON RENTAL INC v. SETTOON (2026)

In February 2025, the trial court consolidated docket numbers 91,409 and 92,317. The trial court then entered judgment on April 7, 2025, in both proceedings. Oversimplifying slightly, the judgment did two things: first, it sustained the exception of prescription filed by Plaintiffs (Settoon Construction Inc., Settoon Inc., and S.A.S. Trucking of Louisiana Inc.). And second, it barred Defendants (Scott A. Settoon Jr., Michelle Settoon, White Water Contractors Inc., and Settoon Investment Properties Inc.) from using prescribed employment-based actions as affirmative defenses.

Three days later, on April 10, 2026, Defendants took an appeal in each proceeding: trial court docket number 91,409 corresponds to appeal docket number 26-154; and trial court docket number 92,317 corresponds to court of appeal docket number 26-155. Then, on May 6, 2026, in an abundance of caution, Defendants filed an application for supervisory writ in the matter now before us. Both appeals and this writ proceeding have since been consolidated.

Nonetheless, at the time the appeals were taken, La.Code Civ.P. art. 1915(B)(1) (2013) provided as follows:

When a court renders a partial judgment or partial summary judgment or sustains an exception in part, as to one or more but less than all of the claims, demands, issues, or theories against a party, whether in an original demand, reconventional demand, cross-claim, third-party claim, or intervention, the judgment shall not constitute a final judgment unless it is designated as a final judgment by the court after an express determination that there is no just reason for delay.[1]

The judgment here sustained Plaintiffs’ exception of prescription as to less than all claims asserted by Defendants. The judgment is also designated as a final judgment under former La.Code Civ.P. art. 1915(B)(1) (2013), thereby allowing this court to exercise appellate jurisdiction in docket numbers 26-154 and 26-155.

To sum up, because the legal issues in the writ application before us are the same as those in the consolidated appeals, because the record from the trial court below has been lodged in the consolidated appeals, and because we are prohibited from exercising both appellate and supervisory jurisdiction, we decline to invoke our supervisory jurisdiction in this matter.²

DISPOSITION

Defendants’ application for supervisory writ is denied.³

WRIT DENIED.

In this consolidated appeal, we are asked to review whether Defendants’ prescribed employment causes of action are sufficiently related to Plaintiffs’ actions for conversion of corporate property such that the prescribed employment actions can be used as affirmative defenses under La.Code Civ.P. art. 424.

FACTS AND PROCEDURAL HISTORY

Scott A. Settoon Jr. (“Junior”) and Michelle Settoon are the son and daughter-in-law of Scott A. Settoon Sr. (“Senior”). Junior and Michelle own the outstanding shares of White Water Contractors Inc. and Settoon Investment Properties Inc. Senior owns the outstanding shares of Settoon Construction Inc., Settoon Inc., S.A.S. Trucking of Louisiana Inc., and Settoon Rental Inc.

Junior and Michelle previously worked for Settoon Construction. But in January 2022, Settoon Construction terminated their employment for allegedly stealing corporate property. One month later, Settoon Construction filed suit for injunctive relief against Michelle.

Then, in December 2022, Settoon Construction amended its petition by adding parties to the litigation—Settoon Inc. and S.A.S. Trucking were added as plaintiffs; Junior, White Water Contractors, and Settoon Investment Properties were added as defendants. The amended petition also added claims, including multiple causes of action against Junior and Michelle for conversion of Settoon Construction's property. Plaintiffs filed a second amended petition in October 2024, bringing more claims against Junior and Michelle.

Two months later, Defendants answered the petition and asserted third-party and reconventional demands. The third-party demand added Senior and two other individuals to the lawsuit. The reconventional demand asserted various damages claims, including four employment-based causes of action: wrongful termination, unpaid wages, unlawful employment, and wrongful arrest.

A few weeks after that, Plaintiffs filed an exception of prescription as to the employment-based actions. The trial of the exception was held in March 2025. Although Junior and Michelle conceded that the actions had prescribed, they then pointed to La.Code Civ.P. art. 424 and argued that the prescribed actions could be used as affirmative defenses to offset any judgment entered against them.

The trial court ruled from the bench: first, the trial court sustained the exception. The court then turned its attention to La.Code Civ.P. art. 424, finding that Junior and Michelle's prescribed actions could not be used as affirmative defenses. This ruling was reduced to a written judgment signed on April 7, 2025. Defendants, in turn, filed an application for supervisory writ; they also took this appeal. Both matters have been consolidated.¹

On appeal, Defendants assert one assignment of error: “The trial court erred in ruling that [Junior and Michelle] cannot use their employment related claims of wrongful termination, unpaid wages, unlawful employment, and wrongful arrest as affirmative defenses under Louisiana Code of Civil Procedure Article 424 to offset any judgment rendered against them.”

LAW AND ANALYSIS

The assigned error presents a question of law: Defendants seek review of the trial court's interpretation and application of La.Code Civ.P. art. 424. Also, no evidence was adduced at the trial of the exception, and the trial court did not make any findings of fact. For these reasons, we review the assignment de novo. First Nat. Bank, USA v. DDS Const., LLC, 11-1418 (La. 1/24/12), 91 So.3d 944.

In relevant part, La.Code Civ.P. art. 424 provides:

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.

As stated earlier, Junior and Michelle concede that their employment-related causes of action for wrongful termination, unpaid wages, unlawful employment, and wrongful arrest are prescribed. Thus, the issue before us is whether those prescribed actions (or corresponding obligations) can be used as affirmative defenses under La.Code Civ.P. art. 424. And this turns on whether the actions are “incidental to, or connected with,” Plaintiffs’ actions for conversion of corporate property.

With that in mind, Plaintiffs’ appeal brief summarizes things this way:

This case arises from a coordinated course of conduct by [Michelle] and [Junior] in which they used their positions as trusted employees of [Settoon Construction] to access Plaintiffs-Appellees’ confidential information, customer relationships, vendor relationships, property, internet accounts, and business infrastructure, and then used that access to divert money, property, and opportunities away from Plaintiffs-Appellees and toward themselves and their related entities ․ Their conversion of Plaintiffs-Appellees’ corporate property was extensive and spanned multiple years.

Junior and Michelle are both former employees of Settoon Construction ․ After it was discovered that Junior and Michelle had stolen corporate property, Settoon Construction terminated the employment of Junior and Michelle on January 25, 2022.

A review of the petition shows that Plaintiffs have asserted multiple causes of action for conversion against Junior and Michelle. For example, the petition alleges that Junior and Michelle illegally used corporate funds to attend out-of-state conferences, to pay personal lines of credit, to pay personal credit cards, and to enrich their own companies. Additionally, Junior and Michelle allegedly sold corporate movables and kept the cash and allegedly misappropriated revenue from residential construction jobs.

By comparison, Junior and Michelle's reconventional demand asserts numerous damages claims, including the four prescribed causes of action at issue: wrongful termination, unpaid wages, unlawful employment, and wrongful arrest. Again, Junior and Michelle concede that their employment-based actions are prescribed. That is not the issue; the issue is whether those actions are “incidental to, or connected with,” Plaintiffs’ conversion actions under La.Code Civ.P. art. 424.

Junior and Michelle attempt to satisfy this nexus requirement by simply pointing out that all causes of action—the prescribed actions and the conversion actions—are directly related to their employment with Settoon Construction.

Plaintiffs disagree. They contend that “the mere fact that the claims asserted by [Junior and Michelle] arise out of the same employer-employee relationship does not meet the connectivity requirement” of Article 424. After all, each of the prescribed actions arises from “distinct legal duties, and distinct time periods that are not connected with the specific conversions of corporate property at issue in the principal demand.”

Before going further, a review of the jurisprudence interpreting and applying La.Code Civ.P. art. 424 is necessary. Junior and Michelle point to six cases in which prescribed actions were permitted as affirmative defenses. The first case is Dixie Building Materials Co. v. Bob L. Whittington & Associates, Inc., 588 So.2d 78 (La.1991). There, the plaintiff filed suit for payment of concrete. The defendant reconvened, asserting a claim that the concrete was defective. Although the defectiveness claim had prescribed, the supreme court allowed it to be used as an affirmative defense under Article 424: the defectiveness claim was incidental to the claim for payment.

Next, in Picard v. Picard, 97-1528 (La.App. 3 Cir. 4/1/98), 708 So.2d 1292, the plaintiff sued her former husband to enforce the terms of a community property partition agreement. In response, the former husband filed a reconventional demand seeking to revoke or modify the agreement on account of lesion. The plaintiff then filed an exception of prescription, arguing that the cause of action for lesion had prescribed. Ultimately, this court held that the former husband could raise the prescribed action as a defense under La.Code Civ.P. art. 424.

Similarly, in Waites v. Waites, 17-499 (La.App. 4 Cir. 10/10/18), 256 So.3d 539, the plaintiff filed suit against her former husband for spousal support arrearages. The husband reconvened, claiming he was entitled to a credit or offset for overpayments made twenty years earlier. The former wife then filed an exception of prescription. The trial court applied Article 424 and ruled that husband's offset claim, though prescribed, could be used as a defense. The fourth circuit affirmed that decision.

The next case is Succession of Watkins, 16-356 (La.App. 4 Cir. 12/7/16), 206 So.3d 1237. There, the succession administrator of Betty Jean Badie Watkins's estate sought to reduce Troy Badie's inheritance because he had removed cabinets, appliances, and fixtures from a home belonging to the estate. In opposition, he argued that the claim for property damages had prescribed and could not be used by the succession. The fourth circuit disagreed, explaining:

[T]he debt owed by Troy Badie to the estate is closely related to his claims against the succession for his inheritance. Troy Badie caused damage to the immovable property that made up the bulk of the estate and the damage he caused led to reduction in the value of the estate. These actions and their cost to the estate are clearly related to his inheritance claim, and as such the debt can be used as an offset even though it may have prescribed.

Id. at 1240.

Likewise, in Fidelity Funds, Inc. v. Price, 491 So.2d 681 (La.App. 1 Cir. 1986), a lender filed suit after the defendant defaulted on his mortgage note. The defendant reconvened, alleging claims under Louisiana Consumer Credit Law. The lender urged prescription. Ultimately, the first circuit determined that Article 424’s connectivity requirement had been met, and it allowed the prescribed claims to be used as a defense.

The sixth and final case is In re P.K. Smith Motors, Inc., 50,357 (La.App. 2 Cir. 3/9/16), 188 So.3d 324, writ denied, 16-852 (La. 6/17/16), 192 So.3d 771. There, the estate of Perry Smith filed suit against Michael Smith (Perry's brother) and P.K. Smith Motors (the corporation owned by the brothers), seeking dissolution of the corporation and disposition of its assets. Michael and the corporation reconvened with various claims, including a claim for $161,735.04 allegedly owed to the corporation by Perry at the time of his death. Although that claim had prescribed, the trial court allowed it as an offset under La.Code Civ.P. art. 424. The second circuit affirmed: “We consider a claim for money lent by a corporation to a shareholder to be incidental to or connected with a claim by a shareholder to dissolve and discontinue the corporation, which would ultimately require the settlement of obligations owed by and to the corporation.” Id. at 339.

Plaintiffs, on the other hand, rely on two cases. First, they point to Petit v. Petit, 23-417 (La.App. 5 Cir. 5/29/24), 388 So.3d 1256. In that case, Judith Petit sued her sister Phyllis for conversion of funds and breach of contract after Phyllis had verbally agreed to hold approximately $11,000.00 for Judith but then refused to return the money. Phyllis reconvened against Judith for breach of contract and conversion of $90,000.00. Judith worked at a café owned by Phyllis from 2016 until 2019. Phyllis claimed that Judith took approximately $90,000.00 from the café during those three years. Though prescribed, Phyllis argued that her claims could be used as defenses under Article 424. The trial court disagreed. The fifth circuit affirmed: “These claims are simply not ‘incidental to, or connected with’ each other. The claim regarding Judith's theft from the café is not inseparable from or attached to Judith's claim for the return of her money.” Id. at 1263.

Plaintiffs also cite Peyton Place, Condo. Associates, Inc. v. Guastella, 08-365 (La.App. 5 Cir. 5/29/09), 18 So.3d 132. There, a condominium association filed suit against unit owners for unpaid fees. The owners, in turn, reconvened for unpaid rent. After sustaining the association's exception of prescription, the trial court found that the prescribed rent claims could not be used as a defense under Article 424. The fifth circuit affirmed, emphasizing that “[t]here is no ‘visceral’ connection between the ․ defendants’ rent claims and the Association's claims for condominium fees.” Id. at 145.

We now turn to the applicable rules of construction. Louisiana Code of Civil Procedure Article 5051 states that “[t]he articles of this Code are to be construed liberally, and with due regard for the fact that rules of procedure implement the substantive law and are not an end in themselves.” However, this rule is tempered by La.Code Civ.P. art. 5052: “When the language of an article is clear and free from ambiguity, its letter is not to be disregarded under the pretext of pursuing its spirit.”

With all this in mind, we return to Junior and Michelle's employment-based actions, beginning with wrongful termination.

 Wrongful Termination

Plaintiffs describe Junior and Michelle's cause of action this way:

The wrongful-termination claims are premised on the decision of Settoon Construction to end Junior's and Michelle's employment on January 25, 2022, and on the alleged absence of a lawful basis for that discharge. Those claims turn on the circumstances of the termination decision and the damages flowing from loss of employment.

To begin with, we agree that this cause of action turns on the circumstances of the termination decision. And we know those circumstances: Settoon Construction terminated Junior and Michelle's employment based on their alleged conversions of corporate property. But Junior and Michelle have denied these allegations; they have denied any wrongdoing.

Indeed, in their reconventional demand, they allege that Junior and his father verbally agreed that Settoon Construction would be sold to Junior at the end of 2022, they allege that a term sheet was prepared by Junior's attorneys and delivered to Senior, they allege that they were wrongfully terminated shortly thereafter because Senior was concerned that he would no longer be able to run personal expenses through the company after the sale, and they allege that Senior then extorted them in an effort to cripple their ability to operate on their own.

Junior and Michelle also allege that their access to Settoon Construction bank accounts and other financial information was limited and that “[a]t all relevant times Senior authorized Junior and/or Michelle Settoon to operate Settoon Construction as Senior had allowed it to run and continued to authorize and approve of Junior and Michelle Settoon's actions in running Settoon Construction, including all of the improper actions complained of herein by Plaintiffs[.]” These allegations form the basis of their wrongful termination claim.

In our view, this essentially amounts to a “he said, she said” contest. But unlike Petit, 388 So.3d at 1263 (where one sister's prescribed conversion claim was “simply not ‘incidental to, or connected with,’ ” the other sister's action for return of funds), and unlike Guastella, 18 So.3d at 145 (where there was “no ‘visceral’ connection between” prescribed rent claims and unpaid condominium fees), the cause of action here for wrongful termination is directly connected with the alleged wrongful conversions of corporate property—the actions arise from the same transactions and occurrences.

In sum, because Junior and Michelle's cause of action for wrongful termination is connected with Plaintiffs’ conversion actions, it can be used as an affirmative defense under La.Code Civ.P. art. 424. The trial court erred in ruling otherwise.

 Unpaid Wages

Both Junior and Michelle assert an action for unpaid wages. As to Junior, the reconventional demand alleges that he “was forced by Senior to work for Settoon Construction for no wages between, on information and belief, the years of 1995 to 2007, during the time Junior being ages five and up.” The pleading also alleges that “Junior was not paid for all of his time” in 2015.

As to Michelle, there is only a general allegation that she was not paid for the first few years that she worked at Settoon Construction. Yet this allegation is not contained in the reconventional demand; it is found in the answer.

According to Plaintiffs, the focus of the wage claims is whether Junior was compensated decades ago and whether Michelle was compensated during the early years of her employment. And this has nothing to do with the conversions of corporate property alleged by Plaintiffs. We agree.

In our view, the causes of action for unpaid wages are neither incidental to, nor connected with, the conversion claims. The mere fact that both sets of claims arose during Junior and Michelle's employment with Settoon Construction does not satisfy the connectivity requirement of La.Code Civ.P. art. 424. The trial court correctly found that the unpaid wage actions could not be used as affirmative defenses.

 Unlawful Employment

The action for unlawful employment is rooted in allegations that Junior, as a minor, was required to work at Settoon Construction without pay. But as alleged, this action has no bearing on whether Junior and Michelle wrongfully converted corporate property during their employment. Hence, the trial court correctly found that this action could not be used as an affirmative defense under La.Code Civ.P. art. 424.

 Wrongful Arrest

Finally, the action for wrongful arrest arises from Junior's 2022 arrest for theft of a pickup truck owned by Settoon Construction. Yet the pickup truck is not at issue in the underlying lawsuit; Plaintiffs do not allege that it was wrongfully converted. So as before, because the action for wrongful arrest has no connection with the conversions of corporate property, the trial court correctly determined that the action cannot be used as an affirmative defense.²

DISPOSITION

We reverse the part of the trial court judgment of April 5, 2025, that bars Defendants Scott A. Settoon Jr. and Michelle Settoon from using their prescribed causes of action for wrongful termination as an affirmative defense under La.Code Civ.P. art. 424. The judgment is affirmed in all other respects, and this case is remanded for further proceedings.

The costs of the appeal are divided equally between Plaintiffs (Settoon Construction Inc., Settoon Inc., and S.A.S. Trucking of Louisiana Inc.) and Defendants (Scott A. Settoon Jr., Michelle Settoon, White Water Contractors Inc., and Settoon Investment Properties Inc.).

AFFIRMED IN PART;

REVERSED IN PART AND REMANDED.

In this consolidated appeal, the issue before us is whether the prescribed causes of action asserted by Defendants (Scott A. Settoon Jr., Michelle Settoon, White Water Contractors Inc., and Settoon Investment Properties Inc.) can be used as affirmative defenses under La.Code Civ.P. art. 424.

In February 2025, the trial court consolidated docket numbers 91,409 and 92,317. The trial court then entered judgment on April 7, 2025, in both proceedings. Oversimplifying slightly, the judgment did two things: first, it sustained the exception of prescription filed by Plaintiffs (Settoon Construction Inc., Settoon Inc., and S.A.S. Trucking of Louisiana Inc.). And second, it barred Defendants from using prescribed employment-based actions as affirmative defenses.

Defendants then took an appeal in each proceeding: trial court docket number 92,317 corresponds to this appeal (26-155); and trial court docket number 91,409 corresponds to court of appeal docket number 26-154. Defendants also applied for supervisory review in this court in docket number 25-245. Although both appeals and the writ proceeding have since been consolidated, our opinion here addresses only the disposition of the appeals.¹

Thus, for the reasons expressed in Settoon Construction, Inc. v. Settoon, 26-154 c/w 26-155 c/w 25-245 (La.App. 3 Cir. 9/30/26), ––– So.3d ––––, 2026 WL 2932481, we affirm in part, reverse in part, and remand for further proceedings.

AFFIRMED IN PART; REVERSED IN PART AND REMANDED.

FOOTNOTES

1.   La.Code Civ.P. art. 1915 was amended and reenacted by 2025 La. Acts No. 250, § 3 (eff. Aug. 1, 2025). However, the amendments have prospective application only and do not apply to this writ proceeding or to the consolidated appeals. See Smith v. Beckman, 25-301, p. 4 n.3 (La.App. 4 Cir. 10/27/25), 423 So.3d 1139, 1142 n.3, writ denied, 25-1448 (La. 12/16/25), 422 So.3d 787.

2.   The legal issues presented here are fully addressed in Settoon Construction, Inc. v. Settoon, 26-154 c/w 26-155 c/w 25-245 (La.App. 3 Cir. 9/30/26), ––– So.3d ––––, 2026 WL 2932481.

3.   This memorandum opinion is issued in compliance with Uniform Rules—Courts of Appeal, Rule 2–16.1(B).

1.   In February 2025, the trial court consolidated docket numbers 91,409 and 92,317. The trial court judgment of April 7, 2025, was entered in both proceedings. Defendants then perfected an appeal in each proceeding: trial court docket number 91,409 corresponds to this appeal (26-154); and trial court docket number 92,317 corresponds to court of appeal docket number 26-155. Defendants also applied for supervisory review in this court in docket number 25-245. Although both appeals and the writ proceeding have since been consolidated, our opinion here addresses only the disposition of this appeal.

2.   In their appeal brief, Plaintiffs also argue that La.Code Civ.P. art. 424 cannot be used to revive prescribed causes of action against Senior because he is not a party-plaintiff in this case. Yet this argument is moot based on our disposition: the action for wrongful termination is against Settoon Construction, not Senior, and it is the only prescribed action that can be used an affirmative defense under Article 424.

1.   The writ application was denied in Settoon Construction, Inc. v. Settoon, 25-245 c/w 26-154 c/w 26-155 (La.App. 3 Cir. 90/30/26), ––– So.3d ––––, 2026 WL 2932481.

FITZGERALD, Judge.