text:
    Kent Andrew HICKEY, M.D. and the Doc's Clinic, APMC v. John E. ANGELO, M.D. and John E. Angelo, D.O. (a Medical Corporation)
    Malcolm Sutter III, and M.F. Leasing, Inc. v. John E. Angelo, and John E. Angelo D.O. (a Medical Corporation)
    NO. 2018-CA-0550 NO. 2018-CA-0551
    Court of Appeal of Louisiana, Fourth Circuit.
    MAY 29, 2019
   Ernest A. Burguieres, ATTORNEY AT LAW, 829 Baronne Street, New Orleans, LA 70113, COUNSEL FOR PLAINTIFF/APPELLANT

Matthew K. Brown, SULLIVAN, STOLIER & RESOR, APLC, 909 Poydras Street, Suite 2600, New Orleans, LA 70112, COUNSEL FOR DEFENDANT/APPELLEE

(Court composed of Judge Daniel L. Dysart, Judge Joy Cossich Lobrano, Judge Tiffany G. Chase )

Judge Joy Cossich Lobrano This appeal arises from wage and rent disputes concerning a medical practice. Plaintiffs/appellants, Kent Andrew Hickey, M.D. ("Dr. Hickey"), Malcolm Sutter, III ("Mr. Sutter"), The Doc's Clinic, APMC ("Doc's Clinic"), and M.F. Leasing, Inc. ("M.F. Leasing")(collectively, "plaintiffs"), appeal the March 9, 2018 judgment of the district court, which awarded Dr. Hickey and Mr. Sutter certain past wages but denied other claims as prescribed. For the reasons that follow, we affirm the judgment of the district court.

This matter stems from two lawsuits, both filed on January 28, 2008, against John E. Angelo, M.D. and his medical practice, John E. Angelo, D.O. (A Medical Corporation). The first suit was filed by Dr. Hickey and Doc's Clinic, while the second suit was filed by Mr. Sutter and M.F. Leasing. These lawsuits were later consolidated on May 25, 2017.

Dr. Hickey and Mr. Sutter were both employed by the practice, respectively, as staff physician and business manager. According to their petitions, Dr. Hickey owned and operated Doc's Clinic, and Mr. Sutter owned and operated M.F. Leasing. Dr. Hickey contends that Doc's Clinic and the practice entered into an agreement in which the practice agreed to reimburse Doc's Clinic for rent, utilities, and expenses associated with three medical clinics: the Orleans clinic, the St. Bernard clinic, and the Franklin clinic. Mr. Sutter alleges that M.F. Leasing entered into a similar agreement with the practice, concerning the same three clinics.

According to all plaintiffs, the practice experienced cash flow shortages and failed to meet its wage and rent obligations. Dr. Hickey alleges that he and Dr. Angelo entered into an agreement in which Dr. Angelo would satisfy his indebtedness to Dr. Hickey and Doc's Clinic upon the sale of a building located on Canal Street in New Orleans (the "Canal Street building"). Mr. Sutter also alleges that he and Dr. Angelo entered into an agreement in which Dr. Angelo would satisfy his indebtedness to Mr. Sutter and M.F. Leasing upon the sale of the Canal Street building. Both petitions state that General Practice Management Group, Ltd. ("GPMG") owned the Canal Street building, and Dr. Angelo solely owned and operated GPMG. The Canal Street building was sold in 2006, and plaintiffs allege that they were not paid any of the disputed past wages or rent from the proceeds of the sale. GPMG was not named a defendant in either lawsuit.

Following a bench trial on December 6, 2017, the district court took the matter under advisement. On March 9, 2018, the district court rendered judgment finding the practice liable to: (1) Dr. Hickey for $ 22,086.35 in past wages (plus applicable withholdings and deductions), $ 21,786.30 in penalty wages, reasonable attorney's fees, judicial interest, and court costs; and (2) Mr. Sutter for $ 8,000 in past wages (plus applicable withholdings and deductions), reasonable attorney's fees, judicial interest, and court costs. However, the district court found that all claims for wages or rent prior to January 28, 2005 had prescribed.

This appeal followed, in which the plaintiffs set forth three assignments of error:

1. The District Judge erred in finding plaintiffs had not proved the existence of an oral contract between Dr. Angelo, Mr. Sutter, and Dr. Hickey, obliging Dr. Angelo to personally pay the amounts due to plaintiffs with the proceeds of the sale of his Canal Street building, instead finding the debts accruing prior to January 28, 2005 had prescribed.
2. The District Judge erred in failing to find Dr. Angelo personally assumed the wage claims awarded in her judgment.
3. The District Judge erred in declining to pierce the corporate veil and hold Dr. Angelo personally liable for the judgment against John E. Angelo, D.O. (A Medical Corporation).

The central issue in this appeal is whether plaintiffs met their burden to prove that Dr. Angelo entered into an oral contract in which he obligated himself, personally, to pay past wages and rent to plaintiffs. No document exists, memorializing the alleged oral contract. Plaintiffs argue that a ten-year prescriptive period applies to their breach of contract claim arising out of Dr. Angelo's personal oral promise, such that plaintiffs' pre-2005 claims have not prescribed.

An oral contract with a value in excess of five hundred dollars "must be proved by at least one witness and other corroborating circumstances." La. C.C. art. 1846. "The plaintiff himself may serve as the witness to establish the existence of the oral contract." Suire v. Lafayette City-Par. Consol. Gov't , 2004-1459, p. 29 (La. 4/12/05), 907 So.2d 37, 58 (citing Gulf Container Repair Servs., Inc. v. FIC Bus. & Fin. Ctrs., Inc. , 98-1144, p. 5 (La. App. 5 Cir. 3/10/99), 735 So.2d 41, 43 ). "The 'other corroborating circumstances' need only be general in nature; independent proof of every detail of the agreement is not required." Id. (citations omitted). "But, the other corroboration must come from a source other than the plaintiff." Id. (citations omitted). A "party claiming to be owed in excess of $ 500.00 [ ] bears the burden of proving the existence of such a contract." Duvio v. Specialty Pools Co., LLC , 2015-0423, p. 10 (La. App. 4 Cir. 6/16/16), 216 So.3d 999, 1008 (citing Landix v. Blunt , 2012-1231, p. 5 (La. App. 4 Cir. 3/20/13), 112 So.3d 376, 379 ).

"The existence or non-existence of a contract is a question of fact, and the [district] court's determination of this issue will not be disturbed unless manifestly erroneous or clearly wrong." Read v. Willwoods Cmty. , 2014-1475, p. 6 (La. 3/17/15), 165 So.3d 883, 888 (citations omitted). The issue of whether the evidence presented is sufficient to corroborate the existence of an oral contract is, likewise, a question of fact, and the fact-finder's determination will not be overturned unless it is manifestly erroneous or clearly wrong. Id. ; Gulf Container Repair Servs., Inc. , 98-1144, p. 6, 735 So.2d at 43.

This Court articulated the manifest error/clearly wrong standard of review in Lakewood Estates Homeowner's Ass'n, Inc. v. Markle , 2002-1864, p. 4 (La. App. 4 Cir. 4/30/03), 847 So.2d 633, 637 :

The two-part test for the appellate review of a factual finding is: 1) whether there is a reasonable factual basis in the record for the finding of the trial court, and 2) whether the record further establishes that the finding is not manifestly erroneous. Mart v. Hill , 505 So.2d 1120, 1127 (La. 1987). Thus, if there is no reasonable factual basis in the record for the trial court's finding, no additional inquiry is necessary to conclude there was manifest error. However, if a reasonable factual basis exists, an appellate court may set aside a trial court's factual finding only if, after reviewing the record in its entirety, it determines the trial court's finding was clearly wrong. See Stobart v. State, through Dep't of Transp. and Dev. , 617 So.2d 880, 882 (La. 1993). Furthermore, when factual findings are based on the credibility of witnesses, the fact finder's decision to credit a witness's testimony must be given "great deference" by the appellate court. Rosell v. ESCO , 549 So.2d 840, 844 (La. 1989). Even though an appellate court may feel its own evaluations and inferences are more reasonable than the fact finder's, reasonable inferences of fact should not be disturbed upon review where conflict exists in the testimony. Stobart , 617 So.2d at 882. Where there are two permissible views of the evidence, the fact finder's choice between them cannot be manifestly erroneous or clearly wrong. Stobart , 617 So.2d at 883.

The following evidence, introduced at trial, is pertinent to this Court's review. Mr. Sutter testified that, in 2002, when the practice's cash flow problems became apparent to Mr. Sutter, Dr. Angelo promised to pay Mr. Sutter's wages "when either the funds became available or when the Canal Street building was sold ...." According to Mr. Sutter, Dr. Angelo "made the same statement when [Mr. Sutter] realize[d] [Dr. Angelo] couldn't pay for the leases he had signed." Mr. Sutter testified that Dr. Hickey also "had the arrangement ... that we all would be paid when the [Canal Street] building was sold." Mr. Sutter did not identify any other witness to Dr. Angelo's alleged promise.

Dr. Hickey testified that his understanding - that Dr. Angelo promised to personally pay back wages upon the sale of the Canal Street building - came from Mr. Sutter, who acted as a liaison between Dr. Angelo and Dr. Hickey. Dr. Hickey did not recall ever having a conversation directly with Dr. Angelo regarding this promise.

Dr. Hickey did not identify any other witness to Dr. Angelo's alleged promise.

In Dr. Angelo's testimony, he denied promising Dr. Hickey or Mr. Sutter that he would personally pay past wages or other amounts owed by the practice. Dr. Angelo testified that GPMG owned the Canal Street building until it was sold in 2006.

Gwendolyn Alexander, a 20-year employee of the practice, testified that she was not paid for the two months she worked after Hurricane Katrina, and that on several occasions Dr. Angelo promised her that she would be paid after the sale of the Canal Street building. Ms. Alexander had no knowledge whether Dr. Angelo made a similar promise to Mr. Sutter or Dr. Hickey.

Cassandra Crowley, a medical assistant for the practice, testified that she was not paid for her work in August 2005, and that she did not try to contact Dr. Angelo to get paid because "we couldn't get in contact with people after the storm [Hurricane Katrina]."

Anthony Jones, a regulatory and technical advisor for the practice's laboratory, testified that Dr. Angelo never promised to pay him any money from the sale proceeds of the Canal Street building. He was not aware of Dr. Angelo promising to pay anyone out of the proceeds of the Canal Street building sale. Mr. Jones testified that, while he worked for the practice, he was sometimes not paid his full wages due to "budgetary reasons" and that the practice owes him between $ 15,000.00 and $ 20,000.00. Dr. Angelo has not agreed to pay him these past wages. Mr. Jones voluntarily resigned from the practice in 2003 to accept a job with a new employer. At the time he resigned, the practice had not paid Mr. Jones' wages in 6 or 7 months. Mr. Jones testified that he sent numerous invoices for his unpaid wages, but he has not otherwise sought to collect them.

Plaintiffs contend that a reasonable fact-finder could not find that Mr. Sutter and Dr. Hickey worked for years without receiving their full wages or rental income, without any assurance from Dr. Angelo that the payments would be forthcoming. The Louisiana Civil Code is explicit, however, that an oral contract must be proven by at least one witness and other corroborating circumstances. La. C.C. art. 1846. As previously noted, whether the evidence at trial was sufficient to corroborate the existence of an oral contract is a determination for the trier of fact, which must not be overturned unless it is manifestly erroneous or clearly wrong. Read , 2014-1475, p. 6, 165 So.3d at 888 ; Gulf Container Repair Servs., Inc. , 98-1144, p. 6, 735 So.2d at 43.

The record on appeal contains no documentary evidence of the alleged oral contract between Dr. Angelo, Dr. Hickey, and Mr. Sutter. At trial, Mr. Sutter was the only witness to testify to personal knowledge of an oral contract. Dr. Hickey admitted that the entirety of his understanding regarding such agreement came from Mr. Sutter. Dr. Angelo denied making the promise at issue. While Ms. Alexander testified that she was promised back wages upon the sale of the Canal Street building, she had no knowledge of an oral contract between Dr. Angelo, Dr. Hickey, and Mr. Sutter. On these facts, we find no manifest error in the district court's determination that plaintiffs' evidence was insufficient to corroborate the existence of an oral contract that would bring this claim within the ambit of a ten-year prescriptive period. Plaintiffs' arguments are without merit.

Plaintiffs raise a separate assignment of error that the district court erred by failing to find that Dr. Angelo personally assumed the debts of the practice. La. C.C. art. 1823 provides that an "obligee and a third person may agree on an assumption by the latter of an obligation owed by another to the former." Under La. C.C. art. 1823, "[t]hat agreement must be made in writing." Comment (b) to La. C.C. art. 1823 recognizes that an exception to the writing requirement may apply "when the promisor has a material interest in making the promise and receives consideration for it." Cf. La. C.C. art. 1847 (prohibiting using parol evidence to prove a promise to pay the debt of a third person). "If the agreement to pay is not made primarily to answer for another, but is impelled from the pecuniary or business motives of the promisor, then the promise to pay is, in effect, a new and independent agreement and parol evidence is admissible to establish the existence of the agreement." Manufacturas Industriales Del Caribe, S. de R.L. de C.V. v. Kathryn Arnett Studio, L.L.C. , 2005-1174, p. 4 (La. App. 4 Cir. 5/10/06), 931 So.2d 1126, 1128 (citations omitted)(recognizing jurisprudential exception to parol evidence rule in "instances wherein the oral promise to pay is prompted by a pecuniary or business motivation on the part of the promisor").

We find nothing in the record to indicate the district court excluded any evidence or testimony based on the parol evidence rule. Plaintiffs nonetheless contend that Dr. Angelo had a pecuniary interest in promising to pay his workers these disputed amounts to induce them to continue working for him. Whether Dr. Angelo personally assumed the debts of the practice presents a question of fact, subject to the manifest error/clearly wrong standard of review. See Boes Iron Works, Inc. v. Gee Cee Grp., Inc. , 2016-0207, p. 14 (La. App. 4 Cir. 11/16/16), 206 So.3d 938, 950.

Plaintiffs cite to Cole v. Joshua , 575 So.2d 859 (La. App. 2d Cir. 1991) for the proposition that an oral promise to pay back wages owed by a third party, not corroborated in writing, may be proven by at least one witness and other corroborating circumstances. The Cole court, nevertheless, recognized that the manifest error/clearly wrong standard applied to its appellate review, and the testimony in the Cole court's record was not expressly contradicted by other testimony or documents. Id. Cole further acknowledged that, pursuant to La. C.C. art. 1846, other corroborating circumstances are required to prove an oral contract with a value exceeding $ 500.00. Id.

Here, the district court, sitting as the trier of fact, heard and considered the testimony of Drs. Angelo and Hickey and Mr. Sutter, weighed that testimony, and evaluated these witnesses' credibility. Even if this Court would feel that its own "evaluations and interests are more reasonable than the [district court's]," on our review we must not disturb "reasonable inferences of fact ... where conflict exists in the testimony." Lakewood Estates Homeowner's Ass'n, Inc. , 2002-1864, p. 4, 847 So.2d at 637. On the facts of record, we cannot say that the district court's determination was clearly wrong, and we find no merit in this assignment of error.

Finally, we address plaintiffs' argument that the district court should have pierced the corporate veil to find Dr. Angelo personally liable for plaintiffs' claims. Plaintiffs contend that the practice was merely Dr. Angelo's alter ego. In Collins v. State Farm Ins. Co. , 2014-0419, p. 16 (La. App. 4 Cir. 2/4/15), 160 So.3d 987, 997, this Court explained:

[A] corporation is a legal entity separate and distinct from the members who compose it. Landry v. St. Charles Inn, Inc. , 446 So.2d 1246, 1251 (La. App. 4th Cir. 1984) (citing La. C.C. art. 435 and Buckeye Cotton Oil Co. v. Amrhein , 168 La. 139, 121 So. 602 (1929) ). "Only exceptional circumstances warrant the radical remedy of 'piercing the corporate veil.' " Landry , 446 So.2d at 1251. The purpose of allowing plaintiffs to pierce the corporate veil is to hold individual shareholders liable for wrongdoing. Scott v. Am. Tobacco Co., Inc. , 04-2095, p. 8 (La. App. 4 Cir. 2/7/07), 949 So.2d 1266, 1274. This court has allowed piercing of the corporate veil in situations where fraud or deceit has been practiced by a shareholder acting through the corporation. Id. (citing Riggins v. Dixie Shoring Co. , 590 So.2d 1164, 1168 (La. 1991) ). This court also has allowed piercing of the corporate veil when shareholders have disregarded the requisite corporate formalities to the extent that the shareholders are no longer distinct from the corporate entity-also known as the "alter ego" doctrine. Id. at 04-2095 at p. 8, 949 So.2d at 1274-75 (citing Gordon v. Baton Rouge Stores Co. , 168 La. 248, 121 So. 759 (1929) ).

The mere fact that a corporation has a sole shareholder is, without more, "insufficient ... to establish a basis for disregarding the corporate entity." See Prasad v. Bullard , 2010-291, p. 8 (La. App. 5 Cir. 10/12/10), 51 So.3d 35, 41. "Absent fraud, malfeasance or criminal wrongdoing, courts have been reluctant to hold a shareholder personally liable for corporate obligations." Brennan's Inc. v. Colbert , 2011-1095, p. 6 (La. App. 4 Cir. 2/29/12), 85 So.3d 787, 791. "When a party seeks to pierce the corporate veil, the totality of the circumstances is determinative." Id. , 2011-1095, pp. 6-7, 85 So.3d at 791.

A district court's finding that a corporation is the alter ego of its shareholders, such that the corporate form must be disregarded and its shareholder assigned individual liability, is a finding of fact subject to the manifest error/clearly wrong standard of review. Prasad , 2010-291, p. 8, 51 So.3d at 4; Jeansonne v. Schmolke , 2009-1467, p. 23 (La. App. 4 Cir. 5/19/10), 40 So.3d 347, 364.

The Louisiana Supreme Court has set forth non-exclusive "factors courts consider when determining whether to apply the alter ego doctrine" including: (1) "commingling of corporate and shareholder funds"; (2) "failure to follow statutory formalities for incorporating and transacting corporate affairs"; (3) "undercapitalization"; (4) "failure to provide separate bank accounts and bookkeeping records"; and (5) "failure to hold regular shareholder and director meetings." Riggins v. Dixie Shoring Co. , 590 So.2d 1164, 1168 (La. 1991).

The record before us contains no allegation or evidence of fraud by Dr. Angelo or the practice. As to whether the practice is the alter ego of Dr. Angelo, we do not find the Riggins factors support such a claim. For the first factor, there is no evidence in the record that Dr. Angelo commingled personal funds with the practice's funds. Considering the second factor, Dr. Angelo testified that he filed articles of incorporation with the Secretary of State for both the practice and GPMG and that both corporations remain in good standing. The record evidence otherwise provides us no guidance from which to determine whether the practice followed statutory formalities for incorporating and transacting corporate affairs. Turning to the third factor, the record contains no specific evidence supporting undercapitalization, though it is undisputed that the practice experienced cash flow shortages.

As to the fourth factor, failure to maintain separate bank accounts and bookkeeping records, there is conflicting testimony whether separate bank accounts were kept. Mr. Sutter testified that he had "never seen" a separate bank account for GPMG. Dr. Angelo testified, however, that the practice and GPMG each had separate bank accounts. There is no dispute that the practice had a bank account, from which the practice's employees were paid wages. Mr. Sutter claimed that he used the practice's funds to pay GPMG's bills. Dr. Angelo testified that the practice paid rent to GPMG, and he did not recall whether Mr. Sutter was using GPMG funds to pay rent to Doc's Clinic. According to Dr. Angelo, GPMG paid its mortgage out of the GPMG bank account, and the practice's payroll and operating expenses were paid from the practice's bank account. As to the fifth factor, the record does not elucidate whether shareholder and director meetings were held.

Considering a totality of circumstances, we cannot say that the district court was clearly wrong in finding no exceptional circumstance warranting piercing the corporate veil. The record lacks any evidence of fraud. Further, the record does not support that Dr. Angelo has entirely ignored corporate formalities to such an extent as to require piercing the corporate veil. We, therefore, find this assignment without merit.

Accordingly, for the reasons set forth in this opinion, we affirm the judgment of the district court.

AFFIRMED

      In this opinion, we refer to John E. Angelo, M.D. individually as "Dr. Angelo," and we refer to John E. Angelo, D.O. (A Medical Corporation) as the "practice." We find no dispute in the record that the practice is solely owned and operated by Dr. Angelo.

      La. C.C. art. 3499 provides that "[u]nless otherwise provided by legislation, a personal action is subject to a liberative prescription of ten years." The reasons for judgment reflect that the district court concluded that a three-year prescriptive period applies to claims for past wages and rent, pursuant to La. C.C. art. 3494, which provides in relevant part:
      The following actions are subject to a liberative prescription of three years:
      (1) An action for the recovery of compensation for services rendered, including payment of salaries, wages, commissions, professional fees, fees and emoluments of public officials, freight, passage, money, lodging, and board;
      (2) An action for arrearages of rent and annuities; ....

      The plaintiffs introduced two leases, one pertaining to the St. Bernard clinic and one pertaining to the Orleans clinic, in which Dr. Hickey leased "equipment" to GPMG, and GPMG assumed responsibility to pay utilities for the clinic building. Both equipment leases were for a twelve-month term starting on March 1, 2002 and "ending on February 28, 2002." Presumably, the parties intended for the lease to terminate on February 28, 2003. For the same time period, the plaintiffs also introduced two leases, one pertaining to the St. Bernard clinic and one pertaining to the Orleans clinic, in which M.F. Leasing leased the clinic building to GPMG, and GPMG assumed responsibility to pay rent and utilities for the clinic building. Dr. Angelo signed all four of these leases in his capacity as "president" of GPMG. Dr. Hickey testified that there was no written lease regarding the Franklin clinic, only a verbal "gentlemen's agreement" extending the terms of the other leases to the Franklin clinic. To Dr. Hickey's understanding, the verbal lease for the Franklin clinic was between GPMG and M.F. Leasing.

      Mr. Sutter also testified that GPMG owned the Canal Street building.

      Dr. Angelo and the practice point out that the plaintiffs failed to plead this issue in the district court. While this is true, Dr. Angelo and the practice filed pre-trial and post-trial memoranda explicitly arguing that the plaintiffs failed to meet their burden to prove a veil piercing claim. Moreover, when Mr. Sutter testified that he used the practice's funds to pay GPMG's bills, Dr. Angelo and the practice did not object or otherwise argue that they were prejudiced by the injection of this issue not previously pled. The district court in its reasons for judgment, thus, addressed Dr. Angelo's and the practice's defenses relative to this issue, finding that the plaintiffs failed to meet their burden to prove a veil piercing claim.
      Under La. C.C.P. art. 1154 :
      When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised by the pleading. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to so amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby, and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense on the merits. The court may grant a continuance to enable the objecting party to meet such evidence.
      While this Court does not generally review issues not brought before or considered by the district court at trial, it is apparent from the record that the district court deemed the pleadings enlarged to include this issue and tried this claim without objection from the parties. We, thus, find plaintiffs' corporate veil piercing arguments properly before this Court on appeal.

      Plaintiffs do not specifically claim which Riggins factors support their claim to pierce the corporate veil. They cite to Fausse Riviere, L.L.C. v. Snyder , 2016-0633 (La. App. 1 Cir. 2/15/17), 211 So.3d 1188, wherein the district court found that the shareholder had used his personal funds to pay corporate debt and used assets of three corporate entities interchangeably to satisfy debts owed by the other entities, and the appellate court upheld the lower court's decision to pierce the corporate veil. We do not find Fausse persuasive, as that case does not reflect that the district court was required to resolve conflicting testimony; rather, the appellate court reviewed under the manifest error standard the district court's finding that the entities were the alter ego of the shareholder, found a reasonable basis for that finding in the record, and upheld the district court. Moreover, no evidence was introduced here that Dr. Angelo comingled personal and corporate funds.


source: Caselaw Access Project

author: Judge Joy Cossich Lobrano

license: Public Domain

text:
    Craig SZEWCZYK v. PARTY PLANNERS WEST, INC., AXIS Insurance Company and New Orleans Public Facility Management, Inc. D/B/A New Orleans Ernest N. Morial Convention Center
    NO. 2018-CA-0898
    Court of Appeal of Louisiana, Fourth Circuit.
    MAY 29, 2019
    Paul E. Mayeaux, ATTORNEY AT LAW, 1421 N. Causeway Boulevard, Suite 100, Metairie, LA 70001, COUNSEL FOR PLAINTIFF/APPELLANT
    Foster P. Nash, III, Travis L. Bourgeois, Matthew F. Morgan, DEGAN BLANCHARD & NASH, 400 Poydras Street, Suite 2600, New Orleans, LA 70130, COUNSEL FOR DEFENDANTS/APPELLEES
    (Court composed of Judge Terri F. Love, Judge Joy Cossich Lobrano, Judge Paula A. Brown )
   Judge Joy Cossich Lobrano

This is a tort suit. Plaintiff/appellant, Craig Szewczyk, appeals the summary judgment issued by the district court on July 24, 2018, in favor of the Defendants/appellees, Party Planners West, Inc., AXIS Insurance Company, and New Orleans Public Facility Management, Inc., D/B/A New Orleans Ernest N. Morial Convention Center ("Defendants"), that dismissed his suit in its entirety. For the reasons that follow, we affirm the summary judgment.

Factual and Procedural Background

On January 31, 2013, Szewczyk and his friend, David Marque, took their children to play at the "NFL Experience" at the Ernest N. Morial Convention Center during the festivities leading up to Superbowl XLVII held in New Orleans. While there, Szewczyk sat on the end of a bench that flew up, causing him to fall onto his tailbone. Szewczyk claims that after he fell, a woman, who had been handing out flags and wore a lanyard around her neck with picture identification ("the female eyewitness"), came over asking him if he was alright. Szewczyk stated that he was "more embarrassed than anything" and, according to Szewczyk, the female eyewitness replied, "Don't feel bad. This happened a few times today." Szewczyk did not get the name of the female eyewitness or for whom she may have been working.

Szewczyk filed suit on January 27, 2014, against Defendants, alleging that Defendants were negligent and liable as owners and/or custodians of a defective bench under La. C.C. arts. 2317 and 2317.1. His deposition was taken on October 1, 2014, during which Szewczyk presented a photograph of the bench he took two days after the alleged incident. Following his deposition, his counsel sent discovery requests to Defendants asking for the identity of all persons working at the NFL Experience. In response to the discovery requests, Defendants claimed that the NFL owned the bench in question and none of them had custody or control of the bench on the date in question. In addition, Defendants produced the name of the event coordinator, names of more than thirty (30) vendors, and others in charge of various aspects of the event. Szewczyk did not file a motion to compel additional information or conduct any further discovery.

The parties engaged in mediation in March 2018, which failed to settle the litigation.

On May 14, 2018, Defendants filed a motion for summary judgment on the basis that Szewczyk could not factually support any of the essential elements of his case. Specifically, Defendants argued Szewczyk had no evidence that: the bench was in the Defendants' custody or control; the bench provided an unreasonable risk of harm; the bench caused his fall; or Defendants knew or should have known of any unreasonable risk of harm created by the bench.

Szewczyk opposed the motion arguing the existence of genuine issues of material fact and the motion should be denied. In support of his opposition, Szewczyk submitted his own affidavit and the affidavit of David Marque, witness to the accident and who heard what the female eyewitness said. In addition, Szewczyk produced the photo of the bench that was attached to his deposition. No motion to continue the hearing was filed. He conducted no discovery between the date the motion for summary judgment was filed and when it was argued. At no time did Szewczyk argue in his opposition brief that he needed additional time to conduct discovery.

The motion was heard on July 13, 2018. For the first time, Szewczyk claimed that Defendants' 2014 responses to the discovery requests were inadequate. He argued that the female eyewitness was exclusively under the control of Defendants who knew she was a witness at least by the time his petition was filed in January 2014. Szewczyk maintained the female eyewitness was wearing a badge with a photo identifying her as an "official employee of Defendants." He further claimed Defendants had photographs of everyone working at the NFL Experience but had not produced them to Szewczyk so he could identify her. In addition, despite knowing the female eyewitness existed, Defendants had made no effort to identify her or produce her for a deposition. Finally, Szewczyk argued that the affidavits he produced were sufficient to create material issues of fact and that the statement by the female eyewitness contained therein was admissible as an exception to the hearsay rule. Szewczyk did not, however, argue that he needed additional time to conduct discovery to properly oppose the motion for summary judgment.

Defendants responded that Szewczyk had no evidence to support any element of his claim. In particular, he could not demonstrate that the bench was unreasonably dangerous or that it caused the accident. In addition, the NFL Experience was a massive event involving more than thirty (30) separate vendors and numerous volunteers. While Szewczyk alleged that the female eyewitness was an employee of Defendants, she could have worked for any one of the vendors, been a volunteer, or even a fan wearing a VIP badge. Thus, Szewczyk failed to support his contention that the female eyewitness was an employee of Defendants.

The district court granted the motion and entered judgment in Defendants' favor. In its oral reasons for judgment, the district court stated:

Based on the evidence presented, plaintiff cannot support at least one essential element of his claims. Specifically, plaintiff doesn't have any evidence to establish, one, the bench presented any unreasonable risk of harm; two, the bench caused plaintiff's fall, or three, the Defendants knew or should have known of any unreasonable risk of harm. Plaintiff has not provided any supporting evidence to show that defendant's failure to properly and safely assemble and maintain the bench caused the accident. Additionally, plaintiff doesn't have any evidence to show that Defendants knew or should have known of an unreasonable risk of harm. Plaintiff attempts to argue that an unidentified woman witnessed the accident and said other people fell down on the same bench earlier that day; however, her statements are considered hearsay and do not fall under the hearsay exceptions. Additionally, the uncalled witness rule is inapplicable to the facts of this case. Because plaintiff cannot support at least one essential element of his claim, the motion for summary judgment is hereby granted.

This timely appeal followed.

Szewczyk assigns the following errors for review:

(1) The trial court erred in concluding that the plaintiff would be unable to prove that the bench presented an unreasonable risk of harm;
(2) The trial court erred in concluding that the plaintiff would be unable to prove the bench caused his fall;
(3) The trial court erred in concluding the Defendants did not have actual or constructive knowledge of the unreasonable risk of harm; and
(4) The trial court erred in failing to apply an exception to the hearsay rule which allows plaintiff and another eye witness to testify as to what an employee said at the time of the incident.

Szewczyk also presents two issues on appeal that were not raised before the district court: (1) whether the district court erred by granting summary judgment while discovery is ongoing and he is still undergoing treatment for his injuries; and (2) whether the district court erred by granting summary judgment when no discovery deadlines or trial date have been set. Because these issues were not first presented to the district court, they are not properly before us. See La. Unif. R. Ct. App. 1-3 ("The Courts of Appeal will review only issues which were submitted to the trial court[.]") See also Stewart Title of Louisiana v. Chevron, U.S.A., Inc., 12-1369, p. 5 (La.App. 4 Cir. 3/27/13), 112 So.3d 949, 952, writ denied , 15-0968 (La. 8/28/15), 176 So.3d 406 (issue not raised in trial court was not properly preserved on appeal). Thus, we decline to address them.

Summary Judgment Principles

The summary judgment procedure is "designed to secure the just, speedy, and inexpensive determination of every action," and the summary judgment procedure is favored. La. C.C.P. art. 966(A)(2). The summary judgment procedure is used when no genuine issue of material fact for all or part of the relief prayed for by a litigant exists. La. C.C.P. art. 966(A)(3).

Appellate courts review the grant or denial of a motion for summary judgment de novo, employing the same criteria that govern the district court's determination of whether summary judgment is appropriate. Sislo v. New Orleans Ctr. for Creative Arts , 16-0178, p. 4 (La.App. 4 Cir. 8/17/16), 198 So.3d 1202, 1205, writ denied, 16-1781 (La. 11/7/16), 209 So.3d 100 (citing Samaha v. Rau , 07-1726, pp. 3-4 (La. 2/26/08), 977 So.2d 880, 882-83 ). The standard for granting a motion for summary judgment is set forth in La. C.C.P. art. 966(A)(3), which provides:

After an opportunity for adequate discovery, a motion for summary judgment shall be granted if the motion, memorandum, and supporting documents show that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law.

A shifting burden of proof is found in La. C.C.P. art. 966(D)(1), which states:

The burden of proof rests with the mover. Nevertheless, if the mover will not bear the burden of proof at trial on the issue that is before the court on the motion for summary judgment, the mover's burden on the motion does not require him to negate all essential elements of the adverse party's claim, action, or defense, but rather to point out to the court the absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. The burden is on the adverse party to produce factual support sufficient to establish the existence of a genuine issue of material fact or that the mover is not entitled to judgment as a matter of law.

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.

Smith v. Our Lady of the Lake Hosp., Inc ., 93-2512, p. 27 (La. 7/5/94), 639 So.2d 730, 751. "A fact is material when its existence or nonexistence may be essential to the plaintiffs [sic] cause of action under the applicable theory of recovery; 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." Chapital v. Harry Kelleher & Co., Inc. , 13-1606, p. 5 (La.App. 4 Cir. 6/4/14), 144 So.3d 75, 81. Whether a fact is material is a determination that must be made based on the applicable substantive law. Roadrunner Transp. Sys. v. Brown , 17-0040, p. 7 (La.App. 4 Cir. 5/10/17), 219 So.3d 1265, 1270 (citing Smith , supra ).

Discussion

Szewczyk argues that he presented sufficient evidence to create a genuine issues of material fact in order to defeat Defendants' motion for summary judgment. We disagree.

To prove premises liability pursuant to La. C.C. art. 2317.1, an injured plaintiff must first establish the following elements: (1) the thing was in the custodian's custody or control; (2) it had a vice or defect that presented an unreasonable risk of harm; (3) the defendant knew or should have known of the unreasonable risk of harm; and (4) the damage was caused by the defect. Once these elements are established, the plaintiff must show: 1) the owner of a thing either knew or should have known of the ruin, vice, or defect which caused the damage; 2) the owner could have prevented the damage by the exercise of reasonable care; and 3) the owner failed to exercise such reasonable care. Alexander v. Hancock Bank, 16-0662, p. 6 (La.App. 4 Cir. 2/8/17), 212 So.3d 713, 717 (citing Garrison v. Old Man River Esplanade, L.L.C. , 13-0869, p. 5 (La.App. 4 Cir. 12/18/13), 133 So.3d 699, 701-02 ; Greenhouse v. C.F. Kenner Associates, Ltd. P'ship , 98-0496, p. 5 (La.App. 4 Cir. 11/10/98), 723 So.2d 1004, 1007.) "To recover, the plaintiff bears the burden of proving these elements in the affirmative, and the failure of any one is fatal to the case." Dupree v. City of New Orleans, 99-3651, p. 6 (La. 8/31/00), 765 So.2d 1002, 1008.

"The liability imposed by La. Civil Code article 2317 is grounded in the custody or control of a defective thing." McElveen v. City of New Orleans, 03-1609, p. 7 (La.App. 4 Cir. 9/14/04), 888 So.2d 878, 882, writ denied, 04-2527 (La. 12/17/04), 888 So.2d 870. Liability arises out of a defendant's legal relationship to the thing based on the defendant's custody or control of the thing, not solely ownership of the thing. Dupree, 99-3651, p. 7, 765 So.2d at 1008. Although it is presumed that an owner has custody or control of its property, this presumption is rebuttable. Davis v. Riverside Court Condo. Ass'n Phase II, Inc., 14-0023, p. 7 (La.App. 4 Cir. 11/12/14), 154 So.3d 643, 648. Ultimately, "[t]he person who has custody or garde of a thing is he who has the legal duty to prevent its vice or defect from harming another." Dupree, 99-3651, p. 8, 765 So.2d at 1009.

Defendants argue in their appellate brief that, based on their answers to Szewczyk's discovery requests, Szewczyk has known since 2014 that the NFL owned the bench in question and that none of the Defendants had custody or control of the bench at the time of the incident. Although Szewczyk does not dispute these statements, these discovery responses are not a part of the record before us. Appellate courts are courts of record and must limit their review to evidence in the record before them. La. C.C.P. art. 2164.

Nonetheless, even assuming that Szewczyk could prove that one or more of Defendants had custody or control of the bench, Szewczyk fails to demonstrate that the bench was defective. A defect, as anticipated by La. C.C. art. 2317.1, is a condition creating an "unreasonable risk of harm." Alexander, 16-0662, p. 6, 212 So.3d at 717. The existence of a defect, however, "may not be inferred solely from the fact that an accident occurred." King v. Allen Court Apartments II , 15-0858, p. 7 (La.App. 1 Cir. 12/23/15), 185 So.3d 835, 840, writ denied , 16-0148 (La. 3/14/16), 189 So.3d 1069. Rather, the plaintiff "must prove that a defect existed and that the defect caused the plaintiff's damages." Id.

The mere fact that a customer in a store falls from a chair, or that a seat or chair collapses, does not of itself establish negligence where no defect has been shown. In Wiltz v. Floor & Decor Outlets of Am. , 15-0516, pp. 10-11 (La.App. 5 Cir. 2/24/16), 186 So.3d 1204, 1209, writ denied, 16-0592 (La. 5/27/16), 192 So.3d 738, the court affirmed summary judgment for a store where the customer failed to establish why a bench collapsed or what defect allegedly existed, as it could have been caused by improper assembly, improper maintenance, or manufacturer negligence; mere speculation was insufficient. The court noted that the plaintiff made no effort to retain an expert to inspect the actual bench, or a similar make and model of bench, to opine on the alleged defect or the cause of the bench's collapse, leading to plaintiff's injuries. Id., 15-0516, p. 10, 186 So.3d at 1209. See also Lasyone v. Kansas City Southern R.R ., 00-2628, p. 14 (La. 4/3/01), 786 So.2d 682, 694 ("[t]he fact that an accident occurred because of a vice or defect does not elevate the condition of the thing to that of an unreasonably dangerous defect").

Despite the years during which discovery could have taken place, Szewczyk has produced no evidence supporting his claim that the bench was defective. We do not know who manufactured the bench or whether the bench was required to be secured to the floor before use. Further, we have no expert testimony supporting Szewczyk's assertion that the bench created an unreasonable risk of harm by not being secured to the floor.

"Proof which establishes only possibility, speculation, or unsupported probability does not suffice to establish a claim." Todd v. State Through Dept. of Social Services, Office of Community Services, 96-3090, p. 16 (La. 9/9/97), 699 So.2d 35, 43. Szewczyk is unable to produce any evidence other than conclusory allegations in his pleadings and his own self-serving affidavit and that of his friend. Therefore, Szewczyk is unable to meet his burden of showing that a defect existed. Absent evidence corroborating Szewczyk's allegations, no genuine issue of material fact exists. King , 15-0858, p. 10, 185 So.3d at 842. Thus, the district court's grant of Defendants' motion for summary judgment was appropriate.

Conclusion

Accordingly, we affirm the summary judgment granted in favor of Defendants, Party Planners West, Inc., AXIS Insurance Company, and New Orleans Public Facility Management, Inc., D/B/A New Orleans Ernest N. Morial Convention Center, dismissing Szewczyk's claims against them with prejudice.

AFFIRMED

      La. C.C. art. 2317 states:
      We are responsible, not only for the damage occasioned by our own act, but for that which is caused by the act of persons for whom we are answerable, or of the things which we have in our custody. This, however, is to be understood with the following modifications.
      La. C.C. art. 2317.1 states:
      The owner or custodian of a thing is answerable for damage occasioned by its ruin, vice, or defect, only upon a showing that he knew or, in the exercise of reasonable care, should have known of the ruin, vice, or defect which caused the damage, that the damage could have been prevented by the exercise of reasonable care, and that he failed to exercise such reasonable care[.]

      Nevertheless, even if these issues had been preserved for appeal, a defendant's motion for summary judgment "may be filed at any time." La. C.C.P. 966(A)(1). Moreover, "[t]he jurisprudence holds that while parties must be given fair opportunity to carry out discovery and present their claim, there is no absolute right to delay action on [a] motion for summary judgment until discovery is complete." Mitchell v. Valteau , 09-1095, p. 13 (La.App. 4 Cir. 1/27/10), 30 So.3d 1108, 1116 (internal quotations omitted). Our Supreme Court directs that " '[t]he only requirement is that the parties be given a fair opportunity to present their claim. Unless plaintiff shows a probable injustice, a suit should not be delayed pending discovery when it appears at an early stage that there is no genuine issue of fact.' " Id. , 09-1095, p. 14, 30 So.3d at 1116 (quoting Simoneaux v. E.I. du Pont de Nemours and Co. , 483 So.2d 908, 912-13 (La. 1986) ). Applying these precepts, we find that the district court did not prematurely grant summary judgment, especially when Szewczyk conducted no discovery from 2014 until 2018, did not seek to continue the motion for summary judgment, or request more time to conduct discovery in either his opposition memorandum or during oral argument before the district court.

      La. C.C.P. art. 2164 states in pertinent part: "The appellate court shall render any judgment which is just, legal, and proper upon the record on appeal."

      See e.g. , Ferguson v. State Farm Fire and Cas. Co., 398 So.2d 72 (La.App. 4th Cir. 1981) (expert testimony introduced to establish cause of chair collapse in doctor's office); Jackson v. Sears Authorized Retail Dealer Store, 36,166 (La.App. 2 Cir. 6/12/02), 821 So.2d 590 ) (expert testimony introduced to prove cause of chair to turn over); Horne v. Liberty Furniture Co., 452 So.2d 204, 208 (La.App. 5th Cir.), writ denied, 456 So.2d 166, 171 (La. 1984) (plaintiff's experts, testifying from photographs, found chair collapsed due to improper gluing).

      Because Szewczyk cannot establish custody or control or that the bench had a defect that created an unreasonable risk of harm, we do not reach the remaining elements under La. C.C. art. 2317.1, cause-in-fact and actual or constructive knowledge by Defendants. In addition, we pretermit discussion of Szewczyk's last assignment of error, whether the statement of the unknown witness is admissible hearsay. Because the statement is being offered to prove an element under La. C.C. art. 2317.1, actual or constructive knowledge, we do not reach this question.


author: Judge Paula A. Brown

text:
    LEIGH OF ALL TRADES, L.L.C. d/b/a by Land or Sea Construction, LLC v. NON-FLOOD PROTECTION ASSETS MANAGEMENT AUTHORITY, Construction Management Enterprises, LLC, and Hudson Insurance Company
    NO. 2019-CA-0042
    Court of Appeal of Louisiana, Fourth Circuit.
    May 29, 2019
    Ryan C. Higgins, Daniel Aubry Ranson, GAUDRY RANSON HIGGINS & GREMILLION, L.L.C., 401 Whitney Avenue, Suite 500, Gretna, LA 70056, COUNSEL FOR PLAINTIFF/APPELLEE
    Albert Joseph Nicaud, Jeffrey M. Siemssen, Will C. Griffin, NICAUD & SUNSERI Law Firm, L.L.C., 3000 18th Street, Metairie, LA 70002, COUNSEL FOR DEFENDANT/APPELLANT
    (Court composed of Chief Judge James F. McKay, III, Judge Joy Cossich Lobrano, Judge Paula A. Brown )
   Judge Paula A. Brown

This appeal arises out of a contract dispute between Appellant/Contractor, Construction Management Enterprises ("CME"), its bond surety, Hudson Insurance Group (collectively, "CME"), and Appellee/Sub-Contractor, Leigh of All Trades, L.L.C. d/b/a By Land or Sea Construction, LLC ("LSC"), regarding sums owed on a public works construction contract. CME appeals the district court's grant of partial summary judgment in favor of LSC, finding CME liable for $ 29,072.19, the balance due on the subcontract. Finding no error of law, we affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

On February 23, 2017, the Non-Flood Protection Assets Management Authority (the "Management Authority") entered into a $ 350,000.00 public works contract ("the prime contract") with CME for the demolition of certain boathouses and improvements (the "Project"). CME obtained a payment and performance bond from Hudson Insurance Group for the Project.

On September 30, 2017, CME and LSC entered into a subcontract, valued at $ 75,000.00, for LSC to perform designated portions of the demolition work. The subcontract provided for LSC to commence work within 24 hours after LSC was notified to do so by CME, and the work was required to be completed within 22 days from the notice to proceed. The subcontract required payment of $ 10,000.00 upon signing, $ 10,000.00 upon completion of the first week of demolition, and $ 55,000.00 within thirty days after completion of LSC's work.

LSC started work on the Project on or about October 5, 2017. CME paid LSC the initial $ 20,000.00 owed on the subcontract. Thereafter, LSC submitted invoices for the remaining work completed in accordance with the original terms of the subcontract and for additional work requested by CME that allegedly went beyond the scope of the subcontract. CME made partial payments on these invoices.

The Management Authority, on November 15, 2017, executed its Notice of Substantial Completion of the Project; and on November 17, 2017, it filed the Notice of Substantial Completion in the Orleans Parish Mortgage Records.

Due to CME's failure to pay LSC's outstanding invoices, on November 20, 2017, LSC filed a Sworn Statement of Claim and Privilege ("Statement of Claim") with the Recorder of Mortgages in the amount of $ 186,550.00. On December 14, 2017, LSC amended its Statement of Claim to $ 189,080.00, which included an additional $ 2,530.00 for additional work performed on the Project on November 29, 2017, at CME's request.

On December 20, 2017, LSC filed a petition against the Management Authority and CME to recover the outstanding amounts owed under the subcontract, sums for the additional work performed beyond the scope of the subcontract, and for damages allegedly caused by CME's delays. CME denied the allegations of the petition and pled affirmative and alternative defenses that included CME's entitlement to an offset.

As part of its response to LSC's petition, the Management Authority filed a petition for concursus, depositing $ 52,454.50, the remaining balance of the prime contract, into the registry of the court. On June 11, 2018, the Management Authority, CME, and LSC entered a consent judgment, which permitted LSC to withdraw $ 25,927.81 out of the deposited funds. Afterwards, on August 8, 2018, LSC filed a motion for partial summary judgment against CME to recover the remaining $ 29,072.19 owed under the subcontract.

In opposition, CME argued that its offset defense barred LSC's right to partial summary judgment. CME offered as evidence the 1442 deposition testimony of its corporate representative and a statement of back charges attached thereto, which itemized CME's offset damages.

LSC, in response, asserted that CME's offset defense was for unliquidated damages; and, as such, the unliquidated damages could not be used to offset LSC's liquidated claim for payment. LSC, also, specifically objected to the admissibility of CME's statement of back charges. LSC argued the statement of back charges was unsupported by an affidavit and LSC disputed CME's assertion that CME's corporate representative properly authenticated the charges listed in the statement of back charges during his 1442 deposition. LSC argued that the deposition revealed the corporate representative did not actually prepare the statement of back charges, nor was he sure when it was prepared.

The district court heard argument on the motion on October 26, 2018. After oral argument, the district court granted LSC's motion for partial summary judgment and sustained LSC's objection to the statement of back charges, excluding it from evidence. The district court designated the judgment as a final judgment pursuant to La. C.C.P. art. 1915(B)(1), finding no just reason to delay.

This timely appeal followed.

STANDARD OF REVIEW

This Court delineated the standard of review for a motion for summary the standard of review for a motion for summary judgment in SBN v. FNBC LLC v. Vista Louisiana, LLC , 2018-1026, pp. 5-6 (La. App. 4 Cir. 3/27/19), 267 So.3d 655, 660 as follows:

Summary judgments are reviewed de novo one appeal, with the reviewing court using the same criteria that govern the trial court's determination of whether summary judgment is appropriate; whether there is any genuine issue of material fact, and whether the movant is entitled to judgment as a matter of law." Smith v. Robinson , [20] 18-0728, p. 5 (La. 12/5/18), 265 So.3d 740, 744, 2018 WL 6382118, (citing La. C.C.P. art. 966 ; Louisiana Safety Ass'n of Timbermen Self-Insurers Fund v. Louisiana Ins. Guar. Ass'n , [20]09-0023, p. 5 (La. 6/26/09), 17 So.3d 350, 353 ). Likewise, "when a matter involves the interpretation of a statute, it is a question of law, and a de novo standard of review is applied." New Orleans Fire Fighters Pension & Relief Fund v. City of New Orleans , 17-0320, p. 5 (La. App. 4 Cir. 3/21/18), 242 So.3d 682, 688 (citing Red Stick Studio Dev., L.L.C. v. State ex rel. Dep't. of Econ. Dev. , 10-0193, p. 9 (La. 1/19/11), 56 So.3d 181, 187 ).
The summary judgment procedure is favored. La. C.C.P. art. 966(A)(2). The standard for obtaining a summary judgment is set forth in La. C.C.P. art. 966(A)(3), which provides that "[a]fter an opportunity for adequate discovery, a motion for summary judgment shall be granted if the motion, memorandum, and supporting documents show that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law." Whether a fact is material is a determination that must be made based on the applicable substantive law. Roadrunner Transp. Sys. v. Brown , [20]17-0040, p. 7 (La. App. 4 Cir. 5/10/17), 219 So.3d 1265, 1270 (citing Smith v. Our Lady of the Lake Hosp., Inc. , 93-2512, p. 27 (La. 7/5/94), 639 So.2d 730, 751 ).

DISCUSSION

CME argues the district court erred in granting LSC's motion for partial summary judgment relief in the following respects: (1) genuine issues of material fact remain regarding CME's defense of offset or compensation; and (2) CME's statement of back charges should have been admitted into evidence. We will address each argument in turn.

Offset Defense

CME contends that it is entitled to a legal offset in the amount of $ 29,072.19, pursuant to La. C.C. art. 1893. La. C.C. art. 1893 states, in relevant part:

Compensation takes place by operation of law when two persons owe to each other sums of money or quantities of fungible things identical in kind, and these sums or quantities are liquidated and presently due.
In such a case, compensation extinguishes both obligations to the extent of the lesser amount.

The Louisiana Supreme Court, in American Bank v. Saxena , 553 So.2d 836, 844 (La. 1989), explained legal offset as follows:

Set-off, or to use the codal term, compensation, takes place by operation of law when two persons owe to each other sums of money and these sums are liquidated and presently due. In such a case, compensation extinguishes both obligations to the extent of the lesser amount. [La.] C.C. [art.] 1893.
"The two debts must be equally liquid..... [A] liquid debt [is] one whose existence is certain and its quantity determined. A disputed debt is not liquid and cannot be admitted as susceptible of compensation unless the one who asserts compensation has in hand the proof of the existence of the disputed debt and is thus in a position to prove it promptly." 4 Aubry & Rau, Cours de Droit Civil Francais, s. 326 (6th ed. 1965).
A claim is liquidated when the debt is for an amount capable of ascertainment by mere calculation in accordance with accepted legal standards. Sims v. Hays, 521 So.2d 730, 733 (La. App. 2d Cir. 1988). Thus, a determination as to the liquidity of a claim is an essential prerequisite to deciding whether such a claim is a proper basis for a plea of compensation. Lack of sufficient liquidity and demandability will preclude such a plea. Hartley v. Hartley, 349 So.2d 1258 (La. 1977) (husband's potential claim against community funds could not be used as compensation against wife's claim for past due alimony).

Thus, to determine whether CME has asserted a valid offset defense, this Court must first examine the liquidity of CME's claimed offset damages.

In calculating its $ 29,072.19 offset claim, CME itemizes that LSC owes CME liquidated damages of $ 9,110.48 for LSC's failure to provide labor and $ 2,961.17 for materials and receipts that were LSC's obligations under the scope of work provisions outlined in the subcontract. Additionally, CME argues that the prime contract specifically entitles it to liquidated damages of $ 1,000.00 per day arising out of LSC's failure to complete the work within 22 days as required by the subcontract's pay schedule provisions. CME avers that LSC took an additional 33 days to complete its work on the Project based on LSC's October 5, 2017 start date and its finish date of November 29, 2017. Thus, CME represents that LSC is liable to CME for liquidated damages in excess of $ 17,000.00 for delay damages. CME characterizes these offset damages as liquid in that the damages can be ascertained by calculation in accordance with accepted legal standards.

Contrariwise, LSC maintains CME's claimed offset damages are not liquid because LSC has no liability for any of the expenditures contained in CME's statement of back charges. Particularly, LSC disputes it owes a total of $ 12,071.65 in back charges for any alleged failure to fulfill its obligations under the subcontract. LSC asserts that those charges, which encompassed equipment and labor costs, arose from CME's obligations. Similarly, LSC contests that it owes $ 17,000.00 in delay damages. While LSC acknowledges that liquidated damages, as stated in the prime contract, may be applied for in the event the work in the subcontract is not timely completed, LSC emphasizes that the Management Authority did not assess CME with $ 1,000.00 per day in liquidated damages for delays; CME presented no evidence at the summary judgment hearing to show it actually sustained damages in connection with any delays; and CME did not file a reconventional demand to recover delay damages. LSC contends that any delays in the completion of the Project were solely attributable to CME. LSC maintains that at the time it entered into the subcontract with CME on September 30, 2017, CME was in default for failure to complete the Project within 60 days of executing the prime contract on February 23, 2017. Moreover, LSC challenges the legitimacy of the alleged back charges, contending that the 1442 deposition testimony of CME's corporate representative suggests the back charges were compiled only in response to LSC's petition. LSC notes that when counsel for LSC asked why the statement of back charges was not presented to LSC until after suit was filed, CME's corporate representative responded as follows:

To tell the truth, I didn't really plan on having to back-charge Leigh for anything. I didn't want to back charge Leigh. All right? But Leigh is trying to charge me for stuff that he has nothing -- there's no right for him to charge me for what he's trying to charge me for.

LSC further notes that the back charges were not specifically pled in support of CME's affirmative offset defense to the petition.

As discussed supra , a contested debt cannot be a liquidated debt unless the party who claims the offset has the proof to show entitlement to offset promptly and summarily. See Hartley , 349 So.2d at 1261. And, the burden of proof is on the party asserting the plea of offset. See Saxena , 553 So.2d at 844.

In the case sub judice , LSC clearly contests CME's offset expenditures. While CME argues LSC owes the expenditures listed in the statement of back charges, it has offered no undisputed evidence that the charges are presently due. CME has failed to meet its burden of proof that the money LSC allegedly owes CME is a liquidated debt. Thus, when we apply the principles enunciated in Hartley, supra and Saxena , supra , CME's claimed offset, although an ascertainable amount capable of mathematical calculation, is nevertheless a contested claim that has yet to be determined. Therefore, we conclude CME's offset claim against LSC is a claim for unliquidated damages.

Balance Due on Subcontract

Next, having found that the alleged amounts CME claims LSC owes is an unliquidated debt, we must determine whether the $ 29,072.19 LSC's claims it is owed on the subcontract is a liquid debt, warranting partial summary judgment.

In the case sub judice , LSC supported its motion for partial summary judgment with the September 30, 2017 subcontract agreement, affidavits, and a list of material facts not in dispute, including that its work had been accepted and the Management Authority had filed a notice of substantial completion on the Project. CME did not contest that LSC had completed its work or that a balance of $ 29,072.19 was owed on the Subcontract. Indeed, CME's offset defense itself conclusively acknowledged the debt. Established jurisprudence provides that one who claims the defense of offset or compensation necessarily admits the underlying debt sued upon. Tolbird v. Cooper , 243 La. 306, 320, 143 So.2d 80, 85 n.3 (1962) ; see also Keiser v. Catholic Diocese of Shreveport, Inc. , 38,797, p. 8 (La. App. 2 Cir. 8/18/04), 880 So.2d 230, 235 (citations omitted).

In National Gypsum Co. v. Ace Wholesale, Inc. , 1996-215, p. 8 (La. App. 5 Cir. 11/26/96), 685 So.2d 306, 310 (citations omitted)-a case instructive on this issue-the Court of Appeal, Fifth Circuit, relying on Saxena , supra , affirmed summary judgment, finding that the defendant's unliquidated claim against the plaintiff could not be used as an offset to bar the plaintiff's right of recovery on its liquidated claim. In National Gypsum Co. , the plaintiff, National Gypsum, filed suit on an open account for the sum of $ 208,724.14, which represented the unpaid amount for materials it had supplied to the defendant, Ace. Ace filed a reconventional demand against National Gypsum, alleging, in part, that National Gypsum had breached their agreement by charging an unfair market rate for its materials and that Ace had sustained significant business losses as a result of National Gypsum's unfair pricing practices. In reaching its conclusion, the appellate court wrote, "[i]t is clear from our jurisprudence that a claim for offset or compensation is not sufficient to prevent summary judgment on a liquidated debt where the compensation is not based on a liquidated claim." Id. , 1996-215,p. 9, 685 So.2d at 310.

Consequently, we conclude LSC proved its entitlement to the $ 29,072.19 was for a liquidated claim, and CME's unliquidated claim against the LSE could not be used as an offset to bar LSE's right of recovery on its liquidated claim. Any factual issues concerning LSC's unliquidated back charges claim are not germane to this Court's determination as to whether or not the district court properly granted partial summary judgment. Once LSC met its burden of proof, the burden shifted to CME to produce factual support to establish the existence of a genuine issue of material fact or show that LSC was not entitled to summary judgment as a matter of law. See La. C.C.P. art. 966(D)(1). CME failed to meet this burden. The record reveals that other than its offset defense and an attempt to introduce the statement of back charges into evidence, as will be addressed infra , CME raised no other valid defenses or offered no other evidence to defeat summary judgment.

Accordingly, based upon our de novo review, we find no genuine issues of disputed facts remained which, as a matter of law, precluded LSC's right to partial summary judgment relief for payment of the $ 29,072.19 balance owed on the subcontract.

This assignment of error is without merit.

Admissibility of Back Statement Charges

CME argues the district court erred in excluding its statement of back charges from admission into evidence. In support of its admissibility, CME avers the document was properly authenticated and verified by its corporate representative, had previously been produced in response to LSC's discovery demands, and had also been attached to LSC's motion for partial summary judgment. As discussed, supra , the sums included within the statement of back charges represented contested, unliquidated damages that cannot defeat the motion for partial summary judgment. This finding renders moot any alleged error attached to the admissibility of the statement of back charges. Thus, we pretermit discussion of this assignment of error.

CONCLUSION

Wherefore, based on the foregoing reasons, the judgment of the district court is affirmed.

AFFIRMED

      CME and Hudson filed separate answers. The record shows Hudson's answer asserted similar defenses as those pled by CME.

      See Non-Flood Protection Assets Management Authority v. Construction Management Enterprises, LLC, et al , Docket Number 2018-3017, Section "F-7."

      LSC and the Management Authority executed a joint motion for partial dismissal of LSC's claims against the Management Authority on August 31, 2018, with LSC reserving all of its other rights and actions against CME.

      $ 75,000.00 (subcontract value)-$ 20,000.00 (CME payments)-$ 25,927.81(concursus payment) = $ 29,072.19.

      The July 12, 2018 deposition testimony of CME's corporate representative, Martin Fears, and the statement of back charges, were also attached as exhibits to LSC's motion for partial summary judgment. The deposition testimony included the following exchange:
      Q. Let's go over this real quick. This is going to be Exhibit 8 [statement of back charges]. When was this document prepared?
      A. I can't recall.
      Q. Do you know who prepared it?
      A. My office.
      Q. Do you know who at your office prepared it?
      A. Joann
      Q. What's Joann's position?
      A. She's the office manager.
      * * *
      Q. Do you know who directed Joann to prepare it?
      A. Oh, I did.
      Q. Do you know when?
      A. I don't.
      * * *
      Q. Would it help if I gave you any kind of dates?
      A. Probably not. I know it was right around that time. It was right at the end of the job when it was being when it was being prepared. It was being kept track of the whole time from October on.
      * * *
      Q. Okay. So you don't know when this document was prepared initially?
      A. No.

      La. C.C.P. art. 1915(B)(1) provides, in relevant part, that "[w]hen a court renders a partial judgment or partial summary judgment ... 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."

      La. C.C.P. art. 966(A)(2) provides that "[t]he summary judgment procedure is designed to secure, the just, speedy, and inexpensive determination of every action" and that "[t]he procedure is favored and shall be construed to accomplish these ends."

      The doctrine of "offset" is also jurisprudentially and statutorily referenced as "set-off" or compensation. Here, CME and LSC both reference the "offset" defense; accordingly, that term shall be employed in this opinion.

      There are two other types of offset-contractual and judicial. Contractual offset is effected by the will of the parties in accord with La. C.C. art. 1901 ; and judicial offset is effected by the courts in accord with La. C.C. art. 1902. Richard v. Vidrine Automotive Services, Inc. , 1998-1020 (La. App. 1 Cir. 4/1/99), 729 So.2d 1174, 1178 (citations omitted). As to contractual offset, La. C.C. art. 1901 provides that "[c]ompensation of obligations may take place also by agreement of the parties even though the requirements for compensation by operation of law are not met." With reference to judicial offset, La. C.C. art. 1902 provides that "although the obligation claimed in compensation is unliquidated, the court can declare compensation as to that part of the obligation that is susceptible of prompt and easy liquidation."

      Scope of Work subsection includes the following:
      "By Land or Sea Construction" will mobilize two boats. One boat will be a 20' x 60' complete with excavator and rotating grapple. The second boat will be 20' x 28' to be used for transporting debris and extracted pilings to the shore for disposal by others. Each boat will have a required deck hand working for "By Land or Sea Construction". All required fuel, insurance, and manual labor to operate the two boats and associated equipment is furnished by "By Land or Sea Construction".
      "By Land or Sea Construction" will pull all necessary pilings as specified. If any of the pilings are unable to be pulled or they happen to get broke off during removal then CME, LLC will supply a diver to cut the piling from the water bottom.
      The boat and excavator with rotating grapple will be used to disassemble the boat house structures and lower the material onto the smaller boat to take to shore. CME, LLC will supply all laborers not on the boats needed for demo of the boat houses. Any required cutting of heavy steel with torches shall also be furnished by others.
      CME, LLC will furnish all required containment boom, with pontoon floats and laborers required to manipulate or move the boom as required. Additionally, CME LLC will supply dumpsters and laborers and excavator on shore to take possession of the debris from the boat so others can dispose of properly in land fill.

      The liquidated damages provision in the prime contract between the Management Authority and CME provides, in pertinent part:
      Contractor agrees to complete all work contracted for within sixty (60) calendar days from the date the work order/notice to proceed is issued by Owner (the "Contract Time"). It is agreed that should the Contractor fail to finish the demolition work on or before the time specified, Contractor shall pay to or allow the Owner to withhold any sum due the Contractor on this Contractor, by way of liquidated damages, the sum of One Thousand Dollars ($ 1000.00) per diem, for each and every day thereafter until the Project is substantially completed in accordance with the Contract Documents.

      The Pay Schedule subsection included within the subcontract states, in relevant part, that the "[t]ime to complete the work shall be 22 days from Notice to Proceed. If not completed in this time period, the liquidated damages as stated in the primary contract may be applied. Time to complete shall include all necessary prep through substantial complete [sic]."

      See also In re Mashburn Marital Trusts , 2010-0278, p. 19 (La. App. 1 Cir. 12/22/10), 52 So.3d 1136, 1147, where, in affirming the district court's judgment that trustees could not use an unliquidated claim against the beneficiary to offset the income the beneficiary was entitled to receive from his family trust, the First Circuit found that Louisiana law does not permit the use of an unliquidated claim to offset a liquidated claim.

      La. C.C.P. art. 966(D)(1) states the following:
      The burden of proof rests with the mover. Nevertheless, if the mover will not bear the burden of proof at trial on the issue that is before the court on the motion for summary judgment, the mover's burden on the motion does not require him to negate all essential elements of the adverse party's claim, action, or defense, but rather to point out to the court the absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. The burden is on the adverse party to produce factual support sufficient to establish the existence of a genuine issue of material fact or that the mover is not entitled to judgment as a matter of law.