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Maison Orleans Partnership in Commendam v. Stewart

Court of Appeals of Louisiana, Fifth Circuit

December 16, 2014

MAISON ORLEANS PARTNERSHIP IN COMMENDAM
v.
FRANK STEWART MAISON ORLEANS PARTNERSHIP IN COMMENDAM
v.
FRANK T. STEWART MAISON ORLEANS II, INC.
v.
FRANK STEWART FRANK T. STEWART, JR.
v.
MAISON ORLEANS II, INC. FRANK T. STEWART
v.
BOB G. DEAN

ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NOS. 547-309, 579-306, 612-672, 612-673, 614-671, 614-672. DIVISION "G" HONORABLE ROBERT A. PITRE, JR., JUDGE PRESIDING

WILLIAM D. TREEBY SAMANTHA P. GRIFFIN JOHN M. FEZIO ATTORNEYS AT LAW COUNSEL FOR APPELLANTS, MAISON ORLEANS PARTNERSHIP IN COMMENDAM, MAISON ORLEANS II, INC. AND BOB G. DEAN, JR.

HARRY A. ROSENBERG ATTORNEY AT LAW COUNSEL FOR APPELLEE, FRANK STEWART

PANEL COMPOSED OF JUDGES SUSAN M. CHEHARDY, JUDE G. GRAVOIS, AND ROBERT A. CHAISSON

ROBERT A. CHAISSON JUDGE

These five consolidated cases all involve the same disputes arising out of the ownership and operation of two nursing homes, Mai son Orleans Partnership in Commendam and Maison Orleans II, Inc.

FACTS AND PROCEDURAL HISTORY

In 1979, Bob Dean, Sr. employed Frank Stewart, a licensed nursing home administrator, as administrator of a nursing home called Maison Orleans I, in St. Bernard Parish. As an incentive, Mr. Dean gave Mr. Stewart a 20% ownership interest in the home. This arrangement continued until the death of Bob Dean Sr. in 1986. Mr. Dean's interests in this home devolved to his wife, Billie Dean, and his two children, Bob Dean, Jr. and Debra Dean Cook. In that same year, these latter parties, along with Mr. Stewart, reorganized the home into the Maison Orleans Partnership in Commendam (MOPIC). Mr. Stewart continued to have a 20% ownership interest in the new entity.

In 1988, a second nursing home, Maison Orleans II, Inc. (MOII), was acquired by the Dean family in Orleans Parish. Again, Mr. Stewart was given a 20% ownership interest in this entity in return for his expertise as a consultant.

Originally, Bob Dean, Sr. formed Bob Dean Enterprises, Inc. (BDE), a corporation which managed the day to day affairs of the original Maison Orleans I. When MOPIC was formed, it continued with BDE as manager under a five-year contract. The pertinent term of that contract was that BDE was paid 7% of the gross revenues generated by the home. All of the owners of MOPIC, including Mr. Stewart, signed this contract. In 1992, the contract was renewed for another ten years on the same terms. Mr. Stewart, as administrator of MOPIC, regularly paid the monies owed to BDE under this contract. When MOII was acquired in 1988, BDE was contracted to manage its affairs, also for a fee of 7% of the gross revenues generated by the home. As a part owner and consultant to MOII, Mr. Stewart was aware of this arrangement.[1]

Both of the nursing homes were originally profitable, and Mr. Stewart was paid dividends as per his ownership interests. However, Bob Dean, Jr., then president of both MOPIC and MOII, testified that because of changes in the Medicaid payment structure, maintenance requirements, and a large civil judgment against MOII, he determined that dividends would have to be terminated as of June of 1999. Mr. Stewart apparently disagreed with this decision and asked to review the books of the two nursing homes. This request was refused, and on November 24, 1999, Mr. Stewart filed the first of several suits between the parties.

Meanwhile, on June 17, 1999, Mr. Stewart submitted a letter to Bob Dean, Jr. in which he resigned his employment positions with both MOPIC and MOII, effective on June 30, 1999. In Mr. Dean's view, this resignation triggered the redemption clauses of the articles of partnership of MOPIC, according to which clauses the procedures for evaluation and buyout of Mr. Stewart's interests were set forth. Mr. Stewart disagreed that his resignation triggered these clauses, but he nonetheless complied with their terms to the extent of having appraisals made of his interests. Eventually, he rejected the values produced by the appraisers, and chose instead to litigate this issue.

Unlike MOPIC, which was a partnership in commendam, MOII was structured as a corporation. As such, the affairs of MOII at issue here were regulated by Louisiana corporate laws, more particularly La. R.S. 12:131 relating to mergers. For various reasons, including apparently the animosity between the parties, the board of directors of MOII proposed a merger plan, which was approved on January 10, 2003. As part of this plan, dissenting shareholders were to surrender their shares for a value either to be agreed upon, or as determined by a court. Because no agreement could be reached, suit was filed to ascertain the proper value of Mr. Stewart's interest in MOII.

In addition to asserting claims for payment of his ownership interests in MOPIC and MOII, Mr. Stewart also asserted claims against Bob Dean, Jr. and BDE for return of excess management fees, as well as for the use of lines of credit available to the two nursing homes for unrelated business interests, and for ...


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