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Cypress Financial Recoveries, LLC v. Schouest

Court of Appeals of Louisiana, Fifth Circuit

May 16, 2018




          Michael L. Lancaster COUNSEL FOR DEFENDANT/APPELLEE, GLENDA SCHOUEST William G. Cherbonnier, Jr.

          Panel composed of Judges Marc E. Johnson, Robert A. Chaisson, and Marion F. Edwards, Judge Pro Tempore


         Appellant, Cypress Financial Recoveries, L.L.C., appeals a trial court ruling which granted appellee's motion to dismiss, without prejudice, in an action to collect on an open account. For the reasons that follow, we affirm.


         On November 18, 2013, appellant, Cypress Financial Recoveries, L.L.C. ("Cypress"), filed a petition in Second Parish Court for the Parish of Jefferson which alleged that appellee/defendant, Glenda Schouest ("Schouest"), had defaulted on a loan made to her by Care Credit, and that it owned the right to collect the principal sum owed by Schouest, together with interest and attorney's fees. While the record does not show that Schouest filed an answer, she did file a response to Cypress' interrogatories on July 18, 2016. On the same date, Schouest also filed a peremptory exception of no right of action that asserted Cypress was not the owner of the account at issue and, therefore, had no standing to collect the alleged debt. Following a September 16, 2016 hearing, [1] the trial court granted Schouest's exception and allowed Cypress 15 days to amend the petition, which it did on September 29, 2016. Cypress did not seek supervisory review of the trial court's judgment. Schouest filed a second peremptory exception of no right of action on November 18, 2016, which reiterated the objections set forth in her original exception. On January 6, 2017, the trial court granted Schouest's exception and gave Cypress 30 days to amend the petition in order to establish ownership of the account as well as the accuracy of the amount alleged to be owed by Schouest. Again, Cypress did not seek supervisory review of the trial court's judgment. Cypress untimely filed its second amended petition on February 16, 2017 and, on March 24, 2017, Schouest filed a motion to dismiss the case, in which she asserted that Cypress' original and amending petitions did not establish that it was the owner of the account at issue or that it had a right to bring the action. On June 15, 2017, the trial court granted Schouest's motion.[2] In an order dated June 22, 2017, the court rendered a judgment that formally granted Schouest's motion to dismiss based upon a finding that Cypress failed "to submit documentation establishing their Right of Action." On July 26, 2017, the trial court amended the June 22, 2017 judgment to clarify that the dismissal was without prejudice.

         This timely appeal follows.


         On appeal, Cypress claims that the trial court erred in granting Schouest's motion to dismiss based upon the finding that it had no right of action.


         "[A]n action can only be brought by a person having a real and actual interest which he asserts." La. C.C.P. art. 681. The exception of no right of action is designed to test whether the plaintiff has a real and actual interest in the action. La. C.C.P. art. 927(A)(6). The function of the exception of no right of action is to determine whether the plaintiff belongs to the class of persons to whom the law grants the cause of action asserted in the suit. Babineaux v. Pernie-Baily Drilling Co., 261 La. 1080, 262 So.2d 328 (1972). The exception of no right of action assumes that the petition states a valid cause of action for some person and questions whether the plaintiff in the particular case has a legal interest in the subject matter of the litigation. Louisiana Paddlewheels v. Louisiana Riverboat Gaming Comm'n, 94-2015 (La. 11/30/94), 646 So.2d 885, 888. The determination of whether a plaintiff has a right of action is a question of law, which the appellate court reviews de novo. Johnson v. Motiva Enters., LLC, 13-305 (La.App. 5 Cir. 10/30/13), 128 So.3d 483, 488.

         In Louisiana, suits to collect credit card debit are treated as suits on an open account.[3] CACV of Colorado, LLC v. Spiehler, 09-151 (La.App. 3 Cir. 6/3/09), 11 So.3d 673, 675. A party who demands performance of an obligation must prove the existence of the obligation. La. C.C. art. 1831. In order to sustain an action on an open account, a creditor bears the burden of proving the demand by a preponderance of the evidence. Ochsner Clinic Found. v. Arguello, 11-326 (La.App. 5 Cir. 11/29/11), 80 So.3d 622, 625. In order to prove an open account, the creditor must first prove the account by showing that it was kept in the course of business and by introducing supporting testimony regarding its accuracy. Id.

         In addressing similar issues, this Court has previously considered various factors to determine whether a creditor has provided sufficient evidence to establish a prima facie right to collect on an unpaid debt. For example, in Midland Funding v. Urrutia, 13-459 (La.App. 5 Cir. 12/19/13), 131 So.3d 474, 477-479, we found that a creditor's assignee in its suit to collect on a debtor's unpaid credit card had established its right to do so by producing the following documentation: an affidavit of correctness of account certifying the balance and terms sued upon, as well as verifying the credit terms and the itemized statement of the account; multiple documents described as a bill of sale of multiple defaulted credit card accounts from the original lender to the collection agency; supporting documentation, including an affidavit by an employee of counsel for the debt collector, establishing that the law office received the case from the debt collector, the account number of the defaulted credit card and the last four digits of the defendant's Social Security number. A second affidavit from a "legal specialist" at the debt collection agency verified that the plaintiff was the current owner of, and/or successor to, the obligation sued upon, and was assigned all the rights, title and interest to the defendant's account (identified by number), and that she had access to and had reviewed the records pertaining to the account and was authorized to make the affidavit on the plaintiff's behalf. A third affidavit, from an employee of the original creditor, stated that the defendant's account was originally opened by the company, and specifically identified the account by name, account number, opening date and the last four digits of defendant's social security number. The same affidavit attested that the records of the original creditor indicate that the account was sold to the debt collector, and that the original creditor retained no ownership interest in the account after it was sold. Attached thereto was data printed by the debt collector from electronic records provided by the original debtor, pursuant to the Bill of Sale/Assignment of Accounts, in connection with the sale of accounts from the original creditor to the debt collector. The data was information relating specifically to the defendant's account and contained his name, address, birthdate, redacted social security number and account number of the credit card in question. Also included in the documentation were three bills of sale of accounts from the original creditor to debt collector, and the Purchase and Sale agreement between the original creditor to the debt collector.

         In the instant case, Cypress' original petition, in relevant part, offered the bare assertion that it is "the owner of all rights, title and interest in this receivable issued through GEC Retail Bank." Shouest challenged Cypress' claim in her exception of no right of action. In response to Schouest's motion, Cypress attached four exhibits to its memorandum in opposition, [4] which were identified as follows: "Exhibit A - CareCredit/GECRB Monthly Statement dated 10/10/2012"; "Exhibit B - Bill of Sale titled "Cypress PSCC MP - May 2013"; "Exhibit C - Affidavit of Sale of Account by Original Creditor, signed May 23, 2013"; and "Exhibit D -Affidavit of Correctness of Account, signed December 7, 2013." At the September 16, 2016 hearing on Schouest's exception, in which no evidence was introduced[5] and no witnesses testified, the trial court stated on the record its finding that Cypress' petition did not show that Cypress had a legal right to attempt to collect the debt. Rather than dismiss the action, however, the trial court gave leave for Cypress to amend its petition within 15 days.

         In its first supplemental and amending petition, filed on September 29, 2016, Cypress added the following paragraphs: (31)

The defendant, GLENDA SCHOUEST (SSN XXX-XX-XXXX), individual account holder, domiciled in BARATARIA, LA, knowingly, intentionally, and purposefully opened and agreed to all contract terms and conditions applicable to a CARE CREDIT account issued through GEC RETAIL BANK bearing account number#6019183000123729.
After opening the Account, Defendant knowingly, intentionally, and purposefully made payments on the Account, the last of which was a payment of $400.00 on or about March 7, 2012.
The subject account was charged-off on October 10, 2012, in the amount of $6, 496.88.
On or about May 19, 2013, the subject account and all rights, titles, and interests thereto was sold to Plaintiff, Cypress ...

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