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ASI Federal Credit Union v. Leotran Armored Security, LLC

Court of Appeals of Louisiana, Fifth Circuit

November 7, 2018



          FOR PLAINTIFF/APPELLEE, ASI FEDERAL CREDIT UNION Philip D. Nizialek Jacqueline M. Brettner Sarah E. Stogner


          Panel composed of Judges Jude G. Gravois, Marc E. Johnson, and John J. Molaison, Jr.


         Intervenors-Appellants, Certain Underwriters at Lloyd's London Syndicates 1414, 457, and 1084 Subscribing to Policy FINFR1503374 ("Underwriters"), appeal from a final default judgment entered on November 29, 2017, which disposes of all claims asserted by plaintiff, ASI Federal Credit Union ("ASI") against defendant, LeoTran Armored Security, LLC ("LeoTran").[1] Underwriters challenge the correctness of the trial court's confirmation of the default judgment alleging both procedural and substantive defects. For the following reasons, we vacate the default judgment and remand the matter for further proceedings.


         Plaintiff, ASI, a credit union headquartered in Jefferson Parish, uses automated teller machines ("ATMs") at its branch offices, as well as at several freestanding locations. In 2012, ASI contracted with ATM Worldwide, LLC ("ATMWW) to service its ATMs. ATMWW then contracted with defendant, LeoTran, a licensed armored car company owned by Leonard Tolleson, to provide armored vehicle services and to transport cash to and from ASI's ATMs. LeoTran serviced ASI's ATMs from August of 2013 through December of 2015.

         On behalf of LeoTran, Mr. Tolleson purchased an Armored Car Cargo Liability Policy from Underwriters, with an effective policy period extending from April 15, 2015 to April 15, 2016 (the "Policy"). ASI alleged that in December 2015, LeoTran removed over one million dollars of ASI's cash from ATMs that LeoTran serviced on behalf of ASI, and also from cash reserves that LeoTran held in trust in LeoTran's vault for future cash delivery to the ASI ATMs that LeoTran serviced. ASI averred that, in total, $1, 382, 200 of ASI's cash went missing while in LeoTran's care, custody and control.

         On December 15, 2015, when ASI learned that its money was missing, ASI reported the missing money to state and federal law enforcement officials. During its initial investigation, the Jefferson Parish Sheriff's Office ("JPSO") recovered $34, 200, which was returned to ASI.[2] Despite demand by ASI to LeoTran to return all of ASI's cash in its care, custody or control, the remaining $1, 348, 000 has never been recovered or returned to ASI.

         Soon after the money went missing, ASI contacted LeoTran's insurance broker to ascertain available coverage for the loss, which led ASI to Underwriters. In January 2016, ASI submitted a claim to Underwriters under the Policy it issued to LeoTran seeking reimbursement of the missing $1, 348, 000. Underwriters denied coverage under the Policy for ASI's loss, claiming that under the Policy's directors and officers exclusion, coverage for the intentional theft by Mr. Tolleson, the "founder, principal, and owner of LeoTran, was excluded."[3]

         According to ASI, even though LeoTran is defunct and the whereabouts of its owner unknown, in order to interrupt prescription and preserve all potential avenues for recovery, ASI filed suit against LeoTran on December 9, 2016. After several failed attempts to serve LeoTran and Mr. Tolleson with the petition, ASI successfully served LeoTran through the Louisiana Secretary of State on October 30, 2017. On November 14, 2017, ASI filed a motion for preliminary default wherein it stated:

As shown by the Record and/or the Certificate of the Clerk of Court attached hereto, although the 15-day legal delay prescribed by law for answering the Petition has expired, LeoTran has not answered, otherwise filed responsive pleadings, or filed a formal request for extension of time with the Court.

         Affixed to the order directing that a preliminary default against LeoTran be entered on the minutes is a certification signed by the deputy clerk on November 14, 2017, the day the motion requesting a preliminary default was filed, certifying that "no answer or other pleadings [had] been filed [by, or on behalf of, LeoTran] in the matter." The following day, on November 15, 2017, the order was signed by the duty judge and a preliminary default judgment against LeoTran was entered into the minutes of the trial court.

         On November 29, 2017, ASI filed a motion to confirm the default, wherein ASI stated that pursuant to La. C.C.P. art. 1702(B)(2), "ASI's demand is based, in part, upon the delictual obligation of LeoTran resulting from the loss of ASI's cash that went missing while in LeoTran's care, custody, and control in order to service and stock ASI-branded ATMs."[4] Attached to ASI's motion was the affidavit of its vice president, Brian Menard, and various exhibits annexed thereto, which ASI averred "contain[ed] facts and evidence sufficient to establish a prima facie case" of LeoTran's liability. Additionally, ASI's motion requested that the Court confirm the default judgment against LeoTran "based on the attached documents … ." In the alternative, ASI requested the trial court to set a hearing date to "allow ASI to present the live testimony of ASI's corporate representative to establish a prima facie case." On the same day that ASI filed its motion-without holding a confirmation hearing or the taking of testimony in open court-the trial court confirmed the default judgment in favor of ASI holding LeoTran liable to ASI for the $1, 348, 000 that was lost or went missing while in LeoTran's care, custody or control. On November 30, 2017, the clerk issued a notice of signing of the default judgment for service by the sheriff upon LeoTran through the secretary of state; service was accomplished on December 7, 2017.

         After learning of the final default judgment rendered in favor of ASI, Underwriters filed a petition for intervention into the proceedings on December 18, 2017, seeking a declaration that the Policy does not provide coverage for ASI's claims, and requesting the default judgment be set aside on the grounds that it was procedurally and substantively improperly obtained.[5] Also on December 18, 2017, Underwriters filed a motion for new trial with respect to the default judgment, which the trial court denied on February 26, 2018. Underwriters then moved for a devolutive appeal on April 10, 2018, seeking review of the November 29, 2017 default judgment against LeoTran claiming that, as LeoTran's insurer-who may become liable for all or part of the judgment rendered against its insured in this matter-it is a third party aggrieved by the judgment.

         On appeal, Underwriters aver that the final default judgment must be reversed because it is both procedurally and substantively defective. Specifically, Underwriters maintain the default judgment is procedurally defective because the trial court erred (1) in granting ASI a preliminary default prior to the expiration of LeoTran's deadline to file an answer, and (2) in failing to hold a hearing in open court on the confirmation of default in contravention of La. C.C.P. art. 1702(B)(2). Underwriters contend the default judgment is substantively defective because the trial court erred (1) in failing to grant Underwriters' motion for new trial based on ASI having obtained the default through ill practices, and (2) in granting the default judgment despite ASI's failure to support its motion by sufficient admissible evidence. Because we find merit to Underwriters' contention that the default judgment is procedurally defective, a finding that requires this Court to vacate the judgment and remand the matter to the trial court, we pretermit any review or discussion regarding whether the default judgment should be set aside for ill practices, or whether ASI presented sufficient admissible evidence to establish a prima facie case of LeoTran's liability for tortious conversion, breach of contract, and/or bad faith.


         I. Jurisdictional Issues


         Our initial inquiry is whether Underwriters have standing to appeal this judgment when Underwriters are not a party to the litigation. Rourke v. Estate of Dretar, 17-672 (La.App. 5 Cir. 5/23/18), 248 So.3d 653. La. C.C.P. art. 2086 provides that "[a] person who could have intervened in the trial court may appeal, whether or not any other appeal has been taken." The sole object of an appeal is to give an aggrieved party to an action recourse to a superior tribunal for the correction of a judgment of an inferior court, and such right is extended, not only to the parties to the suit in which the judgment is rendered, but also to a third party when such third party is aggrieved by the judgment. In re Succession of Walker, 02-625 (La.App. 5 Cir. 12/11/02), 836 So.2d 274, 277-78, writ denied, 03-110 (La. 3/28/03), 840 So.2d 572. Thus, Underwriters have the right to prosecute this appeal, if they could have intervened in ASI's suit against LeoTran in the trial court proceedings.

         La. C.C.P. art. 1091, authorizing intervention in a pending action, provides:

A third person having an interest therein may intervene in a pending action to enforce a right related to or connected with the object of the pending action against one or more of the parties thereto by:
(1) Joining with plaintiff in demanding the same or similar relief ...

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