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Lasalle v. G.E.C., Inc.

Court of Appeals of Louisiana, Fifth Circuit

April 24, 2019

SHELBY P. LASALLE, JR., WILLIAM B. HAENSEL, JR., STEPHEN W. PHILLIPPI AND RONALD J. DANOS
v.
G.E.C., INC. KREBS, LASALLE, LEMIEUX CONSULTANTS, INC.
v.
G.E.C., INC.

          ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 732-755 C/W 749-232 C/W 780-420, DIVISION "D" HONORABLE SCOTT U.SCHLEGEL, JUDGE PRESIDING

          COUNSEL FOR PLAINTIFF/APPELLANT, KREBS, LASALLE, LEMIEUX CONSULTANTS, INC. Jeffrey L. Oakes

          COUNSEL FOR DEFENDANT/APPELLEE, G.E.C., INC. Matthew A. Sherman Preston L. Hayes Patrick R. Follette

          Panel composed of Judges Fredericka Homberg Wicker, Jude G. Gravois, and Hans J. Liljeberg

          JUDE G. GRAVOIS JUDGE

         Appellant, Krebs, Lasalle, Lemieux Consultants, Inc. ("KLL"), appeals the trial court's May 22, 2018 judgment which granted defendant G.E.C., Inc.'s ("GEC") exception of no right of action and dismissed with prejudice KLL's suit against GEC for enforcement of a promissory note. The dispute between these parties, going back to 2013, includes four separate district court cases, three of which have been consolidated, as well as two previous appeals to this Court. Previously, in Krebs, Lasalle, Lemieux Consultants, Inc. v. G.E.C., Inc., 16-24 (La.App. 5 Cir. 7/27/16), 197 So.3d 829, 833 ("Krebs I"), this Court found that as a corporation which had been dissolved by affidavit pursuant to La. R.S. 12:142.1 of the old Business Corporation Law, [1] KLL had thereby lost the right to enforce its inchoate claims upon dissolution, and therefore no longer had the right to sue GEC for enforcement of a promissory note allegedly defaulted on by GEC in 2013.

         At issue in this appeal is whether KLL's reinstatement to active corporate status in 2016 has given KLL back its right of action against GEC for enforcement of the promissory note. In this third suit by KLL against GEC on the promissory note, the trial court ruled against KLL, finding that the law in effect at the time of both KLL's dissolution in 2012 and the alleged default on the note in 2013, the old Business Corporation Law, governed, rather than the Business Corporation Act which became effective on January 1, 2015. KLL appeals, arguing that under the new law, its reinstatement to active status should be retroactive to the date of dissolution, rendering the dissolution as if it never had occurred. Alternatively, KLL argues that jurisprudence interpreting the prior law, upon which this Court previously relied, is wrong and should be repudiated. Finally, KLL argues that even under the prior law, its reinstatement should be retroactive to its dissolution and therefore it has a right of action against GEC.

         For the following reasons, we find that the applicable law to this dispute over the 2013 alleged default of the promissory note is the old Business Corporation Law. Under that law, because KLL dissolved by affidavit rather than by employing a liquidator, KLL failed to preserve its inchoate claims, one of which was the right to sue GEC for default on the promissory note, as previously determined by this Court in Krebs I. Further, KLL's reinstatement is prospective only and does not serve to revive its extinguished right of action against GEC. Accordingly, the judgment of the trial court granting GEC's exception of no right of action and dismissing KLL's suit against GEC with prejudice is affirmed.

         FACTS AND CHRONOLOGICAL PROCEDURAL HISTORY

         In the 2016 appeal before this Court, Krebs I, we summarized certain facts and procedural history as follows:

On February 21, 2011, KLL, Inc. entered into an Asset Purchase Agreement ("the Agreement"), wherein G.E.C., Inc. bought, accepted, or acquired [a] certain portion of KLL, Inc.'s trade, business, operations, assets, good will and liabilities. On February 28, 2011, in connection with the Agreement, G.E.C., Inc. executed a promissory note in favor of KLL, Inc. On December 26, 2012, KLL, Inc.'s shareholders voluntarily dissolved KLL, Inc. by affidavit pursuant to La. R.S. 12:142.1.
On November 8, 2013, the former shareholders of KLL, Inc. filed a petition to enforce the promissory note, under Shelby P. LaSalle, William B. Haensel, Jr., Stephen W. Phillippi, and Ronald J. Danos v. G.E.C., Inc., Division "D," case number 732-755, contending that G.E.C., Inc. failed to pay the monthly installment on the promissory note for June 2013, and it remained in default thereafter by failing to pay the successive monthly installments and other amounts due on the promissory note. The shareholders asserted that as the former shareholders of KLL, Inc., they were entitled to enforce the promissory note because they were the holders in due course. G.E.C., Inc. filed an answer and reconventional demand denying the allegations in plaintiffs' petition and contending that KLL, Inc. violated and/or breached the Agreement. G.E.C., Inc. brought the reconventional demand against the former shareholders individually as required by law, since KLL, Inc. was voluntarily dissolved in 2012. G.E.C., Inc. also filed an exception of no right of action and no cause of action requesting the dismissal of the former shareholders' individual claims.
On April 15, 2015, the trial court sustained G.E.C., Inc.'s exception of no right of action finding that the former shareholders individually did not have a right of action, but allowed the former shareholders fifteen days to file an amended petition to name KLL, Inc. as party plaintiff. The judgment further held that if an amended petition was not filed within fifteen days, the petition would be dismissed with prejudice.
On April 29, 2015, instead of filing an amended petition, KLL, Inc., through its former shareholders, filed a new petition to enforce the promissory note, under Krebs, Lasalle, Lemieux Consultants, Inc. v. G.E.C., Inc., Division "P," case number 749-232. In this petition, KLL, Inc. asserted the same claims as previously asserted in the prior lawsuit, i.e., that G.E.C., Inc. was in default on the promissory note. In response to this petition, G.E.C., Inc. filed exceptions of res judicata, lack of procedural capacity, no right of action, and no cause of action. On July 13, 2015, the trial court dismissed the claims filed by the former shareholders individually against G.E.C., Inc. On August 7, 2015, the parties consented to a transfer and consolidation of the two cases. On August 26, 2015, the trial court overruled G.E.C., Inc.'s exceptions of res judicata and no cause of action, held that the exception of lack of procedural capacity was moot, sustained the exception of no right of action and dismissed KLL, Inc.'s claims with prejudice. …

Krebs I, 197 So.3d at 830-31.

         KLL's shareholders appealed the dismissal of their suit against GEC to this Court. In Krebs I, appellants argued that La. R.S. 12:1-1405 of the recently enacted Business Corporation Act should apply to the dispute. Unlike specific statutory provisions that were in effect both at the time of KLL's dissolution by affidavit in 2012 under La. R.S. 12:142.1 and when it commenced suit against GEC in 2013, "new" La. R.S. 12:1-1405 purports to allow a corporation, though dissolved, to commence a proceeding in its corporate name to collect its assets, i.e., sue on the promissory note. However, in Krebs I, this Court held that La. R.S. 12:1-1405 did not apply under the facts of this case. This Court determined that newly enacted La. R.S. 12:1-1405 was substantive in nature, because it changed the fundamental rights of the parties concerning dissolution of corporations, and therefore should be applied prospectively only. Krebs I, 197 So.3d at 832. Applying jurisprudence interpreting the statutory law regarding corporate dissolution in existence at the time of KLL's dissolution in 2012, this Court determined that because KLL dissolved by affidavit under La. R.S. 12:142.1, rather than by formally dissolving with a liquidator as per La. R.S. 12:142, KLL waived and failed to preserve its inchoate claims against GEC. Krebs I, 197 So.3d at 832-33. Thus, this Court affirmed the trial court's judgment granting GEC's exception of no right of action.

         Meanwhile, on May 12, 2016, KLL through its designated representatives filed a suit, In Re Krebs, Lasalle, Lemieux Consultants, Inc., case number 760-781 of the Twenty-fourth Judicial District Court, Parish of Jefferson, seeking reinstatement of its corporate status so that it could "collect certain assets due and owing to it."[2] The trial court denied KLL's petition for reinstatement, citing La. R.S. 12:1-1444, "Reinstatement of terminated corporation."[3] KLL appealed to this Court. This Court, In Re Krebs, Lasalle, Lemieux Consultants, Inc., 16-586 (La.App. 5 Cir. 3/15/2017), 215 So.3d 939 ("Krebs II"), vacated the ruling. Noting our decision in Krebs I, this Court held that the repealed Business Corporation Law, rather than La. R.S. 12:1-1444 (which is part of the newly enacted Business Corporation Act), governed KLL's request for corporate reinstatement. Krebs II, 215 So.3d at 941. This Court cited La. R.S. 12:1-1701-1703, transition statutes found in the Business Corporation Act, holding that La. R.S. 12:1-1701 evidenced the Legislature's intent that the new law would apply only to corporations in existence on January 1, 2015. Krebs II, 215 So.3d at 942-43. As KLL was not in existence on that date, this Court determined that as per La. R.S. 12:1-1703, the reinstatement time limitations of La. R.S. 12:1-1444 did not apply to KLL, who had dissolved under the repealed La. R.S. 12:142.1 which contained no time limits in which to seek reinstatement. Id. This Court remanded for KLL to have a reasonable opportunity to seek an evidentiary hearing on the question of whether KLL had a lawful and valid purpose for seeking reinstatement. Krebs II, 215 So.3d at 943. On remand, the trial court granted KLL's petition for reinstatement on September 14, 2017, retroactive to May 12, 2016, the date KLL's petition for reinstatement was filed.

         On February 5, 2018, reinstated KLL filed a third suit against GEC to enforce the promissory note, case number 780-420 of the Twenty-fourth Judicial District Court, Parish of Jefferson. On April 6, 2018, GEC filed exceptions of no right of action, no cause of action, and res judicata, which KLL opposed. On April 10, 2018, the 2018 suit was consolidated with the 2013 (732-755) and 2015 (749-232) suits. Following a hearing on May 22, 2018, the trial court granted GEC's exception of no right of action and dismissed KLL's suit with prejudice.[4] The trial court ruled that in accordance with this Court's previous two appellate opinions (Krebs I and Krebs II), the applicable law was the Business Corporation Law and not the Business Corporation Act, specifically La. R.S. 12:142.1, and that that statute, as interpreted by jurisprudence, did not provide for a corporation dissolved by affidavit to regain the right, upon reinstatement, to enforce claims that were inchoate at the time of the corporation's dissolution; in other words, KLL's reinstatement in 2016, under the provisions of the pre-2015 law, was not retroactive to the date of its dissolution and did not operate to revive KLL's right to enforce its inchoate claims against GEC, which right was lost when KLL dissolved by affidavit in 2012. KLL's timely appeal followed.

         On appeal, in its only assignment of error, KLL asserts that the trial court erred in its ruling that KLL has no right of action to enforce the note against GEC. In its assignment of error, KLL first argues that once its corporate status was reinstated, La. R.S. 12:1-1444(H) of the new Business Corporation Act should apply, rather than the prior law, to provide that its reinstatement is retroactive to the date of its dissolution, and thus it has the right to sue GEC to enforce the promissory note. KLL argues alternatively that in the event the prior law (La. R.S. 12:142.1) does apply, the Fourth Circuit jurisprudence interpreting this statute is wrong and should be repudiated by this Court. Finally, KLL argues, also alternatively, that under the prior statutory scheme, specifically La. R.S. 12:163(E), the reinstatement of KLL's corporate articles is retroactive "as though the revocation never occurred," and thus KLL did not lose its right of action against GEC when it elected to dissolve by affidavit in 2012.

         LAW ...


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