Treva A. Ory v. Lee M. Russell, Amanda N. Russell and Versatile Fab, Inc.

STATE OF LOUISIANA

COURT OF APPEAL

FIRST CIRCUIT

2018 CA 1491

TREVA A. ORY

VERSUS

LEE M. RUSSELL, AMANDA N. RUSSELL, AND
VERSATILE FAB, LLC

Judgment Rendered: NOV 12 2019

On Appeal from the 19th Judicial District Court
In and for the Parish of East Baton Rouge
State of Louisiana
Trial Court Number 643375

Honorable Donald R. Johnson, Judge Presiding

Floyd J. Falcon, Jr. Attorney for Plaintiff/Appellant,
Baton Rouge, Louisiana Treva A. Ory

Brian J. Prendergast Attorney for Defendant/ Appellee,
Baton Rouge, Louisiana Amanda N. Russell

Lee M. Russell Defendant/ Appellee

Zachary, Louisiana In Proper Person

BEFORE: GUIDRY, HIGGINBOTHAM, THERIOT,
CHUTZ, AND PENZATO, JJ.

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GUIDRY, J.

Plaintiff, Treva A. Ory, appeals a judgment in favor of defendant, Amanda

N. Russell, denying and dismissing her claims. For the reasons set forth below, we

affirm in part, reverse in part, and render.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Treva Ory is the mother of Lee Russell. Lee Russell married Amanda

Russell on July 7, 2007. In January 2008, the Russells acquired 12. 7 acres of land

for the purpose of building a home. The property was encumbered with a

mortgage.
Ms. Ory offered to loan the Russells the funds to build the house and

pay off the existing mortgage. Upon completion of the home, the Russells secured

a mortgage on the home and re -paid Ms. Ory a portion of the money that they had

borrowed from her. Amanda Russell filed for divorce on February 28, 2014, and

the couple divorced in 2015.

Lee Russell is the sole member of Versatile Fab, LLC (" Versatile Fab"),

which was formed in September 2006, prior to his marriage to Amanda Russell.

The parties agree that Versatile Fab is Lee Russell' s separate property. Versatile

Fab is a limited liability company with its own bank account. In addition to the

funds that Ms. Ory testified were loaned for the construction of the home, during

the same time period, Ms. Ory loaned money to Versatile Fab for the purchase of a

tractor, a truck, and other expenses.

On October 27, 2015, Ms. Ory filed suit for the balance of the funds loaned

to the Russells and Versatile Fab. In her petition, Ms. Ory alleged that the balance

due from the Russells in connection with the construction of their family home was

101, 631. 57 and that the Russells had continuously acknowledged that the balance

was due and payable. The petition alleged that the balance due from Versatile Fab

was $ 97,400. 00 and that during his marriage, Lee Russell personally guaranteed

the debt.

2

Amanda Russell answered the petition, asserting that the balance due on the

construction loan was $ 41, 631. 50. She further averred that the petition did not

state a cause of action against her with regard to the loan to Versatile Fab as she is

not a member of the limited liability company. Lee Russell, personally and on

behalf of Versatile Fab, admitted the allegations of the petition.

A bench trial was held on September 7, 2017, and February 2, 2018. In his

opening remarks, counsel for Amanda Russell argued that more than three years

had passed since any repayment of the construction loan, and therefore, the action

was prescribed pursuant to La. C. C. art. 3494.' Following the conclusion of Ms.

Ory' s case, counsel for Amanda Russell moved for an involuntary dismissal, 2

again arguing that Ms. Ory' s action for the balance of $ 101, 631. 57 due on the

construction loan was prescribed and that Ms. Ory failed to prove that prescription

was interrupted as to Amanda Russell. The trial court took the motion for

involuntary dismissal under advisement, and Amanda Russell proceeded with her

defense. At the conclusion of the testimony, the trial court took the entire matter

under advisement, and on March 8, 2018, signed a judgment that provided as

follows:

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED
that, in light of this Court' s finding that Versatile Fab, LLC is the
separate property of Defendant, Lee M. Russell, there be Judgment in
favor of Plaintiff, Treva A. Ory, and against Defendant, Versatile Fab,
LLC, and Defendant, Lee M. Russell, in solido, in the full and true
sum of Ninety -Seven Thousand Four Hundred ($ 97, 400. 00) Dollars,
together with legal interest from date of judicial demand until paid.

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED
that there be Judgment in favor of Defendant, Amanda N. Russell,

1 Louisiana Civil Code article 3494 provides that an action on money lent is subject to a
liberative prescription of three years.

Z Louisiana Code of Civil Procedure article 1672( B) provides that in an action tried by the court
without a jury, after the plaintiff has completed the presentation of his evidence, any party,
without waiving his right to offer evidence in the event the motion is not granted, may move for
a dismissal of the action as to him on the ground that upon the facts and law, the plaintiff has
shown no right to relief. The court may then determine the facts and render judgment against the
plaintiff and in favor of the moving party or may decline to render any judgment until the close
of all the evidence.

K

denying and dismissing the claims of Treva A. Ory, pursuant to LSA-
C. C. P. Art. 1672. This Court finds that Plaintiff' s cause of action
against Defendant, Amanda N. Russell has prescribed and that
Plaintiff has not carried her burden of proof to show that there has
been acknowledgment of the debt of One Hundred and One Thousand
Six Hundred Thirty -One Dollars and Fifty -Seven Cents ($ 101, 631. 57)
by Defendant Amanda N. Russell since 2011 as to interrupt
prescription.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED
that there be Judgment in favor of Plaintiff, Treva A. Ory and against
Lee M. Russell, individually, in the full and true sum of One Hundred
and One Thousand Six Hundred Thirty -One Dollars and Fifty -Seven
Cents ($ 101, 631. 57), together with legal interest from date of judicial
demand until paid. This Court finds that Plaintiff has carried her
burden of proof to show, by way of the Defendant Lee M. Russell' s
own testimony that he has acknowledged the debt as to interrupt
prescription.

Ms. Ory filed a motion for new trial as to the portions of the judgment that

dismissed her claims against Amanda Russell, which the trial court denied in a

judgment signed April 27, 2018. This appeal followed.'

ASSIGNMENTS OF ERROR

Ms. Ory urges the following assignments of error:

1) The Trial Court erred in failing to recognize that the $ 101, 631. 57
balance owed to Treva Ory on the home construction loan was a
community obligation of Lee M. Russell and Amanda N. Russell
and thus the [ Russells] were solidary obligors.

2) The Trial Court erred in finding that Treva Ory did not prove that
Amanda N. Russell repeatedly acknowledged owing the balance of
101, 63[ 1]. 57 loaned for the construction of the [ Russells']

community home.

3) The Trial Court erred in finding that the $ 97, 400. 00 debt owed to
Treva Ory was solely the obligation of Versatile Fab, L.L.C. and
Lee M. Russell where the evidence established that sum was loaned
for the benefit of the [ Russells'] community and was used to pay
community living expenses that were personally guaranteed by Lee
M. Russell during the existence of the [ Russells'] community and
thus the [ Russells] were also solidarily liable for this loan.

4) The Trial Court erred in failing to apply [ La. C. C. arts.] 1799 and
3503 which establish that interruption of prescription by one
solidary obligor interrupts as to all solidary obligors.

3 Neither Lee Russell nor Versatile Fab appealed.

C!

LAW AND DISCUSSION

A legal error occurs when a trial court applies incorrect principles of law and

such errors are prejudicial. Legal errors are prejudicial when they materially affect

the outcome and deprive a party of substantial rights. Evans a Lungrin, 97- 0541

La. 2/ 6/ 98), 708 So. 2d 731, 735. When such a prejudicial error of law skews the

trial court' s finding of a material issue of fact and causes it to pretermit other

issues, the appellate court is required, if it can, to render judgment on the record by

applying the correct law and determining the essential material facts de novo. Id.

Prescription ( Assignment of Error Number 4)

The trial court found that the balance due from the Russells in connection

with the construction of their family home was $ 101, 631. 57. ( R 20) The trial

court further found that Lee Russell acknowledged the debt so as to interrupt

prescription as to him, but that Ms. Ory failed to carry her burden of proof that

Amanda Russell acknowledged the debt, concluding that Ms. Ory' s cause of action

against Amanda Russell in connection with the home construction loan had

prescribed.
However, a thorough review of the record reveals that no peremptory

exception raising the objection of prescription was filed on behalf of any party.

The objection of prescription is a peremptory exception and must be specially

pleaded. La. C. C. P. art. 927. Jurisprudence is clear that the prescription exception,

whether urged at trial or on appeal, must be presented in a formal pleading; it

cannot be injected into the proceedings by brief or oral argument. Pence a Austin,

2015- 1371 ( La. App. 1 Cir. 2/ 26/ 16), 191 So. 3d 608, 612. Thus, it was legal error

for the trial court to find that Ms. Ory' s cause of action against Amanda Russell

had prescribed in the absence of an exception of prescription being presented in a

formal pleading. See Benedetto a Benedetto, 2015- 373 ( La. App. 5 Cir. 12/ 9/ 15),

182 So. 3d 344, 351; Moore a City of Monroe, 49, 207 ( La. App. 2 Cir. 8/ 13/ 14),

147 So. 3d 288, 294- 95, writ denied, 2014- 1935 ( La. 11/ 21/ 14), 160 So. 3d 973.

5

Accordingly, we review the evidence de novo to determine whether judgment can

be rendered based on the record.

Home Construction Loan ( Assignments of Error Numbers 1 and 2)

Ms. Ory testified that in 2009, she agreed to assist the Russells in building a

home on a tract of land that they had purchased in 2008. On November 30, 2009,

Ms. Ory directly paid $ 88, 839. 23 to First Bank and Trust to pay off the Russells'

loan on the tract of land. On January 25, 2010, a construction account was opened

in the names of Lee Russell, Amanda Russell, and Treva Ory. The parties do not

dispute that between January 25, 2010, and June 6, 2011, Ms. Ory deposited

210, 880.00 into the construction account and that the money was a loan for the

construction of the Russell home. In addition, and also not in dispute, Ms. Ory

directly paid the Russells' bill of $4, 514.07 to Home Depot.

In addition to the above amounts, Ms. Ory testified that on November 19,

2009, she loaned the Russells $ 50, 000. 00 in connection with the construction of

their home in the form of a cashier' s check made payable to Versatile Fab.

According to Ms. Ory, the check was made payable to Versatile Fab because that

was the only checking account that the Russells had at that time. Lee Russell

testified that the Versatile Fab account was the only account the parties had in

November 2009, and that the $ 50, 000. 00 was used to clear the land, rent

equipment, pay workers, acquire driveway dirt, gravel, and sea cans for storage,

and dig a water well. Amanda Russell acknowledged that prior to opening the

construction account on January 25, 2010, work was done in connection with

construction of the house, including drafting house plans, soil testing, and

construction of the driveway. However, she disputed that the $ 50, 000. 00 cashier' s

check was loaned for construction of the home because the check was issued

before the construction account was opened, and she was not aware of what the

money was used for.

0

The Russells secured a permanent loan on the constructed home in August

2011. From the proceeds of that loan, they paid Ms. Ory $ 252, 601. 73 for the

money she loaned them to construct their home. Ms. Ory contends that the balance

due to her in connection with the money she loaned to the Russells to construct the

community home is $ 101, 631. 57. Amanda Russell asserts that the balance due to

Ms. Ory is $ 41, 631. 50.

A Louisiana limited liability company is a separate legal entity from its

members. Charming Charlie, Inc. a Perkins Rowe Associates, L.L.C., 2011- 2254

La. App. 1 Cir. 7/ 10/ 12), 97 So. 3d 595, 598. The fact that the $ 50, 000. 00 check

was made payable to Versatile Fab and deposited into the LLC account has legal

consequences, i. e., the debt was incurred by the company, not Lee Russell. The

parties agree that Amanda Russell has no interest in Versatile Fab.

After a thorough review of the record before us, we find that Ms. Ory is

entitled to judgment against Amanda Russell, in solido with Lee Russell, in the

amount of $
51, 631. 57.4 The remaining balance of $50, 000.00 loaned by Ms. Ory

was a loan made to Versatile Fab, and acknowledged by Lee Russell. Therefore,

with respect to the alleged construction loan, we find that Ms. Ory is entitled to

judgment against Versatile Fab and Lee Russell, in solido, in the amount of

505000. 00.

4 As previously stated, Ms. Ory disbursed the following amounts in connection with the
construction of the Russells' home: $ 88, 839. 23 to pay off the Russells' land loan; $ 210, 880. 00
placed in a construction account; $ 4, 514.07 to pay off the Russells' Home Depot bill; and
50, 000. 00 in a cashier' s check made payable to Versatile Fab. The grand total of the amounts
disbursed by Ms. Ory was $ 354,233. 30, of which the Russells re -paid Ms. Ory $ 252, 601. 73,
leaving a balance of $101, 631. 57.

7

101, 500.00 Loan to Versatile Fab ( Assignment of Error Number 3)

Ms. Ory testified that between 2009 and 2012, she loaned $ 101, 500.00 by

depositing funds into the Versatile Fab account. There was no dispute that the

balance owed on the loan to Versatile Fab is $ 97, 400.00. Ms. Ory testified that the

Russells personally guaranteed the funds loaned to Versatile Fab, which were for

their personal living expenses. Lee Russell acknowledged that he personally

guaranteed payment of the loans made to Versatile Fab. Amanda Russell denied

that she personally guaranteed Versatile Fab' s debts, but had no evidence to dispute

Lee Russell' s testimony that during the marriage, he personally guaranteed the

repayment of money loaned by Ms. Ory.

The trial court rendered judgment in favor of Ms. Ory and against Versatile

Fab and Lee Russell, in solido, in the amount of $97,400. 00. Ms. Ory concedes

that the money was loaned to Versatile Fab, but argues that depositing the funds

into the Versatile Fab account " is of no moment." ( Appellant brief p. 14) She

argues that Amanda Russell should be liable for the debt because Lee Russell

guaranteed the loan during the existence of the marriage for the benefit of the

community. Ms. Ory contends that pursuant to La. C. C. art. 2360,5 the obligation

incurred by Lee Russell, through his actions of personally guaranteeing the loan to

Versatile Fab during the existence of the community property regime and using the

money for community interests, converted the Versatile Fab debt into a community

obligation for which Amanda Russell is liable. Ms. Ory further argues that because

the obligation was incurred by Lee Russell during the existence of the community

property regime, the obligation is presumed to be a community obligation. See La.

C. C. art. 2361.

In accordance with our discussions above regarding the legal consequences

5 Louisiana Civil Code article 2360 provides that an obligation incurred by a spouse during the
existence of a community property regime for the common interest of the spouses or for the
interest of the other spouse is a community obligation.

r-
1

of a loan to Versatile Fab, an LLC which is a separate legal entity, we further find

the $ 97, 400. 00 loan was a debt incurred by the company, not Lee Russell. Again,

the parties agree that Amanda Russell has no interest in Versatile Fab. Moreover,

the contract of guaranty is equivalent to a contract of suretyship, which must be

express and in writing. La. C. C. art. 3038; Regions Bank a Louisiana Pipe & Steel

Fabricators, LLC, 2011- 0839 ( La. App. 1 Cir. 12/ 21/ 11), 80 So. 3d 1209, 1212.

There was no evidence presented of a written contract of guaranty. Therefore, any

personal guarantee or acknowledgment of the debt by Lee Russell did not create an

obligation for which Amanda Russell is liable. See Raspanti a Litchfield, 2005-

1512 ( La. App. 4 Cir. 11/ 21/ 06), 946 So. 2d 234, 240, writ denied, 2007- 0367 ( La.

4/ 27/ 07), 955 So. 2d 685. Thus, the trial court did not err in concluding that

Amanda Russell had no liability for the $ 97, 400. 00 loan to Versatile Fab.

CONCLUSION

For the above and foregoing reasons, the March 8, 2018 judgment of the trial

court is affirmed in part and reversed in part. The judgment in favor of Amanda

Russell denying and dismissing Ms. Ory' s claim as to the $ 97, 400. 00 loan to

Versatile Fab is affirmed. The judgment in favor of Amanda Russell denying and

dismissing Ms. Ory' s claim as to the balance of $ 101, 631. 57 loaned for the

construction of the Russells' home, pursuant to the trial court' s La. C. C. P. art. 1672

finding of prescription, is reversed in part, and judgment is rendered in favor of

Ms. Ory and against Amanda Russell, in solido with Lee Russell, in the amount of

51, 631. 57, and in favor of Ms. Ory against Lee Russell and Versatile Fab, LLC, in

solido, in the amount of $50, 000. 00. Costs of this appeal are assessed equally

against Treva A. Ory and Amanda N. Russell.

AFFIRMED IN PART; REVERSED IN PART; AND RENDERED.

E

STATE OF LOUISIANA
COURT OF APPEAL
FIRST CIRCUIT
2018 CA 1491

TREVA A. ORY

VERSUS

LEE M. RUSSELL, AMANDA N. RUSSELL, AND
VERSATILE FAB, LLC

PENZATO, J., dissenting in part.

I respectfully dissent in part from the majority opinion. As the majority

recognizes, the trial court found that the balance due from the Russells in

connection with the construction of their family home was $ 101, 631. 57. Because

this factual finding was not affected by the trial court' s error in finding that Ms.

Ory' s cause of action against Amanda Russell had prescribed, a manifest error

standard of review is appropriate in evaluating the trial court' s finding that the

balance due in connection with the home construction loan was $ 101, 631. 57. See

Lam ex rel. Lam a State Farm Mut. Auto. Ins. Co., 2005- 1139 ( La. 11/ 29/ 06), 946

So. 2d 133, 135- 36. Under the manifest error standard of review, a reviewing court

may not merely decide if it would have found the facts of the case differently.

Hayes Fund for First United Methodist Church of Welsh, LLC v. Kerr-McGee

Rocky Mountain, LLC, 2014- 2592 ( La. 12/ 8/ 15), 193 So. 3d 1110, 1115. Rather, to

reverse a trial court' s factual conclusion, the appellate court must satisfy a two- step

process based on the record as a whole: there must be no reasonable factual basis

for the trial court' s conclusion, and the finding must be clearly wrong. Stobart v.

State, Department of Transportation and Development, 617 So. 2d 880, 882

La. 1993). Reasonable evaluations of credibility and inferences of fact should not

be disturbed, even if the appellate court feels that its own evaluations and

inferences are as reasonable. Bouchon a Walkenford, 2016- 1232 ( La. App. 1 Cir.

4/ 20/ 17), 218 So. 3d 1100, 1103- 04.

The majority opinion concludes that because the $ 50, 000. 00 cashier' s check

was made payable to Versatile Fab, the debt was incurred by the company, not the

Russells. However, Ms. Ory testified that while made payable to Versatile Fab,

those funds were loaned to the Russells and used by them in connection with the

construction of their home.' This testimony was corroborated by Lee Russell who

testified that the $ 50, 000. 00 was used to clear the land, rent equipment, pay

workers, acquire driveway dirt, gravel, and sea cans for storage, and dig a water

well. Amanda Russell admitted that work was performed in connection with

construction of the house prior to the opening of the construction account,

including drafting house plans, soil testing, and construction of the driveway, and

she failed to identify any other source of funding for this work.

Based upon the evidence presented, the trial court could have reasonably

concluded that Ms. Ory loaned the $ 50, 000. 00 at issue to the Russells, not Versatile

Fab. The trial court' s finding that the balance due on the loan from Ms. Ory for the

construction of the Russells home was $ 101, 631. 57 is not manifestly erroneous or

clearly wrong. Thus, I would render judgment in favor of Ms. Ory and against

Amanda Russell, in solido with Lee Russell, in the amount of $101, 631. 57. I agree

with the majority opinion in all other respects.

In contrast, Ms. Ory conceded that she loaned additional funds to Versatile Fab by depositing
funds into the Versatile Fab account. I agree with the majority opinion that Amanda Russell is
not liable for the balance of $97, 400. 00 on the loan made to Versatile Fab.