Scott Gurney, in his capacity as the Trustee of the Gurney Family Trust v. Josh P. McCoy

STATE OF LOUISIANA

COURT OF APPEAL

AQ.-
ri FIRST CIRCUIT

2021 CA 0696

SCOTT GURNEY, IN HIS CAPACITY AS THE TRUSTEE OF THE
GURNEY FAMILY TRUST

VERSUS

JOSH P. MCCOY

JUDGMENT RENDERED: APR 0 4 2022

Appealed from
The Nineteenth Judicial District Court
Parish of East Baton Rouge • State of Louisiana
Docket Number C670818 • Section 24

The Honorable Donald R. Johnson, Presiding Judge

Kyle M. Keegan COUNSEL FOR APPELLANT
David A. Lowe DEFENDANT— Josh P. McCoy
Baton Rouge, Louisiana

Carroll Devillier, Jr. COUNSEL FOR APPELLEE
Danielle Borel PLAINTIFF— Scott Gurney,
Baton Rouge, Louisiana in his Capacity as the Trustee of
the Gurney Family Trust

BEFORE: MCCLENDON, WELCH, AND THERIOT, JJ.
VM G

WELCH, J.

In this suit on a promissory note, the defendant, Josh P. McCoy, appeals a

summary judgment granted in favor of the plaintiff, Scott Gurney, in his capacity

as the Trustee of the Gurney Family Trust, entering judgment against Mr. McCoy
for principal, interest, and late fees, as well as a subsequent judgment rendered in

furtherance of that judgment for attorney fees, costs, and judicial interest. For

reasons that follow, we reverse the summary judgment, vacate the subsequent

judgment, and remand for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

Mr. Gurney is the trustee of the Gurney Family Trust, a trust established

under the laws of the State of California ( hereinafter collectively referred to as

Gurney"). Mr. McCoy is an individual of the full age of majority domiciled in

East Baton Rouge Parish. On October 25, 2015, Mr. McCoy signed a promissory

note in favor of Gurney (" the note"). The note was for the principal amount of

750, 000. 00, and had an interest rate of 12% per year, the annual interest each year

being $ 90, 000. 00, payable at $ 22, 500. 00 per quarter year, totaling $ 180, 000. 00 for

the entirety of the note. Pursuant to the note, Mr. McCoy was obligated to make

payments to Gurney of $22, 500. 00 in quarterly interest, with the first of eight

interest payments due by February 1, 2016, with principal payable in part or in

whole. The payment of any unpaid principal was due on or before the maturity

date of October 25, 2017. Additionally, the note provided that Mr. McCoy was

obligated to pay attorney fees and costs of the holder of the note in the event it was

necessary to employ an attorney to collect the promissory note.

On June 25, 2018, Gurney instituted this proceeding, asserting that Gurney

was the holder of the note, that Mr. McCoy had failed to make all required

payments due under the note, and that Mr. McCoy was in default. Gurney sought

judgment for the principal amount of $711, 275. 00, accrued and unpaid interest in

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the amount of $90, 000. 00, late fees in the amount of at least $ 40, 063. 35, legal

interest until paid, attorney fees, and all costs for the proceeding.

Mr. McCoy filed an answer with affirmative defenses and a reconventional

demand. Essentially, Mr. McCoy asserted that the note was executed in favor of

Gurney as part of a larger agreement between the parties entered into on October

151 2015, which involved other related transactions and their shared ownership

interests in other entities, i.e., Blackwater Farms, Inc., Deer Dynasty Properties,

LLC, and Deer Dynasty Ranch, LLC, and which concerned the ownership of

immovable property used for hunting and a lodge that was constructed on that

property (" the October 15, 2015 agreement"). Mr. McCoy further asserted that,

pursuant to the October 15, 2015 agreement, he sold his membership interests in

these other entities to Gurney in consideration for ( 1) a lifetime personal servitude

over the immovable property owned by the entities, along with the ability to stay

on that immovable property any day that Gurney was not present on the property,

and ( 2) Gurney' s loan to him, as represented by the note.

According to Mr. McCoy, Gurney began to breach the October 15, 2015

agreement around November 2016 by failing to honor the lifetime personal

servitude it granted to Mr. McCoy. Thereafter, Mr. McCoy ceased making

payments on the note due to this breach, as the servitude provided a portion of the

consideration for the note. Mr. McCoy also asserted that Gurney failed to disburse

the entire principal sum of the note and that it failed to pay him the sum of

300, 000. 00, which was due to him under one of the related transactions between

the parties and their ownership interests in Deer Dynasty Properties, LLC.

Therefore, Mr. McCoy sought damages for Gurney' s breach of the note, his breach

of the October 15, 2015 agreement by failing to honor the lifetime personal

servitude, and Gurney' s failure to pay Mr. McCoy all sums owed to him pursuant

to the October 15, 2015 agreement and the note.

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Thereafter, Gurney filed a motion for summary judgment, seeking judgment

against Mr. McCoy for the amounts owed pursuant to the note. Specifically,

Gurney sought judgment against Mr. McCoy in the principal amount of

711, 274. 97, accrued and unpaid interest in the amount of $90, 000. 00, and late

fees in the amount of $40, 063. 35. In addition, Gurney sought attorney fees in the

amount of $59,463. 95, expenses and costs of this proceeding in the amount of

1, 844.95, and costs and judicial interest from June 25, 2018 ( the date of filing of

this suit on the note) through satisfaction of judgment. Mr. McCoy opposed the

motion, asserting that there were issues of fact as to its defenses and

reconventional demand, i.e. Gurney' s breach of the note, its breach of the October

15, 2015 agreement, and failure and/ or want of consideration, which precluded

summary judgment.

After a hearing, the trial court signed a judgment on April 1, 2020, granting

the motion for summary judgment and entering judgment in favor of Gurney and

against Mr. McCoy in the principal amount of $ 711, 274. 97, plus accrued and

unpaid interest in the amount of $ 90, 000. 00, and late fees in the amount of

401063. 35. The judgment further provided that the parties were to contact the

trial court to have a hearing to determine whether attorney fees and costs would be

awarded, and if so, the amounts.'

Thereafter, Gurney filed a motion to tax attorney fees, costs, and judicial

interest. After a hearing, the trial court signed a judgment on March 2, 2021 in

favor of Gurney and against Mr. McCoy, granting the motion and entering

judgment against Mr. McCoy for attorney fees in the amount of $73, 015. 00, court

costs and fees in the amount of $3, 983. 48, and deposition costs in the amount of

Mr. McCoy filed an application for supervisory writs seeking review of this judgment. This

Court denied the writ application on the basis that once a judgment containing proper decretal
language was rendered on the remaining issue of attorney fees and costs, the judgment would
constitute a final appealable judgment, and that Mr. McCoy would be entitled to file a motion for
appeal therefrom.See Scott Gurney, in his capacity as Trustee of the Gurney Family Trust
v. Josh P. McCoy, 2020- 1129 ( La. App. 1St Cir. 2/ 18/ 21)( unpublished writ action).

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2, 102. 10, plus judicial interest from October 25, 2017 until satisfaction of the

April 1, 2020 judgment.

Mr. McCoy has appealed, challenging both the judgment granting summary

judgment and the judgment granting the motion to tax attorney fees, costs, and,

judicial interest. With respect to the summary judgment, Mr. McCoy asserts that

the trial court erred in granting summary judgment because there were genuine

issues of material fact regarding Gurney' s breach of the October 15, 2015

agreement, which resulted in a failure of consideration on the note, and Gurney' s

failure to disburse the entire principal amount of the loan, which resulted in a want

or lack of consideration. Mr. McCoy also asserts that Gurney failed to establish

there were no genuine issues of material fact relating to the amount of principal,

interest, and late fees to which it claimed it was entitled.

As to the judgment awarding attorney fees, costs, and judicial interest, Mr.

McCoy asserts that since summary judgment was inappropriately granted, the trial

court also erred in awarding any attorney fees, costs, and judicial interest.

Alternatively, Mr. McCoy asserts that the award of attorney fees was unreasonable

and improperly included attorney fees incurred by Gurney in defense of the

reconventional demand. He also asserts that the award of costs included costs to

which Gurney was not entitled, and that the judicial interest awarded was

inappropriate, as contractual interest had already been awarded.

LAW AND DISCUSSION

A motion for summary judgment is a procedural device used to avoid a full

scale trial when there is no genuine issue of material fact. Johnson v. Evan Hall

Sugar Cooperative, Inc., 2001- 2956 ( La. App. 1St Cir. 12/ 30/ 02), 836 So. 2d 484,

486. After an opportunity for adequate discovery, a motion for summary judgment

shall be granted if the motion, memorandum, and supporting documents show that

there is no genuine issue as to material fact, and that the mover is entitled to

judgment as a matter of law. La. C. C. P. art. 966( A)( 3).

In determining whether summary judgment is appropriate, appellate courts

review evidence de novo under the same criteria that govern the trial court' s

determination of whether summary judgment is appropriate. In re Succession of

Beard, 2013- 1717 ( La. App. Pt Cir. 6/ 6/ 14), 147 So. 3d 753, 759- 760. The initial

burden on a motion for summary judgment is on the mover to show that no

genuine issue of material fact exists and that the mover is entitled to judgment as a

matter of law. La. C. C. P. art. 966( A)(3) and ( D)( 1). The burden then shifts to the

adverse party to produce factual support sufficient to establish the existence of a

genuine issue of material fact or that the mover is not entitled to judgment as a

matter of law. Id. If the adverse party fails to do so, then summary judgment shall

be granted. Id.

Summary judgment is an appropriate procedural device to enforce a

promissory note when the defendant establishes no defense against enforcement.

See American Bank v. Saxena, 553 So. 2d 836, 845- 846 ( La. 1989). In a suit to

collect on a promissory note, once the plaintiff, as holder of a promissory note,

proves the maker' s signature, or the maker admits it, the holder has made out his

prima facie case by mere production of the note; the burden then shifts to the

defendant to prove the existence of a triable issue of material fact and/ or any

affirmative defenses. American Bank, 533 So. 2d at 842; see also Hancock Bank

of Louisiana v. C & O Enterprises, LLC, 2014- 0542 ( La. App. Pt Cir. 12/ 23/ 14),

168 So. 3d 595, 598- 599, writ denied, 2015- 0621 ( La. 5/ 22/ 15), 171 So. 3d 251.

Failure of consideration is an affirmative defense that may be asserted by the
11t
defendant. See La. C. C. P. art. 1005; Winston v. Hall, 2017- 1097 ( La. App.

Cir. 4/ 6/ 18)( unpublished), 2018 WL 1663020 at * 3.

on

Additionally, in a suit on a promissory note by the payee against the maker,

the payee is entitled to the presumption that the instrument was given for value

received. However, the presumption is rebutted if the maker casts doubt upon the

consideration. Once the maker casts doubt upon the issue of consideration, the

burden shifts to the payee to prove consideration by a preponderance of the

evidence. Sonnier v. Gordon, 50, 513 ( La. App. 2nd Cir. 4/ 13/ 16), 194 So. 3d 47,

54. Notably, however, there is a difference between the affirmative defense of

failure of consideration and the defense of want or lack of consideration. The

former concedes that there was consideration for the instrument in its inception,

but alleges that the consideration has wholly or partially ceased to exist. Id. The

latter defense, however, asserts that consideration was not given for the note.

Thus, the defendant is merely producing evidence which rebuts the plaintiff' s

contention that consideration was given for the note. Id. An affirmative defense or

special plea is not necessary to permit the introduction of evidence which tends to

rebut evidence introduced by the plaintiff in the proof of his case. Id.

Gurney, in support of his motion for summary judgment, submitted: a copy

of the petition with the affidavit of verification of Gurney and the October 25, 2015

note attached thereto; Mr. McCoy' s answer to the petition; excerpts from Mr.

McCoy' s deposition with attachments; and an affidavit of correctness executed by

Gurney.

The factual allegations of the petition were set forth above. The October 25,

2015 note attached thereto set forth the following terms: ( 1) Mr. McCoy promised

to pay Gurney the principal sum of $750, 000. 00; ( 2) the note would bear interest at

a rate of 12% per year based on $ 750, 000. 00, thus the annual interest each year

would be $ 90, 000. 00, at $ 22, 500. 00 per quarter year, and would total $ 180, 000. 00

for the entirety of the note; ( 3) commencing on the first day of the month after the

third month/first quarter after the note' s date, and every successive quarter for two

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years, Mr. McCoy would pay $ 22, 500. 00 in quarterly interest and could pay

principal in part or in whole, and any unpaid principal would be paid on or before

the maturity date; ( 4) the maturity date was October 25, 2017 and on that date, Mr.

McCoy would pay any and all unpaid principal on the note, together with the

eighth of eight interest payments; ( 5) late fees of 5% of the entire amount

outstanding would be owed by Mr. McCoy if any payment was not paid within

thirty days of the due date; ( 6) the proceeds of the loan were not to be used by Mr.

McCoy for personal, family, or household purposes, but instead for the

development of residential real estate; ( 7) Mr. McCoy could prepay any

obligations under the note without penalty by making payment in full of the then -

remaining unpaid principal, but such payment would not affect his obligation to

pay the interest totaling $ 180, 000. 00; ( 8) Mr. McCoy waived presentment, protest,

demand, and notice; ( 9) if it was necessary to employ counsel to collect the note,

Mr. McCoy agreed to pay reasonable attorney fees and costs; ( 10) default was

defined and upon default, any unpaid principal balance would be due and payable

without presentment, demand, or notice; and ( 10) the note was secured by a

mortgage on Mr. McCoy' s interest in sale proceeds by Deer Dynasty Properties,

LLC and/ or Deer Dynasty Ranch, LLC of certain land, and Mr. McCoy would

grant a mortgage on all immovable property purchased with the money lent

through the note. The note bears the signature of "Josh Paul McCoy" and provides

that it was executed on and to be effective as of October 25, 2015.

According to Mr. McCoy' s deposition, he had been working as a builder on

construction projects, through his company, Dynamic Group, LLC, when he came

upon an opportunity to participate in the development and construction of houses

in Sunset Lakes subdivision in Port Allen, Louisiana. Mr. McCoy purchased 12- 15

lots in Sunset Lakes, and the purchase of those lots was mostly funded by money

that he borrowed from Gurney. The houses in Sunset Lakes were sold as they

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were built, and by the end of 2016, all of the houses had been built and sold. Mr.

McCoy admitted that the loan from Gurney essentially operated like a construction

line of credit in that he would make draws against the loan and Gurney would pay
based on the status of the construction.2 In addition to the purchase of land and

construction of houses in Sunset Lakes, the money that Mr. McCoy borrowed from

Gurney also funded a project in Denham Springs, Louisiana, which involved the

purchase of raw land for the development of Magnolia Mound subdivision and the

purchase of two lots in Watson, Louisiana. According to Mr. McCoy, no houses

were built in Magnolia Mound subdivision, as its development stopped with the

flooding in 2016 because the market went down and because Mr. McCoy decided

that he wanted to end his dealings with Gurney. Mr. McCoy understood that the

money from Gurney was a loan and that he was obligated to pay it back. However,

he stated that " it wasn' t just a loan agreement" rather it was part of a " global deal"

based on his rights and ownership in other entities involving Gurney.

After Mr. McCoy got an email from Gurney that Mr. McCoy would not be

able to go to the property that was the subject of the servitude, Mr. McCoy realized

that Gurney was dissatisfied with the servitude agreement and that there were

going to be issues involving his use of the servitude. At that point, Mr. McCoy

determined that if Gurney was " going to breach our agreement," then he would let

Gurney " give [ McCoy his] servitude money of six hundred thousand, buy [ him]

out of [the servitude], and [ they would] settle up the difference on the loan." In

addition, Mr. McCoy decided that he was not going to re -pay the funds he had

drawn on the note and that as soon as Magnolia Mound was " paid," they " would

settle everything out."

Mr. McCoy admitted that he signed the note for $ 750, 000. 00 in favor of

2
We note that, although Mr. McCoy admitted that the loan from Gurney operated like a
construction line of credit, he never stated or admitted that such arrangement was intended by the
parties.

I

Gurney, that he complied with all payments due under the note until November

2016, and that he stopped paying the note in November 2016, when his rights

under the servitude agreement were withheld. Mr. McCoy also admitted that the

note did not make his payment obligation contingent on the servitude rights. Mr.

McCoy stated that he made interest payments totaling $ 90, 000. 00 and that had no

reason to dispute the amount of the draws made on the loan.

According to Gurney' s affidavit, Scott Gurney stated that he was trustee of

the Gurney Family Trust and that he was the holder of, owner of, and entitled to

enforce the note dated October 25, 2015 in the original principal amount of

750, 000.00 bearing interest of 12% per year, which was executed by Mr. McCoy.

Gurney stated that the loan operated as a construction line of credit and that Mr.

McCoy received draws in the principal amount of $711, 274. 97. Under the terms

of the note, Mr. McCoy was obligated to pay eight quarterly interest payments of

22, 500. 00 and to pay the note on the two year anniversary of the note' s date. Mr.

McCoy made only the first four interest payments, had not made any payments on

principal,
was in default, and was indebted to Gurney for the principal sum of

711, 274. 97, plus accrued and unpaid interest of $ 90, 000. 00, late fees of

40, 063. 35, plus reasonable attorney fees and costs. To date, Gurney had incurred

attorney fees in the amount of $59, 688. 88 and costs of $1, 844. 95 related to the

collection of the note.

Herein, we find that Gurney produced the note and that he established, with

the documents in support of his motion for summary judgment, he was the holder

of the note, that Mr. McCoy signed the note, that Mr. McCoy received money

pursuant to the note totaling $ 711, 274. 97, that Mr. McCoy made only the first four

interest payments, had not made any payments on principal, was in default, and

was indebted to Gurney for the principal sum of $711, 274. 97, plus accrued and

unpaid interest of $90, 000. 00, late fees of $40, 063. 35, plus reasonable attorney

10

fees and costs. Therefore, we find that Gurney met his initial burden of

establishing a prima facie case for enforcement of the note; thus, the burden then

shifted to Mr. McCoy to establish the existence of a triable issue of material fact

and/ or any defenses.

In opposition to the motion for summary judgment, Mr. McCoy offered his

own affidavit, along with the October 15, 2015 agreement and emails between the

parties attached thereto. According to Mr. McCoy' s affidavit, in January 2012, he

formed Blackwater Farms, Inc. (" Blackwater"). Initially, 100 shares of stock were

issued in Blackwater and he owned all 100 shares. Blackwater was incorporated

for the initial purpose of providing comprehensive deer hunting facilities to the

public. In order to accomplish this purpose, around February 17, 2012, Blackwater

purchased approximately 300 acres in Livingston Parish for $ 1, 100, 000. 00 from

Leonard Jerry Kinchen and L. Jerry Kinchen, Inc. Blackwater paid $ 50, 000. 00 in

cash to purchase the 300 acres and financed the remainder of the purchase price

through a promissory note in the amount of $ 1, 050, 000 at 6% interest ( the

Kinchen note").

Around October 25, 2013, Mr. McCoy executed a resolution with Gurney

wherein Gurney purchased 50 of the 100 shares of Blackwater stock for the sum of

146, 982. 52, thereby making Gurney 50% owner of Blackwater and Mr. McCoy

the owner of the remaining 50% of Blackwater. Gurney " took out" the Kinchen

note and became the lender on the 300 acres, and in connection therewith,

Blackwater executed a promissory note in favor of Gurney in the amount of

1, 020, 721. 00, with interest payable at prime plus 2. 75% over 240 months ( the

300 acre note"). Since Mr. McCoy and Gurney were equal shareholders in

Blackwater at that time, they agreed to make equal payments on the 300 acre note.

Mr. McCoy made alternating monthly payments on the note and Gurney claimed

that he made alternating monthly payments on the note.

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In January 2014, Blackwater purchased an additional 250 acres, which were

contiguous to the 300 acres, from Leonard Jerry Kinchen and Sheila Gill Kinchen

for $ 525, 000. 00, and the purchase price was financed by Gurney. In connection

therewith,
Blackwater executed a promissory note in favor of Gurney in the
amount of $ 553, 898. 00, with interest payable at prime plus 2. 75% over 240

months (" the 250 acre note"). Since McCoy and Gurney were equal shareholders

in Blackwater at that time, they agreed to make equal payments on the 250 acre

note.
Mr. McCoy made alternating monthly payments on the note and Gurney

claimed that it made alternating monthly payments on the note.

In June 2014, Blackwater decided to build an 8 -bedroom lodge on the 550

acres and anticipated that it would need $ 600, 000. 00 to build the lodge. Gurney

loaned $ 600, 000. 00 to Blackwater for this purpose and the lodge was subsequently

built. Additionally, at this time, Mr. McCoy agreed to sell 25% of his shares of

stock in Blackwater to Gurney for $ 300, 000. 00. In order to effectuate this sale,

Blackwater issued an additional 100 shares of stock, which were sold to Gurney

for $ 600, 000. 00. However, Gurney never paid any money to Blackwater or Mr.

McCoy for these additional shares of stock.

Following the issuance of the additional 100 shares of stock, Mr. McCoy

owned 25% of Blackwater through his 50 shares of stock and Gurney owned 75%

of Blackwater through its 150 shares of stock. Gurney and Mr. McCoy placed a

value of $300, 000. 00 on 50 shares of stock in Blackwater at that time, and thus, the

total 200 shares of stock in Blackwater were worth $ 1, 200, 000. 00 at that time. In

connection with the issuance of the additional 100 shares of stock to Gurney, Mr.

McCoy retained the right for five years to repurchase from Gurney 50 shares of

stock in Blackwater for $ 300, 000. 00.

Additionally, in 2014, at the suggestion of Gurney, it was proposed that two

limited liability companies be organized and that Blackwater' s assets and liabilities

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be transferred to these new limited liability companies. Based on this suggestion,

Gurney and Mr. McCoy organized Deer Dynasty Ranch, LLC and Deer Dynasty

Properties, LLC. At the time of its organization, Mr. McCoy owned 25%

membership interests in Deer Dynasty Ranch, LLC and
in Deer Dynasty

Properties, LLC and Gurney owned the remaining 75%. Blackwater then assigned

all of its immovable assets and all of its movable assets and liabilities, including

the 300 acre note and the 250 acre note, to Deer Dynasty Properties, LLC.

In 2015, negotiations began for the sale of Mr. McCoy' s remaining 25%

interests to Gurney because Mr. McCoy had decided to convert his interest in those

entities into cash and to pursue a residential housing development instead. The

terms of the sale of Mr. McCoy' s interests were ultimately agreed upon, and

Gurney and Mr. McCoy executed the October 15, 2015 agreement.

According to Mr. McCoy, pursuant to the October 15, 2015 agreement, he

sold, conveyed, and transferred his 25% interest in Deer Dynasty Properties, LLC

and Deer Dynasty Ranch, LLC to Gurney; thus, Gurney became 100% owner of

the lodge and the membership interests in Deer Dynasty Properties, LLC and Deer

Dynasty Ranch, LLC. Mr. McCoy' s consideration for entering into the October

151 2015 agreement consisted of a lifetime personal servitude on the lodge and the

550 acres, as well as a loan made by Gurney to him. Specifically with respect to

the loan, funds equaling the approximate value of his 25% interests in Deer

Dynasty Properties, LLC and Deer Dynasty Ranch, LLC, which totaled

approximately $ 750, 000. 00, were to be transferred by Gurney to Mr. McCoy. Mr.

McCoy would then repay those funds over time in exchange for Gurney granting

him a lifetime servitude over the lodge and 550 acres. Mr. McCoy' s obligation to

repay the funds set forth in the October 15, 2015 agreement was conditioned upon

Gurney honoring Mr. McCoy' s lifetime servitude and complying with the terms of

the October 25, 2015 note. Likewise, Gurney' s duties to Mr. McCoy under the

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servitude identified in the October 15, 2015 agreement were memorialized in the

agreement. Thus, the net effect of the October 15, 2015 agreement was that the

servitude formed the consideration for Mr. McCoy' s execution of the note and his

obligation to repay the $ 750, 000. 00 " purchase price" set forth in the note for his

25% interest in the lodge, Deer Dynasty Properties, LLC and Deer Dynasty Ranch,

LLC.

But for the lifetime servitude over the lodge and the 550 acres, Mr. McCoy

would not have entered into the October 15, 2015 agreement, would not have

executed the note, and would not have borrowed any money from Gurney that

forms the basis of the claims in this suit. Rather, he would have simply demanded

the payment of $750, 000. 00 for his remaining 25% interest.

Mr. McCoy executed the note, which Gurney prepared, in October 2015;

however, Gurney did not disburse any of the loan proceeds from the promissory

note until November 2015 and he never disbursed the full $750, 000. 00 as set forth

in the note, even though it was required by the terms of the note. Rather, Gurney

made disbursements as follows: $ 156, 305. 00 on November 19, 2015; $ 264, 513. 98

on January 20, 2016; $ 97, 898. 28 on February 3, 2016; $ 62, 654. 94 on March 3,

2016; $ 18, 500. 00 on March 30, 2016; $ 72, 500. 00 on April 11, 2016; $ 20, 402. 77

on April 27, 2016; and $ 18, 500. 00 on June 30, 2016. Although these

disbursements totaled $ 711, 274.97, Gurney continued to charge Mr. McCoy full

interest on the full $750, 000. 00 from the date that he executed the note on October

25, 2015. During this time, Mr. McCoy complied with all terms of the note,

including payment of interest.

In 2016, Gurney began violating terms of the servitude agreement in

multiple ways. First, Gurney prevented Mr. McCoy from staying at the lodge on

multiple occasions. Next, Gurney also tried to make Mr. McCoy pay for the

servitude, even though the consideration for Mr. McCoy executing the note ( and

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effectively repaying the purchase price for his 25% interest) was the granting of the

lifetime servitude, and it was agreed that Mr. McCoy would not pay for the use of

the servitude. Thereafter, Gurney terminated the servitude agreement in writing

and Gurney has precluded Mr. McCoy from using the lifetime servitude or

exercising any of the rights granted to him. After Gurney breached the October 15,

2015 agreement with regard to the servitude, Mr. McCoy ceased making payments

on the note in 2017 because the servitude agreement formed the consideration for

his execution of the note and the October 15, 2015 agreement.

According to the October 15, 2015 agreement between Mr. McCoy and

Gurney, which was attached to Mr. McCoy' s affidavit, "[ o] wnership and capital

obligations [
of Deer Dynasty Ranch, LLC and Deer Dynasty Properties] [ would

be] 100% Gurney" and "[ c] apital obligations [ would] be borne 100% by Gurney."

The October 15, 2015 agreement also provided that upon the sale of the

Endeavor," Gurney would be paid the first $ 3, 292, 000. 00 from the gross sales

receipts; next, Mr. McCoy would be paid 1% of the gross sales receipts; then, Mr.

McCoy would be paid $ 212, 000. 00 from the gross sales receipts, if any; and all

residue, if any, would be paid to Gurney. Mr. McCoy was provided a seven

calendar day right of first refusal in the event of any proposed sale of the Endeavor

for no less than $ 3, 292, 000. 00, and his time- limited right to redeem his 25%

interest in the Endeavor for $300, 000. 00 was extinguished. The agreement further

provided that Mr. McCoy would have a personal servitude on the 250 and 300

acres, which would exclude the right to take/kill game of any kind without

Gurney' s written approval, except that Mr. McCoy would have the right to kill two

turkeys per year, and would exclude the right to stay overnight if Gurney was

present, other than as an invited guest. Mr. McCoy was to obtain from Circle C a

100 year lease in favor of Deer Dynasty Ranch, LLC and the Endeavor for a non-

exclusive, but unrestricted use of the barn, with said lease having specific

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provisions.

The October 15, 2015 agreement further provided that Gurney would lend

750, 000.00 to Mr. McCoy on a two year promissory note, which was for a

residential development project. The promissory note would be secured by Mr.

McCoy' s monetary interests in the Endeavor that remain after and result from the

agreement and by mortgages on all immovable property purchased with the loan

capital. The loan would have 12% interest per year based on the loan amount of

750, 000. 00, allowing quarterly interest only payments, each in the amount of

22, 500. 00, thus the annual interest each year shall be $ 90, 000. 00 at $ 22, 500. 00

per quarter year, and shall total $ 180, 000. 00 for the entirety of the note.

In addition, the October 15, 2015 agreement provided that the operating

agreements for Deer Dynasty Properties, LLC and Deer Dynasty Ranch, LLC

would be amended to reflect the terms agreed to and the parties would enter into

and execute any and every document necessary to memorialize, formalize, ratify

and/ or notify third -parties of this agreement and its terms. The agreement was

signed by Mr. McCoy on November 3, 2015 and by Gurney on November 10,

2015.

Based on our de novo review of the documents offered by Mr. McCoy in

opposition to the motion for summary judgment, we find Mr. McCoy met his

burden of establishing that there are genuine issues of material fact as to the issue

of consideration that preclude summary judgment in favor of Gurney on the note.

More specifically, we find Mr. McCoy established genuine issues of material fact

as to whether Gurney breached the October 15, 2015 agreement between the

parties, thereby resulting in a failure of consideration, and whether Gurney was

obligated under the note and the October 15, 2015 agreement to disburse the entire

loan proceeds, thereby resulting in a lack of consideration.

The documents offered by Mr. McCoy established that the note was part of

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the October 15, 2015 agreement between the parties and that there was an issue of

fact as to whether Gurney breached that agreement by preventing and eventually

terminating Mr. McCoy' s servitude that was established by the agreement, and by

failing to disburse the full proceeds of the loan. Mr. McCoy' s affidavit establishes

that he both executed the note for the $ 750,000. 00 loan from Gurney and

transferred his interest in Deer Dynasty Properties, LLC and Deer Dynasty Ranch,

LLC to Gurney in exchange for the lifetime servitude set forth in the October 15,

2015 agreement. Thus, any purported breach of the October 15, 2015 agreement

by Gurney might result in a failure of consideration, or in a lack of consideration; it

might also excuse Mr. McCoy' s non-performance under the note, or reduce the

amount to which Gurney is entitled to recover under the note.

Gurney contends that Mr. McCoy should not be able to rely on the October

155 2015 agreement in defense to the suit on the note because ( 1) any purported

breach of the October 15, 2015 agreement would be an unliquidated claim for

damages, which cannot be used to offset a liquidated claim, such as enforcement of

a promissory note, and ( 2) the October 15, 2015 agreement constitutes

inadmissible parol evidence, which cannot be used to alter the terms of the note.

However, we find no merit to Gurney' s contentions.

We recognize that in general, courts have held that an unliquidated claim for

damages based upon a breach of contract may not be offset against a liquidated

claim, such as a promissory note. See American Bank, 553 So. 2d at 844- 846.

However, in cases where a promissory note is part of a larger related agreement

between the parties, a breach of the larger related agreement may provide a defense

to the enforcement of the promissory note, thereby rendering summary judgment

inappropriate. See Ouachita National Bank in Monroe v. Gulf States Land &

Development, Inc., 579 So. 2d 1115, 1121- 1123 ( La. App. 2" Cir.), writ denied,

3rd
587 So. 2d 695 ( La. 1991) and Butler v. Begnauds, LLC, 2019- 51 ( La. App.

17

Cir. 5/ 29/ 19), 273 So. 3d 412, 481; see also Geaux Live Digital, L.L.C. v. Taylor

and Ross Entertainment, L.L.C., 2011- 601 ( M.D. La. 6/ 28/ 12), 2012 WL

130019029 * 3- 4.

In this case, we find the October 15, 2015 agreement and the note are so

interrelated that a breach of the October 15, 2015 agreement could provide a

defense to the enforcement of the note. The note was a part of the October 15,

2015 agreement, was executed in conjunction with the October 15, 2015 agreement

and the specific terms, purpose, and security for the note were specifically set forth

and related to the terms of the October 15, 2015 agreement. As such, we find that

Mr. McCoy is entitled to rely on the October 15, 2015 agreement in defense of the

suit on the note and in defense of Gurney' s motion for summary judgment. And

based on the terms of the October 15, 2015 agreement and Mr. McCoy' s affidavit,

summary judgment was improper.

As to whether the October 15, 2015 agreement constitutes inadmissible parol

evidence, we also recognize that, in general, parol evidence is not admissible to

vary or contradict the terms of an authentic act or an act under private signature,

and further, that the promissory note herein was an act under private signature.

See La. C. C. art. 1848; Sonnier v. Boudreaux, 95- 2127 ( La. App. 1St Cir.

5/ 10/ 96), 673 So. 2d 713, 718. However, between the parties to an instrument,

parol evidence is admissible to show want or failure of consideration. Scafidi v.

Johnson, 420 So. 2d 1113, 1115 ( La. 1982); M.G. Mayer Yacht Servs., Inc. v.

Ryder, 2003- 2225 ( La. App. 1St Cir. 10/ 29/ 04), 897 So. 2d 72, 74. Parol evidence

is also admissible to prove that the written act was modified by a subsequent and

valid oral agreement. La. C. C. art. 1848. As such, parol evidence is admissible as

between Mr. McCoy and Gurney to show either want or failure of consideration.

Furthermore, we find that Mr. McCoy was not offering the October 15, 2015

agreement to vary or contradict the terms of the note. Indeed, the terms set forth in

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October 15, 2015 agreement pertaining to the note are consistent with the terms of

the note itself. Rather, Mr. McCoy has offered the October 15, 2015 agreement for

the purpose of establishing the entire agreement of the parties, of which the note

was a part, in order to establish a failure or a lack of/want of consideration and

Gurney' s non-performance of the parties' overall agreement. Thus, the October

15, 2015 agreement does not constitute inadmissible parol evidence and was

appropriately relied on by Mr. McCoy in defense of the suit and in opposition to

Gurney' s motion for summary judgment.'

For all of the above and foregoing reasons, we find that Mr. McCoy

established genuine issues of material fact as to the issue of consideration. As

such, the trial court improvidently granted Gurney' s motion for summary judgment

and entered judgment in favor of Gurney and against Mr. McCoy for principal in

the amount of $711, 274. 97, plus accrued and unpaid interest in the amount of

90, 000. 00, plus late fees in the amount of $40, 063. 35. Therefore, we reverse the

April 1, 2020 judgment of the trial court.

Additionally, we note that the March 2, 2021 judgment, which granted

Gurney' s motion to tax attorney fees, costs, and judicial interest and entered

judgment in favor of Gurney and against Mr. McCoy for attorney fees in the

amount of $73, 015. 00, court costs and fees in the amount of $3, 983. 48, deposition

costs in the amount of $2, 102. 10, and judicial interest from October 25, 2017 until

satisfied, was entered in furtherance of the April 1, 2020 summary judgment. As

we have reversed that judgment herein, we vacate the March 2, 2021 judgment

rendered in furtherance of that judgment.

3 We do note that Gurney offered parol evidence, i.e. the deposition testimony of Mr. McCoy, in
order to establish that the note was a construction line of credit rather than a loan for
750,000. 00 as provided by the note and by the October 15, 2015 agreement. However, because
we find the documents offered by Mr. McCoy were sufficient to establish genuine issues of
material fact as to the issue of consideration, we need not address the effect of that parol
evidence.

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CONCLUSION

For all of the above and foregoing reasons, the April 1, 2020 judgment,

which granted the motion for summary judgment and entered judgment in favor of

Scott Gurney, in his capacity as Trustee of the Gurney Family Trust, and against

Josh P. McCoy in the principal amount of $711, 274. 97, plus accrued and unpaid

interest in the amount of $90, 000. 00, and late fees in the amount of $40, 063. 35, is

reversed. In addition, the March 2, 2021 judgment rendered in furtherance of the

April 1, 2020 judgment, which entered judgment in favor of Scott Gurney, in his

capacity as Trustee of the Gurney Family Trust and against Josh P. McCoy in the

amount of $ 73, 015. 00 for attorney fees, court costs and fees in the amount of

3, 983. 48, and deposition costs in the amount of $2, 102. 10, plus judicial interest

from October 25, 2017 until satisfaction of the April 1, 2020 judgment, is vacated.

All costs of this appeal are assessed to Scott Gurney, in his capacity as

Trustee of the Gurney Family Trust.

APRIL 1, 2020 JUDGMENT REVERSED; MARCH 2, 2021
JUDGMENT VACATED.

20

STATE OF LOUISIANA

COURT OF APPEAL

FIRST CIRCUIT

2021 CA 0864

SCOTT GURNEY, IN HIS CAPACITY
AS THE TRUSTEE OF THE GURNEY FAMILY TRUST

VERSUS

JOSH P. MCCOY

McClendon, J., concurring.

I concur in the result reached by the majority.