William F. Grace, Jr. and Anne M. Grace v. Equipco, L.L.C.

WILLIAM F. GRACE, JR. AND * NO. 2023-CA-0119
ANNE M. GRACE
*
VERSUS COURT OF APPEAL
*
EQUIPCO, L.L.C. FOURTH CIRCUIT
*
STATE OF LOUISIANA
*******

APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2015-08989, DIVISION “J”
Honorable D. Nicole Sheppard,
******
Chief Judge Terri F. Love
******
(Court composed of Chief Judge Terri F. Love, Judge Joy Cossich Lobrano, Judge
Tiffany Gautier Chase)

Jennifer N. Willis
WILLIS & BUCKLEY, APC
3723 Canal Street
New Orleans, LA 70119

AND

Gary Joseph Gambel
MURPHY ROGERS SLOSS & GAMBEL
701 Poydras Street
One Shell Square, Suite 400
New Orleans, LA 70139

AND

Antonio Clayton
CLAYTON, FRUGE & WARD
3741 Highway 1 South
Port Allen, LA 70767

COUNSEL FOR PLAINTIFFS/APPELLANTS, WILLIAM F. GRACE, JR.
AND ANNE M. GRACE

Charles M. Pisano
Jan K. Frankowski
ROEDEL PARSONS KOCH BLACHE FONTANA PIONTEK & PISANO

1555 Poydras Street, Suite 1700
New Orleans, LA 70112

AND

Christian J. Rhodes
PELICAN STATE PARTNERS
234 Loyola Avenue, Suite 300
New Orleans, LA 70112

COUNSEL FOR DEFENDANT/APPELLEE, EQUIPCO, L.L.C.

AFFIRMED IN PART; REVERSED IN PART; REMANDED
OCTOBER 4, 2023

TFL

JCL
This appeal arises from the execution of four promissory notes, totaling over
TGC
one million dollars, between Plaintiffs, William Grace, Jr. and Anne Grace

(collectively “Plaintiffs”) and Defendant, Equipco, L.L.C. Plaintiffs executed four

promissory notes as an infusion of cash for Equipco. After seeking repayment,

Equipco asserted that the notes were either null for want of consideration or

converted to equity. Plaintiffs and Equipco filed opposing cross-motions for

summary judgment.

The trial court denied Plaintiffs’ Motion for Summary Judgment, but granted

Equipco’s Motion for Summary Judgment finding that Plaintiffs’ notes were

converted to equity in Equipco.

Plaintiffs appealed contending the trial court erred by denying their Motion

for Summary Judgment and granting Equipco’s Motion for Summary Judgment.

Equipco also answered the appeal regarding related evidentiary rulings.

We find the trial court correctly denied Plaintiffs’ Motion for Summary

Judgment, as Equipco presented evidence the debt was either extinguished for want

of consideration or conversion. However, we find the trial court erred by granting

Equipco’s Motion for Summary Judgment because numerous genuine issues of

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material fact exist regarding the same issue of consideration or conversion. Thus,

we reverse the trial court’s judgment granting Equipco’s Motion for Summary

Judgment and remand for further proceedings consistent with this opinion.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Equipco was created in 2006, to offer the rental and servicing of construction

equipment. The members of Equipco’s Board were the President, Donald G.

Charbonnet, and Shannon W. Fethke. Seeking to expand the company in 2007,

Equipco sought additional funding.

On June 6, 2008, Mr. Grace sent a letter to Mr. Charbonnet and Mr. Fethke to

memorialize the terms of their agreement for Mr. Grace to purchase thirty-five

percent of the membership interests in Equipco. In consideration, Mr. Grace outlines

that he is providing a 1) $250,000.00 payment of cash equity; 2) $500,000.00 one

year term loan with option to convert into equity/additional capital; and 3)

$500,000.00 plus loan. Mr. Grace, Mr. Charbonnet, and Mr. Fethke signed the

letter/agreement. The notes are outlined below.

First Promissory Note

On June 11, 2008, Plaintiffs executed a $500,000.00 promissory note to

Equipco with a maturity date of June 10, 2012. The note provided the following for

calculating interest:

INTEREST RATE. This Note shall bear no interest
during the first year of term of this Note. After June 10,
2009; if this Note is not converted to equity, advances shall
bear interest at the Applicable Rate. The term "Applicable
Rate" shall mean a rate equal to the lesser of (a) the
maximum rate permitted by applicable law or (b) the
LIBOR Rate plus 200 hundred (200) basis points per
annum or two (2%) percent per annum. . . .

The principal was due by June 10, 2009. In the event of nonpayment, the note

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provided:

3.(b) If principal is not converted to equity in Borrower
prior to June 10, 2009 or, if principal is not paid in full
prior to June 10, 2009, Principal and interest under this
Note shall be payable in consecutive monthly Installments
of principal and interest in the amount sufficient to fully
amortize the principal outstanding, together with interest
thereon at the rate per annum equal to the Applicable
Interest Rate, in equal installments of principal based on a
five (5) year amortization, with the first installment of
Eight Thousand Three Hundred Thirty-Three and 33/100
($8,333.33) Dollars being due and payable on July 10,
2008 and like installments of principal in the amount of
Eight Thousand Three Hundred Thirty-Three and 33/100
($8,333.33) Dollars, together with the interest under the
Applicable Interest Rate continuing on the same day of
each calendar month thereafter with one final balloon
payment of the entire remaining principal balance and all
unpaid accrued interest being due and payable in full on
June 10, 2012.

The note also included provisions for late charges and default. Specifically, the note

included this section on conversion:

13. CONVERSION: Lender shall convert to membership
interests in Borrower all of the principal due Lender by
Borrower under this Note if, and only if, for the 2008
calendar year Borrower’s financial statements, prepared in
accordance with generally accepted accounting principles,
show positive net distributable income.

Lastly, the note was signed by Mr. Charbonnet.

Second Promissory Note

Also on June 11, 2008, Plaintiffs executed a second promissory note to

Equipco for $562,000.00, with a maturity date of June 10, 2012. The interest rate

and payments were defined as follows:

2. INTEREST RATE. Advances under this Note shall bear
interest at the Applicable Interest Rate. The term
“Applicable Interest Rate” shall mean a rate equal to the
lesser of (a) the maximum rate permitted by applicable law
or (b) the LIBOR Rate plus two hundred (200) basis points
per annum or two (2%) percent per annum. . . .

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* * *
3. PAYMENT OF INTEREST AND PRINCIPAL. (a)
Principal and interest under this Note shall be payable in
consecutive monthly installments of principal and interest
in the amount sufficient to fully amortize the principal
outstanding, together with interest thereon at the rate per
annum equal to the Applicable Interest Rate, in equal
installments of principal based on a ten (10) year
amortization, with the first installment of Five Thousand
Nine Hundred Three and 36/100 ($5,903.36) Dollars being
due and payable on July 10, 2008 and like installments of
principal in the amount of Four Thousand Six Hundred
Eighty-Three and 33/100 ($4,683.33) Dollars together
with the interest under the Applicable Interest Rate
continuing on the same day of each calendar month
thereafter with one final balloon :payment of the entire
remaining principal balance and all unpaid accrued
interest being due and payable in full on June 10, 2012.

Like the first note, the second contains clauses on default and late payment. Mr.

Charbonnet signed the note.

Third Promissory Note

The third promissory note was executed on July 29, 2008, for $12,000.00 and

had a maturity date of July 28, 2018, with terms similar to the second promissory

note. Mr. Charbonnet signed the note.

Fourth Promissory Note

The fourth promissory note was executed on September 30, 2008, with a

maturity date of January 1, 2009, for $200,000.00. This note differed from the first

three, in that this note promised to pay Mr. Grace, but did not include Mrs. Grace.

The note contained provisions on interest, payment, etc. and was signed by Mr.

Charbonnet.

After Executing the Promissory Notes

Plaintiffs contend that after Mr. Charbonnet made some payments, he then

asked to postpone any further payments on the notes until Equipco’s funds were

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sufficient. Subsequently, however, Mr. Charbonnet and Mr. Fethke left Equipco.

Walter Boasso then assumed management of Equipco. No further payments on the

notes were made.

Plaintiffs filed suit seeking payment on the notes. Plaintiffs filed a Motion for

Summary Judgment asserting there were no genuine issues of material fact that

Equipco owed and never paid the notes. In response, Equipco filed a Motion for

Summary Judgment contending Plaintiffs never funded the notes or that they

converted the money from the notes into equity.

The trial court held:

1. Equipco’s Motion to Strike the Exhibits to
“Supplemental Memorandum in Support of Plaintiffs’
Motion for Summary Judgment” be and the same is hereby
DENIED;
2. Equipco’s Motion to Strike “Plaintiffs’ Supplemental
Opposition to Defendant’s Motion for Summary
Judgment” be and the same is hereby DENIED;
3. Plaintiffs’ Motion for Summary Judgment be and the
same is hereby DENIED;
4. Equipco’s Motion for Summary Judgment be and the
same is hereby GRANTED and, accordingly,

IT IS HEREBY FURTHER ORDERED,
ADJUDGED AND DECREED that the claims, demands,
and causes of action asserted in and the Petition for
Damages filed herein by plaintiffs, William F. Grace, Jr.,
and Anne M. Grace, against defendant, Equipco, L.L.C.,
be and the same are hereby DISMISSED, WITH
PREJUDICE, at plaintiffs’ cost.

IT IS HEREBY FURTHER ORDERED,
ADJUDGED AND DECREED that, to the extent this
judgment is not already a final judgment pursuant to La.
Code Civ. Proc. Art 1915, there is no just reason for delay
and this judgment shall be deemed a final judgment
pursuant to the terms of La. Code Civ. Proc. Art.
1915(B)(1).

Plaintiffs’ Motion for Devolutive Appeal followed.

On appeal, Plaintiffs maintain the trial court erred by denying their Motion for

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Summary Judgment and granting Equipco’s Motion for Summary Judgment.

Equipco filed an Answer to the appeal “solely to preserve its appeal rights from the

district court’s ruling . . . denying Equipco’s motion to strike certain exhibits

submitted by the Graces in support of their motion for summary judgment, and

denying also Equipco’s motion to strike the Graces’ supplemental opposition to

Equipco’s motion for summary judgment.”

MOTIONS FOR SUMMARY JUDGMENT

“The summary judgment procedure is designed to secure the just, speedy, and

inexpensive determination of every action, except those disallowed by Article 969.”

La. C.C.P. art. 966(A)(2). “The procedure is favored and shall be construed to

accomplish these ends.” Id. The appropriate time for filing a motion for summary

judgment is “[a]fter an opportunity for adequate discovery.” La. C.C.P. art.

966(A)(3). Then, “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.” Id.

Generally, the burden of proof is with the mover. La. C.C.P. art. 966(D)(1).

However, “if the mover will not bear the burden of proof at trial on the issue that is

before the court on the motion for summary judgment,” the mover must “point out

to the court the absence of factual support for one or more elements essential to the

adverse party’s claim, action, or defense.” Id. Then, the opposing party must

“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.

STANDARD OR REVIEW

“An appellate court reviews summary judgments under the de novo standard

of review, using the same standard applied by the trial court in deciding the motion

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for summary judgment.” Strategic Cap. Holdings, LLC v. Bennett, 21-0672, p. 3

(La. App. 4 Cir. 7/29/22), 366 So. 3d 255, 258, as clarified on reh'g (9/20/22), writ

denied, 22-01572 (La. 1/11/23), 352 So. 3d 983. Thus, “we are not required to

analyze the facts and evidence with deference to the judgment of the trial court or

its reasons for judgment.” Id.

PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT

Plaintiffs filed a Motion for Summary Judgment contending that they

presented a prima facie case as to the fact that they were entitled to collect on the

four promissory notes.

“It is well established that ʽsummary judgment is the appropriate procedural

device to enforce a negotiable instrument when the defendant establishes no defense

against enforcement.’” Jarrell v. Conerly, 17-0713, p. 7 (La. App. 4 Cir. 3/7/18),

240 So. 3d 266, 271 (quoting Pannagl v. Kelly, 13-0823, p. 6 (La. App. 5 Cir.

5/14/14), 142 So. 3d 70, 74). “In a suit on a promissory note, the plaintiff must

merely produce the note in question to make out a prima facie case.” Colonial

Mortg. & Loan Corp. v. James, 01-0526, p. 4 (La. App. 4 Cir. 3/6/02), 812 So. 2d

817, 820. “The burden then shifts to the defendant to prove any affirmative

defenses.” Id. See also Traffic Scan Network, Inc. v. Winston, 98-2428, p. 4 (La.

App. 4 Cir. 7/21/99), 766 So. 2d 557, 559.

In support of their Motion for Summary Judgment, Plaintiffs attached Mr.

Grace’s affidavit, copies of the notes, the letter memorializing Mr. Grace’s purchase

of thirty-five percent interest in the Membership Interests in Equipco, the affidavit

of Mr. Charbonnet, a credit letter from Chase showing a $1.2 million credit taken by

Mr. Boasso in benefit of Mr. Grace, and a formal demand letter for payment of the

notes to Mr. Boasso.

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Mr. Grace stated that in 2008, he agreed to pay Equipco $250,000.00 for a

thirty-five percent membership interest. He then agreed to loan Equipco money

“conditioned upon Equipco and its members agreeing to terms set forth in a letter

agreement dated June 6, 2008.” Mr. Grace maintained that the letter served as an

operating agreement.

As we discussed above, the letter was sent to Mr. Charbonnet and Mr. Fethke

to memorialize the terms of their agreement for Mr. Grace to purchase thirty-five

percent of the membership interests in Equipco. In consideration, Mr. Grace outlines

that he is providing a 1) $250,000.00 payment of cash equity; 2) $500,000.00 one

year term loan with option to convert into equity/additional capital; and 3)

$500,000.00 plus loan. Mr. Grace, Mr. Charbonnet, and Mr. Fethke signed the

letter/agreement.

Mr. Grace stated that Equipco made $13,031.39 in payments on note 2. Once

Equipco was no longer able to make payments on the notes, Plaintiffs agreed to

forbear further payments. The parties allegedly agreed to pay the notes in full when

Equipco obtained the cash flow, but that payments were required to resume prior to

Mr. Grace’s sixty-fifth birthday. Mr. Grace averred this agreement was confected

in writing, but he was not in possession of the writing. Further, he stated that the

notes were not “satisfied or extinguished.” Mr. Grace claims to have the original

notes; copies were submitted, but Mr. Grace said he was never asked to surrender

the originals.

Mr. Charbonnet stated that he was the sole manager and president of Equipco

during all or part of 2008 and 2009. He provided that he made agreements with Mr.

Grace for the thirty-five percent membership interest and the loans, as evidenced by

the letter/operating agreement. The money loaned, as accounted for in the notes,

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was deposited into Equipco’s account at Whitney Bank. Mr. Charbonnet contended

that the copies of the notes were authentic. He reiterated that Equipco was unable

to make payments on the loans and asked Mr. Grace to forbear payments. “The

forbearance agreement as to the notes was first bound with Grace in November or

December 2008 and was reconfirmed in 2009. A handwritten document evidencing

the forbearance agreement was made a part of the Company’s file.” However, Mr.

Charbonnet did not have a copy of the forbearance agreement. Lastly, Mr.

Charbonnet stated that he was not aware of Plaintiffs’ loans being converted to

equity.

Plaintiffs also attached documents regarding a $1.2 million line of credit

granted to Mr. Boasso on behalf of Plaintiffs and a formal demand letter to Mr.

Boasso in 2014.

In opposition, Equipco averred that Plaintiffs failed to establish a prima facie

case without the original promissory notes, that no money was ever given to

Equipco, and that the monies received were converted to equity. In support, Equipco

attached the affidavit of Ralph Litolff, Equipco’s expert certified public accountant;

Mr. Boasso’s affidavit; the notes; business records from Equipco; discovery

documents; and tax documents relevant to Mr. Litolff’s opinion.

After reviewing the records, Mr. Litolff stated that he saw no evidence of

Equipco depositing funds from notes 1 and 2 contained in the ledgers. He found a

$12,000.00 deposit on July 31, 2008, labeled as “WE&RE Buyout.” Mr. Litolff

found a corresponding increase to the account titled “Partner Equity-A&WMG.”

However, there was no notation that it related to note 3. He did not see any notation

that the $12,000.00 was a liability to Plaintiffs. The records reflected a $200,000.00

increase on September 30, 2008, titled as “Loan from Wm. Grace.” Then he viewed

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an adjusting journal entry depicting $200,000.00 liability under the ledger account

“A&WM Grace ST Loan,” but nothing indicating it was related to note 4. He

summarized his findings as follows:

Moreover, I have not seen any documentation such as
bank statements, cancelled checks, wire transfer receipts,
etc., to validate the actual receipt of funds by Equipco, in
connection with the alleged proceeds from Promissory
Notes 1, 2, 3, or 4. Further, the general ledger activity for
the month of December 2009 and the Form K-1 of William
F. Grace for 2009, as filed with the Internal Revenue
Service by Equipco and the Graces, clearly indicate that
the amounts previously listed as amounts owed to the
Graces were reclassified to the equity account of Anne &
William Grace.

Mr. Boasso stated that he has been the managing member of Equipco since

April 9, 2010, and that he was the only one to authenticate Equipco’s business

records and documents. He maintained that Equipco did not have any records

“evidencing Equipco’s receipt of any money from the Graces in connection with any

of the loans represented” by the notes. Mr. Boasso reiterated that the Form K-11 for

Mr. Grace in 2009 depicted that the debt was reclassified as equity. Further, Mr.

Boasso asserted that Mr. Charbonnet was not authorized to sign a promissory note

on behalf of Equipco at the time of execution and was not authorized to speak for

Equipco when he signed his affidavit.

Equipco also attached its Answer and Reconventional Demand, wherein it

was alleged that Mr. Boasso was duped into taking over Equipco to take the fall

when the company failed. Additionally attached was a Petition evidencing a lawsuit

filed by Equipco, Mr. Boasso, and Mr. Grace against Mr. Charbonnet alleging that

1 K-1 is utilized to report the filer’s portion of income, deductions, credits, etc. from an
organization. Partner’s Instructions for Schedule K-1, (January 17, 2023)
https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf.

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he breached his fiduciary duties, committed conversion, and diverted business

opportunities. The Petition also asserted claims of misappropriation, misuse,

violation of policies and procedures, fraud, and intentional and negligent

misrepresentation.

Plaintiffs filed a supplemental memo in support of their Motion for Summary

Judgment attempting to incorporate the exhibits they filed in opposition to Equipco’s

Motion for Summary Judgment. Plaintiffs averred:

In an abundance of caution, plaintiffs take this
opportunity to make this submission formally designating
the exhibits previously filed with their opposition to
defendant’s motion for summary judgment, as exhibits in
support of plaintiffs’ motion for summary judgment.
Specifically, these exhibits (attached in globo as exhibit 1)
are:
Deposition of defense CPA expert Ralph A. Litolff
dated April 18, 2018,
Affidavit of plaintiff William F. Grace dated August
10, 2022, and
Affidavit of plaintiff Anne M. Grace dated August
10, 2022.

Equipco objected to the filing and consideration of Plaintiffs’ supplemental memo

and attachments. The trial court denied Equipco’s Motion to Strike.2

The trial court found, “I do not find that the plaintiff’s Motion for Summary

Judgment is appropriate. Specifically, it is [sic] they have failed to meet their burden

as required.” We agree.

While Plaintiffs presented copies of the notes and supporting documentation,

Equipco countered with substantial evidence that the monetary amount of the notes

was never received or that it was converted into equity. This demonstrates a possible

want of consideration and extinguishment, which creates genuine issues of material

2 Due to this Court’s ruling on Plaintiffs’ Motion for Summary Judgment, we pretermit analyzing

whether the trial court’s denial of the Motion to Strike was correct.

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fact as to whether Equipco remains obligated to pay on the notes. See Jarrell, 17-

0713, 240 So. 3d 266; Good Acres, Inc. v. Jemison, 08-0976 (La. App. 4 Cir.

3/11/09), 8 So. 3d 749; Succession of Mexic v. Mexic, 593 So. 2d 897, 899 (La. App.

4th Cir. 1992). Accordingly, we find that genuine issues of material fact exist such

that the trial court correctly denied Plaintiffs’ Motion for Summary Judgment. That

portion of the trial court’s judgment is affirmed.

EQUIPCO’S MOTION FOR SUMMARY JUDGMENT

Equipco filed a Motion for Summary Judgment contending that the notes were

not funded or, if funded, the amount owed was extinguished when converted into

equity in Equipco.

In support, Equipco attached a different affidavit of Mr. Boasso3, a different

affidavit of Mr. Litolff4, and the Answer and Reconventional Demand that was

attached to the opposition to Plaintiffs’ Motion for Summary Judgment.

3 Plaintiffs maintain Mr. Boasso’s affidavit should have been disregarded because he lacks
personal knowledge. This argument lacks merit. Mr. Boasso is the records custodian. “[W]here
affiants attest to facts contained in business records said affiants are not required to demonstrate
that they personally prepared the records or have firsthand knowledge of the contents of the
records.” Cap. One Bank (USA), NA v. Sanches, 13-0003, p. 7 (La. App. 4 Cir. 6/12/13), 119 So.
3d 870, 874.
4 Plaintiffs contend Mr. Litolff’s affidavit should be excluded because of questions regarding his

methodology and lack of examination pursuant to Daubert v. Merrell Dow Pharms., Inc., 509 U.S.
579, 582, 113 S. Ct. 2786, 2791, 125 L. Ed. 2d 469 (1993). However, “[w]hen an objection to an
affidavit in support of or in opposition to a motion for summary judgment is made in accordance
with La. Code Civ. P. art. 966(D)(2), the only issue to be determined is whether that affidavit is in
compliance with La. Code Civ. P. art. 967.” Successions of Millet, 21-0355, 21-0356, p. 9 (La.
App. 1 Cir. 12/22/21), 340 So. 3d 252, 257-58. See also Mariakis v. N. Oaks Health Sys., 18-0165,
p. 9 (La. App. 1 Cir. 9/21/18), 258 So. 3d 88, 95; Farrar v. Centerpoint Energy Res. Corp., 52,557,
p. 10 (La. App. 2 Cir. 4/10/19), 269 So. 3d 1149, 1155. La. C.C.P. art. 967(A) provides, in
pertinent part:
Supporting and opposing affidavits shall be made on personal
knowledge, shall set forth such facts as would be admissible in
evidence, and shall show affirmatively that the affiant is competent
to testify to the matters stated therein. The supporting and opposing
affidavits of experts may set forth such experts' opinions on the facts
as would be admissible in evidence under Louisiana Code of
Evidence Article 702, and shall show affirmatively that the affiant
is competent to testify to the matters stated therein.
We find Mr. Litolff’s affidavit complies with La. C.C.P. art. 967.

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Mr. Boasso stated that he had been a member of Equipco since January 1,

2010, and the managing member since April 9, 2010. As to the status of Equipco,

he provided that Equipco sold all of the assets in April 2016, that there are no

employees, and that he maintains custody of the records, as well as authenticates

them. He certified that the business records relied upon by Mr. Litolff were true and

correct copies. Lastly, he stated that “the alleged loans evidenced by the promissory

notes at issue in this lawsuit converted to equity and are not due or payable.”

Mr. Litolff, Equipco’s accounting expert, stated that he reviewed various

business records of Equipco and Plaintiffs’ tax returns. After reviewing these

records, he summarized his findings as follows:

• There are four (4) promissory notes (Exhibit 3)
whereby the Graces have allege to have loaned funds to
Equipco.
• The general ledger detail of Equipco as of the year
ended December 31, 2008 reflects balances attributable to
the four (4) promissory notes.
• The 2009 general ledger detail of Equipco reflects
that the balances attributable to these four (4) promissory
notes were reclassified from the relevant liability accounts
to the equity account of Anne & William Grace.
• The 2009 federal tax return of Equipco as filed with
the IRS includes a Form K-1 of William F. Grace that
reflects the conversion of the full outstanding balance of
the four (4) promissory notes to equity (capital) in
Equipco.
• In July of 2010 William Grace advised his CPA,
Paul E. Gardner, that he had debt that converted to equity
upon a capital infusion from Walter Boasso in late 2009.
• Paul E. Gardner prepared and the Graces filed with
the Internal Revenue Service their 2009 tax return which
contains information from the 2009 Form K-1 of Equipco
that reflects the conversion to equity.5

5 The records Mr. Litolff relied upon were attached to his affidavit.

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In opposition, Plaintiffs stated that their “motion, memorandum in support and

exhibits thereto are referenced and incorporated herein as if copied in extenso.”

They attached the affidavit of Samuel Buckley, III, who assisted Plaintiffs in

searching the remaining business records of Equipco, housed in a storage unit. He

believed that “[m]any normal business records, such as general ledgers, that one

would expect to find, were absent.” Further, no boxes contained information

regarding the notes.

After Equipco filed a reply, Plaintiffs again filed a Supplemental Opposition

to Equipco’s Motion for Summary Judgment and attached affidavits from Plaintiffs

and Mr. Litolff’s deposition.

The trial court ruled:

However, as it relates to Defendant’s Motion for Summary
Judgment, I do believe that all facts and circumstances
indicate that a conversion did, in fact, occur. Absent the
general allegation by the plaintiffs that it didn’t occur,
everything else provides that it did. I do not think that there
is a genuine issue of material fact. And so with that, I will
grant the defendant’s Motion for Summary Judgment.

The trial court also denied Equipco’s Motion to Strike Plaintiffs’ Supplemental

Opposition and corresponding attachments.

Equipco maintains that the trial court erroneously considered Plaintiffs’

Supplemental Opposition. La. C.C.P. art. 966(B)(3) stated that “[a]ny reply

memorandum shall be filed and served in accordance with Article 1313 not less than

five days prior to the hearing on the motion. No additional documents may be filed

with the reply memorandum.” Further, “[t]he court may consider only those

documents filed in support of or in opposition to the motion for summary judgment.”

La. C.C.P. art. 966(D)(2). “A sur-reply is not permitted.” Hartley v. Univ. of Holy

Cross, 22-0840, p. 6 (La. App. 4 Cir. 7/19/23), ___ So. 3d ___, ___, 2023 WL

14

4618313, *3. We need not determine whether the trial court correctly considered

Plaintiffs’ Supplemental Opposition, as our review reflects the trial court erred by

granting Equipco’s Motion for Summary Judgment from reviewing the Motion for

Summary Judgment and the first Opposition.

“Even though summary judgment is now favored, it is not a substitute for a

trial on the merits, and it is inappropriate for judicial determination of subjective

facts, such as motive, intent, good faith, or knowledge that calls for credibility

determinations and the weighing of testimony.” Stewart Title of Louisiana v.

Chevron, U.S.A., Inc., 12-1369, p. 6 (La. App. 4 Cir. 3/27/13), 112 So. 3d 949, 952.

“Additionally, the circumstantial evidence usually necessary for proof of motive or

intent requires the trier-of-fact to choose from competing inferences, a task not

appropriate for a summary judgment ruling.” FMC Enterprises, L.L.C. v. Prytania-

St. Mary Condominiums Ass’n, Inc., 12-1634, p. 16 (La. App. 4 Cir. 5/15/13), 117

So. 3d 217, 228.

Upon our review, we find Equipco’s Motion for Summary Judgment was

erroneously granted, which resulted in a substitution of a trial on the merits. Equipco

presented evidence that Plaintiffs were not owed money on the notes because the

debts were extinguished due to conversion of the debt into equity. The issue of

whether Plaintiffs’ promissory notes were satisfied or extinguished is replete with

questions concerning intent, credibility, and the weighing of evidence.

The notes were presented, along with expert testimony based on review of

Equipco’s business records. This evidence regarding whether there was want of

consideration or that the debt was converted to equity in Equipco or not must be

weighed by the factfinder. Accordingly, we find that Equipco was not entitled to

judgment as a matter of law because numerous genuine issues of material fact

15

remain. The judgment of the trial court is reversed, and the matter remanded for

further proceedings consistent with this opinion.

DECREE

For the above-mentioned reasons, we find the trial court correctly denied

Plaintiffs’ Motion for Summary Judgment, as genuine issues of material fact remain

regarding whether Equipco is obligated to pay the notes. Likewise, we find the trial

court erred by granting Equipco’s Motion for Summary Judgment. Summary

judgment is not a substitute for a trial on the merits. Numerous genuine issues of

fact remain regarding the notes, which requires the factfinder to weigh evidence,

assess credibility, and determine intent. As such, we reverse the trial court’s grant

of Equipco’s Motion for Summary Judgment and remand for further proceedings

consistent with this opinion.

AFFIRMED IN PART; REVERSED IN PART; REMANDED

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