Southeast Dirt, L.L.C. v. D.R. Horton, Inc. - Gulf Coast

STATE OF LOUISIANA

COURT OF APPEAL

FIRST CIRCUIT

2024 CA 0724

SOUTHEAST DIRT, L.L.C.

VERSUS

D.R. NORTON, INC. - GULF COAST

DATE OF JUDGMENT. DEC 2 7 2024

ON APPEAL FROM THE TWENTY FIRST JUDICIAL DISTRICT COURT
PARISH OF TANGIPAHOA, STATE OF LOUISIANA
NUMBER 2022183, DIVISION E

Danial C. Vidrine Counsel for Plaintiff A
- ppellee
Baton Rouge, Louisiana Southeast Dirt, L.L.C.

Edward J. Laperouse, 11 Counsel for Defendant -Appellant
Laura E. Marcantel D.R. Horton, Inc. —Gulf Coast
Christopher M. Patin
Baton Rouge, Louisiana

Jason A. Bonaventure
Gonzales, Louisiana

Disposition: INTERLOCUTORY RULINGS AFFIRMED; DEFAULT JUDGMENT VACATED.
REMANDED.

CHUTZ, J.

Defendant -appellant, D.R. Horton, Inc. —Gulf Coast ( DRH), appeals the trial

- ppellee, Southeast Dirt, L.L.C. ( SE
court' s default judgment in favor of plaintiff a

Dirt), awarding the amount due on an open account and attorney fees. DRH also

challenges the trial court' s ruling, which denied an order of arbitration. For the

following reasons, we affirm the interlocutory ruling, vacate the default judgment,

and remand.

SE Dirt filed a petition on an open account on January 21, 2022, averring that

DRH failed to pay for labor and materials SE Dirt had supplied pursuant to a

construction contract between the parties signed on January 11, 2021. On September

20, 2022, SE Dirt filed a motion to lift stay, alleging that a stay had previously been

ordered by the trial court based on an agreement between the parties to mediate but

despite multiple requests by SE Dirt to agree on a mediator, DRH had not agreed on

either a date for mediation or the name of a mediator. A hearing was held on

February 23, 2022, at which it was determined that DRH never filed the order for a

stay but to the extent a stay existed, the trial court granted SE Dirt' s motion.

On May 1, 2023, SE Dirt sought a default judgment against DRH. At the

hearing, documentary and testimonial evidence was adduced after which the trial

court signed a default judgment, awarding SE Dirt the sum of $241, 327. 75 on an

open account and attorney fees in the amount of $72, 398.32. On May 5, 2023, DRH

filed a motion to set aside and vacate the trial court' s ruling, nullify and vacate the

default judgment, cancel the mortgage inscription, and for sanctions. DRH followed

the motion with an ex parte motion seeking to expedite the hearing on its May 5,

2023 motion. SE Dirt voluntarily vacated the May 1, 2023 default judgment in an

order signed by the trial court on May 12, 2023.

2

On June 13, 2023, DRH filed into the record, a dilatory exception of

prematurity or, alternatively, a peremptory exception of no cause of action, with

attachments, contending that in October 2020, the parties entered into the

INDEPENDENT CONTRACTOR AGREEMENT ( ICA), which required that they

complete mediation or arbitration as a condition precedent to the filing of a lawsuit.

DRH requested dismissal of SE Dirt' s lawsuit or a stay of proceedings until the

parties participated in arbitration. That same day, DRH also filed a motion to stay

proceedings pending mediation and arbitration. According to the allegations of

DRH' s motion, "[ t]he parties have conferred and agreed to mediate the claims arising

from the ICA, which [ was] ... set for June 27, 2023." In an order dated June 30,

2023, the trial court set the motion for hearing. Thereafter, the parties filed pleadings

related to discovery.

A hearing was held on August 21, 2023, to address the sanctions DRH sought

in conjunction with its motion to set aside the May 1, 2023 default judgment, DRH' s

exceptions, DRH' s motion to stay proceedings pending mediation and arbitration,

and the discovery matters. At the commencement of the hearing, Judge Brian K.

Abels of Division D announced his self r-ecusal to avoid the appearance of

impropriety because his secretary' s husband and his company were represented by
counsel for DRH in a separate matter.

The litigation was reallotted to Judge Brenda Ricks of Division E and, by joint

motion, all matters that had been set for the August 21, 2023 hearing were reset for

hearing on November 20, 2023. After SE Dirt presented evidence, the trial court

ascertained that the mediation to which the parties had agreed had not occurred and

ruled that it was not going to order arbitration. DRH filed a supervisory writ with this
court "
concerning the ruling rendered in open court ... on November 20, 2023,"

which overruled DRH' s dilatory exception of prematurity or alternative peremptory

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exception of no cause of action. This court and the Louisiana Supreme Court denied

writs. See Southeast Dirt, L.L.C. a D.R. Horton, Inc. —Gut( Coast, 2024-0019 ( La.

App. 1st Cir. 2/ 26/ 2024) ( unpublished writ action), writ denied, 2024- 00397 ( La.

5/ 29/ 24), 385 So. 3d 704.

During the pendency of the writ with this court, DHR filed a motion to stay

proceedings pending resolution of the writ. That matter was set for hearing on

February 20, 2024. The trial court denied the stay. At the February 20, 2024 hearing,

the trial court also addressed outstanding motions that were not ruled upon at the

November 20, 2023 hearing. Judgments in conformity with these rulings were

subsequently signed by the trial court on March 11, 2024.1

On March 11, 2024, SE Dirt presented documentary and testimonial evidence

in support of a default judgment against DRH. At the conclusion of the hearing, the

trial court determined the matter was an open account and awarded the principal sum

of $241, 327. 75 and attorney fees of $96,531. 10. A default judgment was signed by

the trial court on March 15, 2024. The trial court subsequently denied DRH' s

expedited motions to vacate and for a new trial of the default judgment. DRH

appeals.

INTERLOCUTORY RULINGS ON ARBITRATION

When an unrestricted appeal is taken from a final judgment, the appellant is

entitled to seek review of all adverse interlocutory judgments prejudicial to him, in

addition to the review of the final judgment. Judson v Davis, 2004- 1699 ( La. App.

1st Cir. 6/ 29/ 05), 916 So.2d 1106, 1112, writ denied, 2005- 1998 ( La. 2/ 10/ 06), 924

So. 2d 167.

1 In addition to the denial of DRH' s motion to stay proceedings pending resolution of the
supervisory writ, on March 11, 2024, the trial court signed judgments denying DRH' s motion for a
protective order, denying SE Dirt' s motion for sanctions, and granting SE Dirt' s motion to deem
requests for admission admitted and compel discovery by DRH within 30 days. The trial court also
signed a written judgment overruling DRH' s dilatory exception of prematurity or alternative
peremptory exception of no cause of action.

I!

DRE initially challenges the trial court' s conclusion that SE Dirt' s claims were

not subject to arbitration. Specifically, DRE maintains the trial court' s overruling of

the prematurity and alternative no cause of action exceptions was erroneous.' The

gist of DRH' s contention is that the provisions set forth in the ICA apply to the

claims asserted by SE Dirt in this lawsuit and that under the ICA provisions, the

determination of whether SE Dirt' s claims are subject to arbitration is properly made
by the arbitrator.

The objection of prematurity raises the issue of whether the judicial cause of

action has yet come into existence because some prerequisite condition has not been

fulfilled. The viability of the exception is determined by the facts existing at the time

the lawsuit is filed. Stated differently, the dilatory exception raising the objection of
prematurity questions whether the cause of action has matured to the point where it is

ripe for judicial determination. McCain v Lewis Companies, Inc., 2019- 0416 ( La.

App. 1st Cir. 2/ 6/ 20), 302 So.3d 1145, 1153. The party raising the exception bears

the burden of proof. See Cordon v. Pointe Coupee Health Serv. Dist. One, 2009-

2202 ( La. App. 1st Cir. 8/ 11/ 10), 47 So.3d 565, 570, writ denied, 2010- 2067 ( La.

11/ 12/ 10), 49 So. 3d 894.

Appellate courts generally review a trial court' s decision concerning an

exception of prematurity for manifest error. Benoit v. Benoit, 2021- 0865 ( La. App.
1st Cir. 2/ 25/ 22), 341 So.3d 573, 579, writ denied, 2022- 00704 ( La. 6/ 22/ 22), 339

So.3d 1185. But the determination of whether to compel arbitration is a question of
law; therefore, appellate courts conduct a de novo review. Browne v Gordon

McKernan Injury Attorneys, LLC, 2022- 0840 (La. App. 1st Cir. 1/ 11/ 23), 361 So.3d
34, 37.

2

Having ascertained that the mediation scheduled for June 27, 2023 had not occurred, by ruling
against issuance of an order of arbitration, the trial court also effectively denied DRH' s motion to
stay proceedings pending mediation and arbitration, a determination for which DRH did not seek
a supervisory writ and does not directly challenge in this appeal. Thus, we disagree with DRH' s
suggestion that the trial court failed to rule on the motion.

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When the issue of whether to stay a proceeding pending arbitration is raised by

the exception of prematurity, the party pleading the exception has the burden of

showing the existence of a. valid contract to arbitrate. Id. The threshold inquiry is
whether the parties have agreed to arbitrate the dispute in question. This

determination involves two considerations: ( 1) whether there is a valid agreement to

arbitrate between the parties; and if so, ( 2) whether the dispute in question falls

within the scope of the arbitration agreement. See Bream v Stewart Enterprises,

Inc., 2004- 1706 ( La. 10/ 8/ 04), 883 So.2d 983, 983 ( per curiam) ( citing Collins v

Prudential Ins. Co., 99- 1423 ( La. 1/ 19/ 00), 752 So. 2d 825, 831). There is a strong

presumption favoring the enforceability of arbitration clauses, both under Louisiana

and federal law. Browne, 361 So. 3d at 37.

The peremptory exception of no cause of action questions whether the law

affords the plaintiff any remedy under the allegations of the petition. The exception

of no cause of action is triable only on the face of the petition and any attached

documentation, and no evidence may be introduced to support or controvert the

objection. The trial court must presume all well -pleaded facts are true, must make all

reasonable inferences in favor of the nonmoving party, and must resolve any doubts

in favor of the petition' s sufficiency. An exception of no cause of action should be

granted only when it appears beyond doubt that the plaintiff can prove no set of facts

in support of any claim that would entitle him to relief. The burden of demonstrating

that a petition fails to state a cause of action is on the exceptor, and an appellate court

reviews a denial of an exception of no cause of action de novo. Midland Funding

LLC v Welch, 2022- 0823 ( La. App. 1st Cir. 2/ 24/23), 361 So.3d 1022, 1026. The

objection to proceeding to trial, rather than to arbitration, may be raised by an

exception of no cause of action because the party has no cause of action at law when

the contract expressly required settlement of contractual controversies and claims by

on

arbitration. Barkley Estate Community Assn, Inc. v Huskey, 2009- 268 ( La. App.
5th Cir. 1/ 12/ 10), 30 So. 3d 992, 995, relying on MatthewsMcCracken Rutland

Corp. v. City ofPlaquemine, 414 So.2d 756, 758 n.4 ( La. 1982).
The ICA, which the parties entered into on October 20, 2020, states in

pertinent part:

This Agreement is entered on a blanket basis. The terms of the
Agreement shall govern all current and future work of Contractor for
Owner. The work to be performed under this Agreement ( the " Work")
shall include all work performed and materials supplied by
Contractor to Owner, including but not limited to the labor, services,
and/ or materials, equipment, transportation, or facilities necessary to
complete the activities generally described in Exhibit A.

Section 13 of the ICA, entitled " ALTERNATIVE DISPUTE RESOLUTION,"

further delineates the procedure by which disputes are to be resolved between the

parties, providing:

13. 1 Disputes. All disputes, whether existing now or arising in
the future between them, related in any way to this Agreement, to
Contractor' s Work, or to any dispute that Owner or Contractor shall
have with any third party related to the Work (" Disputes") shall be
subject to Alternative Dispute .Resolution....

13. 2 Mediation. If a Dispute cannot be settled through

negotiation, Owner and Contractor may agree in good faith to settle the
Dispute by mediation. Cost of mediation shall be shared equally by the
parties. Notwithstanding the foregoing, a party need not resort to

mediation before seeking equitable relieffrom an arbitrator or a court
ofappropriatejurisdiction.

13. 3 Arbitration.If mediation fails, the Dispute shall be
submitted to binding arbitration under the Federal Arbitration Act, 9
U.S. C. 1 et seq., regardless of any other choice of law provision in any
underlying contract or this Agreement. All demands for arbitration shall
be made before the expiration of the applicable prescriptive period. The
award rendered by the arbitrator(s) shall be final, and judgment may be
entered upon it in any court of competent jurisdiction....

13. 5 Rules. To the extent not in conflict with the Federal
Arbitration Act, any mediation and arbitration shall be conducted in
accordance with the Construction Industry Arbitration Rules and
Mediation Procedures of the American Arbitration Association
AAA") and shall follow settled law in rendering a decision, except
that any mediation or arbitration shall be administered by the mediator
or the arbitrator(s) and not by the AAA. [Emphasis added.]

6

In Section 16, entitled " GENERAL CONTRACT PROVISIONS," the ICA

expressly sets forth that " no provision of this Agreement may be amended or

supplemented except in writing signed by both Owner and Contractor" and provides

that in the event of a conflict between the ICA and the terms of any purchase order or

other agreement or document pertaining to the " Work," the ICA controls.

On January 11, 2021, the parties entered into another agreement, entitled

CONTRACT BETWEEN OWNER AND CONTRACTOR, for various civil

improvements for Fox Hollow subdivision ( the Fox Hollow contract). It is

undisputed and review of the contract shows thatt there is no express mention of

alternatives for dispute resolution in the later dated contract.3

Generally, legal agreements have the effect of law upon the parties, and, as

they bind themselves, they shall be held to a full performance of the obligations

flowing therefrom. See La. C.C. art. 1983; Brown v. McGinity, 2021- 1405 ( La. App.

1st Cir. 7/ 14/ 22), 347 So.3d 900, 905, writ denied., 2022- 01239 ( La. 11/ 8/ 22), 349

So.3d 575. Interpretation of a contract is the determination of the common intent of

the parties. Thus, a contract between the parties is the law between them, and the

courts are obligated to give legal effect to such contracts according to the true intent

of the parties. Moreover, the parties are free to contract for any object that is lawful.

See La. C. C. art. 1971; Brown, 347 So. 3d at 906. The reasonable intention of the

parties to a contract is to be sought by examining the words of the contract itself, and

not assumed. When the words of a contract are clear and explicit and lead to no

3 At the November 20, 2023 hearing. SE Dirt sought to introduce an unsigned, undated, and
never -before -produced document entitled " TERMS & CONDITIONS" between Duplantis
Design Group ( the Fox Hollow project engineer) and its unidentified " Client." DRH objected to
its introduction on the basis of relevancy. See La. C. E. art. 402. Although the trial court did not
rule on the objection or order the exhibit entered into evidence, the minutes from the hearing
reflect that it was in fact filed into the record. Our review of the document shows that it has
nothing to do with SE Dirt, the Fox Hollow contract, the ICA, or this litigation as a whole. It is
the project engineer' s proposed terms and conditions for its client, DRH. Further, it is unsigned,
undated, and marked as " proposal," and there is no evidence that, even if it were relevant, it was

actually executed and in effect. Therefore, it does not support SE Dirt' s suggestion of a conflict
between the Fox Hollow contract and the ICA regarding resolution of disputes it may have with
DRH.

3

absurd consequences, no further interpretation may be made in search of the parties'

intent. La. C. C. art. 2046; Prejeun v. Guillory, 2010-0740 ( La. 7/ 2/ 10), 38 So.3d 274,

NO

Reading the two contracts together, because the Fox Hollow contract -- and

the open account sum generated by that agreement -- is among " all work

performed and materials supplied by [ SE Dirt] to [ DRH]," it appears to fall within

the " blanket" basis that SE Dirt entered into the ICA. And since the open account

sum SE Dirt seeks from its performance of the Fox Hollow contract is presumably

among "[ a] ll disputes, whether existing now or arising in the future between [ the

parties],
related in any way to ... [ SE Dirt' s] Work," the Fox Hollow contract may

fall within the ambit of Section 13. 1 of the ICA, mandating Alternative Dispute

Resolution. However, Section 13. 2 of the ICA allows, but does not require, the

parties ( after unsuccessful negotiation) to agree in good faith to settle the dispute

by mediation. Importantly, Section 13. 2 provides that a party need not resort to

mediation before seeking equitable relief from either an arbitrator or a court of

appropriate jurisdiction. Thus, to the extent that ICA controls the parties' disputes,

under its plain language it clearly does not mandate either mediation or arbitration.

By its explicit terms in Section 13. 2, mediation can be excluded as an alternative

resolution to a dispute and equitable relief can be sought in a court of appropriate

jurisdiction, which is what SE Dirt has done by filing its petition on an open

account. Thus, DRH failed to show a valid arbitration agreement. Accordingly, we
conclude that the trial court correctly determined that DRH was not entitled to an

order of arbitration and properly overruled both the dilatory exception raising the

objection of prematurity and its alternative peremptory exception objecting on the
basis of no cause of action.

GE

NOTICE OF INTENT TO OBTAIN A DEFAULT JUDGMENT

La. C. C. P. art. 1702 provides in relevant part:

A. ( 1) If a defendant in the principal or incidental demand fails to
answer or file other pleadings within the time prescribed by law or by
the court, and the plaintiff establishes a prima facie case by competent
and admissible evidence that is admitted on the record, a default
judgment in favor of the plaintiff may be rendered, provided that
notice that the plaintiff intends to obtain a default judgment is sent if
required by this Paragraph, unless such notice is waived....

2) If a party who fails to answer has made an appearance of record in
the case, notice that the plaintiff intends to obtain a default judgment
shall be sent by certified mail or actually delivered to counsel of
record for the party, or if there is no counsel of record, to the party, at
least seven days before a default judgment may be rendered.

3) If an attorney for a party who fails to answer has contacted the
plaintiff or the plaintiffs attorney in writing concerning the action
after it has been filed, notice that the plaintiff intends to obtain a
default judgment shall be sent by certified mail or actually delivered
to the party' s attorney at least seven days before a default judgment
may be rendered...

5) No default judgment shall be rendered against a defendant when
notice is required under Subparagraph ( 2) or ( 3) of this Paragraph

unless proof of the required notice is made in the manner provided by
R.S. 13: 3205.

Thus, pursuant to the current version of Article 1702, a default judgment may be

rendered provided that a notice of intent to obtain a default judgment is sent if

statutorily required.

On appeal, SE Dirt points to a letter it introduced into evidence at the default

judgment hearing. The letter, addressed to DRH' s attorney and dated June 6, 2023,

states that it was sent by certified mail and advises SE Dirt is " putting you on

Notice that [ SE Dirt] intends to obtain a default judgment against [ DRH]." SE Dirt

attached to its letter, a USPS Tracking confirmation indicating delivery. The USPS

confirmation did not include the street address or the recipient to whom the item

had been mailed, noting only that it had been " delivered to the front desk,

reception area, or mail room at 3: 16 p.m. June 7, 2023 in BATON ROUGE, LA

10

70809." With this showing, SE Dirt maintains that it satisfied the notice of intent
requirements of Article 1702.

Our review of the record shows that as of the March 11, 2024 hearing, DRH

had not answered the lawsuit. DRH had made numerous appearances of record

prior to SE Dirt' s June 6, 2023 letter, mostly in attempts to have the matter

removed to arbitration.' Moreover, the record is replete with email correspondence

between counsel for SE Dirt and counsel for DRH prior to SE Dirt' s June 6, 2023

letter. Therefore, DRH was a party who failed to answer that had made an

appearance of record in the case, and SE Dirt was required to send a notice of its

intent to obtain a default judgment by either certified mail or actually delivering

the notice to DRH' s counsel pursuant to Subparagraph ( 2). Also, DRH was

required to send a notice of its intent to obtain. a default judgment by either

certified mail or actually delivering the notice to DRH' s counsel pursuant to

Subparagraph ( 3) since DRH, having failed to answer, had contacted SE Dirt' s

attorney in writing concerning the action after it has been filed.

Since the notice of intent was required under either or both Subparagraph ( 2)

or ( 3), to properly demonstrate entitlement to a default judgment, under

Subparagraph ( 5) of La. C. C. P. art. 1702, SE Dirt was further required to offer into

evidence the proof that the mandated notice was made in the manner provided by

La. R.S. 13: 3205.

According to La. R.S. 13: 3205:

No default judgment may be rendered against the defendant and
no hearing may be held on a contradictory motion, rule to show cause,
or other summary proceeding, except for actions pursuant to R.S.
46: 2131 et seq., until thirty days after the filing in the record of the
affidavit of the individual who has done any of the following:

4 An appearance of record includes filing a pleading, appearing at a hearing, or formally
enrolling as counsel of record. Sam v. Feast, 2000- 1163 ( La. App. 1st Cir . 3/ 28/ 01), 802 So. 2d
680, 683.

11

1)
Mailed the process to the defendant, showing that it was
enclosed in an envelope properly addressed to the defendant, with
sufficient postage affixed, and the date it was deposited in the United
States mail, to which shall be attached the return receipt of the
defendant.

2) Utilized the services of a commercial courier to make
delivery of the process to the defendant, showing the name of the
commercial courier, the date, and address at which the process was
delivered to the defendant, to which shall be attached the commercial
courier' s confirmation of delivery.

3) Actually delivered the process to the defendant, showing the
date, place, and manner of delivery.

The record is devoid of the affidavit of the individual who mailed the June b,

2023, certified letter stating SE Dirt' s intent to obtain a default judgment against

DRH. Thus, SE Dirt failed to comply with the notice of intent provisions of La.

C. C. P. art. 1702( A)( 5). Because proof of the notice of intent is mandated by

Subparagraph ( 5), we conclude that proof -- as set forth in La. R.S. 13: 3205 -- is a

necessary element for a plaintiff to establish compliance with the notice of intent

required to obtain a default judgment. Absent the mandated proof, the default

judgment rendered in favor of SE Dirt on March 11, 2024 is an absolute nullity,

which may be collaterally attacked in this appeal. See La. C. C.P. art. 2002(A)(2)

A final judgment shall be annulled if it is rendered ... [ a] gainst a defendant ...

whom a valid default judgment has not been taken."). See also Bernard v. Fireside

Commercial Life Ins. Co., 633 So. 2d 177, 184 ( La. App. lst Cir. 1993), writ

denied, 93- 3170 ( La. 3/ 11/ 94), 634 So.2d 839 (" A judgment is an absolute nullity

if any of [ the] vices of form [ set forth in Article 2002( A)] exists, and may be

attacked collaterally at any time.").

Accordingly, because the March 15, 2024 default judgment is an absolute

nullity, it is vacated. The matter is remanded.

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DECREE

For these reasons, we affirm the trial court' s interlocutory rulings, which

overruled DRH' s dilatory exception of prematurity or alternative peremptory

exception of no cause of action. The default judgment issued on March 15, 2024 is

vacated. We remand for further proceedings consistent with this opinion. Appeal

costs are assessed one- half to D.R. Horton, Inc. — Gulf Coast, and one- half to

Southeast Dirt, L.L.C.

INTERLOCUTORY RULINGS AFFIRMED; DEFAULT JUDGMENT

VACATED. REMANDED.

13