The Carmouche Law Firm, Aplc v. Scott J. Pias

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CA 04-130

THE CARMOUCHE LAW FIRM, APLC

VERSUS

SCOTT J. PIAS

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APPEAL FROM THE
FOURTEENTH JUDICIAL DISTRICT COURT
PARISH OF CALCASIEU, NO. 99-4346
HONORABLE DAVID PAINTER, DISTRICT JUDGE

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JOHN D. SAUNDERS
JUDGE

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Court composed of John D. Saunders, Oswald A. Decuir, and Glenn B. Gremillion,
Judges.

AFFIRMED IN PART; REVERSED IN PART;
AND REMANDED.

William Joseph Mize
Robicheaux, Mize & Wadsack
P. O. Drawer 2065
Lake Charles, LA 70602
(337) 433-0234
Counsel for: Plaintiff/Appellee
William Joseph Mize
John Frederick Wadsack
John F. Robicheaux

Gerald Joseph Casey
Attorney at Law

3101 Lake St.
Lake Charles, LA 70601
(337) 474-5005
Counsel for: Plaintiff/Appellee
William Joseph Mize
John Frederick Wadsack
David Ross Frohn
Terry Thibodeaux
The Carmouche Law Firm, APLC
John F. Robicheaux

Kathleen Kay
Attorney at Law
P. O. Box 2042
Lake Charles, LA 70602-2042
(337) 439-7616
Counsel for: Defendant/Appellant
Scott James Pias

Leslie Qvale Knox
Attorney at Law
P. O. Box 2266
Lake Charles, LA 70602-2266
(337) 990-0015
Counsel for: Plaintiff/Appellee
The Carmouche Law Firm, APLC

SAUNDERS, Judge.

Plaintiffs and defendant appeal the judgment of the trial court awarding Scott

Pias $38,234.50, for termination without cause by The Carmouche Law Firm

(“TCLF”) and payment for work performed for the firm from October 1, 1996 to

December 6, 1996, and awarding TCLF $6,102.02 based on the calculation found in

a Shareholders Agreement addressing the redemption of shares upon a shareholder’s

termination. TCLF also appeals the trial court’s decision to appoint a liquidator to

facilitate the dissolution of TCLF. For the reasons stated below we affirm in part,

reverse in part, and remand.

FACTS

The TCLF, is a professional law corporation formed in April of 1990. As of

January of 1996, the shareholders/directors of the firm were Joseph A. Delafield,

David, R Frohn, W. Joseph Mize, Scott J. Pias, John F. Robichaux, Terry Thibodeaux,

and John F Wadsack. On February 14, 1996, all shareholders of the firm signed a

Shareholders Agreement, effective as of October 1, 1995, which forms the basis for

this suit. Additionally, all shareholders also signed an Employment Agreement, also

effective October 1, 1995.

In the Spring of 1996, Delafield and Pias accepted representation of Crane

Ceaux. During the course of that litigation, Delafield and Pias were cited for

contempt by the presiding judge. Marty Stroud was retained to represent Delafield

and Pias in this contempt proceeding, with an agreement among all shareholders of

TCLF that the firm would pay all legal bills for his representation of Delafield and

Pias in the contempt proceeding.

In late September 1996, during the pendency of the contempt proceeding,

Delafield and Pias traveled to Chicago to attend the National Bond Lawyers

Association annual meeting. While at this conference, the attorney for the Fourteenth

Judicial District Court presented a letter for Delafield and Pias to sign. The letter was

not presented during this trial, and the actual contents of it are the subject of much

dispute. It is alleged by Pias that it contained an admission of guilt as to the contempt

charge, and a formal apology. Pias and Delafield were contacted in Chicago by Mize

to discuss the letter, its contents, and whether they would agree to sign. Believing the

letter contained an admission of guilt, Pias and Delafield both refused to sign the

letter.

The actual chain of events following the phone conversations between Mize and

Pias and Mize and Delafield are intensely contested. Pias and Delafield both allege

that they were told they must sign the letter or the firm would refuse to pay Stroud’s

attorney fees on their behalf and they would be asked to leave the firm. Frohn, Mize,

Robichaux, Thibodeaux, and Wadsack deny that there was ever any mention of

termination during this discussion, or after Pias and Delefield returned from the

conference. Pias and Delefield eventually resolved the contempt issue by signing a

different letter of apology, and Stroud’s legal fees were eventually paid by the firm.

Pias remained at TCLF wrapping up his files until December 6, 1996. The firm

continued the practice of law until January of 1998, at which time Delafield tendered

his resignation and the remaining members split and formed two new law firms, Frohn

&Thibodeaux and Robicheaux, Mize & Wadsack . Delafield, Frohn &Thibodeaux,

and Robicheaux, Mize & Wadsack all continued to occupy the physical space which

had been leased by TCLF.

Following Pias’ departure, Robicheaux wrote a letter to Pias advising him that,

based upon the withdrawal formula contained within the Shareholders Agreement,

Pias owed the firm $49,552.87, payable in thirty-six monthly installments. The

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Shareholders Agreement, signed by all shareholder/directors of the firm on February

14, 1996, contains the following provision for redemption of shares upon a

shareholder’s termination:

1.1 Withdrawal. Should a shareholder’s employment with the
Corporation terminate for any reason other than the shareholder’s
permanent disability or retirement (both as described below) or death,
the Corporation shall redeem the entirety of its common stock held by
that shareholder for a redemption price equal to that shareholder’s
proportionate share (determined by dividing the number of shares of
stock of the Corporation outstanding on such date) of the outstanding
stock of the corporation (Capital Percentage) as of the beginning of the
fiscal year in which that shareholder’s termination of employment is
effective, times eighty percent (80%) of the invoiced and unpaid fee and
expense accounts receivable of Corporation, that are 120 or less days old
and reasonably determined by the Corporation to be collectible, as of the
effective date of withdrawal; plus the shareholder’s capital percentage
times a sum equal to six (6) times the average monthly net earnings of
the Corporation for the twelve (12) consecutive calendar months
immediately preceding the calendar month of the effective date of
withdrawal; less the shareholder’s capital percentage times the total
outstanding indebtedness of the Corporation on the following
obligations: [1] First National Bank Long Term Loan; [2] First National
Bank Line of Credit Loan; [3] Building Space Lease with Premier Bank;
[4] Notes payable to shareholders; and [5] accounts payable.

In June of 1999, following Pias’ refusal to pay, TCLF filed a Petition for

Money Judgment. Pias filed an exception claiming non-joinder of indispensable

parties, seeking to have the other shareholders/directors joined as parties to the

lawsuit. The trial court sustained the objection and ordered that Robichaux, Mize,

Frohn, Thibodeaux, and Wadsack be made parties to the lawsuit. In June of 2001 Pias

filed an Answer to Plaintiff’s Petition for Money Judgment and First Supplemental

and Amending Petition and Reconventional Demand. In his reconventional demand

Pias sought damages specified under his employment contract for termination without

cause. In addition, Pias requested the appointment of a liquidator pursuant to La.R.S.

12:143. Trial on the merits was held May 12 and 13, 2003.

The trial court issued Written Reasons for Judgment on June 6, 2003. The court

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held that Pias owed TCLF $6,102.02 under the terms of the Shareholders Agreement.

The court also held that Pias was terminated by TCLF without cause and awarded him

$25,546.50 under the terms of his Employment Agreement, and $12,688.00 for work

he performed for the firm between October 1, 1996, and December 6, 1996. Finally,

the trial court appointed a liquidator as requested by Pias to force the dissolution of

TCLF, which the trial court found was no longer operational. On August 28, 2003,

the trial court entered a money judgment in favor of Pias in the amount of $31,264.76

and appointed Leslie Knox as the liquidator of the TCLF.

MOTIONS OF NO RIGHT/CAUSE OF ACTION

As a preliminary matter, all parties filed exceptions in this appeal. Pias filed a

Peremptory Exception of No Right of Action against the individual

shareholders/directors of TCLF. He alleges that they have no right to appeal a

judgment in favor of or against TCLF. He urges they cannot seek redress through

appeal on behalf of the corporation as requested in their answers. In support of this

contention Pias cites the first circuit case of Dawson Engineers, Inc. v. Lemel

Ironworks, Inc., 307 So.2d 771 (La.App. 1 Cir. 1975), claiming that the situation in

the present matter is “factually identical” to the Dawson case.

Dawson is clearly distinguishable from the present matter. In that case Dawson

Engineers, Inc. filed suit against Lemel Ironworks, Inc. for damages arising from

Lemel’s alleged refusal to permit Dawson Engineers to recover a plate roll machine

left on Lemel’s premises. Following a trial on the merits, judgment was rendered in

favor of Lemel, dismissing Dawson Engineers’ demands. Following the judgment,

William J. Dawson, individually, moved for, and was granted, a suspensive appeal.

No appeal was taken by Dawson Engineers, Inc. The first circuit held, on its own

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motion, that there was a lack of valid appeal and a consequent lack of jurisdiction.

The court stated: “It is basic that a suit can be brought only by one having a real

interest in the subject matter thereof. [La.Code Civ.P. art. 681]. Appeals may be taken

only by parties to the suit, their legal representatives, or by third persons who could

have intervened in the trial court. [La.Code Civ.P. arts. 2082, 2086].” Id. at 772.

The key distinction between the Dawson case and the present matter is that Mr.

Dawson was never a party to the suit, and therefore, lacked standing to appeal the trial

court’s judgment. In the instant case, Pias sought to join the individual shareholders

as indispensable parties in this suit against him. He succeeded, and the trial court

granted his request with respect to all individual shareholders except Delafield.

Louisiana law is clear in its interpretation of La.Code Civ.P. art. 2082. Any party to

a suit may appeal the judgment of the trial court. Pias joined the individual

shareholders, and cannot now attempt to un-ring that bell and deny them, as parties

to the suit, the ability to appeal the trial court’s judgment. Accordingly, Pias’ motion

is denied.

The individual shareholders, as appellees and cross-appellants, filed Peremptory

Exceptions of No Right of Action, No Cause of Action, Res Judicata, and

Prescription. They claim that Pias has no right of action to seek the involuntary

dissolution of TCLF and is not one of the persons authorized to request the

appointment of a liquidator pursuant to La.R.S. 12:143(B). Additionally, they argue

that Pias has failed to state a cause of action which would allow him to seek a money

judgement against the individual shareholders for the debts of the corporation.

Furthermore, if any such cause of action was stated, it would be barred by preemption

as set forth in La.R.S. 12:92(D), and regardless, is res judicata as a result of an express

release of such shareholders by Pias.

5

For the reasons we state below, we reverse the appointment of a liquidator to

handle the dissolution of TCLF, and we affirm the judgment of the trial court denying

Pias’ requests for money judgment against the individual shareholders of TCLF. As

Pias’ request for money judgment against the individual shareholders is denied on

other grounds, we will not address the issue of res judicata by an earlier express

release of the shareholders by Pias.

ASSIGNMENTS OF ERROR

Pias presents the following assignments of error for our review: did the trial

court err in finding that TCLF could bring suit to enforce the Shareholders Agreement

when it was not a party to the agreement; did the trial court err by allowing Plaintiff’s

Exhibit No. 2 into evidence and allowing Wadsack to testify as to its contents; and

finally, did the trial court err in refusing to find the shareholders/directors of TCLF

personally liable for the debt of the firm following the unlawful distribution of assets

to themselves, which distribution renders the corporation insolvent.

The individual plaintiffs have not presented a single brief, but have grouped

themselves and submitted a total of three briefs between them: a brief has been filed

by Frohn, another has been filed by Thibodeaux, and one brief has been filed on

behalf of Mize, Robichaux, and Wadsack collectively. Although the plaintiffs have

presented a total of three separate briefs, the arguments within them are substantially

similar and they raise essentially the same issues on appeal. For organizational

simplicity we have consolidated their arguments and present them as issues raised by

the plaintiffs/appellees collectively.

The plaintiffs present the following assignments of error: did the trial court err

in making the factual determination that Pias was terminated, in light of the fact that

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the legal requirements for such termination had not been established; did the trial court

fail to properly interpret the Shareholders Agreement by altering the withdrawal

formula and limiting Pias’ lease obligation to the time period specified for early

termination within the firm’s business space lease with Premier Bank as well finding

that TCLF had a duty to mitigate its damages in this situation; and finally, did the trial

court err in appointing a liquidator at Pias’ request to force the dissolution of TCLF.

LAW AND ARGUMENT

Pias’ Assignments of Error

Assignment of Error #1

In his first assignment of error, Pias claims that the trial court erred in ruling

that TCLF had standing to bring suit against him to enforce the Shareholders

Agreement when the firm was not a party to that agreement. Pias claims that TCLF

was not a signatory to the written contract, and therefore, it cannot be bound. The

plaintiffs counter that, pursuant to La.R.S. 12:809, a professional law corporation is

bound by the terms of a shareholder agreement signed by all the voting shareholders.

The trial court agreed with the plaintiffs, stating in its reasons for judgment:

It is the contention that THE CARMOUCHE LAW FIRM is not
the proper party to bring the action since it did not sign the Shareholder
Agreement. The Employment Agreement and the Shareholder
Agreement are intertwined. THE CARMOUCHE LAW FIRM is
specifically mentioned and referred to a number of times as a corporation
throughout the document. All parties to THE CARMOUCHE LAW
FIRM signed the document as well as the individual Employment
Agreement. Therefore, the Court finds no merit that THE
CARMOUCHE LAW FIRM has no standing to bring this action.

We agree that there is no merit to this assignment by Pias, and we affirm this

ruling by the trial court.

Assignment of Error #2

In his second assignment of error Pias claims that the trial court clearly erred

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in granting any weight to Wadsack’s testimony as to the calculation of the debt Pias

allegedly owes to the firm, as well as in admitting plaintiff’s exhibit number 2 into

evidence, a letter to Pias accompanied by the summary of the amount he allegedly

owes the firm pursuant to the withdrawal calculation contained in the Shareholders

Agreement. Pias argues that it was error for the trial court to admit that summary as

an accurate reflection of the values to use in the withdrawal calculation. He argues

that, pursuant to the Louisiana Code of Evidence, the contents of otherwise admissible

evidence may be admitted in the form of a chart, summary, or calculation only where

the evidence supporting the summary is made available for examination. La.Code

Evid. art. 1006. Furthermore, Pias draws our attention to author’s note four of the

La.Code Evid. art. 1006, which states that there are four foundational requirements

which must be satisfied prior to the admission of such a summary. Those

requirements are: (1) the underlying materials must be so voluminous that they cannot

be conveniently examined in court, (2) it must be demonstrated that the underlying

materials which are summarized are otherwise admissible into evidence, (3) advance

notice and opportunity to examine the underlying evidence must be given to the

opposing side, and (4) the summary must be authenticated.

Pias contends that the underlying materials used in preparing the document and

providing the values used in the redemption equation were never made available for

his examination, despite repeated requests both before and during the trial. Pias

claims that Wadsack, who was the sole source of testimony supporting the document

and who performed the calculation of the redemption equation, relied heavily on

hearsay evidence in preparation of the summary. Therefore, Pias alleges that the

document itself is hearsay not subject to any exception.

Pias urges that the insufficiency of the evidence used to support this summary

8

was made abundantly clear during trial. No documentation was provided to support

the underlying first variable of the equation, the shareholder’s capital percentage, or

the value used as the average monthly net earnings, notes payable to shareholders, or

accounts payable. Furthermore, Wadsack was unable to provide even basic

information to support his values used, such as where, or from whom, he obtained

these figures. Most striking, it was shown at trial that the figures presented in court

testimony were different than the figures actually used in the calculation. Pias argues

that the trial court erred in awarding any sum to TCLF under the terms of the contract

as there was no competent evidence upon which it could base that award.

In our review of the trial record, and the testimony at trial, it is clear that the

summary admitted as Plaintiff’s Exhibit No. 2 suffers from a great many inadequacies

and inconsistencies. An excerpt from the cross examination of Wadsack during trial

reads as follows:

Q. Can you tell me how you arrived at the figure that you inserted into your
spreadsheets?

A. Which are you talking about, the figure 43,786.35? Is that the figure that
you’re talking about?

Q. I’m talking about the figure that’s next to the average monthly net
earnings.

A. And that number is 43,786.35.

Q. Yes. How’d you arrive at that number?

A. I cannot tell you.

Q. You can’t tell us?

A. Other than reading what’s in the Shareholder’s Agreement.

Q. Well, how do we know what numbers you relied on to arrive at that
figure?

A. That was the number that was provided to me at the time the calculation

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was run.

Q. But you can’t tell me how - - so you yourself did not calculate that?

A. I did not calculate that number and I do not have - -

Q. Any you don’t have the person who calculated the number?

A. I’m sorry, I - -

Q. Whoever did calculate that number I’m assuming isn’t here today?

A. No.

Q. So you can’t testify as to what documents they relied upon to arrive at
that number?

A. No.

Q. Nor can you tell me about what methodology they used to get there?

A. That’s correct.

Q. Okay. The next number you have on here is the First National Bank
loan. Where did you get that number from?

A. It was off one of those sheets that was provided to you yesterday. I’ve
[sic] believe it’s sheet number four.

Q. Do you have anything from the bank that verifies the figure on there?

A. Asking me personally?

Q. Yes.

A. No, I do not.

Q. Did you personally consult with the bank to verify the accuracy of that
figure on December 6th?

A. No, I did not. Or at any other time.

The responses contained in this line of questioning are representative of the

responses given by Wadsack upon questioning about the value used to represent the

First National Bank Credit Line. Additionally, the value used for shareholder notes

on the spreadsheet, $20,656.58, is different than the value for that figure which

10

appears on the documents presented by the firm to support its calculation of the

withdrawal equation, $14,982.56. On the stand Wadsack acknowledged this clear

discrepancy. A similar discrepancy was shown during trial between the value for

accounts payable found on the spreadsheet used to run the equation, $47,801.28, and

the documentation provided at trial to support the information used to run the

spreadsheet, $43,759.42.

We agree that the spreadsheet was not valid evidence, and does not stand for

what it purports. Furthermore, these are not inconsistences that can be resolved

without additional documentation from TCLF indicating the accurate value to be used

for the variables in the withdrawal equation contained in the Shareholders Agreement.

Accordingly, we find that any calculation of Pias’ financial obligation to the firm

based upon the information contained in this summary is inherently faulty and,

therefore, inadmissable. We remand the matter of the accurate calculation of the

withdrawal equation contained within the Shareholders Agreement to the trial court

for recalculation following presentation of an adequately supported figured for use in

that calculation.

Assignment of Error #3

In his final assignment of error, Pias claims the trial court erred in failing to find

personal liability on the part of the individual defendants in reconvention. The trial

court did not address Pias’ claims against the individual defendants in reconvention

in its reasons for judgment, or in the judgment itself. He notes that, when a trial court

fails to address a claim placed before it, that claim is presumed to have been rejected

by the trial court for purposes of appeal. Big “D” Dirt Services, Inc. v. Westwood,

Inc., 94-1234 (La.App. 3 Cir. 3/1/95), 653 So.2d 604.

Pias argues that Frohn, Thibodeaux, Robicheaux, Mize, and Wadsack entered

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into an agreement on March 19, 1998, whereby they agreed to “wind up the affairs”

of the corporation, and they transferred one-fifth of the cash collected by the firm for

time and expenses owed to it through January 1, 1998, to each of them. The

agreement indicates that the consideration for this disbursement was that they had not

been paid their salaries for a number of months, and the five signatories had assumed

five-sixths of the short term debt of the firm, and five-sevenths of the long term debt

of the firm. Pias claims that, according to this agreement, these five individuals

received cash from the firm totaling $402,053.73. Pias alleges that the sole purpose

of this agreement was to dissolve the corporation, stripping it of assets and rendering

the firm worth virtually nothing.

Pias relies heavily on the case of Lopez v. TDI Services, Inc., 93-619 (La.App.

3 Cir. 2/2/94), 631 So.2d 679, writ denied 94-864 (La. 6/3/94), 637 So.2d 501. He

notes that, in Lopez, this court found that the officers and directors of a corporation

owe a fiduciary duty to the corporations creditors, and are under an obligation to see

that the creditors are paid. We found the shareholder/director in that case personally

liable to a creditor of the corporation for a debt owed. The creditor in Lopez was a

former employee, and the debt was in the form of unpaid wages, penalties, and

attorney fees. Pias argues that, just as is the case here, the shareholder/director had

entered into a transaction with the corporation to repay a debt allegedly owed to him,

with the effect of stripping the corporation of cash with which to pay the debt owed

to the plaintiff. Pias argues that we found that this transaction by the defendant

constituted a breach of his fiduciary duty as an officer and director of the corporation

to the plaintiff who was a creditor. Pias urges that this same analysis applies in the

instant matter, and the individual shareholder/directors of the firm should be held

personally liable for the firm’s debt to him.

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The plaintiffs argue that Lopez is factually distinguishable from the present

matter, and the holding in that case does not apply in this situation. They contend that

any evidence presented at the trial court level to support a request to hold the plaintiffs

personally liable for any debts of the firm is completely lacking and would not justify

piercing the corporate veil in this matter.

As a general rule, corporations in Louisiana are distinct legal entities separate

from the individuals comprising them. As a result, shareholders are not liable for the

debts of the corporation except in very limited circumstances. Louisiana Revised

Statute 12:93 provides in pertinent part:

B. A shareholder of a corporation organized after January 1, 1929,
shall not be liable personally for any debt or liability of the corporation.

....

D. Every shareholder who receives any unlawful dividend or other
unlawful distribution of assets shall be liable to the corporation, or to
creditors of the corporation, or to both, in an amount not exceeding the
amount so received by him. An action to enforce this liability must be
brought within two years from the date on which the unlawful
distribution was received, and this time limit shall not be subject to
suspension on any ground, nor to interruption except by timely suit.

We find the plaintiffs are correct in their assertion that Lopez is factually

distinguishable from the present matter. The events which led to our finding of

personal liability for the corporation’s debts in that case do not correspond with the

actions of the plaintiffs in the present matter. In Lopez we held:

The evidence clearly shows that Thomas DesOrmeaux has incorporated
at least six different companies in less than ten years. Each new
company was clearly formed in order to escape the liabilities and
creditors of its predecessor. The business of each company exclusively
involved the DesOrmeaux patented technology for waste disposal, the
license for use for which was granted and withdrawn at the whim of the
patentholders. The sole patentholder since June 1988 has been Thomas
DesOrmeaux. There is no evidence that any of the companies was ever
legally dissolved; they simply stopped doing business. Each successor
corporation used the personnel and equipment of its predecessor. The

13

operational management of each corporation remained in the hands of
Thomas DesOrmeaux.

Thermal Dynamics, Inc. and TDI Services, Inc. were grossly
undercapitalized. The only capital contributed by the shareholders was
$1 per share, for 1000 shares. All other financing for these companies,
running to millions of dollars, came from outside investors, creditors
who have, for the most part, not been fully repaid.

We see no policy reason not to hold Thomas DesOrmeaux
personally liable for the judgment owed to Lopez by Thermal Dynamics.
The purpose of limited liability, to encourage investments in high risk
businesses by enabling investors who use the corporate form to make
capital contributions while insulating their personal wealth from the
business risks, is not served in this case. Thomas DesOrmeaux
essentially risked nothing; his creditors risked all. The only asset of
value to these corporations, the patent rights valued at $125,000,000,
always remained in the ownership and control of the DesOrmeauxes and,
since June 1988, of Thomas DesOrmeaux.

Lopez, 631 So.2d at 686.

The situation described above, which justified piercing the corporate veil in the

Lopez case, does not exist here. We have not been provided with any conclusive

evidence that the distribution of cash to the shareholders which resulted from the 1998

Shareholder Agreement was an illegal transaction or was conducted for the specific

purpose of avoiding the debt obligations of the corporation, which would justify

piercing the corporate veil under La.R.S. 12:93(D). There was evidence presented at

trial that it was a regular occurrence for the shareholders to have to temporarily do

without their monthly draws due to cash flow issues within the firm. Furthermore,

there was no evidence presented by Pias to contradict the plaintiffs’ contention that

they had not been receiving their salaries for several months. Without more, we do

not find adequate circumstances to justify piercing the corporation veil in this matter

and impose liability on the individual shareholders/directors of the Carmouche Firm.

Plaintiffs’/Appellees’ Assignments of Error

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Assignment of Error #1

In their first assignment of error the plaintiffs note that the trial court’s

interpretation of the Employment Agreement turns on its determination that Pias was

fired. They allege that, on Friday December 6, 1996, Pias informed the firm’s

corporate secretary that he quit the firm. Up until that day, they claim that there had

been no discussions among the directors to fire Pias. They insist that there had been

no meeting and vote to terminate Pias, and no action to terminate him was taken by

any director. The plaintiffs argue that only the self-serving testimony of Pias himself

contradicts their position.

The plaintiffs also argue that there is no legal basis for concluding that Pias was

terminated. They state that La.R.S. 12:224 requires a vote for the termination of a

director of a corporation. They insist that there was no evidence presented indicating

the required meeting of shareholders and subsequent vote for termination of Pias and

Delafield ever occurred. They further argue that this is not a case of apparent

authority, as that doctrine cannot apply to someone with knowledge who cannot show

a reasonable reliance on the apparent scope of an agent’s authority. They insist that

Pias, as an attorney, knew and understood his relationship to the rest of the directors

and knew that Mize did not have the authority to fire him without the required vote

by the firm’s shareholders.

The plaintiffs also claim that the trial court mistakenly determined that

Delafield was offered a continuing relationship with the firm while Pias was not, and

that the trial court erroneously treated the rent sharing agreement with Delafield as

being contemporaneous with Pias’ departure. In addition, another basis for the trial

court’s determination that Pias was fired is the assertion that Pias did not receive any

new assignments of files during the two months prior to his departure. They claim

15

that there was no testimony regarding the issue of how a director in the firm receives

business, whether it is assigned or the director is expected to generate business.

The Employment Agreement signed by all of the shareholders of TCLF,

including Pias, provides the following provisions for a shareholder’s termination of

employment with the firm:

8. Termination of Employment. Employer may terminated this
Agreement without cause at any time (except during a period when
Employee is totally disabled) upon thirty (30) days written notice to the
Employee, and Employer shall only be obligated to continue to pay
Employee a pro rata portion of Employee’s Annual Salary (based on the
number of months employed during the fiscal year) due him under this
Agreement through the date of termination, plus thirty-five (35%)
percent of Employee’s Annual Salary for the immediately preceding
fiscal year of Employer, payable over (6) equal monthly installments,
which shall be in lieu of any claims Employee may have with respect to
accounts generated by Employee while an employee hereunder. If
Employee is terminated with cause, then he is not entitled to any
compensation beyond his compensation through day of termination.

....

Following any notice of termination of employment hereunder,
whether given by Employer of Employee, Employee shall fully
cooperate with Employer in all matters relating to the winding up of his
pending work on behalf of the Employer and the orderly transfer of such
work to the other professional employees of Employer.

The question of whether Pias was, in fact, fired by the firm, is one of fact and

will not be set aside on appeal absent manifest error by the trial court. Rosell v.

ESCO, 549 So.2d 840 (La.1989). Furthermore, where findings are based on

evaluations of credibility of witnesses, the manifest error/clearly wrong standard of

review requires great deference for the factfinder’s conclusions. Id. In our review of

the record we find no such manifest error in the determination of the trial court that

Pias was fired by the firm.

In particular, we note that it seems clear that the trial court was persuaded by

the testimony of Delafield, called as a witness by TCLF and not Pias. Delafield

16

supported Pias’ position that they were told they would be terminated if they refused

to sign the letter of apology, and that he felt that he had been fired. Despite this

impression by Delafield, he stated that he refused to leave the firm unless he was

physically removed by the other shareholders, and eventually his standing in the firm

was clarified.

In its reasons for judgment, the trial court stated:

Delafield who testified as a witness called by CARMOUCHE and
was probably the only disinterested witness to testify, testified that he
thought he was terminated in September of 1996 but that he refused to
leave the firm and stayed on and rented space from the firm until he
finally left in 1998. On December 6, 1996 PIAS notified the firm that he
was leaving. Apparently, they did not offer him the same deal as
Delafield to stay and rent space from them.

PIAS and Delafield, they were certainly made to feel
“unwelcome” in the firm by the action of the shareholders subsequent to
the September “incident”. PIAS handled no new files and only helped
resolve existing files for the firm. He worked from October 1st to
December 6th during the new fiscal year for the firm. PIAS was not
offered a rental space in the building.

....

The court believes that PIAS was terminated, Delafield who was
in the same boat felt like he was terminated in September 1996. The
firm treated PIAS like he was not longer a member of the firm because
he was not assigned to any of the new files during the period after
October 1, 1996/ Although he continued to work on the firms files, he
was not treated as a member of the firm.

There is no reference within the Employment Agreement that a meeting and

vote of the shareholders would be required to terminate employment. Following being

told by the managing partner that they were going to be “out of the firm” if they

refused to sign the letter, it was reasonable for Pias and Delafield to believe that they

had been fired. Therefore, we similarly find no error on the part of the trial court in

its determination that Pias’ termination was without cause, entitling him to the

recovery outlined in the Employment Agreement quoted above. We affirm the ruling

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of the trial court that Pias was terminated, and that he was terminated without cause.

Therefore we affirm the decision of the trial court that Pias is entitled to a payment of

$25,546.50, representing thirty-five percent of his salary from the immediately

preceding fiscal year.

Assignment of Error #2

In their next assignment of error, the plaintiffs argue that the intent of the

parties as expressed in the 1996 Shareholders Agreement is clear. They argue that the

agreement required that any parting attorney is responsible for certain obligations of

the firm, including the lease obligation. The plaintiffs insist that the uncontroverted

evidence presented at trial was that the total outstanding indebtedness of the

corporation for the Premier Bank lease at the time of Pias’ departure was $426,862.00.

The plaintiffs argue that the 1996 Shareholders Agreement did not specifically

require that the firm exercise any early termination clause in the lease for the benefit

of a departing director. They claim that, as a result of TCLF’s prior experience of

having to carry the lease and debt burden of the form after the departure of lawyers,

their primary concern in establishing their current lease with Premier Bank was to

prevent the possibility of another similar situation. The plaintiffs insist that the

relevant clause in the Shareholders Agreement is clear and unambiguous and the trial

court should not have looked beyond the four corners of the document to determine

the meaning of the provision. Cashio v. Shoriak, 481 So.2d 1013 (La.1986). They

contend that the phrase “total outstanding indebtedness” of the corporation on the

business space lease found in the withdrawal formula is not subject to further

interpretation or dispute.

Pias contends that the plaintiffs’ argument incorrectly assumes that there is only

one definition of “total outstanding debt of the corporation on the ... [b]usiness space

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lease.” Pias counters that the total outstanding debt of the firm with respect to the

lease would be how much it would owe on the date of the director’s termination. He

insists that amount would be the amount prescribed by the early termination clause in

the lease, the most the corporation was obligated to pay under the Premier Bank lease

on the date of Pias’ departure, found by the trial court to be $85,408.80.

The business space lease entered into by TCLF with Premier Bank contains the

following provision for early termination of the lease:

12.1 Early termination. Provided that no Event of Deafult is
then in existence, Tenant, upon giving Landlord 90 days’ prior written
notice, shall have the right to terminate this Lease in its entirety and to
vacate the Leased Premises upon payment by Tenant to Landlord of a
termination penalty equal to the sum of two month’s Base Rental plus
the then existing Unamortized Amount.

The extent of the obligation to pay out the Building Space Lease with Premier

Bank is not defined to specifically include the full five year term of the lease. We find

it is clear that the intent of the shareholders in negotiating this current lease and

drafting the 1996 Shareholders Agreement was to prevent the possibility of their being

legally obligated to continue rental payments on a lease space they can no longer

afford. However, this eventuality was effectively eliminated though the negotiation

of their lease with Premier Bank, which contained the early termination clause. The

only remaining obligation from which they needed to protect themselves via the 1996

Shareholders Agreement was the fulfillment of the remaining financial obligation in

the event they must exercise the early termination clause of their business space lease.

Any further protection was offered by the lease itself.

We agree with the trial court that the only mandatory obligation on the lease

that the firm could be held accountable for in the event of an inability to continue

paying on their lease is early termination clause contained in the lease agreement.

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This provision within the lease provides the Corporation with its desired protection

for the risk of having to fulfill a long term and overly burdensome financial

obligation. The only protection required by the subsequent shareholder’s agreement

is coverage for payments sufficient to satisfy the early termination conditions within

the lease. The firms decision to stay in the business space despite the loss of a portion

of the funds supporting rent payments is not one that Pias is required to financially

support.

This is particularly true in these circumstances, where Pias repeatedly offered

to remain in the office space and continue to pay on his portion of the lease obligation

and the shareholders refused any attempt to reduce the financial burden they were

apparently so concerned about. That they chose to deny this very reasonable request

from Pias, a request which was later granted to Delafield, indicates to us that they

were not overly burdened by the financial impact of Pias’ termination. Where the

term of the equation is not specifically defined to include the full remaining term of

the lease, and the early termination clause exists within the lease agreement, we refuse

to extend Pias’ financial obligation over the entire remaining term of the lease. We

affirm the ruling of the trial court holding that Pias’ only obligation for the as to the

building space lease is to fulfill the financial obligation that would be incurred upon

the firm if it enacted the early termination clause of the lease agreement at the time of

his termination.

Assignment of Error #3

In their final assignment of error, the plaintiffs claim the trial court erred in

appointing a liquidator to force dissolution of TCLF at Pias’ request. The plaintiffs

argues that the statute regarding the involuntary liquidation of a professional law

corporation is clear, and Pias does not fit within any of the categories of individuals

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entitled to bring such an action. Louisiana Revised Statute 12:143 states in pertinent

part

B. An involuntary proceeding for dissolution may be instituted
against a corporation by either:
(1) A shareholder or shareholders, severally or jointly, who have
been registered owners, for a period of not less than six months, of not
less than twenty per cent of the entire outstanding shares of the
corporation; or
(2) A majority of the corporation’s directors; or
(3) A creditor whose claim has been reduced to judgment, on
which execution has been issued and returned “nulla bona”; or
(4) A receiver appointed under R.S. 12:151 to take charge of the
corporation's property.

The plaintiffs contend that the statute is clear. Pias does not hold, and has never

held, at least twenty percent of the entire outstanding shares of the corporation and he

is not a receiver appointed to take charge of the corporation’s property. Furthermore,

even if Pias is deemed to be a creditor under the terms of the statute, it must first be

established that the corporation is actually insolvent before a creditor can force

liquidation of the corporation. They stress that Louisiana courts have consistently

held that the involuntary liquidation of a corporation is reluctantly applied and the

grounds for such a liquidation are limited and specific. LaFleur v. Guillbeau, 617

So.2d 1362 (La.App. 3 Cir. 1993). They insist that Pias is not authorized to bring an

action to dissolve the corporation or request the appointment of a liquidator.

We find the trial court abused its discretion in appointing a liquidator at the

request of Pias. The plaintiffs are correct in their assertion that Pias does not meet any

of the criteria of an individual authorized to bring an action to force liquidation of the

corporation under La.R.S. 12:143. Prior to instituting such an action Pias must be in

possession of a judgment, and he must attempt to execute that judgment and have it

returned nulla bona to establish that the corporation is, in fact, insolvent. That has not

yet been established in this case. A forced liquidation of the corporation in this matter

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is premature. The ruling of the trial court appointing a liquidator is reversed.

DECREE

The judgement of the trial court holding that TCLF has standing to bring suit

to enforce the terms of the Shareholders Agreement is affirmed, as is its refusal to find

the shareholders personally liable for the debts of the firm following the distribution

of assets in the January 1998 agreement. The trial court abused its discretion in

admitting Plaintiff’s Exhibit No. 2 into evidence, as there was no foundation laid that

the figures used to calculate the withdrawal equation contained in the 1996

Shareholders Agreement were correct. The matter of the values to be used in

calculation of the withdrawal equation is remanded to the trial court and values

consistent with this opinion as to appropriate lease obligation shall be used in the

withdrawal formula calculation to determine Pias’ financial obligation to TCLF. We

affirm the trial court’s conclusion that Pias was terminated without cause and that he

is entitled to thirty-five percent of he salary during the fiscal year immediately

preceding his date of withdrawal from the firm, or $25,546.50, as well as $12,688.00

in unpaid wages for work he performed for the firm between October 1, 1996 and

December 6, 1996. Finally, we reverse the trial court’s ruling appointing a liquidator

as requested by Pias. All costs of this appeal are cast against TCLF.

AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

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