Edward D. Gutierrez v. David M. Baldridge

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CA 12-138

EDWARD D. GUTIERREZ

VERSUS

DAVID M. BALDRIDGE, ET AL.

Consolidated with CA 12-139

A & A CONSTRUCTION, LLC

VERSUS

EDWARD DONOVAN GUTIERREZ

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. C-20091819 C/W C-20092962
HONORABLE MARILYN CARR CASTLE, DISTRICT JUDGE

**********

JIMMIE C. PETERS
JUDGE

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Court composed of Oswald A. Decuir, Jimmie C. Peters, and Billy Howard Ezell,
Judges.

AFFIRMED.

Burnice Gerald Weeks
The Weeks Law Firm
1150 Expressway, Ste 205
Pineville, LA 71360
(318) 442-3045
COUNSEL FOR PLAINTIFF/APPELLEE:
Edward D. Gutierrez

Cade Aaron Evans
Allen & Gooch, APLC
2000 Kaliste Saloom Road, #400
Lafayette, LA 70508
(337) 291-1240
COUNSEL FOR DEFENDANTS/APPELLANTS:
David M. Baldridge
A & A Construction, LLC

PETERS, J.

In these consolidated cases, David M. Baldridge appeals the trial court’s

rejection of his claim against Edward D. Gutierrez for recovery of certain financial

obligations associated with a partnership agreement entered into between the two

individuals; A & A Construction, LLC appeals the trial court’s rejection of its

monetary claim against Edward D. Gutierrez based on a real estate mortgage. For the

following reasons, we affirm the trial court judgment.

DISCUSSION OF THE RECORD

Procedural History

On March 26, 2009, Edward D. Gutierrez brought a suit for damages against

David M. Baldridge and his wife, Alexis R. Baldridge. In his suit, Mr. Gutierrez

claimed that he and Mr. Baldridge entered into a partnership agreement on July 17,

2007, wherein they agreed to conduct business under the name of A & A Construction,

LLC (A & A), a preexisting business entity wholly owned by David and Alexis

Baldridge. Mr. Gutierrez asserted in his petition that through his connections and

expertise, he obtained a number of contracts for the partnership which resulted in

gross receipts to A & A of $5,000,000.00 and estimated profits in excess of

$1,400,000.00. According to Mr. Gutierrez’s pleadings, he discovered during the

partnership dissolution process that Mr. Baldridge had diverted the profits into

numerous other businesses he personally owned. These included entities known as

Safe House Technologies, LLC; A & A Pest Control of LA, LLC; and David M.

Baldridge, Inc. Mr. Gutierrez claimed $700,000.00 as his share of the net profit of the

partnership, and sought judgment against Mr. and Mrs. Baldridge for that amount.

Mr. and Mrs. Baldridge answered the petition on May 6, 2009, by

acknowledging the existence of the partnership as well as the legal entities identified

in the petition, but denying that the partnership participated in any lucrative contracts

or years of steady work. In addition to raising a number of affirmative defenses, Mr.
1

and Mrs. Baldridge asserted that the partnership relationship ceased due to Mr.

Gutierrez’s failure to perform his partnership obligations and that any amounts owed

to Mr. Gutierrez were offset by his financial obligations to them.

A reconventional demand, filed by Mr. Baldridge alone, accompanied the

answer to Mr. Gutierrez’s petition. In his reconventional demand, Mr. Baldridge

asserted that the partnership agreement became null and void under its terms on April

30, 2008, when Mr. Gutierrez ceased communicating with him or any representative

of A & A and ceased providing services to A & A. He further asserted that on August

13, 2008, Mr. Baldridge sent Mr. Gutierrez a letter demanding payment of two

separate debts:

(1) $62,324.80, being Mr. Gutierrez’s share of outstanding debts owed
by the partnership to A & A.

(2) $190,000.00 owed by Mr. Gutierrez to A & A, being a loan from A
& A to Mr. Gutierrez for the purchase of his personal residence at 102
Saddlewood in Lafayette, Louisiana.

In his reconventional demand, Mr. Baldridge sought a personal judgment for

the amount associated with the partnership, but not with the real estate loan. In his

answer to the reconventional demand filed on May 20, 2009, Mr. Gutierrez

acknowledged that he received the demand letter, but denied the remainder of the

allegations.

On May 15, 2009, or nine days after the filing of the answer and reconventional

demand to Mr. Gutierrez’s petition, A & A filed a separate suit against Mr. Gutierrez

captioned as a “PETITION FOR FORECLOSURE BY ORDINARY PROCESS.”

In that petition, A & A asserted that it was the holder and owner of a promissory note

in the original principal sum of $180,000.00 which had been executed by Mr.

Gutierrez on May 19, 2008; that the promissory note was made payable on demand to

the order of the bearer of the note; that it bore interest at the rate of seven percent per

annum; and that it had been “paraphed Ne Varietur for identification with and secured

2

by a Collateral Mortgage” executed the same date and affecting immovable property

situated in Lafayette Parish, Louisiana.1 A & A attached copies of the mortgage and

note to its petition, and in its prayer for relief, sought a judgment against Mr.

Gutierrez for the amount due on the promissory note, including interest and attorney

fees, and for recognition of the mortgage against the immovable property.

In his April 12, 2010, general denial answer to this petition, Gutierrez admitted

that he had executed the collateral mortgage and note, but asserted that the

indebtedness represented by the promissory note had been cancelled pursuant to a

written act of release of the mortgage dated May 19, 2006, the same day as its

execution.

On April 19, 2010, Mr. and Mrs. Baldridge filed a motion to set their matter for

trial. On April 26, 2010, the trial court set the matter for trial on September 13, 2010.

However, when the motion was filed, there was a pending motion filed by Mr. and

Mrs. Baldridge seeking consolidation of both actions. On the same day the trial court

set a trial date, it also granted the motion to consolidate. The trial court executed a

judgment granting the consolidation of the actions on April 30, 2010.

Some of the issues raised in the pleadings were resolved after an August 30,

2010, hearing wherein the trial court dismissed all of Mr. Gutierrez’s claims against

Mr. and Mrs. Baldridge. This judgment which was executed by the trial court on

September 3, 2010, is not before us in this appeal.2 Thus, when the matter went to

trial on September 13, 2010, the only claims before the trial court were Mr.

Baldridge’s claim against Mr. Gutierrez for reimbursement under the partnership

1
The petition provides the legal description of the mortgaged property as Lot 7 of Points of
View Subdivision in Lafayette Parish, Louisiana. There seems to be no dispute but this legal
description is that of a piece of property bearing a municipal address of 102 Saddlewood in
Lafayette Parish.
2
The merits of this judgment were considered on appeal by this court in a prior opinion, and
those issues are not now before us. See Gutierrez v. Baldridge, 10-1528, 10-1529 (La.App. 3 Cir.
5/11/11), 65 So.3d 251, writ denied, 11-1589 (La. 10/7/11), 71 So.3d 319.
3

agreement and A & A’s claim against Mr. Gutierrez associated with the real estate

transaction.

Mr. Gutierrez did not appear at the September 13, 2010, trial, but after hearing

all of the evidence presented by Mr. Baldridge and A & A, the trial court rejected their

demands. The trial court executed a judgment dismissing their claims on May 13,

2011, and denied their subsequent motions for new trial by a written judgment dated

November 7, 2011. Thereafter, Mr. Baldridge and A & A timely perfected this appeal.

Evidence Presented at Trial

Mr. Gutierrez sought and was denied a continuance of the September 13, 2010,

trial. Without any appearance by him or his counsel, the matter went to trial and was

decided based solely on the evidence presented by Mr. Baldridge and A & A. In

addition to the testimony of Mr. Baldridge and Rebecca K. Miller, Mr. Baldridge’s

administrative assistant at A & A, Mr. Baldridge and A & A offered the following

exhibits as evidence at trial:

1. A copy of the collateral mortgage note dated May 19, 2006.

2. A certified copy of the collateral mortgage paraphed for identification
with the collateral mortgage note.

3. A copy of the August 13, 2008, demand letter together with the
attached certified mail receipt reflecting delivery to Mr. Gutierrez on
August 14, 2008, and a single page attachment purporting to be a
summary of assets and liabilities of the partnership as of April 30, 2008.

4. A copy of the partnership agreement dated July 17, 2007, as well as
one addendum to the agreement dated the same day.

5. A copy of a September 30, 2009, letter from the Lafayette Parish
Sheriff’s Department notifying A & A, as mortgage holder, that the
immovable property securing its mortgage had been sold at tax sale on
May 6, 2009, and was subject to redemption through May 19, 2012.

6. A certified copy of a tax redemption deed dated and recorded October
23, 2009, reflecting that the immovable property subject to the collateral
mortgage had been redeemed by the payment of $1,977.55.

7. A four-page document entitled “SUMMARY OF ASSETS AND
LIABILITIES” and purporting to be a summary for A & A as of April 30,
2008. The document suggests a net worth of a negative $137,209.70.
4

8. A six-page document entitled “SUMMARY OF PARTNERSHIP
DEBT AS OF 4/30/08” and purporting to be a summary of the
partnership financial activity giving rise to a total partnership debt of
$184,678.81.

9. A copy of a cancelled check dated May 11, 2006, drawn on the A & A
Construction account for $190,000.00, and made payable to Mark B.
Tompkins, Attorney.

10. An A & A bank statement covering the period between April 22 and
May 19, 2006, and reflecting that the $190,000.00 check was cashed on
May 12, 2006.

Mr. Baldridge testified that he met Mr. Gutierrez in 2003, authorized A & A to

loan Mr. Gutierrez the funds necessary to purchase his home in May of 2006, and

personally entered into the partnership agreement on July 17, 2007. Nothing was ever

paid to A & A for the home loan, and the partnership lasted less than one year.

With regard to A & A’s claim, Mr. Baldridge testified that he was present on

May 19, 2006, when Mr. Gutierrez executed both the collateral mortgage note and the

collateral mortgage, but that he never acquired possession of the note itself on behalf

of A & A. He further testified that while his efforts to find the original note in the

records of the attorney who handled the transaction proved unsuccessful,3 he had no

evidence to suggest that the note had been given to anyone else. As further proof of

the transaction, he offered as evidence a copy of the collateral mortgage note, a

certified copy of the collateral mortgage, and a copy of a $190,000.00 check dated

May 11, 2006, made payable to Mark Tompkins, Attorney. The trial court allowed

the latter two exhibits to be introduced, but rejected his evidentiary offering of the

copy of the May 19, 2006, collateral mortgage note in lieu of the original, and refused

to allow the record to remain open for the introduction of further evidentiary filings to

cure the court’s objection to the offering. The trial court allowed A & A to introduce

evidence that, on at least one occasion, it had redeemed the property after a tax sale

when Mr. Gutierrez failed to pay the annual property taxes.

3
The attorney died before trial began.
5

Ms. Miller testified that she began working for A & A and Mr. Baldridge in the

latter part of 2006 and only became aware of the real estate transaction when she

began recreating the 2006 records in January of 2007. In that process, she came

across the $190,000.00 check made payable to Mr. Tompkins and when she

questioned Mr. Baldridge concerning the purpose of the payment, he replied that it

was a real estate loan to Mr. Gutierrez. She flagged the transaction for consideration

by the company’s accountant because she had no category in her bookkeeping records

to enter the payment.

With regard to the partnership settlement claim, Mr. Baldridge testified that

when he sent the August 13, 2008, demand letter, the amount due from Mr. Gutierrez

was $62,324.80 as evidenced by the attachments to the letter. He acknowledged being

a party to both the July 17, 2007, written partnership agreement and addendum

introduced into evidence, and asserted that these documents contained the intended

terms of the relationship created. However, he testified that Mr. Gutierrez failed to

provide any significant services to the partnership although “[h]e did round up two or

three little jobs.” According to Mr. Baldridge, in March of 2008 Mr. Gutierrez simply

stopped coming to work. He testified that his attempts to contact Mr. Gutierrez by

telephone were unsuccessful, but that ultimately Ms. Miller made contact.

Ms. Miller testified that it was the last day of April of 2008, not March of 2008

as testified to by Mr. Baldridge, when Mr. Gutierrez ceased coming to work. Several

days later she contacted him and he informed her that he had quit “because there was

no money to be made.”

Ms. Miller assisted Mr. Baldridge in compiling the financial documents

attached to the August 13, 2008, demand letter. However, the exhibits and her

testimony revealed internal contradictions concerning the calculation of the amount

owed to A & A as of April 30, 2008. The August 13, 2008, demand letter suggested

that Mr. Gutierrez’s share of liability was $62,324.80 based on some minor
6

adjustments made to the four-page exhibit introduced in evidence which purports to

show A & A’s net worth on April 30, 2008, as -$137,209.70. In direct conflict with

this calculation is the six-page exhibit also introduced in evidence which purports to

show that the total partnership debt as of April 30, 2008, was $184,678.81. Ms.

Miller acknowledged that the six-page document had not been attached to the demand

letter, but testified that the actual amount owed by Mr. Gutierrez was one half of the

larger amount, or $92,339.39. This adjustment was based on a reevaluation of some

of the debt categories. In response to questions by the trial court, she further

acknowledged that if one considered the amount set forth in the demand letter to be

the more accurate figure, it still should be reduced by $2,500.00. Further questioning

by the trial court caused Ms. Miller to acknowledge that other categories needed

adjusting and, if adjusted, would generate an increase of $2,881.00 in the amount

owed by Mr. Gutierrez.

Ms. Miller also confirmed that in the latter part of 2008 a number of limited

liability companies owned solely by Mr. Baldridge were consolidated into one

corporation: David Baldridge, Incorporated. These included A & A, as well as A & A

Insulation, LLC; Real Construction, LLC; Safehouse, LLC; and A & A Pest Control,

LLC. Ms. Miller testified that, while technically the umbrella corporation assumed all

the assets and liabilities of the limited liability companies, only A & A had any debts.

In reaching its decision to reject Mr. Baldridge’s request for reimbursement, the

trial court did not consider the discrepancies in the accounting documents. Instead,

based on its interpretation of the partnership language, the trial court concluded that

an accounting was not yet available because A & A continued to do business,

although in another name. The trial court concluded that the partnership agreement

did not provide an accounting remedy until A & A ceased to do business.

Additionally, the trial court noted that the partnership agreement provided that in the

event that either party ceased to perform his obligations within the partnership, the
7

partnership was to be considered null and void. Based on the inability of A & A to

produce an original promissory note and its further failure to show compliance with

the requirements of La.R.S. 13:3741, the trial court also rejected its claim for

judgment against Mr. Gutierrez.

Assignments of Error

In their appeals, Mr. Baldridge and A & A jointly raise five assignments of

error:

1. The trial court erred when it failed to consider A&A’s breach of
contract theory and only considered the claim for enforcement of the
note.

2. The trial court erred when it found that A&A failed to properly
establish the existence of the indebtedness owed to it by Gutierrez.

3. The trial court erred when it failed to accept into evidence a copy of
the Collateral Mortgage Note.

4. The trial court erred when it denied Baldridge’s unopposed motion to
leave the case open or to continue the trial so that proof sufficient to
establish the lost note could be presented.

5. The trial court erred in its interpretation of the Partnership Agreement
between Baldridge and Gutierrez.

OPINION

A & A’s Assignments of Error

The first four assignments of error address A & A’s claim against Mr. Gutierrez

and will be considered together. However, we choose not to consider them in the

order in which they are presented.

Assignment of Error Numbers Three and Four

These assignments of error address the trial court’s refusal to allow A & A to

introduce a copy of the collateral promissory note at trial, and its refusal to leave the

record open to allow A & A the opportunity to remedy the defect in the offering as

recognized by the trial court. We find no error in either of these assignments.

8

The trial court rejected A & A’s offering based on La.R.S. 13:3741, which

provides in pertinent part that “[i]n every case where a lost instrument is made the

foundation of a suit or defense, it must appear that the loss has been advertised within

a reasonable time in a public newspaper and proper means taken to recover the

possession of the instrument[.]” A & A acknowledges through the testimony of Mr.

Baldridge that it does not have the original note, has no knowledge of its whereabouts,

and did not comply with the advertisement provisions of La.R.S. 13:3741 before

attempting to introduce it into evidence. In fact, despite A & A’s assertion in its

petition that it was the holder and owner of a promissory note executed by Mr.

Gutierrez and secured by a collateral mortgage, Mr. Baldridge testified that he never

acquired possession of the note on behalf of A & A. The trial court did not err in

refusing to allow the copy of the collateral promissory note to be introduced into

evidence.

Nor do we find that the trial court erred in refusing to allow the record to

remain open for further filings by A & A. 4 This request for relief ignores Mr.

Baldridge’s testimony to the effect that A & A never had possession of the original

collateral promissory note. Therefore, he cannot now assert that he has lost what he

never had and it would be a vain and useless act to hold the record open.

Assignment of Error Number Two

In this assignment of error, A & A asserts that the trial court erred in

concluding that A & A failed to establish the existence of the debt owed to it by Mr.

Gutierrez. Taking this assignment in context with all the other assignments, and in

particular with the assertions in the first assignment of error, we interpret the merit of

this assignment of error within the context of its specific allegations in the pleadings.

As previously noted, those pleadings assert a cause of action based on a promissory

4
The brief on appeal suggests that this is Mr. Baldridge’s assignment of error, but it
addresses only the claim asserted by A & A.
9

note secured by the property described in the May 19, 2006, collateral mortgage

executed by Mr. Gutierrez.

The supreme court has explained the nature of the collateral mortgage as

follows:

The collateral mortgage, though now recognized by statute, is a
form of conventional mortgage that was developed by Louisiana’s
practicing lawyers and has long been recognized by Louisiana courts.
Levy v. Ford, 41 La.Ann. 873, 6 So. 671 (La.1889); Merchants' Mut. Ins.
Co. v. Jamison, 25 La.Ann. 363 (La.1873); Succession of Dolhonde, 21
La.Ann. 3, 1869 WL 4559 (La.1869). The collateral mortgage arose out
of the need for a special form of mortgage to secure revolving lines of
credit and multiple present and future cross-collateralized debts for which
there was no provision in the Civil Code. David S. Willenzik, Future
Advance Priority Rights of Louisiana Collateral Mortgages: Legislative
Revisions, New Rules, and a Modern Alternative, 55 La. L.Rev. 1, 7
(1999). The collateral mortgage was designed “to create a mortgage note
that can be pledged as collateral security for either a pre-existing debt, or
for a debt created contemporaneously with the mortgage, or for a future
debt or debts, or even for a series of debts.” Max Nathan, Jr. & H. Gayle
Marshall, The Collateral Mortgage, 33 La. L.Rev. 497 (1973). One
advantage it holds for creditors is that liabilities are ranked from the date
of the original pledge of the collateral mortgage note (assuming the
mortgage has been recorded), rather than from the date of the individual,
subsequent advances. Further, the creditor is able to secure multiple
present and future loans and obligations on a cross-collateralized basis.

This Court discussed the fundamentals of a collateral mortgage in
First Guaranty Bank v. Alford, 366 So.2d 1299, 1302 (La.1978), as
follows:

A mortgage is an accessory right which is granted to the
creditor over the property of another as security for the debt.
La.Civ.Code arts. 3278, 3284. Mortgages are of three types:
conventional, legal and judicial. La.Civ.Code art. 3286.
Within the area of conventional mortgages, three different
forms of mortgages are recognized by the Louisiana statutes
and jurisprudence: an “ordinary mortgage” (La.Civ.Code
arts. 3278, 3290); a mortgage to secure future advances
(La.Civ.Code arts. 3292, 3293); and a collateral mortgage.
See Thrift Funds Canal, Inc. v. Foy, 261 La. 573, 260 So.2d
628 (1972). Unlike the other two forms of conventional
mortgages, a collateral mortgage is not a “pure” mortgage;
rather, it is the result of judicial recognition that one can
pledge a note secured by a mortgage and use this pledge to
secure yet another debt.

A collateral mortgage indirectly secures a debt via a
pledge. A collateral mortgage consists of at least three
documents, and takes several steps to complete. First, there
10

is a promissory note, usually called a collateral mortgage
note or a “ne varietur” note. The collateral mortgage note is
secured by a mortgage, the so-called collateral mortgage.
The mortgage provides the creditor with security in the
enforcement of the collateral mortgage note.

Up to this point, a collateral mortgage appears to be
identical to both a mortgage to secure future advances and
an ordinary mortgage. But a distinction arises in the
collateral mortgage situation because money is not directly
advanced on the note that is paraphed for identification with
the act of mortgage. Rather, the collateral mortgage note
and the mortgage which secures it are pledged to secure a
debt.

366 So.2d at 1302 (emphasis in original).

Pledge is an accessory contract by which one debtor gives
something to a creditor as security for the debt. La.Civ.Code art. 3133;
Texas Bank of Beaumont v. Bozorg, 457 So.2d 667, 671 n. 4 (La.1984).
Invariably, the thing given as security for the debt is a movable, in which
case the contract is more accurately called pawn. La.Civ.Code arts. 3134
and 3135. A person may give a pledge not only for his own debt, but
also for that of another. La.Civ.Code art. 3141. The pledge secures only
that debt or debts contemplated in the contract between the pledgor and
pledgee. Alford, 366 So.2d at 1304 (quoting Durham v. First Guaranty
Bank of Hammond, 331 So.2d 563, 565 (La.App. 1st Cir.1976)); see also
Peter S. Title, Louisiana Real Estate Transactions, Second Edition, §
14.9 (2000).

A collateral mortgage is not a “pure” mortgage; instead, it
combines the security devices of mortgage and pledge into one. First
Federal Savings & Loan Ass'n v. Moss, 616 So.2d 648, 654 (La.1993). It
is important to remember that the collateral mortgage does not directly
secure a debt; instead, the collateral mortgage device “is designed to
create a mortgage note for a fictitious debt that can be pledged as
collateral security for a real debt.” Bozorg, 457 So.2d at 671; see also
David S. Willenzik, Louisiana Secured Transactions, § 2:13 (2000)
(“The borrower's mortgage secures a fictitious collateral mortgage note,
which is payable to bearer on demand. The collateral mortgage note is
then pledged under a collateral pledge agreement to secure the
borrower’s true indebtedness under one or more hand notes.”). Because
the mortgagor, after executing the collateral mortgage and the collateral
mortgage note, then pledges the collateral mortgage note as security for a
debt, usually represented by a separate hand note, the collateral mortgage
package combines the security devices of pledge and mortgage. Bozorg,
457 So.2d at 671 (citing Nathan & Marshall, The Collateral Mortgage,
33 La.L.Rev. at 498).

Diamond Services Corp. v. Benoit, 00-0469, pp. 5-9 (La. 2/21/01), 780 So.2d 367,
370-72 (footnotes omitted).

11

In the matter now before us, A & A not only failed to produce the original

collateral promissory note, but it also failed to produce the promissory note to which

the collateral promissory note should have been pledged as security. Therefore, we

find no merit in this assignment of error.

Assignment of Error Number One

In this assignment of error, A & A asserts that even if one should conclude that

it failed to meet its burden of proof regarding the cause of action raised in its

pleadings, the other evidence sufficed to support a breach of contract claim which

should have been considered by the trial court. Specifically, A & A asserts that its

prayer for “all general and equitable relief” together with the language of La.Code

Civ.P. art. 862 allows it to assert a breach of contract theory separate and apart from

the suit on note with security claim made in its petition.

In ordinary proceedings “[n]o technical forms of pleadings are required.”

La.Code Civ.P. art. 854. Still, “[a]ll allegations of fact of the petition . . . shall be

simple, concise, and direct, and shall be set forth in numbered paragraphs. As far as

practicable, the contents of each paragraph shall be limited to a single set of

circumstances.” Id. Additionally, the petition “shall contain a short, clear, and

concise statement of all causes of action arising out of, and of the material facts of, the

transaction or occurrence that is the subject matter of the litigation[.]” La.Code Civ.P.

art. 891(A) (emphasis added).

A & A argues that, notwithstanding the mandate of La.Code Civ.P. art. 891(A)

that the petition shall state all causes of action arising out of the transaction at issue,

La.Code Civ.P. art. 862 allows it to rely on the less specific language of its prayer in

allowing evidence on a cause of action not stated. Louisiana Code of Civil Procedure

Article 862 provides:

Except as provided in Article 1703, a final judgment shall grant the
relief to which the party in whose favor it is rendered is entitled, even if

12

the party has not demanded such relief in his pleading and the latter
contain no prayer for general and equitable relief.

Nevertheless, “when the party's failure to request a particular form of relief, and the

party's trial conduct, improperly and substantially prejudice its adversary's

presentation of a defense, it is not entitled to relief under this rule.” T. L. James &

Co., Inc. v. Kenner Landing Inc., 562 So.2d 914, 915 (La.1990). Louisiana Code of

Civil Procedure Article 862 has as its goal “to enable all litigants to make the same

realistic appraisal of the case, so that settlement and litigation strategy are based on

knowledge and not speculation.” Id. at 918.

In making its argument to this court that it should be able to rely on La.Code

Civ.P. art. 862 to expand its pleadings to assert a separate cause of action, A & A does

not cite the phrase “Except as provided in Article 1703. . . .” to the court. Louisiana

Code of Civil Procedure Article 1703 refers to a situation where a plaintiff is

attempting to obtain a judgment by default and provides that such a judgment “shall

not be different in kind from that demanded in the petition.” (emphasis added). While

that Article could probably be applied by analogy given the failure of Mr. Gutierrez to

appear at trial, we find La.Code Civ.P. art. 1154 to be more compelling. That Article

provides in pertinent part that “[w]hen issues not raised by the pleadings are tried by

express or implied consent of the parties, they shall be treated in all respects as if they

had been raised by the pleadings.” (emphasis added). In the matter now before us,

there was neither express nor implied consent to enlarge the pleadings because neither

Mr. Gutierrez nor his counsel was present to consent or waive objection.

We do not find that La.Code Civ.P. art. 862 supports A & A’s position on this

issue and find no merit in this assignment of error.

13

Mr. Baldridge’s Assignment of Error

This final assignment of error addresses Mr. Baldridge’s attempt to secure a

judgment for amounts he claims are due under the July 17, 2007, partnership

agreement. That agreement reads in pertinent part as follows:

[David M. Baldridge and Edward D Gutierrez] hereby enter into a
business partnership agreement as outlined below:

Both parties are working and participating individuals in A & A
CONSTRUCTION LLC, a Louisiana Limited Liability Corporation
which is registered in the State of Louisiana with DAVID M.
BALDRIDGE as the owner and registered agent of said corporation.

This agreement includes all activities of A & A Construction LLC
as well as all activities generated from A & A Insulation, REAL
Inspections and Safehouse Technologies LLC and A & A Pest control of
La.

IT IS HEREBY AGREED that all assets and liabilities owned by
A & A Construction will be shared equally by both parties excluding the
2001 Ford F250 pick-up VIN # 1FTNW20S81ED39045, the 1999 Ford
F150 pick-up VIN # 1FTRX17W4XKA25565, and the 1997 Chevrolet
S-10 pick-up VIN # 1GCCS1945V8148107.

IT IS FURTHER AGREED that any purchases and/or transactions
conducted by A & A Construction LLC and any of the aforementioned
entities in excess of $3,000.00 will be determined by both parties herein
unless either party is not available to consult prior to the need of a
decision being made.

IT IS FURTHER AGREED by both parties that this agreement
will be deemed null and void if either party herein does not perform his
equal share of the marketing of services and management of day to day
operations of said corporation and does not contribute a minimum of
thirty five (35) hours per week to the operations of said company.

IT IS FURTHER AGREED that all expenses incurred by A & A
CONSTRUCTION LLC will be deducted and profit and loss statement
will be provided before any proceeds of profits will be paid to either
party herein.

IT IS FURTHER AGREED that if A & A CONSTRUCTION LLC
should cease its operations and shut down all facilities, that a statement
of liabilities will be provided by a non-participating party in this
agreement and each party herein agrees to pay fifty percent (50%) of any
outstanding debts either through his share of any funds remaining in the
accounts of A & A CONSTRUCTION LLC and if there are no funds
available through the accounts of said company, each individual will pay
50% of the debts outstanding until all debts have been satisfied.

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In rejecting Mr. Baldridge’s claim for reimbursement, the trial court stated the

following:

Well, I’ve read the document. And, based on the document, I find
that you have failed to prove by a preponderance of the evidence that Mr.
Gutierrez, at this point, is responsible for any of the debts of A&A
Construction, because your agreement says that the partnership is going
to be nullified when the other party does not perform his share.

And the only provision for payment of outstanding indebtedness
comes when the business ceases, which there’s been no evidence that it
ceased. So I’m denying any recovery on the basis of indebtedness owed
to the partnership.

Mr. Baldridge asserts that regardless of the ongoing nature of A & A, the

partnership terminated at the end of April 2008 when Mr. Gutierrez ceased coming to

work and that this event gave rise to an accounting.

A partnership as defined by La.Civ.Code art. 2801 “is a juridical person . . .

created by a contract[.]” As such, it is to be interpreted pursuant to the rules

governing the interpretation of contracts and the principle determination “is the

determination of the common intent of the parties.” La.Civ.Code art. 2045. To that

end, “[w]hen the words of a contract are clear and explicit and lead to no absurd

consequences, no further interpretation may be made in search of the parties’ intent.”

La.Civ.Code art. 2046.

With regard membership within a partnership, La.Civ.Code art. 2818(B)

provides in pertinent part that “[a] partner also ceases to be a member of a partnership

in accordance with the provisions of the contract of partnership.” Louisiana Civil

Code Article 2826 provides that included within the ways a partnership is terminated

is the situation where it “terminates in accordance with provisions of the contract” as

well as by “the reduction of its membership to one person.” Additionally, “[w]hen a

partnership terminates, the business of the partnership ends except for the purpose of

liquidation.” La.Civ.Code art. 2828.

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We interpret the partnership agreement to mean that the partnership may be

terminated in either of two ways: (1) when A & A ceases operations and shuts down

all of its facilities, or (2) when either of the partners ceases to perform his duties under

the agreement and fails to contribute a minimum of thirty-five hours per week to the

partnership activity associated with the operation of A & A. The first means of

termination provides a specific method of satisfying the obligation to contribute to the

outstanding debts arising from the partnership operation, while the second is silent as

to how the partnership debts would be satisfied.

With regard to the first reason for termination, the trial court correctly

concluded that Mr. Baldridge could not rely on that language in the agreement

because A & A had not yet ceased operations, nor was there any evidence that it shut

down its facilities. It simply merged into another legal entity: David Baldridge,

Incorporated. The trial court read the performance requirement in conjunction with A

& A operational status and concluded that Mr. Baldridge could not maintain his action

until A & A ceased its operations and shut down its facilities even though Mr.

Gutierrez had ceased to perform pursuant to the agreement. Thus, without specifically

saying so, the trial court concluded that Mr. Baldridge did not yet have a cause of

action against Mr. Gutierrez for contribution to the debts of the partnership. La.Code

Civ.P. art. 927(A)(5). The trial court can raise the peremptory exception of no cause

of action on its own motion. La.Code Civ.P. art. 927(B).

We find, however, that the trial court erred in failing to find that the partnership

terminated when Mr. Gutierrez ceased contributing thirty-five hours per week to its

operation through A & A. Louisiana Civil Code Article 2050 provides that “[e]ach

provision in a contract must be interpreted in light of the other provisions so that each

is given the meaning suggested by the contract as a whole.” Thus, the error before us

is not a factual error governed by the manifest error/clearly wrong standard of review

as set forth in Rosell v. ESCO, 549 So.2d 840 (La.1989); contractual interpretation
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questions are questions of law which require a de novo review of the evidence

presented. Boykin v. PG Industries, Inc., 08-117 (La.App. 3 Cir. 6/18/08), 987 So.2d

838, writ denied, 08-1640 (La. 10/31/08), 994 So.2d 537. Our de novo review of the

matter before us leads us to conclude that Mr. Baldridge has failed to meet his burden

of proof.

According to the partnership agreement, Mr. Gutierrez’s failure to perform his

obligations rendered the partnership agreement “null and void.”5; the agreement fails

to provide the method of liquidation in the event a partner fails to perform. “In the

absence of contrary agreement, a partnership is liquidated in the same manner and

according to the same rules that govern the liquidation of corporations.” La.Civ. Code

art. 2834. The specific procedure for the liquidation of a corporation is found in Part

XIV of the Louisiana Corporation Law, La.R.S. 12:141, et seq. Neither party to this

litigation made any effort to comply with that procedure. In fact, the difficulty in

evaluating the claims of each litigant is that they have ignored, in both operation and

termination, the juridical personal nature of their partnership, of A & A, and of the

other three limited liability companies listed in the partnership agreement. They have

treated these entities simply as vehicles of convenience and flow-through entities for

their own business activities. However, there are no procedural exceptions before us

on appeal, and we will treat the remaining issue as the parties have – a dispute

between two litigants that happens to flow through a number of juridical persons.

When Mr. Baldridge forwarded Mr. Gutierrez the August 13, 2008, demand

letter, he claimed a balance owed of $62,324.80. Although there is some confusion

concerning exactly what was attached to the letter, he did attach at least one page

purporting to justify the balance demanded. On that single sheet of paper, he did not
5
This represents an unfortunate phraseology choice in the partnership agreement. Black’s
Law Dictionary defines this phrase as “a common redundancy, and states that the use of the
adjective “null” refers to something as “[h]aving no legal effect: without binding force; VOID.” To
interpret the contract in this context would lead to an absurd consequence. As mandated by La.Civ.
Code art. 2045, we look to the common intent of the parties and interpret this phrase to mean that the
partnership agreement is terminated at this point rather than being declared of no legal effect.
17

detail the individual liabilities of A & A, but combined them and asserted one half of

the company’s negative net worth was $68,604.80, and that after some minor

adjustments shown on the attachment, Mr. Gutierrez’s share was $62,324.80, the

amount asserted in the demand letter.

Ms. Miller testified that an additional four-page document was also attached to

the demand letter which better itemized the sources of the figure representing A & A’s

negative net worth. In addition to a more detailed summary sheet, the second

document included a page setting forth the individual accounts payable (totaling

$179,530.06), a page setting forth the total accounts receivable as well as cash on

hand (totaling $9,205.46), and a page listing A & A’s equipment and product

inventory ($33,115.00). However, Ms. Miller also testified that an additional six-page

document exists, which was prepared sometime after the four-page document and

purports to show payments made by A & A on the debts listed on that four-page

document. The preparation of this document resulted in an adjustment of A & A’s

negative net worth upward to $184,678.82, thereby adjusting Mr. Gutierrez’s share

upward to $92,339.39.

The record clearly establishes that A & A was a functioning company long

before the partnership was formed, yet we are provided with no base line by which to

evaluate the difference between the company worth on July 17, 2007, and its worth on

April 30, 2008. Further, no effort has been made by Mr. Baldridge to differentiate

between the A & A expenses associated with the partnership and its other endeavors,

nor did he set forth the activity of the other three companies listed in the partnership

agreement despite the fact that two of the three are listed under the accounts

receivable page of the four-page exhibit. In fact, that same page suggests that an

accounts receivable item from A & A to itself exists.

The four-page exhibit lists accounts payable in the amount of $179,530.06 as of

April 30, 2008, and a total of $9,205.46 as cash on hand and accounts receivable on
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the same date. However, the six-page exhibit not only suggests significant upward

changes to the accounts payable, but also asserts that over the next year, A & A paid

in excess of $76,000.00 on these debts while asserting that on April 30, 2008, it had

slightly over $9,000.00 in liquid assets on hand. There is no explanation in the record

of what caused this financial windfall over such a short period of time in what is

purported to be a failed company. Simply stated, we find that Mr. Baldridge failed to

present sufficient evidence to support his claim.

DISPOSITION

For the foregoing reasons, we affirm the trial court’s judgment in favor of

Edward D. Gutierrez and against David M. Baldridge, dismissing Mr. Baldridge’s

claims in full. We assess all costs of this appeal to David M. Baldridge.

AFFIRMED.

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