GROSJEAN v. GROSJEAN, 45,529 (La.App. 2 Cir. 10/13/10)

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As can be seen therefore by this definition for "possession," the "detention" of a "corporeal thing" is essential. Therefore, the incorporeal thing or incorporeal movable in this action cannot be corporeally possessed or detained by another. Likewise, within the remedy afforded by the revendicatory action, "delivery of the thing" to the plaintiff and the ending of the detention of the thing by the defendant indicate the owner's recovery of a corporeal movable in kind.

Accordingly, we do not find that Robert may assert that Lola's claims of ownership of a partnership interest of her deceased husband and the present interest in the LLC were lost by acquisitive prescription due to any adverse possession of those incorporeal movables. We like-wise do not find that plaintiffs claim falls squarely under the revendicatory action as defined in Article 526. Nevertheless, plaintiffs petition expressly asserts a claim for declaratory judgment for the recognition of her ownership of the incorporeal rights in dispute. That claim of ownership may not be lost by acquisitive prescription. Likewise, under Article 481, since "ownership exists independently of any exercise of it and may not be lost by nonuse," we find that plaintiffs suit has set forth a timely cause of action against Robert for a judgment declaring the ownership of the incorporeal movable.

Moreover, even if Robert might be considered as having exercised "possession" of these incorporeal movables, his possession against his co-heirs and co-owners could only commence when he demonstrated sufficient overt and unambiguous acts that gave notice to plaintiff. La.C.C. art. 3478.

Nevertheless, the asserted recognition of Lola's ownership in the interests or shares in the Partnership and LLC entities concerns more than just the adverse claim of Robert, but also the contractual agreements for the formation and operation of those entities and the mutual understanding of the partners/members. Plaintiff has named the LLC as a defendant, and the judgment now in dispute purports to bind the LLC for the recognition of her ownership in the defendant entity and that of the unnamed parties. Given the plaintiffs power as usufructuary under Article 566 for the preservation of the incorporeal rights in dispute and the limited liability feature of our limited liability company law (La.R.S. 12:1320), we do not find that the peremptory exception of nonjoinder of these parties is warranted.

We also note that four of the five children gave testimony at trial which was favorable to Lola's claims.

Discussion

The complex issues raised by appellants concern not only the transactions and intentions of the Grosjean family but also the transactions and intentions of the former partners of the Partnership and the membership of the LLC. While certain legal issues are presented, the trial court's judgment rests largely upon its findings of fact.

It is well settled that a court of appeal may not set aside a trial court's or a jury's finding of fact in the absence of "manifest error" or unless it is "clearly wrong," and where there is conflict in the testimony, reasonable evaluations of credibility and reasonable inferences of fact should not be disturbed upon review, even though the appellate court may feel that its own evaluations and inferences are reasonable. Rosell v. ESCO, 549 So.2d 840 (La. 1989); Menard v. Lafayette Ins. Co., 09-1869 (La.3/16/10), 31 So.3d 996; Brown v. Brian Riley Bar Transport, LLC, 43,326 (La. App.2d Cir. 6/11/08), 986 So.2d 901. Where two permissible views of the evidence exist, the fact finder's choice between them cannot be manifestly wrong. Rosell, supra; Cole v. State Department of Public Safety and Corrections, 01-2123 (La.9/4/02), 825 So.2d 1134. Where the fact finder's conclusions are based on determinations regarding credibility of the witnesses, the manifest error standard demands great deference to the trier of fact, because only the trier of fact can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener's understanding and belief in what is said. Rosell, supra.

The initial factual and legal controversy which the parties debate concerns the ownership of Victor's interest in the Partnership, which he apparently acquired as a community property interest during his marriage with Lola. Lola insists that the "partnership interest at issue belonged to Victor and Lola," which would have implications regarding that interest both before and after Victor's death. Robert asserts that Victor's "partnership interest did not devolve to his heirs." These arguments about a "partnership interest" are resolved by a review of the codal provisions on community property and the law of partnership. In the law, there is a clear distinction between one's membership in the partnership as a partner and his partnership interest or value in which his spouse and heirs may have rights.

There is no dispute in this record that Victor and Lola first acquired rights in the Partnership in Victor's name as their community asset. Nevertheless, it is also clear that only Victor, and not Lola, was one of the nine named partners identified in the 1986 "Second Amendment and Restatement of Palmetto Farms Partnership." Before his death, his partnership share decreased to one-tenth with nine other partners in the Partnership. As such, Civil Code Article 2352 shows that the management right of this community asset of the Grosjeans was exclusively Victor's and that Lola could not "affect the legal relationship of the partner spouse and the other partners" of Palmetto Farms Partnership. Official Revision Comment, La.C.C. art. 2352.

La.C.C. art. 2352 provides, in pertinent part, as follows:
A spouse who is a partner has the exclusive right to manage, alienate, encumber, or lease the partnership interest.

After the Civil Code revision of the law of partnership in 1980, a substantial change in the law concerned the continuity of the partnership as a separate and distinct entity despite events such as death or bankruptcy that might terminate an individual partner's membership in the partnership. La.C.C. arts. 2801 and 2818, and Official Revision Comments, 1980. Upon the cessation of a partner's membership, which in this case resulted by Victor's death, the partnership entity continues in the absence of any contrary provision of the partnership agreement, and the following code articles apply:

La.C.C. art. 2823: The former partner, his successors, or the seizing creditor is entitled to an amount equal to the value that the share of the former partner had at the time membership ceased.

La.C.C. art. 2824: If a partnership continues to exist after the membership of a partner ceases, unless otherwise agreed, the partnership must pay in money the amount referred to in Article 2823 as soon as that amount is determined together with interest at the legal rate from the time membership ceaaes.

In 1989 at the time of Victor's death, there was no contractual provision governing the Partnership which would alter or prevent the operation of Articles 2823 and 2824. Therefore, this law would supplement the partners' contract for the consequences of the death of a partner. The result in 1989 at Victor's death would be that each of the nine remaining partners' interests would have increased from one-tenth to one-ninth, while the Partnership itself would owe an amount equal to the value of Victor's former one-tenth share. It is this result which Robert and the LLC, as the successor to the debts of the Partnership, now assert. The LLC, which assumed the Partnership's debts, has also urged prescription regarding any claim by Lola and Victor's heirs for the accounting obligation owed by the Partnership for Victor's share under Article 2824.

While the suppletive law of Articles 2823 and 2824 supports the appellants' view of the status of the Partnership following Victor's death, the facts support the trial court's conclusion that Victor's partnership interest continued after his death. The Partnership's tax filings after Victor's death show that ten partnership shares were continued. The Partnership never attempted to follow the dictates of Article 2824 by determining the value of Victor's share and offering that amount to Lola and Victor's heirs. Instead, Contractors, Inc. was billed for the three Grosjean partnership shares for the annual assessments of the Partnership. Contractors, Inc., as the family corporate entity under Lola's ownership control, acted as the representative for the family in the maintenance of the three family shares within the Partnership. In 1995, at the time of the execution of the termination documents by all partners, the Partnership still reported ten partnership shares without any assertion that Victor's death had reduced the Partnership membership to nine. Finally, while the 1995 documentation lists Robert's name for a one-tenth share in the Partnership, there was no showing by the appellants that following Victor's death the nine remaining partners conveyed a one-tenth interest to Robert in return for a new value contributed by Robert to the Partnership.

A partnership is created by contract. La.C.C. art. 2801. Since the Palmetto Farms Partnership involved the ownership of immovable property from its inception, the Partnership's creation was by written contract, and the record reveals the initial filing of the contract of partnership with the secretary of state in 1983. See La.C.C. art. 2806. Aside from issues surrounding a partnership's ownership of immovable property as addressed in Civil Code Article 2806, a writing is not essential to a partnership agreement. Lang v. Sproull, 45,208 (La.App.2d Cir. 4/28/10), 36 So.3d 407; Porter v. Porter, 36,007 (La.App.2d Cir. 6/12/02), 821 So.2d 663; Butler v. Sudderth, 00-1950 (La.App. 5th Cir. 4/24/01), 784 So.2d 125, writ denied, 01-1905 (La.10/5/01), 799 So.2d 485; Diaz v. Kelley, 562 So.2d 21 (La.App. 5th Cir. 1990); Harris v. Wallette, 538 So.2d 728 (La.App. 2d Cir. 1989). Unless the law prescribes a certain formality for the intended contract, offer and acceptance may be made orally, in writing, or by action or inaction that under the circumstances is clearly indicative of consent. La.C.C. art. 1927. Agreements legally entered into have the effect of law upon the parties thereto, and may be modified or abrogated by the mutual consent of the parties. Snedegar v. Noel Estate, Inc., 438 So.2d 677 (La.App. 2d Cir. 1983), writ denied, 442 So.2d 459 (La. 1983). The law is clear that written contracts may be modified by oral contracts and the conduct of the parties. Rhodes Steel Bldgs., Inc. v. Walker Const. Co., 35,917 (La.App.2d Cir. 4/3/02), 813 So.2d 1171; Williams Engineering, Inc. v. Goodyear, 480 So.2d 772 (La.App. 5th Cir. 1985); Maryland Cas. Co. Southern Equipment, Inc. v. Watson Marine Repair Cleaning Service, Inc., 416 So.2d 194 (La.App. 1st Cir. 1982), unit denied, 421 So.2d 249 (La. 1982).

In Diaz, supra, the court recognized that the plaintiff had become a partner in an existing partnership by merely paying a capital contribution to the partnership without any other written evidence of her membership as a partner. The court found that she was admitted as a new partner by her payment and the action of the partnership in receiving the payment, and the partnership was so modified.

From these principles, the trial court's conclusion that Victor's partnership interest remained as a separate partner's share in the Partnership after his death is supported by law and fact. While the Partnership could have insisted upon the cessation of Victor's membership share in the Partnership under Civil Code Articles 2823 and 2824, it did not. By the implications of the Partnership's actions, Victor's share was recognized as remaining in the Grosjean family, and the suppletive legal effect of the codal provisions which would otherwise govern the Partnership was modified. None of the remaining nine partners testified to the contrary, as each was content to remain as a one-tenth partner in the Partnership through the time of the Partnership's termination in 1995.

Regarding the use of Robert's name in association with Victor's share of the Partnership after 1989, the Fourth Amendment to the Partnership quoted above shows that a partner's share owned other than by a single individual required the designation of one person or "member" for the enjoyment of the exclusive right to utilize the land and other assets of the Partnership. Thus, while the Partnership had partners that were business entities, a single "member" representing such partner utilized the property for hunting and related privileges. As Victor's partnership share was first administered by his succession and later placed into the possession of his Wife and heirs, the fact that Robert, one of the heirs, was identified with that interest as the "member" participant for his family's share did not represent an aberration in the conduct of the Partnership's affairs between 1989 and 1995.

Accordingly, we reject the appellants' contentions that Victor's partnership interest did not survive after his death as a partner's share recognized by the Partnership and owned by Lola and Victor's heirs. We further reject Robert's contention that because of Contractors, Inc.'s payment of annual assessments for this disputed interest and the identification of the interest in Robert's name, the community asset of Robert and Lola became owned by either the company or Robert. There was sufficient testimony of the commingling of Victor and Lola's personal matters with their closely held corporation before and after Victor's death to support the trial court's conclusion that the partnership share which was first acquired in Victor's name in 1986 remained his personal asset and that of his wife and heirs, including Robert, until the termination of the Partnership in 1995.

Next, regarding the end of the Partnership in 1995 and the formation of the LLC, Robert argues:

(1) There was no merger or conversion that occurred between the two entities;

(2) Lola was never a member of the LLC; and

(3) Although Robert was the named member for the disputed interest of the LLC, he held possession of the membership for Contractors, Inc. and therefore, in any event, acquired the interest in his later purchase of the company.

While the LLC also argues Lola's lack of membership in the LLC, it asserts alternatively that the judgment should be amended to reflect that the LLC interests of Lola and the other non-party children be that of non-member owners/assignees in accordance with our statutory provisions for the assignment of interests in the LLC. La.R.S. 12:1330 and 1332(A).

Any technical label of merger, conversion or buy-out which might be placed upon the 1995 transaction between the Partnership and the LLC has primary relevance for understanding the mutual intent of the founding members of the newly formed limited liability company. See La.R.S. 12:1304(A). With the former Victor Grosjean partner share having been allowed to remain as an interest in the Partnership as discussed above, the intention of the new members for the treatment of all the former partners' interests upon their creation of the LLC is relevant. Since the LLC did not exist as a separate entity before the 1995 transactions, there was no prior capitalization for its ownership and membership independent of its transactions with the Partnership. The nine partners' shares which are not disputed became equivalent membership and ownership interests in the LLC. The asset holdings and liabilities of the Partnership became the initial assets and liabilities of the new entity.

Contrary to Robert's assertion, the Partnership was not dissolved by the liquidation process under Civil Code Articles 2832, et seq., with its debts paid to its creditors. There was likewise not a sale of the Partnership assets to the LLC and a distribution of sale proceeds to the partners. Instead, under the circumstances presented, the corporation code's definition of a business conversion appears applicable. As La.R.S. 12:1601(1) provides:

"Conversion" means the continuance of a domestic entity of one type as a domestic entity of another type.

From the non-legal analysis of Dr. Chidlow, there was no intent on behalf of the partners to force anyone out of the organization, and simply, a better business entity was chosen for the group's endeavor.

As a result of the 1995 LLC transaction, the underlying ownership of the disputed one-tenth interest involved somewhat ambiguously both Robert and Lola. Robert's name was listed as the initial member in the LLC. Yet, Robert was a co-owner with his family members of his father's estate, and like the former limitation of the Partnership for ten participating members, there were only ten members of the LLC. Significantly, Lola's home address was listed on the initial report with the secretary of state as the registered address of the LLC. This reflects that the 30% ownership interest (three memberships) of the Grosjean family was retained in the LLC. Finally, Lola executed a personal guaranty for the debts of the LLC on November 19, 1996.

Under these circumstances, from the perspective of the seven founding members of the LLC who were not Grosjean-related parties, their intentions and actions in dealing with Robert and in naming him as a member in the LLC does not exclude their understanding of him as a co-owner acting on behalf of the ownership of his family as derived through Victor Grosjean. Cf. La.C.C. art. 802 (providing that as against third persons, a co-owner has the right to use and enjoy the thing as if he were the sole owner). Their acceptance of Lola's continued involvement with the debts of the LLC does not reflect any intent contrary to her continuing ownership. The trial court's ruling therefore reflects this measure of the intentions of such founding members of the LLC for the entity's creation, and its fact determination is not manifestly in error. Accordingly, we find that the ownership of Victor's former partnership interest remained owned by his wife and children as a one-tenth interest in the LLC.

Regardless of this conclusion about Lola's and her children's ownership of economic rights in the LLC, member management and privileges can be separate from the ownership of the economic rights for an interest in a limited liability company under Louisiana law. For example, the provisions of the corporation code addressing an assignment of a member's interest in a limited liability company or a member's death reveal, in pertinent part, as follows:

La.R.S. 12:1330. Assignment of membership interest

A. Unless otherwise provided in the articles of organization or an operating agreement, a membership interest shall be assignable in whole or in part. An assignment of a membership interest shall not entitle the assignee to become or to exercise any rights or powers of a member until such time as he is admitted in accordance with the provisions of this Chapter. An assignment shall entitle the assignee only to receive such distribution or distributions, to share in such profits and losses, and to receive such allocation of income, gain, loss, deduction, credit, or similar item to which the assignor was entitled to the extent assigned.

B. Unless otherwise provided in the articles of organization or an operating agreement, the pledge of or granting of a security interest, lien, or other encumbrance in or against any or all of the membership interest of a member shall not cause the member to cease to be a member or to have the power to exercise any rights or powers of a member.

C. Unless otherwise provided in a written operating agreement and except to the extent assigned by agreement, until an assignee of a membership interest becomes a member, the assignee shall have no liability as a member solely as a result of such assignment.

La.R.S. 12:1332. Right of assignee to become a member.

A. Except as otherwise provided in the articles of organization or a written operating agreement:

(1) An assignee of an interest in a limited liability company shall not become a member or participate in the management of the limited liability company unless the other members unanimously consent in writing.

(2) Until the assignee of an interest in a limited liability company becomes a member, the assignor shall continue to be a member.

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La.R.S. 12:1333. Powers of estate of a deceased or incompetent member.

If a member who is an individual dies or a court of competent jurisdiction adjudges him to be incompetent to manage his person or his property, the member's membership ceases and the member's executor, administrator, guardian, conservator, or other legal representative shall be treated as an assignee of such member's interest in the limited liability company. . . .

Professor Kalinka identifies these changes in a member's relationship to the limited liability company caused by assignment or death as dissociation events. Susan Kalinka, Dissociation of a Member from a Louisiana Limited Liability Company: The Need for Reform, 66 La. L. Rev. 365 (2006). She notes that the dissociation statutes for the limited liability company respect "the principle of delectus personae, that partners have the right to choose their associates." Id. at 370.

Thus, while we do not find any intention of the seven (non-Grosjean) founding members of the LLC to end the ownership rights of Lola in the conversion of the Partnership into the LLC, the documentation for the LLC clearly shows that Robert was the named member for that interest. The appellants are correct that Lola was never included as a member of the LLC. However, under these unique circumstances, we find that the formation of the LLC could occur with Robert's representation as the named LLC member of the family's co-owned interest in the former partnership. The result (as though Lola and her children were treated as assignees of this interest in the LLC) is not prohibited under the Louisiana limited liability company law as shown by the above provisions concerning the assignment of a member's interest in a limited liability company. Accordingly, while we affirm the trial court's recognition of Lola's and her family's ownership of the LLC interest, we amend the judgment to reflect that the voting member of the LLC for the Grosjean family interest is Robert. Such amendment also resolves any claim of Robert and Contractors, Inc. for recovery of assessments paid to the LLC subsequent to Robert's purchase in 2005 of Contractors, Inc. from his mother.

None of the parties presented into evidence any operating agreement for the LLC which might address further an interest owned in the LLC in the manner now determined by this judgment. However, the statutory protection afforded assignees of an interest in a limited liability company under La.R.S. 12:1330(A) should now apply to Lola's interest.

Moreover, the record does not specifically identify the amount of assessments from the LLC or payments on the debts of the LLC by Robert or Contractors, Inc. after Lola's sale of the business in 2005.

Finally, we further reject Robert and Contractors, Inc.'s arguments that the disputed interest was acknowledged by Lola in 2005 as an asset of Contractors, Inc., so that any claim to that interest was sold to Robert and his sister, Vickie Cox, as a part of Lola's stock sale of the company. At the time of that transaction, the 2004 balance sheet for Contractors, Inc. did list in its assets as "Investment — Palmetto" an asset entry with a $376,400 value. Robert claims that this entry was for all three of the family's memberships in the LLC. On the records of the LLC, those memberships stood in the names of Robert, Contractors, Inc. and GG C. In May 2005, preceding Lola's sale of her ownership of the business, the membership of Contractors, Inc. was sold for $125,000 and the sale proceeds were used by Contractors, Inc. to have a bank CD in Lola's name freed as a security pledge for the business. Before this suit, in 2007, the GG C membership in the LLC was sold to a third party. The proceeds of that sale did not go to Contractors, Inc., but to the three family members who owned GG C. The membership standing in the name of Robert was never changed in the records of the LLC to reflect its ownership in Contractors, Inc. Last, the testimony of Lola and Ronald Cox, whose wife, Vickie, was also purchasing her mother's stock, does not reflect that the evaluation of the company's assets for the sale price to Lola specifically included the value of the membership which was originally purchased by Victor.

The trial court's ruling was that two of the three family memberships in the LLC were included as assets only for the enhancement of the value of Lola's closely held company for the company's bonding capacity. Such commingling of assets did not represent a transfer to Contractors, Inc. of either the former Victor Grosjean membership in Palmetto Farms or the GG C membership. Our review of the record supports that conclusion and the conclusion that Lola did not sell the disputed membership as a part of her stock sale of the business.

Conclusion

Based upon the above reasoning, the judgment of the trial court recognizing the ownership of Lola and her children of the disputed interest in the LLC is amended to recognize that Robert remains as the member of the LLC with the economic rights in the LLC being owned by Lola and her children in the manner set forth in the judgment. As amended, the judgment is affirmed. Costs of appeal are assessed to Robert E. Grosjean and Grosjean Contractors, Inc.

JUDGMENT AMENDED AND, AS AMENDED, AFFIRMED.

APPLICATION FOR REHEARING Before BROWN, WILLIAMS, STEWART, GASKINS and CARAWAY, JJ.

Rehearing denied.