Baker v. Baker

27 So. 3d 958, 9 La.App. 3 Cir. 507, 2009 La. App. LEXIS 1893, 2009 WL 3681663
CourtLouisiana Court of Appeal
DecidedNovember 4, 2009
DocketNo. CA 09-507
StatusPublished

This text of 27 So. 3d 958 (Baker v. Baker) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Baker v. Baker, 27 So. 3d 958, 9 La.App. 3 Cir. 507, 2009 La. App. LEXIS 1893, 2009 WL 3681663 (La. Ct. App. 2009).

Opinion

GREMILLION, Judge.

|]The defendants, John Burr Baker, Jr. (Johnny) and Alta Baker, appeal the judgment of the trial court in favor of the plaintiffs, Wilma Young Baker and the Succession of John Burr Baker, Sr.1 For the following reasons, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In August 2006, Wilma, the mother of Johnny, and the Succession of John, Sr. filed a petition for the return of $1,592,500 in loans made to her son and his wife, Alta, [961]*961prior to her husband’s death in May 2003.2 Johnny and Alta vehemently deny that the monies were loans and instead claim that they were donations. Extensive litigation followed, including a petition filed by Johnny to have his mother disinherited. Shortly before the trial commenced, Johnny filed a renewed motion on peremptory exception of prescription and for directed verdict. A four-day trial was held over a time period from January 2008 through August 2008. In its January 2009 judgment, the trial court found that $1,492,500 were loans that had to be repaid by Johnny and Alta. The defendants filed various exceptions following the trial, and the plaintiffs filed a motion to strike testimony from the defendants’ post-trial memorandum which was ruled inadmissable at trial. The defendants’ exceptions were denied, and the plaintiffs’ motion to strike was granted. Johnny and Alta now appeal and assign as error:

1. The trial court’s findings that the monies given were loans as opposed to gifts or reimbursements.
2. The trial court’s finding that the total amount of money |2received was $1,492,500 because that number is an arithmetic error.
3. The trial court’s finding that the claims had not prescribed.
4. Alternatively, if all claims had not prescribed, the trial court’s finding that an acknowledgment only to one creditor interrupted prescription as to the claims of all creditors.
5. The trial court’s exclusion of defendants’ material witness and allowance of plaintiffs’ “surprise” material witness.
6. The trial court’s refusal to consider their defense that their alleged debts had been extinguished by specific written and notarized renunciations of those debts.

DISCUSSION

John, Sr. was a successful rice farmer prior to his death. In 1994, John, Sr. entered into a mineral lease in which he held a 20% royalty interest. Prior to the commencement of drilling of the well, he donated portions of his 20% royalty as follows: 5% to his wife, 3% to his son Dr. Tim Baker, 3% to his daughter Beryl Baker Wade, and 3% to the defendant, Johnny, Jr. Since 1994, the well has produced millions of dollars of mineral royalties for all members of the family. Beginning in October 1999, and continuing through March 2003, the deceased made over forty transfers of funds to the defendants totaling over 1.4 million dollars.

The four-day trial consisted of substantial testimony and documentary evidence. Brent Young, a tax lawyer from Shreveport, testified that Wilma is his aunt and John, Sr. was his uncle. He testified that he was very close with his aunt and uncle, socializing with them quite often and even traveling with them on occasion. He stated that he visited them at their home in Gueydan between eight and ten times per year. He testified that he discussed business and investment matters with John, Sr. routinely. Young went on to state that he had a close relationship with Beryl and IsTim, but not Johnny.

Young testified that he prepared tax returns and various legal instruments for many years for his aunt and uncle. He also began the succession proceedings upon John, Sr.’s death. Young next examined some checks that were admitted into [962]*962evidence. Young said that the checks were issued by either John or Wilma to Johnny individually or Johnny and his wife. He said the total of the checks issued to Johnny and/or Alta was $1,592,500. Young testified that Wilma and John, Sr. indicated that the funds represented loans, and that this information was subsequently confirmed in conversations with Beryl, Tim, and Johnny. Young testified that he had multiple conversations over the years with John, Sr. and Wilma in which the loans were discussed. He even advised the Bakers to use a pad of hand notes in order to have some documentation of the loans.

Young then went on to describe situations in which Johnny acknowledged the nature of the loans. Young said that over lunch Johnny commented on how successful his businesses were and John, Sr. commented that they would not be without his “help.” Young said that Johnny stated that “he was going to care of it,” and would either pay Beryl and Tim directly to even them out or issue stock to them in his business ventures.

Young then discussed the handwritten ledger prepared by John, Sr. listing all of the individual loans made to Johnny and/or Alta. At the point in the ledger in which the total had reached $834,000, John, Sr. placed a handwritten notation stating, “I hope this is all.” Young testified that seven checks were missing from the ledger as they had been issued shortly before John, Sr.’s death. Young then discussed a document he prepared in January 2004 that he sent to Wilma, Johnny,' |4Tim, and Beryl following John, Sr.’s death. The document extensively discusses the tax implications involved in the “cash advances” and “loans” made to Johnny and/or Alta and various scenarios that could occur regarding repayment of the loans. The first scenario addresses “what the final distribution [of John, Sr.’s estate] will look like if Johnny and Beryl repay their loans in full.” The second, if neither repays their loans and the taxes are paid out of the assets of the estate, and the third, a partial repayment. The document addresses a separate loan made to Beryl in the amount of $500,000. Young then discusses the attached Estate Tax Return that he prepared for the federal government which lists the advances totaling $1,592,500 given to Johnny and Alta. Further, the loan made to Beryl was also listed as a “demand loan” or debt due to the decedent. Shortly thereafter, Young received notice that any correspondence should be sent to a CPA, Glenn Thibodeaux, rather than Johnny and Alta. In a letter to Young from Thibodeaux dated February 4, 2004, Thi-bodeaux stated, in reference to the letter Young sent to him:

The letter did not address the loans made to Beryl and Johnnie. Your recent letter INCORRECTLY refers to the interest accruing on those loans. Since no promissory notes exist, at best, these are non-interest bearing loans. The gift loan provisions are an IRS device only, and do not apply to the actual balance of the loans. The IRS rules impute the interest income as phantom income to the recipient and phantom expense to the payer. The resulting phantom gift to the payer is subject to gift tax, paid by the donor. Perhaps you need to also advise your clients about the unpaid gift taxes that are outstanding, and you should also reduce the value of the gross estate by the amount of interest you incorrectly claim is an asset of the estate.

Young testified that a letter that he composed and dated July 15, 2004, along with the succession proceedings, continued to refer to the indebtedness owed by Johnny [963]*963and Beryl.3

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Bluebook (online)
27 So. 3d 958, 9 La.App. 3 Cir. 507, 2009 La. App. LEXIS 1893, 2009 WL 3681663, Counsel Stack Legal Research, https://law.counselstack.com/opinion/baker-v-baker-lactapp-2009.