STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
05-976
EMILSEN AMADOR, ET AL.
VERSUS
JOHN F. REGGIE, ET AL.
**********
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF ACADIA, NO. 82388 HONORABLE MARILYN CARR CASTLE, DISTRICT JUDGE
MARC T. AMY JUDGE
Court composed of Ulysses Gene Thibodeaux, Chief Judge, Marc T. Amy, and Glenn B. Gremillion, Judges.
AFFIRMED.
James E. Diaz, Sr. Onebane Law Firm Post Office Box 3507 Lafayette, LA 70502 (337) 233-6200 COUNSEL FOR DEFENDANT/APPELLEE: American Exporters of Rice, Inc.
Robert H. Matthews 830 Union Street, Suite 400 New Orleans, LA 70112 (504) 523-4542 COUNSEL FOR PLAINTIFFS/APPELLANTS: Fredy Amador Siervo Amador Martha Amador Emilsen Amador Emmett C. Sole Stockwell, Sievert, Viccellio, Clements & Shaddock, LLP Post Office Box 2900-2900 Lake Charles, LA 70602 (337) 436-9491 COUNSEL FOR DEFENDANTS/APPELLEES: Barry J. Heinen Barry J. Heinen, APLC
James H. Gibson Allen & Gooch Post Office Box 3768 Lafayette, LA 70502-3768 (337) 291-1300 COUNSEL FOR DEFENDANTS/APPELLEES: Scott M. Hawkins Hawkins & Villemarette Chris Villemarette V. Jacob Garbin
Randy M. Guidry Durio, McGoffin, Stagg & Ackerman Post Office Box 51308 Lafayette, LA 70505 (337) 233-0300 COUNSEL FOR DEFENDANTS/APPELLEES: John F. Reggie, Inc. John F. Reggie AMY, Judge.
The plaintiffs were the sole shareholders of a corporation that pursued the
purchase of a rice mill. Surrounding events resulted in a default judgment entered
against the corporation and, eventually, its bankruptcy. The plaintiffs brought this
suit in their individual capacity in an attempt to recover funds invested in the
corporation. The suit was dismissed after the trial court sustained the defendants’
exception of no right of action. The plaintiffs appeal. For the following reasons, we
affirm.
Factual and Procedural Background
The plaintiffs, Fredy Amador and Siervo Amador, along with their wives, filed
this suit seeking return of their $860,000 investment in American Exporters of Rice,
Inc. (hereinafter American Exporters). The plaintiffs were the sole shareholders in
the corporation which, in 2002, sought to purchase the Liberty Rice Mill in Kaplan,
Louisiana. Through events which the plaintiffs recite in their brief, but upon which
the resolution of this case does not turn, John Reggie, a contractor engaged by
American Exporters to perform repairs to the rice mill, obtained a lien against the
facility. Litigation concerning the propriety of the lien ensued as did a breach of
contract suit filed by Mr. Reggie. Although Fredy Amador was served with notice
of the petition in the suit, an answer was not filed on behalf of American Exporters.
Mr. Reggie confirmed a default judgment against American Exporters in the breach
of contract suit in the amount of $1,059,101.15. Following the entry of this
judgment, the rice mill was closed, and American Exporters sought bankruptcy
protection. Subsequently, the trial court granted a motion for new trial and ultimately
vacated the default judgment. The Amadors filed the instant matter in October 2004. Mr. Reggie, along with
John F. Reggie, Inc., and various attorneys were named as defendants.1 The Amadors
asserted that, as a result of the bankruptcy, they lost their $860,000 investment in
American Exporters. They also contended that due to the mandated reorganization,
they lost their one hundred percent shareholder status. Finally, the plaintiffs sought
damages for emotional distress and mental anguish.
The defendants responded to the petition with exceptions of no right of action
and no cause of action. In short, the defendants asserted that the Amadors had no
right, personally, to pursue a claim for the damages sought. Rather, the defendants
contended that the right of action is that of the corporation. Following a hearing, the
trial court granted the defendants’ exceptions of no right of action. The Amadors’
claim against these defendants was dismissed. The Amadors appeal that
determination.
Discussion
The Amadors acknowledge the general precept that shareholders have no right
of action to enforce rights of a corporation. See Glod v. Baker, 02-988 (La.App. 3
Cir. 8/06/03), 851 So.2d 1255, writ denied, 03-2482 (La. 11/26/03), 860 So.2d 1135.
However, they assert that they have an independent right to recover damages
associated with their investment in the corporation. The Amadors argue in their brief
that “[w]hatever monies the Amadors lost and whatever ownership interest they lost
does not belong to the corporation.” They further assert that “[t]he corporation’s
claim is for its lost profits occasioned by the defendants’ misconduct. The Amadors’
1 The defendants relevant to the no right of action maintained by the trial court are John F. Reggie, Inc., John F. Reggie, Scott M. Hawkins, Esq., Chris Villemarette, Esq., Jacob Garbin, Esq., Hawkins & Villemarette, L.L.C., formerly known as Hawkins, Garbin & Villemarette, L.L.C., formerly known as Hawkins & Garbin, L.L.C.
2 claims for the loss of their investment, their 100% ownership interest in the
corporation, and their severe emotional distress and mental anguish are clearly
individual, separate and distinct claims from those of American Exporters.”
The peremptory exception of no right of action is provided by La.Code Civ.P.
art. 927(A)(5). The exception serves to determine whether a plaintiff belongs to the
class of persons that the law provides with the cause of action advanced in the
petition. Turner v. Busby, 03-3444 (La. 9/9/04), 883 So.2d 412. “The exception of
no right of action assumes that the petition states a valid cause of action for some
person and questions whether the plaintiff in the particular case is a member of the
class that has a legal interest in the subject matter of the litigation.” Indus. Cos., Inc.
v. Durbin, 02-0655, p. 12 (La. 1/28/03), 837 So.2d 1207, 1216. On appeal, a trial
court’s ruling on an exception of no right of action is considered de novo. Boyer v.
Stric-Lan Cos. Corp., 04-872 (La.App. 3 Cir. 11/10/04), 888 So.2d 1037.
Having reviewed the record, we conclude that the trial court did not err in
maintaining the defendants’ exceptions of no right of action. Although styled by the
plaintiffs as a suit related to their investment and the mental anguish associated with
the loss of their investment, the claim is clearly derivative of the alleged corporate
loss. In Glod, 851 So.2d at 1264, a case advanced by all parties, this court explained
that: “The rule in Louisiana is that a shareholder has no separate or individual right
of action against third persons, including directors and officers of a corporation, for
wrongs committed against or causing damage to the corporation.” The court further
referenced a number of cases recognizing “[t]he rule that a right of action for
mismanagement or fraud that causes loss to the corporation is an asset of the
corporation and may only be asserted secondarily by a shareholder through a
3 shareholder’s derivative suit[.]” Id. at 1265. Neither does the plaintiffs’ status as one
hundred percent shareholder indicate that this is a suit that the plaintiffs can bring
individually. Rather, even in instances where one person is the sole shareholder of
a corporation, the right of action is retained by the corporation. Id.
In this case, the alleged damage was sustained by American Exporters. The
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STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
05-976
EMILSEN AMADOR, ET AL.
VERSUS
JOHN F. REGGIE, ET AL.
**********
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF ACADIA, NO. 82388 HONORABLE MARILYN CARR CASTLE, DISTRICT JUDGE
MARC T. AMY JUDGE
Court composed of Ulysses Gene Thibodeaux, Chief Judge, Marc T. Amy, and Glenn B. Gremillion, Judges.
AFFIRMED.
James E. Diaz, Sr. Onebane Law Firm Post Office Box 3507 Lafayette, LA 70502 (337) 233-6200 COUNSEL FOR DEFENDANT/APPELLEE: American Exporters of Rice, Inc.
Robert H. Matthews 830 Union Street, Suite 400 New Orleans, LA 70112 (504) 523-4542 COUNSEL FOR PLAINTIFFS/APPELLANTS: Fredy Amador Siervo Amador Martha Amador Emilsen Amador Emmett C. Sole Stockwell, Sievert, Viccellio, Clements & Shaddock, LLP Post Office Box 2900-2900 Lake Charles, LA 70602 (337) 436-9491 COUNSEL FOR DEFENDANTS/APPELLEES: Barry J. Heinen Barry J. Heinen, APLC
James H. Gibson Allen & Gooch Post Office Box 3768 Lafayette, LA 70502-3768 (337) 291-1300 COUNSEL FOR DEFENDANTS/APPELLEES: Scott M. Hawkins Hawkins & Villemarette Chris Villemarette V. Jacob Garbin
Randy M. Guidry Durio, McGoffin, Stagg & Ackerman Post Office Box 51308 Lafayette, LA 70505 (337) 233-0300 COUNSEL FOR DEFENDANTS/APPELLEES: John F. Reggie, Inc. John F. Reggie AMY, Judge.
The plaintiffs were the sole shareholders of a corporation that pursued the
purchase of a rice mill. Surrounding events resulted in a default judgment entered
against the corporation and, eventually, its bankruptcy. The plaintiffs brought this
suit in their individual capacity in an attempt to recover funds invested in the
corporation. The suit was dismissed after the trial court sustained the defendants’
exception of no right of action. The plaintiffs appeal. For the following reasons, we
affirm.
Factual and Procedural Background
The plaintiffs, Fredy Amador and Siervo Amador, along with their wives, filed
this suit seeking return of their $860,000 investment in American Exporters of Rice,
Inc. (hereinafter American Exporters). The plaintiffs were the sole shareholders in
the corporation which, in 2002, sought to purchase the Liberty Rice Mill in Kaplan,
Louisiana. Through events which the plaintiffs recite in their brief, but upon which
the resolution of this case does not turn, John Reggie, a contractor engaged by
American Exporters to perform repairs to the rice mill, obtained a lien against the
facility. Litigation concerning the propriety of the lien ensued as did a breach of
contract suit filed by Mr. Reggie. Although Fredy Amador was served with notice
of the petition in the suit, an answer was not filed on behalf of American Exporters.
Mr. Reggie confirmed a default judgment against American Exporters in the breach
of contract suit in the amount of $1,059,101.15. Following the entry of this
judgment, the rice mill was closed, and American Exporters sought bankruptcy
protection. Subsequently, the trial court granted a motion for new trial and ultimately
vacated the default judgment. The Amadors filed the instant matter in October 2004. Mr. Reggie, along with
John F. Reggie, Inc., and various attorneys were named as defendants.1 The Amadors
asserted that, as a result of the bankruptcy, they lost their $860,000 investment in
American Exporters. They also contended that due to the mandated reorganization,
they lost their one hundred percent shareholder status. Finally, the plaintiffs sought
damages for emotional distress and mental anguish.
The defendants responded to the petition with exceptions of no right of action
and no cause of action. In short, the defendants asserted that the Amadors had no
right, personally, to pursue a claim for the damages sought. Rather, the defendants
contended that the right of action is that of the corporation. Following a hearing, the
trial court granted the defendants’ exceptions of no right of action. The Amadors’
claim against these defendants was dismissed. The Amadors appeal that
determination.
Discussion
The Amadors acknowledge the general precept that shareholders have no right
of action to enforce rights of a corporation. See Glod v. Baker, 02-988 (La.App. 3
Cir. 8/06/03), 851 So.2d 1255, writ denied, 03-2482 (La. 11/26/03), 860 So.2d 1135.
However, they assert that they have an independent right to recover damages
associated with their investment in the corporation. The Amadors argue in their brief
that “[w]hatever monies the Amadors lost and whatever ownership interest they lost
does not belong to the corporation.” They further assert that “[t]he corporation’s
claim is for its lost profits occasioned by the defendants’ misconduct. The Amadors’
1 The defendants relevant to the no right of action maintained by the trial court are John F. Reggie, Inc., John F. Reggie, Scott M. Hawkins, Esq., Chris Villemarette, Esq., Jacob Garbin, Esq., Hawkins & Villemarette, L.L.C., formerly known as Hawkins, Garbin & Villemarette, L.L.C., formerly known as Hawkins & Garbin, L.L.C.
2 claims for the loss of their investment, their 100% ownership interest in the
corporation, and their severe emotional distress and mental anguish are clearly
individual, separate and distinct claims from those of American Exporters.”
The peremptory exception of no right of action is provided by La.Code Civ.P.
art. 927(A)(5). The exception serves to determine whether a plaintiff belongs to the
class of persons that the law provides with the cause of action advanced in the
petition. Turner v. Busby, 03-3444 (La. 9/9/04), 883 So.2d 412. “The exception of
no right of action assumes that the petition states a valid cause of action for some
person and questions whether the plaintiff in the particular case is a member of the
class that has a legal interest in the subject matter of the litigation.” Indus. Cos., Inc.
v. Durbin, 02-0655, p. 12 (La. 1/28/03), 837 So.2d 1207, 1216. On appeal, a trial
court’s ruling on an exception of no right of action is considered de novo. Boyer v.
Stric-Lan Cos. Corp., 04-872 (La.App. 3 Cir. 11/10/04), 888 So.2d 1037.
Having reviewed the record, we conclude that the trial court did not err in
maintaining the defendants’ exceptions of no right of action. Although styled by the
plaintiffs as a suit related to their investment and the mental anguish associated with
the loss of their investment, the claim is clearly derivative of the alleged corporate
loss. In Glod, 851 So.2d at 1264, a case advanced by all parties, this court explained
that: “The rule in Louisiana is that a shareholder has no separate or individual right
of action against third persons, including directors and officers of a corporation, for
wrongs committed against or causing damage to the corporation.” The court further
referenced a number of cases recognizing “[t]he rule that a right of action for
mismanagement or fraud that causes loss to the corporation is an asset of the
corporation and may only be asserted secondarily by a shareholder through a
3 shareholder’s derivative suit[.]” Id. at 1265. Neither does the plaintiffs’ status as one
hundred percent shareholder indicate that this is a suit that the plaintiffs can bring
individually. Rather, even in instances where one person is the sole shareholder of
a corporation, the right of action is retained by the corporation. Id.
In this case, the alleged damage was sustained by American Exporters. The
record indicates that it was American Exporters, not the plaintiffs personally, that
entered into the contract with Mr. Reggie. Furthermore, Mr. Reggie’s suit named
American Exporters as the defendant in the suit which later resulted in the default
judgment entered against it. Furthermore, as alleged in the plaintiffs’ petition, the
default judgment caused the cessation of operations at the rice mill and, in turn
American Exporters’ bankruptcy. The claims and any damages associated with these
actions are those of the corporation.
The plaintiffs advance Glod for the proposition that in some circumstances, a
shareholder may have a right of action for a personal loss. The plaintiffs further
reference a portion of Glod, 851 So.2d at 1266, which states that “a shareholder may
have a right of action for a personal loss if the cause of action is based on breach of
a contract between the shareholder and the corporation and its directors.” However,
in its discussion on this point, the court in Glod repeatedly recognized that such a
personal right of action only exists in the event that a loss is not suffered by the
corporation. As stated above, the corporation sustained a loss due to the default
judgment and the resulting bankruptcy.
Finally, we address the plaintiffs’ assertion that they have a right of action for
mental anguish and distress damages associated with the defendants’ complained of
conduct. In L&L Industries, Inc. v. Progressive National Bank, 535 So.2d 1156, 1158
4 (La.App. 2 Cir. 1988), the second circuit denied such a claim by sole shareholders,
noting that the wrongful acts alleged “were all directed towards [the corporation], not
Mr. and Mrs. Lott as individuals. A person cannot recover in tort for mental anguish
resulting from injuries suffered by another.” The court reiterated that “if a
corporation has sustained a loss then only that corporation can sue to recover it.” Id.
As in the second circuit case, all of the alleged wrongful conduct of the defendants
was directed toward the American Exporters, not the plaintiffs individually.
For these reasons, the plaintiffs’ arguments on appeal lack merit.
DECREE
The judgment of the trial court is affirmed. All costs of these proceedings are
assigned to the plaintiffs-appellants, Emilsen Amador, Fredy Amador, Martha
Amador, and Siervo Amador.