Ogea v. Merritt

130 So. 3d 888, 2013 WL 6439355, 2013 La. LEXIS 2774
Supreme Court of Louisiana·Decided December 10, 2013·No. No. 2013-C-1085·Published·Cited by 91 cases

Opinions

WEIMER, Justice.

|,We granted the writ application in this case to address the extent of the limitation of liability afforded to a member of a limited liability company (LLC). This matter evaluates the correctness of the lower courts’ rulings, which found the sole member of an LLC personally liable for defects in a home that was constructed pursuant to a contract between the LLC and a landowner. After reviewing the record and the controlling legal principles, we reverse the lower courts’ judgment of personal liability and render judgment in favor of the LLC member, dismissing the landowner’s claims against him.1

FACTUAL AND PROCEDURAL BACKGROUND

In 2007, Mary P. Ogea signed a contract captioned “Custom Home Building Agreement” for Merritt Construction, LLC, to build a home on an undeveloped parcel of land she owned. On behalf of the LLC, its sole member, Travis Merritt, signed the contract. The contract did not specifically describe the type of foundation to be 12provided for the home. However, either the stock plans referenced in the contract specified, or the parties otherwise mutually understood, that the home was to be built on a slab-on-grade foundation.

After executing the contract, Ms. Ogea asked Mr. Merritt if she could have a friend prepare the site for the foundation. Mr. Merritt replied that there would be no warranty if Ms. Ogea’s friend prepared the site, so Ms. Ogea abandoned that idea. Mr. Merritt himself operated the bulldozer to prepare the dirt “pad” upon which the slab would be poured; a subcontractor then poured the concrete slab foundation. Mr. Merritt’s operation of the bulldozer would later become a focal point of this case.

After the construction work had advanced well past the point of building the foundation and framing the home, Ms. Ogea hired another concrete contractor to pour a driveway and patio. This concrete contractor informed Ms. Ogea that he believed there were problems with the concrete work for the home’s foundation. Ms. Ogea then hired a licensed engineer, Charles Norman, to inspect the structure. Mr. Norman conducted several inspections and concluded there were indeed significant problems with the slab foundation. Mr. Norman observed deviations from acceptable flatness standards, excessive and deep cracks, and a chain wall of inadequate thickness. Mr. Norman also found the slab in the kitchen area to be unlevel.

Ms. Ogea notified the LLC of the problems with the foundation. Based on her consultations with Mr. Norman, who believed the problems with the foundation [893]*893were beyond eeonomically-feasible repairs, Ms. Ogea requested a refund of all monies she paid to the LLC (approximately $94,000) and sought demolition of the unfinished home. The LLC did not reply to the refund request. Ms. Ogea did not make the final installment payment called for in the contract, and the LLC ceased all work on the home.

| sIn April 2008, Ms. Ogea filed suit against the LLC and against Mr. Merritt individually. Ms. Ogea sought to recover the money she had expended for the home, plus other damages under the New Home Warranty Act (La. R.S. 9:3141-3150), as well as under various theories relating to construction defects. Mr. Merritt, individually, filed a peremptory exception of no cause of action, which the district court denied. The LLC filed an answer denying liability and asserted a reconventional demand in the amount of $8,805 for unpaid work on the home.2 The matter proceeded to a bench trial. Counsel for the LLC and Mr. Merritt withdrew, and Mr. Merritt appeared pro se at the trial.

Following trial, the district court rendered judgment against both Mr. Merritt, personally, and the LLC “in solido ” for various items of damages totaling $247,117.11. The district court found that Mr. Merritt personally performed some of the foundation work and failed to properly supervise the subcontractor who actually poured the concrete, providing grounds for Mr. Merritt’s personal liability. The district court explained:

Under a number of theories of responsibility, Louisiana Civil Code Article 2762 is the liability of a contractor for damages due to badness of workmanship; Louisiana Civil Code Article 2769, contractor’s liability for non-compliance with contract; redhibition under Civil Code Article 2520; and further the New Home Warranty Act under Title 9:3141 through:3150 et seq., are inclusive It is noted under looking at the requirements of the New Home Warranty Act, definition of builder would fall under both the definition or the position that Mr. Travis Merritt was in personally, as well as the corporation [sic], or . LLC.... Under one or more of the theories I do find that the damages were caused by either Travis Merritt and/or Merritt Construction, LLC.... It is noted that early on in the construction Ms. Ogea asked to have another individual actually do the dirt work and build the pad. Her testimony being uncontra-dicted was that Mr. Merritt said there would be no warranty if he did not do the actual work. Thereafter he [evidently took] control of the heavy equipment, provided the pad, doing that work Lpersonally, based on his own testimony.... Today in court during the presentation of the defendant’s case in chief is the first time that there was a mention of insurance, after some four-and-a-half years post-contract....
In looking at the totality of those actions I would find that Mr. Travis Merritt would be personally responsible for any actions, in addition to Merritt Construction. I do find ... that the home would be deemed a total loss, and would so find at this time, and that that total loss was, in fact, caused by the action of Travis Merritt, both individually and as Merritt Construction, LLC, in the handling or pouring of the slab....
[T]he handling of the pouring of the slab ... is what the main defect is arising. It was the job of Merritt Construction, [894]*894whether it was poured by them or not, to oversee and make sure that it was done within the standards that would be expected under the law.

The district court also found Mr. Merritt had perpetrated a fraud, citing the fact Mr. Merritt did not provide proof of insurance to Ms. Ogea’s counsel until trial. The court apparently believed litigation might have been avoided if Mr. Merritt had provided proof of insurance earlier, and the court noted that Mr. Merritt might not be able to discharge his personal liability in bankruptcy with a judgment against him based on fraud.

Both Mr. Merritt and the LLC appealed. The court of appeal reduced the amount of the general damage award from $221,262.11 to $128,302.71, but affirmed the imposition of personal liability on Mr. Merritt. Ogea v. Merritt, 12-1028, pp. 16 & 19 (La.App. 3 Cir. 2/6/13), 109 So.3d 516, 527 & 528. Focusing on La. R.S. 12:1320, the court of appeal ruled: “In our view, the legislature limits the personal liability of an LLC member for the debts, obligations, or liabilities of the LLC unless the debt, obligation, or liability at issue is the result of the member’s own personal actions. ...” Id., 12-1028 at 7, 109 So.3d at 522. Thereafter, Mr. Merritt and the LLC together sought a writ from this court; the crux of their application being that the LLC alone, and not Mr. Merritt personally, should be liable.

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Ogea v. Merritt, 130 So. 3d 888, 2013 WL 6439355, 2013 La. LEXIS 2774 (La. 2013).

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