Pot of Gold, Incorporated v. Sampak, L.L.C. , 441 F. App'x 278 ( 2011 )

Case: 10-30725 Document: 00511605961 Page: 1 Date Filed: 09/19/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 19, 2011
No. 10-30725 Lyle W. Cayce
Clerk
POT OF GOLD, INCORPORATED,
Plaintiff–Appellee
v.
SAMPAK, L.L.C.; BETTY CLAIRE SAMUELS
Defendants–Appellants
Appeal from the United States District Court
for the Western District of Louisiana
Case No. 1:09-cv-00501-JDK
Before JOLLY, HAYNES, and GRAVES, Circuit Judges.
PER CURIAM:*
This case presents a protracted property dispute between a brother, Joe
Pasternack, Jr. (“Joe, Jr”. or “Pot of Gold”),1 and a sister, Betty Claire
(Pasternack) Samuels (“Betty” or “Sampak”),2 that has been on-going for nearly
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
1
Pot of Gold, Inc. is a Louisiana Corporation that was formed by Joe Pasternack, Jr.
and his son, Joe Pasternack, III on August 28, 1991.
2
Sampak, L.L.C. is a Mississippi Limited Liability Company formed on December 28,
1999 by Betty Claire (Pasternack) Samuels and her three children: Harold C. Samuels, Jr.,
Joseph B. Samuels, and Pamela Ann Samuels.
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thirty years. In light of an amendment to Louisiana Civil Code article 543 and
the Louisiana Supreme Court’s decision in Campbell v. Pasternack Holding Co.,
Inc., 625 So. 2d 477 (La. 1993), Pot of Gold filed suit in state court seeking to
partition by licitation certain property held in indivision with Sampak.3 Pot of
Gold’s suit was subsequently removed to federal court by Sampak. Sampak,
thereafter, filed its motion for judgment on the pleadings. The magistrate judge
held that Pot of Gold’s cause of action was not barred by Louisiana’s doctrine of
res judicata because Pot of Gold’s present cause of action did not exist at the
time of the two prior suits. Aggrieved, Sampak appealed.
I. Background
In 1963, Joseph Pasternack died testate. He was survived by his wife,
Agatha Pasternack, and two children: Joe Pasternack, Jr., and Betty Claire
Pasternack. Joseph Pasternack left his half of the community property to be
divided between his two children subject to a usufruct4 in favor of Agatha. In
1979, Agatha died testate. Agatha left her half of the community property to the
grandchildren in two separate trusts – one trust for Joe Pasternack, III and one
trust for Betty’s three children (“Samuels children”). The Samuels children’s
interest in the property was subject to a usufruct in favor of Betty.
In the early 1980's, Joe, Jr. filed his first suit in Louisiana state court
against Betty seeking to partition by licitation5 certain property held in
indivision. Pasternack v. Samuels, 406 So. 2d 290, 291 (La. Ct. App. 1981), cert.
granted, 411 So. 2d 453 (La. 1982), aff’d, 415 So. 2d 211 (La. 1982). After a trial
3
This is the third suit filed by Pot of Gold against Sampak seeking to partition
property by licitation.
4
A “usufruct” is “ [a] right for a certain period to use and enjoy the fruits of another’s
property without damaging or diminishing it, but allowing for any natural deterioration in the
property over time.” BLACK’S LAW DICTIONARY 1684 (9th ed. 2009).
5
“Licitation” is Louisiana’s legal term for judicial sale of property held in common.
BLACK’S LAW DICTIONARY 1005 (9th ed. 2009).
2
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on the merits, the trial court found that the property in question was not
susceptible to partition in kind, but was subject to partition by licitation. Id.
Louisiana’s Third Circuit Court of Appeal agreed that the property was not
subject to partition in kind, but held that the land subject to a usufruct was
prohibited by law from being partitioned by licitation. Id. at 293-94. Joe, Jr.
appealed to the Louisiana Supreme Court. The sole issue presented for the
Court’s determination was “whether the owner of an undivided interest in full
ownership of property subject to an outstanding usufruct may demand partition
by licitation.” Pasternack, 415 So. 2d at 213. Relying on Louisiana Civil Code
article 543, which prohibited partition by licitation for property subject to a
usufruct, even if there was a person who had both a usufructuary interest and
an ownership interest, the Court concluded that the property could not be
partitioned by licitation and affirmed the judgment of the court of appeal. Id. at
213-14.
One year after the Louisiana Supreme Court’s decision in Pasternack, the
Louisiana legislature amended article 543, which now provides: “[w]hen property
is held in indivision, a person having a share in full ownership may demand
partition of the property in kind or by licitation, even though there may be other
shares in naked ownership or usufruct.” LA. CIV. CODE ANN. art. 543 (2010).
After the amendment, Joe, Jr., individually, as the trustee for Joe, III, and as co-
executor of his mother’s estate, filed a second action in Louisiana state court
against Betty for partition by licitation. Succession of Pasternack, 484 So. 2d
305, 305 (La. Ct. App. 1986), cert. denied, 487 So. 2d 443 (La. 1986). The sole
issue in that case was “whether the 1983 revision of C.C. Art. 543 was curative,
remedial, or procedural in nature, such as to render it applicable to cases and/or
property rights arising before the effective date of the revision.” Id. The trial
court held that the amendment to article 543 was not intended to be applied
retroactively. Id. at 306. Therefore, the trial court dismissed Joe, Jr.’s demand.
3
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Id. Joe, Jr. timely appealed. Louisiana’s Third Circuit Court of Appeal affirmed
the judgment of the trial court based on the Louisiana Supreme Court’s decision
in Cahn v. Cahn, 468 So. 2d 1176 (La. 1985), which explicitly stated that
amended article 543 could not apply retroactively. Id. In 1986, the Louisiana
Supreme Court denied writ of certiorari. Succession of Pasternack, 487 So. 2d
at 443.
In 1993, the Louisiana Supreme Court reconsidered its Cahn decision in
Campbell, 625 So. 2d 477.6 In Campbell, the Court explicitly overruled Cahn,
finding that the amendment to article 543 was procedural and thus could be
applied retroactively. Id. at 478. Thereafter, Pot of Gold filed suit against
Sampak and Betty Claire Samuels, individually, in Louisiana state court seeking
to partition the property by licitation. Sampak timely removed the case to
federal court based on diversity jurisdiction. On August 10, 2009, Sampak filed
its motion for judgment on the pleadings, arguing that Louisiana’s doctrine of
res judicata barred Pot of Gold’s present cause of action.7
On September 21, 2009, the magistrate judge issued its ruling on
Sampak’s motion for judgment on the pleadings. The magistrate judge found
that Pot of Gold’s present cause of action did not exist at the time of the two
prior suits. It found that a cause of action did not exist until after the Louisiana
legislature amended article 543 and the Louisiana Supreme Court recognized
that the amendment should apply retroactively. Therefore, the magistrate judge
denied Sampak’s motion for judgment on the pleadings.
6
Campbell did not involve any of the property here at issue. Campbell did, however,
involve the same parties as this case, but as defendants. In that case, the Louisiana Supreme
Court found that the decision in Cahn “may have been driven by equitable or ‘policy’
considerations. But it was not legally correct, we now conclude.” Campbell, 625 So. 2d at 482.
Thus, the Campbell court explicitly overruled Cahn. Id. at 482-83.
7
The parties also filed their consent to proceed to trial before a magistrate judge on
a stipulated set of facts.
4
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On July 7, 2010, the magistrate judge entered its judgment in favor of Pot
of Gold and against Sampak and Betty Claire Samuels.8 The magistrate judge
then ordered the property to be sold, without appraisal, and the profits
partitioned. Sampak timely appealed.
II. DISCUSSION
A. Standard of Review
“The res judicata effect of a prior judgment is a question of law that this
court reviews de novo.” Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559,
571 (5th Cir. 2005). To determine whether Pot of Gold’s claim is barred by res
judicata, we apply Louisiana’s doctrine of res judicata. See In re Keaty, 397 F.3d
264, 270 (5th Cir. 2005) (“When giving preclusive effect to a state court
judgment, this court must apply the preclusion rules of that state.”); see also St.
Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 436 (5th Cir. 2000) (When
determining the preclusive effect of a state court judgment in a subsequent
federal lawsuit, “a federal court must refer to the preclusion law of the state in
which judgment was rendered.”).
B. Res Judicata
As an initial matter, the parties agree – and Fifth Circuit precedent
requires – that Louisiana’s pre-1991 res judicata law applies to this case. St.
Paul Mercury Ins. Co., 224 F.3d at 436 (“[T]he preclusive effect of judgments
arising from suits filed before [January 1, 1991], such as the present matter, is
determined by the law in effect prior to 1991.”). Louisiana’s doctrine of res
judicata applicable to this case states:
The authority of the thing adjudged takes place only with respect to
what was the object of the judgment. The thing demanded must be
the same; the demand must be founded on the same cause of action;
8
On December 30, 2009, pursuant to a pretrial and status conference via telephone,
the magistrate judge determined that the court would render its judgment based upon the
record and the parties’s stipulations.
5
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the demand must be between the same parties, and formed by them
against each other on the same quality.
LA. REV. STAT. ANN. § 13:4231(1985). Thus, for res judicata to apply, the urging
party must show: (1) an identity of the thing demanded; (2) an identity of the
parties; and (3) an identity of the cause of action. St. Paul Mercury Ins. Co., 224
F.3d at 437.
The doctrine of res judicata is stricti juris9 and any doubt concerning the
doctrine’s application is to be resolved against its application. Eugene v.
Ventress, 220 So. 2d 94, 98 (La. 1969). Res judicata’s preclusive effect will not
obtain, however, unless all its necessary elements are established beyond all
question. Rhodes v. O’Connor-Valls Lab. Inc., 470 So. 2d 334, 335 (La. Ct. App.
1985). Only the third element is at issue in this case.10
This case presents the question of whether the “cause of action” is the
same in the present case as in the 1986 judgment. A great deal of caution is
required when addressing the question of identity of cause of action, particularly
because there is substantial room for confusion between the common-law concept
of a “cause of action” and the civil law concept of “cause.” The Fifth Circuit’s
decision in St. Paul Mercury Ins. Co. addresses this distinction at length:
As for the third requirement of identity of cause of action, Louisiana
courts have concluded that the phrase is a mistranslation of the
French and that it really refers to the civil concept of cause. Cause
is the juridical or material fact which is the basis for the right
claimed or the defense pleaded. It may be likened to grounds,
theory of recovery, or the principle upon which a specific demand is
9
“Stricti juris” is defined as “[o]f strict right of law; according to the exact law, without
extension or enhancement in interpretation. . . . 2. Roman law. (Of a contract) required to be
interpreted strictly on its terms, regardless of circumstances.” BLACK’S LAW DICTIONARY 1558
(9th ed. 2009).
10
According to the record, the parties stipulated that the parties and property involved
in the present suit are the same as the parties and property in the prior two suits.
6
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grounded, and it is a narrower concept than the common law’s cause
of action.
We can distinguish between cause and cause of action by
gauging their effects under res judicata. After final judgment, a
cause of action includes all grounds in support of it, and together
they merge into the judgment so that relitigation of the cause of
action on different grounds is barred. But because cause is roughly
analogous to theory of recovery, a second suit on a different ground
is not precluded. As a result, with minor exceptions, Louisiana’s
law of res judicata does not recognize the common law “might have
been pleaded” rule.
224 F.3d at 437-38 (internal citations omitted) (citing, among other authorities,
Mitchell v. Bertolla, 340 So. 2d 287, 291 (La. 1976)). The proper inquiry as to
identity of cause under pre-1991 Louisiana res judicata law is, therefore,
whether the juridical facts and theory of recovery are the same as between the
present case and the prior case. If there is any divergence, then there is no
identity of cause and the present suit is not barred.
Clearly, the present case and the 1986 case involved: joint ownership in
indivision, the presence of a usufruct, the usufructuary’s refusal to agree to
partition by licitation, and a basis for relief grounded in the right to partition
under article 543. The only three things that have changed since the 1986 are:
(1) a transfer of ownership interests to successors, (2) the passage of time, and
(3) the courts’ interpretation of article 543.
The first of these changes is addressed by the identity of parties doctrine,
not the identity of cause/juridical facts issue, and is no bar to the application of
res judicata here. The second change – the passage of time – is better addressed
within the construct of “identity of the thing demanded” than as a changed
juridical fact. That is, the passage of time here does not affect the rights of the
parties as such; but it might conceivably change the character of the thing
demanded in the present suit. That is not to say, of course, that the passage of
time is categorically not a juridical fact; but rather that it is not here. In the
7
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present case, though, the passage of time does not affect the theory of recovery
or availability of relief under the statute: that is, it is not part of the “basis of the
right claimed” in either the present or the past suit. Mitchell, 340 So. 2d at 291.
The remaining possible “juridical fact” is the change in the courts’
interpretation of the law. Louisiana cases strongly suggest that a change in
judicial interpretation of a statute is not a new juridical fact that saves a case
from the application of res judicata where it would otherwise apply. See, e.g.,
McClendon v. State of La. Dep’t of Transp. & Dev., 642 So. 2d 157, 160 (La.
1994). In McClendon, the plaintiffs had previously lost a land condemnation suit
brought by the state; in the first suit, the district court awarded plaintiffs
compensation for their land and interest from the date of the taking until paid.
The court of appeals, however, concluded that a statute restricting the date from
which interest was to be awarded to the date of judicial demand – not the date
of the taking – applied retroactively and reduced the amount of interest
awarded. After the judgment became final, the Louisiana Supreme Court held
that the new statute establishing the date from which interest is to be calculated
should not be applied retroactively. The plaintiffs filed a new suit against the
state for additional compensation. After first concluding that the pre-1991 law
applied, the court held quite expressly that, under the civilian law, “[a] claim
that a prior adjudication was incorrect, because of an erroneous interpretation
of law, or because of reliance on a legal principle later overruled, is immaterial
to the application of res judicata in a following proceeding so long as the [other]
requirements of res judicata are met. That this Court subsequently overruled
the first McClendon case precedent . . . is of no consequence.” Id. at 160
(citations omitted). Determining that a new judicial interpretation of the law
would be a changed or new juridical fact would clearly be irreconcilable with
McClendon.
8
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Based on McClendon, we view the 1986 judgment as conclusively correct
in all respects, and thus there is no proper way to consider a change in the law
as part of the res judicata analysis. Under this view, when Pot of Gold
previously sued for partition by licitation, its claim was rejected on the grounds
that the law was not retroactive; when Pot of Gold makes the same demand now,
we are obliged to give conclusive effect to that prior determination precisely as
the Louisiana Supreme Court did in McClendon. Therefore, because there is an
identity of cause between the litigation resulting in the 1986 judgment and the
present case, we conclude that Louisiana’s doctrine of res judicata applies.
III. CONCLUSION
Therefore, based on the foregoing, the district court’s decision is
REVERSED. Because the doctrine of res judicata applies to bar Pot of Gold’s
present suit, we find that judgment should be RENDERED in favor of Sampak.
REVERSED and RENDERED.
9