Jennifer Diane Nunez v. Pinnacle Homes, L.L.C. and Sua Insurance Company , 180 So. 3d 285 ( 2015 )

Supreme Court of Louisiana
FOR IMMEDIATE NEWS RELEASE NEWS RELEASE #050
FROM: CLERK OF SUPREME COURT OF LOUISIANA
The Opinions handed down on the 14th day of October, 2015, are as follows:
BY GUIDRY, J.:
2015-C -0087 JENNIFER DIANE NUNEZ v. PINNACLE HOMES, L.L.C. AND SUA INSURANCE
COMPANY (Parish of Cameron)
For the reasons set forth above, the judgment of the court of
appeal affirming the trial court’ judgment in favor of the
plaintiff is reversed insofar as it finds the individual member
of the L.L.C. personally liable. Judgment is hereby rendered in
favor of the defendant, Mr. Lenard, in his individual capacity as
a member of the L.L.C., dismissing all claims against him.
REVERSED; JUDGMENT RENDERED.
JOHNSON, C.J., dissents and assigns reasons.
10/14/15
SUPREME COURT OF LOUISIANA
No. 2015-C-0087
JENNIFER DIANE NUNEZ
VERSUS
PINNACLE HOMES, L.L.C. and SUA INSURANCE COMPANY
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL
THIRD CIRCUIT, PARISH OF CAMERON
GUIDRY, Justice
We granted the defendants’ writ application in this case to determine
whether the lower courts erred by imposing personal liability on the sole member
and manager of a limited liability company (“L.L.C.”). The issue presented
concerns the scope of the narrow professional duty exception to the general rule of
limited liability for members, managers, employees, and agents of an L.L.C. set
forth in La. Rev. Stat. 12:1320. We find the plaintiff failed to show the defendant
member of the L.L.C. owed her a professional duty outside the confines of the
contract. We further find the defendant was not personally liable to the plaintiff
for his negligent or wrongful acts. For the reasons set forth below, we reverse the
rulings of the lower courts.
FACTS
On January 8, 2008, Jennifer Diane Nunez (“Mrs. Nunez”) and Pinnacle
Homes, L.L.C. (“Pinnacle”), entered into a cost-plus contract (“the contract”) for
the construction of a home in Cameron Parish. Allen Lenard (“Mr. Lenard”), a
state licensed residential and commercial construction contractor, signed the
contract in his capacity as the sole member of Pinnacle. The contract provided that
1
the work would comply with all applicable national, state, and local building codes
and laws. The Cameron Parish Police Jury issued a permit requiring that the base
flood elevation for Mrs. Nunez’s home be 10 feet above sea level, one foot higher
than the base flood elevation required by FEMA, which is 9 feet above sea level.
After ordering the post-construction elevation certificate necessary to secure
flood insurance, Mrs. Nunez was informed by Accu-Line Surveying, Inc., that her
house did not meet the elevation required under the permit and the flood insurance
rate maps for Cameron Parish. As the trial court found, Mr. Lenard failed to
properly supervise or to calculate the proper elevation of Mrs. Nunez’s property.
The post-construction elevation of the house is 8.66 feet above sea level, and the
lowest elevation of machinery or equipment serving the residence is 8.10 feet
above sea level. Because the house was built on a concrete slab, the estimated cost
to raise it to the required base flood elevation is $201,600.
PROCEDURAL HISTORY
On July 28, 2009, Mrs. Nunez filed a lawsuit against Pinnacle and SUA
Insurance Co. (“SUA”) for various breaches of contract, and breach of warranty
under the New Home Warranty Act, La. Rev. Stat. 9:3141-3150. She later
amended her petition to include Mr. Lenard, in his personal and individual
capacity. She also voluntarily dismissed the claims against SUA, and amended her
petition to include American Safety Casualty Insurance Co. (“ASCI”) as
defendants.
ASCI filed a Motion for Summary Judgment on the ground of the policy’s
“Work Product” exclusion, which does not provide coverage for the contractor’s
own defective work. The trial court granted ASCI’s motion and dismissed all
claims against them.
2
Mr. Lenard and Pinnacle filed an Exception of No Cause of Action, a
Motion for Summary Judgment, and a motion for an order staying the proceedings
and ordering arbitration. Essentially, they asserted that Mrs. Nunez had no factual
or legal basis to subject Mr. Lenard to personal liability, because he was not a party
to the contract, and because Pinnacle was and has been operated as a separate
entity from Mr. Lenard. The defendants’ motions and exception were denied.
After a trial on the merits, Pinnacle was found liable for breach of contract, while
Mr. Lenard was found personally liable on the ground of professional negligence
under La. Rev. Stat. 12:1320(D). The court awarded damages in favor of Mrs.
Nunez.
Pinnacle and Mr. Lenard appealed, and a majority of the court of appeal
affirmed, finding no error in the judgment of the trial court. Nunez v. Pinnacle
Homes, L.L.C., 13-1302 (La. App. 3 Cir. 4/02/14), 135 So. 3d 1283, 1985.
Pinnacle and Mr. Lenard sought writs in this court, which were granted, and the
case was remanded to the court of appeal with instructions to consider this court’s
decision in Ogea v. Merritt, 13-1085 (La. 12/10/13), 130 So.3d 888. On rehearing,
a majority of the court of appeal again affirmed the trial court’s judgment, finding
Mr. Lenard personally liable for the failure to correctly elevate the house. Nunez v.
Pinnacle Homes, L.L.C., 13-1302, p. 7 (La. App. 3 Cir. 12/17/14), 158 So.3d 71,
76. In support of its reasoning, the court of appeal majority quoted Black’s Law
Dictionary, which defines “professional” as: “One engaged in one of the learned
professions or in an occupation requiring a high level of training and proficiency.”
Further, the majority referred to La. Rev. Stat. 39:1484, related to the chapter on
public finance, which defines “professional service,” although no mention of
3
“contractors” is made in the statute.1 Finally, the majority quoted La. Rev. Stat.
3:3804, which distinguishes between professions and occupations regulated by the
Horticulture Commission, to “conclude that professional status may extend beyond
the narrow scope of the professions enumerated” in La. Revised Statues, Title 12,
dedicated to the general law of business entities. Nunez, 13-1302 at 5-6, 158 So.3d
at 75-76. While none of the quoted statutes mentioned building contractors, the
majority below held that its “analysis of the record and the statutes regarding
licensing and regulation of contractors convinces [it] that […] Lenard was acting
as a professional with attainments in special knowledge, particularly as evidenced
by his having attained licensure from the state, as distinguished from mere skill.”
Id.While not contesting the L.L.C.’s contractual liability, Mr. Lenard and
Pinnacle sought a writ from this court, arguing the court of appeal erred by
imposing personal liability upon Mr. Lenard for breach of professional duty, on the
ground that he was an individually licensed contractor. The writ was granted to
address the scope of the exceptions to the principle of non-liability of members,
managers, employees, or agents of a L.L.C. under La. Rev. Stat. 12:1320(D).
DISCUSSION
I) General Statement of the Law
The instant case requires us to interpret and apply a statute. In our civilian
jurisdiction, when a law is clear and unambiguous and its application does not lead
to absurd consequences, the law shall be applied as written and no further
interpretation may be made in search of the intent of the legislature. La. Civ. Code
1
While it does not impact our reasoning in this case, La. Rev. Stats. 39:1481-1493 have been
repealed by Acts 2014, No. 864, § 3, eff. Jan. 1, 2015.
4
art. 9. See also La. Rev. Stat. 1:4 (“When the wording of a Section is clear and free
of ambiguity, the letter of it shall not be disregarded under the pretext of pursuing
its spirit”). The purpose of the law must nevertheless be sought when its language
is susceptible of different meanings. See La. Civ. Code art. 10. Technical words
and phrases, and such others as may have acquired a peculiar and appropriate
meaning in the law, shall be construed and understood according to such peculiar
and appropriate meaning. La. Rev. Stat. 1:3. The word “shall” is mandatory and
the word “may” is permissive. Id. Furthermore, when the words of a law are
ambiguous, their meaning must be sought by examining the text in which they
occur, and the text of the law as a whole. La. Civ. Code art. 12.
The present lawsuit was brought against a limited liability company
(“L.L.C.”) and against a member/manager thereof in his individual capacity. As
we explained in Ogea, pp. 5-6, 130 So.3d at 894-95, the personalities of an L.L.C.
and its members are wholly separate by law. See also La. Civ. Code art. 24; La.
Rev. Stat. 12:1301.2 In allowing for limited liability companies, the legislature
clearly intended to promote business in the state by limiting personal liability for
some debts incurred or acts performed on behalf of business entities. See Regions
Bank v. Ark-La-Tex Water Gardens, L.L.C., 43-604 (La. App. 2 Cir. 11/5/08), 997
2
La. Rev. Stat. 12:1301 provides in part:
(10) “Limited liability company” or “domestic limited liability company” means
an entity that is an unincorporated association having one or more members that is
organized and existing under this Chapter. No limited liability company organized
under this Chapter shall be deemed, described as, or referred to as an incorporated
entity, corporation, body corporate, body politic, joint stock company, or joint
stock association.
***
(12) “Manager” or “managers” means a person or persons designated by the
members of a limited liability company to manage the limited liability company
as provided in its articles of organization.
(13) “Member” means a person with a membership interest in a limited liability
company with the rights and obligations specified under this Chapter.”
5
So.2d 734, 740; see also W.J. Spano Company, Inc. v. Mitchell, 05-2115 (La. App.
1 Cir. 9/15/06), 943 So.2d 1131. Thus, the legislature intended to shield individual
members, managers, and employees of an L.L.C. from liability, albeit with certain
exceptions. To that end, the legislature established “narrowly defined
circumstances” under which individual members of an L.L.C. may be subject to
individual personal liability. Ogea, id. The liability protection afforded to the
members, managers, employees, and agents of an L.L.C., as well as the exceptions
thereto, are set forth in the statute at issue, La. Rev. Stat. 12:1320, entitled
“Liability to third parties of members and managers,” and which provides:
A. The liability of members, managers, employees, or agents, as such,
of a limited liability company organized and existing under this
Chapter shall at all times be determined solely and exclusively by the
provisions of this Chapter.
B. Except as otherwise specifically set forth in this Chapter, no
member, manager, employee, or agent of a limited liability company
is liable in such capacity for a debt, obligation, or liability of the
limited liability company.
C. A member, manager, employee, or agent of a limited liability
company is not a proper party to a proceeding by or against a limited
liability company, except when the object is to enforce such a person's
rights against or liability to the limited liability company.
D. Nothing in this Chapter shall be construed as being in derogation
of any rights which any person may by law have against a member,
manager, employee, or agent of a limited liability company because of
any fraud practiced upon him, because of any breach of professional
duty or other negligent or wrongful act by such person, or in
derogation of any right which the limited liability company may have
against any such person because of any fraud practiced upon it by
him.
La. Rev. Stat. 12:1320.
Under La. Rev. Stat. 12:1320, the liability of a member of an L.L.C. “shall
at all times be determined solely and exclusively” by the provisions of Chapter 22
of Title 12 of the Revised Statutes. [emphasis added.] La. Rev. Stat. 12:1320(A).
See also Ogea, 13-1085, p. 8, 130 So.3d at 896. As we explained in Ogea, the
6
language of La. Rev. Stat. 12:1320(B) clearly establishes the limited liability of
members of an L.L.C. as a general rule, where it states that “except as otherwise
specifically set forth in this Chapter,” personal liability of an L.L.C. member acting
in such capacity is barred. Id. Finally, La. Rev. Stat. 12:1320(D) enumerates the
“narrowly defined circumstances” in which an L.L.C. member may be held
personally liable, by exception to the general rule stated in subsections (A) and (B).
Ogea, 13-1085 pp. 5-6, 130 So.3d at 894-95. Therefore, limited liability of an
L.L.C. member shall be construed as the general rule and personal liability as an
exception strictly framed by the law.
At issue here is the interpretation of the following exceptions to the general
rule of limited liability: breach of professional duty and negligent or wrongful act. 3
See La. Rev. Stat. 12:1320(D). First, we are required to determine whether the
lower courts erred in finding that an individually licensed building contractor is a
“professional” under La. Rev. Stat. 12:1320(D). Though not decided by the lower
courts, we are further required to determine whether the failure to build Mrs.
Nunez’s house to the proper elevation was a “negligent or wrongful act” sufficient
to invoke Mr. Lenard’s personal liability.
Where there is no dispute as to the dispositive facts, the issue can be decided
as a matter of law and the review is de novo. Kevin Associates, L.L.C. v.
Crawford, 03-0211, p.15 (La. 1/30/04), 865 So.2d 34, 43. Because the facts of this
case are not in dispute, we are called upon to interpret, and then apply, the relevant
dispositions of La. Rev. Stat. 12:1320 in the light of the general rules of statutory
construction, as well as our own jurisprudence.
II) Breach of Professional Duty
3
Mrs. Nunez has not asserted fraud by Mr. Lenard.
7
We hold the lower courts erred when they found Mr. Lenard to be a
“professional” within the meaning of La. Rev. Stat. 12:1320(D). The courts below
improperly held him personally liable for breach of a professional duty under La.
Rev. Stat. 12:1320(D), on the sole ground that he was a contractor, individually
licensed by the State of Louisiana. See Nunez, p. 6, 158 So.3d at 76.
In Ogea, we noted the legislature in La. Rev. Stat. 12:1320(D) did not define
“any breach of professional duty,” but therein we explained our interpretation of
the phrase as follows:
[I]n searching for the intended meaning of “any breach of
professional duty” in La. Rev. Stat. 12:1320(D), we recall that “this
Court must assume the Legislature was aware of existing laws on the
same subject.” [Foti v. Holliday, 09-0093 p. 6 (La. 10/30/09), 27
So.3d 813, 817]. Recognizing that the word “professional” is the
focus of the quoted exception, the following principle must be
observed as well: “Technical words and phrases, and such others as
may have acquired a peculiar and appropriate meaning in the law,
shall be construed and understood according to such peculiar and
appropriate meaning.” La. Rev. Stat. 1:3.
When the LLC statutes were enacted, “professional” had a
clearly defined technical meaning within the law of business entities.
See JAMES S. HOLLIDAY, JR., & H. BRUCE SHREVES,
LOUISIANA PRACTICE SERIES: LOUISIANA
CONSTRUCTION LAW § 1:9 pp. 10-11 (2013) (“Since 1964,
professional law corporations have been possible in Louisiana. In
1968, with recodification of Louisiana’s corporate laws, professional
medical corporations were also permitted. Since then, Louisiana has
enacted statutory provisions for professional corporations for the
dental, accounting, chiropractic, nursing, architectural, optometry,
psychology, veterinary medicine and architectural-engineering
professions.” (Footnotes omitted.))
Ogea, pp. 12-13, 130 So.3d at 898-99.
In Ogea, we concluded the plaintiff had introduced no evidence the
defendant was a member of one of these legislatively-recognized professions. Id.,
p. 13, 130 So.3d at 899. We further found no merit to the argument that the
defendant’s role as a contractor equated to a professional role and that derogation
8
from acceptable standards for contractor should likewise be found to equate to a
“breach of professional duty” under La. Rev. Stat. 12:1320(D). We declined to
make such a finding in that case primarily because the plaintiff had failed to even
show the defendant was individually licensed and because it appeared the L.L.C.
itself held the contractor’s license. Thus, we did not reach the question of whether
such licensing elevates an individual member of an L.L.C. to the status of a
professional as contemplated by the legislature in La. Rev. Stat. 12:1320(D),
though we explicitly were not suggesting that mere licensure would result in one
being considered a professional. Id.We answer that question today, however, because it was established in the
instant case that Mr. Lenard was an individually licensed contractor, and the lower
courts have held him personally liable on that basis. We thus hold the lower courts
erred in imposing personal liability on the individually licensed contractor as a
“professional” within the meaning of La. Rev. Stat. 12:1320. In enacting the
statutory provisions for an L.L.C., the legislature defined “business” as “any trade,
occupation, profession, or other commercial activity engaged in for gain, profit or
livelihood.” La. Rev. Stat. 12:1301. Accordingly, the legislature surely
recognized distinctions among these various pursuits for a livelihood, given that
they are listed disjunctively. See Regions Bank v. Ark-La-Tex Water Gardens,
L.L.C., 43,604 (La. App. 2 Cir. 11/5/08), 997 So.2d 734, 741 (Caraway, J.,
dissenting in part). As we noted in Ogea, the legislature when it enacted La. Rev.
Stat. 12:1301 et seq. was most certainly aware that a “profession” is different from
other occupations and trades. The Legislature mandated that a determination of
what is a “profession” “shall at all times be determined solely and exclusively by
the provisions of this Chapter.” See La. Rev. Stat. 12:1320(A). Contracting is not
included among the professional corporations listed in Title 12 of the Revised
9
Statutes. Furthermore, there is no indication the legislature intended for licensed
contractors to owe a separate, non-contractual duty to their customers as may
members of the enumerated professions.
To follow the rulings of the lower courts would allow the general rule of
limited liability to be swallowed up by the narrow professional duty exception
whenever a member of the L.L.C. has obtained a state license to practice his trade
or occupation. In addition to the professions recognized by Title 12 of the Revised
Statutes, there are some fifty-seven other “professions and occupations” also
licensed by the State of Louisiana.4 Interpreting subsection (D) of La. Rev. Stat.
12:1320 as encompassing all “professions and occupations” licensed by the state,
on the sole ground of their licensure, would lead to absurd results, and extend the
narrow professional duty exception to limited liability to situations the legislature
never intended to be covered thereby. See Smith v. Town of Vinton, 25 So.2d 237(La. 1946). The public policy of the State, which supports limited liability as a
general rule within L.L.C. business entities, is embodied in the corresponding
statute, and a court may not substitute its social and economic beliefs for the
judgment of the Louisiana Legislature. See Ogea, 13-1085, p. 26, 130 So.3d at906 (citing Retired State Employees Association v. State, 13-0499, p. 7 (La.
6/28/13), 119 So.3d 568, 573).
For these reasons, we find Mrs. Nunez failed to show Mr. Lenard was a
“professional” subject to the personal liability exception set forth in La. Rev. Stat.
12:1320(D). As a contractor, Mr. Lenard was not engaged in a “profession” as
would be generally understood. Thus, we hold the lower courts erred in extending
4
See State of Louisiana – Professional and Occupational Licenses,
http://louisiana.gov/Services/POLicenses/.
10
the scope of the professional duty exception in La. Rev. Stat. 12:1320(D) to
contractors simply because they are licensed by the state.
III) Negligent or Wrongful Act
Though not reached by the appellate court majority, we next address the
plaintiff’s contention, in support of the judgment in her favor, that Mr. Lenard
committed a “negligent or wrongful act” for which he can be held personally
liable. See La. Rev. Stat. 12:1320(D). As with the professional duty exception, the
terms “negligent or wrongful act” are not defined by the statute. Accordingly, this
court in Ogea articulated four factors to consider in determining whether a member
may be held personally liable for his negligent or wrongful acts:
“1) Whether a member’s conduct could be fairly characterized as a
traditionally recognized tort; 2) whether a member’s conduct could be
fairly characterized as a crime, for which a natural person, not a
juridical person, could be held culpable; 3) whether the conduct at
issue was required by, or was in furtherance of, a contract between the
claimant and the LLC; and 4) whether the conduct at issue was done
outside the member’s capacity as a member.”
Ogea, 13-1085 at 15, 130 So.3d at 900-01.
Thus, we will review the facts established in the record under these guidelines to
determine whether Mr. Lenard committed a “negligent or wrongful act” when he
failed to check the proper elevation of Mrs. Nunez’s house. See Ogea, 13-1085 at
24, 130 So.3d at 906. For the reasons set forth below, we find Mr. Lenard’s acts
or failures to act did not constitute a “negligent or wrongful act” subjecting him to
personal liability.
First, we cannot say Mr. Lenard’s failure to either perform the elevation
survey himself or to have one of his employees do so may be fairly characterized
as a tort. There is no showing Mr. Lenard owed a duty to Mrs. Nunez with regard
to the elevation of the residence outside of the obligations of the contract. The
11
existence of a duty is a question of law. Ogea, 13-1085 at 24, 130 So.3d at 905
(citing Faucheaux v. Terrebonne Consol. Government, 615 So.2d 289, 292 (La.
1993)).
A showing of poor workmanship arising out of a contract entered into by the
L.L.C., in and for itself, is insufficient to establish a “negligent or wrongful act”
arising under La. Rev. Stat. 12:1320(D). Ogea, 13-1085 at 25, 130 So.3d at 905-
06. In Ogea, the defendant operated a bulldozer himself, and supervised the
contractor who poured the defective concrete foundation at issue therein. Ogea,
13-1085 at 24, 130 So.3d at 905. Under those facts, we found the defendant’s
conduct was undertaken in furtherance of the contract, and he did not owe a
separate tort duty to the plaintiff. Id.Here, Mrs. Nunez failed to show Mr. Lenard owed her a separate tort duty
susceptible to engage his personal liability. Indeed, the obligation to check the
proper elevation of the house arises from the contract formed between Mrs. Nunez
and the L.L.C., which provides the residence must comply with “all national, state,
and local building codes and laws.” The flood elevation requirements arise from
both national (FEMA) and local rules (Cameron Parish Flood Damage Prevention
Ordinance). The record shows Mr. Lenard did not supervise the proper elevation
of the slab before proceeding to the construction of Mrs. Nunez’s house, and did
not check it himself, although he testified he would normally do so. Although
these failures constitute a breach of the contract, poor workmanship is not
sufficient to hold Mr. Lenard personally liable for these breaches, as they arise
from the contract entered into with Pinnacle.
We also find no showing Mr. Lenard’s acts or failures to act violated a
criminal statute granting a right of restitution to Mrs. Nunez. In Ogea, we noted
12
that “if the conduct at issue constitutes a crime, that fact weighs in favor of
allowing the victim(s) to recover against the offender.” Ogea, 13-1085 at 18, 130
So.3d at 902. Nevertheless, only crimes for which a natural person may be held
culpable should be considered, although the member need not have been actually
convicted of the crime to establish the factor of criminal conduct as a “negligent or
wrongful act.” Ogea, 13-1085 at 19-22, 130 So.3d at 902-903. Moreover, we
caution that a violation of a criminal statute, whether prosecuted or not, is but one
factor to consider in determining whether an exception to the rule of limited
liability would lie.
Here, Mrs. Nunez alleges Mr. Lenard’s conduct violated Section 7-35 of the
Cameron Parish Flood Damage Prevention ordinance, which reads as follow:
a. The applicant must contact the Cameron Parish Police Jury
when the forms for the foundation are complete or structure
is moved on the site within thirty (30) days of the issuance of
the development permit. The inspector will determine if the
structure is in accordance with the base flood elevation
requirements.
b. If the applicant fails to comply with the development permit
application and the base flood elevation requirements, the
floodplain administrator will send a certified letter to the
applicant informing the applicant of the violation. If the
applicant fails to comply with requirements, within (30)
thirty days of receipt of the certified letter, said violation shall
constitute a misdemeanor.
c. Any person who violates this chapter or fails to comply with
any of its requirements shall upon conviction thereof be fined
not more than five hundred dollars ($500.00) or imprisoned for
not more than six (6) months, or both, for each violation and, in
addition, shall pay all costs and expenses involved in
prosecution of such case. [Emphasis added.]
Cameron Parish Police Jury, Louisiana, Code of Ordinances, Section 7-35
The record does not support a conclusion Mr. Lenard’s acts or failures to act
constituted a violation of the ordinance at issue, as defined therein. Section 7-35 of
the ordinance requires, in its subsection (a), that the Cameron Parish Police Jury be
13
contacted by “the applicant.” The record shows the following: (1) the development
permit was delivered to “Russel & Jennifer Diane Nunez,” registered as owners;
(2) the “applicant information” section is empty; (3) “Allen Leonards”5 was named
on the permit under the “contractor information” section; and (4) the permit was
signed by Mrs. Diane Nunez. Because Mr. Lenard is not “the applicant” on the
development permit, we do not find Section 7-35 of the ordinance to be applicable
to him.
Moreover, Subsection (b) states the elements required for a violation
resulting in potential criminal sanctions, and subsection (c) merely states the
penalty that may be applied when a violation occurs and a conviction obtained.
Subsections (a) and (b) place a duty solely on “the applicant,” and not simply upon
“any person,” to comply with the requirements of the permit. The applicant is the
person who must contact the Parish inspector, to whom a certified letter is sent to
inform him of any non-compliance, and who has a duty to comply with the
requirements of the certified letter. Here, the ordinance provides that the parish
inspector be contacted “when the forms of the foundation are complete,” pursuant
to which an “inspector will determine if the structure is in accordance with the base
flood elevation requirements.” There is some question whether the parish itself
will perform the elevation survey to make this determination, but the record
testimony suggests the parish inspector was awaiting the elevation survey from the
applicant before making its determination. The failure to obtain the survey
consequently prevented the parish inspector from identifying a potential violation
of the flood elevation requirements, and the applicant to be informed of the
violation by certified letter, pursuant to the dispositions of subsection (b) of
5
Although the contractor’s name is “Allen Lenard,” it was erroneously written as “Allen
Leonards.”
14
Section 7-35 of the ordinance. In short, no letter was ever sent by the parish.
While Mr. Lenard’s alleged failures undoubtedly constitute a contractual violation,
they do not constitute a crime pursuant to which Mr. Lenard could be held
personally liable in his capacity as a member of the L.L.C., because, as subsection
(b) explains, a misdemeanor violation is only constituted upon the applicant’s
failure to comply with the requirements of the certified letter sent by the floodplain
administrator to the applicant.
The third factor requires deciding whether Mr. Lenard’s conduct was in
furtherance of the contract between Mrs. Nunez and the L.L.C. As previously held
in Ogea, “if the reason a member is engaged in the conduct at issue is to satisfy a
contractual obligation of the L.L.C., then the member should be more likely to
qualify for the protections of the general rule of limited liability in La. Rev. Stat.
12:1320(B).” Ogea, 13-1085 at 22, 130 So.3d at 904. We find Mrs. Nunez failed
to show Mr. Lenard’s acts or failures to act did not arise in furtherance of the
contract. Mr. Lenard’s supervision of his employees with regard to the proper
elevation of the house, or checking the elevation himself, which he testified he
sometimes did, were acts required by or in furtherance of the contract between
Mrs. Nunez and the L.L.C.
Finally, the record establishes Mr. Lenard’s alleged failures to act fall within
the context of his membership in the L.L.C. and were not undertaken in a personal
capacity. Here, the plaintiff’s claim is one alleging poor workmanship arising out
of a residential construction contract. As we noted in Ogea, “To hold that poor
workmanship alone suffice[s] to establish personal liability would allow the
exception in La. Rev. Stat. 12:1320(D) to negate the general rule of limited
liability in La. Rev. Stat. 12:1320(B).” Ogea, p. 25, 130 So.3d at 905-06.
15
DECREE
For the reasons set forth above, the judgment of the court of appeal
affirming the trial court’s judgment in favor of the plaintiff is reversed insofar as it
finds the individual member of the L.L.C. personally liable.6 Judgment is hereby
rendered in favor of the defendant, Mr. Lenard, in his individual capacity as a
member of the L.L.C., dismissing all claims against him.
REVERSED; JUDGMENT RENDERED
6
As indicated, this judgment addresses only the liability of Mr. Lenard, individually, and has no
impact on the L.L.C.’s liability, which was not at issue.
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10/14/15
SUPREME COURT OF LOUISIANA
No. 2015-C-0087
JENNIFER DIANE NUNEZ
VERSUS
PINNACLE HOMES, L.L.C. and SUA INSURANCE COMPANY
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL
THIRD CIRCUIT, PARISH OF CAMERON
JOHNSON, Chief Justice, dissents and assigns reasons.
I respectfully dissent. In this case, Mrs. Nunez contracted with Pinnacle
Homes, L.L.C. to build her home. Mr. Lenard, a state licensed residential and
commercial construction contractor, is the sole member of that L.L.C. It is undisputed
that Mrs. Nunez’s home did not meet required elevation levels. The estimated cost
to raise the house to the required base flood elevation exceeds $200,000. The majority
of this court finds Mr. Lenard was not personally liable to Mrs. Nunez for his
negligent or wrongful acts. I disagree.
An LLC member’s protections against personal liability is not unlimited. Ogea
v. Merritt, 13-1085, 130 So. 3d 888, 897 (La. 12/10/13). To encourage commerce, the
legislature has limited personal liability for some debts incurred or acts performed on
behalf of business entities. However, this statute was not intended to shield
professionals from liability for personal negligence. Regions Bank v. Ark-La-Tex
Water Gardens, L.L.C., 43,604 (La. App. 2 Cir. 11/5/08), 997 So. 2d 734, 740.
Specifically, La. R.S. 12:1320 provides:
A. The liability of members, managers, employees, or agents, as such,
of a limited liability company organized and existing under this Chapter
shall at all times be determined solely and exclusively by the provisions
of this Chapter.
B. Except as otherwise specifically set forth in this Chapter, no member,
manager, employee, or agent of a limited liability company is liable in
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such capacity for a debt, obligation, or liability of the limited liability
company.
C. A member, manager, employee, or agent of a limited liability
company is not a proper party to a proceeding by or against a limited
liability company, except when the object is to enforce such a person's
rights against or liability to the limited liability company.
D. Nothing in this Chapter shall be construed as being in derogation
of any rights which any person may by law have against a member,
manager, employee, or agent of a limited liability company because of
any fraud practiced upon him, because of any breach of professional
duty or other negligent or wrongful act by such person, or in
derogation of any right which the limited liability company may have
against any such person because of any fraud practiced upon it by him.
In this case, flood elevation requirements mandated that Mrs. Nunez’s home be
elevated 10 feet above sea level. This requirement is confirmed on the building
permit issued to Mrs. Nunez by the Cameron Parish Police Jury. The majority
recognizes that “Mr. Lenard did not supervise the proper elevation of the slab before
proceeding to the construction of Mrs. Nunez’s house, and did not check it himself,
although he testified he would normally do so.” However, the majority finds these
failures are simply breaches of the construction contract.
In my view, Mr. Lenard’s conduct goes beyond poor workmanship under the
contract. Mr. Lenard owed Mrs. Nunez a duty not only to construct a home of
acceptable quality, but also to ensure the home was built in compliance with the law.
The record supports a finding that Mr. Lenard individually committed a negligent act
by building a home in violation of the building permit issued by the Cameron Parish
Policy Jury and in violation of the Flood Plain Ordinance of Cameron Parish. Mr.
Lenard failed to properly calculate and/or confirm the amount of dirt that would be
required to bring the property to proper grade/elevation, and failed to have an
elevation shot performed after the dirt work was completed and prior to beginning
construction on plaintiff's home.
It was ultimately the responsibility of Mr. Lenard, the licensed contractor on
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the job, and not the homeowner to ensure the house was built in compliance with the
mandated base flood elevation. The record is clear that he failed to do so. Now, due
to Mr. Lenard’s negligent acts, Mrs. Nunez’s home must be raised in order to be in
compliance with the flood elevation requirement.
Thus, based on the facts of this case, I would find Mr. Lenard personally liable
for Mrs. Nunez’s damages resulting from his failure to build her home in compliance
with the legally mandated flood elevation level.
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