Atlantic Pacific Equipment, Inc. v. Gulf South Services, Inc. f/k/a/ Gulf South Scaffolding, Inc.

STATE OF LOUISIANA
COURT OF APPEAL
FIRST CIRCUIT
2021 CA 0438
ATLANTIC PACIFIC EQUIPMENT, INC.
VERSUS
GULF SOUTH SERVICES, INC.
F/K/A GULF SOUTH SCAFFOLDING, INC.
DATE OF JUDGMENT; MAY 1 8 2022
ON APPEAL FROM THE SIXTEENTH JUDICIAL DISTRICT COURT
NUMBER 131,667, DIVISION E, PARISH OF ST. MARY
STATE OF LOUISIANA
- HONORABLE KEITH J. COMEAUX, JUDGE
W. Scott Keaty
Joshua G. McDiarmid
Juan J. Moreno
Baton Rouge, Louisiana
Jude C. Bursavich
Carroll Devillier, Jr.
Baton Rouge, Louisiana
Bernard E. Boudreaux, Jr.
Baton Rouge, Louisiana
BEFORE: GUIDRY, WELCH, THERIOT, HOLDRIDGE, AND CHUTZ, JJ.
Disposition: AFFIRMED IN PART; REVERSED IN PART; AND REMANDED WITH
INSTRUCTIONS. MOTION TO CORRECT RECORD DENIED. ANSWER TO APPEAL
DENIED.
OK OK OK OK
Counsel for Appellant-Plaintiff/
Defendant-in-Reconvention
Atlantic Pacific Equipment, Inc.
Counsel for Appellee-Defendant/
Plaintiff-in-Reconvention
Gulf South Services, Inc. f/k/a
Gulf South Scaffolding, Inc.
Kk OK OR
Ot de. A part, issonks 1 Past fe thle ed PeUS OR
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CHUTZ, J.
Plaintiff-appellant, Atlantic Pacific Equipment, Inc. (AT-PAC), appeals a trial
court judgment denying its claim for past due rentals of scaffolding equipment. For
the following reasons, we affirm in part, reverse in part, and remand this matter.
FACT AND PROCEDURAL BACKGROUND
AT-PAC is in the business of selling and leasing scaffolding equipment. Gulf
South Services, Inc. (GSSI) has done business with AT-PAC since 2010, and
sometimes re-rented the scaffolding equipment it leased from AT-PAC to its own
customers. GSSI’s account became delinquent in 2015. AT-PAC sent GSSI a
statement of account, dated February 28, 2017, reflecting a balance owed totaling
over $1.5 million. For some time previously, the parties had been discussing the
possibility of GSSI purchasing the leased equipment for a lump sum including the
past due rentals owed. No agreement had been reached by March 14, 2017, when
AT-PAC sent a letter to GSSI demanding it immediately pay past due rentals in the
amount of $1,520,303.12 and return all leased equipment to AT-PAC. The parties
continued negotiations and reached an agreement for GSSI to buy the equipment. In
accordance with their agreement, AT-PAC sent GSSI an invoice on March 24, 2017,
for the purchase of 108,773 pieces of leased equipment for the price of
$1,580,991.65, which included and/or was equal to the amount of past due rentals
owed. GSSI responded by sending AT-PAC a purchase order for the leased
equipment for the price stated on the invoice. The parties did not execute any
additional sale documents.
In an attempt to obtain financing for the purchase price, GSSI requested AT-
PAC provide a letter for GSSI to present to potential lenders indicating forgiveness
of the past due rentals GSSI owed. In response, AT-PAC provided a letter, dated
April 17, 2017, stating:
Upon the receipt of good and valid funds by AT-PAC in the amount of
One Million, Five Hundred Eighty Thousand, Nine Hundred Ninety-
One Dollars and Ninety-One Cents!!] ($1,590,991.61 USD), [GSSI]
will have satisfied all of its amounts due and owing to AT-PAC.
GSSI was unable to secure financing, and it never paid the purchase price for the
equipment.
By letter dated August 24, 2017, AT-PAC advised GSSI that its offer to accept
$1,580,991.617 as full payment of all obligations GSSI owed would expire on
September 1, 2017, failing which AT-PAC reserved its right to commence legal
proceedings. AT-PAC received no payment. On October 6, 2017, AT-PAC filed
suit alleging GSSI was in breach of both the lease agreement and the buy/sell
agreement, having failed to pay either the rentals due or the purchase price. AT-
PAC further alleged GSSI had also refused to surrender the leased equipment. AT-
PAC requested all relief to which it was entitled, including, but not limited to, past
due rentals and specific performance. Subsequently, AT-PAC filed an amended
petition in which it also requested present and future rentals, in addition to past due
rentals.
After AT-PAC filed suit, GSSI agreed to pay AT-PAC $35,000.00 per month,
which was to be credited against any amounts GSSI was held to owe AT-PAC. GSSI
made three payments, totaling $105,000.00. The payments were made in return for
AT-PAC agreeing to engage in settlement negotiations while the legal proceedings
were ongoing, but the parties never reached a settlement.
In March 2018, AT-PAC filed thirteen liens on ten well sites operated by
Anadarko Petroleum Company, one of GSSI’s largest customers, in order to secure
the rentals GSSI owed. Each of the liens was in the amount of $2,060,741.38. On
| Due to typographical errors in the letter, there is a small inconsistency between the written-out
amount and the numeric amount stated as being due, as well as a discrepancy of a few cents
between those amounts and the actual purchase price of $1,580,991.65.
2 Again, there is a discrepancy of a few cents between the figure stated in the letter and the actual
purchase price of $1,580,991.65.
3
April 27, 2020, GSSI filed a reconventional demand against AT-PAC alleging the
liens were filed in bad faith with full knowledge that the amount of the liens
exceeded any privilege AT-PAC might have and with no justifiable evidence that
AT-PAC equipment was located on or had been used at the well sites. GSSI sought
judgment for business losses and damages to its business reputation, as well as for
attorney’s fees, under the Louisiana Unfair Trade Practices Act (LUTPA), La. R.S.
51:1401, et seg. In response, AT-PAC filed peremptory exceptions raising
objections of no cause of action and prescription.
In April 2018, AT-PAC filed a rule to surrender leased property in which it
requested the return of all equipment from GSSI. After GSSI “voluntarily agreed”
to return the equipment, the trial court signed a consent judgment dated May 25,
2018, ordering GSSI to “make a good faith effort to return all of Plaintiff's
equipment in due course ... with all parties reserving all rights with respect to any
property that is returned or not returned and any damage thereto.” (Emphasis added.)
At the time of trial, all equipment had been returned except for 1,915 pieces, valued
at $45,123.37.
Trial of this matter was held on June 15 and 16, 2020. Thereafter, the trial
court issued written reasons for judgment in which it rejected AT-PAC’s claim for
equipment rentals. The trial court concluded the debt GSSI owed for rentals was
extinguished by novation when a sale of the equipment occurred in March 2017.
Noting that AT-PAC elected to seek a return of its equipment upon “the dissolution
of the sale,” the trial court held AT-PAC was only entitled to an award of $45,123.37
for unreturned equipment. The trial court further held AT-PAC should pay
$59,876.63 to GSSI, representing the balance of the $105,000.00 paid by GSSI, after
that amount was offset by the award made to AT-PAC. Finally, the trial court held
GSSI’s reconventional demand was prescribed since it was filed more than one year
after AT-PAC filed the liens on which GSSI’s LUTPA claim is based. In any event,
4
the trial court concluded GSSI failed to prove it sustained any damages, having
presented only speculative evidence to establish its claim.
The trial court signed a judgment on December 9, 2020, in accordance with
its written reasons for judgment AT-PAC has now appealed, arguing in three —
assignments of error that the trial court erred in finding a novation occurred and in
failing to award judgment in its favor for equipment rentals owed. GSSI answered °
the appeal, requesting we reverse the dismissal of its reconventional demand as
being prescribed.
DISCUSSION
AT-PAC argues the trial court erred in finding GSSI owed AT-PAC only
$45,123.37 when GSSI had use of AT-PAC’s equipment for years without paying
any rentals. While AT-PAC admits a sale to GSSI occurred, it argues: (1) no
novation occurred as a result of the sale; and (2) the sale was subsequently dissolved
for nonpayment of the purchase price. AT-PAC contends the evidence establishes
it was the clear intent of the parties that GSSI’s debt would be extinguished only
upon receipt of the purchase price. Thus, while not disputing on appeal that a sale
occurred,’ AT-PAC argues the trial court erred in finding there was a novation since
the purchase price was never paid. Additionally, AT-PAC asserts that upon
dissolution of the sale, the parties should have been returned to their original
positions, meaning GSSI owed both the “Original Rental Obligation ($1,580,991.61)
3 The judgment contains no mention of AT-PAC’s claim for equipment rentals, despite the trial
court’s consideration of the claim in its written reasons for judgment. Generally, silence in a
judgment as to any issue, claim, or demand placed before the trial court is deemed a rejection of
the claim and the relief sought is presumed to be denied. Schoolhouse, Inc. v. Fanguy, 10-2238
(La. App. Ist Cir. 6/10/11), 69 So.3d 658, 664. Therefore, we consider AT-PAC’s claim for unpaid
equipment rentals to have been denied by the trial court.
4 Tp its reasons for judgment, the trial court found a sale had occurred “upon the issuance of the
invoice and a purchase order being rendered by GSSI” since the thing, the price, and the consent
of the parties, i.¢., the required elements of a sale under La. C.C. art. 2439, were all present at that
point. This factual finding has not been challenged on appeal.
5
and continued to accrue [an] Additional Rental Obligation ($930,733.84), totaling
$2,511,725.45.”
In its written reasons for judgment, the trial court specifically concluded “the
original debt [for past due rentals] was extinguished by the novation agreed to in the
form ofa sale.” This conclusion was the basis of the trial court’s ruling denying AT-
PAC’s claim for past due rentals.
Novation is the extinguishment of an existing obligation by the substitution
of a new one. La. C.C. art. 1879. For a novation to occur, the parties’ intention to
extinguish the original obligation must be clear and unequivocal. La. C.C. art. 1880.
Novation may not be presumed, and the burden of proving novation falls on the party
who seeks its protection. La. C.C. art. 1880; Ciolino v. First Guaranty Bank, \2-
2079, 12-2080 (La. App. Ist Cir. 10/30/13), 133 So.3d 686, 691. The intention to
novate may be shown by the character of the transaction, the facts and circumstances
surrounding it, as well as by the terms of the agreement itself. Ciolino, 133 So.3d
at 691.
It appears the parties’ intention was for the purchase price of the equipment
to satisfy the past due rentals owed by GSSI. What is less clear is whether the parties
intended for a novation to occur regardless of whether GSSI actually paid the
purchase price. In the April 2017 forgiveness letter requested by Gulf State, AT-
PAC stated that “[u]pon the receipt of good and valid funds” in the amount of
$1,580,991.61 (the purchase price), GSSI “will have satisfied all of its amount due
and owing to [AT-PAC].” Even though the letter post-dated the sale, it nevertheless
may be evidence of AT-PAC’s intent to forgive GSSI’s debt for past due rentals only
upon payment of the purchase price. Such a conclusion is logical because creditors
are not in the business of releasing debtors who have not paid. See Ciolino, 133
So.3d at 691; Pike Burden Printing, Inc., 396 So.2d 361, 366 (La. App. Ist Cir.
1981). Regardless, in light of subsequent actions by the parties that constituted a
6
voluntary dissolution of the sale, it is unnecessary to determine whether the trial
court manifestly erred in finding a novation occurred.
The principal obligation of a buyer is to pay the sale price. La. C.C. art. 2549;
Groner Apartments y. Controlled Building Systems, 432 So.2d 1142, 1145 (La.
App. 3d Cir.), writ denied, 438 So.2d 1106 (La. 1983). Upon a buyer’s failure to do
so, the seller has two remedies available: one for the enforcement, or affirmance, of
the contract and the other for its dissolution. Groner Apartments, 432 So.2d at 1145.
While AT-PAC did not specifically pray for dissolution of the sale to GSSI, the
petition included a prayer for all relief AT-PAC was entitled to by law or equity.
Moreover, the petition included allegations that there was a sale agreement but GSSI
never paid the purchase price, which is sufficient to state a cause of action for
dissolution of a sale for nonpayment under La. C.C. art. 2561. See Sajare Interests,
Ltd. vy. Esplanade Management, Inc., 459 So.2d 748, 751 (La. App. 4th Cir 1984).
Moreover, after AT-PAC filed a rule in these proceedings for GSSI to
surrender its leased equipment, GSSI voluntarily agreed to return the equipment.
The parties’ agreement that GSSI would return the equipment to AT-PAC
constituted a voluntary dissolution of the sale. See La. C.C. art. 2013; La. C.C. art.
2561, Revision Comments — 1993, Comment (i). Moreover, the dissolution was
judicially memorialized in the consent judgment the trial court signed on May 25,
2018, wherein the trial court granted AT-PAC’s rule for surrender of leased property
and stated GSSI should return “Plaintiff's equipment.”
Accordingly, while the trial court did not expressly declare a dissolution of
the sale, the court clearly recognized a dissolution of the sale had occurred under the
circumstances. In its written reasons for judgment, the court stated, “Since [AT-
PAC] has filed a rule for return of the merchandise, this indicated to the Court that
it exercised its remedy upon the dissolution of the sale to a return of the product.”
(Emphasis added.) The trial court’s acknowledgement of the dissolution is also
7
implicit in the judgment rendered, which did not hold GSSI liable for any portion of
the purchase price. In fact, the trial court held that GSSI was entitled to a return of
the balance of the $105,000.00 GSSI did pay to AT-PAC, after that amount was
offset by the $45,123.37 award made to AT-PAC. The trial court correctly
recognized that the purchase price was no longer due because the parties had
voluntarily dissolved the sale when GSSI agreed to AT-PAC’s demand for the return
of the equipment.
In Thomas v. Philip Werlein, Ltd., 181 La. 104, 112, 158 So. 635 (1935), the
Louisiana Supreme Court likewise dealt with a case where a sale was dissolved
through the parties’ actions. The seller in Thomas forcibly repossessed a radio from
the buyer due to nonpayment of the full purchase price. The supreme court held that
by repossessing the radio and declining to return it, the seller indicated its intent to
rescind (dissolve) the sale. Moreover, when the buyer filed suit seeking a return of
the portion of the purchase price already paid to the seller he was deemed to have
acquiesced in the rescission (dissolution). Thomas, 181 La. at 112, 158 So. at 638.
Similarly, in the instant case, AT-PAC clearly evidenced its intent to dissolve
the sale when it filed a rule for surrender of its equipment. GSSI likewise acquiesced
in the dissolution when it consented to return the equipment. Further, unlike the
extra-judicial dissolution in Thomas, the actions of the parties leading to the sale’s
dissolution occurred within the judicial proceedings instituted by AT-PAC. As
previously noted, the parties’ implicit agreement to dissolve the sale was judicially
recognized in the consent judgment providing for GSSI to return the equipment to
AT-PAC.
Nevertheless, despite recognizing that a dissolution of the sale had occurred,
the trial court evidently did not consider the legal consequences of the dissolution.
When a contract of sale is dissolved, the parties are returned to the position they
originally occupied prior to the sale. Sliman v. McBee, 311 So.2d 248, 252 (La.
8
1975); Thomas, 181 La. at 112, 158 So. at 638; In re Argo Financial, Inc., 337 F.3d
516, 523 (Sth Cir. 2003); see also La. C.C. art. 2018 (“Upon dissolution of a contract,
the parties shall be restored to the situation that existed before the contract was
made.”).
In addition to relieving GSSI of its obligation to pay the purchase price, the
dissolution of the sale also restored the parties to the original positions they occupied
as lessor and lessee. Therefore, as lessor of the equipment, GSSI owed rentals to
AT-PAC under the terms of their lease agreement for the entire time the equipment
was in GSSI’s possession. The trial court’s legal error in failing to restore the parties
to their original lessor/lessee relationship led to the further error of the trial court
denying AT-PAC’s claim for accrued rentals. Due to its legal error, the trial court
never determined the amount of accrued rentals AT-PAC was owed, either prior to
or subsequent to the dissolved sale. Because the trial court failed to address this
issue, we will remand the matter to the trial court with instructions to determine and
fix the total amount of accrued rentals due to AT-PAC. See Welch v. Planning &
Zoning Commission of East Baton Rouge Parish, 16-0253 (La. App. Ist Cir.
4/26/17), 220 So.3d 60, 69; Petchak v. Bossier Parish Police Jury, 45,705 (La. App.
2d Cir. 11/24/10), 55 So.3d 840, 855, writ denied, 11-0165 (La. 4/29/11), 62 So.3d
112.
Additionally, in view of our finding that the trial court erred in denying AT-
PAC’s claim for accrued rentals, we also reverse the trial court’s order for AT-PAC
to pay GSSI the balance of the $105,000.00 in payments it made to AT-PAC (after
offsetting that amount against the $45,123.37 awarded to AT-PAC for unreturned
equipment). At trial, the parties stipulated the payments GSSI made to AT-PAC
should be credited against any amount GSSI was determined to owe AT-PAC.
Because the trial court concluded AT-PAC was not entitled to any amount other than
$45,123.37 for unreturned equipment, it ordered AT-PAC to return the balance of
9
the payments to GSSI. However, we now hold the disposition of these payments
should await a determination upon remand of the amount due to AT-PAC for accrued
rentals. The trial court should credit GSSI for $105,000.00 against any award made
to AT-PAC.
ANSWER TO APPEAL
In its answer, GSSI requests we reverse the dismissal of its reconventional
demand. GSSI asserts it is entitled to $843,526.64 on its LUTPA claim for business
losses and damages to its business reputation resulting from the wrongful filing of
the thirteen liens by AT-PAC. GSSI maintains the liens contain misrepresentations
that AT-PAC equipment was utilized on the well sites in question, AT-PAC was not
paid for the use of the equipment, and AT-PAC was entitled to a privilege on the
well sites. According to GSSI, its LUTPA claim was not prescribed because the
“continuous misrepresentations” contained in the liens, together with AT-PAC’s
failure to cancel the liens, constituted a continuing tort.
Under La. R.S. 51:1409(E), LUTPA claims must be filed within one year
“from the time of the transaction or act which gave rise to this right of action.” In
rejecting GSSI’s continuing tort theory, the trial court stated:
[T]he original wrongdoing was the filing of the liens on the thirteen
well sites in four various parishes around South Louisiana. This was
done on March 2, 2018. The Reconventional Demand alleging
Louisiana Unfair Trade Practices was filed on April 27, 2020, and thus
more than one year from the alleged date of the unfair trade practices
of March 2, 2018. Since this claim is one of tort, this Court finds that
the Louisiana Unfair Trade Practices claim of GSSI is prescribed.
We find no error in the trial court’s ruling. A continuing tort is one where the
operating cause of injury is a continuous one giving rise to continuous damages.
Crump v. Sabine River Authority, 98-2326 (La. 6/29/99), 737 So.2d 720, 726. It
is occasioned by continuous wrongful acts, not the continuation of the ill effects of
an original, wrongful act. Crump, 737 So.2d at 728. No continuing tort exists if the
wrongful conduct is completed, but the plaintiff continued to experience injury in
10
the absence of any further activity by the tortfeasor. Hogg v. Chevron USA, Inc.,
09-2632, 09-2635 (La. 7/6/10), 45 So.3d 991, 1005. The pertinent inquiry is whether
the tortfeasor perpetuates the injury through overt, persistent, and ongoing acts.
Hogg, 45 So.3d at 1005.
Herein, the operating cause of GSSI’s alleged injuries was the filing of the
liens by AT-PAC on March 2, 2018. GSSI did not establish any continuous
wrongful acts by AT-PAC. The fact that the liens remained on the public records
was simply a continuing ill effect of the alleged wrongful act of filing the liens. See
Hogg, 45 So.3d at 1007 (the leaking underground storage tanks was the cause of the
plaintiffs’ injuries rather than the failure to contain or remediate). Accordingly,
because GSSI did not file its reconventional demand until more than two years after
the liens were filed, its LUTPA claim was prescribed. We find no error in the trial
court’s dismissal of GSSI’s reconventional demand on this basis. Therefore, we
deny the answer to appeal filed by GSSI
CONCLUSION
For the reasons assigned, we hereby reverse the portions of the December 9,
2020 judgment denying AT-PAC’s claim for unpaid equipment rentals and ordering
AT-PAC to pay $59,876.63 to GSSI. The judgment of the trial court is affirmed in
all other respects. It is further ordered that this matter be remanded to the trial court
for the trial court to determine any damages AT-PAC is entitled to receive from
GSSI, including unpaid equipment rentals for the entire period GSSI had possession
of the equipment without paying rent, both before and after the dissolved sale. All
costs of this appeal are assessed to GSSI.°
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED
WITH INSTRUCTIONS. MOTION TO CORRECT DENIED. ANSWER TO
APPEAL DENIED.
> The parties filed a joint motion to correct the record on appeal. In view of our remand of this
matter to the trial court for a determination of damages, we deny the motion as moot since the
exhibit in question, which according to the motion consists of invoices sent to GSSI, is relevant
principally to the issue of damages.
ll
STATE OF LOUISIANA
COURT OF APPEAL
FIRST CIRCUIT
2021 CA 0438
ATLANTIC PACIFIC EQUIPMENT, INC.
VERSUS
tA GULF SOUTH SERVICES, INC. F/K/A GULF SOUTH SCAFFOLDING, INC.
Holdridge, J., agreeing in part and dissenting in part
I agree that the trial court’s judgment denying AT-PAC’s claim for unpaid
equipment rentals accruing prior to the sale of the equipment and ordering AT-
PAC to pay $59,876.63 to GSSI should be reversed. However, I disagree with the
opinion insofar as it dissolves the sale and holds that AT-PAC has a claim for
additional rentals accruing after the sale of the equipment. It is undisputed in this
case that a sale occurred, pursuant to which ownership of the equipment transferred
to GSSI. AT-PAC has no claim for any rental after the date of the sale since it no
longer owned the equipment. The only amount that AT-PAC is entitled to receive
after the validly confected sale was entered into is the agreed upon amount of
$1,580,991.65. GSSI’s failure to pay the purchase price constituted a breach of the
contract of sale, entitling AT-PAC to damages arising from that breach. AT-
PAC’s claim for damages for breach of the contract of sale should be offset by the
amount of the payments GSSI made to AT-PAC after the sale was perfected,
$105,000.00. Additionally, because GSSI voluntarily returned the equipment to
AT-PAC, GSSI should receive a credit against the purchase price for the total
value of the equipment voluntarily relinquished to AT-PAC in accordance with the
agreement of the parties.
The sale agreement was reached by the negotiations between two
sophisticated parties and to attempt to undue their agreement would lead to unfair
and inequitable consequences. Therefore, I would remand the case to the trial court
for a determination of the accrued rentals AT-PAC was owed prior to the sale, and
the amount, if any, which may be due to either party in accordance with the
binding sales agreement which they entered into in March of 2017.