In re Cole
| Decision Date | 26 December 2012 |
| Docket Number | No. 12–802.,12–802. |
| Citation | 108 So.3d 240 |
| Parties | SUCCESSION of James Robert COLE, Sr. |
| Court | Court of Appeal of Louisiana — District of US |
108 So.3d 240
SUCCESSION of James Robert COLE, Sr.
No. 12–802.
Court of Appeal of Louisiana,
Third Circuit.
Dec. 26, 2012.
[108 So.3d 243]
Byron Andrew Richie, Richie, Richie & Oberle, L.L.P., Shreveport, LA, for Appellant, Cynthia Anne Cole.
Robert Patrick Vance, Jones, Walker, Waechter, Poitevent, Carrére & Denégre, L.L.P., New Orleans, LA, for Appellee, James R. Cole, Jr., Individually.
Jean–Paul Perrault, McGlinchey, Stafford, P.L.L.C., Baton Rouge, LA, for Appellee, James R. Cole, Jr., as Executor.
Court composed of ULYSSES GENE THIBODEAUX, Chief Judge, JOHN D. SAUNDERS, and PHYLLIS M. KEATY, Judges.
THIBODEAUX, Chief Judge.
[3 Cir. 1]In this dispute over the appropriate disposition of shares of bank stocks inherited by two siblings, legatee Cynthia A. Cole (Cindy) appeals from a judgment dismissing her attempt to rescind a compromise and her claim of a breach of fiduciary duty, and granting the exceptions of her brother, co-heir, and executor of her father's estate, James Robert Cole, Jr. (Jim). For the following reasons, we affirm the judgment of the trial court.
We must decide:
(1) whether the trial court manifestly erred in finding a compromise between
[108 So.3d 244]
the parties and in granting Jim Cole's exception of res judicata;
(2) whether the trial court erred in granting Jim Cole's exception of prescription and dismissing Cindy Cole's claims for damages for breach of fiduciary duty; and
(3) whether the trial court abused its discretion in charging one half of the litigation expenses to the estate.
The deceased, James Robert Cole, Sr. (Mr. Cole), was the majority stockholder of Sabine Bancshares, Inc. (SBI), a bank holding company which owned 100% of the shares of Sabine State Bank & Trust Company in Sabine Parish, Louisiana. In 2006 Mr. Cole executed a six-page will naming his son Jim as the executor of his succession. At the time of his death in April 2007, Mr. Cole owned 7,041 shares, representing 70.67%, of the 9,963 outstanding shares in SBI; Jim and Cindy each owned 1,406 shares; and thirteen other shareholders owned a total of 110 shares. Mr. Cole's will provided for special bequests of movable and immovable property, specific charitable donations, and it created a family trust for the [3 Cir. 2]grandchildren, naming Jim as trustee and bequeathing 1,000 shares of the SBI stock to the trust. The remaining 6,041 shares of SBI stock fell to the residual estate which Mr. Cole left to his two children, Jim and Cindy, to “share and share, alike.”
As executor of the succession, during the eight months following his father's death, Jim filed approximately twenty-five petitions seeking authority to continue business, pay estate debts, invest funds, sell timber, and sell immovable property in private sales and public auctions. One of the directives in the will instructed that the new trust created by the bequeathal of 1,000 shares of SBI stock, be free of all estate and inheritance taxes of any nature, with all such taxes to be paid from the residual estate. The federal estate and gift transfer taxes owed by the succession came to approximately twenty-one million dollars, and they were due on January 17, 2008.
On December 10, 2007, Jim filed a twelve-page petition for authority to apportion the 6,041 shares of SBI stock, and the tax liability, equally between himself and Cindy. The petition asserted that, while the executor [Jim] had netted $9,466,207.00 for the succession, there remained a cash deficiency of $11,327,003.00 for the taxes due the following month. It sought authority for the executor to borrow up to $8,000,000.00 and to collect $1,971,550.00 each, from Cindy and Jim, via advances on their inheritances. The petition further sought authority to sell over 400 of Cindy's shares of SBI stock to fund her cash contribution.
On January 4, 2008, Cindy filed an opposition to the December 10 petition, asserting that the succession had the financial capacity to borrow all of the funds necessary to meet the tax liability without using the “extraordinary” means suggested by Jim. She further asserted that Jim had failed in his duty as succession representative to act in the best interest of the succession and its legatees by refusing to consider alternative means of obtaining the funds to pay the taxes.
[3 Cir. 3]On January 7, 2008, the trial court conducted a contradictory hearing on Jim's December 10 petition and Cindy's opposition to it. Both Jim and Cindy were present, and both were represented by counsel. After the entry of opening statements, exhibits, stipulations, and some testimony by Cindy, the court recessed. When court reconvened, the parties had reached an
[108 So.3d 245]
agreement, the terms of which were read into the record by Jim's attorney, characterizing the agreement as a compromise. Cindy's attorney agreed to the stipulated agreement as cited and further stipulated that Jim had “complied with his fiduciary obligation as succession representative insofar as the payment of the federal estate and generation skipping tax.”
On January 23, 2008, the parties jointly submitted and signed a consent judgment entitled, Judgment on Petition by Succession Representative for Authority Filed December 10, 2007. The 2008 consent judgment authorized the executor [Jim] to apportion the 6,041 shares of SBI stock equally between Jim and Cindy, allocating 3,020.5 shares to each. Subsequently, Cindy obtained new counsel, and a dispute arose over the division of the shares. The premise of Cindy's dispute is that she inherited an undivided interest in 6,041 shares, whose value as a controlling majority block was severely diminished by the in-kind division authorized in the consent judgment. She apparently seeks a partition by licitation at some point.
Cindy attempted unsuccessfully in March 2011 to get Jim to join her in a motion to modify and partially annul the 2008 consent judgment. Jim filed a petition for a declaratory judgment confirming the 2008 consent judgment.
On May 26, 2011, Cindy filed reconventional demands seeking to set aside the 2008 consent judgment; seeking a declaratory judgment regarding the indivision ownership of the stock; and seeking damages and attorney fees for breach of fiduciary duty resulting in diminution of the value of the allocated shares.
Jim filed exceptions of res judicata and no cause of action as to Cindy's demands for setting aside the 2008 consent judgment, and he filed an exception of [3 Cir. 4]prescription as to Cindy's demand for damages for breach of fiduciary duty. Due to a dispute over the succession's attorney fees, Jim also filed a motion for payment of attorney fees.
Following a contradictory hearing, the trial court dismissed Cindy's claims regarding the allocation of the stock, declaring that the 2008 consent judgment was a valid and enforceable compromise not subject to set aside or modification on any of the grounds asserted. The judgment declared that the 6,041 shares of SBI stock would be divided in kind with 3,020.5 shares going to each, Jim and Cindy, after all debts and charges of the succession were paid.
The court's judgment granted Jim's exception of res judicata regarding the preclusive effect of compromise; it pretermitted Jim's exception of res judicata as it pertained to a final judgment; and it pretermitted Jim's exception of no cause of action.
The judgment also granted Jim's exception of prescription as to any and all of Cindy's claims based upon breach of fiduciary duty; and it granted in part and denied in part Jim's request for the payment of attorney fees from the succession. Cindy filed the appeal. We must affirm the judgment of the trial court.
“The standard of review of a ruling sustaining an exception of res judicata is manifest error when the exception is raised prior to the case being submitted and evidence is received from both parties.” Steckler v. Lafayette Consol. Gov't, 11–427, p. 2 (La.App. 3 Cir. 11/2/11), 76 So.3d 161, 164 (citations omitted). An appellate court may not set aside a trial court's findings of fact in absence of manifest error or unless
[108 So.3d 246]
it is clearly wrong. Stobart v. State, Through DOTD, 617 So.2d 880 (La.1993); Rosell v. ESCO, 549 So.2d 840 (La.1989).
ISSUE (1): THE 2008 CONSENT JUDGMENT
Cindy now challenges the validity of the 2008 consent judgment as a compromise and an apportionment of the inherited stock, asserting that it should be set aside on grounds of mutual error, exceptional circumstances, the capacity of Jim individually and as executor, non-compliance with notice/publication requirements, violation of the Bank Holding Company Act of 1956, and provisional partition. We find no manifest error in the trial court's judgment dismissing these claims for the following reasons.
Compromise is governed by La.Civ.Code arts. 3071 through 3083. “A compromise is a contract whereby the parties, through concessions made by one or more of them, settle a dispute or uncertainty concerning an obligation or other legal relationship.” La.Civ.Code art. 3071. It must be “made in writing or recited in open court” rendering it “susceptible of being transcribed from the record of the proceedings.” La.Civ.Code art. 3072. “A compromise precludes the parties from bringing a subsequent action based upon the matter that was compromised.” La.Civ.Code art. 3080.
Compromise agreements made to avoid litigation are favored by law, and courts will not declare a settlement void without a clear showing that it violates good morals or the public interest. Brignac v. Brignac, 96–1702 (La.App. 3 Cir. 6/18/97), 698 So.2d 953,writ denied,97–2584 (La.1/16/98), 706 So.2d 976.
The essential elements of a compromise are (1) mutual intention of putting an end to the litigation and (2) reciprocal concessions of the parties in adjustment of their differences. The Code also specifically requires a contract in writing....
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