ODECO Oil & Gas Co. v. Nunez

• Decision Date: 12 October 1988
• Docket Number: No. CA,CA
• Citation: 532 So.2d 453
• Court: Court of Appeal of Louisiana — District of US
• Parties: ODECO OIL & GAS COMPANY v. Marcel J. NUNEZ, Sr. 87 0855.

Page 453

532 So.2d 453

ODECO OIL & GAS COMPANY v. Marcel J. NUNEZ, Sr.

No. CA 87 0855.

Court of Appeal of Louisiana First Circuit.

Oct. 12, 1988.

Writ Denied Jan. 6, 1989.

Walter Christy and Bart Sisk, New Orleans, for plaintiff, appellant.

Patrick J. Berrigan, Slidell and Gilbert Ganucheau, Jr., New Orleans, for defendant, appellee.

Before CARTER, LANIER and LeBLANC, JJ.

LANIER, Judge.

This is a suit for damages by an employer against an employee asserting causes of action in tort and contract for breach of the duty of fidelity owed by the employee to the employer. The employer also obtained a writ of attachment for some of the employee's property. The trial court found as fact that the employee "violated the trust that the company placed in him" and that the employee "clearly knew that what he was doing was in violation of his company's policies", but held that the employer failed "to prove the existence of fraud or actual damages by clear and convincing evidence" and dismissed the employer's suit. The employer took this suspensive appeal.

FACTS

In 1962, Marcel J. Nunez, Sr. was employed by Ocean Drilling & Exploration Company as an electrical mechanic in the production department. On January 8, 1965, Nunez was promoted to maintenance supervisor in the same department. On June 15, 1967, while working as maintenance supervisor, Nunez filled out a questionnaire concerning his employer's conflict of interest policy. This policy prohibited, among other things, any officer or employee from engaging in any type of activity that would amount to a conflict of interest, including the following:

a.) Ownership by an employee or any member of his immediate family living with him of a substantial financial interest in any outside concern which does business with, or is a competitor of, the Company, except where such interest consists of securities of a publicly owned corporation and such securities are regularly traded on the open market.

b.) Rendition by an employee of directive, managerial or consultative service to any outside concern which does business with, or is a competitor of, the Company, except with the Company's knowledge and consent.

In the questionnaire, Nunez acknowledged that he had read the conflicts of interest policy and that he had no interest which would amount to a conflict as defined in the policy. Nunez also obligated himself to "make prompt and full disclosure to the company of any situation which may involve a conflict of interests."

On March 10, 1972, Nunez was promoted to maintenance foreman. Nunez's duties as maintenance foreman were, among other things, supplying technical supervision to all personnel performing mechanical and/or electrical work, coordinating all work on mechanical and electrical equipment, controlling repair costs on mechanical and electrical equipment, and originating, approving and/or recommending approval of requisitions and service and repair orders as needed. Nunez directly supervised the company's field foremen working on production platforms and was primarily responsible for requesting and authorizing repairs to navigational aids and the leasing of replacement generators.

In 1974, Ocean Drilling and Exploration Company formed Odeco Oil & Gas Company (ODECO) as a wholly owned subsidiary. Nunez began working for ODECO shortly after ODECO was formed and continued to work for ODECO until his termination in August of 1985. Nunez transferred to ODECO as a maintenance foreman with the same duties and responsibilities, at the same pay, and with the same benefits as he had with Ocean Drilling & Exploration Company.

In 1976, Nunez formed a company known as Dixie Generator Rentals, Inc. (Dixie). Bobby Miller, a sales representative for Tideland Signal Company, a company which did business with ODECO, was shown as the incorporator and president of Dixie. However, Nunez operated the business on a day-to-day basis and also received the profits made by the company. After Dixie was formed, Nunez used his position as maintenance foreman at ODECO to insure that, whenever ODECO had need of a rental generator, the order was placed with Dixie if Dixie had the correct size that ODECO needed. Dixie supplied rental generators to ODECO during the period of 1976 through August of 1985. ODECO's internal audit manager testified Dixie's charges for rentals during this period of time were $79,951 higher than standard market prices. During this period, Nunez's supervisor had no knowledge of Nunez's ownership interest in Dixie.

In 1978, Nunez was approached by Alvin Benjamin, a navigational aid repairman. Benjamin asked Nunez if he (Benjamin) could do navigational aid repair work for ODECO through his (Benjamin's) company, Benco. Nunez told Benjamin that he (Nunez) would form a navigational aid repair company and that Benco could do the ODECO repair work for Nunez. Nunez then formed Dynamic Electronics, Inc. (Dynamic). Clara Braquet was named as President of Dynamic. At the time of incorporation, Braquet received Dynamic stock which she, in turn, assigned to Nunez. Although Braquet signed all the incorporation papers for Dynamic, Nunez made all the arrangements concerning the formation of the company.

During the period of 1978-1985, Nunez used his position as maintenance foreman at ODECO to have all the navigational aid repair work performed by Dynamic, unless the work had to be done by the manufacturers of the equipment. ODECO navigational equipment that was in need of repair would be brought in from the field by foremen working under Nunez's direct supervision and picked up by Nunez. Nunez personally delivered the navigational aids to Braquet who turned them over to Benco. Benco repaired the navigational aids and returned them to Braquet. Nunez then picked up the repaired items and returned them to ODECO. Benco invoiced Dynamic for the repair work, and Braquet, using prices set by Nunez, issued a Dynamic invoice to ODECO. During this period, Dynamic paid Benco $106,290 for work performed, and Dynamic billed ODECO $502,785 for this same work, a difference of $396,495. Nunez himself picked up the Dynamic invoices and submitted them for payment to ODECO. As with Dixie, Nunez never told anyone at ODECO of his involvement with Dynamic.

In August of 1985, ODECO was notified by the Federal Bureau of Investigation about Nunez's involvement in Dixie and Dynamic. After ODECO conducted its own internal investigation, Nunez was terminated.

BURDEN OF PROOF

(Assignment of Error Number 3)

The trial court decided this case with the following rationale:

The court finds that under the policies of the company, Nunez clearly violated the trust that the company placed in him. He also clearly knew that what he was doing was in violation of his company's policies. Odeco submitted voluminous accounting sheets and made analyses which attempted to suggest that there may have been some damages as a result of Nunez's violation of company policy. But these records are insufficient to prove the existence of fraud or actual damages by clear and convincing evidence. Hoover v. Mid-South Exploration Company Inc., 479 So.2d 551, (La.App.1985).

ODECO contends the trial judge "erred in applying the wrong standard of proof as to the existence of fraud and damages." ODECO asserts the trial judge required it to meet a "clear and convincing" burden of proof when, under the law, the case should have been examined under a "preponderance of evidence" standard.

The common standard of proof in civil cases is a preponderance of the evidence. However, there are a limited number of claims and contentions which can be proven only by an intermediate standard termed "clear and convincing" evidence. Succession of Lyons, 452 So.2d 1161 (La.1984). In Succession of Riggio, 468 So.2d 1279, 1288 (La.App. 1st Cir.), writ denied, 472 So.2d 33 (La.1985), this court observed as follows:

What constitutes clear and convincing evidence is further explained in State v. Johnson, 458 So.2d 937, 942 (La.App. 1st Cir.1984), writ denied, 463 So.2d 593 (La.1985), as follows:

To further put this definition in perspective, and as indicated in the above quote, clear and convincing evidence requires more proof than a 'preponderance of the evidence.' A preponderance of the evidence has been defined as follows:

A preponderance of the evidence means evidence of greater weight or evidence which is more convincing than that offered in opposition to it.

* * *

And clear and convincing evidence is less than 'beyond a reasonable doubt.' 'Beyond a reasonable doubt' has been defined as follows:

A reasonable doubt is not a mere possible doubt. It should be an actual or substantial doubt. It is such a doubt as a reasonable man would seriously entertain. It is a serious doubt, for which you could give good reason.

[Citation omitted.]

The clear and convincing standard of proof is usually applied when there is a special danger of deception, or when a particular type of claim is disfavored on public policy grounds. Succession of Lyons, 452 So.2d at 1165.

Proof of Nunez's Liability

The trial court held that "Nunez clearly violated the trust that the company placed in him" and "clearly knew that what he was doing was in violation of his company's policies" but held that ODECO did not prove fraud by clear and convincing evidence and could not recover. ¹ A contract is formed by the consent of the parties. La.C.C. art. 1927. The legal relationship between ODECO and Nunez was a contract of employment. The essential elements of an employment contract are (1) consent, (2) giving of services (labor), and (3) a fixed price. La.C.C. arts. 163, 164, 2669, 2673 and 2675; Vining v. Bardwell, 482 So.2d 685 (La.App. 1st Cir.1985), writ denied, 487 So.2d 439 (La.1986). Consent to a contract may be vitiated by fraud. La.C.C. art. 1948. When consent to a contract has been vitiated by fraud, the contract may be rescinded in an action for annulment. La.C.C. art. 2029, et...