Pierrotti v. Johnson

• Decision Date: 19 March 2012
• Docket Number: No. 2011 CA 1317.,2011 CA 1317.
• Citation: 91 So.3d 1056
• Parties: Warren “Chip” PIERROTTI and Elizabeth T. Pierrotti v. Glenn Lee JOHNSON, Kim Graham Johnson, Stephen Colson and Prestige Title.
• Court: Court of Appeal of Louisiana — District of US

91 So.3d 1056

Warren “Chip” PIERROTTI and Elizabeth T. Pierrotti

v.Glenn Lee JOHNSON, Kim Graham Johnson, Stephen Colson and Prestige Title.

No. 2011 CA 1317.

Court of Appeal of Louisiana, First Circuit.

March 19, 2012.

Brent P. Frederick, Baton Rouge, LA, for Plaintiffs–Appellants Warren “Chip” Pierrotti and Elizabeth T. Pierrotti.

Richard Mary, Frank Tomeny, III, Baton Rouge, LA, for Defendants–Appellees Glenn Lee Johnson and Kim Graham Johnson.

Before PETTIGREW, McCLENDON, and WELCH, JJ.

PETTIGREW, J.

[1 Cir. 2]Plaintiffs appeal the dismissal of their lawsuit as res judicata due to a prior arbitration. For the reasons set forth below, we reverse and remand.

FACTS AND PROCEDURAL HISTORY

According to the record, plaintiffs, Warren “Chip” Pierrotti and Elizabeth T. Pierrotti (collectively referred to hereafter as “Pierrotti”), and defendants, Glenn Lee Johnson and Kim Graham Johnson (collectively referred to hereafter as “Johnson”), were years ago partners in multiple business ventures. On January 15, 2004, Pierrotti and Johnson entered into a Master Settlement Agreement (“MSA”) “to effect a settlement of all claims between the parties.” It was the intent of the parties that by entering into the agreement, they were settling all claims between them, “whether asserted or not.”

For purposes of this litigation, the important section of the MSA is Agreement # 6, which sets forth the following:

Johnson agrees to transfer to Pierrotti or his designee all of Johnson's right, title and interest in two parcels of real property in which Johnson is a co-owner with Pierrotti, including an office and warehouse facility located at 11862 Cloverland Court, Baton Rouge, Louisiana, 70808, and a rental parcel located at 3620 Nelson Road, Lake Charles, Louisiana 70605. The consideration for the transfer shall be the assumption of liability by Pierrotti and the release of Johnson from obligations as maker or guarantor; the act of transfer shall not occur until Johnson shall have been fully released as a maker and guarantor of notes and all other obligations associated with the parcels in question. Johnson agrees to execute the act of transfer simultaneously ( i.e., at the same closing) with his release from the obligations.

Pierrotti agrees that during the period of time between the execution of this agreement and the transfer described in this section, he will maintain the property in good condition at his expense; he will keep casualty and liability insurance in place naming Johnson as an additional insured; and he will service the debt owed to lenders on a regular basis without permitting default. Further, Pierrotti agrees that he will not encumber the property without the knowledge and consent of Johnson. Johnson agrees that he will have no claim to the rental income earned through leases; and Johnson and Pierrotti agree that Johnson will not be shown as a recipient of passive income or losses for income tax purposes for 2003 or until Johnson transfers the property interests.

In the event that Pierrotti fails to effect the transfer of real property from Johnson within 3 years from the date of this agreement, or in the event Johnson is called upon at any time to make any payment to creditors holding secured interests in the real property parcels, or required to pay delinquent taxes to taxing authorities to prevent the sale of the parcels for unpaid taxes, then the obligation of Johnson to transfer his ownership [1 Cir. 3]interest to Pierrotti shall, at the option of Johnson, be cancelled. All of the other obligations of the parties in this agreement shall remain in force and effect, even if the obligations under Agreement # 6 are not fulfilled.

When the parties entered into the MSA on January 15, 2004, both parcels of property listed in Agreement # 6 were mortgaged, and neither Pierrotti nor Johnson owned any equity in the properties. At some point in early 2005, Pierrotti sought to refinance the Cloverland property and arranged, in accordance with Agreement # 6, for Johnson to be “fully released as a maker and guarantor of notes and all other obligations associated” with the Cloverland property. As further intended by the MSA, Johnson executed a document entitled “Act of Donation” on February 28, 2005, transferring his ownership interest in the Cloverland property to Pierrotti.

As evidenced by documents in the record, Johnson transferred his ownership interest in the Cloverland property to Pierrotti, Johnson was released as a maker and guarantor on all loans and obligations associated with the Cloverland property, and Pierrotti secured a new mortgage on the Cloverland property, which paid off the existing mortgage. For the next 5 years, Pierrotti made monthly payments on the mortgage totaling over $200,000.00. Johnson never made a payment on the mortgage,nor was he ever called upon to make a payment on the Cloverland property.

According to the record, however, there was a problem with the Nelson property in early 2005. Johnson was contacted by the bank holding the mortgage on the Nelson property and informed that the note was 90 days past due. At that point, Johnson began making monthly payments on the Nelson property. Arbitration was invoked to enforce Agreement # 6 of the MSA. The arbitrator found that pursuant to Agreement # 6 of the MSA, because Johnson had been called upon to make payment on the Nelson property, his obligation to transfer his ownership interest in the property was cancelled. Thus, the arbitrator ruled in Johnson's favor, cancelling Johnson's obligation to transfer his ownership interest in the Nelson property to Pierrotti. The award of the arbitrator was signed November 15, 2005. Pierrotti then transferred ownership of the Nelson property to Johnson in exchange for Johnson reimbursing Pierrotti the amounts Pierrotti expended for mortgage payments on the Nelson property after the MSA became effective.

[1 Cir. 4]Subsequently, on July 30, 2010, Pierrotti entered into a purchase agreement to sell the Cloverland property to a third party. During the buyer's due diligence period, their attorney, Brett Furr, noticed that the title company that handled the refinancing on the Cloverland property had failed to properly record the “Act of Donation” that Johnson had signed transferring his interest in the Cloverland property to Pierrotti. Mr. Furr also noticed that only one witness had signed the “Act of Donation.” Mr. Furr contacted Johnson to obtain corrective documents. Mr. Furr was advised by Johnson's attorney that Johnson would sign whatever was needed to be signed “in order to uncloud the title.” However, once Mr. Furr presented the documents for signing, Johnson refused to cooperate and acted to obstruct the sale.

On August 17, 2010, Pierrotti filed suit to clear the title to the Cloverland property and recover damages occasioned by Johnson's actions. Named as defendants were Johnson, Prestige Title, Inc., the company that handled the refinancing of the Cloverland property, and Stephen Colson, an employee of Prestige Title, Inc. Pierrotti sought a judgment finding that Johnson had transferred all ownership interest in the Cloverland property on February 28, 2005, and ordering that Johnson execute curative documents to formally notice the transaction. Pierrotti also requested damages for lost profits from the sale of the property and costs incurred relative to the lost sale.

In response to the petition, Johnson filed a general denial and exceptions raising the objections of res judicata and no cause of action. Johnson argued that the parties had previously arbitrated Agreement # 6 of the MSA, the section upon which Pierrotti based his alleged claims, and that the previous arbitration award between the parties barred Pierrotti's suit due to its res judicata effect. The parties subsequently filed competing motions for summary judgment. All of the matters proceeded to hearing before the trial court on April 4, 2011. After hearing argument from the parties, the trial court made the following observations:

Warren Pierrotti, plaintiff, and Glenn Johnson, defendant, were business partners and co-owned two parcels of land, the Cloverland property and the Nelson property.

[1 Cir. 5]In 2003, Mr. Pierrotti and Mr. Johnson wanted to sever their business partnership. On January 15, 2004 they entered into a Master Settlement Agreement, which the Court will refer to as the M.S.A., to effect a formal separation of all ties between them, both business and personal.

Pursuant to Agreement Number 6 of the M.S.A., Mr. Johnson had an obligation to transfer his interest in either parcel of property as long as that transaction took place on or before January 16th of 2007, and Johnson was not called upon to make any payments to creditors holding secured interest in the property, or required to pay any delinquent taxes before the transfer of the ownership occurred. When the M.S.A. was signed by the parties after it was arbitrated, both the Cloverland and Nelson parcels of property listed in Agreement 6 were mortgaged with personal guarantees by both Pierrotti and Johnson.

In early 2005, the plaintiff sought to refinance the Cloverland property and arrange for Johnson to be fully released as a maker and guarantor of the notes and all other obligations associated with that parcel as required by the [M.S.A.].

The Johnsons claim that Agreement 6 of the [M.S.A.] required Pierrotti, as consideration for the transfer of the two properties, to secure Johnson's release for the debts affecting both properties. They further claim that Johnson was not released from the obligation to creditors as agreed upon, and therefore, he wants to set aside the transfer at issue. In order to facilitate the transfer of the properties and to comply with the Agreement Number 6 of the [M.S.A.], Johnson executed a purported Act of Donation regarding the Cloverland property; however, the act was not properly recorded, and from there, the...