Wellan v. Comfort Innovations, LLC
| Decision Date | 12 June 2020 |
| Docket Number | 2019 CA 0812 |
| Citation | 305 So.3d 883 |
| Parties | Doris M. WELLAN, Ph.D. v. COMFORT INNOVATIONS, LLC |
| Court | Court of Appeal of Louisiana — District of US |
305 So.3d 883
Doris M. WELLAN, Ph.D.
v.
COMFORT INNOVATIONS, LLC
2019 CA 0812
Court of Appeal of Louisiana, First Circuit.
DATE OF JUDGMENT: JUNE 12, 2020
Gregory Thomas Akers, Joshua P. Melder, Baton Rouge, Louisiana, Counsel for Plaintiff-Appellee Doris M. Wellan, PhD
David Allen Lowe, Baton Rouge, Louisiana, Counsel for Defendant-Appellant Comfort Innovations, LLC
BEFORE: McDONALD, THERIOT, AND CHUTZ, JJ.
CHUTZ, J.
Defendant-appellant, Comfort Innovations, LLC (CI), appeals the trial court's judgment awarding unpaid rent and conversion/unjust enrichment relief to plaintiff-appellee, Doris Wellan, as the dispossessed owner of a corporeal movable. We amend and, as amended, affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Wellan filed this lawsuit on September 10, 2012, averring a breach of a 66-month written lease of movable property that she entered into with CI in July 2007. The movable property consisted of "The Mold," which was described in the lease as "[a] series of molds ... used to produce all of the plastic parts for the assembly of a portable air conditioner, under patent # US 7,188,489 B2" held by CI. According to the petition, CI had defaulted on the required monthly payments and, despite demand by Wellan, refused to make payments in accordance with the terms of the lease. Wellan claimed "an amount sufficient to compensate her for past-due monthly payments" from CI.
CI answered the lawsuit on April 4, 2013, generally denied Wellan's allegations, and asserted a reconventional demand. In its claim against Wellan, CI averred that to raise capital and expand its business relative to its portable air conditioner invention, it had entered into an investment contract with Wellan whereby, for a $300,000.00 investment by Wellan, CI agreed to repay her original investment plus a return over a period of a little more than five years. According to CI, the "investment contract" was memorialized in part by the lease agreement executed on July 20, 2007, and CI "was to be and would always be the majority owner" of The Mold while Wellan would simply receive a return on her investment. Thus, the lease agreement "was a simulation of part of the terms, conditions, and understandings of the investment contract" into which the parties had entered.
In its reconventional demand, CI acknowledged that Wellan had paid $266,685.32 of the $300,000.00 that she had agreed to pay but refused to pay the balance. Claiming that Wellan's failure to pay the remaining $33,314.68 constituted a breach of the investment contract, CI sought damages, including the remaining sums on the original investment amount. Wellan answered, generally denying CI's allegations.1 The parties engaged in discovery and Wellan filed a motion for partial summary judgment, which was denied.
A pretrial order was signed by the trial court on November 6, 2017, and the matter was tried on November 15, 2017. On February 5, 2019, the trial court issued a final judgment against CI, awarding Wellan the amounts of $298,364.66 for unpaid rent and $826,125.00 for conversion and unjust enrichment relief. Additionally, the judgment dismissed all of CI's claims.2 This appeal followed.
UNPAID RENT
Challenging the award of unpaid rent to Wellan in accordance with the terms of the written lease agreement, CI maintains the trial court erred in failing to conclude that Wellan breached the lease agreement by
failing to deliver The Mold and to pay the full sum of $300,000.00.3
Where factual findings are pertinent to the interpretation of a contract, those factual findings are not to be disturbed unless manifest error is shown. But when appellate review is not premised upon any factual findings made at the trial level, but is, instead, based upon an independent review and examination of the contract on its face, the manifest error rule does not apply. In such cases, appellate review of questions of law is simply whether the trial court was legally correct or legally incorrect. This determination of a legal question is made de novo. Whether a contract is ambiguous or not is a question of law. Bonvillain Builders, LLC v. Gentile , 2008-1994 (La. App. 1st Cir. 10/30/09), 29 So.3d 625, 629, writ denied, 2010-0059 (La. 3/26/10), 29 So.3d 1264.
At trial, Wellan testified that she and CI verbally agreed for her to purchase The Mold. She pledged some of her assets and the Bank of Montgomery (bank) was willing to give her "a certain amount" of money, which she believed would amount to between $200,000.00 and $250,000.00. According to Wellan, "[w]hatever I was able to get from the bank" was the amount she agreed to pay for The Mold. Wellan recalled having discussed the purchase of The Mold with Cecil Cavanaugh, who was her CPA and whom she understood would serve as Chief Financial Officer (CFO) for CI.
Wellan made two payments to CI for the purchase of The Mold. The first was $150,000.00 given to CI on August 16, 2007. The second payment was provided to CI by a money order dated December 5, 2007, issued from the bank in the amount of $116,685.32. Wellan testified that after the second payment, she was never asked for any more money by anyone at CI to complete the purchase of The Mold.
In addition to the purchase of The Mold, Wellan explained that she entered into a written lease agreement, entitled "Manufacturing Mold Lease" dated July 19, 2007, that she signed along with Bonnie Floyd, the President and CEO of CI, on July 20, 2007. The lease agreement stated in pertinent part:
The Mold, manufactured at an overseas plant and housed in the plant of production chosen by [CI] shall be leased to [CI] under the following terms:
1. The lease term shall be for a period of 66 months.
2. Lease payments for the first 6 months shall be $2500.00 per month, payable quarterly.
3. Lease payments of $6,375.00 per month shall be paid at the beginning of month 7 and continue until the end of the lease period.
4. Unless otherwise directed, all lease payments are to be made to [Wellan]....
5. [CI] reserves the right to purchase The Mold from [Wellen] at fair market value within 90 days of the end of the lease.
Wellan recalled no other terms beside those reflected in the written agreement.
Around September 2007, Wellan remembered that CI began to make payments as agreed to in the lease and that the payments continued for some time. She described that at times, the payments were either not in the specified amount or at the required time, but in an effort to assist CI, she accepted less than the lease required. She believed that when sales were at the anticipated levels, she would be compensated by CI for the differences. Wellan identified an IRS 1099 form that she received from CI showing her receipt of $33,231.34 as miscellaneous income from "Rents" in 2008. According to Wellan, she received a total of approximately $99,134.00 in rent under the terms of the lease agreement.
Floyd also testified at trial. She remembered that her interactions with Wellan were through Cavanaugh. Floyd identified an invoice she sent to Wellan, dated August 11, 2007, which stated "One (1) mold for manufacturing ... portable air conditioners. To include both the top and bottom sections and the instrument panel" and noted under "TERMS " a "Down Payment - Due Now" in the amount of $150,000.00; "Due Upon Completion" was $120,000.00; and "Due Upon Delivery" was $30,000.00, for a "Total Amount Due" of $300,000.00. Wellan subsequently made payments totaling $266,685.32. And while Wellan failed to pay the full amount, Floyd conceded that CI never made a formal demand in writing but she said that CI "referenced it several times."
Although Floyd admitted that she wrote a March 20, 2009 letter to Wellan stating that Wellan purchased an interest in The Mold, not an interest in CI, Floyd testified at trial that, in her opinion, Wellan did not purchase The Mold. The arrangement between the parties was done as an investment interest for tax reasons so Wellan could get a return on her money in a short period of time. According to Floyd, "on paper" CI leased The Mold from Wellan and made payments to her but there was no document in which CI sold The Mold to Wellan because the arrangement was an investment, not a sale. CI began making payments to Wellan immediately.
Floyd explained that on July 20, 2007, CI knew The Mold was not ready for use and thought it would be ready in about eight months. Floyd acknowledged that CI selected the third-party manufacturer of The Mold who had not yet been determined when the parties entered the lease agreement, but noted that CI had no control over delivery. The Mold was not delivered to CI in 2007 or 2008. CI sent a letter to Wellan pointing out that in March 2009, costs associated with The Mold were $410,251.11. Floyd indicated that when The Mold was completed in September 2009, the actual cost was $488,466.72. She elaborated that the additional expenditures beyond the original investment amount were incurred in fixing problems with The Mold which increased costs of production from the original projection. Floyd acknowledged that under the terms of their arrangement, CI never intended to receive The Mold from...
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