Case ID: so2d_398/html/1146-01.html
Source: Caselaw Access Project
Author: {"author": "\n      BOUTALL, Judge. REDMANN, Judge, SCHOTT, Judge.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

EASTLAKE TRADING CO., INC. v. IBERIA TRADING CO., INC. and Lanark, Inc.
    No. 12104.
    Court of Appeal of Louisiana, Fourth Circuit.
    Dec. 29, 1980.
    On Rehearing April 24, 1981.
    Writ Denied June 12, 1981.
    Phelps, Dunbar, Marks, Claverie & Sims, Rutledge C. Clement, Jr., George J. Fowler, III, New Orleans, for Lanark, Inc., defendant-respondent.
    Oestreicher & Whalen, David W. Oest-reicher, II, Ralph S. Whalen, New Orleans, on behalf of Eastlake Trading Co., Inc., plaintiff-appellant.
    Before REDMANN, BOUTALL and SCHOTT, JJ.
   BOUTALL, Judge.

We granted a writ of certiorari on the application of Eastlake Trading Co., Inc. plaintiff in this matter, to review the correctness of a judgment of the Civil District Court for the Parish of Orleans dated November 24, 1980, rendered in favor of defendant, Lanark, Inc., and against plaintiff dissolving and vacating a writ of attachment previously issued on November 19, 1980, and maintaining a peremptory exception of no right of action filed by Lanark, dismissing plaintiff’s suit with prejudice.

Eastlake Trading Co., Inc., a Panamanian corporation, sued Lanark, Inc., also a Panamanian corporation, alleging that the parties had entered into a joint venture agreement to sell steel products and that Lanark had violated the agreement between them, causing damages in the amount of $404,000. In this petition, Eastlake sought garnishment against Iberia Trading Company, Inc., a Louisiana corporation, alleging that Iberia had in its possession or under its control property belonging to Lanark, and obtained a non-resident writ of attachment attaching the sum of $122,876.30 purportedly due La-nark under a sight draft payable November 23, 1980.

In response to this petition and the resulting attachment, Lanark filed a peremptory exception of no right of action and a motion to dissolve the attachment. These matters came to trial resulting in the judgment above mentioned. Several issues have been raised both under the motion to dissolve the attachment, and under the exception of no right of action. Because of the fact that the motion to dissolve the attachment would only have effect as to the validity of the attachment itself, and would have nothing basically to do with the main issue of the suit, that is, a suit for violation of contract between Eastlake and Lanark, and because of the conclusion we reach on the exception, we see no necessity to discuss the issues relative to attachment.

The peremptory exception of no right of action (Article 927(5) of the Code of Civil Procedure) is based on 2 grounds, 1.) that the plaintiff corporation is not qualified to do business in the State of Louisiana, and 2.) neither the Corporation nor its President has been authorized to institute suit. As to the first, it is apparent from the record that Eastlake is a foreign corporation as its petition recites that it is a “Panamanian Corporation with its principal place of business located in Panama City, Republic of Panama.” There is some evidence, but not con-clusory, that Eastlake maintains an office and a bank account in New Orleans and has been actively doing business. Under LRS 12:314(A) a foreign corporation transacting business in Louisiana is not permitted to present any judicial demand before a court of this state unless it has been authorized to transact such business. Because there is some doubt in our minds as to whether, under the evidence presented, there is sufficient evidence to show that Eastlake did such business in Louisiana to bring it within the prohibition of that statute, (see R.S. 12:302) we do not rely upon that ground in affirming the maintenance of the exception.

The second basis of the exception, authority to institute suits, similarly is hinged upon whether Eastlake is doing business in Louisiana. R.S. 12:82(G) provides that the president of any foreign corporation doing business in this state shall have power to institute suit, unless otherwise provided, and no exception of want of authority shall lie on the part of the other party. This section is not applicable in this case because Eastlake has not provided the certificate of authorization to transact business required by R.S. 12:314(A).

The record shows that there was never any authority given the president of East-lake to file this suit, and that the board of directors of the corporation has never authorized this suit. There is no showing that the president was granted authority either by charter or by by-laws of the corporation to unilaterally bring such a suit on behalf of the corporation. Lacking such authority, plaintiff’s suit must be dismissed at its cost. Correspondingly, because we affirm the dismissal of the suit, the writ of attachment is dissolved and the stay order previously issued by this court is also dissolved.

The judgment appealed from, dated November 24, 1980, is affirmed.

AFFIRMED.

REDMANN, J., dissenting.

REDMANN, Judge,

dissenting.

The trial judge dismissed this suit because the president of plaintiff corporation Eastlake (who instituted the suit for plaintiff) is also president and sole shareholder of defendant corporation Iberia (though not of the real defendant, Lanark). That circumstance, however, is no obstacle to this suit, which is not one by an individual against himself but one by one legal person against another, wholly separate legal person.

The majority affirms on the grounds that (a) if plaintiff foreign corporation is doing business in Louisiana without having qualified, La.R.S. 12:814 A prevents its suit and (b) if plaintiff is not doing business in Louisiana it may sue but its suit must be authorized by its board of directors.

The assumption of the majority opinion is that the president of a foreign corporation not doing business in Louisiana has no authority to brihg suit for the corporation. I dissent from that assumption.

La.R.S. 12:82 G provides that

the president ... of any corporation or any foreign corporation doing business in this state, shall have power in the name and behalf of the corporation to authorize the institution ... of any suit and other legal proceedings, and no exception of want of authority shall lie on the part of any other party.

Although that statute is silent as to foreign corporations not doing business in the state, the conclusion seems unwarranted that the president of such a corporation must be presumed to lack authority to sue, when the general rule as to all corporations is to the contrary. See Fletcher, Cyclopedia Corporations, § 4216 (rev.1976); Henn, Corporations (2d ed., 1970), § 225. Because La.R.S. 12:82 G is otherwise consistent with the general rule, its silence on foreign corporations not doing business in Louisiana should not be interpreted to institute a contrary rule as to those corporations.

The facts of this case, furthermore, call for maintaining the suit instituted by plaintiff’s president. He and his father own 50% of plaintiffs shares and should alone exercise the corporate powers as to this suit because the other 50% belong to Lanark (the real defendant) and the Lanark-named directors have a conflict of interest that should prevent their vote. (See La.R.S. 12:84.) That plaintiff’s president owns 100% of “defendants”-garnishee Iberia presents no conflict of interest because Iberia concedes it owes the money in question, and the only issue is whether Lanark is indebted to plaintiff on the related contract alleged. If the Lanark-named directors of plaintiff corporation can prevent plaintiff’s suit against Lanark, then the non-Lanark shareholders will be unable to benefit from the plaintiff-Lanark contract sued on.

The correct result is to overrule Lanark’s exceptions and allow trial on the merits.

ON REHEARING

SCHOTT, Judge.

We granted a rehearing in order to reconsider our position that the trial judge properly maintained an exception of no right of action based on the fact that the president of plaintiff Corporation was not authorized to file suit in behalf of the corporation.

Although defendants’ exception was styled no right of action, a peremptory exception under C.C.P.Art. 927, we have concluded that the exception is more properly classified as a dilatory exception under Art. 926. The exception of no right of action is defined as one in which there is no interest in the plaintiff to institute the suit, Art. 927(5). Surely Eastlake had an interest in instituting this suit against Lanark and obtaining a conservatory writ of nonresident attachment pursuant to C.C.P.Art. 3541(5) with respect to the draft payable by defendant Iberia Trading Co., Inc. to La-nark, Inc. Under Art. 923 the function of the dilatory exception is to retard the progress of the action but it does not tend to defeat the action. On the other hand, the peremptory exception’s function is to have plaintiff’s action declared legally nonexistent, or barred by effect of law.

Defendants’ exception simply questions the authority of the president of a corporation to bring suit. If that question is not answered satisfactorily the progress of the suit is retarded by a judgment sustaining the dilatory exception. However, when the grounds of the objection may be removed by amendment of the petition or other action by plaintiff, the judgment sustaining the exception shall order plaintiff to remove them within the delay allowed by the court. The suit may be dismissed only for a noncompliance with this order, Art. 933.

In our original opinion, we held that the judgment of the trial court was correct starting from two alternative assumptions. If plaintiff is a foreign corporation doing business in Louisiana without having qualified, LSA-R.S. 12:314 prevents it from filing suit in Louisiana. If on the other hand plaintiff was not doing business in Louisiana the provisions of R.S. 12:82(G) would have no application and defendants’ exception of want of authority as to the president of the corporation bringing the suit would lie.

In briefs filed in this court on rehearing, plaintiff has alleged that it is now authorized by the Secretary of State to do business in Louisiana. It also alleged that its application for authority was pending at the time of the hearing on this exception. If that is so the defect in plaintiff’s status was being and could have been removed had plaintiff been given time by the trial judge in which to do so. We would therefore affirm the judgment of the trial court sustaining the exception as a dilatory exception of want of authority and allow plaintiff time in which to amend its petition to allege that it is now authorized to do business in the State of Louisiana.

Once plaintiff can prove itself as doing business in Louisiana, the provisions of R.S. 12:82(G) apply. This section is an unequivocal declaration that no exception of want of authority shall lie on the part of a defendent when the president of a foreign corporation doing business in the state authorizes the institution of a suit.

We are not unmindful of the trial court’s impression that plaintiff’s president was abusing the judicial system of the state in order to gain some personal advantage over Lanark and its principals. However, the assertions made by Lanark of wrong doing on the part of plaintiff are countered with equally strong assertions by plaintiff as to wrong doing on the part of Lanark and its principals. Furthermore, Lanark’s assertions do not compel the conclusion that Eastlake, as a matter of law, is not entitled to avail itself of the provisions relative to the writ of non-resident attachment simply because of the relationship of Hines to both Eastlake and Iberia. ■

If the seizure of the draft is maintained the parties may produce all of their conflicting evidence to show bad faith and misconduct on the part of each other, the trial court will have an opportunity to evaluate the evidence and can arrive at a conclusion awarding the funds to the proper party. This is preferable since matters will remain in status quo until the controversy is fully tried and decided. While Lanark, if it prevails in the litigation, may be caused some temporary inconvenience while the check remains under seizure, such inconvenience should not be irreparable.

Accordingly, the judgment of the trial court sustaining the exception of Lanark, Inc. is affirmed but only to the extent that the exception is considered a dilatory exception of want of authority on the part of plaintiff’s president to bring the suit. The judgment of the trial court dismissing plaintiff’s suit is reversed and the case is remanded to the trial court to enable plaintiff to file amended pleadings in order to allege that it is authorized by the Secretary of State to do business in Louisiana and for further proceedings consistent with this opinion. All costs of this appeal are taxed against Lanark, Inc. with the balance of costs to await the outcome of this case.

AFFIRMED IN PART, REVERSED IN PART AND REMANDED.

REDMANN, J., concurs in the reversal and remand. 
      
      . “The president or chief executive officer of a corporation according to the more modern authorities, ordinarily has power to institute suits on behalf of the corporation, although there are cases to the contrary.”
     
      
      . “So far as instituting corporate litigation or arbitration in the corporate name is concerned, the president or any other officer or person acting as general manager usually has implied authority to do so, but such implied authority, like other implied authority, can be negatived by provisions in the articles of incorporation or bylaws or by resolution of the board of directors.”
     
      
      .Lanark’s argument that Panamanian law disables a president to act without board authorization rests exclusively on that law’s rule that corporate powers are vested in the board of directors. Because that is also the rule in Louisiana, La.R.S. 12:81 A, and, so far as this writer is informed, also the rule in every other jurisdiction, Lanark’s argument is unfounded.