Louisiana Eggs, Inc. v. Gunter Farms, Inc.

Citations: 844 So. 2d 400; 2001 La.App. 1 Cir. 0932; 2003 La. App. LEXIS 794; 2003 WL 1758798Docket: No. 2001 CA 0932

Court: Louisiana Court of Appeal; April 1, 2003; Louisiana; State Appellate Court

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Debtor company Louisiana Eggs, Inc. is contesting a trial court's calculation of the debt owed by Gunter Farms, asserting that the amount due is $92,521.75. Louisiana Eggs was established in 1995, with stockholders Herbert Holman, George Holman, and Joseph Gunter, and it operated from a facility leased from Gunter Food Products, owned by Joseph Gunter’s parents. Herbert Holman, residing in Georgia, was the president, while Margaret and Ken Gunter managed day-to-day operations. 

In September 1996, after concerns about growing accounts receivable impacting credit renewal, a meeting led to an agreement where Gunter Farms granted Louisiana Eggs a security interest in certain collateral, including an egg machine and a truck, with assurances of a first lien. However, shortly before Louisiana Eggs intended to declare bankruptcy in November 1996, it discovered that the security agreement had been canceled and that a prior lien existed in favor of Charles McCoy.

Subsequently, Louisiana Eggs, through its liquidators, filed suit against Gunter Farms and its officers on August 22, 1997, seeking the reinstatement of its security interest and prioritization above other liens on the collateral. The court found merit in the debtor's arguments and modified the trial court’s judgment accordingly.

Louisiana Eggs sought a writ of seizure and sale for collateral specified in a September 6, 1996, security agreement. In an amended petition dated February 4, 1998, Louisiana Eggs claimed that Charles McCoy and Joseph Gunter were personally liable for damages due to fraudulent misrepresentation regarding the security agreement's priority. A bench trial on September 1, 2000, resulted in a ruling favoring Louisiana Eggs, with Gunter Farms ordered to pay $92,521.75. The trial court reinstated the September 6, 1996, security agreement, declared it improperly canceled, and confirmed its ranking privilege upon filing. Additionally, a writ of seizure and sale was issued for the collateral, but claims against McCoy and Gunter personally were dismissed. Gunter Farms appealed, contesting the judgment amount, while Louisiana Eggs countered, arguing for attorney fees under the security agreement.

In addressing the appeal, Gunter Farms disputed the total owed, while Louisiana Eggs needed to establish its claim for the open account by demonstrating the account was maintained in the regular course of business. The burden then shifted to Gunter Farms to challenge any inaccuracies in the account. During the trial, only two witnesses testified: Herbert Holman and Joseph Gunter. Holman provided an itemized list of invoices to substantiate the claim, along with copies of the actual invoices as evidence. Gunter Farms attempted to refute this by highlighting discrepancies between the amounts listed in Holman's itemized report and other financial documents. A specific inconsistency arose from an aging accounts receivable list, showing no balances over 30 days for Gunter Farms in July and October 1996, but a balance of $83,167.15 due by November 20, 1996. Holman explained that the aging report was prepared without access to individual invoices at that time and relied on data from Margaret Gunter.

Gunter Farms attempted to challenge the itemized listing provided by Louisiana Eggs using exhibit D-3, a financial statement from July 31, 1996, which showed accounts receivable for Gunter Farms at $90,680.31. This figure diverged from amounts in documents D-2 and P-2. Herbert Holman, who drafted exhibit D-3, attributed discrepancies to information relayed by Margaret and Ken Gunter, noting he lacked specific sales invoices and detailed ledgers. After November 1996, he received additional invoices from Margaret Gunter for compilation into exhibit P-2. Gunter Farms contested the validity of individual sales invoices in exhibit P-1, claiming a change in billing practices after May 1996 when Louisiana Eggs began paying Gunter Farms for deliveries of shell eggs. Joseph Gunter testified that some invoices improperly credited amounts to Gunter Farms that were actually for Louisiana Eggs’ customers, based on the specific listings on the invoices. Holman maintained that Louisiana Eggs consistently billed for all delivered eggs. Each invoice included itemized orders without separate cost totals, complicating the billing assessment. The trial court ultimately found Gunter Farms owed Louisiana Eggs $92,521.75 as shown in exhibit P-2, agreeing with Louisiana Eggs' evidence over Gunter Farms’. However, it erred by not granting Gunter Farms credits it had proven, as there was insufficient evidence to refute their entitlement to those credits.

Herbert Holman testified that all credits and payments from Gunter Farms were reflected in exhibit P-2. However, none of the credit invoices submitted by Gunter Farms as exhibit D-6 appeared in exhibit P-2. While the evidence presented by Louisiana Eggs, including exhibits P-1, P-2, and P-7, was sufficient to establish a prima facie claim, the trial court erred by not acknowledging Gunter Farms' entitlement to certain credits, which necessitates a reduction in the amount owed to Louisiana Eggs. Additionally, Louisiana Eggs successfully argued for attorney fees based on the September 6, 1996 security agreement, which entitles the Secured Party to fees in case of default and foreclosure. The trial court's omission to award these fees was also deemed an error, leading to a remand for a hearing to determine a reasonable amount of attorney fees. The judgment was amended to reflect a total owed to Louisiana Eggs of $83,033.50, accounting for a credit of $9,488.25 to Gunter Farms. The appeal costs are to be shared equally between the parties. Furthermore, exhibit P-7 contained invoices dated before May 1996 with payment receipts not listed on P-2, but neither party raised this omission. An invoice dated March 26, 1996, in the amount of $5,197.48, was canceled by a corresponding credit to Gunter Farms on August 20, 1996.