Nat'l Collegiate Student Loan Trust 2006-1 v. Thomas

322 So.3d 374

NATIONAL COLLEGIATE STUDENT LOAN TRUST 2006-1

v.Latonya M. THOMAS

21-90

Court of Appeal of Louisiana, Third Circuit.

June 2, 2021

Brian D. Roth, Bryan C. Shartle, Bradley J. St. Angelo, Sessions, Israel & Shartle, LLC, 3850 North Causeway Boulevard, Suite 200, Metairie, LA 70002, (504) 828-3700, COUNSEL FOR PLAINTIFF/APPELLANT: National Collegiate Student Loan Trust 2006-1

Christine Wells, Michael L. Lancaster, M. Reah Linton, Eaton Group Attorneys, Post Office Box 3001, Baton Rouge, LA 70821-3001, (225) 378-3110, COUNSEL FOR PLAINTIFF/APPELLANT: National Collegiate Student Loan Trust 2006-1

William Gardere Cherbonnier, Jr., 2550 Belle Chasse Highway, Suite 215, Gretna, LA 70053, (504) 309-3304, COUNSEL FOR DEFENDANT/APPELLEE: Latonya M. Thomas

Garth Jonathan Ridge, 251 Florida Street, Suite 301, Baton Rouge, LA 70801, (225) 343-0700, COUNSEL FOR DEFENDANT/APPELLEE: Latonya M. Thomas

David Anthony Szwak, Bodenheimer, Jones & Szwak, 416 Travis Street, Suite 800, Shreveport, LA 71101, (318) 424-1400, COUNSEL FOR DEFENDANT/APPELLEE: Latonya M. Thomas

J. David Andress, 120 Rue Beauregard, Suite 205, Lafayette, LA 70508, (337) 347-9919, COUNSEL FOR DEFENDANT/APPELLEE: Latonya M. Thomas

Court composed of Candyce G. Perret, Sharon Darville Wilson, and Charles G. Fitzgerald, Judges.

PERRET, Judge.

Plaintiff-appellant, the National Collegiate Student Loan Trust 2006-1 ("NCSLT"), seeks review of the trial court's October 20, 2020 judgment sustaining an exception of no right of action filed by defendant-appellee, Latonya M. Thomas, dismissing NCSLT's action against her with prejudice. For the following reasons, we reverse the trial court's judgment that sustained the exception of no right of action and remand for further proceedings.

FACTS:

This suit arises out of an educational loan note account that was originally issued to Ms. Thomas on November 28, 2005, through Charter One Bank, N.A. On May 7, 2018, NCSLT filed suit against Ms. Thomas to collect on the student loan debt in the amount of $53,338.04, together with accrued interest in the amount of $4,724.86, totaling the sum of $58,062.90. Attached to the petition, NCSLT filed into the record an "Affidavit and Verification of Account" executed by an employee of Transworld Systems, Inc., the designated custodian of records concerning the education loan at issue, attesting that The National Collegiate Funding, LLC sold, assigned, and transferred Ms. Thomas's student loan to NCSLT on March 9, 2006.

Ms. Thomas subsequently filed peremptory exceptions of no right of action, no cause of action, and prescription. With respect to the exception of no right of action that is the subject of this appeal, Ms. Thomas argued that NCSLT, a Delaware trust, lacks the procedural capacity to appear as plaintiff because Louisiana law "mandates that only the trustee has the capacity to file suit on behalf of a trust[,]" and that a "trust itself has no right of action[.]" In her memorandum in support of the exception of no right of action, Ms. Thomas states that "NCSLT has two trustees, specifically, U.S. Bank National Association is the ‘Indenture Trustee’ and Wilmington Trust Company is the ‘Owner Trustee.’ " NCSLT responded to the exception of no right of action by arguing that it is a Delaware statutory trust which, by definition, is an unincorporated association with the right, capacity, and standing to sue in its own name. In further support of its argument, NCSLT cites to La.R.S. 12:507(A)¹ and La.Code Civ.P. art. 689² to argue that Louisiana "fully recognizes the separate personality of unincorporated associations" and that, as a juridical person under La.Civ.Code art. 24,³ it has the procedural capacity to sue Ms. Thomas to enforce its rights in its own name.

After a hearing, the trial court signed a judgment on August 24, 2020, which denied the exceptions of no cause of action and prescription but sustained the no right of action. At that time, the judgment ordered that NCSLT "shall have forty-five (45) days to amend its Petition in accordance with this Judgment if it is able to do so." The trial court provided the following pertinent reasons for sustaining the exception of no right of action:

Plaintiff, National Collegiate Student Loan Trust 2006 (hereinafter "NCSLT") brought the present suit in an attempt to collect a student loan obligation. The exception of no right of action is urged on the basis that NCSLT is a trust which is not permitted to prosecute a lawsuit on its own behalf under Louisiana law.

The first issue presented to the Court was whether Delaware or Louisiana law should be applied. The Court applied the factors set forth in Triche v Martin , [08-1220 (La.App. 1 Cir. 5/8/09),] 13 So.3d 649 [, writ denied , 09-1284 (La. 9/25/09), 18 So.3d 76 ]. The loan that is the subject of this lawsuit was executed in Louisiana, between two Louisiana residents and an Ohio bank, the funds were allegedly disbursed in Louisiana for the purpose of attending a Louisiana institute of higher education. Further, the plaintiff filed the suit in the 15th Judicial District Court, Lafayette Parish, Louisiana. The policies of the State of Louisiana would be most significantly impaired if its laws were not applied. Therefore, this Court will apply the law of Louisiana.

Under Louisiana law, a statutory trust created under the laws of another state is by definition an "express trust" and with one exception which is not applicable in this case, the trustee of an express trust is the real party in interest, and the proper party plaintiff, in a lawsuit brought in Louisiana on behalf of an express trust, to enforce a right or interest of the trust.^[4]

On October 20, 2020, the trial court took "judicial notice that as of October 9, 2020, more than forty-five (45) days have elapsed from the date of the signing of the Judgment, and Plaintiff, [NCSLT], has failed to amend its petition to comply with the judgment of the Court." Accordingly, the trial court entered a final judgment dismissing the matter with prejudice. NCSLT now appeals this final judgment alleging the following two assignments of error:

1. The trial court erred in sustaining the exception of no right of action when the issue presented was one of capacity -- a dilatory exception that had been waived.

2. The trial court erred by deeming NCSLT an express trust under Louisiana law and subject to the limitations on the capacity of express trusts to file suit in Louisiana pursuant to [La.Code Civ.P.] art. 699.

STANDARD OF REVIEW:

The standard of review of a ruling on an exception of no right of action, which presents a question of law, is de novo. Washington Mut. Bank v. Monticello , 07-1018 (La.App. 3 Cir. 2/6/08), 976 So.2d 251, writ denied , 08-530 (La. 4/25/08), 978 So.2d 369. "Appellate review of questions of law is simply a review of whether the lower court was legally correct or legally incorrect." Foster v. ConAgra Poultry Co ., 95-793, p. 2 (La.App. 3 Cir. 2/14/96), 670 So.2d 471, 473, writ denied , 96-645 (La. 4/26/96), 672 So.2d 674.

DISCUSSION:

Louisiana Code of Civil Procedure Article 681 provides that "an action can be brought only by a person having a real and actual interest which he asserts." A peremptory "exception of no right of action is a threshold procedural device used to terminate a suit brought by a person who has no legally recognized right to enforce the right asserted." Joseph v. Hosp. Serv. Dist. No. 2 of Par. of St. Mary, 05-2364, p. 4 (La. 10/15/06), 939 So.2d 1206, 1210. Thus, "[t]he exception of no right of action serves to question whether the plaintiff in the particular case is a member of the class of persons that has a legal interest in the subject matter of the litigation." Badeaux v. Sw. Computer Bureau, Inc., 05-612 pp. 6-7 (La. 3/17/06), 929 So.2d 1211, 1217.

The first issue we will address is whether the trial court correctly deemed NCSLT an express trust under Louisiana law since it is dispositive of the case sub judice . Although both parties agree that Louisiana procedural laws apply to the process by which juridical entities and express trusts access and file suit in Louisiana courts, NCSLT argues that the trial court erred in finding it to be an express trust rather than a business trust which was established under Delaware law as an independent juridical entity. In support of this argument, NCSLT cites to La.R.S. 12:1-140(24B), which defines an "Unincorporated entity" to include a "business trust," to argue that it is a foreign juridical person and, as such, it has the right and capacity to access the Louisiana courts in its own name per La.Civ.Code art. 24.

In response, Ms. Thomas argues that "[t]here is no statutory exception that would allow a foreign trust to file suit in its own name in Louisiana" and that "Louisiana is not required by the U.S. Constitution to step aside and allow Delaware Law and procedure to control its courts." Thus, Ms. Thomas argues that per La.Code Civ.P. art. 699, "only the trustee has a right to assert a claim on behalf of a trust" and that the trial court properly granted the no right of action upon finding that the trust, NCSLT, was not the proper party and had no real and actual interest in the claim asserted.

"Judicial review of issues of Louisiana trust law, like such review of all issues of Civil Law, begins not with an examination of jurisprudence but with the plain wording of the Trust Code [ La.R.S. 9:1721 ], read as a whole and interpreted according to its own rules of construction." Read v. U.S. ex rel. Dep't of Treasury , 169 F.3d 243, 248 (5th Cir. 1999). Under the Louisiana Trust Code, a trust is defined as "the relationship resulting from the transfer of title to property to a person [the trustee] to be administered by him as a fiduciary for the benefit of another." La.R.S. 9:1731. A trustee is defined as "a person to whom title to the trust property is transferred to be administered by him as a fiduciary." La.R.S. 9:1781. Additionally, La.Code...