UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
______________________
No. 98-31293
______________________
WORLDWIDE REMEDIATION, INC.
Plaintiff-Appellee
versus
ONEBANE, BERNARD, TORIAN, DIAZ
MCNAMARA & ABELL LAW FIRM
Intervenor Plaintiff-
Appellant
versus
PETROLEUM HELICOPTERS, INC.
Defendant-Appellee.
_______________________
Appeal From The United States District Court
for the Western District of Louisiana
_______________________
May 22, 2000
Before WIENER, BENAVIDES, and PARKER, Circuit Judges.
WIENER, Circuit Judge:
The Civilian doctrine of compensation, codified in Louisiana
as article 1893 of the Civil Code, provides, as a general rule,
that when two persons owe each other reciprocal obligations payable
in money (or quantities of fungible things identical in kind), and
these sums (or quantities) are liquidated and presently due, both
obligations are extinguished by operation of law to the extent of
the lesser amount. If compensation applies in this case, then when
the district court simultaneously rendered partially offsetting
money judgments —— the first in favor of Plaintiff-Appellee
Worldwide Remediation, Inc. (“Worldwide”) against Defendant-
Appellee Petroleum Helicopters, Inc. (“PHI”) for $32,200, and the
second in favor of PHI on its counterclaim against Worldwide for
$437,836 —— PHI’s $32,200 debt to Worldwide would be extinguished
and Worldwide’s $437,836 debt to PHI would be reduced by $32,200 to
$405,636. We conclude that compensation is applicable under these
circumstances.
Nevertheless, compensation cannot take place if its
application would prejudice “rights previously acquired by third
parties.”1 This case turns, then, on whether, as a matter of law,
any rights of the Intervenor-Plaintiff-Appellant, the law firm of
Onebane, Bernard, Torian, Diaz, McNamara & Abell (“Onebane”), in
the judgment rendered in favor of Worldwide, its former client,
were acquired prior to the existence of that judgment, thereby
precluding that compensation. Convinced that any right of Onebane
in that judgment was not previously acquired, we hold that the
reciprocal judgment debts of Worldwide and PHI were extinguished by
compensation to the extent of Worldwide’s judgment, and affirm the
ruling of the district court to that effect.
I.
FACTS & PROCEEDINGS
PHI entered into a contract with Worldwide, obligating
1
La. Civ. Code art. 1899.
2
Worldwide to perform waste remediation services at PHI’s helicopter
base site in Vermilion Parish, Louisiana. After PHI ordered
Worldwide to stop performing work under the contract, Worldwide
hired Onebane to file suit in district court against PHI for breach
of contract. The gravamen of Worldwide’s complaint was that PHI
had prematurely terminated the contract and was liable for the loss
suffered by Worldwide as a result of PHI’s actions. PHI answered
Worldwide’s suit and filed a counterclaim asserting, in essence,
that Worldwide had not performed the contract in a workmanlike
fashion and was therefore obligated to refund all payments that PHI
had made to Worldwide under the contract.
After the suit had been pending for over six months, Worldwide
terminated its relationship with Onebane and engaged another law
firm, Perret, Doise (“Perret”), to prosecute the suit against PHI.
Onebane repeatedly asked Worldwide to pay for the legal services
that it had rendered. When these demands proved to be ineffectual,
the court permitted Onebane to intervene in the Worldwide-PHI
lawsuit to assert a special privilege, pursuant to La. Rev. Stat.
§ 9:5001, on any judgment that might be rendered in favor of
Worldwide.
After a bench trial, the district court ruled that (1) PHI had
not remunerated Worldwide for demurrage and equipment rental, the
combined value of which was $32,200, and (2) Worldwide had not
performed work under the contract satisfactorily, as a result of
which Worldwide was obligated to return the $437,836 that PHI had
3
paid for Worldwide’s services.
After the court issued its ruling, Onebane, PHI, and Perret
filed post-trial motions regarding the propriety of setting off the
$32,200 judgment that PHI owed to Worldwide against the $437,836
judgment that Worldwide owed to PHI. Both PHI and Perret urged
that the reciprocal obligations of PHI and Worldwide should be set
off to the extent of the lesser sum, leaving Worldwide with an
obligation to pay PHI the difference of $405,636. Onebane
countered that its previously acquired right to collect its fee
from the judgment in Worldwide’s favor would be prejudiced if the
judgments were offset, thereby pretermitting compensation and
requiring Worldwide and PHI to pay each other.
Relying in the alternative on the Civilian doctrines of
confusion and compensation, the district court entered a
clarification of judgment, explaining that the reciprocal
obligations of PHI and Worldwide were extinguished by operation of
law to the extent of the smaller obligation. The court rejected
Onebane’s contention that its rights, as the holder of a special
privilege for attorneys’ fees on any judgment rendered in
Worldwide’s favor, were previously acquired and would be prejudiced
by allowing the offset, thereby preventing application of
compensation. The court concluded that when it rendered the
judgments simultaneously, the offset occurred ipso facto, so that
there was no judgment in Worldwide’s favor to which Onebane’s
4
attorneys’ fee privilege could attach. Onebane timely appealed.2
II.
ANALYSIS
A. Jurisdiction & Standard of Review
Jurisdiction in the district court was based on diversity of
citizenship.3 We have appellate jurisdiction over final judgments
of the district courts pursuant to 28 U.S.C. § 1291. The relevant
facts are not disputed; and this appeal presents but a single
question of law which, we review de novo.4
B. Merits
1. Confusion
Article 1903 of the Louisiana Civil Code states that “[w]hen
the qualities of obligee and obligor are united in the same person,
the obligation is extinguished by confusion.”5 When, for example,
a son borrows money from his father, making the son the obligor and
his father the obligee, and, thereafter, while the debt remains
unpaid, the father dies and the son as heir or legatee succeeds to
his father’s rights as obligor, the son becomes both obligor and
obligee as to that debt by operation of law, extinguishing the debt
2
No party has appealed from the underlying contract dispute.
3
See 28 U.S.C. § 1332.
4
See Baldwin v. Stalder, 137 F.3d 836, 839 (5th Cir. 1998)
(conclusions of law entered after bench trial subject to de novo
review).
5
Emphasis added.
5
by confusion. Note that, in this example, there is only one
obligation, and the status of both the father (obligor) and of his
son (obligee) relate to that solitary obligation.
Not so in the instant case. When the district court rendered
judgment, Worldwide and PHI were both obligor and obligee of each
other, but neither party was both obligor and obligee with respect
to any one obligation. Rather, for both parties, the status of
obligor related to one obligation and that of obligee to another.
As Civilian scholars have explained, in such a situation the
doctrine of compensation might apply, but confusion cannot because
“in the case of confusion there is only one credit to extinguish.”6
This conclusion squares with the language of article 1903, which
makes reference to a singular obligation. We hold, therefore, that
the doctrine confusion is inapplicable.
2. Compensation
In what has been referred to as more of a description than a
definition,7 the Louisiana Civil Code sets forth the general rule
of compensation as follows:
Art. 1893. Compensation extinguishes obligations
Compensation takes place by operation of law when
6
2 PLANIOL, TRAITE ELEMENTAIRE DE DROIT CIVIL pt. 1, ch. V, no. 598,
at 326 (La. St. L. Inst. Trans., 11th ed. 1959); see also, Aubry &
Rau, Droit Civil Francais, in 1 Civil Law Translations § 330 at 257
n.2 (1965) (“In contrast to compensation, which extinguishes two
debts by respective payment, the confusion extinguishes only one
obligation”).
7
SAUL LITVINOFF, OBLIGATIONS § 19.1, AT 641 (5 LOUISIANA CIVIL LAW
TREATISE 1992).
6
two persons owe to each other sums of money or quantities
of fungible things identical in kind, and these sums or
quantities are liquidated and presently due.
In such a case, compensation extinguishes both
obligations to the extent of the lesser amount. . . .
In this case, Worldwide and PHI each owed the other a sum certain
which became liquidated and presently due, at the very latest, when
the court rendered the partially offsetting judgments. If Article
1893 applies, then by operation of law the reciprocal judgments
would be extinguished to the extent of the smaller one, i.e.,
Worldwide’s $32,200 judgment against PHI, at the moment they were
rendered.
Onebane nevertheless insists that compensation cannot occur
here. Its argument rests on article 1899 of the Civil Code, which
provides that compensation cannot take place when its application
would prejudice “rights previously acquired by third parties.”8
Onebane reasons that when it intervened and asserted its right to
be paid the liquidated amount of its attorneys’ fees, it acquired
a vested right in any judgment its former client might eventually
obtain in that lawsuit. Given both the general rule of
compensation in article 1893 and the exception to that rule in
article 1899, we arrive at the decisive issue in this appeal:
whether Onebane holds a previously acquired right in one of the
offsetting obligations, precluding compensation.
8
The full text of article 1899 is as follows: “Compensation
can neither take place nor may it be renounced to the prejudice of
rights previously acquired by third parties.”
7
Onebane advances that its right —— more accurately, its
“special privilege” —— to have its attorneys’ fees paid from the
$32,200 judgment rendered in Worldwide’s favor is a right conferred
by statute. Specifically, Onebane cites to § 5001 of the Civil
Code Ancillaries, La. Rev. Stat. § 9:5001:
§ 5001. Privilege for fees
A. A special privilege is hereby granted to
attorneys at law for the amount of their professional
fees on all judgments obtained by them, and on the
property recovered thereby, either as plaintiff or
defendant, to take rank as a first privilege thereon.
B. [omitted]9
Onebane maintains that its privilege was “a legally perfected”
interest prior to the time that the judgment was rendered in the
principal litigation and that it had “vested rights” in any
judgment thereafter rendered in favor of its former client. A
critical examination of the relevant statute and jurisprudence
reveals, however, that Onebane’s “right” in the judgment was at
best inchoate; there was nothing to which its privilege could
attach until a judgment was rendered in Worldwide’s favor. Prior
to that time, Onebane’s only interest was a mere expectancy, which
would not vest at all unless Worldwide obtained a judgment; it
could not ripen into a “legally perfected” right unless a judgment
were actually rendered in favor of Worldwide, and then only when
that judgment was rendered. Before that, Worldwide had only a
cause of action, and alone that will not support the statutory
9
Emphasis added.
8
privilege. Only when, as a novation, the claim is transformed into
a judgment is there anything to which the privilege can attach.
Onebane has cited us no authority for the special privilege to
relate back, nunc pro tunc, to any occurrence prior to the
judgment, and we have found none on our own.
The plain language of § 9:5001 compels this conclusion,
granting a privilege in “judgments” only. The jurisprudence
construing § 9:5001 and its predecessors uniformly holds that no
statutory privilege arises on a judgment not yet in existence,10 and
that “extend[ing] the scope and effect of the statute in order to
recognize a lien not embraced in its terms” would be
inappropriate.11
At the earliest, Onebane’s special privilege attached to the
judgment in Worldwide’s favor at the moment it was rendered by the
10
See Calk v. Highland Construction & Mfg., 367 So. 2d 495, 497
(La. 1979) (“R.S. 9:5001 creates a special privilege to assist the
attorney in collection of his fee only from a judgment and the
property recovered by virtue of such a judgment. It simply does
not relate to the proceeds of a settlement.”); Smith v. Vicksburg,
S. & P. Ry. Co., 36 So. 826, 829 (La. 1904) (“‘We know of no law
giving an attorney at law a privilege on a judgment not yet in
existence.’” (quoting Rind v. Hunsicker, 24 La. Ann. 572 (1872));
see also Davis Finance & Securities Co., Inc. v. O’Neal, 160 So.
463 (La. App. 1935) (discussing the history of the statute granting
a special privilege to attorneys at law).
11
Smith, 36 So. at 828; see also Calk v. Highland Construction
& Mfg., 367 So. 2d 495, 497 (La. 1979) (“‘The statute in terms
confers ‘a special privilege in favor of attorneys at law on all
judgments obtained by them.’ Privileges are stricti juris, and
cannot be extended by inference to other objects than those
mentioned in the statute granting them.’” (quoting Weil v. Levi, 3
So. 559 (1888)).
9
district court. No later than at that very instant liquidated and
presently due reciprocal money obligations existed between
Worldwide and PHI.12 Consequently, Onebane’s “right” was not one
that had been previously acquired —— at best, Onebane’s right came
into existence simultaneously with the offsetting judgments which
themselves were susceptible of extinction by compensation.13
We hold that Onebane acquired no right in its former client’s
judgment prior to the rendering of the judgments in favor of
Worldwide and PHI, and that the judgment in favor of that former
client, Worldwide, was extinguished by compensation at a time when
Onebane did not have a previously acquired privilege in and to that
judgment.
III.
CONCLUSION
For the forgoing reasons, the judgment of the district court
12
PHI argues that the reciprocal obligations between it and
Worldwide were liquidated and presently due before the district
court rendered judgment; however, even if we assume that the debts
were liquidated and presently due for the first time when judgment
was rendered —— an assumption that gives Onebane’s argument its
best chance of success —— Onebane’s claim cannot succeed: A tie
will not do it. We therefore find it unnecessary to determine
exactly when PHI and Worldwide’s debts became liquidated and
presently due.
13
Cf. Arkla, Inc. v. Maddox & May Brothers Casing Service,
Inc., 671 So. 2d 1220 (La. App. 1996) (compensation extinguished
reciprocal obligations before lien was perfected; thus, there was
no property to which lien could attach); Continental Casualty Co.
v. Associated Pipe & Supply Co., 447 F.2d 1041, 1062 (5th Cir.
1971) (construing predecessor to La. Civ. Code art. 1899).
10
is
AFFIRMED
11