WLP Capital Inc v. Dustin Porte, et al

Filing 52

ORDER AND REASONS. ORDERED that Defendant Dustin Porte's 21 Motion to Dismiss for Failure to State a Claim is granted in part and denied in part, as set forth herein. FURTHER ORDERED that Defendant Paul A. Lea, Jr.'s 24 Motion to Di smiss for Failure to State a Claim is granted in part and denied in part, as set forth herein. FURTHER ORDERED that Defendant Patriot Group Services, Inc.'s 41 Motion to Dismiss for Failure to State a Claim is denied. FURTHER ORDERED that P laintiff WLP Capital's claim to declare the Addendum is a simulation or a sham is dismissed without prejudice. To the extent WLP Capital can cure the defects discussed herein, WLP Capital shall have 14 days from the date of this Order to file an amended complaint. Signed by Judge Darrel James Papillion on 09/25/2024. (ko)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
WLP CAPITAL INC.

CIVIL ACTION

VERSUS

NO. 23-457

DUSTIN PORTE, ET AL.

SECTION: “P” (3)
ORDER AND REASONS

Before the Court is Defendant Dustin Porte’s Motion to Dismiss Under Rule 12(b)(6) (R.
Doc. 21), Defendant Paul A. Lea, Jr.’s Motion to Dismiss Under Rule 12(b)(6) (R. Doc. 24), and
Defendant Patriot Group Services, Inc.’s Motion to Dismiss Under Rule 12(b)(6) (R. Doc. 41).
Plaintiff opposes each of the motions. 1 For the following reasons, Porte and Lea’s motions are
GRANTED IN PART and DENIED IN PART, and Patriot Group Services, Inc.’s motion is
DENIED.
I.

BACKGROUND
Plaintiff, WLP Capital Inc., brings this revocatory action pursuant to Louisiana Civil Code

article 2036 against defendants, Dustin Porte, Patriot Group Services, Inc. (“PGS”), and Paul A.
Lea, Jr. 2 WLP Capital alleges that, in 2019, WLP Capital obtained judgments in its favor and
against Porte and PGS for a sum of $477,580.45, together with post-judgment interest. WLP
Capital further alleges that at all relevant times since the entry of judgment both Porte and his
entity, PGS, are and have been insolvent. Porte is the President and CEO of PGS and has complete
control over its business affairs.
In December 2022, WLP Capital conducted a Judgment Debtor Exam of Porte, in his
individual capacity, during which WLP Capital discovered PGS received death benefits in the

1
2

R. Docs. 30, 31, 43.
R. Doc. 13.

amount of $611,929.09 in June 2022 in connection with a life insurance policy PGS carried on one
of its employees who died earlier that year. WLP Capital also learned that Porte withdrew a portion
of these death benefits, namely $250,000.00, from the PGS operating account and transferred the
funds to Lea on July 6, 2022. WLP Capital alleges PGS received no value or consideration in
return.
According to the Complaint, Lea is the registered agent for PGS and has intermittently
acted as Porte and PGS’s attorney and accountant for the last fifteen years. In addition, Lea and
Porte maintain a lessor-lessee relationship. In 2012, Porte and his wife allegedly sold Lea their
personal residence, which they now lease from him, but WLP Capital contends Lea never made
any payment in exchange for the property. Nevertheless, Porte and Lea entered into a lease
agreement, dated August 1, 2012, that allowed Porte and his wife to continue residing at the
property in exchange for $2,500.00 per month. The lease was for a twelve-month term and has
automatically renewed every three months since the expiration date of the original term.
On or about September 15, 2022, more than two months after Porte provided Lea with the
$250,000.00 from the PGS operating account, Porte and Lea executed an Addendum to the lease
agreement, extending the lease for a 10-year period commencing on October 1, 2022, and
extending through the last day of September 2032, in exchange for $250,000.00. WLP Capital
alleges that on the date the cash from PGS’s account was delivered to Lea and on the date Porte
and Lea executed the Addendum, both PGS and Porte owed WLP Capital a sum of $477,580.48,
plus post-judgment interest. WLP further alleges that Porte delivered the $250,000.00 in cash to
Lea with the intent of depriving WLP Capital of the right it has as Porte and PGS’s creditor to
execute on their property.

2

WLP Capital therefore seeks to annul the transfer of the funds from PGS to Lea (Count I)
and to annul the Addendum executed by Porte and Lea (Count II) pursuant to Louisiana Civil Code
article 2036. In the alternative, WLP Capital seeks a declaration that the Addendum is a simulation
or sham (Count III). 3 Defendants Porte and Lea filed motions to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6) challenging each of Plaintiff’s claims. Defendant PGS likewise filed
a motion to dismiss pursuant to Rule 12(b)(6), but PGS only challenges Count I.
II.

LEGAL STANDARD
To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts “to state

a claim for relief that is plausible on its face.” 4 A claim is “plausible on its face” when the pleaded
facts allow the court to “draw the reasonable inference that the defendant is liable for the
misconduct alleged.” 5 A court must accept the complaint’s factual allegations as true and must
“draw all reasonable inferences in the plaintiff's favor.” 6 The court need not, however, accept as
true legal conclusions couched as factual allegations. 7 To be legally sufficient, a complaint must
establish more than a “sheer possibility” the plaintiff's claims are true. 8 If it is apparent from the
face of the complaint that an insurmountable bar to relief exists, and the plaintiff is not entitled to
relief, the court must dismiss the claim. 9 The court’s review is limited to the complaint and any
documents attached to the motion to dismiss that are central to the claim and referenced by the
complaint. 10

The Complaint contains a clerical error that refers to this count as Count II despite it being the third count in the
Complaint. See R. Doc. 13 at p. 12. The Court will refer to this count as Count III for ease of reference.
4
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007)).
5
Id.
6
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009).
7
Iqbal, 556 U.S. at 678.
8
Id.
9
Lormand, 565 F.3d at 255–57.
10
Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).
3

3

III.

LAW AND ANALYSIS
In Count I of the Complaint, WLP Capital seeks to annul the transfer of funds from PGS’s

operating account to Lea. Defendants Porte, Lea, and PGS each contest the plausibility of WLP
Capital’s claim in Count I by portraying Count I as a challenge to the transfer of funds from PGS
to Porte. 11 But the Complaint as well as WLP Capital’s opposition memoranda make clear that
Count I indeed alleges the money was transferred directly from PGS to Lea. 12 In other words,
under the theory WLP Capital asserts in Count I, Porte was involved in the physical transfer of the
funds to Lea, and the ownership of those funds never actually transferred to Porte. Defendants’
challenges to Count I therefore fail because they have misconstrued the allegations in the
Complaint and their arguments are inapplicable. 13
In Count II of the Complaint, WLP Capital seeks to annul the Addendum to the lease
executed by Porte and Lea such that all cash proceeds transferred pursuant to the terms of the
Addendum must be returned. This revocatory action is brought pursuant to article 2036 of the
Louisiana Civil Code, which provides that “[a]n obligee has a right to annul an act of the obligor,
or the result of a failure to act of the obligor, made or effected after the right of the obligee arose,
that causes or increases the obligor’s insolvency.” 14 Defendants Porte and Lea argue that WLP

Indeed, all three defendants argue Count I must be dismissed because WLP Capital has not plausibly alleged how
it was prejudiced by the transfer of funds from PGS to Porte.
12
R. Doc. 13 at ¶ 45 (“Porte and Lea’s action in withdrawing the insurance proceeds from PGS’s bank account and
delivering them to Lea, with PGS receiving no value in return, caused PGS to be insolvent or deepened its
insolvency.”).
13
The Court recognizes Counts I and II are seemingly contradictory because one relies on the direct transfer of the
funds from PGS to Lea, and the other relies on the transfer from Porte to Lea pursuant to the terms of the Addendum.
Indeed, for Count II to stand and for the revocation of the Addendum to result in the return of the funds, the funds
must have been transferred to Lea pursuant to the terms of the Addendum, which means they must have been
transferred from Porte to Lea, which necessarily means ownership of the funds had to have been transferred from PGS
to Porte before they were transferred to Lea. But Count I hinges on the allegation that the funds were transferred
directly from PGS to Lea. Ultimately, these appear to be alternative claims for relief, and the applicable claim will
depend on whether the funds ever transferred ownership from PGS to Porte—a fact to be determined through discovery
in this case and which the Court cannot resolve at this stage of the proceedings.
14
LA. CIV. CODE art. 2036.
11

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Capital has failed to plead the requisite factual elements of a revocatory action under article 2036
because WLP Capital has not plausibly alleged that the transfer of funds from Porte to Lea pursuant
to the terms of the Addendum caused or increased Porte’s insolvency. First, they take issue with
the sufficiency of the allegations contained in the Complaint. Next, they contend the Complaint
recognizes that Porte and Lea entered a 10-year lease extension by which Porte paid $250,000.00
in exchange for the right of occupancy for that 10-year period. Thus, they argue, the Addendum
did not cause or increase Porte’s insolvency as an obligor because it added an asset (the right of
occupancy) to Porte’s personal balance sheet.
Here, the Complaint states that at all relevant times since the entry of judgment against him
Porte is and has been insolvent. 15 The Complaint further alleges Porte has no assets of significant
value to satisfy the judgment and that if the Addendum is enforced according to its terms, it will
increase Porte’s insolvency. 16 Accepting these allegations as true, WLP Capital has pleaded
enough facts to state a claim for relief that is plausible on its face. 17 As to Porte and Lea’s
arguments regarding the balance sheet effects of the Addendum, these are factual disputes that are
inappropriate for the Court’s consideration at the motion to dismiss stage. Indeed, even assuming
Porte’s right of occupancy is an asset WLP Capital could seize to satisfy the judgment such that
the right of occupancy has any impact on Porte’s solvency for purposes of this case, 18 the fair

R. Doc. 13 at ¶ 9.
Id. at ¶ 42.
17
With respect to the allegation that the Addendum will increase Porte’s insolvency if it is enforced according to its
terms, Porte argues this relates to Porte’s future financial condition and is therefore irrelevant to a revocatory action.
The Court does not read this allegation so narrowly. Rather, the Court draws all reasonable inferences in WLP
Capital’s favor and reads this allegation in light of the fact that the Addendum is currently being challenged by WLP
Capital such that WLP Capital is relying on the annulment of the Addendum, which would return the funds back to
Porte, but in the event WLP Capital’s challenge fails and the Addendum remains in place, the Addendum will increase
Porte’s insolvency and WLP Capital will then have no other avenue to recover the debts owed by Porte.
18
See LA. CIV. CODE art. 2037 (“An obligor is insolvent when the total of his liabilities exceeds the total of his fairly
appraised assets.”).
15
16

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market value of a 10-year, pre-paid right of occupancy that is by its own terms a personal right
granted to Porte and his spouse only 19 remains to be determined.
And finally, the Court rejects Lea’s separate argument that Porte’s lease obligation predated the WLP Capital debt, thus rendering the $250,000.00 transfer to be a payment on an alreadyexisting obligation such that it could not cause or increase Porte’s insolvency. Assuming the
$250,000.00 transfer was payment for pre-paid rent pursuant to the terms of the Addendum, this
obligation did not come into existence until the parties executed the Addendum. Prior to the
execution of the Addendum, Porte’s obligations under the original lease came into existence on a
monthly basis in the amount of $2,500.00 per month and were subject to renewal or termination
every 3 months. 20 Thus, according to the allegations of the Complaint and the documents attached
thereto, the $250,000.00 transfer was not payment for an obligation that preceded Porte’s
obligation to WLP Capital. 21 Porte and Lea’s challenges to Count II therefore fail.
In Count III of the Complaint, WLP Capital alternatively pleads the Addendum should be
declared a simulation or sham, entered into with the intent to hide cash and deprive WLP Capital
of the right it has as a creditor to execute on the funds transferred to Lea as “pre-paid rent” and
should therefore be declared null, rescinded, and set aside. Count III merely incorporates all
allegations in the preceding paragraphs. Porte and Lea challenge Count III, arguing it contains
nothing more than conclusory assertions and also that the allegations in the Complaint

See R. Doc. 13-4.
See R. Doc. 13-1 at ¶ 17; R. Doc. 13-3.
21
The case Lea cites for this proposition is inapposite. See R. Doc. 24-1 at n.39. In In re Gulf Fleet Holdings, Inc.,
491 B.R. 747, 765–766 (Bankr. W.D. La. 2013), Gulf Fleet entered into certain agreements more than three years
prior to the filing of its bankruptcy petition that defined and fixed Gulf Fleet’s obligation to pay specific fees, expense
reimbursements, and commissions. The Court found that although the Complaint alleged Gulf Fleet was insolvent at
the time it made payments pursuant to these agreements, the payments were made in satisfaction of an antecedent debt
and thus, by definition, would not have increased Gulf Fleet’s insolvency. Id. at 766–67. Here, based on the facts
alleged in the Complaint, Porte had no obligation to pay Lea up-front for the right of occupancy for the next 10 years
until he and Lea executed the Addendum in September 2022. Meanwhile, WLP Capital obtained its judgment against
Porte in May 2019, and the judgment was made executory in this District in August 2019. R. Doc. 13 at ¶ 8.
19
20

6

acknowledge consideration was provided for the Addendum and, therefore, it cannot be set aside
as a simulation. The Court agrees. Without more, the Court is unable to find that WLP Capital
has plausibly alleged in the alternative that the Addendum is a simulation or a sham.
Under Louisiana Civil Code article 2026, “[a] simulation is absolute when the parties
intend that their contract shall produce no effects between them. That simulation, therefore, can
have no effects between the parties.” The revision comments to article 2026 provide that “[a]n
example of absolute simulation is an act whereby the parties make an apparent sale when they
actually intend that the vendor will remain owner.” 22 The Louisiana jurisprudence historically
referred to these acts as “‘sham transactions,’ that is, acts intended by the parties to have no effect
at all.” 23
In its opposition memoranda, WLP Capital points out that since Lea purchased the property
in 2012 Porte has remained the occupant of the property and that nothing changed when Lea and
Porte executed the Addendum in 2022. WLP Capital also points out that it alleged the $250,000.00
transfer to Lea occurred months before the Addendum was executed. Thus, WLP argues, this gap
in time between the transfer of cash and the execution of the Addendum shows they were not part
of the same transaction and that the transfer was merely to place the cash beyond the reach of
creditors. WLP Capital then argues Porte and Lea have failed to prove that the Addendum was
intended to have any effect between the parties or that any consideration was actually given in
return for the cash.
As an initial matter, at this stage, it is WLP Capital’s burden to allege enough facts to state
a claim for relief that is plausible on its face. 24 And WLP Capital failed to plausibly allege the

LA. CIV. CODE art. 2026 cmt. (a).
Id.
24
Iqbal, 556 U.S. at 678.
22
23

7

Addendum had no effect between the parties or that no consideration was given in return for the
funds. For example, WLP Capital relies on the fact that “nothing changed” when Porte and Lea
executed the Addendum because Porte and his wife occupied the property both prior to and after
the execution of the Addendum. But Porte’s continued occupancy of the home is precisely what
was contemplated in the Addendum. And although WLP Capital also alleged Lea never paid Porte
and his wife for the sale of the home in 2012, WLP Capital does not allege, for example, that Porte
and his wife have been living in the home rent-free since 2012, or that Porte and his wife are
continuing to pay their rent obligation under the original lease despite having executed the
Addendum. Thus, without more, WLP Capital has not alleged any facts that would allow the Court
to infer that Porte and Lea never intended for the Addendum to have any effect between them such
that Porte (or PGS) retained ownership of the $250,000.00. WLP Capital has therefore failed to
allege enough facts to support its claim that the Addendum is an absolute simulation, and WLP
Capital did not make any attempt to argue it has plausibly alleged a relative simulation. 25
Accordingly, the Court must dismiss WLP Capital’s alternative claim that the Addendum be
declared a simulation or sham. To the extent WLP Capital can amend the defects discussed herein,
WLP Capital shall have 14 days from the date of this Order to do so.
IV.

CONCLUSION
For the foregoing reasons,
IT IS ORDERED that Defendant Dustin Porte’s Motion to Dismiss Under Rule 12(b)(6)

(R. Doc. 21) is GRANTED IN PART and DENIED IN PART, as set forth herein.

See LA. CIV. CODE art. 2027 (“A simulation is relative when the parties intend that their contract shall produce
effects between them though different from those recited in their contract. A relative simulation produces between the
parties the effects they intended if all requirements for those effects have been met.”).
25

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IT IS FURTHER ORDERED that Defendant Paul A. Lea, Jr.’s Motion to Dismiss Under
Rule 12(b)(6) (R. Doc. 24) is GRANTED IN PART and DENIED IN PART, as set forth herein.
IT IS FURTHER ORDERED that Defendant Patriot Group Services, Inc.’s Motion to
Dismiss Under Rule 12(b)(6) (R. Doc. 41) is DENIED.
IT IS FURTHER ORDERED that Plaintiff WLP Capital’s claim to declare that the
Addendum is a simulation or a sham 26 is DISMISSED WITHOUT PREJUDICE. To the extent
WLP Capital can cure the defects discussed herein, WLP Capital shall have 14 days from the date
of this Order to file an amended complaint.
New Orleans, Louisiana, this 25th day of September 2024.

__________________________________________
DARREL JAMES PAPILLION
UNITED STATES DISTRICT JUDGE

26

R. Doc. 13 at p. 12.

9