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NOT DESIGNATED FOR PUBLICATION JOSEPH MODELISTE, * NO. 2007-CA-0297 GEORGE PORTER, JR., LEO NOCENTELLI, ARTHUR * COURT OF APPEAL LANNON NEVILLE, JR., INDIVIDUALLY , AND AS THE * FOURTH CIRCUIT RECORDING AND PERFORMING GROUP * STATE OF LOUISIANA KNOWN AS "THE METERS" * * * * * * * VERSUS MARSHALL ESTUS SEHORN, A/K/A MARSHALL SEHORN, ALLEN TOUSSAINT, RHINELANDER MUSIC, INC., SANSU ENTERPRISES, INC., MARSHALL E. SEHORN, PRODUCTIONS, INC., JEFFERSON JAZZ, INC., SOUTHERN SWAMP MUSIC, INC., SANSU RECORDS, ET AL. APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 84-9262, DIVISION “E-7” HONORABLE MADELEINE LANDRIEU * * * * * * JUDGE MICHAEL E. KIRBY * * * * * * (Court composed of Judge Michael K. Kirby, Judge Max N. Tobias Jr., and Judge Roland L. Belsome) BELSOME, J., CONCURS IN THE RESULT J. SCOTT LOEB MONTGOMERY BARNETT BROWN READ HAMMOND & MINTZ, L.L.P. 200 GREENLEAVES BOULEVARD SUITE 1 MANDEVILLE, LA 70448 COUNSEL FOR PLAINTIFF/APPELLANT(JOSEPH MODELISTE) EDGAR D. GANKENDORFF ERIC R. G. BELIN PROVOSTY & GANKENDORFF, LLC 650 POYDRAS STREET SUITE 2700 NEW ORLEANS, LA 70130 COUNSEL FOR DEFENDANTS/APPELLEES (RHINO ENTERTAINMENT, INC. AND R & B MUSIC, L.L.C.) REVERSED AND REMANDED Plaintiff, Joseph Modeliste, appeals the granting of defendants’ peremptory exception of no cause of action and peremptory exception of prescription of the defendants, Rhino Entertainment Company and R&B Music, L.L.C. (“Rhino/R&B.”). We reverse. Joseph Modeliste, plaintiff, is one of the four founding members of the local musical recording and performing group known professionally as “The Meters.” The other three original founding members of The Meters are Leo Nocentelli, Arthur L. Neville and George Porter, Jr. On or around December 20, 1971, Messrs. Modeliste, Nocentelli, Neville, and Porter entered into separate songwriter contracts with Rhinelander Music, Inc. (“Rhinelander”), a company owned by now-bankrupt defendant, Marshall E. Sehorn (“Sehorn”), whereby they each assigned one hundred percent (100%) of their rights and interests in the music they had participated in writing or composing as The Meters to Rhinelander, thereby entering into a new contract (hereinafter referred to as the “Songwriter Agreement”). Additionally, plaintiff’s petition alleges on or around this date, each 1 member of The Meters entered into a contract with Rhinelander (hereinafter referred to as the “Recording Agreement”) wherein they agreed to render their services as musicians for a period of five years to Rhinelander in connection with performing and making several master recordings for the production of phonograph records. The Recording Agreement provided for the assignment by plaintiff, Nocentelli, Neville, and Porter to Rhinelander of all their rights, titles, and interests in and to the master recordings. In return for these assignments, the members were to receive “substantial royalties”. It is alleged that Sehorn was the sole owner of Rhinelander, a New York corporation. As best as we can determine from the damaged appellate record, we find that Sehorn was residing in New Orleans during the relevant time period. 1 Plaintiff further alleges in his petition that on or around May 7, 1974, the parties collectively agreed to modify the earlier Songwriter Agreement. Under these later contracts of amendment, the parties agreed that the rights and interests in the music composed from that day forward would be owned fifty percent (50%) by Rhinelander and fifty percent (50%) by plaintiff, Nocentelli, Neville, and Porter jointly doing business as Cabbage Alley Music. As with the previous contracts, the members were to receive “substantial royalties”. Plaintiff alleges that the contract entitled him to 12.5% of the 24 songs written after the May 7, 1974 modification of the December 20, 1971 Songwriter Agreement. These 24 songs are referred to as the Cabbage Alley Catalog. 1 The physical appellate record in this matter was severely mildewed from water damage suffered from Hurricane Katrina making it difficult to review. That is, some parts of the appellate record are illegible due to water damage. 2 The petition alleges Sehorn/Rhinelander materially breached the 1971 and 1974 Songwriter Agreement and Recording Agreement because it never paid royalties to plaintiff, Nocentelli, Neville or Porter. The 1971 and 1974 Songwriter and Recording Agreements were formally terminated by written agreement dated April 19, 1978. In June 1984, the original members of The Meters commenced the instant action seeking recovery of unpaid royalties, as well as any additional remedies to which they would have been entitled as a matter of law.2 It is alleged on or around November 12, 1989, Nocentelli, Neville, and Porter entered into a settlement and administration agreement with all of the then named defendants. Plaintiff was not a party to this agreement, did not participate in its negotiation, and continued to seek the judicial enforcement of his rights. The petition alleges that although several parties continue to profit from his music, to date plaintiff has yet to receive royalty payments in accordance with the 1971 and 1974 Songwriter and Recording Agreements. On June 21, 1996, during the pendency of this suit, as a part of Sehorn’s and Rhinelander’s bankruptcy proceedings, Rhino/R&B entered into an Asset Purchase Agreement (APA) with the bankrupts wherein Rhinelander sold all of its rights under the 1971 and 1974 contracts to Rhino/R&B for the sum of six-hundred and twenty-five thousand dollars ($625,000). Moreover it is alleged that the APA 2 We note that federal law such as 17 U.S.C. 101, et seq. ,relative to copyright, may be implicated in the resolution of the matters alleged. Nevertheless, since our sole task is to review exceptions of prescription and no cause of action on state law grounds, we need not address the merits of the underlying copyright issues. 3 between Rhinelander and Rhino/R&B notified Rhino/R&B of the instant litigation, by means of clauses contained therein. On September 21, 1998, plaintiff filed another supplemental and amending petition to include Rhino/R&B as defendants to this suit. DISCUSSION The trial court granted Rhine/R&B’s two peremptory exceptions, namely exceptions of prescription and no cause of action. Appellate review of the record following a hearing on exceptions of prescription is governed by the manifest error standard when evidence has been introduced at the hearing. In the absence of evidence, the exception of prescription must be decided on the facts alleged in the petition, which are accepted as true. Cichirillo v. Avondale Industries, Inc., 2004- 2894, p. 5 (La. 11/29/05), 917 So.2d 424, 428. The exception of no cause of action is reviewed de novo based upon the four-corners of the plaintiff’s petitions. An appellate court can notice the exception of no cause of action on its own motion. La. C.C.P. art. 927B. Since this court finds no evidence introduced to support the exception of prescription,3 we conduct a de novo review of the petition, accepting the pleaded facts as true. We note at the outset, that the Louisiana Civil Code art. 461, classifies the thing that is in dispute, i.e. the intellectual property rights to the songs, as an 4 incorporeal movable. 3 We again note that due to the water-damaged and mildewed state of the record, there are some parts that are illegible. 4 The common law refers to such intellectual property as an intangible personal property. 4 PRESCRIPTION The resolution of the prescription issue hinges upon the issue of whether or not Rhino/R&B were in good faith when they acquired the rights to the music formerly owned by Rhinelander/Sehorn. La. C.C. art. 3490, states: One who has possessed a movable as owner, in good faith, under an act sufficient to transfer ownership, and without interruption for three years, acquires ownership by prescription. [Emphasis added.] In order for Rhino/R&B to take advantage of acquisitive prescription under these facts, their argument must overcome two obstacles. First, since intellectual property is incorporeal/intangible, proof of adverse possession of such a movable is not as easy as in the case of a corporeal/tangible movable, where one clearly can possess the entirety of its finite matter. This is because two claimants of the same intellectual property rights can exercise those rights at the same time. Second, plaintiff’s petition questions the good faith of Rhino/R&B, because the APA recognized some limitations and specifically acknowledged this current pending litigation. Finally, it can be argued that even if Rhino/R&B were found to be in good faith, the three-year period did not accrue. The APA transaction occurred in June of 1996, and plaintiff amended his petition to include Rhino/R&B as defendants in September of 1998, approximately nine months short of the three-year prescriptive period. While one might debate Rhino/R&B’s good faith, there can be no such argument concerning the prior possessor, Mr. Sehorn’s company, Rhinelander. 5 Therefore, Rhino/R&B cannot tack time from Mr. Sehorn’s company to meet the requisite three-year period. Accordingly, accepting the pleadings as true, we find the trial court erred in granting Rhino/R&B’s exception of prescription. NO CAUSE OF ACTION When dealing with corporeal movables the nature of the problem in this case can be summarized thus: The rules of law governing the transfer of ownership of movables arise out of a conflict between two competing interests: the security of ownership and the security of transaction. This conflict is created by two opposing legal principles. The first is the rule codified in article 2279 of the French Civil Code which states that ‘la possession vaut titre’ (with respect to movables possession is considered equivalent to title). This rule promotes the security of transaction by protecting those who acquire possession of a movable in good faith from one they believe had the ability to transfer its ownership.