28,018 La.App. 2 Cir. 4/3/96, American Bank and Trust Co. v. Price

• Decision Date: 03 April 1996
• Citation: 688 So.2d 536
• Parties: 28,018 La.App. 2 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 536

688 So.2d 536

28,018 La.App. 2 Cir. 4/3/96

AMERICAN BANK AND TRUST COMPANY, Plaintiff-Appellant, v. Anna Jean Moore PRICE, Defendant-Appellee.

No. 28018-CA.

Court of Appeal of Louisiana,

Second Circuit.

April 3, 1996.

Opinion Adopting Dissent on

Grant of Rehearing June 7, 1996.

Writ Denied Oct. 11, 1996.

Pringle & Herzog by R. Perry Pringle, Shreveport, for appellant.

Hargrove, Pesnell & Wyatt by Scott C. Sinclair, Shreveport, for appellee.

Before MARVIN, C.J., and STEWART and GASKINS, JJ.

GASKINS, Judge.

The plaintiff, American Bank and Trust Company, appeals a trial court judgment finding invalid an appraisal of the defendant's property, seized and sold by the plaintiff in satisfaction of a debt. The trial court found that, due to the invalid appraisal, the plaintiff was not entitled to a deficiency judgment against the defendant. For the following reasons, we affirm the trial court judgment.

BACKGROUND FACTS

The present case arises from a 1987 loan from American Bank and Trust to the defendant for the purchase of immovable property in Bossier Parish. Although not necessary to the decision of this case the background facts are as follows. On July 23, 1976, the defendant, Anna Jeanne Moore Price, married Harold Gene Evans. This marriage was purportedly undertaken by Ms. Price under duress, due to threats by Mr. Evans. Ms. Price and Mr. Evans never lived together. In 1981, Ms. Price moved to Dallas. However, she did not pursue a termination of the marriage at that time due to the threatening atmosphere created by Mr. Evans. According to Ms. Price, Mr. Evans had a prior unterminated marriage. On April 8, 1987, Ms. Price obtained an annulment of the marriage in Texas.

During the course of the marriage, Mr. Evans frequently borrowed money from American Bank and Trust Company (which later became Tri-State Bank and Trust). American Bank and Trust Company (the Bank) required Ms. Price's signature on the loan documents as the spouse of Mr. Evans. Ms. Price signed these documents, as requested, but claimed that she never received any proceeds from the loans. Ms. Price testified that she signed loan documents for Mr. Evans in 1982 and in 1985. She testified that the proceeds of the loans went to Mr. Evans for his business enterprises.

In 1986, Ms. Price signed a promissory note with Mr. Evans, secured by a mortgage on Mr. Evans' house. Ms. Price stated that she signed the note because she was afraid not to. Ms. Price again testified that she did not receive any of the proceeds from this transaction. Some payments were made on the 1986 note by companies owned by Mr. Evans.

PRESENT LOAN

When the 1986 loan fell into default, the Bank looked to Ms. Price for payment. She testified that Carl E. Matthews, an officer of the Bank, contacted her and proposed a plan to satisfy the debt. According to the plan, the Bank would refinance the 1986 loan by making a new loan to Ms. Price. The proceeds of the new loan would be used to purchase Mr. Evans' house. Mr. Evans would then vacate the house and the property would be sold to repay the Bank. This plan was implemented on October 16, 1987. The Bank loaned Ms. Price $47,065.81 for the purchase of the house. ¹ The loan was secured by a mortgage on the house. A cash sale deed was executed conveying the house from Mr. Evans to Ms. Price. The record shows that proceeds of the new loan to Ms. Price were used to pay off a second mortgage on the house held by the Bank as well as a first mortgage in favor of another mortgage company.

Contrary to the plan, it appears that Mr. Evans continued to live in the house and the property was not immediately seized and sold by the Bank. It appears that some payments were made on Ms. Price's loan. Her loan then fell into default. On February 11, 1988, Ms. Price was contacted by Mr. Matthews and informed that the loan was past due. On January 18, 1989, the Bank instituted executory proceedings against Ms. Price to seize and sell the house in satisfaction of her debt, with the benefit of appraisal. The Bank alleged that $46,755.44 was due on the debt, as well as $3,198.30 in interest. The Bank chose its officer, Mr. Matthews to appraise the property. He valued the house at $40,000. Bill Hearn, an appraiser appointed by the Bossier Parish Sheriff's Office to represent Ms. Price, valued the property at $42,000. The house was sold for $27,334. After the payment of fees and costs, $26,142.38 was applied to the debt. The Bank then converted the matter to an ordinary proceeding in order to obtain a deficiency judgment against Ms. Price.

Ms. Price answered the Bank's claim for deficiency judgment, arguing that the house was sold without a legal appraisal. She asserted that the Bank's appraiser, Mr. Matthews, employed by the Bank primarily as a loan officer, was not trained in real estate appraisals and further, that he did not enter the house prior to making the appraisal. The defendant also pointed out the disparity in the earlier appraisal of the house made in 1985. At that time, the property was appraised at $80,000. When the Bank seized and sold the house in 1989, it appraised at only $40,000. The defendant asserted that, because the appraisal was not properly made, the Bank is not entitled to deficiency judgment. Ms. Price also asserted that the promissory note which formed the basis of this action was invalid and unenforceable by reason of lack of legal consent, duress, error, mistake and/or misrepresentation.

The matter was tried on November 5, 1994. On March 16, 1995, the trial court issued reasons for judgment, finding in favor of Ms. Price. The court found that the appraisal by the Bank was not valid for the purpose of rendering a default judgment against the defendant. One factor considered by the court was that Ms. Price's involvement in the loan transactions occurred only because of her questionable marriage to Mr. Evans. The court found that the Bank devised the plan in 1987 for the repayment of Mr. Evans' loan and that Ms. Price had little, if any, understanding regarding the various documents she signed. However, the trial court found that Ms. Price's lack of understanding of the documents she signed was not a defense.

The court also noted that Ms. Price did not receive any benefit from the loans. The trial court found that there was "some question as to whether or not, based upon Mr. Evans' prior conduct, Ms. Price might have been under some threat or duress to sign the various documents." However, the court did not rule on the defendant's allegation that the promissory note was invalid because of lack of legal consent, duress, error, mistake and/or misrepresentation.

The trial court found that the Bank's appraiser, Carl Matthews, was not qualified to make an appraisal of this property. The trial court noted that Mr. Matthews was the bank officer responsible for the loan and that it was to his employer's benefit to receive the largest deficiency judgment possible against Ms. Price. The court found that this posed a conflict of interest for Mr. Matthews in appraising the property. The court noted that Mr. Matthews was not a licensed appraiser and had no formal training in making appraisals. The court also found that Mr. Matthews did not view the interior of the house prior to making the appraisal. The court noted the disparity between the 1985 appraisal and Mr. Matthews' appraisal in 1989. Based upon these factors, the trial court found that the appraisal was invalid and the Bank was not entitled to a deficiency judgment against the defendant. The court found that, although the proceeds of the sale were insufficient to satisfy the debt for which the property was sold, nevertheless the debt stood fully satisfied and the defendant was discharged as to any personal obligation owed to the Bank. On April 7, 1995, the trial court signed a judgment dismissing the plaintiff's deficiency judgment claim against the defendant, with prejudice. The Bank appealed the trial court judgment.

VALIDITY OF APPRAISAL

The Bank argues on appeal that the trial court erred in finding Mr. Matthews to be unqualified to make a valid appraisal of the property in question and in finding that the appraisal in this case was invalid. The Bank argues that Mr. Matthews qualified as an appraiser by virtue of his sixteen years experience in the financial field and met the requirements imposed by the jurisprudence for an appraiser.

Legal Principles

La.C.C.P. Art. 2723 provides in pertinent part:

Prior to the sale, the property seized must be appraised in accordance with law, unless appraisal has been waived in the act evidencing the mortgage, the security agreement, or the document creating the privilege and plaintiff has prayed that the property be sold without appraisal, and the order directing the issuance of the writ of seizure and sale has directed that the property be sold as prayed for....

La.C.C.P. Art. 2771 provides in pertinent part:

Unless otherwise provided by law, the creditor may obtain a judgment against the debtor for any deficiency due on the debt after the distribution of the proceeds of the judicial sale only if the property has been sold under the executory proceeding after appraisal in accordance with the provisions of Article 2723.

The Deficiency Judgment Act, La.R.S. 13:4106 provides in pertinent part:

Unless otherwise provided by law, if a mortgagee or other creditor takes advantage of a waiver of appraisement of his property, movable, immovable, or both, by a debtor, and the proceeds of the judicial sale thereof are insufficient to satisfy the debt for which the property was sold, the debt nevertheless shall stand fully satisfied and discharged insofar as it constitutes a personal obligation of the debtor. The mortgagee or other creditor shall not have a right thereafter to proceed against the debtor or any of his other property for such deficiency....

La.R.S. 13:4363 provides in pertinent part:

Not less than seven days,...