American Bank and Trust Co. of Baton Rouge v. Louisiana Sav. Ass'n

• Decision Date: 21 May 1980
• Docket Number: No. 7444,7444
• Citation: 386 So.2d 96
• Parties: AMERICAN BANK AND TRUST COMPANY OF BATON ROUGE, Plaintiff-Appellee, v. LOUISIANA SAVINGS ASSOCIATION, Defendant-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 96

386 So.2d 96

AMERICAN BANK AND TRUST COMPANY OF BATON ROUGE, Plaintiff-Appellee, v. LOUISIANA SAVINGS ASSOCIATION, Defendant-Appellant.

No. 7444.

Court of Appeal of Louisiana, Third Circuit.

May 21, 1980.

Rehearing Denied July 16, 1980.

Anderson, Leithead, Scott, Boudreau & Savoy, Everett R. Scott, Jr., Lake Charles, for defendant-appellant.

McCollister, McCleary, Fazzio, Mixon, Holliday & Jones, Michael S. Wolf, Baton Rouge, for plaintiff-appellee.

Camp, Carmouche, Palmer, Barsh & Hunter, Wade N. Kelly, Lake Charles, for garnishee-appellee.

Before CULPEPPER, DOMENGEAUX and STOKER, JJ.

STOKER, Judge.

This is an action for declaratory judgment. The petitioner is American Bank and Trust Company of Baton Rouge. The defendant is Louisiana Savings Association. Both parties claim certain funds realized from the sale of certain assets by one Ludwig S. Bandaries, Jr. The assets in question consist of an alleged interest in a partnership. The purpose of the declaratory action suit is to determine which party is entitled to the funds. The determination of that question is the issue in the case.

Recognizing their conflicting claims, the parties agreed to place the disputed funds in escrow in the Calcasieu Marine National Bank, Lake Charles, Louisiana, pending a decision of court to decide who should be awarded the funds. American Bank and Trust Company of Baton Rouge (American Bank) bases its claim on a creditor relationship with Ludwig S. Bandaries, Jr., arising out of a loan by American Bank to Bandaries. American Bank asserts that its claim primes the claim of Louisiana Savings Association (Louisiana Savings) by virtue of a security agreement by which Bandaries gave a written hypothecation of an interest in an apartment complex in Lafayette, Louisiana. This hypothecation is sometimes referred to in the record as an "assignment". The nature and legal effect of the "assignment" is one of the principal matters of argument in this law suit. The "assignment" was executed by Bandaries in favor of the bank on February 28, 1975, and was recorded in Lafayette Parish on October 21, 1976.

On December 28, 1976, Louisiana Savings recorded in Lafayette Parish a judgment rendered against Bandaries by the Tenth Judicial District Court for the Parish of Natchitoches, Louisiana. It is the judicial mortgage created by this recordation on which Louisiana Savings rests its claim. After entering the escrow agreement, and despite the agreement, Louisiana Savings caused a seizure under garnishment to be made of the funds in escrow. The validity of this seizure is an issue in this case.

FACTS

In order to understand the issues and arguments of counsel, a more detailed chronicle of the facts is necessary. While numerous individuals and entities figure in the narrative of facts in this case, the only parties to this action, in the legal sense of the word, are the plaintiff Bank and defendant Association.

The saga which gave rise to the tangled relations and disputed issues of this case began with a business venture launched by three individuals, Ludwig S. Bandaries, Jr., Doyle Whittington and Henry L. Landry. These three persons became partners to promote and operate an apartment house complex in Lafayette, Louisiana, known as Acadian House Apartments. No written partnership agreement was ever entered into. No immovable property was ever acquired by the three partners. The apartment complex was constructed on property largely belonging to Wana C. Landry, sister of Henry L. Landry. Some small area appears to have belonged to Henry L. Landry, but the principal owner was Wana Landry. Tr. 464. The modus operandi of the partners was to acquire a leasehold or ground lease on the property on which the complex was built. To further complicate the legal relations, the partners did not acquire the lease of the land directly, but through a "nominee corporation" formed by them called Acadian House Apartments, Inc.¹ The partners owned equal shares, one-third each, in both the partnership and the nominee corporation.

Under the theory of the partners, the nominee corporation was in fact acting as agent for the partners. The arrangement by which the nominee corporation so acted was covered by a nominee agreement, Exhibit P-5, Tr. 100-103. The nominee agreement was entered into in writing on June 4 1970.² The nominee agreement contains all the elements of the appointment of an agent. It is annexed to this opinion as Appendix I. In the agreement, Whittington, Bandaries, and Landry style themselves as "Lessees". They set forth in a preamble that they propose to lease certain property in the Parish of Lafayette described as the Landry property (by legal description, 2.89 acres belonging to Wana C. Landry and 0.25 acres belonging to Henry Landry). The preamble concludes with the following paragraph:

In order to expedite and simplify the lease, operation and management of the aforementioned property, lessees desire to appoint Acadian House Apartments, Inc., a corporation organized and existing under the laws of the State of Louisiana, to hold for lessees the lease to the said property, as well as any movables or other property interests connected with said lease and proposed apartment house project and to administer the same pursuant to lessees' specific instructions and written authorization. Acadian House Apartments, Inc. has agreed, subject to the terms of this nominee agreement, to act as nominee.

In addition to appointing and empowering the nominee corporation to hold the ground lease, the agreement is broad enough to also authorize the nominee to act for the partners in financing, constructing and administering the apartment project. It appears from the testimony given at the trial by Bandaries and Whittington concerning the nominee corporation device that they had been given to understand the nominee arrangement would achieve financing for the apartment construction at rates available only to corporations and permit retention of the tax consequences of direct ownership as well as limit liability exposure of partners. With the nominee agreement in existence, other features of the modus operandi followed. In order to finance improvements the Landrys would transfer title to the land to the nominee, the nominee would then mortgage the property to a lending institution and, thereafter, reconvey title to the Landrys. Thus, the mortgagee would have full rights of a mortgagee against the true owners, the Landrys; and the nominee (holding a long term lease on the land) would have the funds with which to construct the apartment complex.

Under the nominee agreement the three partners actually reaped the benefit of the apartment business. The agreement contained a provision (paragraph 3) in which it was acknowledged that "This agreement shall constitute evidence of lessees' (the partners) beneficial ownership of the lease and other property connected with said apartment house project after it is acquired by nominee." Also, the nominee agreed (paragraph 5) "Promptly upon receipt by nominee of any rental or other proceeds from the said lease or other property interests (to) remit or cause such proceeds to be remitted to lessees." Under the modus operandi described, the apartment complex came into being and operated for some time.

The next episode leading to the present legal controversy was the loan of February 28, 1975, made by American Bank to Bandaries in the amount of $228,958.47. To secure the promissory note (P-6, Tr. 104-105) Bandaries gave what the plaintiffs refer to as an assignment of Bandaries' partnership interest in the Acadian House Apartments partnership (not the nominee corporation).³ It is included in this opinion as Appendix II. From this instrument the alleged rights of American Bank as plaintiff arise. The petition alleges recordation took place on October 21, 1976.⁴ Whittington was made a loan by American Bank at about the same time and gave a similar assignment. (P-8, Tr. 511-512) Both Whittington and Bandaries warranted that they owned a 33 1/3% interest in the partnership.

The claim of defendant, Louisiana Savings, arose out of a personal judgment obtained against Bandaries in Natchitoches Parish, Louisiana, in the Tenth Judicial District Court on December 21, 1976, for the sum of $447,508.09. This judgment was recorded in Lafayette Parish on December 28, 1976.⁵

In 1977, Bandaries and Whittington divested themselves of their one-third interest in the partnership, leaving Henry L. Landry as co-owner of one-third with a group which acquired the Bandaries and Whittington two-thirds interest. The two-thirds interest was purchased by a group of investors from Lake Charles, Louisiana, who styled themselves as an ordinary partnership known as 710 SOUTH COLLEGE ROAD. (P-2, Tr. 78-98) The transfer was made in two steps. First, Bandaries sold his interest to Whittington, and then Whittington sold his entire holding to the Lake Charles investors. Although Henry L. Landry retained his partnership interest, the Lake Charles investors (according to the testimony of their attorney) took a lease of Landry's interest. Tr. 417.

In order to follow the issues of this case it is necessary to outline in more detail the mode, sequence, and ramifications of the transfers mentioned in the preceding paragraph. The attorney for the Lake Charles investors, 710 SOUTH COLLEGE ROAD, undertook to prepare the transfer to his clients. He discovered the tangled skein of affairs forming the background of the Acadian House Apartments. He noted the absence of any recorded partnership agreement between Bandaries, Whittington, and Henry L. Landry. He noted an existing mortgage given by the nominee corporation. In particular, he noted the "assignment" of plaintiff, American Bank, and the judgment of defendant, Louisiana Savings. Apparently, the attorney for the Lake Charles investors concluded his clients' interests would be best served by having...