Bank of New Orleans and Trust Co. v. H.P.B., Jr. Development Co., Inc.

• Decision Date: 10 January 1983
• Docket Number: No. 5-282,5-282
• Citation: 427 So.2d 486
• Parties: The BANK OF NEW ORLEANS AND TRUST COMPANY v. H.P.B., JR. DEVELOPMENT COMPANY, INC. et al.
• Court: Court of Appeal of Louisiana — District of US

Page 486

427 So.2d 486

The BANK OF NEW ORLEANS AND TRUST COMPANY v. H.P.B., JR. DEVELOPMENT COMPANY, INC. et al.

No. 5-282.

Court of Appeal of Louisiana Fifth Circuit.

Jan. 10, 1983.

On Rehearing March 7, 1983.

Rehearing Denied March 17, 1983.

John M. Mamoulides, Mamoulidas & Hoepffner, Metairie, David H. Schaub, Vice-President and Counsel, The Bank of New Orleans and Trust Co., Walter C. Thompson, Jr., Sessions, Fishman, Rosenson, Boisfontaine & Nathan, New Orleans, for plaintiff-appellee.

J. Barry Mouton, Lafayette, for defendant-appellant.

Before BOWES, CURRAULT and GRISBAUM, JJ.

CURRAULT, Judge.

This appeal originates in the Twenty-Fourth Judicial District Court, Division "M", wherein the Honorable Judge Robert J. Burns rendered judgment on a note in favor of plaintiff, the Bank of New Orleans and Trust Company, and against defendant, Carlos J. Marcello, in the full sum of One Million, Seven Hundred Eighty Thousand, One Hundred Twenty Dollars ($1,780,120), together with interest, attorney's fees and costs, and further rendering judgment in favor of plaintiff, the Bank of New Orleans and Trust Company, recognizing, maintaining and enforcing its mortgage, lien, and privilege rights under the collateral mortgage of defendant, H.P.B. Jr. Development Co., Inc., a/k/a H.P.B. Jr. Development Corporation. We affirm.

Plaintiff, the Bank of New Orleans and Trust Company (BNO) instituted this action for collection of the $1,780,120 balance due on a One Million, Eight Hundred Thousand Dollar ($1,800,000) loan made to defendant, Carlos J. Marcello (Marcello), and for recognition and enforcement via ordinaria of the collateral mortgage given by defendant, H.P.B. Jr. Development Co., Inc. (H.P.B.) to secure the loan. Defendants Marcello and H.P.B. filed a dilatory exception of prematurity, and as shown by the judgment dated June 30, 1981, the trial court ruled that the exception of prematurity properly constituted an affirmative defense, and that it should be heard in conjunction with the merits.

As a result of the trial court so ruling, defendants sought supervisory writs arguing that the suit had been filed prior to the date of maturity shown on the face of the note, and additionally that an extension of five years beyond the facial maturity date had been orally agreed to. The Fourth Circuit Court of Appeal denied writs by order dated August 21, 1981. Subsequently, on September 4, 1981, the Louisiana Supreme Court granted a supervisory writ and ordered that the dilatory exception of prematurity be tried and decided in advance of the trial on the merits.

The exception of prematurity was then tried and overruled by the trial court on September 9, 1981, in advance of the trial on the merits. The case thereupon proceeded to trial on the merits and, at the conclusion of the trial, the court rendered judgment in favor of plaintiff BNO and against defendants.

Defendants have perfected this appeal and we find the issues to be as follows:

I. Whether or not the trial court erred in overruling the exception of prematurity based on the evidence presented;

II. Whether or not the trial court erred in prohibiting the introduction of parol evidence allegedly establishing there was an oral agreement to extend the promissory note an additional five years; and

III. Whether or not the trial court erred in failing to allow defendant Marcello a credit for $300,000 because of an alleged misapplication of part of the proceeds of the $1.8 million loan.

I. EXCEPTION OF PREMATURITY

Appellant Marcello was the maker of a $1.8 million promissory note which was executed on February 3, 1976 in favor of appellee BNO. To secure the Marcello note, a collateral mortgage note was pledged and assigned to BNO by appellant H.P.B. dated February 3, 1976, and paraphed for identification with a mortgage which was duly recorded in the public records of Jefferson Parish, Louisiana.

The hand note (Marcello note) was for a five-year term and, on its face, matured on February 3, 1981. BNO's suit was filed after the close of banking business on February 2, 1981. Appellants, citing pertinent codal authority ¹, urged strongly that BNO's action was in fact premature on its face and that the litigation was not yet ripe for adjudication, thus entitling appellants to have the action dismissed.

BNO argues, however, that their suit was mature in that the security behind Marcello's note had become impaired and, as a result of Marcello's failure to provide additional security, his note became due. It is BNO's contention that Marcello's failure to have the collateral mortgage note acknowledged activated the acceleration clause of the hand note, thus maturing it.

It is evident from the record that a meeting was held on Friday, January 30, 1981. Mr. John Lewis, Senior Executive Vice-President, Bank of New Orleans; Mr. Lawrence A. Merrigan, President, Bank of New Orleans; Mr. Carlos Marcello; and Mr. David Levy, Attorney and House Counsel for Mr. Marcello, were all present at this meeting. Marcello and Levy were informed of certain impairments confronting H.P.B.'s collateral mortgage note. The primary concern of BNO, the pending impairment, was the five-year prescription of the collateral mortgage note (Ne varietur note). BNO expressed the need to have the collateral mortgage note acknowledged to interrupt prescription running against it and gave Marcello and Levy forms of resolution authorizing the acknowledgment. Marcello and Levy were also informed that the deadline to have the collateral mortgage note acknowledged would be the following Monday, February 2, 1981, which was also the day before the hand note would mature and the collateral mortgage note would prescribe.

The BNO officials testified they felt they had appellant's complete cooperation in having the collateral mortgage note acknowledged, however, it was also their belief that Marcello firmly refused to honor the hand note upon maturity because of a dispute between BNO and Marcello regarding an oral agreement extending the hand note an additional five years. Because of the approaching maturity date and their meeting with Marcello, the BNO official met again the following day, Saturday, January 31, 1981, with their house counsel. As a result of that meeting, BNO issued a demand letter to Marcello.

Pursuant to the terms of the hand note, BNO notified Marcello by a demand letter dated January 31, 1981, that the collateral securing the loan had become impaired and thus declined in value. Accordingly, BNO made formal demand on Marcello to furnish and pledge additional securities to cover the impairment requiring such compliance by Marcello to take place within 24 hours. The letter concluded that failure to comply would mature the note without any further demand, notice, or putting in default.

The "ne varietur " note can prescribe and, being a demand note, will do so in five years unless the mortgagor signs a written acknowledgment on the "ne varietur " note within five years after execution of the note. To prevent the "ne varietur " note from becoming prescribed, it is necessary to repeat the acknowledgment within five-year periods; otherwise, upon prescription of the "ne varietur " note (collateral mortgage note), there remains no outstanding mortgage against the subject property. Consequently, the mortgage pledged to secure the hand note is lost and the hand note becomes the purely personal obligation of its maker. ²

We are of the opinion that BNO established at trial that it had validly accelerated the facial maturity date of the note, in accordance with the acceleration clause therein, by delivering notice to Marcello based on the impairment of the collateral and the failure to receive acknowledgment. Therefore, having sufficient evidence establishing that BNO had validly accelerated the maturity date of the hand note, we find the trial court was correct in overruling defendant's exception of prematurity.

However, appellants argue that there was no impairment on the security in that Marcello made interest payments and at least one principal payment on the hand note. Appellants assert that these payments interrupted prescription against the collateral mortgage note. Appellants support their argument by citing LSA-R.S. 9:5807 ³.

The effect of that statute in the collateral mortgage context is that a debtor's payment of principal or interest on the hand note operates to interrupt five-year prescription not only on that note, but also on the collateral mortgage note pledged by him "or his codebtors in solido " to secure the hand note. In this case, the collateral mortgage note was a demand note, and thus susceptible to five-year prescription in the absence of interruption. Marcello, as the debtor on the hand note, did in fact pay interest on that note, and H.P.B.'s collateral mortgage note was in fact pledged behind Marcello's hand note. Nevertheless, the collateral mortgage note was not a note pledged by the debtor Marcello or "his codebtors in solido " within the technical wording of the statute, since the pledge was by H.P.B., and H.P.B. was not a codebtor in solido with Marcello. H.P.B. executed the back of the hand note only to effectuate the pledge of the collateral mortgage note secured by the collateral mortgage, as recited, and H.P.B. did not execute or endorse as a co-maker or solidary surety. In other words, H.P.B.'s mortgage was in rem and it had no in personam liability to BNO.

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