First Nat. Bank of West Monroe v. Pickens

• Decision Date: 27 February 1985
• Docket Number: No. 16790-CA,16790-CA
• Parties: FIRST NATIONAL BANK OF WEST MONROE, Plaintiff-Appellant, v. James Dewitt PICKENS, et al., Defendants-Appellee-Appellants. 465 So.2d 874
• Court: Court of Appeal of Louisiana — District of US

Page 874

465 So.2d 874

FIRST NATIONAL BANK OF WEST MONROE, Plaintiff-Appellant, v. James Dewitt PICKENS, et al Defendants-Appellee-Appellants.

No. 16790-CA.

465 So.2d 874

Court of Appeal of Louisiana, Second Circuit.

Feb. 27, 1985.

McLeod, Swearingen, Verlander & Dollar by David E. Verlander, III, P.C., Monroe, for plaintiff-appellant.

Hudson, Potts & Bernstein by W. Craig Henry, Monroe, for defendant-appellee, James DeWitt Pickens and defendants-appellants, Pickens M. Kaplan & Son, Inc., Pickens Steel Buildings, Inc., and Pico Steel, Inc.

Before HALL and SEXTON, JJ., and PRICE, J. Pro Tem.

SEXTON, Judge.

In this action for a deficiency judgment, plaintiff Bank appeals that portion of the judgment rejecting its claim against James Dewitt Pickens, personally and as endorser and guarantor of certain corporate notes. The corporate defendants appeal that portion of the judgment granting judgment against them for the deficiency on the corporate notes. We affirm.

The facts of this matter, while complicated, are largely undisputed. On December 19, 1980, First National Bank of West Monroe (hereinafter referred to as "Bank") filed a petition to collect sums of money owed to it on thirty promissory notes which were executed during the years 1973 through 1977. The notes in question were made variously by James Dewitt Pickens personally, and by corporations of which Pickens was the sole shareholder: Pickens M. Kaplan & Son, Inc., Pickens Steel Buildings, Inc., and Pico Steel, Inc. The corporate notes of Pickens M. Kaplan & Son, Inc. and Pickens Steel Buildings, Inc. were secured by collateral chattel mortgages on the corporate inventory and equipment. The corporate accounts receivable of Pico Steel, Inc. were assigned to the Bank. Mr. Pickens personally endorsed all but one of the corporate notes. The Bank also asserts that Mr. Pickens executed a personal guaranty of the corporate debts, which was secured by mortgages on three tracts of real estate owned by Mr. Pickens, and which tracts shall hereinafter be referred to as Arkansas Road, Dumas Road, and North 7th Street. This guaranty agreement which is not contained in the record, was stipulated to by all parties.

In addition to the corporate notes, the Bank sought to collect on three personal notes of which Pickens was the maker. As we appreciate the evidence, these notes were also secured by the mortgaged real estate.

In the year 1977, and into early 1978, Mr. Pickens' corporations and Mr. Pickens himself were in serious financial trouble. They were all in default of their loans to the Bank and were unable to make the notes current. Therefore, the Bank advised Mr. Pickens and his corporations that it intended to call all of these notes and foreclose, and to then look to Mr. Pickens for payment as endorser and guarantor on each corporate note.

In order to delay foreclosure, Mr. Pickens entered into an arrangement whereby the chattel mortgaged corporate property belonging to Pickens M. Kaplan & Son, Inc. and Pickens Steel Buildings, Inc. would be sold in an advertised public auction by a professional auctioneer, with the net proceeds to be applied to the debts.

The auction of the movable property took place on August 10, 1977. The sale was advertised, and was conducted by Keith Babb, a professional auctioneer. The total sale proceeds were $32,738.50. After deducting $1,810.00 for property belonging to Mr. Pickens personally and not mortgaged to the Bank, $790 in advertising costs, and $3,092.85 for the auctioneer's commission, the net proceeds of $27,045.65 were paid to the Bank and credited to the account of Pickens M. Kaplan & Son, Inc.

Additionally, the parties agreed that two tracts of immovable property mortgaged to secure Pickens' guaranty of all indebtedness owed the Bank by Pickens and his corporations, the Dumas Road and North 7th Street tracts, would be transferred to the Bank. The transfer of this property occurred on February 3, 1978. The deed recites that the parties desired to effect a voluntary conveyance of the property to the Bank "without incurring the expense of foreclosure proceedings at evaluations determined by an independent appraiser acceptable to both parties in order that PICKENS may receive credit against his indebtedness to the BANK for the full appraised value of said properties without deduction for the costs, fees and other expenses which would be involved in said foreclosure proceeding." The document states that it is not to be considered a dation en paiement but is a present sale of the property. The deed further states that the net appraised value of the properties, $45,000.00 for the North 7th Street, and $77,749.54 for the Dumas Street, for a total of $122,749.54, was credited to Pickens' indebtedness to the Bank. The payment summary sheets for the corporations and Pickens personally reflect that $122,749.54 was credited to the account of Pickens M. Kaplan & Son, Inc. on February 6, 1978, "as per agreement for transfer of property."

At the same time as the transfer of the property, the parties executed an unrecorded addendum to the act of conveyance. In this document, the parties recognized that Pickens was of the opinion that the properties had a fair market value in excess of the net appraised value, and was of the opinion that a qualified and reputable real estate appraiser would place a value of $60,000 on the North 7th Street property and $126,249.54 on the Dumas Street property for a total value of $186,249.54. Therefore, the parties agreed, so that the property could be transferred immediately, that credit for Pickens' estimated values would be immediately applied to his indebtedness, with the proviso that if Pickens failed to supply a detailed appraisal comporting with his figures within ninety days, then the credit on his indebtedness would be retroactively reduced to the sum of $45,000 on the North 7th Street property and $77,749.54 on the Dumas Street property for a total credit of $122,749.54. Also in this addendum, the Bank agreed to forego suit against Pickens and the various corporations for one year, and Pickens agreed to make reasonable efforts to liquidate the indebtedness to the Bank. The Bank further agreed that if it were to sell either of the properties for a net sales price in excess of the credit given Pickens, credit for the difference would be given to Pickens.

In connection with this agreement, Pickens introduced an offer to the Bank to buy the North 7th Street property for $80,000, which offer was rejected by the Bank.

Also on February 3, 1978, Pickens sold the Arkansas Road property to Guy Antley for $60,000. A corresponding reduction of $60,000 "as per agreement for transfer of property" is reflected on the payment summary sheet for Pickens M. Kaplan & Son, Inc. The record in this matter does not disclose an appraisal of this property.

Pico Steel, Inc. was created to complete the contracts of the other corporations which they were unable to perform after the auction. Pico's accounts receivable were assigned to the Bank. All loans made by Pico from the Bank post date the auction of the movable property belonging to Pickens M. Kaplan & Son, Inc. and Pickens Steel Buildings. Pico owned no equipment or machinery, but obtained loans to pay for labor and lease of equipment necessary to complete the contracts of the other corporations.

The Bank subsequently instituted suit for the deficiency remaining on all notes. The defendants filed an exception of prematurity, which was denied, and a motion for summary judgment, which was also denied.

The defendants' basic contention at trial was that the Bank was precluded from obtaining a deficiency judgment by LSA-R.S. 13:4106, the Deficiency Judgment Act, because of the transfers by private sale of property which was mortgaged to secure the corporate debts and Mr. Pickens' personal guaranty.

Following a trial, the trial court held that the Deficiency Judgment Act did not apply to protect either the corporate defendants or Mr. Pickens individually with regard to the sale of movable property belonging to the corporations. Although a judicial sale of that property had not been conducted, the court indicated that because all defendants agreed to a private sale and actively participated in the liquidation of the corporate movable assets, they were precluded from claiming the benefits of the Deficiency Judgment Act.

However, the court noted that a more substantial question was presented by the conveyance of the two tracts of real estate owned by Mr. Pickens to the Bank and another tract, also belonging to Pickens, to a third party. The court held that Mr. Pickens did not actively participate in those transfers, therefore, he could enjoy the protection of the Deficiency Judgment Act. However, the court further held that the Deficiency Judgment Act did not extend to protect the corporate defendants, and therefore a judgment was granted against them and in favor of the Bank for all deficient amounts owed on the promissory notes.

The plaintiff Bank subsequently appealed that portion of the judgment denying its claims against defendant Pickens. The defendants filed an answer to the appeal, attacking that portion of the judgment granting the plaintiff Bank's claims against the corporate defendants for all deficient amounts.

The Liability for Deficiency Of Pickens M. Kaplan & Son,

Inc. and Pickens Steel Buildings, Inc. Resulting

from Sale of Chattels

As previously noted, the equipment and machinery belonging to Pickens M. Kaplan & Son, Inc. and Pickens Steel Buildings, Inc. were liquidated by private auction on August 10, 1977, and that corporation's account with the Bank was credited with the proceeds of the sale. The parties stipulated that the movables were not appraised.

Defendants contend that since the sale of property was by private and not judicial sale, the Bank is barred from recovering from them the deficiency on the corporate notes.

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