FMB Dev., L. L.C. v. Hibernia Nat'l Bank, Capital One Fin. Corp.

• Decision Date: 12 July 2017
• Docket Number: NO. 2016-CA-1057.,2016-CA-1057.
• Citation: 224 So.3d 431
• Parties: FMB DEVELOPMENT, L.L.C. v. HIBERNIA NATIONAL BANK, Capital One Financial Corporation and Bank South
• Court: Court of Appeal of Louisiana — District of US

224 So.3d 431

FMB DEVELOPMENT, L.L.C.

v.HIBERNIA NATIONAL BANK, Capital One Financial Corporation and Bank South

NO. 2016-CA-1057.

Court of Appeal of Louisiana, Fourth Circuit.

JULY 12, 2017

Charles V. Giordano, Anthony J. Milazzo Jr., HEBBLER & GIORDANO, L.L.C., 3501 North Causeway Blvd., Suite 400, Metairie, LA 70002, COUNSEL FOR PLAINTIFF/APPELLANT

Thomas J. Lutkewitte, Conor T. Lutkewitte, FAVRET, DEMAREST, RUSSO, LUTKEWITTE & SCHAUMBURG, 1515 Poydras St., Suite 1400, New Orleans, LA 70112, COUNSEL FOR DEFENDANT/APPELLEE

(Court composed of Judge Rosemary Ledet, Judge Sandra Cabrina Jenkins, Judge Regina Bartholomew Woods )

JUDGE SANDRA CABRINA JENKINS

This appeal arises from a series of commercial mortgage loans used to finance the purchase of land for the development of a high rise condominium complex on the lakefront in New Orleans. FMB Development, LLC ("FMB") appeals the trial court's July 18, 2016 judgment granting a motion for summary judgment filed by appellees, Capital One N.A., and Capital One Financial Corporation (collectively, "Capital One"), and dismissing all claims by FMB against Capital One, with prejudice. For the reasons that follow, we affirm.

FACTUAL AND PROCEDURAL HISTORY

Between September 10, 2004 and July 21, 2005, FMB entered into five "Multiple Indebtedness Mortgages" (collectively, the "Mortgage Contracts") with Capital One¹ to secure loans in the total principal amount of $3,625,000.00. These loans financed FMB's purchase of various parcels of land in the general area fronting Lake Marina Avenue, West Robert E. Lee Boulevard, and Regent Street in New Orleans (the "Mortgaged Property"). The parcels of land were partially improved with "several old single-family, doubles, and multi-family buildings, with other portions vacant and grassy."²

As part of the loan process, Capital One ordered an appraisal of the Mortgaged Property from Bird and Associates ("Bird"). Bird submitted an appraisal to Capital One dated August 26, 2004, as amended on July 12, 2005. In the appraisal, Bird reported that all of the Mortgaged Property was located in "FEMA Flood Zone AO." The appraisal specifically stated as follows:

This report is prepared for the sole and exclusive use of the client identified in the report, and it may not be used for any purpose other than that which is specified in the report. No third parties are authorized to rely upon this report without written consent of the appraiser, and in any event, only in its entirety.

On August 29, 2005, Hurricane Katrina struck the New Orleans area and the subsequent flooding allegedly destroyed the residential buildings on the Mortgaged Property, which was not covered by flood insurance.

After Hurricane Katrina struck, the condominium project languished. In March 2008, Capital One agreed to renew and decrease FMB's original loans to $3,360,000.00, with a renewal for three years. On April 17, 2008, FMB executed a promissory note in favor of Capital One in the principal amount of $3,360,000.00, with a maturity date of April 17, 2011 (the "Note").

On June 17, 2011, and January 27, 2012, FMB executed two Agreements Regarding Loan Modification (collectively, the "Loan Modifications"), which extended the maturity date of the Note to January 17, 2012 and April 16, 2012, respectively. In each of the Loan Modifications, FMB agreed as follows:

BORROWER ACKNOWLEDGES THAT THIS MODIFICATION REPRESENTS CHANGES TO ANY EXISTING DEBT OWED TO BANK. IN CONSIDERATION OF BANK'S CONSENT TO SUCH CHANGES UPON THE TERMS SET FORTH HEREIN, BORROWER HEREBY AGREES THAT ALL DISPUTES AND CLAIMS WHATSOEVER OF ANY KIND OR NATURE WHICH BORROWER PRESENTLY HAS OR MAY HAVE AGAINST BANK ARE FULLY AND FINALLY RELEASED, COMPROMISED AND SETTLED. BORROWER ... DOES HEREBY EXPRESSLY RELEASE AND FOREVER RELIEVE, DISCHARGE AND GRANT FULL ACQUITTANCE TO BANK FOR AND FROM ANY AND ALL CAUSES OF ACTION, SUITS,

CLAIMS, DEBTS, OBLIGATIONS OR LIABILITIES OF ANY NATURE WHATSOEVER, KNOWN OR UNKOWN, ALLEGED OR NOT ALLEGED, WHICH BORROWER HAS OR MAY HAVE AGAINST BANK, ITS AGENTS, OFFICERS, EMPLOYEES, DIRECTORS AND SHAREHOLDERS AS OF THE EFFECTIVE DATE HEREOF. THIS RELEASE SHALL BE CONSTRUED TO HAVE THE BROADEST POSSIBLE SCOPE. [Emphasis added.]

On May 16, 2013, FMB filed a Petition for Damages against defendants Hibernia National Bank, Capital One Financial Corporation, and Bank South, alleging that in August 2005, Hurricane Katrina caused a total loss by flooding of all structures on FMB's Mortgaged properties. According to FMB, the defendants breached the provisions of the Mortgage Contracts by failing to notify FMB that the properties were in a special flood hazard area, failing to notify FMB of the amount of flood insurance that was required by Capital One, and failing to place the required flood insurance on the property when FMB did not. On July 3, 2013, FMB filed a First Supplemental and Amended Petition adding Capital One, N.A. as a defendant.

On August 24, 2015, Capital One filed a Motion for Summary Judgment seeking dismissal of FMB's claims on the following grounds: (1) FMB's claims were barred by the res judicata effect of the 2011 and 2012 Loan Modifications; (2) Capital One had no duty under the Mortgage Contracts to notify FMB that the properties were in a special flood hazard area, or to procure or maintain flood insurance on the Mortgaged Properties; and (3) Capital One had no fiduciary duty to notify FMB that the properties were in a special flood hazard area.

On July 18, 2016, the trial court held a hearing on Capital One's Motion for Summary Judgment. On July 18, 2016, the trial court signed a final judgment granting Capital One's Motion for Summary Judgment and dismissing all of FMB's claims and demands against Capital One, with prejudice. FMB appealed.

DISCUSSION

On appeal, FMB asserts four assignments of error:

(1) The trial court erroneously ruled that the claims by FMB were barred by res judicata;

(2) The trial court erred in finding that Capital One did not breach the contract with FMB;

(3) The trial court erred in ruling that FMB did not have a claim for detrimental reliance against Capital One;

(4) The trial court erred in ruling that Capital One did not owe a fiduciary duty to FMB.

Summary Judgment Criteria/Standard of Review

This court applies a de novo standard of review when considering rulings on motions for summary judgment, using the same criteria that governed the trial court's determination of whether summary judgment was appropriate. Bank of New York Mellon v. Smith , 15–0530, p. 8 (La. 10/14/15), 180 So.3d 1238, 1243. Capital One's Motion for Summary Judgment is governed by criteria set forth in the version of La. Code Civ. P. art. 966 in effect prior to the 2015 amendments.³

A court must grant a motion for summary judgment "[i]f the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, admitted for purposes of the motion for summary judgment, show that there is no genuine issue as to material fact, and that mover is entitled to judgment as a matter of law." La. Code Civ. P. art. 966(B)(2) (2015).

Before the 2015 amendments, the summary judgment standard was as follows:

The burden of proof remains with the movant. However, if the movant will not bear the burden of proof at trial on the matter that is before the court on the motion for summary judgment, the movant's burden on the motion does not require him to negate all essential elements of the adverse party's claim, action, or defense, but rather to point out to the court that there is an absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. Thereafter, if the adverse party fails to produce factual support sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial, there is no genuine issue of material fact.

La. Code Civ. P. art. 966(C)(2) (2015).

Assignment of Error No. 1: Res Judicata

FMB contends that its claims are not barred by the res judicata effect of the release language in the Loan Modifications. Given our disposition of FMB's individual claims in FMB's second through fourth assignments of error, we pretermit any discussion of this first assignment of error.

Assignment of Error No. 2: Mortgagee's Duty to Procure and Maintain Flood Insurance

In light of our disposition of FMB's second through fourth assignments of error, we first address FMB's second assignment of error. FMB contends that the trial court erred in ruling that Capital One did not have a duty to notify FMB that the Mortgaged Properties were in a special flood hazard area so that FMB could obtain flood insurance. FMB asserts that Capital One's duty arises under the language of the Mortgage Contracts and the provisions of the National Flood Insurance Act.

FMB relies on the following language from the Mortgage Contracts to support its claim that Capital One was obligated to notify FMB that the Mortgaged Properties were in a special flood hazard area:

Required Insurance. So long as this Mortgage remains in effect, Mortgagor shall, at its sole cost, keep and or cause others, at their expense, to keep the Property constantly insured against loss by fire, by hazards included within the term "extended coverage," and by such other hazards (including flood insurance, where applicable) as may be required by Mortgagee.

* * * *

Should the Real Property be located in an area designated by the Director of the Federal Emergency Management Agency as a special flood hazard area, Mortgagor agrees to obtain and maintain Federal Flood Insurance, if available, within 45 days after notice is given by Mortgagee that the Property is located in a special flood hazard area, for the full unpaid principal balance of the loan and any prior liens on the property securing the loan, up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Mortgagee, and to maintain such insurance for the term of the

...