George A. Broas Co. v. Hibernia Homestead & Sav. Ass'n

• Decision Date: 06 November 1961
• Docket Number: No. 127,127
• Court: Court of Appeal of Louisiana — District of US
• Parties: GEORGE A. BROAS CO., Inc. v. HIBERNIA HOMESTEAD & SAVINGS ASSOCIATION.

Page 356

134 So.2d 356

GEORGE A. BROAS CO., Inc. v. HIBERNIA HOMESTEAD & SAVINGS ASSOCIATION.

No. 127.

Court of Appeal of Louisiana, Fourth Circuit.

Nov. 6, 1961.

Darden & Screen, Carole A. Breithoff, New Orleans, for plaintiff and appellant.

Browne & Rault, Gerard A. Rault, New Orleans, for defendant and appellee, and third-party plaintiff and appellant.

Stone, Pigman & Benjamin, Ewell P. Walther, Jr., New Orleans, for third-party defendant and appellee.

Before McBRIDE and REGAN and JANVIER, JJ.

REGAN, Judge.

Plaintiff, the George A. Broas Co., Inc., a corporation organized for the purpose of developing real estate, instituted this suit against the defendant, the Hibernia Homestead & Savings Association, endeavoring to recover the sum of $24,499.86, representing the damages plaintiff alleged it incurred as the result of defendant's breach of contract, wherein defendant, through its former president, Albert Emke, committed itself to furnish interim and permanent financing to veterans who purchased homes in a subdivision developed by plaintiff.

Defendant answered and denied the existence of the contract, and in the alternative, pleaded that if such a commitment existed, the homestead president was without authority to make the commitment, and this fact was well known to the plaintiff.

Then, assuming the position of third party plaintiff, the homestead asserted that if it were cast in judgment, then Albert Emke, third party defendant, was liable for the amount thereof, since the commitment, if in fact in was ever made, was unauthorized by the board of directors and was therefore an ultra vires act for which the third party defendant is liable.

From a judgment dismissing both the principal demand and the third party action, the plaintiff has prosecuted this appeal. Defendant has also appealed the dismissal of the third party action so as to preserve its claim against the third party defendant in the event that the plaintiff should prevail in this court.

This case was consolidated with a similar suit, arising out of a parallel transaction, in order to facilitate and expedite the trial thereof. The suit referred to is entitled Adele Corporation v. Hibernia Homestead & Savings Association, 134 So.2d 362. In that case, plaintiff sued to recover $27,030.68, representing damages it asserted it had occurred as the result of the homestead's unwarranted revocation of a commitment to finance purchasers of homes in plaintiff's subdivision.

George A. Broas is president of both plaintiff corporations. ¹ The homes that were built by both plaintiffs are contained in one subdivision, located in Algiers and designated as Ellen Park. While the evidence adduced in the record concerns the negotiations between both of the plaintiff corporations and the defendant, for the purpose of preserving the simplicity and continuity hereof, we shall hereinafter relate the pertinent facts involving George A. Broas, Co., Inc., the plaintiff in this case.

In August, 1955, Broas began negotiations to purchase the property upon which plaintiff subsequently developed Ellen Park Subdivision. Learning of this proposed venture, defendant's president, Albert Emke, solicited the financing thereof for the Hibernia Homestead. Both Broas and Emke related that the plaintiff agreed to borrow $222,200 as interim financing for the purpose of developing the subdivision and Emke, in turn, guaranteed to plaintiff that it would furnish permanent financing to any qualified applicant who bought a home in Ellen Park.

In conformity with this agreement, plaintiff obligated itself to direct all individual purchasers to the defendant for financing, unless the individual desired to finance his home through another lending agency.

Broas and Emke explained that this agreement was mutually profitable. The contractor was assured that all qualified purchasers could secure financing and the homestead, in turn, developed a source for many individual loans. According to Broas and Emke, a real estate developer is in a position to recommend the homestead he favors to prospective purchasers, most of whom have no commitment or contract with another lending institution.

Pursuant to this verbal agreement, Emke, in his capacity as defendant's president, issued what was asserted to be a confirmation thereof by virtue of a letter dated March 23, 1956. ²

On April 2, 1956, plaintiff purchased the property and obtained a $222,200 loan from defendant, secured by a vendor's lien and mortgage on the tract.

Three months thereafter, the first group of homes was completed. Plaintiff then procured the services of Richard C. Fitzgerald, a real estate agent, to find purchasers therefor. In advertising the homes, Fitzgerald represented that financing could be arranged by the realtor. In the summer and early fall of that year, Fitzgerald brought ten prospective purchasers to the homestead, which ultimately made loans to these individuals.

Meanwhile, the Home Loan Bank of Little Rock, defendant's federal supervisory agency, initiated an investigation into its operations and as a result thereof, Emke was removed as president by defendant's board of directors. This was consummated at a meeting of the board held on October 30, 1956. At approximately the same time, the federal bank instructed the defendant to reject all future G.I. loans, which then yielded only 4 1/2 interest. However, the defendant was advised to honor all firm commitments given before this order was issued.

In November, 1956, Fitzgerald brought several applicants to the defendant, whom it is asserted were qualified and desired to obtain G.I. loans; however, the homestead rejected their applications and denied it was committed to extend such loans.

The plaintiff, as a result thereof, was forced to seek financing elsewhere. To obtain it, the plaintiff was required to pay large origination fees and bonuses because at that time money was 'tight' and G.I. loans, from the lending agencies' standpoint, were undesirable. In addition, the plaintiff asserted that it was forced to expend additional sums for servicing and maintaining the unsold properties. Therefore, the plaintiff insists that the foregoing constitutes the measure of damages incurred by it in consequence of the defendant's unjustified revocation of a commitment to finance purchasers of homes in its subdivision. Hence this suit.

The trial judge dismissed both the main and third party demands, and expressed the opinion that the contract lacked mutuality.

The initial question posed for our consideration is whether there is merit in the defendant's contention that its president, Emke, did not possess authority to enter into this agreement and that the plaintiff's president, Broas, was fully aware of that lack of authority.

The evidence concerning this aspect of this case is both fascinating, and to say the least, very convincing relative to the result which we have agreed should be reached herein.

The record reveals that Emke's duties, as the defendant's president, consisted of soliciting business, screening all loan applicants, and finally presenting those applications he considered desirable to the board of directors. The board was then obligated to evaluate each application, and either authorize the extension of that loan or reject it. Of course, no loan could be extended without the final approval of the board of directors.

According to the defendant's minutes, Emke presented the plaintiff's application for an interim loan to the board at a meeting held on March 8, 1956, and eighteen directors were in attendance. Among those present was Adele Broas, who, in addition to being a director, was executive vice-president of the homestead. She was also the wife of plaintiff's president, George Broas, and the sister of defendant's president, Albert Emke. ³

Nine directors testified that the minutes of that meeting were falsified because the plaintiff's loan application was never presented to the board. In fact, they stated, that its consummation was only disclosed by the federal investigation conducted the following fall. The majority were positive that they would remember this transaction had it been discussed since a $200,000 loan is unusually large and, in addition thereto, plaintiff's...