Lilliedahl & Mitchel, Inc. v. Avoyelles Trust and Sav. Bank

• Decision Date: 17 November 1977
• Docket Number: No. 6202,6202
• Citation: 352 So.2d 781
• Parties: LILLIEDAHL & MITCHEL, INC., Plaintiff-Appellee, v. AVOYELLES TRUST & SAVINGS BANK, Defendant-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 781

352 So.2d 781

LILLIEDAHL & MITCHEL, INC., Plaintiff-Appellee, v. AVOYELLES TRUST & SAVINGS BANK, Defendant-Appellant.

No. 6202.

Court of Appeal of Louisiana, Third Circuit.

Nov. 17, 1977.

Rehearing Denied Dec. 14, 1977.

McCollister, Belcher, McCleary, Fazio, Mikon, Holliday & Jones by Donna D. Fraiche, Baton Rouge, Lee & Lee, James N. Lee, Bunkie, for defendant-appellant.

Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell by Joseph Onebane, Lafayette, Harold J. Brouillette, Marksville, for plaintiff-appellee.

Before DOMENGEAUX, WATSON and GUIDRY, JJ.

DOMENGEAUX, Judge.

This case involves the proceeds from four certificates of deposit, numbers 22, 363, 458, and 499, issued by the defendant, Avoyelles Trust & Savings Bank (Bank) to the plaintiff, Lilliedahl & Mitchel, Inc. (Corporation).

Plaintiff Corporation is engaged in the construction business. Its now deceased president and principal stockholder, Marvin Lilliedahl, was authorized by resolution of the Board of Directors to manage the financial and business affairs of the corporation. As such, Lilliedahl dealt with the defendant Bank as agent for the Corporation. Lilliedahl also dealt with the Bank on a personal basis.

Over a period of years Lilliedahl made personal loans from the Bank. Apparently, the proceeds of these loans would be deposited into the corporate account and the personal liability account of Lilliedahl on the corporate books would be credited. The Corporation then would purchase a certificate of deposit and the Bank's account on the corporate books would be debited. These certificates of deposit would then be pledged as security for Lilliedahl's loans at the Bank.

The pledges of the certificates of deposit were not reflected on the corporate books and were unknown to the auditor of the Corporation, the bookkeeper of the Corporation, and the other stockholder and current president of the Corporation, Roland Mitchel.

The present controversy arose when it was discovered after the death of Lilliedahl that the corporation was in financial difficulty. It was then revealed that four certificates of deposit owned by the corporation were cancelled by the Bank. The Corporation alleges that the proceeds from these certificates were used to pay the personal indebtedness of Lilliedahl to the Bank.

The Bank's records revealed that certificates of deposit in the following amounts were cancelled on the following dates:

                CERTIFICATE OF                  DATE
                DEPOSIT NUMBER    AMOUNT      CANCELLED
                --------------  ----------  -------------
                      22        $15,000.00  July 15, 1975
                     363        $40,000.00  Dec. 27, 1974
                     458        $50,000.00  Dec. 27, 1974
                     499        $50,000.00  Jan. 28, 1975
                

The Bank's records also indicate that personal notes of Lilliedahl in the following amounts were paid on the following dates:

                NOTE NUMBER    AMOUNT    DATE PAID
                -----------  ----------  -------------------
                   1572      $15,000.00  July 15, 1975
                   7535      $40,000.00  Dec. 30, 1974 1
                   4202      $50,000.00  Dec. 30, 1974
                   1571      $50,000.00  Jan. 28, 1975
                

The Corporation filed suit seeking payment from the Bank from the proceeds of the certificates of deposit. The trial court found the Bank liable on certificates of deposit numbers 363, 458, and 499, because the proceeds from these certificates were never paid to the Corporation. The trial court refused to find liability on certificate of deposit number 22 because the proceeds from this certificate had been deposited in the corporate account. The trial court awarded judgment for the principal amount of the certificates of deposit numbers 363, 458, and 499 and for the stated interest on these certificates from the time of the Bank's cancellation to the date of judicial demand, for a total amount of $152,846.55. The Bank appealed. The Corporation has answered the appeal requesting recovery on certificate of deposit number 22.

The Bank specifies five errors upon appeal:

1. The trial court erred in failing to sustain various exceptions;

2. The trial court erred in finding that the certificates of deposit were never paid to the Corporation;

3. The trial court erred in failing to find that the Bank has a legal right and authority to apply the proceeds of the certificates of deposit to payment of Lilliedahl's personal notes to the Bank upon the instructions of Lilliedahl because of the general power and written authority given by the corporation to its president;

4. The trial court erred in failing to credit interest accrued on the certificates of deposit to the judgment; and

5. The trial court erred in adding interest to the principal sums of certificate of deposit numbers 363, 458, and 499.

I. PROCEDURAL ISSUES

Defendant Bank raised the exception of prescription in the trial court and reurges its plea on appeal. The trial court referred the plea to the merits. Defendant argues that this suit arises ex delicto for the wrongful act of the Bank. As such the action prescribes in one year.

Defendant's argument is unavailing. This is a suit arising ex contractu. Its purpose is to recover on the contracts between the Bank and its depositor, the Corporation. When the Bank issued the certificate of deposit it acknowledged a receipt of money from the Corporation and promised to repay the money to the Corporation with interest at a later date. This suit is merely to enforce the promise to pay and the claim has not prescribed under any of the Codal provisions governing the prescriptive period for contracts. C.C. Arts. 3538, 3540, and 3544. ²

Defendant also reurges on appeal its exceptions of no cause of action and no right of action. These exceptions were overruled by the trial court.

Defendant cannot seriously contend that the Corporation has no right of action. The certificates were purchased by the Corporation and made payable to the Corporation. The Corporation was therefore the primary party to bring suit. Consequently, the exception is without merit. The exception of no cause of action is also without merit. The petition alleged sufficient facts to give rise to a cause of action for recovery on the contract of the certificate of deposit.

Defendant urges for the first time on appeal that the suit is defective for failure to join an indispensable party. Louisiana Code of Civil Procedure Article 641 provides:

"Indispensable parties to an action are those whose interests in the subject matter are so interrelated, and would be so directly affected by the judgment, that a complete and equitable adjudication of the controversy cannot be made unless they are joined in the action.

No adjudication of an action can be made unless all indispensable parties are joined therein."

Defendant argues that in order for plaintiff to recover, Lilliedahl would have to be found a mismanager of corporate funds, converter, or a breacher of fiduciary duties. It concludes that the succession representative of Lilliedahl is indispensable to a complete and equitable adjudication of the controversy.

Defendant's argument is unavailing. A party is indispensable only when his absence necessarily would result in an impairment of substantial rights. State, Department of Highways v. Lamar Advertising Company of Louisiana, 279 So.2d 671 (La.1973). Defendant has failed to show how these proceedings would necessarily impair the rights of Lilliedahl's succession.

II. PAYMENT OF THE CERTIFICATES OF DEPOSIT TO THE CORPORATION

Defendant Bank urges in its brief that the trial court erred in finding that the proceeds of the certificates of deposit numbers 363, 458, and 499 were not paid to the Corporation. The court in its written reasons stated as a finding of fact that when the certificates became due and payable, the Bank, by mutual consent between it and Lilliedahl, applied the proceeds directly towards payment of Lilliedahl's personal notes. The Bank argues, however, that in actuality it paid the proceeds of the certificates to the Corporation.

Looking to the record in this case we find that certificates of deposit numbers 363 and 458 were combined to make a cashier's check in the amount of $90,000.00 at the direction of Lilliedahl. This check was made payable to the order of "Selves" and used by the Bank, again at the direction of Lilliedahl, to satisfy a personal note. Thus, defendant apparently maintains that the making of the cashier's check constituted payment on paper to the Corporation and once the corporate funds were delivered to the corporate president, the Bank was relieved of liability.

This argument seems appealing but we reject it on the following basis. The cashier's check was not made payable to the Corporation. The corporate account was never credited with any amount reflecting the proceeds of these certificates. Furthermore, we do not see how the corporation ever had actual or constructive possession of the proceeds. Lilliedahl simply instructed the Bank to apply the money owed by the Bank to the Corporation to his personal indebtedness. Absent express or implied authorization from the Corporation, it is difficult to justify any finding that the proceeds were in fact paid to the Corporation.

With regard to certificate of deposit number 499, defendant contends that since Lilliedahl was authorized to endorse instruments and since certificate of deposit number 499 was apparently endorsed by Lilliedahl on behalf of the Corporation, the Corporation received the proceeds of the certificate. This is so even though, as part of the same transaction, Lilliedahl directed the Bank to apply the proceeds to his loan. Again, the corporate account was never credited with the proceeds nor did the Corporation have actual or constructive possession of the funds. Under these circumstances we cannot find that the trial court erred in finding that the proceeds from the certificate of deposit

were paid to the Corporation. III. AUTHORITY TO LILLIEDAHL

TO USE FUNDS OWED TO THE CORPORATION TO PAY PERSONAL...