Ouachita Nat. Bank (Premier Bank, N.A.) v. Palowsky

• Decision Date: 31 October 1990
• Docket Number: No. 21805-CA,21805-CA
• Citation: 570 So.2d 114
• Parties: OUACHITA NATIONAL BANK (PREMIER BANK, N.A.), Plaintiff/Appellee, v. Stanley R. PALOWSKY, Jr., Defendant/Appellant. 570 So.2d 114
• Court: Court of Appeal of Louisiana — District of US

Page 114

570 So.2d 114

OUACHITA NATIONAL BANK (PREMIER BANK, N.A.) Plaintiff/Appellee, v. Stanley R. PALOWSKY, Jr., Defendant/Appellant.

No. 21805-CA.

570 So.2d 114

Court of Appeal of Louisiana Second Circuit.

Oct. 31, 1990.

Theus, Grisham, Davis & Leigh by J. Michael Hart, Monroe, for defendant appellant Stanley R. Palowsky, Jr.

George M. Wear, Jr., Monroe, for third-party defendant, Herschel Sullivan.

F. Drake Lee, Shreveport, for Premier Bank.

Hudson, Potts & Bernstein by James A. Rountree, William T. McNew, Monroe, Winstead, McGuire, Sechrest & Minick by W. Mike Baggett, Dallas, Tex. by Jeff Joyce, Houston, Tex., for appellee Ouachita Nat. Bank in Monroe.

Before FRED W. JONES, Jr., SEXTON and NORRIS, JJ.

FRED W. JONES, Jr., Judge.

Defendant, Stanley R. Palowsky, appealed the partial summary judgment granted by the trial court in favor of plaintiff, Ouachita National Bank in Monroe, now Premier Bank, N.A. (ONB) in the action by plaintiff for the collection of certain promissory notes executed by defendant. Finding no error, we affirm.

Issues Presented

On appeal, defendant presents the following assignments of error:

1) Whether the issuance of promissory notes contrary to the provisions of Regulation U of the Federal Securities Exchange Act gives rise to void obligations;

2) Whether the insertion of the words "on demand" in a note is a material alteration which renders the note void; and,

3) Whether defendant was fraudulently induced to sign certain promissory notes.

Factual Context

These voluminous and factually complex proceedings arose from plaintiff making numerous loans in connection with the development of a tract known as North Pointe Subdivision in Monroe. Defendant was one of a number of borrowers who executed promissory notes to the bank in connection with the development of the subdivision. Due to various disputes between the bank and developers of the subdivision, the developers, including Palowsky, filed suit against the bank for damages. Subsequently on August 15, 1988, the bank instituted this proceeding for the collection of five promissory notes, naming Palowsky as defendant.

In its petition, the bank alleged Palowsky was indebted to it for $805,217.57. Plaintiff asserted it was the holder of the following notes executed by defendant:

1) Note No. 22048 for $118,334.17, dated November 9, 1987 (A);

2) Note No. 25822 for $440,000, dated December 16, 1987 (B);

3) Note No. 93149 for $30,000, dated March 11, 1988 (C) (originally incurred on March 10, 1986);

4) Note No. 96082 for $45,000, dated September 28, 1987 (D) (originally incurred on July 25, 1986); and,

5) Note No. 99733 for $120,000, dated October 9, 1987 (E). (Note E is not an issue in this appeal).

Plaintiff contended the above described notes were due as the result of defendant's failure to furnish current financial statements as required by defendant's contract with plaintiff and Notes A, B, D and E were past due. Plaintiff stated it had made amicable demand upon defendant to no avail.

Among numerous allegations in his answer and reconventional demand, defendant alleged that during the period of 1983-1984 he was informed by various representatives of ONB that he was a candidate to be placed on the Board of Directors of the bank. Defendant asserted he was advised by the bank representatives that in order for him to be more acceptable as a member of the Board he would be required to own stock in ONB. Accordingly, he made various acquisitions of stock based upon the representations of R.L. Vanderpool, Jr., President of ONB at that time, and Herschel Sullivan, a member of the Board of Directors. Defendant further alleged he was advised by the representatives, including Vanderpool and Sullivan, that any such acquired stock would become very valuable in the future, and based upon these representations, defendant was induced by these individuals to acquire the stock for which some of the indebtedness sued upon was incurred. Defendant also contended that the actions of ONB were part of a continuing and ongoing series of actions designed to bankrupt him and all of his projects which were previously financed with ONB. Defendant also filed a third-party demand naming as third-party defendants Vanderpool and Sullivan, alleging that based upon assurances as to the values of stock in ONB he was fraudulently induced to acquire the stock to be on the Board of Directors of the bank.

The record demonstrates that notes A and B were actually the consolidation of numerous other notes. Note A for $118,334.17 was the consolidation of the following three notes:

1) Note No. 94932 for $20,000 executed on May 13, 1986;

2) Note No. 92401 for $60,000 executed on February 10, 1986; and,

3) Note No. 87138 for $380,000 executed on August 13, 1985.

Defendant paid $347,181.62 on Note No. 87138 on September 18, 1985, leaving a balance of $38,334.17 for this note. Note B for $440,000 was the consolidation of the following four notes:

1) Note No. 88041 for $260,000 executed on September 10, 1985;

2) Note No. 90605 for $50,000 executed on December 10, 1985 3) Note No. 90889 for $20,000 executed on December 19, 1985; and,

4) Note No. 91529 for $110,000 executed on January 9, 1986.

It appears from the evidence that most of these loans were for the purpose of "construction" and defendant admitted in answers to interrogatories that his signature on the notes was genuine. Notes A, C, D and E were all payable 182 days after the date of execution, whereas Note B was payable on demand.

On November 14, 1988 plaintiff filed a motion for summary judgment on the five promissory notes. Plaintiff alleged that at the time suit was filed Note C was in default only because of defendant's refusal to submit a current financial statement. However, it was now past due as were all of the other notes which were sued upon. Plaintiff asserted there were no genuine issues of material fact as to defendant's liability to plaintiff and plaintiff was entitled to summary judgment as a matter of law.

The affidavit of Vanderpool was submitted in connection with plaintiff's motion for summary judgment. Affiant stated he was in charge of the records of ONB relating to defendant and that the affidavit was given on the basis of his personal knowledge derived from the bank's business records. Affiant described each of the notes and stated they were all past due and owing and, additionally, in default as defendant failed and refused after numerous requests to provide current financial statements.

Defendant opposed plaintiff's motion for summary judgment, alleging that material disputes of fact existed with respect to the indebtedness sued upon by ONB. Among his allegations, defendant contended Vanderpool had not personally dealt with defendant in the handling of his loans and the affidavit was also allegedly incorrect insofar as the purpose of the loans was stated. Defendant again asserted he was fraudulently induced to enter into the loans based upon statements made by the officers of ONB and was induced to buy stock by these misrepresentations.

In his affidavits, which were submitted in connection with his opposition to the summary judgment, defendant alleged that the purpose of the notes as set forth in Vanderpool's affidavit was totally inaccurate and incorrect as the loan proceeds were not used for construction or equipment but, to the contrary, a large portion of the loans was used for the acquisition of stock. Defendant stated he had never had any personal banking relationship with Vanderpool nor had Vanderpool ever been in charge of his accounts or had any dealings with defendant concerning those accounts. He further contended this proceeding was only instituted by ONB after defendant and others filed suit against the bank for its default in another transaction. Defendant also stated that the bank would receive weekly reports which showed checks issued on accounts in ONB in individual amounts in excess of $10,000. Defendant wrote checks in excess of $10,000 for each of his stock acquisitions and stated that Vanderpool and other bank officials would have had to have been in a position to have seen the purpose of the checks, in particular, the acquisition of the stock.

In June 1989, while plaintiff's motion for summary judgment was pending, defendant caused subpoenas and subpoenas duces tecum to be issued seeking certain individuals to appear and produce various financial documents. After the trial court's refusal to quash the subpoenas, this court granted supervisory writs on the application of ONB and the individuals to consider only the discovery issue. After reviewing the matter, we reversed the judgment of the trial court and granted the motion to quash. See Ouachita National Bank in Monroe v. Palowsky, 554 So.2d 108 (La.App. 2d Cir.1989).

On March 20, 1989 plaintiff filed a supplemental memorandum in support of its motion for summary judgment, alleging there were no material facts in dispute. Plaintiff noted defendant had admitted his signature and the genuineness of all of the promissory notes which had been sued upon and did not dispute having received the proceeds of the notes. The only thing defendant denied was the purpose of some of the loans for which the promissory notes were issued. Plaintiff alleged that, although defendant's answers to interrogatories and the documents which he had produced in discovery contradicted his assertions concerning the use of borrowed funds, this did not amount to a disputed issue of material fact. Plaintiff argued it simply did not matter how defendant had used the money he had borrowed from ONB. It further contended that defendant's allegations as to being induced into buying stock to be considered favorably for a position on the bank's Board of Directors was a meaningless consideration in the context of this motion for summary judgment. Plaintiff noted that attached to defendant's supplemental answers to...