Trans Global Alloy Ltd. v. First Nat. Bank of Jefferson Parish

• Decision Date: 08 June 1990
• Docket Number: No. 89-CA-736,89-CA-736
• Citation: 564 So.2d 697
• Parties: TRANS GLOBAL ALLOY LIMITED, John D. Wyatt and F. Paul Naquin, Jr., Debtors-in-Possession, v. FIRST NATIONAL BANK OF JEFFERSON PARISH, Allied Bank of Texas, and John R. Spratt. 564 So.2d 697
• Court: Court of Appeal of Louisiana — District of US

Page 697

564 So.2d 697

TRANS GLOBAL ALLOY LIMITED, John D. Wyatt and F. Paul Naquin, Jr., Debtors-in-Possession, v. FIRST NATIONAL BANK OF JEFFERSON PARISH, Allied Bank of Texas, and John R. Spratt.

No. 89-CA-736.

564 So.2d 697

Court of Appeal of Louisiana Fifth Circuit.

June 8, 1990.

Rehearing Denied July 17, 1990.

Edward F. Kohnke, IV, James H. Brown, Jr., Walter F. Marcus, III, Lemle & Keller, New Orleans, for plaintiffs/appellants.

Donald A. Meyer, Kenneth S. Ardoyno, Shushan, Meyer, Jackson, McPherson & Herzog, New Orleans, for defendant/appellee, First Nat. Bank of Jefferson Parish.

Before CHEHARDY, GAUDIN, and WICKER, JJ.

WICKER, Judge.

This appeal arises from a suit for breach of contract, breach of fiduciary duty, and wrongful misrepresentation, in which a jury found the defendant bank liable and awarded damages not only to the plaintiff corporation, but also to the individual plaintiffs, who were officers and shareholders of the corporation. Subsequently the trial judge granted the defendant's motion for judgment notwithstanding the verdict, reducing the corporation's damages from $1,079,642 to $500,000 and vacating the awards to the individual plaintiffs. The plaintiffs have appealed and the defendant has answered the appeal.

PROCEEDINGS IN THE TRIAL COURT

The suit was filed on December 10, 1985, by Trans Global Alloy Limited (TGA), John D. Wyatt, and F. Paul Naquin Jr. against First National Bank of Jefferson Parish ( FNJ ), Allied Bank of Texas (ABT) and John R. Spratt.

The gravamen of the complaint was that FNJ violated its fiduciary obligations to and agreement with TGA, and to Wyatt and Naquin as TGA's owners, by failing to provide agreed-upon financing necessary for TGA to perform contracts to import oilfield equipment from a Chinese manufacturer for resale to a Louisiana customer, which would have resulted in a profit to TGA of over one million dollars.

Spratt was made defendant because he was the loan officer who handled TGA's transactions. ABT was made defendant because it was the correspondent bank through which FNJ handled issuance of the international letters of credit that were the medium of the financing arrangements. Both Spratt and ABT eventually were dismissed from the suit.

FNJ filed a third-party petition against Pel-Star Couplings, Inc. (Pel-Star), and China Corporation of Shipbuilding Industry, Wuhan Branch (CCSI), for indemnification if cast in judgment on the main demand, alleging that any breaches on its part were caused by the failure of Pel-Star and CCSI to perform services under contracts financed by FNJ.

FNJ also filed a reconventional demand, alleging the plaintiffs were liable in solido for $193,412.94, plus interest, attorney's fees and costs, for defaulting on loans. Acknowledging that the plaintiffs had filed petitions for bankruptcy, FNJ asserted it would seek to have the automatic bankruptcy stay lifted.

Pel-Star filed a motion to stay, since it also had filed a bankruptcy petition. However, the trial judge stayed only FNJ's third-party action against Pel-Star.

FNJ filed exceptions of no cause of action and no right of action, asserting that Wyatt and Naquin, as shareholders of the corporation TGA, could not sue to recover damages allegedly due the corporation.

Following a week-long trial in November 1988, the jury returned a verdict in favor of the plaintiffs. They found that FNJ breached a "contractual or fiduciary obligation between it and TGA"; that the breach proximately caused damages to TGA of $1,079,642; that the breach was in bad faith; that the breach proximately caused Wyatt to take personal bankruptcy; that the damages sustained by Wyatt solely as the result of his bankruptcy were $324,000; that the breach proximately caused Naquin to take personal bankruptcy; and that the damages sustained by Naquin solely as a result of his bankruptcy were $17,000.

JUDGMENTS OF THE TRIAL COURT

Pursuant to the stipulation of the parties, the third-party demand and reconventional demand were submitted to the trial judge. On November 28, 1988, he rendered judgment on the reconventional demand in favor of FNJ against TGA, Wyatt, and Naquin in solido in the amount of $213,387.48, together with $46.29 per day commencing November 15, 1988, until paid. The judge also rendered judgment in favor of FNJ on its third-party demand against CCSI in the amount of $1,420,642, plus interest and costs.

On November 29, 1988, the judge rendered judgment in conformity with the jury verdict. He awarded judgment in favor of TGA against FNJ in the amount of $1,079,642, in favor of Wyatt against FNJ for $324,000, and in favor of Naquin against FNJ for $17,000, all with legal interest from date of judgment and with expert fees and costs taxed against FNJ.

FNJ filed several post-trial motions. First, it moved for a mistrial or for a new trial, contending that certain instructions to the jury were prejudicial. It also moved for a judgment notwithstanding the verdict (judgment N.O.V.) or for a new trial, in whole or limited solely to quantum, arguing that the jury did not understand the law regarding the plaintiffs' obligation to minimize their loss and damages due to the trial judge's refusal to reread the instructions to the jury. Further, FNJ filed a motion for remittitur, urging the jury erred as a matter of law by awarding excessive damages. Finally, it sought to amend the judgment to tax jury costs against TGA and to have each party bear its own expert witness fees.

TGA, Wyatt and Naquin filed a motion to amend the judgment, seeking prejudgment interest.

On April 18, 1989, the trial judge rendered an amended judgment, in which he granted FNJ's motion for judgment notwithstanding the verdict. He vacated the judgments in favor of Wyatt and Naquin, finding they had no right of action for breach of an obligation owed to the corporation, and concluded Wyatt and Naquin had not articulated a separate and distinct cause of action entitling them to damages. He reduced the judgment in favor of TGA against FNJ to $500,000, plus interest from November 22, 1988, with all costs and experts' fees taxed against FNJ. He also restated his ruling on the reconventional and third-party demands in accord with the prior judgment.

TGA, Wyatt and Naquin have appealed the judgment of April 18, 1989. They assert the district court erred in granting judgment N.O.V., in denying prejudgment interest, and in striking the damages awarded to Wyatt and Naquin since these were attributable to FNJ's breach. TGA, Wyatt and Naquin specifically seek a partial reversal of the trial judge's reduction of TGA's award to $500,000, of his dismissal of the claims of Wyatt and Naquin, and of his refusal to award prejudgment interest.

FNJ has filed an answer to the appeal, asserting that the law and the evidence do not support the finding in favor of TGA and/or Wyatt and/or Naquin; that the court's instructions to the jury after it had retired for its deliberations and prior to the entry of the jury's verdict were prejudicial and were in the nature of a prohibited Allen charge; and that the judgment should be reversed, amended, or a mistrial declared, except as to the portion of the judgment that granted FNJ's reconventional demand.

EVIDENCE

The testimony at trial set forth the following:

John Douglas Wyatt

John Douglas Wyatt, known as Doug, testified he had been successful in the oilfield supply business for several years prior to the formation of TGA, through Oilfield Tubulars, Inc. (OTI), a company he formed in 1977 that supplied pipe to oilfield contractors.

In 1981 J. Paul Naquin, Jr., who had known Wyatt socially for a number of years, approached him about the possibility of importing seamless pipe manufactured in China. Naquin had developed contacts with Asian International, Ltd., a Baton Rouge agency representing China Corporation of Shipbuilding Industry (CCSI), the manufacturer. Naquin and Wyatt did a market survey and obtained purchase orders from potential customers worth millions of dollars. In July 1981 Wyatt and Naquin formed Trans Global Alloy Limited. Each owned 50 percent of the stock.

On July 7, 1981, a "Master Distributorship" agreement was confected between TGA and Asian International, under which Asian appointed TGA "sole importer and Master Distributor within the United States of 'products' manufactured by CCSI." The agreement defines "products" as "drilling pipes, casings and oilfield drilling tubes and couplings, caps, and drill collars of all types and sizes manufactured by CCSI".

Within a week Wyatt and Naquin left for China to visit the factories. They discovered CCSI could not make seamless casing in excess of 20 feet long, although the industry required 40-foot lengths; therefore, they decided to explore the manufacture of couplings at a CCSI factory in Wuhan, China.

As a result, a letter of intent was executed between CCSI-Wuhan Branch, and TGA on July 24, 1981, under which TGA expressed its intent to enter into a contract for the purchase of in quantities of a minimum of two million pounds the first year, 2.5 million the second year, and three million pounds the third year, providing the product quality complied with standards set forth by the American Petroleum Institute. TGA was to provide to CCSI the manufacturing drawings, specifications and other information required to manufacture the couplings to meet API standards.

Through OTI, Wyatt had established a banking relationship with John Spratt, a loan officer at Jefferson Bank and Trust Company. After Spratt left Jefferson Bank in late 1978 or 1979 to work for Continental Bank, he solicited Wyatt's business and Wyatt transferred all his personal and business accounts to Continental. Continental later merged with First National Bank of Jefferson and continued operations under FNJ's name. (Accordingly, we refer to it hereafter as "C/FNJ.")

Upon returning to the United States, Wyatt made an appointment with Spratt to...