Whitney Nat. Bank v. Rockwell

• Decision Date: 16 October 1995
• Citation: 661 So.2d 1325
• Parties: 94-3049 La
• Court: Louisiana Supreme Court

Page 1325

661 So.2d 1325

94-3049 La. 10/16/95

WHITNEY NATIONAL BANK v. Richard G. ROCKWELL.

No. 94-CC-3049.

Supreme Court of Louisiana.

Oct. 16, 1995.

Clay J. LeGros, Metairie, Keith P. Richards, NEWMAN, MATHIS, BRADY, WAKEFIELD & SPEDALE, New Orleans, for Applicant.

Malcolm B. Robinson, Metairie, Richard L. Epstein, Metairie, for Respondent.

Mary Elizabeth Arceneaux, Baton Rouge, for Louisiana Bankers Association (Amicus Curiae).

[94-3049 La. 1] LEMMON, Justice ^*.

This is an action by Whitney National Bank on a promissory note which was payable in the full amount of principal and interest seventy-six days from date of execution. In addition to resisting the principal demand on the note, defendant asserted a reconventional demand for damages on the basis that the lender had breached its verbal agreement to accept interest-only payments for a period of time and then to grant a term of years for repayment in monthly installments.

The only matter before this court at this stage of the proceedings is the denial by the lower courts of the Bank's motion for summary judgment on defendant's reconventional demand. The principal issue is whether defendant has a cause of action for damages under the facts asserted by him in the reconventional demand [94-3049 La. 2] and the affidavit in opposition to summary judgment regarding oral promises and representations by the Bank as to terms for repayment of the loan when the loan contract contained specific payment terms and stipulated that the provisions of the contract "may not be waived or modified except in writing, signed by the Bank."

Facts

On October 16, 1992, defendant executed a promissory note in the amount of $195,000 payable to Whitney National Bank seventy-six days from date. The note stated that in the event of non-payment of any principal or interest when due, "the full amount of this note and all other obligation and liabilities" of defendant, at the option of the bank, shall be immediately due and payable without notice or demand. The note further gave the Bank the right in its sole discretion to extend the maturity date of the note, but provided that any delay or failure of the Bank in exercising its rights under the note shall not be construed as a waiver. There was also an express statement that the provisions of the note "may not be waived or modified except in writing signed by the Bank."

In December 1993, the Bank filed this action on the note which then had a principal balance of $122,220. Defendant answered, stating that the note in suit was one of a series of promissory notes executed in connection with his purchase from an estate of certain property on which the Bank held a delinquent mortgage note from the deceased owner. Defendant alleged that the Bank required him to include in the loan granted him by the Bank all of the obligations of the deceased owner to the Bank, but that he and the Bank agreed at the time of the execution of the original note that the interest on the note would be paid monthly for a period of time and that the principal then would be amortized over a period of years. Defendant further alleged that he timely made all interest payments for three years. [94-3049 La. 3] In his reconventional demand, defendant made the following allegations:

11.

Plaintiff in reconvention, Richard G. Rockwell ("Rockwell"), avers that the Whitney National Bank ("Whitney") caused a series of events to unfold which inured to the mutual benefit of Whitney and Rockwell, only to later change or alter those events, and demand full and immediate payment of the loan Whitney made to Rockwell. Whitney and Rockwell had agreed that a loan would be made to Rockwell and that interest-only payments would be required until the Whitney and Rockwell could put in place a mutually-agreeable repayment plan.

12.

It was never the intention of either of the parties that the subject loan would be required to be repaid in a lump sum. On the contrary, it was mutually understood and agreed that the subject loan would be repaid over a number of years, with the details to be worked out between the parties.

13.

At the time the loan was agreed to by the parties, Rockwell assumed a delinquent, troubled loan from the estate of Dr. Manning. Rockwell's agreement to assume the obligation of the deceased borrower took the Whitney out of a bad loan situation and into a positive loan posture.

Further, within the last year, Rockwell has sold the real estate that Whitney required him to purchase from Dr. Manning's estate and applied all of the net proceeds to the loan balance, significantly improving Whitney's position.

14.

Whitney's actions in calling this loan and instituting litigation constitute a breach of the intent and spirit of the agreement between the parties, as well as a breach of covenants of good faith and fair dealing. ¹

The Bank then filed two motions for summary judgment. The first motion, which sought judgment on the Bank's principal demand, was supported by an affidavit of the Bank's credit officer, stating the balance due on principal and interest and also denying any written agreement to forbear collection on the note [94-3049 La. 4] or to grant any terms of repayment other than that specified in the note. The second motion sought dismissal of the reconventional demand as a matter of law.

Defendant opposed the motions, asserting that there were numerous questions of fact that precluded summary judgment. Defendant also filed a countervailing affidavit, which stated:

1. The Whitney National Bank (hereafter "Whitney") had been involved in a long term relationship with Dr. Manning, the original owner of 20/20 Vision Center.

2. Dr. Manning's loan was in default and Dr. Manning was terminally ill.

3. Richard G. Rockwell ("Rockwell") made an offer to purchase 20/20 Vision Center in May of 1990. The actual deal was not closed until January 30, 1991 due to certain conditions required by the Whitney.

4. Whitney would not release 20/20 unless the lot adjoining the business, also owned by Dr. Manning, was purchased along with the business. Whitney strongly encouraged Rockwell to purchase the lot and referred him to Paul Richards, a commercial real estate agent.

5. Rockwell made a new offer for 20/20 in the amount of $105,000 and $90,000 for the lot. However, when the appraisal came in for the lot at only $60,000, he reduced his offer to $75,000.

6. Rockwell did not want anything to do with the lot, but was told that for the Whitney to release 20/20 the business and the lot had to be sold together. Further, Whitney held a loan account with Dr. Manning, and later Dr. Manning's estate, and wanted to close the account with a sale to Rockwell and a payout of all obligations held by Whitney in the Manning name. With Rockwell involved Whitney saw a method whereby the delinquent loan(s) in the name of Dr. Manning could be closed and a new borrower obtained for the troubled loan(s).

7. The Whitney advised Rockwell that they would accept interest only during the first 12 months until the lot could be sold. Thereafter, Rockwell and the Whitney would re-do the loan and provide for a repayment with an amortization schedule of at least three years.

8. Interest was paid and current when Whitney "called" the loan. Thereafter they would not accept payments of any kind, principal or interest.

9. After the lot sold and Rockwell paid down the principal of the loan, Whitney realized that they had not secured the proper collateral [94-3049 La. 5] for the loan and pushed Rockwell to sign a very one-sided collateral agreement and a one year extension of the loan.

10. Whitney never pressured Rockwell to start [principal] payments, but did tell him that he needed to be set up on an amortization plan. Whitney's statement that they cannot commit to more than a three year payout, quickly became "we want full payment now". This tactic occurred after Rockwell's account changed hands, from the loan officer who originally handled the loan and set up the interest only arrangements, to a Louis Marascalco, who became much more aggressive and who changed the arrangements Rockwell and the Whitney agreed to at the outset. The actions of the Whitney are a breach of the original loan agreement, both the written note, and the agreement about how the entire obligation would be handled.

After the trial court denied both motions, the court of appeal granted the Bank's application for supervisory writs. In an unpublished opinion, the intermediate court reversed in part, rendering summary judgment in favor of the Bank on the principal demand while affirming the denial of the Bank's other motion.

As to the principal demand, the court noted that a trial court should grant summary judgment on a promissory note when the debtor establishes no defense against enforcement, citing American Bank v. Saxena, 553 So.2d 836 (La.1989). The court reasoned that the debtor, in order to defeat summary judgment, must assert a valid defense to liability on the note and cannot do so by asserting separate and distinct claims that are not related to the question of liability on the note. While stating that parol evidence is admissible to explain an ambiguity in the contract or to show fraud, mistake, illegality, want or failure of consideration or that the writing is part of an entire oral contract, the court held that defendant did not assert facts that would constitute a valid defense to enforcement of the note. Because there was no genuine issue of material fact, the court held the Bank was entitled to judgment as a matter of law. ²

[94-3049 La. 6] As to the reconventional demand, the court of appeal held that defendant's assertions of the Bank's failure to deal fairly with him raised a triable issue of fact and that the Bank's motion for summary judgment was properly denied.

On the Bank's application, this court granted certiorari. 94-3049 (La. 2/9/95), 649 So.2d 413. While certiorari grants by this court...