Case Title: American Bank v. Saxena

Citation: 

Docket Number: 89-CC-0927

State: louisiana

Court: Louisiana Supreme Court

Date: 1989-12-13T00:00:00Z

Document:
American Bank v. Saxena  553 So. 2d 836 (1989) AMERICAN BANK v. Ram S. SAXENA. No. 89-CC-0927. Supreme Court of Louisiana. December 11, 1989. Concurring Opinion December 13, 1989. *837 William E. Brown, Linda R. Gallagher, Stone, Pigman, Walther, Wittman & Hutchinson, New Orleans, for plaintiff-applicant. Lanny R. Zatzkis, Karen D. McCarthy, Lawrence E. Mack, Rhonda M. Benedetto, Law Office of Lanny R. Zatzkis, New Orleans, for defendant-respondent. DIXON, Chief Justice[*]. Plaintiff bank filed three suits, seeking to enforce five delinquent promissory notes. Respondent debtor filed an answer and a number of reconventional demands, asserting defenses to the bank's claims. Plaintiff's motion for summary judgment in one of the three suits was denied. Subsequently, the three suits were consolidated and a motion for summary judgment in the consolidated suit was also denied, the trial judge finding a material question of fact. The court of appeal denied petitioner's writ application, reasoning the defendant is entitled to trial on the merits to resolve the issues of fact presented in the pleadings. We granted the plaintiff's writ application and now reverse in part and affirm in part. The five promissory notes, ranging in value from 464,000 to $2,367,069, were signed in conjunction with loans defendant Saxena obtained from American Bank. Three of these loans were undertaken in connection with real estate ventures in which Saxena was involved, the Garden Vue Square Condominium Hotel, Garden Vue Lounge, and Condo Inns, Inc. The other two loans were "personal." All five of the notes matured on December 1, 1987, and the bank filed suit in January of 1988, alleging the notes were delinquent and seeking payment of the unpaid balances and accrued interest, plus attorney's fees for 257 of the principal and interest. In his answer, Saxena pleaded the affirmative defenses of compensation, set-off, estoppel, failure of consideration and error. He also made reconventional demands, alleging failure of consideration, misrepresentation, and duress, and sought $10,500,000 in damages for lost property value and other injuries. Sometime prior to 1982, Saxena bought three condominiums in each of two different projects, the Bordeaux and the Futura, from Frank Gatlin, head of Gatlin Construction Company. According to Saxena, Gatlin was the kind of guy "who would walk in your office every morning with a project." Gatlin also tried to impress Saxena with his position as a member of American Bank's advisory board. At some point after the two men had begun to do business with each other and on one of his visits to Saxena, Gatlin brought along the then-president of American Bank, Richard Hollan. Gatlin presented Saxena with documents showing projected costs and revenues *838 of a proposed development called the Garden Vue Square Condominium Hotel, a project to be built in Kenner with a purported preconstruction appraised value of $4,500,000. After a series of meetings between Gatlin and Saxena at which this project was discussed, Hollan agreed, on behalf of the bank, to provide construction financing and Saxena decided to invest in the project. Subsequently, Saxena and Gatlin formed RF Enterprises, a partnership owned 51% by Saxena and 49% by Gatlin. Saxena provided $200,000 in certificates of deposit as security for the loan, as well as money to buy the land for a building site. Meanwhile, Gatlin's contribution to the project was to make the construction decisions, hire the subcontractors and supervise the project. (Saxena apparently provided the wherewithal behind RF Enterprises. He claims he made Gatlin several loans, the largest being $10,000, none of which were repaid). Gatlin built the condominiums and, as he sold each of the units, paid off the construction loan. He and Saxena each bought five of the eighty units in the hotel; Saxena's five units were financed at a lending institution other than American Bank. Shortly thereafter, Saxena bought five more units from the roofing subcontractor, who had decided he no longer wanted them. This purchase apparently was also financed at an institution other than American Bank. It was not until some five years after these events that, Saxena contends, he learned Hollan had made but failed to keep certain preconstruction commitments: that the bank would supervise Gatlin's construction, and that it would obtain a post-construction preclosing appraisal of the property. Saxena has not produced the letter which he claims memorialized these agreements, nor does the record show he made any investigation as to whether these alleged commitments had been fulfilled. In addition, Saxena admits he made no effort to ascertain the value of the condominiums, but instead claims he relied totally on Gatlin and Hollan. He has raised these allegations in answer to the bank's suit on notes unrelated to the initial construction loan. Long before these troubles, when everything still was, in his words, "goody-goody," Saxena obtained a 1983 loan of $120,336 from American Bank, the purpose of which was to provide operating capital for Condo Inns, Inc., an organization created to manage the Garden Vue Square Hotel. Originally, there were three or four owners of Condo Inns, with Gatlin and a relative in charge of the hotel's day-to-day operation. Then, in part because the hotel was losing money, Gatlin decided to pursue other interests and in 1984 Saxena bought all of the stock in and assumed sole ownership of Condo Inns. In the meantime, the 1983 loan for operating capital has never been paid off and is one of the loans being sued upon. Gatlin had apparently sold many of the condominiums in the Garden Vue Hotel to various individuals, including several of the subcontractors on the project, who later decided they did not want their units. As a result, Saxena alleges that in 1984 Gatlin and Hollan approached him and asked whether he wanted to buy an additional thirty-two units. Saxena, claiming he relied on assurances by Hollan that the property was worth what he was paying for it, agreed and consequently undertook the largest of the five loans involved in this suit, the one supported by a note for $2,367,069. Again, Saxena made no independent effort to determine the worth of these units but claims he merely relied on assurances by Hollan and Gatlin that the units, for which he was paying an average of $79,600 each, were worth that much or more. It was not until 1987, in connection with domestic proceedings, that Saxena obtained an independent appraisal of the property purportedly showing the thirty-two units have a total value of as little as $900,000. Around the same time in 1984 when he purchased these additional condominiums, Saxena also purchased the Garden Vue Lounge, because the person who owned it wanted to sell, and Saxena wanted to keep a lounge in the hotel. That purchase was financed by American Bank and the promissory note supporting the loan is *839 also one that the bank is trying to enforce. Saxena contends the individual from whom he bought the lounge misrepresented the amount of profits the lounge was making; however, the seller is not a party to this suit and any such allegations of fraud are irrelevant to enforcement of the note. The final two promissory notes supported personal loans. Saxena also asserts the bank acted without authority in pledging, cross-pledging, appropriating and applying to the disputed loans some of the nearly $1,300,000 he had invested in certificates of deposit at the bank. Saxena contends the bank has never rendered an adequate accounting of either the amount of CDs he had purchased, the amount of interest owed on the CDs, or the current status of the funds he had invested in CDs. Furthermore, he claims the bank has failed to furnish an accounting of outstanding amounts due on the loans showing credit for payments made on the notes. In its memorandum supporting the consolidated motion for summary judgment, the bank argues Saxena does not deny that he made the loans, that he received the money, that he pledged some of the CDs as collateral for the loans, or that the loans are in default. The bank acknowledges having cashed two pledged CDs, in the total amount of $240,000, and applied them to the $2,367,069 delinquent loan in accord with provisions of the collateral pledge agreement signed by Saxena. The bank also asserts the total amount of Saxena's CDs was $1,266,052 rather than the $1,300,000 he claims. With the exception of the $240,000 of pledged funds, the bank claims the value of the CDs has been returned to Saxena. In support of this claim, the bank produced a number of canceled checks and a handwritten accounting of the purported disposition of these funds. Also in support of its consolidated motion for summary judgment, American Bank produced the affidavit of its current president listing the amount of principal and interest due on each of the loans. The bank argues that Saxena's claims are unliquidated and cannot be interposed against its own liquidated claim for the delinquent amounts. Moreover, the bank argues Saxena's reconventional demands relate to merely one of the five loans involved in this suit and thus cannot be asserted as a defense to the other four loans. Furthermore, American Bank argues Saxena's claims concerning misrepresentation and duress have prescribed, since alleged wrongdoing on the part of the bank took place several years before suit on the reconventional demands was filed. The trial judge referred the prescription question to the merits and denied the motion for summary judgment, finding that a material question of fact existed. The court of appeal denied the writ. We granted the bank's application for supervisory writs to examine the propriety of the lower court rulings. THE PROMISSORY