Opinion ID: 408195
Heading Depth: 1
Heading Rank: 1

Heading: A Change of Seasons

Text: 2 In the spring of 1974, appellants Bryan Zeringue, Curtis Chauvin and Dr. W. B. Landry learned-later to their detriment-that certain common stock of the St. Charles Bank and Trust Company was to be made available for sale. The circumstances surrounding the sale of that stock gave rise to the present suit. Disagreement between the parties as to the facts is minuscule. 3 Appellants are two businessmen and a practicing physician who live and work in St. Charles Parish, Louisiana. For years they had banked with the St. Charles Bank and Trust Company (hereinafter referred to as the Bank). When the Bank formed an advisory board in the fall of 1973, appellants Zeringue and Chauvin were asked to serve on it; they accepted. In the spring of 1974, both Zeringue and Chauvin were informed at one of the board's meetings that the Bank's chairman of the board, Charest Thibaut, was thinking of retiring and was willing to sell some of his common stock. Not long thereafter, Dr. Landry was also informed, by one of his patients, 2 that stock in the Bank was to be made available for purchase. That summer, each appellant purchased 1,500 shares of the Bank's common stock at $60 per share for a total of $90,000 apiece, or $270,000 for the total purchase price. 4 At first, it appeared that the money invested by the appellants was well spent-in January of 1975 a 25% stock dividend was declared, increasing the common stock ownership of each appellant from 1,500 to 1,875 shares. This feeling of euphoria, however, was unfounded. In the fall and winter of 1974, and the spring of 1975, various audits and bank examinations conducted by the Federal Deposit Insurance Corporation and the Louisiana Commissioner of Financial Institutions revealed gross inadequacies and deficiencies in the financial structure of the Bank. As a result of these examinations and actions taken by regulatory authorities, very substantial changes in the Bank's organization were brought about, including the resignation of the Bank's president, C. Therral Ransome, and the Bank's chairman of the board, Charest Thibaut. Other members of the board also resigned or were asked to resign in the spring and summer of 1975. Finally, in December of 1975, the Bank issued a proxy statement in which its precarious financial condition was set out, and in January, 1976, the Bank issued a stock offering to raise needed additional capital. At that time the Bank's common stock was valued at $4 per share-down from the $60 per share paid by appellants in the summer of 1974. 5 Outraged by the drastic devaluation of their investments, appellants consulted with counsel, and on January 26, 1977, filed suit in federal court alleging that All American Assurance Company, Republic Securities Corporation, Charest Thibaut, Remy F. Gross and C. Therral Ransome had violated § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. 3 Specifically, appellants contended that the financial statements prepared and issued by the Bank in 1973 and 1974 were inaccurate and grossly misrepresented its financial condition. Furthermore, it was asserted that representations made by the various defendants at advisory board meetings and elsewhere were affirmatively misleading, inaccurate and omitted material information. 4 6 On January 29, 1979, appellants amended their complaint so as to expand both the number of defendants and the causes of action asserted. Added to the list of defendants were the Bank, Royal American Corporation, Henry Friloux and Alcide J. Laurent. 5 The causes of action asserted were broadened to encompass claims under § 17(a) of the Securities Act of 1933, La.Rev.Stat.Ann. § 12:91, and the Louisiana Blue Sky Law (La.Rev.Stat.Ann. § 51:701, et seq.). 7 Prior to trial, however, the defendants filed motions to dismiss and/or for summary judgment claiming that no private cause of action was created under either § 17(a) of the Securities Act of 1933 or La.Rev.Stat.Ann. § 12:91. The trial court agreed and dismissed the counts. The trial court also granted defendants' motion to dismiss the Louisiana Blue Sky claim and held that the two-year statute of limitations included in the Blue Sky Law 6 was peremptive rather than prescriptive. 8 Thereafter, the case went to trial. Although the jury found that the Bank, Henry Friloux and Alcide J. Laurent had knowingly or recklessly misrepresented or failed to disclose material facts to the appellants in connection with their purchases of stock, it also found that the appellants had not exercised due diligence in purchasing the stock and were, therefore, precluded from recovery. This appeal ensued.