Opinion ID: 1143085
Heading Depth: 1
Heading Rank: 5

Heading: Application of Statute in this Case

Text: In the present case, the Bank argues that the interest-only agreement alleged by defendant falls under La.Rev.Stat. 6:1123 A(3), being an agreement by a financial institution to take or not to take certain action, and that the credit agreement statute therefore bars any action by the borrower on the alleged oral agreement. The Bank further argues that the trial court implicitly allowed the introduction of parol evidence to prove the alleged interest-only agreement, although parol evidence is inadmissible when the law requires a contract to be in writing unless the instrument has been lost, stolen, or destroyed. La.Civ.Code art. 1832. Finally, the Bank argues that allowing defendant's reconventional demand to go to trial violates the underlying purpose behind the credit agreement statute. The Bank's entitlement to a summary judgment on the reconventional demand turns on whether the facts alleged in defendant's pleading and stated in his countervailing affidavit, which the Bank is willing to accept as true for purposes of the motion for summary judgment, establish a cause of action outside the parameters of an action on a credit agreement under La.Rev.Stat. 6:1122. Defendant essentially asserts (1) that the Bank required him to buy the lot adjacent to the business building he was purchasing; (2) that the Bank agreed to require payment only of interest during a period of time within which the lot could be sold and then to amortize the payments of principal and interest over a period of years; (3) that the Bank accepted interest-only payments for three years; and (4) that the Bank's demanding payment in full breached the oral agreement as well as covenants of good faith and fair dealing. Because of the limited allegations in the pleading and the affidavit, it is unnecessary in this case to pass on whether there are any exceptions to the credit agreement statute, such as fraud, misrepresentation, promissory estoppel or particularly vulnerable parties. [6] Even under defendant's factual assertions, the Bank did not require him to purchase the adjacent lot. Indeed, the Bank simply refused to grant a partial release of the business building from its mortgage, as it had every right to do. The alleged oral agreement by the Bank to require interest-only payments for a period of time and then to amortize the payments over a period of years was clearly an agreement to forbear repayment and to make financial accommodations that constituted a credit agreement under the statute which could not be enforced in an action or reconventional demand for damages unless the agreement was in writing. The alleged acceptance by the Bank of interest payments for three years was simply the forbearing from exercising remedies under the prior credit agreement, an action which under La.Rev.Stat. 6:1123 A(3) did not give rise to a claim that a new credit agreement was thereby created. Finally, the Bank's alleged breach of the oral agreement by demanding payment in full, in accordance with the terms of the note, is exactly the situation that the Legislature contemplated in enacting the credit agreement statute. The very purpose of the statute was to prohibit a debtor's action for damages based on the breach of an alleged oral agreement to forbear repayment or to make financial accommodations. As to the alleged breach of covenants of good faith and fair dealing, no specific facts are alleged in the pleading or stated in the affidavit, [7] and no argument has been made in this court regarding this conclusory statement. [8] Under La.Rev.Stat. 6:1123 B, a credit agreement cannot be implied merely from the relationship between the creditor and the debtor, and a waiver of the written contract cannot be implied from forbearance or failure to exercise rights under the contract. We therefore conclude that the Bank is entitled to a summary judgment as a matter of law on defendant's reconventional demand.