Court Opinion

ID: 10440
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:54:12+00
Date Added: 2024-06-11T15:03:30.100624
License: Public Domain

UNITED STATES COURT OF APPEALS

                            FOR THE FIFTH CIRCUIT

                             __________________

                                No. 96-30083
                              Summary Calendar
                             __________________

     FARM CREDIT BANK OF TEXAS,

                                                 Plaintiff-Counter Defendant-
                                                 Appellee

                                   versus

     ASHLAND PLANTATION INCORPORATED;
     KENNETH H. KAHOA,

                                                 Defendants-Counter Claimants-
                                                 Appellants.

         ______________________________________________

      Appeal from the United States District Court for the
                  Middle District of Louisiana
                         (92-CV-313-M2)
         ______________________________________________

                         October 1, 1996
Before SMITH, BENAVIDES, and DENNIS, Circuit Judges.

PER CURIAM:*

     This appeal stems from a suit to enforce the provisions of a

promissory     note   and   mortgage.       On     November   10,   1976,   the

appellants,     Ashland     Plantation,   Inc.      and   Kenneth   A.   Kahao

(hereinafter Borrowers), executed a promissory note payable to the

*
 Pursuant to Local Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in Local Rule 47.5.4.
Federal Land Bank of New Orleans.         The Federal Land Bank of New

Orleans subsequently changed its name to the Federal Land Bank of

Jackson.    The   Federal   Land   Bank    of   Jackson   was   placed   in

receivership, and the receiver assigned the promissory note to Farm

Credit Bank, the appellee in the case at bar.

     The Borrowers made payments on the note until July 15, 1985.

Less than a year later, on April 18, 1986, Farm Credit Bank1 filed

suit against the Borrowers in Louisiana state court to enforce the

note.   Borrowers appeared in the state court action and claimed

prematurity of suit and requested dismissal without prejudice.

Farm Credit Bank later filed its ex parte dismissal of the state

court suit on October 27, 1988.    The dismissal occurred before any

hearing was conducted on Borrower's dismissal request.

     Farm Credit Bank thereafter filed a complaint in the district

court to obtain a money judgment on the note and proceed to enforce

the mortgage securing the note. The district court granted summary

judgment in favor of Farm Credit Bank.

     It is undisputed that the note is in default.         The Borrowers

argue that the enforcement of the note is barred by prescription,

that the note does not provide for compound interest, and that Farm

Credit Bank had failed to comply with the Agricultural Credit Act

of 1987 and its corresponding regulations.            Finding that the

1
  Land Bank, Farm Credit Bank's predecessor in interest, actually
filed the suit. However, there is no dispute that Land Bank was
the predecessor in interest; thus, only Farm Credit Bank will be
referred to in this opinion.

                                   2
district court properly granted summary judgment, we affirm.

      I.     WHETHER ENFORCEMENT OF NOTE IS BARRED BY PRESCRIPTION

      It is undisputed that the note in question was subject to a

prescriptive period of five years.              La.Civ.Code art. 3498 (1992).

The prescriptive period may be interrupted by, among other things,

the obligee filing suit against the obligor in a court of competent

jurisdiction and venue.         La.Civ.Code art. 3462.            Although such an

interruption       continues    as   long     as   the    suit   is     pending,   the

interruption is considered never to have occurred if the plaintiff

abandons, voluntarily dismisses, or fails to prosecute the suit at

trial.     La.Civ.Code art. 3463.

      The parties agree that prescriptive period began to run on

July 16, 1985.      As previously set forth, less than one year later,

on   April   18,    1986,    Farm    Credit    Bank      filed   suit    against   the

Borrowers in Louisiana state court, and that suit was dismissed

without prejudice.          Subsequently, on April 14, 1992, Farm Credit

Bank filed suit in federal district court to enforce the note.

Accordingly, because the instant suit was filed more than five

years after the start of the prescriptive period, the issue is

whether the state court suit interrupted prescription.

      Relying on Hebert v. Cournoyer Oldsmobile-Cadillac GMC, 419

So.2d 878 (La. 1982), the district court concluded that the prior

state court suit had interrupted prescription.                     In Hebert, the

Louisiana Supreme Court explained that "[b]ecause the voluntary

dismissal     in    this     case    occurred      after    defendants'      general

                                         3
appearance, at which time defendants could have objected to, and

the trial court could have denied, a dismissal without prejudice,

we hold that C.C.Art. 35192 does not apply." Id. at 881 (footnote

added).    Applying the holding in Hebert, the court below concluded

that because the Borrowers had made a general appearance in the

state court suit, the filing of that suit interrupted prescription.

     The   Borrowers     do   not    dispute       that     they    made   a   general

appearance in state court. Nonetheless, the Borrowers contend that

the district court's broad reading of Hebert is incorrect.                        They

argue that Hebert is distinguishable from the facts of their case

because unlike Hebert, there was no joint motion of dismissal filed

in the previous state suit.            In support of this argument, the

Borrowers cite Plaisance v. Loop, Inc., 499 So.2d 736 (La.App. 4

Cir. 1986).        In Plaisance, the Court of Appeal of Louisiana

distinguished Hebert because there was no joint motion of dismissal

filed in Plaisance.           The court explained that in Hebert the

opposing parties could have objected to the dismissal but in

Plaisance the defendants were not aware of the motion for dismissal

until after it had been granted.

     Because Plaisance was a decision by the Court of Appeal of

Louisiana,    to   the   extent     that       there   is   any    inconsistency     or

conflict we must follow the decision of the Louisiana Supreme Court

in Hebert.    See Lamarque v. Massachusetts Indem. & Life Ins. Co.,

2
    Article 3519 is the predecessor to article                        3463,    and   is
identical to the provision at issue in this case.

                                           4
794 F.2d 194, 196 (5th Cir. 1986) (explaining that federal courts

presiding over diversity cases must "apply the latest and most

authoritative expression of state law applicable to the facts of a

case"). Moreover, assuming Plaisance correctly interpreted Hebert,

it   affords    the   Borrowers    no       relief.     The   Plaisance    court

distinguished Hebert on the basis that the defendants were not

aware of the motion to dismiss and thus had no opportunity to

object if they had so desired.               However, the Borrowers do not

dispute that, in the previous state proceeding, they themselves had

claimed prematurity of suit and had moved that the petition be

dismissed without prejudice.       Therefore, the basis upon which the

Louisiana Court of Appeal distinguished Plaisance from Hebert,

i.e., the defendants in Plaisance were unable to object to the

dismissal, is not present here.

      The Borrowers also argue that the language in Hebert "is mere

dicta which must be limited to its particular facts." They further

argue that "[a] joint dismissal, which means the defendant joins in

the dismissal, takes the dismissal out of the mandatory language of

the second sentence of Article 3463 which speaks of a dismissal

only by plaintiff."        We are unpersuaded by the Borrowers' attempt

to distinguish the Hebert decision.

      In Hebert, the Supreme Court did not rely on the fact that the

dismissal had been pursuant to a joint motion of all the parties.

The Court expressly based its holding on the fact that because the

voluntary      dismissal    occurred    after     the   defendants'       general

                                        5
appearance, the defendants could have objected to a dismissal

without prejudice.     Further, in Roger v. Estate of Moulton, 513

So.2d 1126, 1133 (La. 1987), the Louisiana Supreme Court explained

that Hebert "held La.Civ.Code art. 3519 (now art. 3463) does not

apply after the defendant has made a general appearance, because

after the defendant answers the trial court is vested with the

discretion to dismiss the suit with prejudice."         (emphasis added).

Accordingly, applying Hebert to the facts of the instant case,

because the Borrowers made a general appearance in the state court

suit and had themselves requested dismissal without prejudice,

article 3463 does not apply. The prescriptive period therefore was

interrupted by the suit filed by Farm Credit Bank in state court.3

     II.   WHETHER THE NOTE PROVIDED FOR COMPOUND INTEREST.

     The   Borrowers   argue   that    the   district   court   erred   in

3
     Citing Adams v. Aetna Casualty & Surety Company, 214 So.2d 148
(La. 1968), the Borrowers argue that the filing of the state court
action on the same note and mortgage did not interrupt the five-
year prescription period because the state court action was
dismissed ex parte on motion of Farm Credit Bank. The Borrowers
contend that in Adams, the Supreme Court of Louisiana "affirmed a
dismissal of a second suit because of prescription, holding that
the first suit, which was voluntarily dismissed by plaintiff on ex
parte motion without prejudice, after defendants had filed various
exceptions and thereby entered a general appearance in the first
suit, did not interrupt prescription because of the voluntary
dismissal and the clear language of Civil Code Article 3519."
     Assuming for purposes of this appeal that the Borrowers'
contention that the defendants in Adams entered a general
appearance is correct, we conclude that the district court properly
denied relief based on the subsequent authority of Hebert. See
Lamarque v. Massachusetts Indem. & Life Ins. Co., supra. Moreover,
Borrowers'   own   request   for   dismissal    without   prejudice
distinguishes Adams from the instant case.

                                   6
concluding that the terms of the promissory note allowed Farm

Credit Bank to compound interest.                       Contrary to the Borrowers'

contention, the note provides for interest upon interest:

       [i]n the event of default of any payment of principal or
       interest, such payments as are not paid when due shall
       bear interest from the date of default until paid at the
       rate of ten (10%) per cent.

Additionally, the second loan treatment application provides that:

       A default in the payment(s) of any principal, interest,
       or advances made by the Bank on this loan shall cause
       such defaulted payment(s) to bear interest at the rate in
       effect during the period of default plus two (2%) percent
       per annum.

Because the note and second loan application expressly authorize

compounding interest, we find this contention without merit.

       III. WHETHER THE AGRICULTURAL CREDIT ACT WAS VIOLATED.

       The Borrowers argue that the Bank's failure to follow certain

procedural requirement of the Agricultural Credit Act constituted

an affirmative defense to the Bank's action on the promissory note.

We agree with the district court's conclusion that the Borrowers

have    failed    to    show   that    the       Farm    Credit   Bank   violated   the

provisions of the Act.           Moreover, assuming the Act was violated,

the    Borrowers       have    cited   no        controlling      authority   for   the

proposition      that    the    failure      to     comply     with   the   procedural

provisions       of    the     Agricultural         Credit     Act    constitutes   an

affirmative defense to the Bank's suit to enforce the promissory

note.    This claim affords the Borrowers no relief.

       For the foregoing reasons, the judgment is AFFIRMED.

                                             7