Aymond v. Citizens Progressive Bank

277 So.3d 477

William Kyle AYMOND, Thad Herron, Hillary Denise Herron and William Garrett Aymond, et al. Plaintiffs-Appellants

v.CITIZENS PROGRESSIVE BANK, Defendant-Appellee

No. 52,623-CA

Court of Appeal of Louisiana, Second Circuit.

Judgment rendered June 26, 2019

SEDRIC E. BANKS, Monroe, S. HUTTON BANKS, Counsel for Appellants

MIXON, CARROLL & FRAZIER, PLLC, By: James L. Carroll, James E. Mixon, Columbia, Rossanna Rahim McIlwain, Counsel for Appellee, Citizens Progressive Bank

PETTIETTE, ARMAND, DUNKELMAN, WOODLEY, BYRD & CROMWELL, LLC., By: Joseph S. Woodley, Shreveport, Counsel for Third Party Appellee, Commercial Capital Bank

COTTON, BOLTON, HOYCHICK & DOUGHTY, By: David P. Doughty, Rayville, Counsel for Appellee, Judge Terry A. Doughty

Before PITMAN, COX, and THOMPSON, JJ.

PITMAN, J.

Plaintiffs¹ KT Farms Partnership II, Thad Kyle Investments, LLC, William C. Aymond ("Billy"), Hillary Herron ("Hillary"), and Garrett Aymond ("Garrett"), appeal judgments sustaining an exception of res judicata and granting motions for summary judgment filed by Defendant Citizens Progressive Bank ("Citizens") and Third Party Defendant, Commercial Capital Bank ("Commercial") and dismissing them from the suit. Plaintiffs also appeal several interlocutory judgments. For the following reasons, the judgments are affirmed and Citizens's request for attorney fees under La. C.C.P. art. 2164 is denied.

FACTS

William Kyle Aymond ("Kyle") and Thad Herron ("Thad") organized a number of business entities to conduct a farming operation in Franklin and Tensas Parishes. The entities included KT Farms Partnership ("KT"); KT Farms Partnership II ("KT II"); KT Planting Partnership; Ruby-Jane, LLC; Pecan Brake, LLC; South Franklin Investments, LLC; and Thad Kyle Investments, LLC ("TKI"). Each year from 2008 through 2011, one or more of these entities obtained and repaid a crop loan from Citizens, which did not make any crop loans to Kyle and Thad personally.

In 2012, Citizens and other participating banks issued a crop loan to KT and KT II. After all proceeds from the 2012 crop had been applied to the loan, a balance of $2,975,909.50 remained due (the "Carry Over Loan"). At KT's request, Citizens agreed to refinance the balance due, but required collateral to secure the loan. The Carry Over Loan was made solely to KT as borrower, based on collateral pledged by KT Planting Partnership; Ruby-Jane, LLC; South Franklin Investments, LLC; TKI; KT; and KT II. Kyle and Thad also personally guaranteed the amount of the Carry Over Loan. KT and KT II made payments on the Carry Over Loan, and it was refinanced by Citizens in a new credit agreement for the remaining balance of $1,320,883.75 in March 2014. The new maturity date was March 17, 2015.

The Carry Over Loan was not paid when it matured in March 2015, and KT did not make arrangements to renew it. Citizens foreclosed on some of the collateral pledged by KT to secure the loan and filed two suits in the Fifth Judicial District Court — Citizens Progressive Bank v. KT Farms Partnership, et al. , Docket No. 44,227, (which foreclosed on land belonging to the defendants in that suit), and Citizens Progressive Bank v. KT Farms Partnership, et al. , Docket No. 44,604, (which foreclosed on equipment). None of the defendants in either suit appeared at the foreclosure proceedings to object or raise any defense to the actions. As a result, the Carry Over Loan was paid in full.

In 2013, after initially failing to secure a crop loan, KT reapplied to Citizens for a crop loan after the president of Commercial advised Gary Sanford, the president of Citizens, that Commercial would participate in a 2013 crop loan provided that the borrowing entity was not KT, which had an outstanding loan with Commercial and its lending limits prevented another loan to the same borrower. The lenders, Citizens, Commercial and Caldwell Bank and Trust Company ("Caldwell"), agreed to issue a 2013 crop loan (the "Crop Loan") to Garrett and Hillary (the children of Kyle and Thad) and Billy (Kyle's father). The $4.7 million line of credit established in the names of Billy, Garrett, and Hillary was secured by the remaining collateral pledged as security for the Carry Over Loan. Neither Kyle, Thad, nor any of their related entities, applied to Citizens as borrowers for the Crop Loan. Later, Citizens also issued a $300,000 supplemental 2013 Crop Loan to Billy, Garrett and Hillary under the same conditions as those relating to the $4.7 million line of credit.

Citizens and Commercial drafted 13 written "Loan Requirements," which were included in the promissory note for the Crop Loan. A separate document containing the loan requirements was signed by Kyle, Thad, the Crop Loan borrowers (Billy, Garrett and Hillary), and Sanford (the banker). In March 2014, the $4.7 million Crop Loan and $300,000 supplement was paid in full and Citizens's lien was cancelled.

In October 2014, Plaintiffs (including others later dismissed from the suit), filed a petition for damages against Citizens, alleging breach of the Loan Requirements. They also alleged bad faith performance of written credit agreements, fraud and conversion of their farming business "lock, stock and barrel." They further alleged that their business had been fraudulently manipulated into liquidation. After filing exceptions of vagueness and no cause and no right of action, Citizens answered the original suit and filed a third party demand against Commercial.

The trial court granted Citizens's exception of vagueness, ordered Plaintiffs to amend their petition and deferred consideration of the other exceptions. Plaintiffs filed an amended petition adding Billy; KT Planting Partnership; Ruby-Jane, LLC; Pecan Brake, LLC; South Franklin Investments, LLC; and TKI; as party plaintiffs. Citizens again filed exceptions of vagueness, no cause and no right of action and failure to join an indispensable party. The trial court denied its exceptions of vagueness, failure to join an indispensable party and no cause of action.

After a hearing on the exception of no right of action, the trial court issued written reasons for judgment and found that neither the Loan Requirements drafted by Citizens, nor the promissory note, contained any language to indicate that the Crop Loan was made for the benefit of any person other than the named makers. As a result, it determined that the Loan Requirements did not set forth a stipulation pour autrui in favor of Kyle and Thad, the nonmaker plaintiffs, because the contract language did not manifest a clear intent to benefit a third party. It further found that the Loan Requirements restricted the use of the loan proceeds and were not benefits. It rendered judgment granting Citizens's exception of no right of action and dismissed the claims of all plaintiffs except the named borrowers. This decision was appealed to this court.

In

Aymond v. Citizens Progressive Bank , 50,825 (La. App. 2 Cir. 9/16/16), 206 So. 3d 330, this court affirmed the judgment in part and found that Kyle and Thad had failed to satisfy their burden of proving that they were third party beneficiaries of the Crop Loan. This court also rendered judgment reversing the trial court's action in part and determined that KT II and TKI both had a right of action. Therefore, this court found that the only viable plaintiffs in the action on the Crop Loan were Billy, Garrett, Hillary, KT II and TKI. In all other regards, the judgment was affirmed and the matter remanded for further proceedings.

A motion to recuse the trial judge was filed, and, while it was pending, in September 2017, the sitting judge signed a "Discovery and Trial Scheduling Order" and set the matter for trial for March 26, 2018. This scheduling order included that "all amendments to pleading shall be filed on or before October 2, 2017."

The Louisiana Supreme Court appointed a judge ad hoc to hear the case. Litigation continued before the ad hoc judge and several interlocutory judgments were rendered which denied discovery requests, granted and denied sanctions, disallowed Plaintiffs' attempt to file a third amending and supplemental petition (which expanded the allegations) and denied motions for summary judgment. In an effort to streamline the litigation which had been ongoing for some time and in which there were many outstanding motions, the ad hoc judge issued an order that all parties would consolidate previously and timely filed dispositive motions into one motion, file a brief not to exceed 15 pages and attach appropriate exhibits.

Third Amending and Supplemental Petition and Res Judicata

On October 2, 2017, in accordance with the scheduling order, Plaintiffs attempted to file a 34-page "Third Amending and Supplemental Petition" without leave of court, sought to add four defendants and alleged for the first time that "Sanford and Adams acted, both individually and in concert in order to conceal plaintiffs' digitalized, unredacted, loan histories at Citizens covering calendar years 2011, 2012, 2013 and 2014." Plaintiffs claimed these allegations were prima facie evidence of fraudulent manipulation and malicious interference with fair and good faith performance of the credit agreements and Loan Requirements at issue.

The trial court struck the third amending and supplemental petition on December 15, 2017, and ruled that the pleading was to be treated as "not filed." In conjunction with this decision, it determined that issues raised therein dealt only with matters concerning the Carry Over Loan, which had previously been settled as a result of the two foreclosure suits brought in the Fifth Judicial District Court. It decided that since no issues raised in the original petition or in the first amended and supplemental petition dealt with the Carry Over Loan, those claims were irrelevant to the case at bar. It sustained an exception of res judicata and precluded any discussion of the Carry Over Loan and any matter outside the scope of the credit agreement between ...