STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
21-630
BYLINE BANK
VERSUS
ALEXANDRIA HOSPITALITY
PARTNERS, L.L.C. , ET AL
**********
APPEAL FROM THE NINTH JUDICIAL DISTRICT COURT PARISH OF RAPIDES, NO. 267,113 HONORABLE PATRICIA E. KOCH, DISTRICT JUDGE
JOHN E. CONERY JUDGE
Court composed of John E. Conery, Jonathan W. Perry, and Gary J. Ortego, Judges.
REVERSED AND REMANDED. Kelvin G. Sanders Attorney at Law 418 Desoto Street P.O. Box 13922 Alexandria, Louisiana 71315 (318) 487-0009 COUNSEL FOR DEFENDANTS/APPELLANTS: Alexandria Hospitality Partners, L.L.C., et al
Richard A. Rozanski Richard A. Rozanski, APLC 2312 South MacArthur Drive Alexandria, Louisiana 71315 (318) 445-5600 COUNSEL FOR PLAINTIFF/APPELLEE: Byline Bank
Barry Bader Great Hospitality Minds 12500 NE 198th Street Bothell, Washington 98011 COUNSEL FOR DEFENDANT/APPELLEE: Great Hospitality Minds
Thomas R. Willson Attorney At Law 1330 Jackson Street, Suite C Alexandria, Louisiana 71301 (318) 473-6650 BANKRUPTCY COUNSEL FOR DEFENDANT/APPELLANT: Alexandria Hospitality Partners, L.L.C. CONERY, Judge.
The trial court granted Byline Bank’s summary judgment based on its Petition
for Foreclosure by Ordinary Process and to Enforce Guaranties against Alexandria
Hospitality Partners, L.L.C. (AHP), and The Alex Café, L.L.C. (Alex Café) known
as (Primary Defendants). Byline Bank’s Petition for Foreclosure by Ordinary
Process and to Enforce Guaranties was also granted by the trial court against the
parties referred to as Guarantor Defendants, which include, Kelvin W. Coney, Felica
W. Coney, Jimmie Lee Johnson, Martin W. Johnson, Karen Bowie Johnson, Gary
Peter Jones, Elaine Foulcard Jones, Joyce A. Williams Rax, Dexter L. Hadnot and
Cleais J. Hadnot. The Primary Defendants and Guarantor Defendants, who are
hereinafter referred to as the AHP Appellants, appeal the trial court’s ruling granting
Byline Banks’s summary judgment. For the following reasons we reverse and
remand to the trial court.
FACTS AND PROCEDURAL HISTORY
In May of 2016, Martin W. Johnson, as Manager of primary defendant AHP
and on behalf of the AHP Appellants, began negotiations with Byline Bank to
refinance its outstanding loan with Evangeline Bank and Trust Company
(Evangeline Bank), which was secured by a multi-indebtedness mortgage on 4.37
acres of property and improvements located at 2211 North MacArthur Drive,
Alexandria, Louisiana. (Evangeline Bank’s Mortgage). The parties reached an
agreement on the refinancing of the property and Mr. Johnson provided Byline Bank,
who was represented by Mr. William Harrigan, with the legal description of the 4.37
acres securing the Evangeline Bank Mortgage.
On April 28, 2017, Mr. Johnson attended the loan closing of the Byline Bank
Mortgage. He was presented with the Promissory Note, which was secured by a
Mortgage, a Security Agreement and Assignments of Rents and Leases. The Mortgage contained a legal description that reflected 5.49 acres of property as
opposed to the 4.37 acres securing the Evangeline Bank Mortgage.
Mr. Johnson, in the presence of Mr. Harrigan, edited the legal description of
the Mortgage to reflect the 4.37 acres agreed to by the parties. Each of the other
defendants present also initialed the legal description as attested in their affidavits
submitted in opposition to Byline Bank’s motion for summary judgment.
The closing of the Byline Bank Mortgage proceeded before a notary public
and Mr. Harrigan signed as one of the witnesses. The signed closing documents
were given to Mr. Harrigan. Mr. Johnson was not provided with a copy of the Byline
Bank Mortgage closing documents. Relying on the Byline Bank Mortgage closing
documents, the AHP Appellants signed a U.S.D.A. Rural Development Form1 as
guarantors of the Promissory note.
On May 15, 2017, Mr. Harrigan sent an email to Mr. Johnson asking why the
hand-written change was made to the legal description at the closing of the Byline
Bank Mortgage. Mr. Johnson responded by providing a copy of the legal description
contained in the Evangeline Bank Mortgage transaction which reflected the agreed
to 4.37 acres. No response from Mr. Harrigan was forthcoming.
Despite this knowledge, Byline Bank filed the Byline Bank Mortgage closing
documents with a legal description stating the Promissory Note was secured by a
Mortgage reflecting 5.49 acres. A dispute arose between the parties which resulted
in Byline Bank filing a Petition for Foreclosure by Ordinary Process and to Enforce
Guaranties of the Byline Bank Mortgage.
The AHP Appellants appeared and filed an Answer and Reconventional
Demand to Byline Bank’s petition in which the AHP Appellants alleged damages
1 RD 4279.14. 2 due to detrimental reliance, fraud and or defamation. The AHP Appellants also filed
a Peremptory Exception of No Cause of Action and Dilatory Exception of
Vagueness and Ambiguity. As per the trial court’s Judgment of March 3, 2021,
these affirmative defenses have not been addressed and are therefore still pending
before the trial court.
On June 17, 2020 Byline Bank filed a motion for summary judgment based
on the Byline Bank Mortgage documents and a Memorandum in support of its
summary judgment. After numerous other filings, the trial court held a hearing on
January 19, 2021 on the motion for summary judgment filed by Byline Bank seeking
to enforce the Byline Bank Mortgage. The AHP Appellants’ filings were also fixed
for hearing on the same date. The trial court found in favor of Byline Bank based
on the Byline Bank Mortgage documents. The trial court held all the AHP
Appellants liable in solido for $3,800,742.97, the amount owed on the Promissory
Note as of April 30, 2020, plus a per diem interest rate of $637.73, and protective
advances, additional attorney fees and collection costs.
The trial court’s summary judgment in favor of Byline Bank was signed by
the trial court on March 3, 2021. The trial court found “that there is no just reason
for delay and that this judgment shall be, and is hereby, designated as a final
judgment pursuant to La.Code Civ.P. arts. 1911 and 1915(A)” and was, therefore,
designated an appealable final judgment despite the still pending reconventional
demand, peremptory exceptions, and dilatory exception filed on behalf of the AHP
Appellants.
The trial court denied the AHP Appellants’ motion for new trial on May 24,
2021. The AHP Appellants filed a motion for a suspensive appeal and the trial court
set the bond at $3,800,742.97. No bond was posted and the suspensive appeal was
converted to a devolutive appeal. 3 Chapter 11 Bankruptcy Filing By Alexandria Hospitality Partners, L.L.C.
Shortly after filing this appeal, the primary defendant, Alexandria Hospitality
Partners, L.L.C., filed a voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code, Case Number 21-80242, on the docket of the United States
Bankruptcy Court, Western District of Louisiana, Alexandria Division. Counsel for
Byline Bank notified the district court of the filing and asked that a motion
authorizing access to the property at issue be stayed pursuant to 11 U.S.C. § 362.
This court, after a review of the record of the Chapter 11 filing of Alexandria
Hospitality Partners, L.L.C., stayed the matter and requested additional information
from counsel concerning the effect of 11 U.S.C. § 362 on the appeal before this
Court, as only Alexandria Hospitality Partners, L.L.C., and none of the other
Appellants, Alex Café and the Guarantor defendants, had filed a petition for
bankruptcy.
This court stayed oral argument slated for January 25, 2022. On January 14,
2022, this court ordered new counsel for Alexandria Hospitality Partners, L.L.C., et.
al. to show cause by brief on or before January 31, 2022 why this case should not be
stayed pending a ruling from the Bankruptcy Court. No response was received from
counsel for Alexandria Hospitality Partners, L.L.C., et. al.
However, on February 8, 2022, this court received a response from counsel
for Byline Bank urging this court to proceed with the appeal, either against all parties,
including Alexandria Hospitality Partners, L.L.C., or the remaining parties, Alex
Café and the Guarantor Defendants, who had not filed for Chapter 11 Bankruptcy.
On February 11, 2022, after conducting its own extensive research, this court
ordered, Thomas Wilson, counsel representing Alexandria Hospitality Partners,
L.L.C. before the Bankruptcy Court, to show cause by brief no later than February
28, 2022 why this case should not be stayed pending a ruling from the Bankruptcy 4 Court.
On February 28, 2022, this court received a response from Mr. Wilson which
in essence indicated that 11 U.S.C. § 362 prevented an action “against the debtor”
He further asserted that 11 U.S.C. § 362 “does not prevent the debtor from taking
any action it could otherwise.” Therefore, there was no restriction on his client
continuing to pursue its appeal pending in this court prior to the bankruptcy filing.
Additionally, counsel also concluded that there was no basis to stay the appeal also
filed by the co-debtors, as “[t]here was no co-debtor stay for Chapter 11,” the chapter
under which the Alexandria Hospitality Partners, L.L.C. filed for bankruptcy relief.
After reviewing the response from bankruptcy counsel for Alexandria
Hospitality Partners, L.L.C. and having received no response to the rule to show
cause, dated January 31, 2022, from counsel for the AHP Appellants in this appeal,
this court lifted the stay, and fixed this case for oral argument on April 27, 2022,
with notice to all counsel, including bankruptcy counsel for Alexandria Hospitality
Partners, L.L.C. Following oral argument, the matter was submitted for decision by
this court.
LAW AND DISCUSSION
Standard of Review - Summary Judgment
A court of appeal reviews summary judgments de novo, using the same
standard used by the trial court. Higgins v. Louisiana Farm Bureau Cas. Ins. Co.,
20-1094 (La. 3/24/21), 315 So.3d 838. Pursuant to La.Code Civ.P. art. 966(A)(2),
the summary judgment procedure is favored and must be construed to accomplish
its purpose of “the just, speedy, and inexpensive determination of every action,
except those disallowed by Article 969.” Article 966(A)(3) further provides that the
“motion for summary judgment shall be granted if the motion, memorandum, and
5 supporting documents show that there is no genuine issue as to material fact and that
the mover is entitled to judgment as a matter of law.”
The Louisiana Supreme Court in Larson v. XYZ Insurance Co., 16-745, pp. 6-
7 (La. 5/3/17), 226 So.3d 412, 416-17, further provides:
In ruling on a motion for summary judgment, the judge’s role is not to evaluate the weight of the evidence or to determine the truth of the matter, but instead to determine whether there is a genuine issue of triable fact. All doubts should be resolved in the non-moving party’s favor. Hines v. Garrett, 2004-0806 (La. 6/25/04), 876 So.2d 764, 765. A fact is material if it potentially ensures or precludes recovery, affects a litigant’s ultimate success, or determines the outcome of the legal dispute. A genuine issue is one as to which reasonable persons could disagree; if reasonable persons could reach only one conclusion, there is no need for a trial on that issue and summary judgment is appropriate. Id. at 765-66.
....
When a motion for summary judgment is made and supported as provided in La. C.C.P. art. 967, an adverse party may not rest upon the mere allegations or denials of his pleadings, but his response, by affidavits or as otherwise provided in La. C.C.P. art. 967, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be rendered against him. La. C.C.P. art. 967(B); see also Dejoie v. Medley, 2008- 2223 (La. 5/5/09), 9 So.3d 826, 832. Whether a particular fact in dispute is material can be seen only in light of the substantive law applicable to the case. Richard v. Hall, 2003-1488 (La. 4/23/04), 874 So.2d 131, 137
Issue of a Credibility Determination By the Trial Court
The AHP Appellants’ basic argument on appeal is that the trial court made
credibility determinations, evaluated testimony, and weighed evidence from witness
affidavits, which made summary judgment inappropriate. The AHP Appellants
further argue that their reconventional demands “could offer the AHP Appellants a
shield against potential liability to Byline [Bank].” AHP Appellants seek discovery
on their reconventional demands and have requested a jury trial.
Byline argues that it provided sufficient evidence of the claims for breach of
Note, Mortgage, and Guarantees which did not require the trial court to make any
6 judicial determinations which called for credibility determinations or the weighing
of testimony. Based on the record before us, we disagree.
All of the parties have indicated that the reason for the new loan with Byline
Bank was to pay off the Multiple Indebtedness Mortgage executed on December 30,
2014 between Alexandria Hospitality Partners, LLC and Evangeline Bank. As
previously indicated, the legal description contained in the Evangeline Bank
Mortgage indicates the “tract contains 4.37 acres more or less,” the exact amount the
AHP Appellants claimed was supposed to be on the Byline Bank Mortgage
documents at issue in this case.
It is undisputed that Alexandria Hospitality Partners, LLC transferred 1.118
acres of the property to Vine Capital, L.L.C. The Act of Transfer was recorded on
April 28, 2017 at 9:36 a.m. in Rapides Parish Clerk of Court Conveyance Book 2060,
Pages 357-360. The Act of Transfer is undated, but Byline Bank claimed the transfer
was executed the day before the Byline Bank’s Mortgage was scheduled to close on
April 28, 2017.
Byline Bank states this transfer was done without its knowledge. However,
Mr. Martin W. Johnson, on behalf the primary defendant Alexandria Hospitality
Partners, L.L.C., stated in his affidavit submitted in opposition to Byline Bank’s
motion for summary judgment that on April 27, 2017 he emailed Mr. Bill Harrigan,
the Loan Officer for Byline Bank, “confirming that the property subject to the Byline
mortgage securing the Byline promissory note was the same property subject to the
Evangeline Bank Mortgage: 4.37 acres at 2211[North] MacArthur Drive, in
Alexandria Louisiana.”
At the closing on April 28, 2017, the description of the amount of acreage was
incorrect on the Byline Bank Mortgage documents. The AHP Guarantors submitted
affidavits attesting that at the closing, a correction was made in the legal description 7 of the Byline Bank Mortgage documents changing the listed 5.49 acres to 4.37 acres.
The 4.37 acres reflected the actual amount of acreage evidenced by the Evangeline
Bank Mortgage, the basis for the new Byline Bank Mortgage. The affidavits of all
of the AHP Appellants indicate the change in the Byline Bank Mortgage was
initialed by all parties, including Mr. Johnson on behalf of Alexandria Hospitality
Partners, L.L.C., Mr. Harrigan, the Loan Officer for Byline Bank and the AHP
Guarantors.
The legal description of the property securing the loan at 2211 North
MacArthur Drive, Alexandria, Louisiana contained in the Byline Bank Mortgage
documents was ultimately filed twenty-one days later in the Mortgage Records of
the Rapides Parish Clerk of Court, Mortgage Book 3016, Page 493 at 510.
The Byline Bank’s Mortgage documents which were filed did not contain the
4.37 acres agreed to by the parties. Instead, the legal description, evidenced on page
510, still contained the 5.49 acres, not the 4.37 acres. Further, the Byline Bank
Mortgage document evidenced no sign of the notations or initials approving the 4.37
acre description, as attested to by all of signees to the Byline Bank Mortgage
documents in their affidavits filed in opposition to Byline Bank’s motion for
summary judgment.
Mr. Johnson contends in his affidavit that “[a]fter the loan closing, my
handwritten correction to ‘Exhibit A,’ attached to Byline Bank’s mortgage was
removed and replaced with a different document that I did not agree to.” The
document in question is entitled “Post Closing Compliance Agreement,” and
contains a waiver of any problems with the Byline Bank Mortgage documents signed
at the closing on April 28, 2017. The Byline Bank Mortgage document has a second
page, with the date April 28, 2017 written at the top of page two, and is signed with
the full signatures of the AHP Appellants. This is clearly not the referenced initialed 8 document attested to in all of the affidavits submitted by the AHP Appellants in
opposition to Byline Bank’s motion for summary judgment, supported by Byline
Bank’s Mortgage document.
Mr. Johnson further attested that, “[t]wenty one (21) days after the loan
closing, Byline recorded the mortgage in the public records with the wrong property
description stating 5.49 acres as opposed to the correct 4.37 acres.” In conclusion,
Mr. Johnson, states “I did not agree to the new ‘Exhibit A’ which Byline recorded.
I did not authorize the change to ‘Exhibit A’ with my handwritten correction to the
property description.”
The Legal Description in the Byline Bank’s Mortgage supporting Byline’s
Bank’s motion for summary judgment was filed in the Mortgage Records of the
Rapides Parish Clerk of Court in Book 3016, Page 510. It is clearly not the Legal
Description contained in the Multiple Indebtedness Mortgage executed on
December 30, 2014, between Alexandria Hospitality Partners, LLC and Evangeline
Bank. The Evangeline Bank Mortgage was the source of the loan with Byline Bank.
As previously indicated, the legal description in the Evangeline Bank Mortgage,
clearly states that the acreage in question is 4.37 acres and not 5.39 acres, referenced
in the Byline Bank Mortgage submitted into the record in support of its summary
judgment.
Reformation Of The Byline Bank Mortgage
The trial court in its judgment reformed the amount of acreage by finding the
legal description of the Byline Bank Mortgage should have been 4.37 acres and not
5.49 acres, as per the legal description in the mortgage filed by Byline Bank in
support of its summary judgment and filed in the Rapides Parish Clerk of Court’s
Mortgage Records. The trial court based its reformation of the Byline Bank
Mortgage document by finding that the AHP Appellants could not use the acreage it 9 had transferred as collateral for a promissory note connected with a mortgage on
property it did not own.
This finding by the trial court was based on the contested argument of Byline
Bank that the Act of Transfer by the AHP of 1.118 acres to Vine Capitol, LLC, as
recorded in Book 2060, Page 357 of the Conveyance Records of the Rapides Parish
Clerk of Court on April 27, 2017, the day before the closing of the Byline Bank’s
Mortgage, resulted in the improper legal description of the acreage contained in the
Byline Bank’s Mortgage documents supporting its summary judgment.
As previously stated, the AHP Defendants opposed the motion for summary
judgment with affidavits, email correspondence, and record documents which
support their assertion that Byline Bank’s Mortgage documents filed in support of
its motion for summary judgment may have been altered. It is clear that from the
very beginning of the negotiations between the parties the amount of the acreage
agreed to was 4.37, not 5.39, as evidenced by the record which contains the
Evangeline Bank Mortgage replaced by the Byline Bank Mortgage.
The trial court recognized that the legal description in the Byline Bank
Mortgage was not correct. Nevertheless, it reformed the amount of the acreage based
on Byline Bank’s assertion that the mistake in the acreage was due to the Act of
Transfer, executed on April 27, 2017. The trial court then granted summary
judgment in favor of Byline Bank, based on the Byline Bank Mortgage documents,
containing a Promissory Note, Mortgage and Guarantees. The trial court also
awarded attorney fees and other costs associated with the foreclosure.
In WMC Mortgage Corp. v. Weatherly, 07-75, p. 4 (La. App. 3 Cir. 6/13/07),
963 So.2d 413, 416, writ denied, 07-1475 (La. 10/5/07), 964 So.2d 945, a panel of
this court discussed reformation of a mortgage document and promissory note after
a trial on the merits and stated: 10 Reformation is an equitable remedy that is available to correct errors or mistakes in written instruments only when the instruments as written do not reflect the true intent of the parties. Agurs v. Holt, 232 La. 1026, 95 So.2d 644 (1957). In a reformation action the party seeking reformation bears the burden of establishing mutual error and mistake by clear and convincing proof. Id.
A mutual mistake is a mistake shared by both parties to the instrument at the time of reducing their agreement to writing, and the mistake is mutual if the contract has been written in terms which violate the understanding of both parties; that is, if it appears that both have done what neither intended. The evidence of mutuality must relate to the time of the execution of the instrument and show that the parties then intended to say one thing and by mistake expressed another and different thing.
Teche Realty & Inv. Co., Inc. v. Morrow, 95-1473, p. 4 (La.App. 3 Cir. 4/17/96), 673 So.2d 1145, 1147 (citation omitted).
The panel in WMC Mortgage also stated that, “[a]s a general rule, whether
there is a mutual error is mainly a question of fact . . . .” Id. at 416. Accordingly, the
determination by the trial court to reform the Legal Description in Byline Bank’s
Mortgage supporting the Promissory Note in this case required a finding of fact and
thus was not appropriate for summary judgment, as it required a credibility
determination. Further, Byline Bank failed to carry its burden of proof “of
establishing mutual error and mistake by clear and convincing proof.” Id.
Based on the record before us we find that the trial court erred in reforming
the Legal Description contained in Byline Bank’s Mortgage document supporting
the Promissory Note. In so doing the trial court made a factual determination which
is precluded in a motion for summary judgment. We therefore reverse the trial
court’s Judgment of March 3, 2021 in its entirety and remand this case for further
proceedings.
11 CONCLUSION
For the foregoing reasons, we reverse in its entirety the March 3, 2021
judgment of the trial court which granted summary judgment on Byline Bank’s
Petition for Foreclosure by Ordinary Process and to Enforce Guaranties against
Alexandria Hospitality Partners, L.L.C., The Alex Café L.L.C., and Kelvin W.
Coney, Felica W. Coney, Jimmie Lee Johnson, Martin W. Johnson, Karen Bowie
Johnson, Gary Peter Jones, Elaine Foulcard Jones, Joyce A. Williams Rax, Dexter
L. Hadnot and Cleais J. Hadnot. All costs of this proceeding are assessed against
Plaintiff/Appellee Byline Bank.
REVERSED AND REMANDED.