Catherine Eakin v. Samuel Eakin

• Court: Louisiana Court of Appeal
• Decided: December 19, 2007
• Docket: CA-0007-0693
• Status: Unknown

Opinion

STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT

07-693

CATHERINE EAKIN

VERSUS

SAMUEL EAKIN

********** APPEAL FROM THE NINTH JUDICIAL DISTRICT COURT PARISH OF RAPIDES, NO. 223,741 HONORABLE JOHN C. DAVIDSON, DISTRICT JUDGE

**********

J. DAVID PAINTER

********** Court composed of Oswald A. Decuir, Elizabeth A. Pickett, and J. David Painter, Judges.

AFFIRMED. James B. Reichman Attorney at Law P.O. Box 210 Alexandria, LA 71309 Counsel for Defendant-Appellant: Hoffman Consulting, LLC

Richard A. Rozanski Stephen D. Wheelis Ryan C. Robinson Wheelis & Rozanski P.O. Box 13199 Alexandria, LA 71301 Counsel for Intervenor-Appellant: Red River Bank J. Ogden Middleton, II Attorney at Law 1744 White St. Alexandria, LA 71301 Counsel for Plaintiff-Appellee: Catherine Gresham, formerly known as Catherine Eakin

Ricky L. Sooter Stephanie N. Prestridge Provosty, Sadler, DeLaunay, Fiorenza & Sobel P.O. Drawer 1791 Alexandria, LA 71309 Counsel for Defendant-Appellee: William Earl Hilton, as Sheriff of Rapides Parish PAINTER, Judge.

Defendant, Hoffman Consulting, L.L.C. (Hoffman Consulting), appeals the

judgment of the trial court dismissing HoffmanConsulting’s Petition for Temporary

Restraining Order, Preliminary and Permanent Injunction. Intervenor, Red River

Bank (Red River), appeals the dismissal of its intervention. For the following

reasons, we affirm the judgment of the trial.

FACTS

The essential facts of this case are undisputed. On November 18, 1997, Samuel

Eakin and Catherine Eakin, who were married at the time , executed two promissory

notes (the Hibernia notes): one in the amount of $196,200.00 and another in the

amount of $70,400.00, both payable to Hibernia National Bank (Hibernia) as lender.

At the same time, the Eakins executed two Multiple Indebtedness Mortgages in favor

of Hiberia in the same amounts as the notes and secured by the Eakins’ community

domicile, located at 1910 White Street, and other property. The Hibernia notes

contain agreements that the debt would be solidary or joint and several as between

Samuel and Catherine.

The Eakins divorced in 1999 and remained co-owners of 1910 White Street.

On April 16, 2001, a Grant Parish court granted Catherine a judgment in the amount

of $375,000.00 against Samuel. That judgment was recorded in Rapides Parish on

April 8, 2005, and again on March 15, 2006. After his divorce from Catherine,

Samuel was remarried to Joan Hoffman. Joan is the sole managing member of

Hoffman Consulting, which she operated as a sole proprietorship for about five years.

On March 5, 2002, Samuel sent a letter to James W. Thibodeaux of Farmer’s

Bank and Trust of Cheneyville (Farmer’s), in which he stated that:

1 Per our recent discussion, I would like to request a loan for $250,000.00, interest only for a period of two years. The purpose of the loan is to purchase notes from Hibernia Bank which secure my residence and adjacent apartments on White Street in Alexandria. It is currently my intent to foreclose on the notes in order to sell the property. This is an unfortunate necessity due to the extenuating circumstances of my divorce three years ago. . . . .

....

. . . . The property will either be put up for sale and refinanced during the upcoming year with proceeds to pay off the loan.

In April 2002, Hoffman Consulting filed Article of Incorporation qualifying

to do business in Louisiana. On June 3, 2002, Samuel executed a promissory note

borrowing $250,000.000 from Farmer’s (the Farmer’s note). The Farmer’s note bears

the signature of Samuel Eakin and no notation that he is signing on behalf of any

other person or business. He also signed as guarantor of the Farmer’s note. Hoffman

Consulting asserts that Samuel acted as its agent in executing the Farmer’s note and

pledging the Hibernia notes as security. Farmer’s wire transferred funds in the

amount required to either payout or purchase the Hibernia notes.

On July 3, 2002, each of the Hibernia notes were assigned to Hoffman

Consulting in a document signed by Joan on behalf of Hoffman Consulting. The

following language was placed on each of the Hibernia notes:

Paid to the Order of Hoffman Consulting, LLC, without warranty or recourse, not even for return of the purchase price.

Hibernia National Bank By: s/Robert Stuart, Jr. Date: July 3, 2002

The notes were further stamped “‘Ne Varietur’ for identification with Act of

Endorsent executed before me this 3 day of July 2002 s/Marcia Olson.” Joan

obtained the original Hibernia notes and delivered them to Farmer’s as security for

2 the Farmer’s note. On December 10, 2002, Samuel executed a Dation en Paiement

conveying his undivided half interest in the White Street property to Hoffman

Consulting. That act was not recorded until January 25, 2006.

In November 2003, Farmer’s went into FDIC receivership, and the FDIC

assigned the Eakin debt to ResComm Holdings No. 2, LLC (Rescomm).

On December 30, 2004, Samuel, acting on behalf of Hoffman Consulting,

borrowed $225,000.00 from Red River for payment of the Farmer’s note, by then held

by ResComm. The two original Hibernia notes, secured by the White Street Property,

were again pledged as security. There does not appear to be any dispute that this loan

was taken on behalf of Hoffman Consulting.

In March 2006, Catherine had her Grant Parish judgment made executory in

Rapides Parish. In May 2006, she began proceedings to seize the White Street

Property.

On July 7, 2006, Capital One, N.A. (Capital One), successor to Hibernia,

executed a Request for Cancellation of the Mortgage or Privilege and Release by

Licensed Financial Institution in connection with the Hibernia mortgages after

Catherine informed a loan officer at Capital One that the Hibernia notes had been

extinguished by payment. That document was filed into the public record on July 11,

2006. On July 12, 2006, Hoffman Consulting filed a Petition for Temporary

Restraining Order, Preliminary and Permanent Injunction seeking to stop the seizure.

On July 14, 2006, Capital One, without requesting a contradictory hearing on the

matter, filed a correction reinstating the Hibernia mortgages, alleging that they were

cancelled in error. In August 2006, Red River Bank filed an intervention in the

proceeding asking for a ranking of the creditor’s claims.

3 After a hearing, the trial court rendered judgment in favor of Catherine. It

found that Samuel executed the Farmer’s note as an individual rather than as the

representative of Hoffman Consulting. It concluded that Samuel had paid off the

Hibernia notes, and, since he and Catherine were solidary obligors, his performance

relieved Catherine of the debt to Hibernia. As a result, the court found that the Dation

en Paiement of the White Street Property to Hoffman Consulting was null for failure

of cause and that Samuel remained co-owner in indivision of the White Street

property. Consequently, it dismissed Hoffman Consulting’s action and the

intervention of Red River Bank. Hoffman Consulting and Red River appeal.

DISCUSSION

Agency

The outcome of this case turns on the determination of whether Samuel was

acting on his own behalf or as agent of Hoffman Consulting when he signed the

Farmer’s note. The trial court, in its written reasons for judgment, noted that:

Joan Eakin also testified that she ratified all the actions of her husband, Samuel Eakin. However, Joan Eakin never granted Samuel Eakin any authority to act on behalf of Hoffman Consulting, LLC or ratified any of his actions in writing, nor is there any record of Joan Eakin orally granting Samuel Eakin authority to act on behalf of Hoffman Consulting, LLC or orally ratifying his actions prior to the commencement of this litigation.

On 3 June 2002, Samuel Eakin executed a promissory note borrowing $250,000.00 from the Farmer’s Bank and Trust of Cheneyville . . . . The Farmer’s Note bears the unqualified signature of Samuel Eakin. He also signed as Guarantor of the Farmer’s Note. There is no other signature anywhere on the note.

It was undisputed at trial that Farmer’s Bank wire transferred funds from the Farmer’s Note in the amount required to either payoff or purchase the Hibernia Notes. However, the source of the transferred funds (i.e. who borrowed the money from Farmer’s Bank) and whether

4 the Hibernia Notes were purchased or paid off was disputed at trial. Hoffman Consulting, LLC suggests that it executed the Farmer’s Note through its agent, Samuel Eakin. However, the evidence does not support Hoffman’s argument.

The Hibernia Notes were paid, in full, with funds Mr. Eakin personally borrowed from Farmer’s Bank. The Farmer’s Note clearly and unambiguously contains Samuel Eakin’s unqualified signature as maker. Hoffman Consulting, LLC is attempting to use parol evidence to prove that it was the true maker of the Farmer’s Note. However, testimonial or other evidence may not be admitted to negate or vary the contents of an act under private signature. La. C.C. art. 1848. Although there are exceptions to the parol evidence rule, none are applicable under the facts of this case. Id; see also, Hartford Accident and Indemnity Co., 522 So.2d 1154 (La.App. 4 Cir. 1988); Parlay Enterprises, Inc. v. R-B-Co, Inc. of Bossier, 504 So.2d 660, 661 (La.App. 2 Cir. 1987). However, even considering Joan Eakin’s testimony, the Court concludes that Mr. Eakin personally and as sole maker, executed the Farmer’s Note. Furthermore, the Court did not find Joan Eakin to be a credible witness.

Farmer’s Bank followed the wire transfer instructions it received on 3 June 2002 and paid off the notes on Mr. Eakin’s behalf. Hoffman Consulting, LLC never received any funds from the Farmer’s Note, nor did it pay any money to Hibernia.

This court will review the trial court’s determination of whether Samuel was

acting as an agent for Hoffman Consulting using a manifest error standard of review:

A trial court’s determination of an agency relationship and scope of authority are essentially factual matters and therefore, are subject to the manifest error standard of review. Bamburg Steel Buildings, Inc., [v. Lawrence General Corp., 36,005 (La.App. 2 Cir. 05/08/02), 817 So.2d 427]; Salley v. Colonial Marine Industries, Inc., 95-2215 (La.App. 4th Cir.09/11/96), 680 So.2d 1242. Thus, the appellate court will not reverse the decision below if credible evidence providing a reasonable factual basis for the trial court's conclusion was presented. Id.

Broussard v. Compulink Business Systems, Inc., 41,276, pp. 5-6 (La.App. 2 Cir.

8/23/06), 939 So.2d 506, 510.

Given the evidence of record, we cannot say that the trial court committed

manifest error in its determination that Samuel signed the Farmer’s note on his own

5 behalf rather than on behalf of Hoffman Consulting. “An agency relationship is never

presumed; it must be clearly shown. The burden of proving apparent authority is on

the party seeking to bind the principal.” Id. at 509. An agent must have express

authority to contract a loan on behalf of a principal. La.Civ.Code art. 2997.

The March 2002 letter cited by the trial judge evidences Samuel’s intention at

that time to borrow money as an individual to buy the notes. Although Joan and

Samuel testified that the bank refused to loan him money personally, there is no

documentary evidence of this refusal. Further, Joan and Samuel admit that no loan

application was filled out by Hoffman Consulting and that the loan was based on

Samuel’s prior relationship with Farmer’s. The Farmer’s note, as stated by the trial

court, was signed by Samuel without any notation that he was signing in any other

capacity than for himself. At the top of the note, Samuel’s name and address and no

other have been entered into blanks appearing above the words “Debtor’s Name and

Legal Address.” Joan admits that she has no document that indicates that Samuel

was acting on behalf of Hoffman Consulting when he signed the Farmer’s note.

Therefore, we find no error in the trial court’s conclusion that Samuel signed the note

on his own behalf.

Hoffman Consulting argues that Joan, as sole member of the LLC, ratified

Samuel’s action in signing the note. With regard to ratification, the trial court found

as follows:

Assuming arguendo Joan Eakin’s ratification is valid, it does not [affect] the rights the plaintiff acquired as a result of Samuel Eakin’s payment of the Hibernia Notes. Although Joan Eakin did testify that she ratified all of Samuel Eakin’s actions, her oral ratification over four years after Mr. Eakin’s execution of the Farmer’s Note does not change the source of the funds used to pay off the Hibernia Notes vis-a-vis Catherine Eakin Grisham. The effects of confirmation and ratification are retroactive to the date of the confirmed or ratified obligation. La.

6 C.C. art. 1844. However, neither confirmation nor ratification may impair the rights of third persons. Id. Article 1844 protects third persons who acquired rights between the time Samuel Eakin executed the Farmer’s Note and the time it was ratified by Joan Eakin. The plaintiff acquired the benefit of payment by a solidary obligor after Samuel Eakin paid the Hibernia Notes with funds he personally borrowed from Farmer’s Bank for that purpose. Even if Joan Eakin’s oral ratification is valid, it occurred at trial over four years after the plaintiff acquired the benefit of extinguishment of her obligation to Hibernia Bank. Thus, Joan Eakin’s ratification does not have retroactive effect vis-a-vis Catherine Eakin Grisham. 5 La.Civ.L. § 12.62.

After the loan proceeds from the Farmer’s note signed by Samuel were

transferred from Farmer’s, Hibernia prepared a “Notarial Act of Transfer,

Endorsement, Assignment and Subrogation of Notes and Related Collateral” in

which it assigned the Hibernia notes to Hoffman Consulting. That document was

executed by Joan on behalf of Hoffman Consulting on July 3, 2002. It is uncontested

that Joan, as sole managing member of Hoffman Consulting, obtained the Hibernia

notes from Hibernia and delivered them to Farmer’s. Even if there is not enough

evidence of record to establish express authority to act on behalf of Hoffman

Consulting, it is possible that Joan’s action in delivering the Hibernia notes to

Farmer’s served as a ratification of Samuel’s actions by Hoffman Consulting.

Ratification is a declaration whereby a person gives his consent to an obligation incurred on his behalf by another without authority.

An express act of ratification must evidence the intention to be bound by the ratified obligation.

Tacit ratification results when a person, with knowledge of an obligation incurred on his behalf by another, accepts the benefit of that obligation.

La.Civ.Code art. 1843.

The evidence shows that Joan was aware of Samuel’s acts. She signed papers

accepting an assignment of the Hibernia notes. This action shows that she was aware

7 of Samuel’s action. Further, by so doing, Hoffman Consulting received the benefit

of the obligation incurred in signing the Farmer’s note which provided funds to

purchase the Hibernia notes. Further, Joan delivered the Hibernia notes, which had

been endorsed to Hoffman Consulting, to Farmer’s to act as collateral for the

Farmer’s note signed by Samuel. However, even if these actions are considered to

be ratification of Samuel’s signing of the note on behalf of Hoffman Consulting, the

ratification occurred after the funds were transferred to Hibernia for payment of the

notes. As a result of Samuel’s payment to Hibernia, the Hibernia notes were

extinguished through confusion. La.Civ.Code art. 1903. Since Catherine was a

solidary obligor as to the Hibernia notes, Samuel’s performance extinguished her

liability to Hibernia under the notes. La.Civ.Code art. 1794. The later ratification

cannot affect the benefit of extinguishment that Catherine received as a result of the

payment.

Dation En Paiement

Samuel further argues that the Dation en Paiement of his interest in the White

Street property was not null. However, his argument in this regard depends on a

determination that the Hibernia notes secured by that property were purchased by

Hoffman Consulting. Having found that the Hibernia notes were paid by Samuel

individually, we agree with the trial court that the Dation en Paiement is null for

failure of consideration. Hoffman Consulting did not buy the Hibernia notes, and the

record does not establish any other debt owed by Samuel to Hoffman Consulting for

which the Eakin dation could have been made. Therefore, the dation was made to

release Samuel from a debt he did not owe and is, therefore, null.

Red River Intervention

8 Red River appeals the dismissal of its intervention. It asserts that it is the

current holder of the Hibernia notes. We disagree. We have found that the obligation

represented by the Hibernia notes was extinguished by confusion. Therefore, Red

River cannot be a holder of the Hibernia notes. However, this does not extinguish

any claim it may have against Hoffman Consulting and Samuel.

CONCLUSION

For these reasons, the judgment of the trial court is affirmed. Costs of this

appeal are to be paid by Hoffman Consulting.

AFFIRMED.