First Nat. Bank v. Lloyd's Underwriters

629 So. 2d 507, 1993 WL 504521
CourtLouisiana Court of Appeal
DecidedDecember 10, 1993
Docket93-CA-16, 93-CA-17 and 93-CA-160
StatusPublished
Cited by12 cases

This text of 629 So. 2d 507 (First Nat. Bank v. Lloyd's Underwriters) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Nat. Bank v. Lloyd's Underwriters, 629 So. 2d 507, 1993 WL 504521 (La. Ct. App. 1993).

Opinion

629 So.2d 507 (1993)

FIRST NATIONAL BANK OF JEFFERSON PARISH
v.
LLOYD'S UNDERWRITERS and Other British Insurance Companies Subscribing to Policy Number GCM 12535.
OCEAN ENERGY, INC.
v.
FIRST NATIONAL BANK OF JEFFERSON PARISH.

Nos. 93-CA-16, 93-CA-17 and 93-CA-160.

Court of Appeal of Louisiana, Fifth Circuit.

December 10, 1993.
Rehearing Denied January 18, 1994.

John T. Nesser, III, David S. Bland, Clare P. Hunter, Elizabeth S. Wheeler, New Orleans, *508 for appellants Ocean Energy, Inc., Power Well Service, Inc., Albert W. Gunther, William Barnett and John Powers.

Rudy J. Cerone, Trial Atty., R. O'Neal Chadwick, Jr., McGlinchey Stafford Lang, a Law Corporation, New Orleans, for appellee First Nat. Bank of Jefferson Parish.

Donald A. Hoffman, New Orleans, for appellees, Underwriters Certain Underwriters at Lloyds and Other British Ins. Companies Subscribing to Policy GCM 12535.

Before WICKER, GOTHARD and CANNELLA, JJ.

CANNELLA, Judge.

In rather involved litigation, the trial court has granted, before trial, several exceptions of no cause of action and several motions for summary judgment on certain issues in the case. Various issues still remain for trial. The losing parties in these pre-trial rulings have appealed. We reverse and remand.

The facts giving rise to this litigation are as follows. In April of 1987, the liftboat M/V Mr. Don, operating as a workover drilling rig, was owned by Ocean Energy, Inc. (Ocean). It was mastered by an employee of Power Well Service, Inc. (Power Well) and was encumbered by several preferred ship mortgages in favor of First National Bank of Jefferson Parish (FNJ). The vessel was insured for $3.5 million by an hull insurance policy issued by Gulf Coast Marine, Inc. and Underwriters at Lloyds, London (Lloyds). Ocean was the named insured on the policy, as the owner of the vessel. Power Well was also a named insured, as operator of the vessel. The policy provided mortgagee coverage for FNJ, who was listed as an additional loss-payee. On April 12, 1987, the M/V Mr. Don capsized and sank in the Gulf of Mexico. All parties agreed that the vessel was a constructive total loss. FNJ sought to recover from Lloyds the full policy limits ($3.5 million) to apply to Ocean's outstanding indebtedness. Lloyds refused payment under the policy. Consequently, on November 23, 1987, FNJ, as loss-payee under the policy, sued Lloyds in case No. 354-478 (the Insurance Litigation) in the 24th Judicial District Court. After a period of negotiation, in January of 1988, Lloyds agreed to pay the policy proceeds to FNJ in return for a Release and Indemnity Agreement (Release Agreement) signed by FNJ, Ocean and Power Well, releasing Lloyd from any further liability. Pursuant thereto, Lloyds paid FNJ $3,466,986.65 in settlement of the claim. The remaining $33,013,35 was withheld to pay one or more lien claimants.[1] FNJ did not, however, have this suit dismissed.

Meanwhile, Ocean, believing that FNJ was obligated under the preferred ship mortgage to fund repair of the M/V Mr. Don upon receipt of the insurance proceeds, negotiated with FNJ for a new loan. FNJ issued a commitment letter, dated September 14, 1987 to Albert W. Gunther, Jr. (Gunther) and William Barnett (Barnett), or their assignees/nominees, to provide the funding for the repair of the M/V Mr. Don. The commitment letter provided in pertinent part:

TITLE OPINION: The Bank will require a title opinion in a standard form issued by a law firm acceptable to the Bank. The opinion shall be in the format of the loan stating that the Bank's mortgage is a first and valid lien and that the property is free of all liens, easements, restrictions or other encumbrances of any kind whatsoever, with only such exceptions in the coverage that are acceptable to the Bank.

OTHER TERMS & CONDITIONS:

1) The above terms and conditions and commitment to fund the new loan of one million forty thousand dollars ($1,040,000.00) is predicated upon the payment to FNJ of an amount satisfactory to FNJ by Lloyds of London or Gulf Coast Marine, Inc. or its designate, in connection with the existing term loan to Ocean Energy, Inc.

Gunther alleges that, pursuant to the agreements which led to the commitment letter, he voluntarily agreed to FNJ's foreclosure on several pieces of his personal property, as well as several pieces of equipment *509 owned by Gunther-related entities, and allowed FNJ to collect all of the accounts receivable owed Ocean.[2]

However, on August 1, 1988, FNJ notified Gunther and Barnett in writing that it would not honor the earlier commitment letter unless various conditions of that commitment were met by August 10, 1988. Gunther and Barnett did not communicate with FNJ prior to August 10, 1988.

On August 8, 1988 the United States Coast Guard issued its report on the investigation of the capsizing of the M/V Mr. Don. Contrary to what all parties had earlier believed, that the capsizing was due to adverse weather conditions, the Coast Guard report found that "the proximate cause of the casualty was that the vessel's recommended design parameters were exceeded." In other words, the vessel was overloaded. Based on this report, Lloyds felt that the insurance proceeds had been erroneously paid to FNJ.

On December 2, 1988, Lloyds filed a reconventional demand against FNJ for return of the paid insurance proceeds, attorney's fees, costs and interest in the earlier suit filed by FNJ to recover insurance proceeds, which had not been dismissed. On June 22, 1989, FNJ notified Ocean that it would not provide the funds to repair the M/V Mr. Don. Then on July 25, 1989, Ocean filed a separate suit against FNJ for specific performance and or damages for FNJ's refusal to fund the repair of the M/V Mr. Don, case No. 384-802 (the Loan Litigation) of the 24th Judicial District Court. Subsequent pleadings filed in the Loan Litigation added Gunther, Barnett and Power Well, as additional plaintiffs, and Lloyds, as an additional defendant.

On April 19, 1991 Ocean and Power Well filed an intervention in the Insurance Litigation asserting various claims for damages against Lloyds. These two cases, the Loan Litigation and the Insurance Litigation, were consolidated in the trial court on November 5, 1991 (the Lawsuits). Each of the parties has filed additional pleadings in the Lawsuits.

On January 2, 1992 FNJ filed a reconventional demand against Ocean and Gunther, claiming funds owed on the ship mortgages in the event Lloyds was successful in getting a return of the insurance proceeds that it had paid FNJ, which had been applied to the mortgage debts. On January 23, 1992, FNJ filed a third-party demand against John H. Powers (Powers) as a guarantor on the notes supporting the ship mortgages.

On March 13, 1992, over the protest of the other parties, FNJ and Lloyds reached a compromise and settled their differences. Lloyds agreed to dismiss its claim for all of the insurance proceeds and FNJ agreed to return $500,000.00 of the previously paid funds (the Settlement). FNJ thereafter filed amended reconventional demands against Ocean and Gunther and an amended third party demand against Powers for reimbursement of the $500,000.00 that it had returned to Lloyds. Ocean, Power Well, Gunther and Barnett thereafter filed a Fourth Supplemental and Amending Petition alleging, among other things, that FNJ had breached the Release Agreement and that Gunther and Powers were third-party beneficiaries of that agreement and, therefore, are entitled to enforce all rights contained therein.

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Cite This Page — Counsel Stack

Bluebook (online)
629 So. 2d 507, 1993 WL 504521, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-nat-bank-v-lloyds-underwriters-lactapp-1993.