Gulf States Land & Development, Inc. v. Premier Bank N.A.

Opinion

United States Court of Appeals,

Fifth Circuit.

No. 91–4105.

GULF STATES LAND & DEVELOPMENT, INC., et al., Plaintiffs–Appellants,

v.

PREMIER BANK N.A., et al., Defendants–Appellees.

March 31, 1992.

Appeals from the United States District Court for the Western District of Louisiana.

Before THORNBERRY, GARWOOD, and DAVIS, Circuit Judges.

THORNBERRY, Circuit Judge:

The Plaintiffs sued Defendant Premier Bank for violations of

the Bank Holding Company Act, the Sherman and Clayton Acts, and the

Louisiana Antitrust Statute. The district court found that the

Plaintiffs failed to establish essential elements of their claims,

and granted summary judgment in favor of the Defendant. We affirm.

Background

On October 13, 1986, Plaintiffs Stanley Palowsky, Carol

Palowsky, Dr. John Smiarowski, Larry James, Dianne James, Walter

Meredith, and Mona Meredith purchased a piece of property to be

developed as a subdivision known as North Pointe. These Plaintiffs

(together, the "Gulf States Plaintiffs") later formed Gulf States

Land & Development, Inc. to develop the property. Defendant

Premier Bank's predecessor, Ouachita National Bank, financed the

purchase of the property and made a commitment to provide a development loan. The Plaintiffs' claims against Premier Bank

arise out of the Bank's involvement in the Plaintiffs' purchase of

the North Pointe property and several related transactions, and

Premier Bank's later refusal to continue funding the development

loan.

Two of the Plaintiffs, Dr. Smiarowski and Mr. Palowsky, were

involved in a number of joint businesses and investments with Dr.

Lee Roy Joyner, some of which involved Premier Bank as a creditor.

Joyner and Smiarowski, together as J & S Pecan Farms, owned the

tract of land (the "North Pointe tract") that was later sold to the

Gulf States Plaintiffs. This tract of land was mortgaged by J & S

to Premier Bank for $1.3 million. The J & S Partnership also owned

another tract of land known as the Williams Orchard, which was

mortgaged to lenders other than Premier Bank.

Joyner, Smiarowski, and Palowsky together owned several

additional pieces of property. They were joint owners of a tract

of land in Arkansas, held free of debt. In addition, all three

were partners in the Reviens Partnership, which owned real estate

on which Premier Bank held a second mortgage. Finally, both Joyner

and Palowsky were part owners of several tracts of land known as

the Interchange property, also mortgaged to Premier Bank.

In 1985, Dr. Joyner had a falling out with his business

partners. He was also experiencing financial difficulties and was

getting divorced from his wife, Nancy Joyner. The J & S loan on the North Pointe property was in default, as was Joyner's other

debt at Premier Bank. All of the parties involved in the different

business ventures, including Premier Bank, thought it desirable to

separate Dr. Joyner's interests from his partners and restructure

the parties' indebtedness to Premier Bank.

Plaintiffs James and Meredith expressed interest in purchasing

the North Pointe tract to develop as a subdivision. They acquired

an option to purchase the tract for $1.3 million, the amount of J

& S's outstanding debt on the property, and they attempted to

obtain government financing of the purchase. When this financing

arrangement fell through, the parties began negotiating a purchase

to be financed by Premier Bank; however, James and Meredith did

not have sufficient financial strength to obtain the financing on

their own. Smiarowski agreed to participate as a purchaser, and

Palowsky either agreed or was blackmailed by Mr. Whitfield Hood, an

executive vice president at Premier Bank, to participate. The

purchase price was fixed at $800,000, and the Bank agreed to fund

a development loan.

A number of transactions between Joyner, Palowsky, and

Smiarowski were negotiated at the same time, and all of the

transactions closed on October 13, 1986. With regard to the North

Pointe transaction, Mr. Hood issued a loan commitment letter to the

Gulf States Plaintiffs for $2.868 million, of which $800,000

covered the purchase price of the North Pointe property. The Bank

released both Joyner and Smiarowski from the $1.3 million J & S loan secured by the property. The Joyners transferred their

partnership interest in the Williams Orchard property to

Smiarowski, and he assumed all of the J & S Partnership debt on

that property.

The Joyners transferred their interest in the Interchange

property, as well as their debt to Premier Bank secured by that

interest, to Palowsky. Palowsky and Smiarowski transferred their

partnership interests in Reviens Partnership to Dr. Joyner, and Dr.

Joyner assumed their liability to Premier Bank on those partnership

interests. The Bank required Dr. Joyner to pledge the

newly-acquired Reviens partnership interests to the Bank as

security for his other loans then in default. Approval of this

transfer by the other Reviens partners took some time; while

approval was pending, Smiarowski and Palowsky pledged the interests

to the Bank. Finally, Palowsky and Smiarowski transferred their

interest in the Arkansas property, owned jointly by Smiarowski,

Palowsky and Joyner, to Nancy Joyner.

These transactions form the basis of the Plaintiffs' Bank

Holding Company Act claims. The Plaintiffs claim that Premier Bank

conditioned the North Pointe purchase and development loan on

Palowsky's and Smiarowski's agreement to the other transactions.

They point out that the Bank benefitted from the other "swap"

transactions because Dr. Joyner's troubled debt was reduced by $1

million, and additional security was pledged for his remaining

debt. The Bank disputes this characterization of the negotiations.

The Bank claims that Palowsky was primarily responsible for

negotiating the restructure plan. Although the Bank admits that it

sought to protect its investments, it claims that its role in the

negotiations was limited to accepting the proposals made by the

parties. The Bank also claims that the parties pressured Mr. Hood

to commit to the development loan, and that Mr. Hood did not inform

Bank management of the commitment.

In March of 1988, Premier Bank notified the Gulf States

Plaintiffs that it would not advance any additional funds on the

North Pointe development loan. Bank management was, at that time,

under the impression that the loan commitment was for $2.4 million.

The Bank claims that as of March 1988, it had funded $2.4 million,

but only 54 of the 175 subdivision lots had been developed. The

Bank had the property appraised, and it was valued at $1 million

less than the outstanding loan balance on the development loan.

The Bank requested additional security or a cash payment to reduce

the undercollateralized portion of the loan.

On March 21, 1988, the Plaintiffs filed suit against the Bank

in Louisiana state court for breach of contract, seeking $195

million in damages and contesting liability on the amount advanced

under the loan commitment. Premier Bank also filed suit in state

court seeking a declaratory judgment as to which party breached the

loan agreement. The Plaintiffs claim that several acts by Premier Bank in the

course of the state court litigation constitute additional

violations of the Bank Holding Company Act. On August 3, 1988, the

Bank deposited the unfunded portion of the development loan into

the state court's registry pursuant to an ex parte order that

placed certain requirements on advances of the funds. The

Plaintiffs refused to comply with the requirements, and the state

court later reversed the ex parte order. On October 2, 1989,

Premier Bank offered to advance funds necessary to complete water

and sewer connections to North Pointe if the Plaintiffs would

consent to an agreed judgment in the amount of the new advances.

The Plaintiffs refused the offer. They describe these actions by

the Bank as extensions of credit on conditions that violate the

anti-tying provisions of the Bank Holding Company Act.

The Plaintiffs also assert claims under the Sherman and

Clayton Acts and the Louisiana Antitrust Statute based on the

Bank's failure to fund the development loan and to perform other

obligations necessary to complete the development of North Pointe,

such as approving subdivision restrictions necessary to transfer

clear title on the lots. They assert that the Bank and its

officers acted in concert to prevent the development of North

Pointe because it competed for lot sales with nearby subdivisions

owned by officers and directors of the Bank.

Two of the Plaintiffs, Roy and Linda McCaskill, were not

parties to the transactions between the Bank and the Gulf States Plaintiffs. Once North Pointe was under development, the

McCaskills purchased a lot in the subdivision and built a house.

Their claim against the Bank is based on the Bank's failure or

refusal to approve subdivision restrictions or to fund water and

sewer hookup for the subdivision. The McCaskills claim that, as a

result of the Bank's inaction, they lost the mortgage on their home

and therefore lost the home and all of the money invested in its

construction. In addition to the federal claims, the McCaskills

assert a pendent claim at state law for intentional interference

with contractual relations.

The district court granted summary judgment in favor of

Defendant Premier Bank on all claims. The Plaintiffs appeal.

Discussion

We review the district court's grant of summary judgment de

novo to determine whether a disputed issue of material fact makes

the district court's grant of summary judgment inappropriate.

1. Bank Holding Company Act

The Plaintiffs assert that Premier Bank violated the

anti-tying provision of the Bank Holding Company Act on three

separate occasions. The relevant provision of the Act provides as

follows:

A bank shall not in any manner extend credit ... on the condition or requirement that the customer provide some additional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan....

12 U.S.C. § 1972(1)(C). The Plaintiffs claim that Premier Bank

violated this provision in the first instance by conditioning the

North Pointe purchase and development loan on Palowsky's and

Smiarowski's agreement to the other transactions. We note at the

outset that the only Plaintiffs with standing to assert this claim

are Mr. Palowsky and Dr. Smiarowski. See 12 U.S.C. § 1975;

Campbell v. Wells Fargo Bank, N.A., 781 F.2d 440, 442–43 (5th

Cir.1986).

Plaintiffs' counsel, in brief and oral argument, focused a

great deal of attention on allegations that Mr. Hood blackmailed

Mr. Palowsky with information obtained in a private investigation

of Mr. Palowsky's background. Mr. Hood allegedly coerced Mr.

Palowsky to participate in the purchase and development loan under

threats that Mr. Hood would expose the information and ruin Mr.

Palowsky's reputation in the community. The district court found

that these allegations were immaterial to the Plaintiff's claims

under the Bank Holding Company Act. We agree. The alleged

extortion does not in itself constitute a Bank Holding Company Act

violation, nor does it establish any element of the Bank Holding

Company Act claim based on the transactions surrounding the sale of

the North Pointe tract.

The district court granted summary judgment on the Plaintiffs'

claim based on those transactions because the Plaintiffs did not establish that conditioning the development loan on the other

transactions was unusual.1 In order to survive summary judgment,

the Plaintiffs must present evidence sufficient to create a fact

issue regarding whether the conditions placed on the loan were

unusual in the banking industry. See Dibidale v. American Bank &

Trust Co., 916 F.2d 300, 304 n. 2 (5th Cir.1990); Rae v. Union

Bank, 725 F.2d 478, 480 (9th Cir.1984). Accepting as true the

Plaintiffs' allegations that Premier Bank conditioned the North

Pointe loan on the other transactions, we find as a matter of law

that the restructuring arrangement entered into by the parties in

this case does not constitute an unusual banking practice.

The Gulf States Plaintiffs sought to purchase the North Pointe

property for $800,000, and requested Premier Bank to release a $1.3

million mortgage on the property, which was then in default. Even

if the Bank, rather than Palowsky or Smiarowski, demanded that the

other transactions occur, the Bank acted within traditional banking

practices in requiring the debtors on the North Pointe property

loan, Joyner and Smiarowski, to restructure their other troubled

1 The district court also stated that the Plaintiffs' claim failed because the Plaintiffs did not establish that Premier Bank had engaged in an anticompetitive practice. Citing Palermo v. First National Bank and Trust Co., 894 F.2d 363 (10th Cir.1990), the district court stated that anticompetitive practice is an essential element of a claim under the Bank Holding Company Act. Because our holding rests on another aspect of the Plaintiffs' claim, we do not address this portion of the district court's opinion. We note, however, that the Fifth Circuit has consistently held that a showing of anticompetitiveness is not required to state a claim under the Bank Holding Company Act. See, e.g., Amerifirst Properties, Inc. v. FDIC, 880 F.2d 821, 826 (5th Cir.1989); Campbell v. Wells Fargo Bank, N.A., 781 F.2d 440, 443 (5th Cir.1986). debts prior to granting them a release on the $1.3 million loan and

foregoing satisfaction of the $500,000 deficiency on the debt.

That restructure necessarily involved Mr. Palowsky, because he was

a joint debtor with Smiarowsky and Joyner on other related loans.

Attempting to establish that the conditions on the North

Pointe loan were unusual, the Plaintiffs emphasize the transfer of

Palowsky's and Smiarowski's interest in the Arkansas property, in

which Premier Bank had no interest, to Nancy Joyner, who the

Plaintiffs argue is an unrelated party. We disagree with the

Plaintiffs' position because, given the state of affairs between

Dr. and Mrs. Joyner at the time, Mrs. Joyner was necessarily

involved in the transactions. Mrs. Joyner was entitled to a

portion of the proceeds of the sale of Dr. Joyner's interests

pursuant to the Joyners' marital settlement agreement. Mrs. Joyner

was obviously not an unrelated party in these transactions;

transferring the Arkansas property directly to her, rather than to

Dr. Joyner, merely satisfied her rights related to the various

properties transferred.

We also note that the testimony of Joyner, Palowsky, and

Smiarowski consistently reflects that all three independently

desired to separate their business interests. Palowsky stated in

deposition that all of the parties felt that mutual values were

exchanged in the swap; this position is also documented in a

release signed by all parties, stating that "[a]ll appearers

acknowledge that the consideration for all of these transactions represent mutual considerations ..., it being acknowledged and

declared by all parties that these mutual considerations and

transactions are equal in value for the benefit of each respective

party." This uncontested testimony supports our view that the Bank

did not abuse its economic power over these borrowers. The Bank

acted within the scope of traditional banking practices to

legitimately protect its troubled investments. Because we find

that the conditions placed on the North Pointe loan were not

unusual, we affirm the district court's grant of summary judgment

on this claim.

We similarly reject the Plaintiffs' claims based on Premier

Bank's actions in the course of the state court litigation. The

Plaintiff's first claim is based on Premier Bank's procurement of

an ex parte order limiting the Plaintiffs' access to funds that

Premier Bank deposited into the registry of the state court. The

order allowed the Plaintiffs to withdraw funds upon certification

that all funds previously advanced were used for development of the

subdivision and that the funds to be withdrawn would be used for

the same purpose. Premier Bank cannot be said to have violated the

Bank Holding Company Act by successfully urging the state court to

enter the order. Given that the Bank suspected misappropriation of

funds by the Plaintiffs, its attempt to invoke the district court's

protection does not constitute "the improper use of economic

leverage that the [Bank Holding Company] Act seeks to prevent."

Amerifirst Properties, Inc. v. FDIC, 880 F.2d 821, 824 (5th

Cir.1989). The Plaintiffs also claim that Premier Bank's offer to advance

funds for water and sewer hookup on the condition that the

Plaintiffs' consent to an agreed judgment for the amount of the

advance violated the Bank Holding Company Act. This was, again, in

the context of litigation in state court, during the course of

which the Plaintiffs had disclaimed liability for the amount of the

funds previously advanced under the loan commitment. The Bank's

offer was an attempt to accommodate the Plaintiffs' development

efforts, while protecting itself against the Plaintiffs' disclaimer

of liability for the funds advanced. As such, this conduct was

within the scope of traditional banking practices, and does not

constitute a violation of the Bank Holding Company Act. See FDIC

v. Linn, 671 F.Supp. 547, 561 (N.D.Ill.1987) (conditioning loan on

waiver of defenses to guaranties found to be a traditional banking

practice).

The Plaintiffs have failed to establish their claims under the

Bank Holding Company Act. We therefore affirm the district court's

summary judgment in favor of the Defendant Premier Bank on those

claims.

2. Sherman and Clayton Acts

Clayton Acts. Although unclear, the Plaintiffs' claim under the

Sherman Act appears to allege a Section 1 violation by claiming

that Premier Bank and its officers and directors, who own subdivision lots in the vicinity of North Pointe, conspired to

eliminate competition in lots sales by Gulf States. Premier Bank

disclaimed the existence of a conspiracy in three affidavits by

officers of Premier Bank, and offered valid business reasons for

the Bank's refusal to continue funding the North Pointe development

loan. The Plaintiffs have not responded with any evidence, direct

or indirect, tending to prove the existence of a conspiracy. For

this reason, summary judgment on their Section 1 claim was

appropriate. See Pan–Islamic Trade Corp. v. Exxon Corp., 632 F.2d

539 (5th Cir.1980), cert. denied, 454 U.S. 927, 102 S.Ct. 427, 70

L.Ed.2d 236 (1981).

To the extent that the Plaintiffs assert other claims under

the Sherman and Clayton Acts, they have failed to specify their

contentions or identify the particular provisions of these statutes

under which their claims arise. Because the Plaintiffs' have

failed to satisfy the standard set forth in Rule 28(a)(4) of the

Federal Rules of Appellate Procedure, we consider those claims

waived. See Weaver v. Puckett, 896 F.2d 126, 128 (5th Cir.), cert.

denied, ––– U.S. ––––, 111 S.Ct. 427, 112 L.Ed.2d 411 (1990).

3. Louisiana State Law Claims

The Plaintiffs' claim under the Louisiana antitrust statute

fails for the same reason their federal antitrust claim fails. The

Plaintiffs have not come forward with any evidence of a conspiracy

to support their claim. See La.Rev.Stat.Ann. § 51:122 (West 1987). The district court's grant of summary judgment was therefore

appropriate.

The McCaskills, who contracted with Gulf States to purchase a

lot in North Pointe, brought a Louisiana state law claim against

Premier Bank for intentional interference with contractual

relations. Louisiana recently recognized a limited exception to

its general refusal to recognize a cause of action for intentional

interference with contractual relations in 9 to 5 Fashions, Inc. v.

Spurney, 538 So.2d 228 (La.1989). That exception is limited,

however, and does not cover the type of conduct at issue here. We

agree with the district court that the McCaskills' claim does not

fit within the 9 to 5 exception and affirm the district court's

summary judgment on this claim.

For all of the foregoing reasons, we AFFIRM the district

court's grant of summary judgment on all claims. We, therefore,

need not consider the Motion for Summary Affirmance recently filed

by the Defendant in this case.