Gulf States Land & Development, Inc. v. Premier Bank N.A. ( 1992 )

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
The Plaintiffs also assert claims under the Sherman and
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.