The opinion
STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT
07-693
CATHERINE EAKIN
VERSUS
SAMUEL EAKIN
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APPEAL FROM THE
NINTH JUDICIAL DISTRICT COURT
PARISH OF RAPIDES, NO. 223,741
HONORABLE JOHN C. DAVIDSON, DISTRICT JUDGE
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J. DAVID PAINTER
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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:
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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
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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.
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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
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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
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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.
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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
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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
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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.
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