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Skannal v. Bamburg

January 27, 2010


Appealed from the Twenty-Sixth Judicial District Court for the Parish of Bossier, Louisiana Trial Court No. 116576 Honorable Ford E. Stinson, Jr., Judge.

The opinion of the court was delivered by: Moore, J.


Dennis and Margie Bamburg appeal a judgment which nullified four contracts with their former business partner, the late John C. Skannal, and awarded damages and attorney fees. After a 16-day trial, the district court found that out of nine contested contracts entered between 1996 and 2004, four -- exclusive right to sell agreement (10/9/03), act of sale of membership interest in Sligo Hills LLC (2/27/04), act of sale of common stock in Sligo Enterprises Inc. (3/2/04), and mineral deed with assignment of leases (3/2/04) -- occurred when Skannal lacked mental capacity to enter business transactions owing to alcohol-induced dementia, Alzheimer's disease and prostate cancer. The court also found that Skannal was "under the influence of Dennis Bamburg." For these reasons the court declared the contracts null. By a supplemental opinion, the court further found that Dennis Bamburg's dealings with Skannal constituted fraud, entitling Skannal's succession to a penalty of 25% of the purchase prices and attorney fees. By a second supplemental opinion, the court set attorney fees and fixed costs.

The court rendered judgment which (1) nullified the four contracts, (2) ordered Skannal's succession to restore the purchase prices of $843,752, (3) ordered the Bamburgs to pay damages of $307,315 for fraud, attorney fees of $500,000, and costs, and (4) ordered incidental relief not contested on appeal.

The Bamburgs have appealed, raising five assignments of error. For the reasons expressed, we reverse the denial of the exception of no right of action, without prejudice. To reflect this change, the judgment will be amended and affirmed. Skannal's succession has answered the appeal, seeking additional attorney fees; this will be denied.

Factual Background

Skannal owned a large tract of land called Sligo Plantation (said to have been in his family since the 1840s) in south Bossier Parish where he ran a livestock operation but primarily lived off his oil and gas royalties. He was retired from the state police and still was a notary public. A host of witnesses described him as reclusive, asocial, a chronic alcoholic and generally unpleasant person. Although many said he was miserly and loath to part with any of his assets, in the mid-1970s he was trying to sell a country lot on Skannal Road when he met the Bamburgs. Dennis was an Air Force vet working as a ticket agent for Delta Airlines when he called Skannal about buying the lot. The Bamburgs bought it and moved their mobile home there.

According to the Bamburgs, Skannal wanted more than just a neighbor; he wanted a business partner. At Dennis's suggestion, they formed a corporation to develop part of Skannal's land into a 148-unit mobile home park called Plantation Acres. A few years later they formed another corporation, Sligo Enterprises Inc., to develop a tract that Skannal's father had subdivided but never completed, Shadow Ridge. Dennis was president, Skannal vice-president, and Margie secretary-treasurer. In both these companies, Skannal contributed the land and the Bamburgs the "sweat equity," and each held 50% of the capital stock. For many years Skannal voiced no objection to this business model, and apparently both projects were financially successful.

In the early 1990s, Skannal's marriage ran aground; his wife moved out while he was at a ham radio convention in Texas, and at least two of his three children sided with their mother. This resulted in a long period of estrangement which, according to the succession, isolated Skannal and accelerated his drinking. Also, it meant that Skannal's immediate family were not able to provide any insight into his thoughts, motives and mental status from about 1992 on.

In the mid-1990s, Skannal and the Bamburgs entered into a series of contracts to develop a large tract of Skannal's land into a golf course with an adjacent subdivision called Olde Oaks. Several different agreements were involved. Initially, Skannal contributed the land, some 332 acres with a reservation of mineral rights, and the Bamburgs paid cash for the equivalent value, $154,750, and each received an equal number of additional shares in Sligo Enterprises Inc.

In February 1999, Skannal and Dennis formed another business, Sligo Hills LLC, to facilitate the project further. As before, Skannal put in a large amount of land (according to the petition, over 1,300 acres, virtually the last remnant of Sligo Plantation, but with a reservation of minerals) and the Bamburgs put in a promissory note for $533,000 (which they and Skannal agreed was an equivalent value), for a 50% interest each in the LLC.

Around this time, Skannal was diagnosed with inoperable prostate cancer. He enrolled in an experimental treatment program at the FeistWeiller Center at LSU Health Sciences Center from January 2000 through February 2003, under the direction of Dr. Richard Mansour, who saw him regularly for these critical three years. Dr. Mansour found him to be a compliant patient who seemed to understand the nature of the experimental program.

Other witnesses, however, described a man in rapid decline, physically and mentally. His office in the old plantation store was unkempt and littered with mounds of beer cans and bourbon bottles. Another person with whom Skannal did business, a fertilizer salesman named Jimmy Pete Burks, testified that by 2003 Skannal's farm was a shambles. Burks began to assist him with the farming operation, and brought him liquor anytime he wanted it. One day in August 2003, Burks found him flat on his face in the flowerbed, seriously drunk and injured in the fall. Skannal had to be hospitalized, first at Highland Hospital, then at LifeCare, and then at the psychiatric ward of Promise Hospital, where a geriatric psychiatrist, Dr. Keith Kessel, described him as delusional and combative. Dr. Kessel testified that he phoned Skannal's daughter, Elizabeth, to advise that in his current state, Skannal could be interdicted. Elizabeth testified that she conveyed this information to Dennis, but she never took any action to interdict her father.

For several years, the Municipal Police Employees Retirement System ("MPERS") had been seeking to diversify its portfolio by acquiring real estate, particularly golf courses. According to MPERS's chairman, Bill Fields, Skannal (a retired state policeman) had always been eager to sell, and on two occasions had literally flagged down his red patrol car to press the issue, but Dennis was holding out. In 2000, MPERS bought a portion of the property for $6.5 million, but when the project foundered, MPERS escalated its requests in the belief that additional land for the surrounding subdivision would help the golf club. After long negotiations between Dennis and MPERS, Sligo Enterprises agreed to sell the remaining property for $4.544 million. Skannal and the Bamburgs both pocketed $2.1 million from the deal, making Sligo Enterprises even more lucrative than their prior ventures. At the closing on February 13, 2004, nobody from MPERS suspected that Skannal was an assisted living patient with multiple forms of dementia. The court did not rescind any of the MPERS contracts.

The Nullified Contracts

On October 9, 2003, while Skannal was still in the psychiatric ward at Promise Hospital, Dennis brought him a document, "Exclusive Right to Sell Agreement," whereby Sligo Enterprises granted Dennis the exclusive right to sell corporate property at a 10% commission. Skannal and Dennis both signed this. When Sligo Enterprises later sold its property to MPERS, Bamburg paid himself a commission of $449,400 pursuant to the exclusive right to sell agreement, the first transaction nullified by the court.

After Skannal was discharged from Promise Hospital on October 13, 2003, Burks resumed carrying him liquor. Burks testified that at Skannal's direction, he sold off the remainder of Skannal's cattle. He also testified that around this time, Skannal was earning $40,000 to $70,000 a month in mineral royalties. Burks admitted skimming off some of this money for his personal use, as did Elizabeth.

Skannal was again hospitalized from January 14 to February 10, 2004, after which Dennis moved him to The Arbor, an assisted living center. While he was living at The Arbor, he signed the three other contracts ultimately nullified by the court.

According to the Bamburgs, after the golf course deal was completed, Skannal wanted to convert his assets to cash. On February 27, 2004, Dennis drove him to the office of real estate attorney Jeff DeLaune, who had handled several of the parties' transactions. Using information supplied by Dennis, DeLaune drew up a two-page "Act of Sale of Membership Interest in Sligo Hills, LLC" whereby Skannal sold his remaining 50% interest in the LLC to the Bamburgs for $400,000, which Skannal received by check and deposited. DeLaune, his wife, and Janelle Ward, the notary, all testified that Skannal chatted with them about the business climate in Bossier, especially the riverboats, where Skannal had become a frequent patron, often losing thousands of dollars a night on the slots. These witnesses described a man perfectly aware of what the sale purported to do. They were not aware that he was in an assisted living center or diagnosed with dementia, and they agreed that no separate counsel was present to explain the deal to him. This was the second contract the court nullified.

Four days later, on March 2, 2004, Dennis again drove Skannal to DeLaune's office, where DeLaune had drawn up two documents based on information provided by Dennis. The first was a two-page "Act of Sale of Common Stock of Sligo Enterprises Inc." whereby Skannal sold his remaining 2400 shares of the company to the Bamburgs for $323,752, which Skannal received by check and deposited. Second was a two-page "Mineral Deed with Assignment of Leases" whereby Skannal sold the naked ownership of all his mineral interests to the Bamburgs for $120,000, which Skannal received by check and deposited. The mineral deed was subject to Skannal's lifetime usufruct. Ms. DeLaune notarized these acts; as on the prior occasion, she and the witnesses testified that Skannal appeared sober and sentient, but they were unaware of his medical condition, and there was no other attorney present to advise him separately. These were the other two contracts nullified by the court.

Subsequent Events and Procedural History

After these events, Skannal's health deteriorated rapidly. Jimmy Pete Burks was bringing him liquor all the time, and the staff at The Arbor reported that Skannal was usually drunk and ornery, fell down frequently, and could not control his bowels. Because drinking was against The Arbor's regulations, Dennis moved him to Garden Court, where the situation continued. In moments of apparent lucidity, however, he began telling Burks that "they" had robbed him blind and that he had nothing left. By "they," he meant the Bamburgs. Burks relayed this information to Elizabeth, who contacted her two brothers, A.C. and Barron. The children then revived a relationship with their moribund father, and in March 2005 they took him to attorney John Odom's office and painted the whole scenario.

On March 14, Skannal filed this suit to rescind his contracts with the Bamburgs, dating back to 1999, on grounds of incapacity, error, fraud and lesion. Skannal died in November 2005, and his son Barron (an undertaker in Texas), ...

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