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American Turbine Technology, Inc. v. Omni Bancshares, Inc.

Court of Appeals of Louisiana, Fifth Circuit

May 31, 2017





          Panel composed of Susan M. Chehardy, Jude G. Gravois, and Stephen J. Windhorst







         In this appeal, plaintiff, American Turbine Technology, Inc., seeks review of the district court's July 14, 2016 judgment granting summary judgment in favor of defendant, Omni Bank, and dismissing plaintiff's action with prejudice. For the reasons that follow, we reverse this judgment and remand the matter for proceedings consistent with this opinion.


         Philip Pawlicki is the sole shareholder and president of American Turbine Technology, Inc. ("American"). Mr. Pawlicki hired Nicole Nicholas in 1999 as office coordinator and fired her in 2010 after discovering that she had converted company funds to her personal use. As office coordinator, Ms. Nicholas had a wide array of responsibilities, which included, among many other things, receiving mail, answering phones, bookkeeping, and managing all aspects of the company's finances. Because Mr. Pawlicki travelled a lot for business, Ms. Nicholas was also permitted, with the requisite authorization, to conduct company business on behalf of the company with a facsimile stamp of Mr. Pawlicki's signature.

         On April 12, 2000, American obtained a $150, 000 line of credit from Omni Bank ("Omni"), evidenced by a promissory note (the "master note") in that amount signed by Mr. Pawlicki on behalf of American. This was secured with, among other things, a collateral mortgage on Mr. Pawlicki's personal property and a personal guaranty by Mr. Pawlicki. Terry Hall was the Omni loan officer who assisted Mr. Pawlicki in opening this line of credit and was assigned to manage it. Mr. Hall was replaced by Brian Heiden in 2003.

         Mr. Pawlicki testified that when requesting a disbursement on this line of credit, he did so orally over the phone with Omni. He maintains that he only made three oral requests on the credit line: $10, 000, $25, 000, and $10, 000. Conversely, Ms. Nicholas testified that Mr. Pawlicki notified her when he wanted to draw on the line of credit, and that she submitted the requests to Omni via fax stamped with his signature.

         There was also disagreement as to where the funds were deposited after they were disbursed. Mr. Pawlicki explained it was his understanding that the funds were wired directly into American's primary operating account at Chase Bank (formerly "Bank One"). On the other hand, both Mr. Heiden and Ms. Nicholas explained that the disbursed funds were initially deposited into American's account at Omni. Though Mr. Pawlicki disputes that this account existed, Mr. Heiden attested that Omni's records indicate a bank account was opened at Omni in the name of American in connection with the line of credit. Additional evidence in the record reflects that a commercial checking account in the name of American was opened at Omni on May 10, 2000; and the signature card executed at the time this account was opened expressly permitted the use of facsimile signatures in connection with the account. Notwithstanding this evidence, Mr. Pawlicki persistently repudiated any knowledge of this account. But according to Ms. Nicholas and Mr. Heiden, it was into this account that funds disbursed on the line of credit were first deposited. Ms. Nicholas then issued checks from this Omni account with the signature stamp and deposited them into the Chase account, from where they were put to company use, according to her.

         American alleges that Ms. Nicholas abused this process between May 2002 and December 2003 whereby she used the signature stamp without Mr. Pawlicki's authorization to request disbursements of funds from the line of credit, totaling $140, 000.[1] American contends that after the funds had been transferred from the Omni account to the Chase account, Ms. Nicholas converted the funds from the Chase account to her personal use. Thus, American concedes in its brief that "the advances transferred by [Ms. Nicholas] from Omni Bank to Bank One/Chase cannot be linked directly to specific acts of theft by [Ms. Nicholas] on specific dates."

         Ms. Nicholas denies these allegations. She avows that each of these disbursement requests was made at Mr. Pawlicki's instruction and that the funds were ultimately put to company use. As it turned out, Ms. Nicholas pled guilty in federal court to forgery in 2013 and was ordered to pay restitution to Mr. Pawlicki in the amount of $65, 295.73. The factual basis offered by the government for this guilty plea was that Ms. Nicholas issued unauthorized checks from American's Chase account with Mr. Pawlicki's signature stamp totaling $65, 295.73 for private school tuition, mortgage payments, and other personal items.

         American also alleges that Ms. Nicholas took additional steps to conceal and continue her crime. American contends that Ms. Nicholas used Mr. Pawlicki's signature stamp without his authorization to renew the line of credit at Omni. The line of credit was renewed annually on five occasions: April 25, 2001, April 29, 2002, September 26, 2003, September 24, 2004, and February 23, 2006.[2] Mr. Pawlicki admits that he authorized the renewals in 2001 and 2002, but alleges that Ms. Nicholas forged the latter three. Ms. Nicholas denies that she forged any of these documents. Mr. Heiden testified that he could not specifically recall witnessing Mr. Pawlicki signing the renewals, but he explained that he often dropped off the documents to Ms. Nicholas and received them back bearing Mr. Pawlicki's signature.

         In or around June of 2006, the line of credit reflected an outstanding balance of approximately $101, 000. This balance evidently had not changed for some time, as Mr. Heiden explained that the outstanding balance as of December 31, 2004 was $101, 111. This debt was reflected in American's 2004 corporate income tax return, in which the line for "Mortgages, notes, bonds payable in less than 1 year" reflected an amount of $101, 111. Although Mr. Pawlicki stated that he had not signed this return that was filed with the IRS, he acknowledged that it bore his signature stamp and was dated September 12, 2006. So, because the line of credit was still stagnant in June of 2006, Omni did not offer to renew the line of credit. Instead, it was converted to an amortized term loan. American alleges that the promissory note executed on June 16, 2006 converting the line of credit to this term loan was also forged by Ms. Nicholas.

         American further claims that Ms. Nicholas changed American's address on file with Omni without Mr. Pawlicki's authorization in her efforts to conceal her crime. In March of 2002, Omni received a request to change American's address on file to a P.O. Box. Ms. Nicholas explained that she submitted this request at Mr. Pawlicki's instruction to facilitate the receipt of company mail. As a result, for a time, all correspondence from Omni was sent to the P.O. Box, of which Mr. Pawlicki maintains he was unaware.

         Mr. Heiden attested that in connection with American's bank account, Omni sent by U.S. mail monthly account statements to the address on file, which was at various times American's business address and the P.O. Box. In connection with American's line of credit, Mr. Heiden attested that Omni sent by U.S. mail statements and notices regarding the loan and guaranty to the address on file, which was at various times American's business addresses, [3] Mr. Pawlicki's personal addresses, and the P.O. Box.

         Mr. Pawlicki maintains that he never received or reviewed any statements from Omni. He also admitted that he never received or reviewed any statements from American's Chase account. Indeed, Ms. Nicholas stated that she never saw Mr. Pawlicki look at any bank statements. Mr. Pawlicki even admitted that had he timely reviewed American's bank statements, he would have discovered the alleged misappropriations.

         Mr. Pawlicki also admitted that he never reviewed or sought to review documents from Omni to ensure that debt on the line of credit was being paid off. He just "assumed" there was no balance. Based on this assumption, and despite knowing that annual renewals were required for the line of credit, Mr. Pawlicki disregarded the lack of correspondence from Omni and chose not to inquire further into the matter.

         This was in keeping with Mr. Pawlicki's hands-off management style. He admitted that he never reviewed any of American's files, books, records, or any other financial documents, because, as he explained, "It wasn't my style." He entrusted Ms. Nicholas to handle all of American's accounting, banking, and finances with minimal oversight.

         Eventually American's loan was placed into default. On December 24, 2007, Mr. Heiden sent by certified mail a letter to Mr. Pawlicki's home address advising him that the loan was in default. Mr. Pawlicki claimed that he never received this letter.

         Mr. Heiden followed this letter with another sent by certified mail on March 11, 2008 to Mr. Pawlicki's home address. In this letter, Omni advised Mr. Pawlicki that the collateral property securing the loan had been sold at a tax sale due to delinquent property taxes. The letter further explained: "As a reminder, you have pledged a mortgage of this property to secure the loan of American Turbine. The delinquent taxes are a violation of the mortgage and place your loan in default." This letter included a Certified Mail Receipt that Mr. Pawlicki acknowledged bore his signature. He explained that when he received this letter, he called Ms. Nicholas and told her, "You need to fix this." He had expected Ms. Nicholas to pay the property taxes on his personal properties as part of her job responsibilities.

         Then, in 2009, Mr. Pawlicki began receiving collection calls. He looked into the matter and learned that his bank statements had been sent to the P.O. Box of which he claimed no knowledge. This prompted him to further investigate his company's finances. Based on his investigation, Mr. Pawlicki determined that Ms. Nicholas had been misappropriating company funds from American's Chase account. Mr. Pawlicki closed the account and opened a new one on November 17, 2009.

         After discovering Ms. Nicholas' activities in the Chase account, Mr. Pawlicki began to investigate American's accounts with Omni. In a meeting with Mr. Heiden on or about March 14, 2010, Mr. Pawlicki claims he learned for the first time that the line of credit had been converted to a term loan and had an outstanding balance of $94, 876.72. Mr. Pawlicki admitted that after learning this, in or around this time, he made several payments on the loan totaling $90, 000.

         On March 9, 2011, American filed a "Petition for Nullity or Rescission of Contract, for Breach of Contract and for Damages for Conversion." In this petition, American named as defendants Omni, Ms. Nicholas, Ms. Nicholas' husband, and her father. American alleged that Ms. Nicholas had converted $140, 000 of company funds that originated from the Omni line of credit between May 2002 and December 2003 and that Mr. Pawlicki did not first learn of this until on or about March 14, 2010. American sought to recover from Omni on the bases that Omni had breached the master note by honoring unauthorized advance requests by Ms. Nicholas and that the ...

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