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American Bank and Trust v. Singleton

Court of Appeals of Louisiana, First Circuit

November 1, 2017

AMERICAN BANK AND TRUST
v.
E. LYNN SINGLETON AND SINGLETON FARM, INC.

         APPEALED FROM THE 21st JUDICIAL DISTRICT COURT ST. HELENA PARISH, LOUISIANA DOCKET NUMBER 22, 106, DIVISION "B" HONORABLE CHARLOTTE FOSTER, JUDGE

          Hansel M. Harlan Baton Rouge, Louisiana Scott H. Sledge Hammond, Louisiana Attorneys for Plaintiff/ Appellant American Bank and Trust

          Lisa Brener New Orleans, Louisiana Attorney for Defendant/ Appellee Singleton Farm, Inc.

          BEFORE: WHIPPLE, C.J., McDONALD, and CHUTZ, JJ.

          Mcdonald, J.

         In this appeal, a bank, as mortgagee, challenges a judgment ordering cancelation of a mortgage on a corporation's immovable property and also ordering the bank to pay attorney fees and costs to the corporation for the bank's failure to timely dismiss one of its claims against the corporation. We reverse in part and affirm in part.

         FACTUAL AND PROCEDURAL BACKGROUND

         Singleton Farm, Inc. (SFI) is a Louisiana corporation in Greensburg, Louisiana.[1]SFI was incorporated in 1992 by Ernest and Evelyn Singleton, the original two directors. At some point, Mr. and Mrs. Singleton transferred ownership of their farm to SFI, which included about 157 acres of land containing a farm house, a dairy barn, three ponds, and some patches of timber (Singleton Farm). Records on file with the Louisiana Secretary of State show that Mr. and Mrs. Singleton were the only two SFI directors until their respective deaths in November and December 2001.

         Mr. and Mrs. Singleton had one son, Ernest "Lynn" Singleton, an attorney whose practice was also in Greensburg. After his parents died, Lynn Singleton did not institute succession proceedings to deal with their estates. In 2001, however, he filed SFI's 2001 domestic corporation annual report with the Secretary of State, listing his deceased father and his surviving mother as directors, and signing the form designating himself as SFI's "President]." In 2004, he again filed SFI's 2004 annual report, marking through his father's name as a director, and writing in his own name, address, and identifying himself as SFI's "President." Similar annual reports, identifying Lynn Singleton as SFI's president, were filed for later years, including 2007, 2008, 2009, and 2011.

         In August 2010, Lynn Singleton personally obtained a $225, 550 loan from American Bank and Trust (AB&T) with the stated purpose of "improvements to farm." The proceeds of this first loan were deposited into SFI's bank account. In July 2012, Lynn Singleton renewed the loan and borrowed additional money, for "business expenses, " totaling $240, 747.65. And, in November 2012, he obtained a third loan for $13, 650 for "business expenses." All three loans to Lynn Singleton were secured by a multiple indebtedness mortgage on Singleton Farm (the Mortgage), executed by him as SFI's purported president. At trial, Lynn Singleton testified that he used the loan proceeds to pay bills, to carry on his dozer business, and for his law practice.

         In 2013, Lynn Singleton had developed Parkinson's disease, had had a long-term alcohol abuse problem, and was committed to a mental institution. In June 2013, his daughter, Stacy Head, was helping to clean out her father's office in preparation to close his law practice. She discovered her deceased grandparents' executed but unprobated wills, in which Mr. and Mrs. Singleton had left all of their property to each other, and if one predeceased the other, then each spouse left all of his/her property to Lynn's children, Ms. Head and her brother, Michael Singleton (grandchildren), to share.[2] This property included all SFI stock. Ms. Head also discovered documents showing that her father had previously obtained the three loans from AB&T and, as SFI's purported president, had granted AB&T the Mortgage to secure the loans. Before June 2013, the grandchildren did not know their grandparents had left wills naming them as legatees.

         In July 2013, the grandchildren filed a petition, alleging the discovery of their grandparents' attached wills; that Mrs. Singleton had become Mr. Singleton's universal legatee in accordance with his will when he died in November 2001; that the grandchildren had become Mrs. Singleton's universal legatees in accordance with her will when she died in December 2001; and requesting that they be put into possession, without administration, of her property. On July 29, 2013, a district court signed a judgment of possession, recognizing the grandchildren as Mrs. Singleton's universal legatees, and giving them possession of enumerated property, including "[a]ll right, title and interest in and to 100% of corporate stock of [SFI]." Two days later, the grandchildren's attorney wrote a letter to AB&T, claiming that the Mortgage was invalid and asking that it be released. Also, about that time, SFI filed updated records with the Secretary of State listing Ms. Head as SFI's president and registered agent.

         AB&T then filed a petition for executory process against Lynn Singleton and SFI, alleging that Lynn Singleton had defaulted on the three loans and seeking seizure and sale of Singleton Farm to satisfy his outstanding debt. SFI responded with an application for preliminary injunction to stop the seizure and sale of its property. After a hearing, the district court signed a judgment temporarily enjoining AB&T from proceeding with the sale, after finding that AB&T had not done "enough to protect [its] interest" before making the loans to Lynn Singleton.

         AB&T later filed an amended petition, converting the matter to an ordinary proceeding and adding a claim for damages against SFI (in addition to the in rem claim against Singleton Farm), in the event the Mortgage against Singleton Farm was found unenforceable. According to AB&T, Lynn Singleton transferred part of the loan proceeds to SFI, and AB&T was entitled to recover those funds from SFI. SFI answered the amended petition, discovery was conducted, motions were filed, ...


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