GE Commercial Finance Business Property Corporation VS Louisiana Hospital Center, L.L.C., Badr Idbeis, Steven J. Phillips, Stephen J. Harris and Hammond Area Development District
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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NO 2010 CA 1838 GE COMMERCIAL FINANCE BUSINESS PROPERTY CORPORATION VERSUS LOUISIANA HOSPITAL CENTER L BADR IDBEIS C STEVEN J PHILLIPS STEPHEN J HARRIS AND HAMMOND AREA DEVELOPMENT DISTRICT Judgment rendered June 10 2011 i t Appealed from the 21st Judicial District Court uv in and for the Parish of Tangipahoa Louisiana Trial Court No 20080000776 Honorable M Douglas Hughes Judge STEPHEN P STROHSCHEIN ATTORNEY FOR PLAINTIFF APPELLEE BATON ROUGE LA GE COMMERCIAL FINANCE BUSINESS PROPERTY CORPORATION ROBERT KNIGHTS ATTORNEY FOR METAIRIE LA DEFENDANTS APPELLANTS STEPHEN J HARRIS BADR IDBEIS and STEVEN J PHILLIPS BEFORE KUHN PETTIGREW AND HIGGINBOTHAM 31 a PETTIGREW J In this case appellants challenge a partial summary judgment rendered in favor of plaintiffs on the issue of liability pursuant to loan documents entered into between the parties For the reasons that follow we affirm FACTS AND PROCEDURAL HISTORY According to the record GE Commercial Finance Business Property Corporation GECF is the holder and owner of a promissory note entitled Amended and Restated Promissory Note executed by Louisiana Hospital Center L LHC C 2007 for the amount of 18 the Note 00 000 dated January 31 The Note amended and restated an earlier promissory note in the amount of 15 that LHC had executed in 00 000 favor of GECF on February 25 2005 LHC executed the Note to acquire financing from GECF for the construction of a medical office and hospital facility in Hammond Louisiana As security for the financing LHC executed a Multiple Indebtedness Mortgage Assignment of Leases and Rents Security Agreement and Fixture Filing as well as a separate Assignment of Leases and Rents in favor of GECF As additional security for the Note Badr Idbeis Steven J Phillips Stephen J Harris and twenty other individuals executed an unlimited guaranty agreement entitled Amended and Restated Guaranty Agreement Construction Loan on January 31 2007 This guaranty amended and restated an earlier unlimited guaranty entitled Guaranty Agreement Construction Loan that was executed by the same guarantors on various dates in favor of GECF as security for the original promissory note in the amount of 15 00 000 LHC executed a Construction Loan Agreement with GECF which governs the terms and conditions of the Note as well as the scope of LHC obligations under the various loan documents s described above In order to acquire certain tax incentives LHC executed an Act of Sale on February 1 2006 whereby it transferred the hospital to the Hammond Area Economic and Industrial Development District HAEIDD The sale was made subject to GECF s Mortgage and Assignment of Leases and Rents In connection with the sale HAEIDD then leased the hospital back to LHC and issued a taxable revenue bond entitled Taxable kil Revenue Bond Louisiana Hospital Center L Project Series 2006 to GECF in the C amount of 15 the Bond 00 000 The Bond was governed by the Indenture of Mortgage and Pledge executed between HAEIDD and Hancock Bank of Louisiana the Trustee of the Bond According to the clear language of the Bond it was issued to represent the same concurrent indebtedness as the indebtedness that was owed under the Note In that regard the Bond states in pertinent part as follows The Issuer HAEIDD hereby agrees that this Bond shall be a concurrent and coterminous obligation as the Promissory Note with both being payable solely from amounts made directly by the Lessee LHC or made available by the Lessee Any and all payments on the Promissory Note shall constitute payment and discharge of a like amount on this Bond and any and all payments on this Bond shall be deemed to constitute payment and discharge of a like amount on the Promissory Note This Bond shall be subject to all the interest rate features payment features interest rate calculation procedures prepayment provisions default rate and all other terms of the Promissory Note PAYMENTS ON THIS BOND SHALL NOT EXCEED OR BE LESS THAN PAYMENTS DUE AND PAYABLE ON THE PROMISSORY NOTE Emphasis in original Likewise the terms of the lease agreement between HAEIDD and LHC are equally as explicit in declaring that the lease would not disturb the Note between GECF and LHC The lease provides as follows WHEREAS the Lessor HAEIDD the Lessee LHC and the Bondholder GECF desire to pursue the Bonds in a manner that will not disturb the existing Conventional Financing but instead have the Bonds represent a duplicative obligation of the Lessee to pay the loan in this case through the Bonds issued by the Lessor but payable solely from payments made by the Lessee On October 1 2007 LHC failed to make the regular monthly payment due on the Note and GECF notified LHC that all amounts would be accelerated if the October monthly payment was not made by October 22 2007 On October 15 2007 LHC made a partial monthly payment which did not cure the outstanding event of default on the Note Thus GECF accelerated the entire balance due under the Note and made amicable demand on LHC and the guarantors to pay the outstanding balance of the Note in full In addition to defaulting on the Note LHC failed to make payment on the principal and interest due on the Bond as of October 2007 thereby constituting a default under the lease between HAEIDD and LHC LHC also failed to pay its annual administrative fees 3 failed to meet operating and employment requirements of the lease and failed to make rental payments under the lease all breaches of the lease between HAEIDD and LHC As a result in February 2008 HAEIDD notified LHC that it was invoking acceleration making all payments under the lease immediately due and payable On March 7 2008 in response to LHC default on the Note GECF filed its Suit on s Note and for Recognition of Security Interests to begin foreclosing on the hospital Named as defendants in the suit were LHC Badr Idbeis Steven J Phillips Stephen J Harris and HAEIDD On April 9 2008 HAEIDD filed its answer and crossclaim against LHC Pursuant to an order of the trial court GECF was subsequently granted a Writ of Sequestration for the seizure of the hospital and Gulf States Real Estate Services was appointed to act as physical keeper of the properly On May 19 2008 the remaining defendants filed an answer and third party demand generally denying the allegations contained in GECF petition and further naming as thirdparty defendants the other s twentyone guarantors whom the defendants alleged were solidarily bound with them as guarantors for the alleged indebtedness of LHC to GECF Thereafter GECF filed a motion for partial summary judgment to establish the liability of the defendants and to declare the validity of its security interests HAEIDD also filed a motion for partial summary judgment seeking to establish that it validly accelerated the lease payments and that LHC is justly liable to HAEIDD for all such unpaid amounts Following a hearing on September 30 2008 the trial court granted both motions in favor of GECF and HAEIDD The trial court signed a judgment in favor of GECF on October 15 2008 The judgment in favor of HAEIDD was signed on November 10 2008 Idbeis Phillips and LHC filed motions for new trial as to the judgments rendered in favor of GECF and HAEIDD which were both denied following a hearing before the trial court on December 8 2008 Also argued at that time was the fact that 1 According to the record Harris began appearing pro se effective September 9 2008 and did not join in with the other defendants in the motions for new trial C the trial court had not designated either of the two judgments as appealable judgments Thus the parties asked the trial court to make a determination as to the finality of said judgments After hearing arguments on this issue the trial court asked the parties to submit memorandums supporting their respective positions Thereafter on February 10 2009 the trial court issued an Amended and Restated Judgment on Motion for Partial Summary Judgment restating in its entirety the October 15 2008 judgment in favor of GECF but adding the designation of finality to the judgment Similarly on March 23 2009 the trial court issued an Amended and Restated Judgment on Motion for Partial Summary Judgment restating in its entirety the November 10 2008 judgment in favor of HAEIDD and adding the designation of finality to the judgment On April 7 2009 Idbeis Phillips and LHC filed a motion and order for appeal from the partial summary judgments and amended and restated partial summary judgments rendered in favor of both GECF and HAEIDD According to this court s records there were two appeals lodged in this matter 1 the appeal currently before us which was docketed on October 7 2010 under docket number 2010 CA1838 and concerns only the judgment rendered in favor of GECF and 2 the appeal of the judgment rendered in favor of HAEIDD which was docketed on October 14 2010 under docket number 2010CA1881 On November 18 2010 the appeal in 2010CA1881 was dismissed with prejudice on motion of the appellants Thus the November 10 2008 judgment rendered in favor of HAEIDD as amended and restated on March 23 2009 is a final judgment and not at issue in the appeal that is before us now z Although Harris did not join in the motion for appeal appellants brief indicates it was filed on his behalf Nonetheless the judgment rendered in favor of GECF against Harris is final as Harris may not now be added as an appellant simply by adding his name to an appellant brief See La Code Civ P art 2121 Baton Rouge Ass of School Employees Local 100 Service Employees Intern Union AFL CIO v East n Baton Rouge Parish School Bd 980526 p 78 La App 1 Cir 4 729 So 1154 1159 writ 99 1 2d denied 991278 La 7 747 So 19 99 2 2d s On the same day that the appeal was filed Idbeis Phillips and LHC also applied for supervisory writs to this court arguing that the GECF and HAEIDD judgments should not have been declared final and appealable The writ application was denied GE Commercial Finance Business Property Corporation v Louisiana Hospital Center L 2009 0752 La App 1 Cir 10 unpublished writ action C 15 ASSIGNMENTS OF ERROR In brief to this court Idbeis Phillips and LHC hereinafter collectively referred to as appellants 1 assign the following specifications of error for our review The Trial Court refusal to grant Appellants Motion for New Trial s was an abuse of discretion andor clearly contrary to the law andor evidence 4 2 3 s GECF monetary claims were subject to remission andor novation GECF did not adequately support its claims for keeper expenses third party charges and attorney fees 53 s 5 s HAEIDD claims had been remitted C There were disputed areas of material fact with regard to HAEIDD s accelerationtermination of the lease 6 There were disputed areas of material fact with regard to GECF s 4 and HAEIDD status as co and remission of the debt by s obligees termination of the lease MOTION FOR NEW TRIAL Assignment of Error No 1 The appellants filed a motion urging the trial court to grant a new trial to reconsider and reverse the judgment on the motion for partial summary judgment in favor of GECF on the grounds that it was contrary to the law and evidence with respect to the issues of liability The standard of appellate review of a denial of a motion for new trial whether on peremptory or discretionary grounds is the abuse of discretion standard Rao v Rao 2005 0059 p 7 La App 1 Cir 11 927 So 356 361 writ denied 2005 05 4 2d 2453 La 3 925 So 1232 Based on our analysis of the merits of this case 06 24 2d the trial court judgment was not contrary to the law and the evidence Thus appellants s were not entitled to a new trial on that peremptory basis see La Code Civ P art 1 1972 and the trial court did not abuse its discretion in denying the motion for new 4 he T established rule in this circuit is that the denial of a motion for new trial is an interlocutory and non appealable judgment McKee v Wal Mart Stores Inc 20061672 p 8 La App 1 Cir 6 07 8 964 So 1008 1013 writ denied 2007 1655 La 10 966 So 583 However the court may 2d 07 26 2d consider interlocutory judgments as part of an unrestricted appeal from a final judgment Bailey v Robert V Neuhoff Ltd Partnership 950616 pp 3 4 La App 1 Cir 11 665 So 16 18 writ 95 9 2d denied 952962 La 2 667 So 534 96 9 2d Because appellants challenge of the trial court denial of s their motion for new trial is part of the appeal from the final judgment we may consider the issue on appeal 5 Assignment of error number three pertains to monetary issues unrelated to the judgment on appeal Therefore these issues are not properly before us for review 6 Because the judgment against HAEIDD is not before us for review we will not address assignments of error numbers four or five as they pertain to issues directly related to said judgment 2 trial in that respect Moreover we find no abuse of discretion in the trial court denial s of a new trial on discretionary grounds See La Code Civ P art 1973 This assignment of error is without merit SUMMARY JUDGMENT Assignments of Error Nos 2 and 6 A motion for summary judgment is a procedural device used to avoid a full scale trial when there is no genuine issue of material fact Gonzales v Kissner 2008 2154 p 4 La App 1 Cir 9 24 So 214 217 Summary judgment is properly 09 11 3d granted if the pleadings depositions answers to interrogatories and admissions on file together with affidavits if any show that there is no genuine issue of material fact and that mover is entitled to judgment as a matter of law La Code Civ P Art 966 B Summary judgment is favored and is designed to secure the just speedy and inexpensive determination of every action La Code Civ P art 966 Aucoin v 2 A Rochel 20081180 p 5 La App 1 Cir 12 5 So 197 200 writ denied 08 23 3d 20090122 La 3 5 So 143 09 27 3d On a motion for summary judgment the burden of proof is on the mover If however the mover will not bear the burden of proof at trial on the matter that is before the court on the motion for summary judgment the mover burden on the s motion does not require that all essential elements of the adverse party claim action s or defense be negated Instead the mover must point out to the court that there is an absence of factual support for one or more elements essential to the adverse party s claim action or defense Thereafter the adverse party must produce factual evidence sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial If the adverse party fails to meet this burden there is no genuine issue of material fact and the mover is entitled to summary judgment La Code Civ P art 2 C 966 Robles v ExxonMobile 2002 0854 p 4 La App 1 Cir 3 844 03 28 2d So 339 341 In ruling on a motion for summary judgment the trial court role is not to s evaluate the weight of the evidence or to determine the truth of the matter but instead VA to determine whether there is a genuine issue of triable fact Guardia v Lakeview Regional Medical Center 20081369 p 3 La App 1 Cir 5 13 So 625 09 8 3d 628 A trial court cannot make credibility decisions on a motion for summary judgment Monterrey Center LLC v Education Partners Inc 2008 0734 p 10 La App 1 Cir 12 5 So 225 232 In deciding a motion for summary judgment the trial 08 23 3d court must assume that all of the witnesses are credible Independent Fire Ins Co v Sunbeam Corp 992181 pp 1617 La 2 755 So 226 236 00 29 2d Despite the legislative mandate that summary judgments are now favored factual inferences reasonably drawn from the evidence must be construed in favor of the party opposing the motion and all doubt must be resolved in the opponent favor s Willis v Medders 20002507 p 2 La 128 775 So 1049 1050 per curiam 00 2d Appellate courts review evidence de novo under the same criteria that govern the trial s court determination of whether summary judgment is appropriate Boudreaux v Vankerkhove 20072555 p 5 La App 1 Cir 8 993 So 08 11 2d 725 729 730 An appellate court thus asks the same questions as does the trial court in determining whether summary judgment is appropriate whether there is any genuine issue of material fact and whether the mover appellant is entitled to judgment as a matter of law Ernest v Petroleum Service Corp 2002 2482 p 3 La App 1 Cir 11 868 So 96 97 writ denied 2003 3439 La 2 866 So 830 03 19 2d 04 20 2d In Smith v Our Lady of the Lake Hosp Inc 932512 p 27 La 7 94 5 639 So 730 751 the Louisiana Supreme Court set forth the following parameters for 2d determining whether an issue is genuine or a fact is material A genuine issue is a triable issue More precisely a issue is n If on the state of the genuine if reasonable persons could disagree evidence reasonable persons could reach only one conclusion there is no need for a trial on that issue Summary judgment is the means for disposing of such meretricious disputes In determining whether an issue is genuine courts cannot consider the merits make credibility Formal determinations evaluate testimony or weigh evidence allegations without substance should be closely scrutinized to determine if they truly do reveal genuine issues of fact A fact is material when its existence or nonexistence may be essential to plaintiffs cause of action under the applicable theory of acts F are material if they potentially insure or preclude recovery 8 recovery affect a litigant ultimate success or determine the outcome of s the legal dispute Simply put a material fact is one that would matter on the trial on the merits Any doubt as to a dispute regarding a material issue of fact must be resolved against granting the motion and in favor of a trial on the merits Citations omitted Because it is the applicable substantive law that determines materiality whether a particular fact in dispute is material can be seen only in light of the substantive law applicable to this case Guardia 20081369 at 4 13 So at 628 3d On appeal appellants argue that s GECF claims against appellants were extinguished through the novation created when LHC obligation to repay the financing s for the hospital project to GECF was replaced by the clearly new obligation of LHC to make lease payments to HAEIDD Thus we understand appellants argument to be whether there was a novation extinguishing GECF existing obligation by the substitution s of a new one and that there is a genuine issue of material fact regarding the novation GECF counters that there was never any intent for the Bond to replace the Note Rather the Bond was issued solely for the purpose of allowing LHC to obtain tax benefits As attested to by Barbara D Atkinson Vice President of GECF A parties intended for II the Note and the Bond to represent the same debt GECF never intended for the Bond to cancel or extinguish the Note in any respect as the language of the Bond clearly evidences GECF points to language in the Bond that provides as follows Except as otherwise provided in the Lease Agreement andor the Indenture nothing herein shall limit the rights and remedies of the Bondholder GECF under the Note the Construction Loan Agreement or any of the other documents executed in connection therewith GECF further contends that appellants novation argument fails because of the chronology of events As previously discussed the original Note was executed in February 2005 the Bond was executed in February 2006 and the Amended and Restated Note was executed in January 2007 As argued by GECF there would have been no need for the Amended and Restated Note in January 2007 if indeed there had been a novation of the original Note with the execution of the Bond in February 2006 Novation is the extinguishment of an existing obligation by the substitution of a new one La Civ Code art 1879 The intention to extinguish the original obligation 9 must be clear and unequivocal Novation may not be presumed La Civ Code art 1880 Louisiana Civil Code article 1881 provides Novation takes place when by agreement of the parties a new performance is substituted for that previously owed or a new cause is substituted for that of the original obligation If any substantial part of the original performance is still owed there is no novation Novation takes place also when the parties expressly declare their intention to novate an obligation Mere modification of an obligation made without intention to extinguish it does not effect a novation The execution of a new writing the issuance or renewal of a negotiable instrument or the giving of new securities for the performance of an existing obligation are examples of such a modification The determining factor is the intention of the parties The intention to novate may be shown by the character of the transaction the facts and circumstances surrounding it as well as by the terms of the agreement itself Schillace v Channell Shopping Partnership 623 So 45 47 La App 1 Cir 1993 2d After a thorough review of the facts and evidence presented and in light of the law regarding novation we are convinced that no cancellation or substitution of the original Note and its outstanding obligations ever occurred There is no indication in the record that the parties desired or intended to effect a novation with the issuance of the Bond and lease agreement between HAEIDD and LHC Rather it appears that the Bond was issued solely for the purpose of allowing LHC to obtain certain tax benefits The parties always intended for the original Note and the Bond to represent the same debt However as is clearly evidenced by the record GECF never intended for the Bond to cancel or extinguish the Note in any respect Thus we find no novation in this case Appellants also argue that GECF claims against appellants were remitted in whole s or in part as a result of the termination by HAEIDD of its lease with LHC Appellants submit that because GECF and HAEIDD are solidary obligors the termination of the lease by HAEIDD remitted and extinguished the LHC debt to both of its solidary obligees GECF and HAEIDD GECF responds that to the extent that any solidary obligation was owed by LHC it was owed to GECF and Hancock Bank of Louisiana the Trustee of the Bond not to 10 HAEIDD GECF argues Since the obligations owed by LHC to HAEIDD and GECF are separate and distinct the argument that HAEIDD termination of the I somehow s ease remitted the indebtedness owed under the Note is fundamentally flawed In support of its argument that the obligations owed by LHC to HAEIDD and GECF are separate and distinct GECF cites to Section 4 of the lease agreement entitled Rents and Other 3 Amounts Payable each with a distinct obligation owed by LHC to a distinct party or parties Subsection a requires LHC to pay Hancock Bank of Louisiana any and all amounts owed under the Bond Under subsection b LHC is obligated to pay Hancock s Bank annual fees and costs Subsection c requires LHC to pay any non exempted ad valorem and sales taxes to the requisite taxing authority that was owed same Finally subsection d mandates that LHC must pay a yearly administrative fee to HAEIDD in the amount of 145 GECF also points to Section 9 of the lease as support for its 00 000 2 argument that LHC obligations under the Note were not to be disturbed and more s specifically would survive any default remedies taken by HAEIDD in enforcement of the lease agreement including termination of same We agree with GECF that appellants remission argument has no merit Pursuant to La Civ Code art 1888 A remission of debt by an obligee extinguishes the obligation That remission may be express or tacit The affirmative defense of remission of a debt is never presumed unless it clearly appears that a creditor intended it The burden of proving remission express or tacit rests with those claiming the benefit Simpson v Goodman 972675 p 10 La App 1 Cir 98 28 12 727 So 555 562 Based on the clear and unambiguous language of the 2d Bond documents and the lease agreement the appellants did not meet the burden of proving that LHC obligation under the Note was remitted either expressly or tacitly s As previously indicated the lease agreement provides that the parties desired to pursue the Bonds in a manner that will not disturb the existing Conventional Financing 8 Section 9 of the Lease provides the remedies available upon default and the following agreement to 2 which the parties agreed No action taken pursuant to this Section including the repossession of the Leased Facilities or termination of the Lease Term shall relieve the Lessee LHC from the Lessee s obligation pursuant to Section 4 hereof all of which shall survive any such action 3 11 The obligations owed by LHC to HAEIDD and GECF were separate and distinct Thus termination of the lease agreement by HAEIDD had no impact on LHC obligation to s GECF under the Note We have thoroughly reviewed the evidence in the record and agree with the trial s court conclusion that partial summary judgment as to the issue of appellants liability under the Note was warranted The arguments made by appellants on appeal are without merit Appellants failed to bear their burden of producing evidence there were genuine issue of material fact remaining as to any of the issues relative to their liability under the Note Accordingly summary judgment was appropriate CONCLUSION For the above and foregoing reasons we find no error in the trial court ruling s granting partial summary judgment in favor of GECF on the issue of liability Thus we affirm the February 10 2009 judgment of the trial court All costs associated with this appeal are assessed against appellants Badr Idbeis Steven J Phillips and Louisiana Hospital Center L C AFFIRMED 12 GE COMMERCIAL FINANCE FIRST CIRCUIT BUSINESS PROPERTY CORPORATION VERSUS COURT OF APPEAL LOUISIANA HOSPITAL CENTER L BADR IDBEIS C STEVEN J PHILLIPS STEPHEN STATE OF LOUISIANA J HARRIS AND HAMMOND AREA DEVELOPMENT DISTRICT NO 2010 CA 1 838 KUHN J dissenting I respectfully disagree with the majority implicit conclusion that the s judgment granting partial summary judgment in favor of GECF is appealable I do not believe the judgment is appealable under La C art 1915A I P 3 point out that the judgment does specify the amount owed on the debt expressly requiring that the parties return to court to have an amount set This deficiency is underscored by the fact that the judgment creates a judicial mortgage records reserves required to be recorded in the mortgage and conveyance but without a decree of the amount Lastly I note that the judgment rights against unnamed parties thereby demonstrating the interlocutory nature of the decree Because I agree that trial court correctly ruled upon those matters before it if this court were to convert the appeal to a writ application I would deny the writ
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