Rita Garlington Weekley Chapman Leger v. Bank of New York, Mellon

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

20-385

RITA GARLINGTON WEEKLEY CHAPMAN
LEGER, ET AL.

VERSUS

BANK OF NEW YORK MELLON, AS TRUSTEE OF THE GSAMP TRUST
2004-SEA-2

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APPEAL FROM THE
THIRTY-FIFTH JUDICIAL DISTRICT COURT
PARISH OF GRANT, NO. C-24670
HONORABLE WARREN D. WILLETT, DISTRICT JUDGE

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D. KENT SAVOIE
JUDGE

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Court composed of Elizabeth A. Pickett, Billy Howard Ezell, and D. Kent Savoie,
Judges.

AFFIRMED.

W. Alan Pesnell
Alan Pesnell Lawyer, LLC
120 E. Mark Street
Marksville, Louisiana 71351
(318) 717-2380
COUNSEL FOR PLAINTIFFS/APPELLANTS:
Rita Leger
Frances Leger

Amanda Stout
Johnathan G. Wilbourn
McGlinchey Stafford
301 Main, Suite 1400
Baton Rouge, Louisiana 70801
(225) 383-9000
COUNSEL FOR DEFENDANT/APPELLEE:
Bank of New York Mellon, As Trustee on behalf of the Registered
Certificate Holders of GSAMP Trust 2004-SEA-2 Mortgage Pass-Through
Certificates, Series 2004-SEA-A

SAVOIE, Judge.

Plaintiffs Rita and Francis Leger appeal the judgment of the trial court,

granting Defendant Bank of New York Mellon’s motion for summary judgment

and dismissing their claims with prejudice. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

On November 12, 1999, Rita and Francis Leger entered into a mortgage

agreement with Bank One, N.A. for home improvements and re-financing of their

home in Pollock, Louisiana. The mortgage secured a promissory note executed by

the Legers in the principal amount of $85,125.00. Under the terms of the note, the

Legers were responsible for making payments monthly in the amount of $692.92

for 179 months, commencing February 12, 2000, with a balloon payment of the

outstanding principal amount and accrued, unpaid interest due and owing on

January 12, 2015. The promissory note was subsequently transferred from Bank

One to Bank of New York Mellon on March 31, 2004.

The Legers subsequently filed for bankruptcy, and on December 7, 2009, the

bankruptcy court entered an order declaring the mortgage current through July

2009. The bankruptcy court further ordered:

[T]hat the debtor shall resume making regular monthly mortgage
payments directly to MORTGAGE CREDITOR beginning with the
payment due for AUGUST, 2009, and the Trustee is relieved of any
further obligations under the plan to make payments to the Secured
Creditors after the disbursement of JULY 31, 2009.

The Legers’ last payment on the mortgage loan was March 25, 2010. On

October 26, 2011, Bank of New York Mellon commenced executory process and

foreclosure proceedings on the property.

The Legers filed a Petition to Rescind Contract on January 30, 2017. The

Legers contend that they never agreed to a balloon note and that “[t]here has been a

substantial error affecting the consent of [the Legers] to this loan contract and the

accompanying mortgage.” On February 3, 2020, Bank of New York Mellon filed

a motion for summary judgment alleging that the Legers cannot show that they are

entitled to rescission of the loan agreement or a cancellation of the mortgage. The

trial court entered judgment in favor of Bank of New York Mellon on March 18,

2020. The Legers now appeal.

ASSIGNMENTS OF ERROR

1. The trial court erred in finding that the parties agreed to a balloon
note and that there was no error present given the evidence before
the court.

2. The trial court erred in concluding that Bank of New York Mellon
was a holder in due course.

3. The trial court erred in considering the Louisiana Credit
Agreement Act.

LAW AND DISCUSSION

I. Motion for Summary Judgment Standard of Review

This court in Bourque v. Tony Chachere’s Creole Foods of Opelousas, Inc.,

20-371, p. 3 (La.App. 3 Cir. 10/28/20), 305 So.3d 949, 952, writ denied, 20-1372

(La. 1/26/21), 309 So.3d 347, explained:

Appellate courts review motions for summary judgment de
novo, using the identical criteria that govern the trial court’s
consideration of whether summary judgment is appropriate. Samaha v.
Rau, 07-1726 (La. 2/26/08), 977 So.2d 880. The reviewing court,
therefore, is tasked with determining whether, “the motion,
memorandum, and supporting documents show that there is no
genuine issue as to material fact and that the mover is entitled to
judgment as a matter of law.” La.Code Civ.P. art. 966(A)(3).

The burden of proof rests with the mover. Nevertheless, if the
mover will not bear the burden of proof at trial on the issue that is
before the court on the motion for summary judgment, the mover’s
burden on the motion does not require him to negate all essential
elements of the adverse party’s claim, action, or defense, but rather to
point out to the court the absence of factual support for one or more

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elements essential to the adverse party’s claim, action, or defense. The
burden is on the adverse party to produce factual support sufficient to
establish the existence of a genuine issue of material fact or that the
mover is not entitled to judgment as a matter of law. La.Code Civ.P.
art. 966(D)(1).

II. Assignment of Error Number One

The Legers first complain that the trial court erred in finding that the parties

agreed to a balloon note and that there was no error present. On this issue, the trial

court explains in its written reasons:

While consent may be vitiated by error, error only vitiates
consent when it concerns a cause without which the obligation would
not have been incurred and that cause was known or should have been
known to the other party. La.C.C. art. 1949; Peironnet v. Matador
Resources Co., 2012-2292 (La. 6/28/13), 114 So.3d 791, 807. In
determining whether to grant rescission, courts have considered
whether the error was excusable or inexcusable, granting relief when
error has been found to be excusable. Peironnet, 144 So.3d at 810.
Applying the legal principles here, [Bank of New York Mellon]
correctly argues that the purported error involves not the cause of the
contract but the repayment terms. The purpose of obtaining the loan
was to refinance and make home improvements; that was
accomplished. The alleged error concerning the payment terms was
unilateral, if it occurred, given the terms of the written agreements
clearly provided the loan was amortized at a fixed interest rate of 8.99%
with a balloon payment due on Jan. 12, 2015. The Legers simply
assert that they did not read the written documents they signed. This
is not excusable error upon which relief can be granted. See Tweedel
v. Brasseaux, 433 So.2d 133, 137 (La. 1983).

The Legers argue that they did not agree to a balloon note and that they

believed the loan would amortize in fifteen years. It is the Legers contention that

there was no meeting of the minds, and the issue is not ripe for summary judgment

because the factfinder must judge their mental state at the time of the signing of the

contract.

The Legers both testified that they would not have taken the loan had they

known it was a balloon note. They further testified that they were told that the loan

was a straight amortization loan, and they relied on those representations at closing.

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The Legers claim that, at the closing, a mass of documents was slid their way, and

they signed where they were told to sign.

The Bank One Promissory Note dated November 12, 1999, and signed by

both Rita and Francis Leger lists the principal amount of the loan as $85,125.000,

with an interest rate of 8.99%. The first two paragraphs of the note state:

PROMISE TO PAY. I promise to pay to the order of Bank One, NA
(“Lender”), the sum of Eighty Five Thousand One Hundred Twenty
Five & 00/100 Dollars (U.S. $85,125.00), together with simple
interest at the rate of 8.990% per annum assessed on the unpaid
principal balance of this Note as outstanding from time to time,
commencing on November 17, 1999 and continuing until this Note is
paid in full.

PAYMENT. This Note shall be payable as follows: The principal of
and interest on this Note shall be due and payable in 179 equal
monthly installments in the amount of $692.92 each, commencing on
February 12, 2000, and continuing on the same day of each month
thereafter, with one final installment in the amount of the principal
balance then outstanding, together with all accrued but unpaid interest,
being due and payable on January 12, 2015. The amount of each of
the foregoing scheduled payments includes principal and interest.
Interest on this Note is computed on a 365/365 simple interest basis;
that is, by applying the ratio of the annual interest rate over the
number of days in a year (366 during leap years), multiplied by the
outstanding principal balance, multiplied by the actual number of days
the principal balance is outstanding. The finance charge shown above
is based on the assumption that I will make payments exactly on the
date scheduled. If I pay early, the finance charge I pay may be less
than the amount shown. If I pay late, the finance charge that I pay
may be more than the amount shown. I will pay Lender at the address
designated by Lender from time to time in writing. Unless otherwise
agreed or required by applicable law, payments will be applied first to
accrued unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs and late charges.

In addition to the Bank One Promissory Note, Rita Leger signed a

Disclosure Statement with Bank One which lists the amount financed as

$81,286.00.1 Also listed in the document is a finance charge of $111,806.75. The

1
This amount represents the note principal ($85,125.00) less prepaid finance charges
($3,839.00).

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finance charge is defined as “[t]he dollar amount the loan will cost me.” The

Disclosure Statement states clearly that the total amount of the payments, defined

as “[t]he amount I will have paid after I have made all payments as scheduled,” is

$193,092.75. It explains the payment schedule “will be 179 monthly payments of

$692.92 each, beginning February 12, 2000, and one final payment of $69,060.07

on January 12, 2015.”

While the Legers contend that they “never agreed to nor would [they] have

ever agreed to a “balloon note,” the documents show that is exactly what they did.

In the Disbursement Request and Authorization signed by both Francis and Rita

Leger on November 12, 1999, the “LOAN TYPE” is listed as “a Fixed Rate

(8.990%), Balloon Loan to a Consumer for $85,125.00 due on January 12, 2015.”

(Emphasis added).

The Legers argue that a substantial error occurred which vitiates their

consent to the contract, and, as a result, the contract should be rescinded. “A

contract is formed by the consent of the parties established through offer and

acceptance.” La.Civ.Code art. 1927. “Consent may be vitiated by error, fraud, or

duress.” La.Civ.Code art. 1948. “Error vitiates consent only when it concerns a

cause without which the obligation would not have been incurred and that cause

was known or should have been known to the other party.” La.Civ.Code art. 1949.

The terms of a contract may not be modified unilaterally. Semco, LLC v.

Grand Ltd., 16-342 (La.App. 5 Cir. 5/31/17), 221 So.3d 1004, writ denied, 17-

1291 (La. 11/6/17), 229 So.3d 475. However, when consent is vitiated by error,

“[r]escission is permitted even where the error is unilateral.” Id. at 1030. For this

to occur, “the error must be excusable, meaning ‘the party in error did not fail to

take elementary precautions that would have avoided his falling into error[.]’” Id.

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(quoting Peirronet v. Matador Resources Co., 12-2292, p. 23 (La. 6/28/13), 144

So.3d 791, 810). The particular circumstances of each case determines whether a

unilateral error is excusable. Id. “Contractual negligence, such as failure to read a

contract one signed, is not excusable and, thus, rescission is not an appropriate

remedy.” Id. at 1030 (emphasis added).

In Tweedel v. Brasseaux, 433 So.2d 133 (La. 1983), the plaintiffs filed a

Petition to Rescind the Donation, alleging their niece was instructed to obtain wills

in her favor but, rather, obtained donations, which plaintiffs were not allowed to

read. The trial court ruled that the documents should be rescinded because the

plaintiffs did not know what they were signing and did not have the document

explained to them. The appellate court affirmed. The Louisiana Supreme Court,

however, reversed the lower courts, explaining:

Plaintiffs argue that they intended to sign wills rather than
donations. However, this claim is supported only by the testimony of
Mr. and Mrs. Tweedel and to a small extent by Mrs. Elliot. The
Tweedels knew the documents were intended to be executed on three
occasions in three different years. Elliot, an impartial witness, was
told by the Tweedels that they were giving or deeding land over a
period of time to avoid inheritance taxes. The Tweedels told the
notary they understood what they were signing, but, most important,
is the language of the instruments themselves. The acts are clearly
titled “Donation Inter Vivos from George Thomas Tweedel & Lillian
Fontenot Tweedel to Hester Tweedel Brasseaux, et als”; they state
that the Tweedels own property in St. Landry and Acadia Parishes;
that they are making donations to their relatives and that they reserve
the right to use and usufruct of the property during the term of their
natural life. The acts also say in paragraph six that the amount donated
constitutes only a small portion of the Tweedels’ estate and that they
have reserved amply for their subsistence. (Tr. 55)

“[S]ignatures to obligations are not mere ornaments.” Boullt v.
Sarpy, 30 La.Ann. 494 at 495. Additionally, the courts of our state
have long held that “[i]f a party can read, it behooves him to examine
an instrument before signing it; and if he cannot read, it behooves him
to have the instrument read to him and listen attentatively [sic] whilst
this is being done.” Snell v. Union Sawmill Company, 159 La. 604 at

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608, 105 So. 728 at 730 (1925). Bagneris v. Oddo, 2 Pelt. 278
(La.App.1919) held:

“The presumption is that parties are aware of the contents
of writings to which they have affixed their signatures ...
The burden of proof is upon them to establish with
reasonable certainty that they have been deceived.” 2
Pelt. at 285.

Therefore, the Tweedels have not established that they erred by
not understanding or intending the donations. The conclusions to the
contrary by the trial court and the court of appeal are clearly wrong.

Tweedel, 433 So.2d at 136-37.

Similarly, in the present case, the Legers testified in their affidavits that they

would not have taken the loan had they known it was a balloon note. The Legers

contend that at the closing “no one explained the documents to them, but instead,

they slid a mass of documents to them and told them where to sign on an industrial

basis.” Tweedel makes it clear that these allegations do not establish an error

which would vitiate the contract. The re-financing documents clearly set forth the

repayment terms, and these documents were signed by the Legers. Accordingly,

we find no genuine issue of material fact.

III. Assignment of Error Number Two

Next, the Legers complain that the trial court erred in finding Bank of New

York Mellon is a holder in due course. In accordance with La.R.S. 10:3-302, a

holder in due course is defined as the holder of an instrument if:

(1) the instrument when issued or negotiated to the holder does
not bear such apparent evidence of forgery or alteration or is not
otherwise so irregular or incomplete as to call into question its
authenticity; and

(2) the holder took the instrument (i) for value, (ii) in good faith,
(iii) without notice that the instrument is overdue or has been
dishonored or that there is an uncured default with respect to payment
of another instrument issued as part of the same series, (iv) without
notice that the instrument contains an unauthorized signature or has

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been altered, (v) without notice of any claim to the instrument
described in R.S. 10:3-306, and (vi) without notice that any party has
a defense or claim in recoupment described in R.S. 10:3-305(a).
The trial court found that:

BONY is the current owner and holder of the Note, which is
endorsed “Pay to the Order of the Bank of New York Mellon . . .
without recourse, Bank One, NA.” Full value was given in the
amount of $85,125.00. See Prudent Affidavit, Exhibit 1 to MSJ. The
Note was given in good faith, contains no signs of forgery, had not
been dishonored, was not in default; and was due for March 2004
payment. Id. Plaintiff’s Responses to Defendant’s Statement of
Uncontested Material Facts admit that at the time the Note was
endorsed to BONY in March 2004, the Note was not overdue, had not
been dishonored, and was not in default. The Legers admit the
purpose for obtaining the loan was to refinance their mortgage and [to]
pull out equity for home improvements, which purpose was
accomplished. Accordingly, BONY is holder in due course of the
Note. As a holder in due course, BONY is not subject to the personal
defense of error. La. R.S. 10-3-305. Accordingly, BONY is entitled
to summary judgment in its favor.

The Legers argue that the note has patent defects on its face, and the ability

to determine the final payment terms is not ascertainable without reference to other

documents. It is their position that this defect defeats Bank of New York Mellon’s

holder in due course status.

The Legers cite SFC Acceptance Corp. v. Spain, 251 La. 902, 207 So.2d 364

(1968), in support of their claim that Bank of New York Mellon is not a holder in

due course. In that case, blanks in the payment schedule made it impossible to

determine the time of payment. The supreme court opined:

The requirement in La.R.S. 7:52(1) that the note must be
‘complete and regular on its face’ for the party who has taken it to be
a holder in due course means that it must be complete within its eight
corners, Morris v. Cain’s Executors, 39 La.Ann. 712, 1 So. 797, 2 So.
418 (1887); and its completeness and regularity, for the purpose of
determining whether the holder is a holder in due course, cannot be
aided by extraneous evidence of any kind. Wilkins v. Reliance
Equipment Co., 259 Ala. 348, 67 So.2d 16 (1953). The note in
question is separable from the mortgage by the perforated line and
could therefore be detached without mutilation. This, together with
the printed words ‘Detach Note Before Filing’ appearing at the foot of

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the sale and chattel mortgage, clearly indicated a studied design to
make them separable. These factors, combined with the general
appearance of the documents, establish unmistakably that they were to
be treated as two separate instruments. For these reasons, whether the
note was ‘complete and regular on its face’ depends upon what
appears within its eight corners—the face of the note—unaided by any
reference to the sale and chattel mortgages or the schedule of
payments attached to the sale and chattel mortgage.

We are of the opinion that the note is not complete and regular
on its face because the blanks in the ‘Schedule of Payments’ make it
impossible to determine the time of payment without reference to the
sale and chattel mortgage and thereafter to the schedule of payments
attached thereto; that is, it cannot be ascertained from its eight corners
that it is payable ‘at a fixed or determinable future time’, as it should
be to make it regular in accordance with the requirements of La.R.S.
7:1.

This holding does not mean that the note is invalid, or that
plaintiff, who is in possession of the note, may not consider it a
demand note for the purposes of collection (La.R.S. 7:7), or complete
the blanks to show the installment payments and thereby render the
note negotiable, (La.R.S. 7:14), or establish the time for payment by
reference to the schedule of payments attached to the sale and chattel
mortgage. We do not pass upon these questions. Our holding simply
establishes that plaintiff is not a holder in due course because when it
received the note it contained blanks where the installment payments
should have been, and it had no determinable date of payment.
Consequently, plaintiff holds the note subject to ‘the same defenses as
if it were non-negotiable.’ La.R.S. 7:58. Remedial Plan, Inc. v. Ott, 199 Ky. 161, 250 S.W. 825 (1923); In re Philpott’s Estate, 169 Iowa
555, 151 N.W. 825 (1915).

In the present case, the note is complete and regular on its face. It clearly

establishes the principal amount ($85,125.00) and interest rate (8.990%) multiple

times throughout the note. The loan date, maturity date, and loan number are all

listed. The note states:

PROMISE TO PAY. I promise to pay to the order of Bank One,
NA (“Lender”), the sum of Eighty Five Thousand One Hundred
Twenty Five & 00/100 Dollars (U.S. $85,125.00), together with
simple interest at the rate of 8.990% per annum assessed on the
unpaid principal balance of this Note as outstanding from time to time,
commencing on November 17, 1999 and continuing until this Note is
paid in full.

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PAYMENT. This Note shall be payable as follows: The principal of
and interest on this Note shall be due and payable in 179 equal
monthly installments in the amount of $692.92 each, commencing on
February 12, 2000, and continuing on the same day of each month
thereafter, with one final installment in the amount of the principal
balance then outstanding, together with all accrued but unpaid interest,
being due and payable on January 12, 2015. The amount of each of
the foregoing scheduled payments includes principal and interest.
Interest on this Note is computed on a 365/365 simple interest basis;
that is, by applying the ratio of the annual interest rate over the
number of days in a year (366 during leap years), multiplied by the
outstanding principal balance, multiplied by the actual number of days
the principal balance is outstanding. The finance charge shown above
is based on the assumption that I will make payments exactly on the
date scheduled. If I pay early, the finance charge I pay may be less
than the amount shown. If I pay late, the finance charge that I pay
may be more than the amount shown. I will pay Lender at the address
designated by Lender from time to time in writing. Unless otherwise
agreed or required by applicable law, payments will be applied first to
accrued unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs and late charges.

Based on the evidence before us, we find Bank of New York Mellon is a

holder in due course of the note in question. This assignment has no merit.

IV. Assignment of Error Number Three

Finally, the Legers argue that the trial court erred in considering the

Louisiana Credit Agreement Act, La.R.S. 6:1122-1124. They contend that the

statutory scheme is inapplicable because the action does not seek to enforce an oral

credit agreement. Bank of New York Mellon explains that the Legers appeared to

assert a claim for detrimental reliance in their petition, which prompted Bank of

New York Mellon to move for summary judgment on this claim. Bank of New

York Mellon points out that, in the Legers’ opposition to its Motion for Summary

Judgment, they “affirmed they were making this claim, stating that their ‘claim of

detrimental reliance is completely with merit.’” The Legers went on to argue that

“[they] have been damaged by their reasonable reliance on the promises of Bank

One and its successors.” They further claimed that “BONY made promises to the

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Legers when they accepted the endorsement on the Note in question.” As such,

Bank of New York Mellon asserts that it was entirely appropriate for the trial court

to rule on this issue as it was part of its Motion for Summary Judgment. The trial

court ruled:

The Legers have also claimed that during the origination and
subsequent collection of the Note, that loan officials have stated terms
contrary to the written terms or acknowledged “problems” with the
loan. An agreement of a creditor to not take certain actions, such as
forbearing from exercising remedies under a credit agreement, does
not give rise to a claim that a new credit agreement was created unless
the agreement is in writing, expresses consideration and is signed by
the debtor and creditor. The Louisiana Supreme Court has held that
the cumulative effect of [the] La. Credit Agreement Statute is to bar
all actions for damages arising from oral credit agreements regardless
of the legal theory of recovery asserted. Jesco Const[r]. Corp. v.
Nationsbank Corp., 2002-0057 (La. 10/25/02), 830 So.2d 989, 991.

In Whitney National Bank v. Rockwell, 94-3049, pp. 10-11 (La. 10/16/95),

661 So.2d 1325, 1331 (footnote omitted), the Louisiana Supreme Court explained:

The Louisiana Legislature in 1989 enacted La.Rev.Stat.
6:1121–1124, which in effect provides a statute of frauds in actions
based on credit agreements as defined in the statute. The Louisiana
statute is modelled after the Minnesota statute, discussed above.

La.Rev.Stat. 6:1121 is a definitional section that defines the key
terms. The pertinent term here is “credit agreement,” which is defined
as “an agreement to lend or forbear repayment of money or goods or
to otherwise extend credit, or make other financial accommodation.”

La.Rev.Stat. 6:1122 expressly prohibits an action against the
creditor based on an oral credit agreement, providing that “[a] debtor
shall not maintain an action on a credit agreement unless the
agreement is in writing, expresses consideration, sets forth relevant
terms and conditions, and is signed by the creditor and the debtor.”

La.Rev.Stat. 6:1123 A addresses specific actions by the lender
that “shall not give rise to a claim that a new credit agreement is
created.” Pertinent among the activities that do not give rise to a new
credit agreement are “[t]he agreement of a creditor to take or not to
take certain actions, such as entering into a new credit agreement,
forbearing from exercising remedies under a prior credit agreement, or
extending installments due under a prior credit agreement.” 5
La.Rev.Stat. 6:1123 A(3). This section in effect treats certain actions

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or representations of creditors as if they were credit agreements and
requires that they be put in writing to be enforceable.

In Whitney, an oral credit agreement between the bank and guarantor, under

which parties allegedly agreed that guarantors and principals would close another

loan in thirty days and then retire the debt owed to the bank, was not enforceable.

Id. The supreme court determined that the credit agreement statute precluded

debtors from maintaining an action on a credit agreement unless the agreement was

in writing. Id.

In the present case, the Legers only complain that the Louisiana Credit

Agreement Act was considered. While the note at issue was in writing, the Legers

allege that they detrimentally relied on the bank’s oral assertions that the note was

a straight amortization loan. Therefore, it was properly relied on in ruling on the

motion for summary judgment. We find this assignment without merit.

CONCLUSION

The judgment of the trial court is affirmed.

AFFIRMED.

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