Byline Bank v. Alexandria Hospitality Partners

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

21-630

BYLINE BANK

VERSUS

ALEXANDRIA HOSPITALITY

PARTNERS, L.L.C. , ET AL

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APPEAL FROM THE
NINTH JUDICIAL DISTRICT COURT
PARISH OF RAPIDES, NO. 267,113
HONORABLE PATRICIA E. KOCH, DISTRICT JUDGE

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JOHN E. CONERY
JUDGE

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Court composed of John E. Conery, Jonathan W. Perry, and Gary J. Ortego, Judges.

REVERSED AND REMANDED.

Kelvin G. Sanders
Attorney at Law
418 Desoto Street
P.O. Box 13922
Alexandria, Louisiana 71315
(318) 487-0009
COUNSEL FOR DEFENDANTS/APPELLANTS:
Alexandria Hospitality Partners, L.L.C., et al

Richard A. Rozanski
Richard A. Rozanski, APLC
2312 South MacArthur Drive
Alexandria, Louisiana 71315
(318) 445-5600
COUNSEL FOR PLAINTIFF/APPELLEE:
Byline Bank

Barry Bader
Great Hospitality Minds
12500 NE 198th Street
Bothell, Washington 98011
COUNSEL FOR DEFENDANT/APPELLEE:
Great Hospitality Minds

Thomas R. Willson
Attorney At Law
1330 Jackson Street, Suite C
Alexandria, Louisiana 71301
(318) 473-6650
BANKRUPTCY COUNSEL FOR DEFENDANT/APPELLANT:
Alexandria Hospitality Partners, L.L.C.

CONERY, Judge.

The trial court granted Byline Bank’s summary judgment based on its Petition

for Foreclosure by Ordinary Process and to Enforce Guaranties against Alexandria

Hospitality Partners, L.L.C. (AHP), and The Alex Café, L.L.C. (Alex Café) known

as (Primary Defendants). Byline Bank’s Petition for Foreclosure by Ordinary

Process and to Enforce Guaranties was also granted by the trial court against the

parties referred to as Guarantor Defendants, which include, Kelvin W. Coney, Felica

W. Coney, Jimmie Lee Johnson, Martin W. Johnson, Karen Bowie Johnson, Gary

Peter Jones, Elaine Foulcard Jones, Joyce A. Williams Rax, Dexter L. Hadnot and

Cleais J. Hadnot. The Primary Defendants and Guarantor Defendants, who are

hereinafter referred to as the AHP Appellants, appeal the trial court’s ruling granting

Byline Banks’s summary judgment. For the following reasons we reverse and

remand to the trial court.

FACTS AND PROCEDURAL HISTORY

In May of 2016, Martin W. Johnson, as Manager of primary defendant AHP

and on behalf of the AHP Appellants, began negotiations with Byline Bank to

refinance its outstanding loan with Evangeline Bank and Trust Company

(Evangeline Bank), which was secured by a multi-indebtedness mortgage on 4.37

acres of property and improvements located at 2211 North MacArthur Drive,

Alexandria, Louisiana. (Evangeline Bank’s Mortgage). The parties reached an

agreement on the refinancing of the property and Mr. Johnson provided Byline Bank,

who was represented by Mr. William Harrigan, with the legal description of the 4.37

acres securing the Evangeline Bank Mortgage.

On April 28, 2017, Mr. Johnson attended the loan closing of the Byline Bank

Mortgage. He was presented with the Promissory Note, which was secured by a

Mortgage, a Security Agreement and Assignments of Rents and Leases. The

Mortgage contained a legal description that reflected 5.49 acres of property as

opposed to the 4.37 acres securing the Evangeline Bank Mortgage.

Mr. Johnson, in the presence of Mr. Harrigan, edited the legal description of

the Mortgage to reflect the 4.37 acres agreed to by the parties. Each of the other

defendants present also initialed the legal description as attested in their affidavits

submitted in opposition to Byline Bank’s motion for summary judgment.

The closing of the Byline Bank Mortgage proceeded before a notary public

and Mr. Harrigan signed as one of the witnesses. The signed closing documents

were given to Mr. Harrigan. Mr. Johnson was not provided with a copy of the Byline

Bank Mortgage closing documents. Relying on the Byline Bank Mortgage closing

documents, the AHP Appellants signed a U.S.D.A. Rural Development Form1 as

guarantors of the Promissory note.

On May 15, 2017, Mr. Harrigan sent an email to Mr. Johnson asking why the

hand-written change was made to the legal description at the closing of the Byline

Bank Mortgage. Mr. Johnson responded by providing a copy of the legal description

contained in the Evangeline Bank Mortgage transaction which reflected the agreed

to 4.37 acres. No response from Mr. Harrigan was forthcoming.

Despite this knowledge, Byline Bank filed the Byline Bank Mortgage closing

documents with a legal description stating the Promissory Note was secured by a

Mortgage reflecting 5.49 acres. A dispute arose between the parties which resulted

in Byline Bank filing a Petition for Foreclosure by Ordinary Process and to Enforce

Guaranties of the Byline Bank Mortgage.

The AHP Appellants appeared and filed an Answer and Reconventional

Demand to Byline Bank’s petition in which the AHP Appellants alleged damages

1
RD 4279.14.
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due to detrimental reliance, fraud and or defamation. The AHP Appellants also filed

a Peremptory Exception of No Cause of Action and Dilatory Exception of

Vagueness and Ambiguity. As per the trial court’s Judgment of March 3, 2021,

these affirmative defenses have not been addressed and are therefore still pending

before the trial court.

On June 17, 2020 Byline Bank filed a motion for summary judgment based

on the Byline Bank Mortgage documents and a Memorandum in support of its

summary judgment. After numerous other filings, the trial court held a hearing on

January 19, 2021 on the motion for summary judgment filed by Byline Bank seeking

to enforce the Byline Bank Mortgage. The AHP Appellants’ filings were also fixed

for hearing on the same date. The trial court found in favor of Byline Bank based

on the Byline Bank Mortgage documents. The trial court held all the AHP

Appellants liable in solido for $3,800,742.97, the amount owed on the Promissory

Note as of April 30, 2020, plus a per diem interest rate of $637.73, and protective

advances, additional attorney fees and collection costs.

The trial court’s summary judgment in favor of Byline Bank was signed by

the trial court on March 3, 2021. The trial court found “that there is no just reason

for delay and that this judgment shall be, and is hereby, designated as a final

judgment pursuant to La.Code Civ.P. arts. 1911 and 1915(A)” and was, therefore,

designated an appealable final judgment despite the still pending reconventional

demand, peremptory exceptions, and dilatory exception filed on behalf of the AHP

Appellants.

The trial court denied the AHP Appellants’ motion for new trial on May 24,

2021. The AHP Appellants filed a motion for a suspensive appeal and the trial court

set the bond at $3,800,742.97. No bond was posted and the suspensive appeal was

converted to a devolutive appeal.
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Chapter 11 Bankruptcy Filing By Alexandria Hospitality Partners, L.L.C.

Shortly after filing this appeal, the primary defendant, Alexandria Hospitality

Partners, L.L.C., filed a voluntary petition for relief under Chapter 11 of the United

States Bankruptcy Code, Case Number 21-80242, on the docket of the United States

Bankruptcy Court, Western District of Louisiana, Alexandria Division. Counsel for

Byline Bank notified the district court of the filing and asked that a motion

authorizing access to the property at issue be stayed pursuant to 11 U.S.C. § 362.

This court, after a review of the record of the Chapter 11 filing of Alexandria

Hospitality Partners, L.L.C., stayed the matter and requested additional information

from counsel concerning the effect of 11 U.S.C. § 362 on the appeal before this

Court, as only Alexandria Hospitality Partners, L.L.C., and none of the other

Appellants, Alex Café and the Guarantor defendants, had filed a petition for

bankruptcy.

This court stayed oral argument slated for January 25, 2022. On January 14,

2022, this court ordered new counsel for Alexandria Hospitality Partners, L.L.C., et.

al. to show cause by brief on or before January 31, 2022 why this case should not be

stayed pending a ruling from the Bankruptcy Court. No response was received from

counsel for Alexandria Hospitality Partners, L.L.C., et. al.

However, on February 8, 2022, this court received a response from counsel

for Byline Bank urging this court to proceed with the appeal, either against all parties,

including Alexandria Hospitality Partners, L.L.C., or the remaining parties, Alex

Café and the Guarantor Defendants, who had not filed for Chapter 11 Bankruptcy.

On February 11, 2022, after conducting its own extensive research, this court

ordered, Thomas Wilson, counsel representing Alexandria Hospitality Partners,

L.L.C. before the Bankruptcy Court, to show cause by brief no later than February

28, 2022 why this case should not be stayed pending a ruling from the Bankruptcy
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Court.

On February 28, 2022, this court received a response from Mr. Wilson which

in essence indicated that 11 U.S.C. § 362 prevented an action “against the debtor”

He further asserted that 11 U.S.C. § 362 “does not prevent the debtor from taking

any action it could otherwise.” Therefore, there was no restriction on his client

continuing to pursue its appeal pending in this court prior to the bankruptcy filing.

Additionally, counsel also concluded that there was no basis to stay the appeal also

filed by the co-debtors, as “[t]here was no co-debtor stay for Chapter 11,” the chapter

under which the Alexandria Hospitality Partners, L.L.C. filed for bankruptcy relief.

After reviewing the response from bankruptcy counsel for Alexandria

Hospitality Partners, L.L.C. and having received no response to the rule to show

cause, dated January 31, 2022, from counsel for the AHP Appellants in this appeal,

this court lifted the stay, and fixed this case for oral argument on April 27, 2022,

with notice to all counsel, including bankruptcy counsel for Alexandria Hospitality

Partners, L.L.C. Following oral argument, the matter was submitted for decision by

this court.

LAW AND DISCUSSION

Standard of Review - Summary Judgment

A court of appeal reviews summary judgments de novo, using the same

standard used by the trial court. Higgins v. Louisiana Farm Bureau Cas. Ins. Co.,

20-1094 (La. 3/24/21), 315 So.3d 838. Pursuant to La.Code Civ.P. art. 966(A)(2),

the summary judgment procedure is favored and must be construed to accomplish

its purpose of “the just, speedy, and inexpensive determination of every action,

except those disallowed by Article 969.” Article 966(A)(3) further provides that the

“motion for summary judgment shall be granted if the motion, memorandum, and

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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.”

The Louisiana Supreme Court in Larson v. XYZ Insurance Co., 16-745, pp. 6-

7 (La. 5/3/17), 226 So.3d 412, 416-17, further provides:

In ruling on a motion for summary judgment, the judge’s role is not to
evaluate the weight of the evidence or to determine the truth of the
matter, but instead to determine whether there is a genuine issue of
triable fact. All doubts should be resolved in the non-moving party’s
favor. Hines v. Garrett, 2004-0806 (La. 6/25/04), 876 So.2d 764, 765.
A fact is material if it potentially ensures or precludes recovery, affects
a litigant’s ultimate success, or determines the outcome of the legal
dispute. A genuine issue is one as to which reasonable persons could
disagree; if reasonable persons could reach only one conclusion, there
is no need for a trial on that issue and summary judgment is appropriate.
Id. at 765-66.

....

When a motion for summary judgment is made and supported as
provided in La. C.C.P. art. 967, an adverse party may not rest upon the
mere allegations or denials of his pleadings, but his response, by
affidavits or as otherwise provided in La. C.C.P. art. 967, must set forth
specific facts showing that there is a genuine issue for trial. If he does
not so respond, summary judgment, if appropriate, shall be rendered
against him. La. C.C.P. art. 967(B); see also Dejoie v. Medley, 2008-
2223 (La. 5/5/09), 9 So.3d 826, 832. Whether a particular fact in dispute
is material can be seen only in light of the substantive law applicable to
the case. Richard v. Hall, 2003-1488 (La. 4/23/04), 874 So.2d 131, 137

Issue of a Credibility Determination By the Trial Court

The AHP Appellants’ basic argument on appeal is that the trial court made

credibility determinations, evaluated testimony, and weighed evidence from witness

affidavits, which made summary judgment inappropriate. The AHP Appellants

further argue that their reconventional demands “could offer the AHP Appellants a

shield against potential liability to Byline [Bank].” AHP Appellants seek discovery

on their reconventional demands and have requested a jury trial.

Byline argues that it provided sufficient evidence of the claims for breach of

Note, Mortgage, and Guarantees which did not require the trial court to make any

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judicial determinations which called for credibility determinations or the weighing

of testimony. Based on the record before us, we disagree.

All of the parties have indicated that the reason for the new loan with Byline

Bank was to pay off the Multiple Indebtedness Mortgage executed on December 30,

2014 between Alexandria Hospitality Partners, LLC and Evangeline Bank. As

previously indicated, the legal description contained in the Evangeline Bank

Mortgage indicates the “tract contains 4.37 acres more or less,” the exact amount the

AHP Appellants claimed was supposed to be on the Byline Bank Mortgage

documents at issue in this case.

It is undisputed that Alexandria Hospitality Partners, LLC transferred 1.118

acres of the property to Vine Capital, L.L.C. The Act of Transfer was recorded on

April 28, 2017 at 9:36 a.m. in Rapides Parish Clerk of Court Conveyance Book 2060,

Pages 357-360. The Act of Transfer is undated, but Byline Bank claimed the transfer

was executed the day before the Byline Bank’s Mortgage was scheduled to close on

April 28, 2017.

Byline Bank states this transfer was done without its knowledge. However,

Mr. Martin W. Johnson, on behalf the primary defendant Alexandria Hospitality

Partners, L.L.C., stated in his affidavit submitted in opposition to Byline Bank’s

motion for summary judgment that on April 27, 2017 he emailed Mr. Bill Harrigan,

the Loan Officer for Byline Bank, “confirming that the property subject to the Byline

mortgage securing the Byline promissory note was the same property subject to the

Evangeline Bank Mortgage: 4.37 acres at 2211[North] MacArthur Drive, in

Alexandria Louisiana.”

At the closing on April 28, 2017, the description of the amount of acreage was

incorrect on the Byline Bank Mortgage documents. The AHP Guarantors submitted

affidavits attesting that at the closing, a correction was made in the legal description
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of the Byline Bank Mortgage documents changing the listed 5.49 acres to 4.37 acres.

The 4.37 acres reflected the actual amount of acreage evidenced by the Evangeline

Bank Mortgage, the basis for the new Byline Bank Mortgage. The affidavits of all

of the AHP Appellants indicate the change in the Byline Bank Mortgage was

initialed by all parties, including Mr. Johnson on behalf of Alexandria Hospitality

Partners, L.L.C., Mr. Harrigan, the Loan Officer for Byline Bank and the AHP

Guarantors.

The legal description of the property securing the loan at 2211 North

MacArthur Drive, Alexandria, Louisiana contained in the Byline Bank Mortgage

documents was ultimately filed twenty-one days later in the Mortgage Records of

the Rapides Parish Clerk of Court, Mortgage Book 3016, Page 493 at 510.

The Byline Bank’s Mortgage documents which were filed did not contain the

4.37 acres agreed to by the parties. Instead, the legal description, evidenced on page

510, still contained the 5.49 acres, not the 4.37 acres. Further, the Byline Bank

Mortgage document evidenced no sign of the notations or initials approving the 4.37

acre description, as attested to by all of signees to the Byline Bank Mortgage

documents in their affidavits filed in opposition to Byline Bank’s motion for

summary judgment.

Mr. Johnson contends in his affidavit that “[a]fter the loan closing, my

handwritten correction to ‘Exhibit A,’ attached to Byline Bank’s mortgage was

removed and replaced with a different document that I did not agree to.” The

document in question is entitled “Post Closing Compliance Agreement,” and

contains a waiver of any problems with the Byline Bank Mortgage documents signed

at the closing on April 28, 2017. The Byline Bank Mortgage document has a second

page, with the date April 28, 2017 written at the top of page two, and is signed with

the full signatures of the AHP Appellants. This is clearly not the referenced initialed
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document attested to in all of the affidavits submitted by the AHP Appellants in

opposition to Byline Bank’s motion for summary judgment, supported by Byline

Bank’s Mortgage document.

Mr. Johnson further attested that, “[t]wenty one (21) days after the loan

closing, Byline recorded the mortgage in the public records with the wrong property

description stating 5.49 acres as opposed to the correct 4.37 acres.” In conclusion,

Mr. Johnson, states “I did not agree to the new ‘Exhibit A’ which Byline recorded.

I did not authorize the change to ‘Exhibit A’ with my handwritten correction to the

property description.”

The Legal Description in the Byline Bank’s Mortgage supporting Byline’s

Bank’s motion for summary judgment was filed in the Mortgage Records of the

Rapides Parish Clerk of Court in Book 3016, Page 510. It is clearly not the Legal

Description contained in the Multiple Indebtedness Mortgage executed on

December 30, 2014, between Alexandria Hospitality Partners, LLC and Evangeline

Bank. The Evangeline Bank Mortgage was the source of the loan with Byline Bank.

As previously indicated, the legal description in the Evangeline Bank Mortgage,

clearly states that the acreage in question is 4.37 acres and not 5.39 acres, referenced

in the Byline Bank Mortgage submitted into the record in support of its summary

judgment.

Reformation Of The Byline Bank Mortgage

The trial court in its judgment reformed the amount of acreage by finding the

legal description of the Byline Bank Mortgage should have been 4.37 acres and not

5.49 acres, as per the legal description in the mortgage filed by Byline Bank in

support of its summary judgment and filed in the Rapides Parish Clerk of Court’s

Mortgage Records. The trial court based its reformation of the Byline Bank

Mortgage document by finding that the AHP Appellants could not use the acreage it
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had transferred as collateral for a promissory note connected with a mortgage on

property it did not own.

This finding by the trial court was based on the contested argument of Byline

Bank that the Act of Transfer by the AHP of 1.118 acres to Vine Capitol, LLC, as

recorded in Book 2060, Page 357 of the Conveyance Records of the Rapides Parish

Clerk of Court on April 27, 2017, the day before the closing of the Byline Bank’s

Mortgage, resulted in the improper legal description of the acreage contained in the

Byline Bank’s Mortgage documents supporting its summary judgment.

As previously stated, the AHP Defendants opposed the motion for summary

judgment with affidavits, email correspondence, and record documents which

support their assertion that Byline Bank’s Mortgage documents filed in support of

its motion for summary judgment may have been altered. It is clear that from the

very beginning of the negotiations between the parties the amount of the acreage

agreed to was 4.37, not 5.39, as evidenced by the record which contains the

Evangeline Bank Mortgage replaced by the Byline Bank Mortgage.

The trial court recognized that the legal description in the Byline Bank

Mortgage was not correct. Nevertheless, it reformed the amount of the acreage based

on Byline Bank’s assertion that the mistake in the acreage was due to the Act of

Transfer, executed on April 27, 2017. The trial court then granted summary

judgment in favor of Byline Bank, based on the Byline Bank Mortgage documents,

containing a Promissory Note, Mortgage and Guarantees. The trial court also

awarded attorney fees and other costs associated with the foreclosure.

In WMC Mortgage Corp. v. Weatherly, 07-75, p. 4 (La. App. 3 Cir. 6/13/07),

963 So.2d 413, 416, writ denied, 07-1475 (La. 10/5/07), 964 So.2d 945, a panel of

this court discussed reformation of a mortgage document and promissory note after

a trial on the merits and stated:
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Reformation is an equitable remedy that is available to correct
errors or mistakes in written instruments only when the instruments as
written do not reflect the true intent of the parties. Agurs v. Holt, 232
La. 1026, 95 So.2d 644 (1957). In a reformation action the party
seeking reformation bears the burden of establishing mutual error and
mistake by clear and convincing proof. Id.

A mutual mistake is a mistake shared by both parties to the
instrument at the time of reducing their agreement to
writing, and the mistake is mutual if the contract has been
written in terms which violate the understanding of both
parties; that is, if it appears that both have done what
neither intended. The evidence of mutuality must relate to
the time of the execution of the instrument and show that
the parties then intended to say one thing and by mistake
expressed another and different thing.

Teche Realty & Inv. Co., Inc. v. Morrow, 95-1473, p. 4 (La.App. 3 Cir.
4/17/96), 673 So.2d 1145, 1147 (citation omitted).

The panel in WMC Mortgage also stated that, “[a]s a general rule, whether

there is a mutual error is mainly a question of fact . . . .” Id. at 416. Accordingly, the

determination by the trial court to reform the Legal Description in Byline Bank’s

Mortgage supporting the Promissory Note in this case required a finding of fact and

thus was not appropriate for summary judgment, as it required a credibility

determination. Further, Byline Bank failed to carry its burden of proof “of

establishing mutual error and mistake by clear and convincing proof.” Id.

Based on the record before us we find that the trial court erred in reforming

the Legal Description contained in Byline Bank’s Mortgage document supporting

the Promissory Note. In so doing the trial court made a factual determination which

is precluded in a motion for summary judgment. We therefore reverse the trial

court’s Judgment of March 3, 2021 in its entirety and remand this case for further

proceedings.

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CONCLUSION

For the foregoing reasons, we reverse in its entirety the March 3, 2021

judgment of the trial court which granted summary judgment on Byline Bank’s

Petition for Foreclosure by Ordinary Process and to Enforce Guaranties against

Alexandria Hospitality Partners, L.L.C., The Alex Café L.L.C., and Kelvin W.

Coney, Felica W. Coney, Jimmie Lee Johnson, Martin W. Johnson, Karen Bowie

Johnson, Gary Peter Jones, Elaine Foulcard Jones, Joyce A. Williams Rax, Dexter

L. Hadnot and Cleais J. Hadnot. All costs of this proceeding are assessed against

Plaintiff/Appellee Byline Bank.

REVERSED AND REMANDED.

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