BATON ROUGE – After six years, a legal battle related to construction loans in default has been settled.
“We’re glad it’s over," attorney Mary Olive Pierson told the Louisiana Record.
BancorpSouth filed a lawsuit in October 2010 against Charles Wallace “Windy” Gladney Jr., his Kleinpeter Trace LLC partnership and partner James G. Tanner III. The lawsuit alleged that Gladney and Kleinpeter Trace were in default on $2 million in loans intended to cover the costs of construction of The Greens at Millerville.
Gladney subsequently filed a counterclaim against BancorpSouth. In the counterclaim, he said that the bank was complicit in allegedly letting Tanner use loan proceeds for his own benefit.
Pierson, who was one of the attorneys representing Gladney and Kleinpeter Trace, said the case was appealed at one point, adding nearly two years to the already long court battle.
“The matter involved a substantial sum of money,” Pierson said.
The settlement was reached in November following mediation and was finalized in December. Before the settlement was reached, a trial had been scheduled to begin in March.
“We voluntarily sought the mediation,” Pierson said, adding that the court did not order the talks.
Pierson said she was bound by a confidentiality agreement, and the terms of the settlement have not been disclosed.
“Both sides were satisfied (with the outcome),” she said.
According to Pierson, the lawsuit did not affect the development of The Greens at Millerville project.
“At this time, (Gladney) has sold off committed to contract all of the parcels,” Pierson said. “The project is almost completed.”
According to an Oct. 1, 2014, Louisiana Court of Appeals ruling on a summary judgment motion, the plaintiffs filed the lawsuit in an effort to enforce the obligations tied to four promissory notes issued to Kleinpeter Trace by BancorpSouth.
Two of the notes in question were in the principal amounts of $1,999,100, the third was in the amount of $799,767.82 and the fourth was in the amount of $2,010,250.
Gladney guaranteed Kleinpeter’s repayment of the first three notes, and Tanner guaranteed the repayment of all four notes.
“Gladney and Kleinpeter Trace essentially contend that they are not liable for notes three and four because Tanner, BancorpSouth and the bank’s president, Larry Denison, engaged in fraudulent acts with regard to those notes,” the appeals court ruling said.
Specifically, Gladney and Kleinpeter alleged that BancorpSouth, with Denison’s help and consent, allowed Tanner to use money from the third note for personal use without any benefit to Kleinpeter Trace.
In addition, Gladney and Kleinpeter claim that the fourth note was originated without their knowledge in an effort by the bank to collateralize $2 million in loans issued to Tanner in connection with a separate project.
“According to the allegations, BancorpSouth and Tanner used Kleinpeter Trace’s property as collateral for the unrelated Tanner loans with the expectation that a pending sale of Kleinpeter Trace’s property would result in sufficient funds to pay Tanner’s loans for both the Bluffs and note four,” the appeals court said.
However, the sale in question never happened, and Gladney found out about the allegedly fraudulent loan.