RECENT DEVELOPMENTS IN LOUISIANA CASELAW

RELATING TO

SECURITY DEVICES, TITLE MATTERS AND OTHER ISSUES OF INTEREST TO BANKS

L. David CromwellPettiette, Armand, Dunkelman, Woodley, Byrd & Cromwell, L.L.P.

Chase Tower, 400 Texas Street, Suite 400 Shreveport, Louisiana 71101

(318) 221-1800dcromwell@padwbc.com

Louisiana Bankers AssociationBank Counsel Conference

December 15-16, 2011

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Table of Contents

Chapter 9 security interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Rights against account obligors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Conventional mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Multiple obligations mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Novation; remission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Judicial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Rights to insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Priority of the attorney's privilege against a mortgage . . . . . . . . . . . . . . . . 9Propriety of concursus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Assignability of claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Accord and satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Public records doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Errors in names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Errors in recordation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Errors in cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Private Works Act Privileges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14When work begins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14When lien period expires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Notice of contract not filed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Notice of contract filed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Residential projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Suretyship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Ambiguous signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Governmental sureties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Foreclosure/collection actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Executory process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Injunction against sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Post-sale attack on use of executory process . . . . . . . . . . . . . . . . . . . . . . . 21Federal attacks on use of executory process . . . . . . . . . . . . . . . . . . . . . . . 23

Rights of third persons in connection with foreclosure sales . . . . . . . . . . . . . . . . 24Junior lienholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Third possessors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Prior owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

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Ordinary process foreclosure/collection actions . . . . . . . . . . . . . . . . . . . . . . . . . 27Required parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Default judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Summary judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Nullity of judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Attorney's fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Forum selection clauses/personal jurisdiction . . . . . . . . . . . . . . . . . . . . . . 32Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Execution of judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Revival of judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Revocatory actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Tax sales/Mennonite issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Lender liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Flood insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Credit agreement statute/fiduciary duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Third party beneficiary/unjust enrichment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Wrongful seizure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48RESPA/HOEPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Private parties as lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Definition of "bank" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Other forged maker signature cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Forged endorsements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Persons entitled to bring suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Prescription/contra non valentem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Other conversion/breach of contract claims against depository banks . . . . . . . . 61Donations of bank deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

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Table of Cases

American Bank & Trust Co. v. Roberts, 2011 WL 3626422 (E.D. La. 2011) . . . . . . . . . . . . . 19

American Bank & Trust Company of Houma v. Wetland Workover, Inc., 523 So. 2d 942 (La. App. 4th Cir. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ASP Enterprises, Inc. v. Guillory, 22 So. 3d 964 (La. App. 1st Cir. 2009) . . . . . . . . . . . . 57, 60

Bank of New York Mellon v. Smith, 2011-60 (La. App. 3d Cir. 6/29/11); 71 So. 3d 1034 . . . 48

Bank of New York v. Parnell, 2010-0435 (La. 11/30/10); 56 So. 3d 160 . . . . . . . . . . . . . . . . 52

Bass v. Chase Home Finance, LLC, 2010 WL 3922709 (E.D. La. 2010) . . . . . . . . . . . . . . . 44

Bizcapital Business & Industrial Development Corp. v. Union Planters Corp., 884 So. 2d 623 (La. App. 4th Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Blackstone v. Chase Manhattan Mortgage Corporation, ___F. Supp. 2d ___ (E.D. La. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Breaux v. Gulf Coast Bank, 2011-192 (La. App. 3d Cir. 10/5/11); 2011 WL 4582503 . . . . . . 60

Brooks v. Flagstar Bank, FSB, 2011 WL 271026 (E.D. La. 2011) . . . . . . . . . . . . . . . . . . . . . 23

Brooks v. TransAmerica Financial Advisors, 45, 833 (La. App. 2d Cir. 2/2/11); 57 So. 3d 1153 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Buck v. Deutsche Bank, 2001-1653 (La. App. 1st Cir. 11/9/11); 2011 WL 5408499. . . . . . . 22

Buckner v. Carmack, 272 So. 2d 326 (La. 1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

C&C Energy, LLC v. Cody Investments, LLC, 2009-2160 (La. 7/6/10); 41 So. 3d 1134. . . . . 40

Calahan v. Haspel, 732 So. 2d 796 (La. App. 3d Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . 33, 34

Carr v. Oaktree Apartments, 45,514 (La. App. 2d Cir. 8/11/10); 46 So. 3d 793 . . . . . . . . . . . 11

Chase v. Resource Bank, 2010-0193 (La. App. 1st Cir. 9/10/10); 2010 WL 3527567 . . . . . . 46

Colonial Finance, LLC v. Colonial Golf & Country Club, Inc., 11-5 (La. App. 5th Cir. 6/14/11); ___ So. 3d ___ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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Costello v. Citibank (South Dakota), N.A., 45,518 (La. App. 2d Cir. 9/29/10); 48 So. 3d 1108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 60

Danzell v. Bank of America, 2011 WL 4905723 (W.D. La. 2011) . . . . . . . . . . . . . . . . . . . . . 23

Derouen v. Malahmeh, 2010-1002 (La. App. 3d Cir. 2/9/11); 61 So. 3d 693 . . . . . . . . . . . . . 53

Deutsche Bank National Trust Company v. Carter, 10-663 (La. App. 5th Cir. 1/25/11); 59 So. 3d 1282 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Deutsche Bank National Trust Company v. Thomas, 2010-1453 (La. App. 1st Cir. 2/11/11); 57 So. 3d 1185 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Discover Bank v. Rusher, 2010-0850 (La. App. 4th Cir. 12/8/10); 53 So. 3d 651 . . . . . . . . . . 31

Eldred v. Fleming, 2010-0794 (La. App. 4th Cir. 1/20/11); 56 So. 3d 432 . . . . . . . . . . . . . . . 34

Evans v. Hamner, 24 So. 2d 814 (La. 1946) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

FIA Card Services, N.A. v. Weaver, 2010-C-1372 (La. 3/15/2011); 62 So. 3d 709 . . . . . . . . 35

First Bank and Trust v. Duwell, 10-481 (La. App. 5th Cir. 12/14/10); 57 So. 3d 1076, writ denied 56 So. 3d 1005 (La. 2/11/11) . . . . . . . . . . . . . . . . . . . . . 26

First Bank and Trust v. Duwell, 2011-0104 (La. App. 4th Cir. 5/18/2011); 70 So. 3d 15 . . . . 26

First Bank and Trust v. Thomas, 2010-1821 (La. App. 1st Cir. 5/6/2011); 2011 WL 1944119 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

First Louisiana Bank v. Morris & Dickson Co., LLC, 45, 668 (La. App. 2d Cir. 11/3/10); 55 So. 3d 815 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

First National Bank, USA v. DDS Construction, LLC, 10-204 (La. App. 5th Cir. 11/9/10); ____ So. 3d ____, writ granted ____ So. 3d ___ (La. 10/12/2011) . . . . . . . . . . . . . . . 13

First NBC Bank v. Gusman, 2011-0458 (La. App. 4th Cir. 9/28/11); ___ So. 3d ____, 2011 WL 4487658 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Ford Motor Credit Company v. Jackson, 45,447 (La. App. 2d Cir. 8/11/10); 47 So. 3d 558 . . . 3

Forterra Capital, L.L.C. v. Mamal, Inc., 2010-0798 (La. App. 4th Cir. 1/13/11); 55 So. 3d. 963 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Freeman v. Quicken Loans, Inc., 626 F. 3d 799 (5th Cir. 2010) . . . . . . . . . . . . . . . . . . . . . . 50

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Garrison v. Trost, 2010-16 (La. App. 3d Cir. 6/2/10); 2010 WL 2179759 . . . . . . . . . . . . . . . 54

Garrity Printing, LLC v. M & M Mortgage, Inc., 10-290 (La. App. 5th Cir. 11/9/10); 54 So. 3d 81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

GE Commercial Finance Business Property Corporation v. Louisiana Hospital Center, LLC, 2010-1838 (La. App. 1st Cir. 6/10/11); 69 So. 3d 649 . . . . . . . . . . . . . . . 7

Goldsby v. Goldsby, 2010-1218 (La. App. 1st Cir. 8/9/11); 2011 WL 3806281 . . . . . . . . . . 38

Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Groue v. Capital One, 2010-0476 (La. App. 1st Cir. 9/10/10); 43 So. 3d 1038 . . . . . . . . . . . . 55

Gulf Coast Bank and Trust Company v. D'Orville, 2010-1237 (La. App. 4th Cir. 1/26/11); 57 So. 3d 553 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Gulf Refining Co. of Louisiana v. Glassell, 171 So. 846 (La. 1936) . . . . . . . . . . . . . . . . . . . 39

Hogan v. Turnipseed, 10-1065 (La. App. 5th Cir. 8/30/11); ___ So. 3d ___ . . . . . . . . . . . . . . 24

Hussain v. Boston Old Colony Ins. Co., 311F. 3d 623 (5th Cir. 2002) . . . . . . . . . . . . . . . . . . . 9

Indymac Federal Bank v. Groshong, 2010-1179 (La. 10/1/10); 45 So. 3d 170 . . . . . . . . . . . . 21

Innovative Hospitality Systems, LLC v. Abraham, 2010-217 (La. App. 3d Cir. 4/6/11); 61 So. 3d 740 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Innovative Hospitality Systems, L.L.C. v. Abe's, Inc., 2010-509 (La. App. 3d Cir. 12/8/10); 52 So. 3d 113, 73 UCC Rep. Serv. 2d 251 . . . . . . . . . . . . . . . . . . . 57

Irons v. U.S. Bank, 966 So. 2d 646 (La. App. 4th Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Keybank National Association v. Perkins Rowe Associates, LLC, ___F. Supp. 2d ___ (M.D. La. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 14

Lewis v. Succession of Johnson, 05-1192 (La. 4/4/06) 925 So. 2d 1172 . . . . . . . . . . . . . . . . 41

Matthews v. Bank One Corp., 25 So. 3d 952 (La. App. 2d Cir. 2009) . . . . . . . . . . . . . . . . . . 61

Mennonite Board of Missions v. Adams, 462 U.S. 791 (1983) . . . . . . . . . . . . . . . . . . . . . . . 40

Mink v. AAA Development, LLC, 190 F. 3d 333 (5th Cir. 1999) . . . . . . . . . . . . . . . . . . . . . 35

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Minyard v. Curtis Products, Inc., 205 So. 2d 422 (La. 1968) . . . . . . . . . . . . . . . . . . . . . . . . 47

Mobile-One Auto Sound, Inc. v. Whitney National Bank, 2011-0535 (La. App. 4th Cir. 11/9/11); ___ So. 3d ___ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Monlezun v. Lyon Interests, Inc., 2011-576 (La. App. 3d Cir. 11/2/11); ____ So. 3d ____ . . . 1

Moore Finance Company, Inc. v. Ebarb, 46, 392 (La. App. 2d Cir. 5/18/11); 70 So. 3d 856 . . 28

Moore v. Sucher, 102 So. 2d 459 (La. 1958) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Nesbitt v. Nesbitt, 46, 514 (La. App. 2d Cir. 9/21/11); ____ So. 3d ____ . . . . . . . . . . . . . . . 37

Nolan v. Audubon Insurance Group, 2010-1362 (La. App. 3d Cir. 3/9/11); 59 So. 3d 487 . . . . 9

Norman H. Voelkel Construction, Inc. v. Recorder of Mortgages, 859 So. 2d 9 (La. App. 1st Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Oliver v. Central Bank, 658 So. 2d 1316 (La. App. 2d Cir. 1995) . . . . . . . . . . . . . . . . . . . . . 43

Paternostro v. Wells Fargo Home Mortgage, 30 So. 3d 45 (La. App. 5th Cir 2009) . . . . . . . . 43

Peak Performance Physical Therapy and Fitness, L.L.C. v. Hibernia Corp., 07-2206 (La. App. 1st Cir. 6/6/08), 992 So. 2d 527 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57, 60

Power of Marketing Direct, Inc. v. Foster, 938 So. 2d 662 (La. 2006) . . . . . . . . . . . . . . . . . . 33

Prestridge v. Bank of Jena, 05-545 (La. App. 3d Cir. 3/8/06), 924 So. 2d 1266 . . . . . . . . . . . 56

Reed v. Meaux, 292 So. 2d 557 (La. 1973 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Regions Bank v. Weber, 2010-1169 (La. App. 4th Cir. 12/15/10); 53 So. 3d 1284 . . . . . . . . 37

Richards v. Louisiana Citizens Property Insurance Corporation, 623 F. 3d 241 (5th Cir. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Richardson v. Capitol [sic] One, N.A., 11-CA-30 (La. App. 5th Cir. 6/14/11); ____ So. 3d ____ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

River Bend Capital, LLC v. Lloyd's of London, 2010-1317 (La. App. 4th Cir. 4/13/11); 63 So. 3d 1092 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Robertson v. Sun Life Financial, 2009-2275 (La. App. 1st Cir. 6/11/10); 40 So. 3d 507 . . . . . 58

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Robertson v. Sun Life Financial, 2011-0172 (La. App. 1st Cir. 6/10/11); 2011 WL 3558170 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Rowley Co., Inc. v. Southbend Contractors, Inc., 517 So. 2d 1260 (La. App. 4th Cir. 1987) . . 17

Smith v. McGuire Funeral Home, Inc., 46,326 (La. App 2d Cir. 6/1/2011); 70 So. 3d 873, writ denied 71 So. 3d 297 (La. 9/30/2011) . . . . . . . . . . . . . . . . . . . . . 62

Smitko v. Gulf South Shrimp, Inc., 2010-0531 (La. App. 1st Cir. 10/19/11); ____ So. 3d ____ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Specialty Construction, LLC v. Jim Meyers Construction Company, LLP, 2010-1378 (La. App. 1st Cir. 2/11/11); 2011 WL 846119 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Standard Materials, L.L.C. v. C&C Builders, Inc., 2010-0250 (La. App. 1st Cir. 12/22/10); 2010 WL 5479903 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Texans Credit Union v. Louisiana Department of Agriculture and Forestry, 2010-1476 (La. App. 1st Cir. 5/3/11); 64 So. 3d 869 . . . . . . . . . . . . . . . . . . . . . . . . . 19

The Nature Conservancy v. Upland Properties, LLC, 2010-0516 (La. App. 1st Cir. 10/29/10); 48 So. 3d 1257 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Thompson Tree & Spraying Service, Inc. v. White-Spunner Construction, Inc., 2010-1187 (La. App. 3d Cir. 6/1/11); 68 So. 3d 1142, writ denied, 71 So. 3d 290 (La. 2011) . 16, 33

Thompson v. Bank One of Louisiana, N.A., 2010-1489 (La. App. 4th Cir. 3/23/11) . . . . . . . . 46

Troth Corp. v. Deutsch, Kerrigan & Stiles, 951 So. 2d 1162 (La. App. 4th Cir. 2007) . . . . . . 31

U.S. Bank National Association v. Maranto, 2010-0766 (La. App. 1st Cir. 10/29/10); 2010 WL 4272924 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

United States v. Scott, 2010 WL 5439775 (W.D. La. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . 27

Veterans Commercial Properties, LLC v. Barry's Flooring, Inc., 11-6 (La. App. 5th Cir. 5/24/11) 67 So. 3d 627 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Vickers v. Vickers, 25 So. 3d 210 (La. App. 3d Cir. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Wede v. Niche Marketing USA, LLC, 2010-C-0243 (La. 11/30/10); 52 So. 3d 60 . . . . . . . . . 12

Whitman v. Whitman, 18 So. 2d 633 (La. 1944) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

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Whitney National Bank v. McFarland, 2010-0417 (La. App. 4th Cir. 9/29/10); 49 So. 3d 454 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Willis v. TMB Partnership, 45, 813 (La. App. 2d Cir. 12/15/10); 56 So. 3d 324 . . . . . . . . . . . 31

Wilson v. Bank of America, 2011-0392 (La. App. 4th Cir. 9/20/11); ___ So. 3d ___ . . . . . . . 51

Wood v. Omni Bancshares, Inc., 10-216 (La. App. 5th Cir. 4/26/11); 69 So. 3d 475 . . . . . . . 63

Young v. Central Progressive Bank, 2010-1816 (La. App. 1st Cir. 3/25/11); 2011 WL 1103877 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997) . . . . . 35

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RECENT DEVELOPMENTS IN LOUISIANA CASELAW

RELATING TO

SECURITY DEVICES, TITLE MATTERS AND OTHER ISSUES OF INTEREST TO BANKS

I. Chapter 9 security interests.

A. Creation.

Monlezun v. Lyon Interests, Inc., 2011-576 (La. App. 3d Cir. 11/2/11); ____ So.3d ____ (not yet released for publication in the permanent law reports). Farmequipment belonging to a family corporation was encumbered in favor of a bankunder a commercial security agreement executed in 2008 as security for a loan thebank made to the corporation<s president (individually). At the time the loan wasmade, the corporation delivered a board resolution authorizing its president toencumber any property belonging to the corporation as security for all the borrower'sobligations. The resolution also contained a continuing validity clause reciting thatit would remain in effect until notice of revocation was delivered to the bank. The2008 loan was ultimately repaid, and in 2009 the same borrower contracted anotherloan from the bank and executed a commercial pledge agreement describingcollateral as "EXISTING COMMERCIAL SECURITY AGREEMENT DATE 04-01-08 COVERING ALL EQUIPMENT EXECUTED BY LYON INTERESTS,INC." After being required to repay this loan following default, a guarantor institutedexecutory proceedings against the corporation<s equipment. At a preliminaryhearing, the trial court found that there were deficiencies in the 2008 corporateresolution and stayed the sheriff's sale. After the suit was converted to ordinaryprocess and proceeded to trial, the trial court concluded that the resolution did in factpermit the officer of the corporation to encumber the corporation<s equipment assecurity for the 2009 loan, and the trial court lifted the stay allowing the sheriff's saleto go forward. The court of appeal affirmed.

The corporation<s argument on appeal was that, because the 2008 loan hadbeen paid in full, any obligations arising under the 2008 loan and its accessoryobligations were extinguished under La. Civ. Code art. 1884, which provides thatsecurity given for the performance of an extinguished obligation may not betransferred to the new obligation without agreement of the parties who gave security.The court of appeal found no error in the trial court<s judgment upholding the validityof the 2009 commercial pledge agreement on the basis of the 2008 resolution. Theplain language of the 2008 resolution did not limit the president<s authorization to the2008 loan or the 2008 commercial security agreement. The bank was entitled to relyon the resolution until notified of its revocation. The court also found that, althoughthe 2009 commercial pledge agreement referenced the 2008 commercial securityagreement, "it clearly contemplates encumbering 'ALL EQUIPMENT' OWNED BY[THE CORPORATION]." Finally, the court rejected the corporation<s argument that

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the trial court<s issuance of a preliminary injunction constituted law of the case. Thisdoctrine cannot be applied to supplant the Code of Civil Procedure provision whichclearly permits a reconsideration of the overruling of peremptory exceptions. Nordoes the doctrine apply when the trial court has ruled on interlocutory issues, suchas the preliminary injunction issued in this case.

B. Rights against account obligors

First Louisiana Bank v. Morris & Dickson Co., LLC, 45, 668 (La. App. 2d Cir.11/3/10); 55 So. 3d 815. During the course of a contractor<s attempts to obtainfinancing for projects he had contracted to construct under purchase orders with awarehouse owner, the owner executed a number of letters addressed "to whom it mayconcern" stating that payment for the purchase orders would be made payable to thecontractor and certain specified named banks. At least two of these letters coveredthe same purchase order and were issued to different banks. For the project inquestion, the contractor obtained financing from the plaintiff bank and granted thebank a security interest in the purchase order. After the contractor ultimatelydefaulted on both the construction contract and its loan, the bank filed suit againstthe owner seeking to enforce the terms of the "to whom it may concern" letter. Aguarantor who had paid a portion of the loan intervened asserting that he had reliedto his detriment on the promise made in this same letter. The trial court renderedjudgment in favor of the owner, rejecting the claims of both the bank and theguarantor. The court of appeal affirmed.

Although the bank provided financing for the contractor, it never notified theowner that it was doing so or that it accepted the offer embodied in the "to whom itmay concern" letter. Under La. Civ. Code art. 1927, a contract is formed by theconsent of the parties established through offer and acceptance. La Civ. Code art.1935 provides that acceptance of an offer may be made in a manner suggested by theoffer or in any reasonable manner. La Civ. Code art. 1936 provides that a mediumor manner of acceptance is reasonable if it is the one used in making the offer or isone customarily used in similar transactions. At the outset, the court observed that,given that there were multiple letters issued to more than one lender covering thesame purchase order, a holding that these letters, without notice of acceptance,created a contract would obligate the owner to include more than one bank on anychecks issued. The court found that this was not the case but rather that the letterwas an offer requiring acceptance and communication of acceptance in order for acontract to arise. In this case, the bank, which had not made any communication atall to the owner, argued that the mere fact of having made a loan was sufficient toconvey acceptance. The court disagreed. The offer was made in writing, and nowritten acceptance was communicated. There was also no showing that simplymaking a loan to the contractor would have constituted customary acceptance in suchtransactions. Although La. Civ. Code art. 1939 provides that when an offeror invitesan offeree to accept by performance, a contract is formed when the offeree performsthe requested performance, La. Civ. Code art. 1941 provides that the offeree must inthese cases give prompt notice of the commencement of performance unless theofferor knows or should have known that the offeree has begun to perform. In this

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case, there was no showing that the owner had invited performance in the first place,and no showing that the bank had given notice of performance to the owner. Thecontractor was apply for financing from numerous banks and could have securedfinancing from some other source. Thus, the circumstances do not show that theowner knew or should have known that the bank had begun to perform. For similarreasons, the court rejected the bank<s contention that it was the beneficiary under astipulation pour autrui. In concluding its opinion on the bank<s claims, the courtcited La. R.S. 10:9-411, which provides that an account obligor may discharge itsobligation after receipt of notification of an assignment only by paying the assignee.According to the court, the result may have been different if the letter had beenwritten at a different time in the loan process.

With respect to the detrimental reliance claim asserted by the guarantor, thecourt reaffirmed an earlier holding that it had made in the same case to the effect thata claim for detrimental reliance appears in the law of contract, rather than in thequasi-delictual field, and thus is subject to a prescriptive period of ten years.However, in order to establish a claim for detrimental reliance, the guarantor wouldhave to show that he was justified in relying on the promise allegedly made by theowner in the "to whom it may concern" letter. The court held that under the factspresented the guarantor was not so justified. No promises were made to theguarantor and no representation was made by the owner in such a manner that theowner should have expected the guarantor to rely on it.

C. Enforcement

1. Ford Motor Credit Company v. Jackson, 45,447 (La. App. 2d Cir.8/11/10); 47 So. 3d 558. While working as an employee at a Forddealership, the defendant acted on behalf of the dealership in selling tohimself a vehicle under a retail installment contract providing for a singlepayment due one year later. The contract was then assigned to Ford MotorCredit Company. When the defendant did not make payment in accordancewith the contract, Ford Motor Credit Company faxed him a voluntarysurrender form in which he recognized that he would be responsible for anydeficiency balance owing after disposition of the vehicle. He signed the formwithout reading it and faxed it back. The creditor then sold the vehicle atauction, leaving a deficiency balance of $15,000. The creditor printed out astatement of sale and submitted it to the defendant, demanding payment ofthe deficiency balance. In a subsequent collection suit, summary judgmentwas rendered in favor of the creditor, primarily on the basis of imagedrecords which were authenticated by the creditor's field servicerepresentative. The court of appeal sustained the summary judgment,rejecting the defendant's argument that the records were "merely oral."According to the court, "the quaint image of the file cabinet, records clerkand dust mites may have dropped from the equation, but electronicdocuments that satisfy [the business records exception under art. 803(6) ofthe Code of Evidence] have the same evidentiary value as their more tangiblepredecessors."

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The court also considered the defendant's arguments that the creditorhad failed to comply with Section 9-620 of the UCC, which governs acreditor's proposal for acceptance of collateral in full or partial satisfactionof the secured obligation. That statute requires that the secured party give thedebtor a writing warning that the debtor will still owe a deficiency afteracceptance of the collateral, stating the amount of the deficiency andproviding an explanation of how the deficiency was calculated. The courtrejected the defendant's contentions that he never consented to theacceptance, because he admitted signing the voluntary surrender form. Hisactions in faxing it back constituted a record under Section 9-102(a)(69) ofthe UCC, as it was information that is "inscribed in a tangible medium." Thevoluntary surrender form also stated that he would be liable for thedeficiency balance if the sale price did not cover the balance owing. Theonly arguable point of the defendant's defense was that Section 9-620requires a single writing rather than multiple writings. The court observedthat Louisiana's version of Section 9-620 includes a non-uniform paragraph(h), borrowed from Section 9-616, which permits proposals for strictforeclosures in consumer cases in exchange for a partial satisfaction of thedebt. According to the court, it would be factually impossible for the securedparty to provide both pre- and post-disposition information in a singlewriting. Thus, the court held that different writings may satisfy the post-disposition notice required under paragraph (h).

Finally, on the merits of the defendant's claim that the vehicle waspurchased for purposes of being part of the dealership's inventory and thatafter he left the dealership his understanding was that he would have nofurther liability and also that he had been told that upon signing the voluntarysurrender form he would have no further liability, the court found that thetrial court did not abuse its discretion in finding the defendant's version ofevents not to be credible.

2. First Bank and Trust v. Thomas, 2010-1821 (La. App. 1st Cir. 5/6/2011);2011 WL 1944119. After defaulting on a vehicle loan, the debtor executeda voluntary surrender form attempting to surrender the vehicle to the creditorin consideration of a $20,000 credit on the debt. However, the creditor didnot sign the surrender form, but instead filed a petition to enforce the securityagreement and to obtain judgment for the full balance of the debt. In supportof summary judgment, the creditor submitted an affidavit from its vicepresident stating that the bank had never accepted the debtor<s offer ofvoluntary surrender. Under La. R.S. 10:9-620(d), a purported or apparentacceptance of movable collateral is ineffective unless the secured partyconsents to the acceptance in an authenticated record or sends a proposal tothe debtor. According to the comments to this section, a secured party'sacceptance of a debtor's voluntary surrender of possession of collateral doesnot, of itself, necessarily raise an implication that the secured party intendsor is proposing to accept the collateral in satisfaction of the secured

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obligation. Thus, the debtor's submission of the surrender form without thebank's acceptance was a unilateral action that did not raise an implication thatthe bank accepted the collateral in partial satisfaction of the debt.

II. Mortgages.

A. Conventional mortgages

1. Multiple obligations mortgages

Keybank National Association v. Perkins Rowe Associates, LLC, ___F.Supp. 2d ___ (M.D. La. 2011). In a ranking dispute between an assignee ofa multiple obligations mortgage and a subcontractor claiming a PrivateWorks Act privilege, the court held that the assignee had priority based uponthe fact that the original mortgage granted to its assignor was recorded beforework began. That original mortgage, in favor of Wachovia, was recorded onSeptember 14, 2005. On April 25, 2006, the borrower executed a mortgage(apparently covering different property in the same development) in favor ofJTS Realty Services, LLC, and, on June 9, 2006, the borrower executedpromissory notes payable to Wachovia and JTS Realty Services in theamounts of $1,000 and $10,000, respectively. On July 21, 2006, after noticeof contract had been filed, Wachovia and JTS assigned their notes andmortgages to Keybank, which then consolidated the notes and mortgages intonew documents, each consolidation claiming that it "amended, restated andconsolidated the previous documents." The consolidated mortgage purportedto increase the limit of the secured indebtedness under the mortgage from$200,000,000 to $500,000,000. Wachovia never lent any money to theborrower on the security of its mortgage; however, shortly after theassignment, Keybank and the borrower entered into a loan agreement underwhich Keybank advanced loan proceeds of $170,000,000. The court foundthat Keybank's mortgage ranked from September 14, 2005, the date ofrecordation of Wachovia's original mortgage.

Under La. Civ. Code art. 3298(B), a mortgage securing multipleobligations takes its rank, as to all obligations, from the date the contract ofmortgage is filed for registry, notwithstanding the nature of the obligationsor the date they arise. In other words, a mortgage securing future obligationshas the same effect and priority it would have if all the obligations were inexistence when the contract of mortgage was entered into. La. Civ. Code art.2342 expresses a general policy which broadly supports assignments of rightsand makes clear that assigning a promissory note also transfers the mortgagesecuring the note. Louisiana law supports the proposition that an assigneestands in the shoes of the assignor.

The subcontractor's first claim was that Wachovia never signed themortgage and thus never gave assent to be bound. Rejecting this contention,the court pointed out that La. Civ. Code art. 3289 provides that the signature

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of the mortgagee is not required because consent is presumed and acceptancemay be tacit. Moreover, in this case, Wachovia received a promissory note,which was signed by a Wachovia representative. Thus, the subcontractorcould not overcome the strong presumption in favor of consent provided inLa. Civ. Code art. 3289.

The subcontractor's next argument was that the Wachovia mortgagecould not be legally established because no obligation ever existed for whichit could serve as security. According to the court, while Wachovia did notlend money, negotiations were ongoing, and the subcontractor could notpoint to any evidence prior to the assignment which showed that Wachoviaand the borrower had ceased having a broad expectation that they mightsomeday reach agreement on the terms of the loan. A related contention bythe subcontractor was that the assignment was merely a sham transactionbecause, without a valid note underlying the mortgage, the mortgageassignment from Wachovia to Keybank could not stand. Although thesubcontractor was "certainly correct" that Louisiana jurisprudence has longheld that a mortgage only provides security to the extent there is anunderlying obligation, the court found that the Wachovia promissory satisfiedthat requirement. The subcontractor cited no authority to establish that thehanding over of money is a prerequisite to incurring an obligation.According the court, "once the note was entered, Wachovia was obligated toadvance the funds." From this proposition, the court reasoned that theWachovia mortgage was thus retroactively triggered and became effective forall purposes once Wachovia effected the assignment to Keybank and thatKeybank stood in Wachovia's shoes. According to the court, these actionssimply reinforced the underlying obligation incurred from the start throughWachovia's promissory note.

The court also rejected contentions that the assignment andconsolidation of the notes and mortgages constituted a novation. The burdenof establishing a novation rests with the party asserting it. According to thecomments to La. Civ. Code art. 7882, novation by substitution of a newobligee is not provided for because the effects of such a novation are readilyachieved through an assignment of credit. When it consolidated the assignednotes, Keybank and the borrower agreed that the consolidated note did notconstitute a novation. Thus, the most important consideration - the intent ofthe parties - clearly weighed against finding a novation. Each consolidationby Keybank was merely the execution of a new writing, which is exactly thetype of "mere modification of an obligation, made without intention toextinguish it" that La. Civ. Code art. 1881 declares is not a novation.

Finally, the court rejected the contention that the increase in theamount of the mortgage affected its ranking. While La. R.S. 9:5390(B)provides that amendments to security agreements are valid, but rank onlyfrom the date of the amendment's recording if the amount of the indebtednessincreases, that statute does not stand as an impediment to the validity of

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Keybank's consolidated note, especially when viewed in light of La. Civ.Code art. 3298. Keybank's obligations never surpassed the $200,000,000limit of the original Wachovia bank mortgage. (The court's analysis of theeffective date of the subcontractor's competing Private Works Act privilegeappears infra.)

2. Novation; remission

GE Commercial Finance Business Property Corporation v. LouisianaHospital Center, LLC, 2010-1838 (La. App. 1st Cir. 6/10/11); 69 So. 3d649. While mortgage indebtedness was outstanding, the mortgagor conveyedthe mortgaged property to an industrial development district, which acquiredthe property subject to the mortgage and immediately leased the propertyback to the mortgagor. The purpose of this transaction was to allow themortgagor to obtain certain tax incentives. At the same time, the industrialdevelopment district issued a bond, which provided by its terms that itrepresented "a concurrent and coterminous obligation" with the mortgagenote and specifically stated that all payments made on the mortgage notewould constitute payment on the bond and vice versa. The lease alsocontained recitations to the effect that the parties desired to "pursue theBonds in a manner that will not disturb the existing Conventional Financingbut instead have the Bonds represent a duplicative obligation of the Lesseeto pay the Loan." A few months later, the mortgagor signed an amended andrestated promissory note to replace the original note, and the guarantorsexecuted an amended and restated guaranty agreement as security for the newnote. After the amended and restated note fell into default, the mortgageeaccelerated the entire balance of the note and filed an ordinary processforeclosure against the mortgagor, the industrial development district and theguarantors. On account of a default under the lease, the industrialdevelopment district accelerated all future rental payments and apparentlyalso terminated the lease. The trial court granted partial summary judgmenton liability in favor of the mortgagee, and the court of appeal affirmed.

The defendants< primary arguments were that the mortgage note hadbeen novated by the bond and that the termination of the lease by theindustrial development district constituted a partial or complete remission ofthe mortgagee's claims. La. Civ. Code art. 1879 provides that novation is theextinguishment of an existing obligation by the substitution of a new one.The intention to extinguish the original obligation must be clear andunequivocal; novation may not be presumed. According to the court, thedetermining factor is the intention of the parties. In this case, there was noindication that the parties desired or intended to effect a novation by theissuance of the bond and lease agreement. Rather, the bond was issued solelyfor the purpose of allowing the mortgagor to obtain tax benefits, and theparties always intended for the original note and bond to represent the samedebt. The court also observed that the claim of novation was contradicted bythe chronology of events. The amended and restated promissory note

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followed the execution of the bond by over a year. If the original mortgagenote had been novated by the bond, there would have been no need for theexecution of the amended mortgage note a year later.

The claim of remission was based upon the argument that theindustrial development district and the mortgagee had become solidaryobligees and that the termination of the lease also extinguished the mortgagenote. The court disagreed. Under La. Civ. Code. art. 1888, remission of adebt is never presumed unless it clearly appears that a creditor intended it,and the burden of proving remission, whether express or tacit, rests uponthose claiming the benefit. In this case, the documents specifically providedthat the note and lease were separate and distinct obligations. The leaserequired the mortgagor to pay rent to the bond trustee and specificallyprovided that the mortgage obligations were not to be disturbed and wouldsurvive any default remedies taken by the industrial development district,including termination of the lease. Thus, the argument of remission had nomerit. Judge Kuhn dissented, finding that the partial summary judgment wasnot a final judgment since it did not specify the amount owed on the debt. Hefelt that this deficiency was underscored by the fact that the judgment createda judicial mortgage "required to be recorded in the Mortgage andConveyance Records" but without a decree of the amount.

B. Judicial mortgages.

In re McMorris, 436 B R. 359 (Bkrtcy. M.D. La. 2010). After foreclosing byexecutory process on mortgaged property that did not include the debtor's homestead,the bank obtained a deficiency judgment, which upon recordation became a judicialmortgage on the debtor's homestead. After applying for Chapter 7 relief, the debtorclaimed a $35,000 exemption on the residence in accordance with La. R.S. 20:1. Thebank objected, claiming that, while its judicial mortgage was admittedly a "judiciallien" within the meaning of 11 U.S.C. § 101(36), this lien arose out of a mortgageforeclosure and therefore was not subject to avoidance since 11 U.S.C. §522(f)(2)(C) provides that the avoidance rule does not apply with respect to a"judgment arising out of a mortgage foreclosure." In holding against the bank, thecourt mentioned that In re Hart, 328 F. 3d 45 (1st Cir. 2003) previously held thatCongress used § 522(f)(2)(C) simply to clarify that the entry of a foreclosurejudgment does not convert the underlying consensual mortgage into a judicial lienthat is subject to avoidance; however, a deficiency judgment, whether it arises in aforeclosure action or in a separate action, is a non-consensual judicial lien subject toavoidance under § 522(f). Applying this reasoning to Louisiana foreclosureprocedure, the court held that the bank's deficiency judgment was merely incidentalto its mortgage foreclosure and not a "judgment arising out of a mortgageforeclosure" insulated from avoidance.

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C. Rights to insurance proceeds

1. Priority of the attorney's privilege against a mortgage.

Richards v. Louisiana Citizens Property Insurance Corporation, 623 F.3d 241 (5th Cir. 2010). After an attorney representing a homeowner on acontingency fee contract successfully obtained an increased settlement froman insurance company for property damage sustained during HurricaneKatrina, the homeowner's mortgagee claimed the full amount of the insuranceproceeds on the ground that its mortgage balance exceeded the sumrecovered. The district court held that the attorney's privilege for hiscontingency fee in the settlement funds was superior to the mortgagee'srights. The court of appeals affirmed. The mortgagee's claims werepredicated upon an assertion that any interest the attorney may have in thesettlement proceeds attached only to the homeowner's recovery and not to theportion owed to the mortgagee. Moreover, the mortgagee contended that itwas not bound by the contingency fee contract because it was not recordedbefore execution of the settlement. Finding Irons v. U.S. Bank, 966 So. 2d646 (La. App. 4th Cir. 2007) to be "virtually indistinguishable", the courtheld that a plain reading of the statute supported the attorney's position. Thecourt distinguished its own prior holding in Hussain v. Boston Old ColonyIns. Co., 311F. 3d 623 (5th Cir. 2002) on the ground that in that case themortgagee hired its own lawyers who put forth their own professional effortsto obtain recovery of the policy proceeds. This case and Irons both involved"static mortgagee-lendors [sic] unwilling to exercise any purported rights totheir recovery." Finally, the court held that the attorney's failure to record hiscontract was immaterial, since the Louisiana Supreme Court has held that anattorney preserves his privilege without recordation if he asserts his claim byintervention or other legal proceedings prior to disbursement of the proceedsto a third party.

2. Propriety of concursus.

Nolan v. Audubon Insurance Group, 2010-1362 (La. App. 3d Cir.3/9/11); 59 So. 3d 487. After enduring hurricane damage to their home, theloss of the home at a foreclosure sale and a Chapter 7 bankruptcy filing, thehomeowners reached an agreement with their homeowner<s insurer over theamount to be paid for the damage sustained by the home. When thehomeowners objected to the listing of their mortgagees as additional payeeson the settlement check, the insurer filed an concursus proceeding, in whichthe homeowners filed a motion seeking penalties for the insurer<s failure topay settlement funds within thirty days as required by La. R.S. 22:1973. Thetrial court granted the insurer<s request for concursus and denied the claim forpenalties. The court of appeal affirmed. The fact that the homeowners hadobtained a discharge in their bankruptcy did not mean that the debt itself wasextinguished or that the mortgagees had no recourse against a third party,such as the insurer. The policy in question provided that the mortgagees

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would be listed as payees for claims for damages and even containedadditional language indicating a possible separate contractual relationshipwas created. Thus, the insurer was not only well within its rights to protectitself from additional liability to the mortgagees through a concursus, it actedreasonably in doing so. As for the homeowners< claim for penalties againstthe insurer for failure to pay within thirty days of the settlement, the courtobserved that the insurer did in fact tender payment within thirty days; thehomeowners were simply not happy with the manner in which the check waswritten.

3. Assignability of claims

In Re Katrina Canal Breaches Litigation, 2010-1823 (La. 5/10/11) 63 So.3d. 955. In the disbursement of "Road Home" grants, the State of Louisianarequired homeowner recipients to execute an assignment of all rights toreimbursement received or to be received under any policy of casualty orflood insurance on their residences. The state then filed suit against all of theinsurance companies who wrote property insurance in Louisiana at the timeof the hurricane. Following removal, the federal district court denied theinsurer<s motion to dismiss, holding that the contractual anti-assignmentprovisions of the relevant insurance policies did not bar post-lossassignments under Louisiana law. In the ensuing interlocutory appeal, theUnited States Fifth Circuit Court of Appeals certified to the LouisianaSupreme Court the question of whether an anti-assignment clause in ahomeowner's insurance policy bars an insured's post-loss assignment ofinsurance claims. Based on La. Civ. Code art. 2653, which provides that aright cannot be assigned when the contract from which it arises prohibits theassignment of that right, the Supreme Court answered that there is no publicpolicy in Louisiana which precludes an anti-assignment clause from applyingto post-loss assignments. The court acknowledged that this holding runscounter to both the prevailing American rule distinguishing between pre-lossand post-loss assignments as well as Louisiana jurisprudence that predatedthe enactment of La. Civ. Code art. 2653 in 1993. There is no public policyin Louisiana favoring free assignability of claims over freedom of contract,which is itself an important public policy consideration. If any exception toLa. Civ. Code art is to be created relative to post-loss assignments, it is up tothe legislature to do so. The court cautioned that contractual languageprohibiting policy assignments must clearly and unambiguously express thatthe non-assignment clause applies to post-loss assignments.

4. Accord and satisfaction

River Bend Capital, LLC v. Lloyd's of London, 2010-1317 (La. App. 4thCir. 4/13/11); 63 So. 3d 1092. In settlement of a loss sustained by anapartment complex during Hurricane Katrina, the property insurer issued tothe property owner and his mortgagee a check which contained languagestating that it was submitted "IN FULL AND FINAL SETTLEMENT OF

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THE HURRICANE KATRINA LOSS OF AUGUST 29, 2005." Afternegotiating the check, the mortgagee later filed suit against the insurer, whichmoved for summary judgment contending that the mortgagee<s negotiationof the check precluded further recovery. The trial court granted the motionfor summary judgment, and the court of appeal affirmed. Citing priorjurisprudence (but failing to cite either La. Civ. Code art. 3079 or La. R.S.10:3-311), the court held that to establish the defense of accord andsatisfaction, the debtor must show an unliquidated or disputed claim betweenthe debtor and creditor and that the debtor tendered, and the creditor acceptedby negotiation, a check for less than the sum claimed by the creditor. Theseelements were all satisfied in the present case. The court rejected themortgagee<s contention that the check was actually an unconditional tenderby the defendant, which had previously issued a letter to the insured offeringthe identical amount of money "on a without prejudice to liability basis." Thecourt observed that this is not the case of an unsophisticated party beingduped; the plaintiff is in the mortgage business and should have been awareof the language contained on the face of the check. The court also rejectedarguments by the mortgagee that further discovery was needed to verify whatwas meant by "full and final settlement." Finally, the court rejected themortgagee<s contention that the insurer was estopped from raising theaffirmative defense of accord and satisfaction since it had not specificallypleaded that affirmative defense in its answer. The insurer<s answer didplead that it had satisfied all contractual obligations to the insured, and themortgagee was not prejudiced by the failure of the insurer to include the"magic words? of accord and satisfaction in its answer.

D. Public records doctrine

1. Errors in names

Carr v. Oaktree Apartments, 45,514 (La. App. 2d Cir. 8/11/10); 46 So.3d 793. The case involves a ranking dispute between the holder of a 1999judicial mortgage and a bank holding a conventional mortgage grantedseveral years later by the judgment debtor. The judgment that formed thebasis of the 1999 judicial mortgage was against "Oaktree Apartments." In2000, the judgment creditor filed amended judgments which, in the caption,spelled the name of the defendant as "Oak Tree Apartments" and then "OakeTree Apartments," though in both of the amended judgments the body of thejudgment continued to refer to the judgment debtor as "Oaktree Apartments."Three years later, the judgment creditor filed partial releases designating thejudgment debtor as "Oaketree." At the time the bank's mortgage wasgranted, the title attorney confirmed that the proper name of the companywas spelled "Oaketree" and conducted an online search of the parishmortgage records, finding no judgment under that name. After receivingtestimony during a rule for ranking, the trial court held that the judicialmortgage did not prime the bank's mortgage. The court of appeal reversed.

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Under the public records doctrine, the issue is whether a recordeddocument provides "sufficient notice" to a third party. Determinationsconcerning the deficiency of notice in the public records are decided on acase-by-case basis. In this case, the partial release, which was filed under thename "Oaketree Apartments", should have placed the title examiner on noticeof the existence of the judicial mortgage and should have alerted her to theneed to examine the recorded document to determine whether it pertained tothe party in question. After so holding, the court then embarked upon adiscussion upon whether the bank had actual knowledge of the recordedjudgment, finding that an obvious connection between the partial release andfinancing that the bank was providing to Oaktree Apartments at the sametime made its argument that it had no notice of the partial release dubious.The court did not explain whether and to what extent any actual knowledgewould have been material. The court of appeal also found that the trial courterred in failing to apply applicable law governing name variations andmortgages. At the time the judgment was recorded, La. R.S. 9:2728 providedthat a conventional or collateral mortgage is not deemed inferior by reasonof the use of any reasonable variation of the mortgagor's name. The courtapparently felt that this statute applied to judicial mortgages. The court alsocited La. Civ. Code art. 3353, which provides that a recorded instrument iseffective against a third person if the name of a party is not so indefinite,incomplete or erroneous as to be misleading and the instrument as a wholereasonably alerts a person examining the records that the instrument may bethat of the party. In this case, the deed that was part of the bank's closingpackage spelled the name as "Oaktree" rather than "Oaketree". Moreover,a print out from the secretary of state's website under the entry for "OaketreeApartments" reflected its general partner to go by the name "Oaktree."According to the court, the title examiner's search of the secretary of state'swebsite should have alerted her to search the mortgage records under bothvariations of the name.

2. Errors in recordation

Wede v. Niche Marketing USA, LLC, 2010-C-0243 (La. 11/30/10); 52 So.3d 60. Counsel for a judgment creditor filed his client's judgment forrecordation with the clerk of court. A year later, the judgment debtors soldimmovable property to a third party buyer. The judgment creditor's counselwrote to this buyer, advising him of the existence of the judgment andsuggesting that he contact his title insurance company. Thereafter, thejudgment creditor's counsel discovered that the judgment had been recordedonly in the conveyance records and not in the mortgage records.Nonetheless, the judgment creditor filed a motion to authorize seizure of theproperty, arguing that the clerk of court's error in recording the judgment inthe conveyance records did not impact the validity of his judicial mortgage.An affidavit from the clerk of court indicated that at the time the judgmentwas tendered for recordation, there were no instructions provided to the clerkof court as to where the document should be recorded. The clerk processed

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the judgment as a conveyance document rather than a mortgage documentwithin the clerk's computerized records. The trial court issued a judgmentauthorizing seizure of the property, but the court of appeal reversed. TheSupreme Court affirmed the judgment of the court of appeal.

Noting first that a judicial mortgage owes its very existence to therecordation of a judgment in the mortgage records, the Court nonethelesspreferred to decide the case on the basis of the more general Civil Code ruleson registry. La. Civ. Code art. 3338 provides that a written instrument iswithout effect as to third persons unless recorded "in the appropriatemortgage or conveyance records." Though La. Civ. Code art. 3347 providesthat the effect of recordation arises upon filing and is unaffected bysubsequent errors of the clerk, art. 3347 does not trump the "emphatic, clear,and absolute imperative" of art. 3338. To hold otherwise would mean thatart. 3347 affords not just the effects of recordation but also the effect ofrecordation in the mortgage records. The Court buttressed its analysis bythe comments to article 3320, which was not changed when the new registryarticles were amended. Those comments state that "a mortgage recorded inthe conveyance records, or a sale recorded in the mortgage records, iswithout effect as to third persons."

3. Errors in cancellation

First National Bank, USA v. DDS Construction, LLC, 10-204 (La. App.5th Cir. 11/9/10); ____ So. 3d ____, writ granted ____ So. 3d ___ (La.10/12/2011). In January 2006, a construction mortgage was executed infavor of the plaintiff bank. Later that year, one of the lots subject to themortgage was sold to a third party, who mortgaged it to another bank. InApril 2008, the plaintiff bank filed an executory process suit against all of theproperty subject to its mortgage, including the lot that had been sold. In Juneof 2009, the clerk of court cancelled the plaintiff<s mortgage to the extent thatit burdened the lot in question pursuant to a request for cancellationsubmitted by the plaintiff bank. Five days later, the plaintiff bank filed a?notarial? act of correction executed by its president, averring that theconstruction mortgage remained in force as to the lot. A second notarial actof correction, which was executed by the notary who had actually executedthe original cancellation of the mortgage, was recorded in October of 2009. The following month, the other bank intervened, alleging that when the lotwas sold to its mortgagor, the plaintiff bank had simply failed to cancel itsconstruction mortgage over the lot. In the ensuing rule for ranking, theargument advanced by the intervener bank was that an act of correction underLa. R.S. 35:2.1 cannot be used to retroactively reinstate a mortgage into thepublic records so as to give the holder of the mortgage priority over anothercreditor. In opposition, the plaintiff bank intended that this limitation on thestatute would defeat the clear legislative purpose of the statute, which theplaintiff bank alleged was to change ?perceived inequities arising out of thepublic records doctrine.? The trial court ruled in favor of the plaintiff bank,

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holding that La. R.S. 35:2.1, which permits notarial acts of correction,applies to acts of correction of cancellations of mortgages. In addition, thetrial court found that there was no showing that the second bank had reliedon the erroneous cancellation or that it was prejudiced during the five daysbefore the first act of correction was recorded.

In reversing this holding, the court of appeal noted that the keyphrases in La. R.S. 35:2.1 are "clerical error," "shall not prejudice the rightsacquired by any third person before the act of correction is recorded" and"shall not alter the true agreement and intent of the parties." FollowingVickers v. Vickers, 25 So. 3d 210 (La. App. 3d Cir. 2009), the court held thatan act of correction may not be used to effect a substantive change. In thiscase, an obligation that burdened the lot in question had been removed andwas then attempted to be restored. This is a substantive change not a clericalerror, and cannot be performed by a notarial act of correction. According tothe court, this limitation creates a safeguard against the improper alterationof recorded instruments. In a limited rehearing, the court of appeal rejectedtwo other arguments advanced by the plaintiff bank. First, it was notnecessary for the intervener bank to prove the amount of indebtedness owedto it, since the purpose of the ranking proceeding was simply to rankcreditors rather than to establish the amount of debt owed to the intervenerbank. The sole requirement to give the intervener his rank was the recorder'sinscription of the mortgage. The court also rejected a contention that theintervener bank was required to introduce its original promissory note. Thesupporting affidavit submitted by the intervener bank was sufficient toestablish its entitlement to enforce its note, even without production of theoriginal note.

III. Private Works Act Privileges

A. When work begins

Keybank National Association v. Perkins Rowe Associates, LLC, ___F. Supp.2d ___ (M.D. La. 2011). In a ranking dispute between a subcontractor andmortgagee, the court was called upon to determine whether the subcontractor'sprivilege ranked as of a date prior to the date as of which the competing mortgagee'smortgage became effective against third persons. Work on different phases of a largedevelopment commenced in 2003 and continued over a number of years. Thesubcontractor's work was performed in 2007. The mortgage was held to have aneffective date of September 14, 2005, and a no work affidavit was filed at the time.The only work that was performed prior to the effective date of the mortgagee'smortgage was (i) site work, including roadway paving, sanitary sewer and stormdrainage collection and associated utilities, which was mentioned in the no workaffidavit and which had been performed pursuant to a contract that was recorded,after site work had already begun, on April 1, 2004; and (ii) the construction of amedical office building pursuant to a construction contract that was recorded onAugust 25, 2003 and ended when a notice of substantial completion was recorded on

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October 14, 2004. The court found against the subcontractor, since it could not showthat its work was part of either the site work or the construction of the medical officebuilding.

As a preliminary matter, the court noted that, under La. R.S. 9:4820, it wasbound by the factual recitations in the no-work affidavit, which indicated that theonly work that had been performed at the time of the inspection consisted of"roadway paving, sanitary sewer and storm drainage collection systems andassociated utilities." In a footnote, the court rejected a contention that the originalmortgagee's actual knowledge to the contrary defeated its assignee's ability to relyon the affidavit, since the legislature amended La. R.S. 9:4820(C) in 1991 in orderto allow a lender to rely on a no-work affidavit unless actual fraud by the lender isproven.

Under the Private Works Act, a subcontractor's privilege ranks as of the daythe "work" of which it is a part began. There are several instances in which certainacts performed by a contractor or subcontractor are considered separate works. First,under La. R.S. 9:4808(C), site preparation work is a separate work to the extent thatit is not a part of the contractor's work for the erection of a building. Secondly, La.R.S. 9:4808(B) allows an owner to sever certain work from overall work by filinga notice of contract for the severed work before work begins. The mortgageecontended in this case that there is a third method under La. R.S. 9:4822(F) - filinga notice of termination with respect to a specified portion or area of work; however,the court noted that this provision simply accelerates the lien filing period; it has noeffect on the effective date of the claimant's privilege.

With regard to the "roadway paving, sanitary sewer and storm drainagecollection systems and associated utilities" referred to in the no work affidavit, thecourt rejected the subcontractor's contention that this work went beyond mere"preliminary site work" contemplated by La. R.S. 9:4808(C). The court found thatthis work was indeed mere preparatory work since it "pardon the pun - paved theway" for other contractors to raise the buildings within the development. Since thiswork was mere site work, it was a separate work from that in which thesubcontractor was involved and therefore did not control the ranking of thesubcontractor's privilege.

The subcontractor's argument that the work in which it was involved was thesame work as the initial construction of the medical office building was apparentlypredicated upon the fact that the site work had begun before notice of the site workcontract was filed and therefore the site work did not constitute a separate workunder La. R.S. 9:4808(B). The court found this argument to be beside the point. Theuntimeliness of recordation of the site work contract would affect only its ability toconstitute a separate work; it did not affect the ability of the timely filed medicaloffice building contract to qualify as a separate work. La. R.S. 9:4808(B) operatedto sever the work done under the medical office building contract from the rest of thedevelopment. Since the medical office building project constituted a separate workfrom all other work and since the subcontractor performed no work on the medical

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office building, the subcontractor's privilege could not take rank from the date thatthe medical office building contract was recorded.

B. When lien period expires

1. Notice of contract not filed

Specialty Construction, LLC v. Jim Meyers Construction Company,LLP, 2010-1378 (La. App. 1st Cir. 2/11/11); 2011 WL 846119. Afterfiling a claim under the Private Works Act on May 20, 2008, a subcontractorfiled suit against the owner and contractor to enforce his claim, as well as anotice of lis pendens, on May 29, 2009. The trial court sustained thedefendant's exception of prescription, but the court of appeal reversed.Where no notice of contract has been filed, a claimant has sixty days to filehis claim, measured from the notice of termination of the work or fromsubstantial completion or abandonment of the work if notice of terminationis not filed. The one-year period expires not one year from the day that theparticular claimant<s statement of claim is filed, but rather one year from thedate that any person falling into that claimant's category could have filed astatement of claim. In this case, there was no evidence offered to establisha date on which the sixty-day period began to run, and the trial courttherefore erred in sustaining the exception of prescription.

2. Notice of contract filed

Thompson Tree & Spraying Service, Inc. v. White-SpunnerConstruction, Inc., 2010-1187 (La. App. 3d Cir. 6/1/11); 68 So. 3d 1142,writ denied, 71 So. 3d 290 (La. 2011). Notice of contract for theconstruction for a Wal-Mart SuperCenter was filed in August, 2007. In June2008, the general contractor filed a document entitled "Certificate ofSubstantial Completion." In September, 2009, the plaintiff, a landscapingsubcontractor, filed a statement of claim under the Private Works Act andbrought suit upon its claim a few months later against the owner, thecontractor and its surety. The defendants filed an exception of impropervenue, based upon a forum selection clause in the subcontract to the effectthat any litigation between the parties would take place in Mobile County,Alabama. The defendants also filed a motion for partial summary judgmenton the basis of the untimeliness of the subcontractor's statement of claim.Implicitly rejecting the exception of improper venue with respect to thePrivate Works Act claim, the trial court held that the subcontractor did nottimely file its statement of claim. The trial court reasoned that both thenotice of contract and the purported notice of termination were defective forwant of a legal description; accordingly, the subcontractor had 60 days aftersubstantial completion within which to file its statement of claim. Withrespect to the breach of contract claim against the general contractor, the trialcourt held that under the forum selection clause the only proper venue wasin Alabama. The court of appeal reversed both holdings.

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La. R.S. 9:4822 provides that, if a notice of contract is properly andtimely filed, the persons to whom a claim or privilege is granted by La. R.S.9:4802 have 30 days after the filing of a notice of termination of work to filea statement of claim or privilege. The court observed that other courts haveconcluded that if a notice of contract is filed, but notice of termination iseither not filed or is deficient, the lien period does not begin to run. In thiscase, however, both the notice of contract and the notice of termination werearguably deficient since neither contained a legal description. La. R.S.9:4822 B provides that a notice of contract is not improperly filed becauseof an error or omission in the absence of a showing of actual prejudice by aclaimant or other person acquiring rights in the immovable. The section alsoprovides that an improper identification of the immovable is prima facieproof of actual prejudice. In Rowley Co., Inc. v. Southbend Contractors,Inc., 517 So. 2d 1260 (La. App. 4th Cir. 1987), which involved the absenceof a legal description from both a notice of contract and a notice oftermination, the Fourth Circuit found that a notice of contract was effectiveeven though it did not contain a legal description, since La. R.S. 9:4811 Bprovides that a notice of contract is not improperly filed because of an erroror omission unless actual prejudice is shown by a claimant. On the otherhand, the First Circuit in Norman H. Voelkel Construction, Inc. v. Recorderof Mortgages, 859 So. 2d 9 (La. App. 1st Cir. 2003) reached a contraryresult, noting that the subcontractor in that case did not rebut the presumptionof actual prejudice. The First Circuit thus applied the 60-day period fromsubstantial completion. According to the court in the present case, La. R.S.9:4822C, which provides the 60-day period, applies only to those situationsin which notice of contract has not been filed. The purpose of a notice ofcontract is to relieve the owner of potentially unlimited liability. Where thenotice of contract fails to identify the immovable, a presumption arises infavor of persons protected under the Private Works Act, such as thesubcontractor, that the notice of contract was improperly filed. In otherwords, the owner is presumptively not relieved of unlimited personalliability. The presumption is therefore for the benefit of the claimant. Whatthe defendants in the present case propose to do is to use the presumption thatwas created in favor of the claimant to his detriment; in essence, thedefendants are arguing that, since they did not do what they were supposedto do in preparing a proper notice of contract, they should benefit from theirown failure. Moreover, even if the presumption were applied, it was rebuttedby the subcontractor's proof that it was not prejudiced by the failure toinclude the legal description in the notice of contract. Since an effectivenotice of contract was filed, but a defective notice of termination was filed,the 30-day claim period never began to run. (On the exception of impropervenue directed to the claims against the contractor, the court held that allcontractual forum selection clauses - not just those proscribed by La. R.S.9:2779 - are invalid because they violate Louisiana public policy. Seediscussion infra.)

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C. Residential projects

Standard Materials, L.L.C. v. C&C Builders, Inc., 2010-0250 (La. App.1st Cir. 12/22/10); 2010 WL 5479903. An unpaid supplier filed suit againstthe owner of immovable property for both a personal money judgment andrecognition of a privilege under the Louisiana Private Works Act. After thetrial court rendered summary judgment in favor of the supplier, the ownerappealed, contending that the supplier had no privilege because he had failedto give notice to the owner ten days prior to filing his statement of claim orprivilege as required by La. R.S. 9:4802G(2). That provision ends with astatement to the effect that "[t]he requirements of this Paragraph (G)(2) shallapply to a seller of movables sold for use or consumption in work on animmovable for residential purposes." The court of appeal recognized thatthere were two conflicting interpretations of this language. Oneinterpretation is that the language simply affirms that the ten-day requirementapplies to residential immovables but does not exclude the application of therequirement to other immovables. The other construction, which the courtadopted, was that the notice requirement of Paragraph (G)(2) is limited toimmovables for residential purposes. Even though the last sentence of theparagraph does not include the word ?only,? the paragraph nonethelessapplies only to residential property, for otherwise the last sentence wouldobviously be both unnecessary and redundant. However, the summaryjudgment on the privilege claim was reversed, because the supplier had failedto show that the materials it provided were being used on a non-residentialimmovable. Nonetheless, the court of appeal affirmed the summaryjudgment imposing personal liability upon the owner. La. R.S. 9:4802 (A)(3)is not qualified by any notice requirement, which is found only in the sectionof the statute pertaining to the privilege. Thus, the owner had a personalobligation to pay suppliers, even in the absence of a privilege.

IV. Suretyship

A. Ambiguous signatures

Veterans Commercial Properties, LLC v. Barry's Flooring, Inc., 11-6 (La. App.5th Cir. 5/24/11) 67 So. 3d 627. Immediately following the signatures of the lessorand lessee on a commercial lease agreement appeared a paragraph by which "theundersigned...bind themselves in solido with Tenant for the faithful execution of andcompliance with all of the obligations, conditions and stipulation assumed or agreedto by Tenant, guaranteeing to Lessor . . . the payment of the rent and all other sumsprovided for in the above lease. . . ." After this language appeared the signature ofthe person who had also signed above as the representative of the lessee. Thatperson apparently wrote the words "Barry's Flooring" immediately above hissignature. The court of appeal reversed a trial court finding that the individual hadnot bound himself as a guarantor. The clear and unambiguous language stated thatthe undersigned guaranteed payment of the tenant<s obligation to the lessor. Thecapacity in which a party executes a document is largely a matter of that party<s

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intention as determined from the circumstances. Considering the entirety of the leaseagreement, the fact that the individual made a handwritten notation of "Barry'sFlooring" above his signature did not obviate the fact that the clear and unambiguouslanguage created a suretyship agreement. Following American Bank & TrustCompany of Houma v. Wetland Workover, Inc., 523 So. 2d 942 (La. App. 4th Cir.1988), in which the court had found that a personal guaranty existed even though theguarantor had followed his signature with his corporate title, the court held that thenotation of the company's name "is merely a title identification instead of a signaturein a representative capacity."

B. Governmental sureties

1. Texans Credit Union v. Louisiana Department of Agriculture andForestry, 2010-1476 (La. App. 1st Cir. 5/3/11); 64 So. 3d 869. The loanmade by the plaintiff was secured by a guaranty from the State MarketCommission pursuant to the Louisiana Agricultural Products ProcessingDevelopment Law. One of the closing documents obtained when the loanwas closed was a written legal opinion from the counsel of the Departmentof Agriculture and Forestry to the effect that the State Market Commissionguaranty was authorized, was legal and did not require the approval of anyother governmental body. After the loan fell into default, the lenderdemanded that the State Market Commission honor its guaranty. The StateMarket Commission rejected the demand on the basis that the guaranty wasunenforceable because it had not been approved by the Louisiana State BondCommission as allegedly required by La. R.S. 39:1405(B). The trial courtgranted summary judgment in favor of the plaintiff, and the court of appealaffirmed. Though the initial legislative grant of authority to the State MarketCommission in 1944 required that the State Market Commission obtain priorapproval of the State Bond Commission<s predecessor, that requirement waseliminated in 1978. The plain, unambiguous language of the LouisianaAgricultural Products Processing Development Law does not requireapproval by the State Bond Commission of loan guaranties issued by theState Market Commission.

2. American Bank & Trust Co. v. Roberts, 2011 WL 3626422 (E.D. La.2011). After a mortgagee instituted a state court executory process action ona mortgage loan that had been guaranteed by the United States Departmentof Agriculture, the defendant removed the suit to federal court, asserting theexistence of federal question jurisdiction on account of the federal guaranty.In remanding the suit to state court, the federal district court disagreed withthe defendant's contention that the suit fell within the "less frequentlyencountered" form of federal jurisdiction mentioned in Grable & Sons MetalProducts, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005),in which the United States Supreme Court had held that federal questionjurisdiction may lie over state law claims that implicate significant federalissues. However, for Grable to apply, it must be clear that the exercise offederal jurisdiction "will not disturb the balance of federal and state judicial

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responsibilities." If the defendant's position were adopted, federal courtswould have jurisdiction over every single foreclosure case in which a loan isguaranteed by the government and there would be a potentially enormousshift of traditional state cases into federal courts.

V. Foreclosure/collection actions

A. Executory process.

1. Injunction against sale

a. Authentic evidence

Colonial Finance, LLC v. Colonial Golf & Country Club, Inc.,11-5 (La. App. 5th Cir. 6/14/11); ___ So. 3d ___(not yet releasedfor publication in the permanent law reports). As exhibits to itsexecutory process petition, the mortgagee attached a promissory note,the mortgage, a notice of default and an affidavit verifying thepetition. The trial court granted the defendant<s application for apreliminary injunction, which was premised upon the assertion thatthe petition lacked crucial authentic evidence because the plaintiffhad failed to attach a loan agreement and development agreement thathad been executed at the time of execution of the mortgage note. Thecourt of appeal reversed. La. C.C.P. art. 2635 provides that for aplaintiff to prove his right to use executory process, it is necessaryonly for him to submit authentic evidence of "the note, bond, or otherinstrument evidencing the obligation", and the authentic act ofmortgage importing a confession of judgment. In this case, theexistence of the debt was established by the promissory note andmortgage. The affidavit of verification was sufficient proof of defaultas required by La. R.S. 9:5555, which provides that an affidavit isdeemed to provide authentic evidence of the existence, amount, termsand maturity of the obligation for purposes of executory process. Thecourt rejected the contention that La. R.S. 9:5555 is applicable onlyto collateral mortgages. The court also rejected the mortgagor<scontention that La. C.C.P. art. 2635 mandates that the mortgageeproduce both the note and other evidence of the indebtedness. Thecode article uses the disjunctive term "or" and thus does not requirean "other instrument" if a promissory note is provided. Since themortgagee in this case included all necessary elements in its petitionfor executory process, the trial court abused its discretion in requiringthe mortgagee to produce additional documentation in order to availitself of executory process.

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b. Forbearance

Indymac Federal Bank v. Groshong, 2010-1179 (La. 10/1/10); 45So. 3d 170. In a per curiam opinion, the Supreme Court reinstated apreliminary injunction that the district court had issued based upon“unanswered questions regarding whether the parties entered into aforbearance agreement.” The court of appeal had reversed theissuance of the injunction, finding that the borrower did not complywith the requirements of the forbearance plan because he did notreturn the signed forbearance agreement by the deadline the creditorhad set. However, that deadline was contained in a letter which theborrower did not even receive until eight days after the deadline hadalready passed. Under these circumstances, the district court did noterr in granting a preliminary injunction to stop the foreclosurepending a determination of whether the parties had entered into avalid forbearance agreement.

2. Post-sale attack on use of executory process

a. Deutsche Bank National Trust Company v. Carter, 10-663 (La.App. 5th Cir. 1/25/11); 59 So. 3d 1282. In executory proceedingsbrought to enforce a residential mortgage, the bank obtained theappointment of a curator, alleging that the mortgagor could not beserved at her last known address. The curator filed a return notingthat he had attempted to locate the mortgagor by certified mail sentto her last known addresses, which were identified through anInternet search, and through two public notices in the newspaper.Nine months after the sheriff<s sale, the plaintiff filed an "emergency?motion to vacate the sheriffs' sale on the ground that the seizingcreditor did not have standing to bring the foreclosure proceedingsbecause it was not the owner of the mortgage note. The trial courtdenied this motion on the ground that the plaintiff's remedy was tochallenge the foreclosure proceedings either by suspensive appeal orinjunction. In her brief on appeal, the mortgagor attached certain"new evidence" that she contended would have affected the outcomeof the trial court<s ruling. The new evidence in question consisted ofa letter from a loan servicer indicating that her personal informationmay have been compromised and some sort of log allegedly kept bythe bank purportedly showing different balances on her loan. Thecourt of appeal granted the seizing creditor<s motion to strike theexhibits from the appellant's brief, since the scope of appellate reviewis limited to evidence in the record. An examination of exhibitsattached to an appellate brief is beyond the scope of review. Thecourt also denied the mortgagor<s motion to remand, finding that shehad failed to demonstrate that the alleged newly discovered evidencewas unobtainable with due diligence for the original hearing or would

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have affected the outcome of the case. Turning to the merits of themortgagor<s appeal, the court observed that a mortgagor who fails toenjoin the sale of property by executory process and who does nottake a suspensive appeal may nonetheless institute a direct action toannul the sale on limited grounds, provided the property remains inthe hands of the foreclosing creditor. Those grounds are that therewere substantive defects in the proceedings striking at the foundationof the executory proceeding. Objections to the lack of authenticevidence or to minor defects of form or procedure may not be usedto annul a judicial sale. In Reed v. Meaux, 292 So. 2d 557 (La.1973), the Louisiana Supreme Court held that an attempt to nullify asale authorized by executory process must be brought in a directaction and the adverse party must be cited to appear as an ordinarysuit. A motion to vacate is a mere summary proceeding that does notrequire citation. The mortgagor should have brought a direct actionto nullify the sale; her motion to vacate was an improper proceduraldevice that was correctly denied by the trial court.

b. Buck v. Deutsche Bank, 2001-1653 (La. App. 1st Cir. 11/9/11);2011 WL 5408499. After uncontested executory proceedingsresulting in the seizure and sale of her home, the mortgagor filed apetition for injunctive and other relief which was denied by thedistrict court. Thereafter she filed a voluntary motion to dismiss allof her claims with prejudice. Several months after the trial courtgranted her own motion to dismiss, the mortgagor filed a petition toannul the judgment of dismissal, claiming grounds such as lack ofservice of the original petition, fraud in the confection of thepromissory note and mortgage, fraud in the appraisal of themortgaged property and the lack of her understanding of thedismissal with prejudice. In prior proceedings, this petition wasdenied, and the ruling was affirmed on appeal. Both the LouisianaSupreme Court and the U.S. Supreme Court denied writs. Thereafter,the mortgagor again filed a suit to annul the judgment of dismissal,essentially re-urging the same claims. The trial court sustained themortgagee<s exceptions of res judicata and no cause of action. Thecourt of appeal affirmed the ruling on the exception of res judicata,finding that in accordance with principles of res judicata, themortgagor was required to present all of her available arguments insupport of her first petition to annul the judgment of dismissal. Oncea final judgment acquires the authority of the thing adjudged, nocourt has jurisdiction to change the judgment, regardless of themagnitude of the final judgment's error. However, the court of appealreversed the trial court<s action in sustaining the exception of nocause of action. Because the mortgagor was not an attorney, theextent of the relief sought in her petition was not entirely clear, so themortgagee<s exception of no cause of action "could not have beenresolved on the face of the pleadings alone."

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3. Federal attacks on use of executory process

a. Brooks v. Flagstar Bank, FSB, 2011 WL 271026 (E.D. La. 2011).Following a state court executory process sale of their home, themortgagors brought suit in federal court against both the lender andits state court attorneys, alleging violations of the federal Fair DebtCollection Practices Act, the federal Unfair Trade Practices Act, theLouisiana Unfair Trade Practices Act, abuse of executory process,bad faith, breach of the duty of good faith, justifiable reliance,negligence and fraud. The court granted the law firm's motion todismiss for lack of subject matter jurisdiction and for failure to statea claim upon which relief can be granted. The assertion of lack ofsubject matter jurisdiction was based upon the Rooker-Feldmandoctrine, under which federal district courts lack jurisdiction to hearcollateral attacks on state court judgments. The doctrine bars notonly review of claims actually raised in state court proceedings butalso issues that are "inextricably intertwined" with a state judgment.The doctrine does not preclude a district court's jurisdiction over anyindependent claims, even one that denies a legal conclusion that astate court has reached. According to the court, all of the plaintiff'sclaims that asserted the impropriety of the state court executoryprocess order fell within the Rooker-Feldman doctrine, and the courttherefore lacked jurisdiction over those claims. Thus, claims that thedefendant had not been properly served, that proper demand had notbeen made and that the defendant abused executory process allconstituted direct attacks on the state court judgment for which thefederal court had no jurisdiction.

Though the Rooker-Feldman doctrine did not precludeconsideration of the remaining claims, the court nonethelessdismissed all of the remaining claims because the plaintiffs had notpleaded facts sufficient to state a cause of action under any of thetheories of recovery. With specific regard to the claim that thecreditor's attorneys had breached their duty of good faith and fairdealing to the plaintiffs and were negligent, the court pointed out thatunder Louisiana law an attorney does not owe a duty to his client'sadversary and is therefore not personally liable to a non-client foreither malpractice or negligent breach of a professional obligation.Moreover, though La. Civ. Code art. 1983 implies a duty of goodfaith and fair dealing in every contract, no such duty can be impliedwhen there is no contract between a plaintiff and a defendant.

b. Danzell v. Bank of America, 2011 WL 4905723 (W.D. La. 2011).After a mortgagee obtained a state court writ of seizure and sale, themortgagor brought a federal action seeking damages because themortgagee allegedly "wrongly processed Plaintiff's home to Sheriff's

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Sale, despite the Plaintiff's efforts to resolve the mortgage hardship,and without reaching a resolution to the corrective processespreviously engaged." The court dismissed the suit under the Rooker-Feldman doctrine. The plaintiff did not seek to enjoin or appeal thewrit of seizure and sale issued by the state court. Since the claimbefore the federal court was, in essence, an attack on the validity ofthe mortgagee's right to foreclose, a judgment of the federal courtgranting those demands would be nothing more that a reversal of thestate court proceedings authorizing seizure and sale.

B. Rights of third persons in connection with foreclosure sales

1. Junior lienholders

First NBC Bank v. Gusman, 2011-0458 (La. App. 4th Cir. 9/28/11); ___So. 3d ____, 2011 WL 4487658 (not yet released for publication in thepermanent law reports). Following a sheriff<s sale, the successful bidderpaid a 10% deposit, with the understanding that the balance would be paidin thirty days. Because of a computer system crash in the parish conveyanceoffice making it impossible for the purchaser to confirm clear title, heobtained from the seizing creditor a written extension of the time to pay thefull balance through January 14, 2011. On January 6, 2011, the day beforethe purchaser actually paid the full price, the junior lienholder wrote to thesheriff claiming to be an "interested party" and demanding that the sheriff re-advertise the property for sale because more than thirty days had elapsedsince the adjudication. The trial court denied the junior lienholder<sapplication for a writ of mandamus, and the court of appeal affirmed. La.R.S. 13:4360 provides that, if the successful bidder fails to pay the entireprice within thirty days after the adjudication, the officer conducting the salemust re-advertise the property for sale on demand of any interested party. Inthis case, however, the crash of the conveyance records system eliminated theability of the purchaser to avail himself of the benefit of the public recordslaw, which is intended "to enforce the public's fundamental, constitutionalright to public records in the most expansive and unrestricted way possible."The result sought by the junior creditor not only conflicted with the purposeof the public records doctrine, but in this case the seizing creditor agreed tothe short extension. Accordingly, there was no error in the trial court'sjudgment denying the writ of mandamus.

2. Third possessors

Hogan v. Turnipseed, 10-1065 (La. App. 5th Cir. 8/30/11); ___ So. 3d___(not yet released for publication in the permanent law reports). Ayear after a mortgagee obtained judgment for the balance owed under themortgage note and for recognition of its mortgage, the parish obtained ajudgment ordering the demolition of a dilapidated house located on theproperty. On that same day, the judgment debtor sold the property to a law

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firm for $10,000. The law firm built on the property a building which it wasusing as an office when the judgment creditor had the property seized by thesheriff five years later under a writ of fieri facias. The law firm intervenedto enjoin the sale on the ground that, since the house no longer existed, themortgage on that portion of the property was extinguished. The trial courtfound that the judgment creditor still had a valid mortgage on the lot, whichit found to have a value of $22,500. The trial court trimmed the attorney'sfees and interest provided for in the original judgment. Finding that 5% ofthe materials from the original house, having a value of over $9,000, wasused in the construction of the new building, the trial court ordered the lawfirm to pay that amount to the judgment creditor or alternatively the sheriff'ssale would not be enjoined. Both parties appealed. In reversing andamending the judgment, the court of appeal found that the trial court did notcorrectly apply the rules applicable to third possessors of mortgaged propertyas provided in La. C.C.P. art. 2703. Under that article, a third possessor hasthree alternative rights: (1) to pay the indebtedness owing, (2) to arrest theseizure and sale on any of the grounds mentioned in La. C.C.P. art 2751(primarily extinguishment of the obligation) or on the ground ofineffectiveness of the mortgage against third parties, or (3) to intervene inthe executory proceedings to assert a claim to the enhanced value of theproperty due to improvements he placed on the property. In this case, thethird possessor was not entitled to avail itself of the alternative of arrestingthe seizure and sale, because that alternative is directed towardextinguishment of the debt supporting the mortgage, not the extinguishmentof the mortgaged property itself. Moreover, the building that third possessorplaced on the mortgaged property became a component part of the tract ofland under La. Civ. Code art. 462 and therefore became subject to themortgage. The appraiser had testified that the value of the lot at the time ofdemolition was $10,500 and that the demolition cost would have been$7,500, leaving a net value of $3,000. The appraiser was of the furtheropinion that upon the law firm<s conversion of the lot to commercial use itsvalue increased to $22,500 and that the value of the new building was$186,000. Based upon this testimony, the court of appeal found the value ofthe land prior to the third possessor<s improvement to be $10,500. It was notproper to deduct the demolition cost because the demolition occurredsimultaneously with the rebuilding of the new structure and there was noadditional expenditure to tear down the old structure. The cost of theimprovements made was $75,000. The amount of the judgment creditor<sjudicial mortgage was the amount expressed in the original money judgment.Thus, the court found that the first $10,500 of sale proceeds should go to theseizing creditor, the next $75,000 to the third possessor, the next proceeds tothe judgment creditor in an amount sufficient to repay all remaining sumsowing under the mortgage, and any excess proceeds to the third possessor asowner of the property.

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3. Agents

First Bank and Trust v. Duwell, 10-481 (La. App. 5th Cir. 12/14/10); 57So. 3d 1076, writ denied 56 So. 3d 1005 (La. 2/11/11). In a foreclosureupon a multiple indebtedness mortgage, the seizing creditor arranged for theagent who signed the mortgage on the mortgagor's behalf to be served withnotice of seizure, along with an attorney appointed to represent the out-of-state mortgagor. The mortgagor never appeared in the proceeding; however,the agent filed a pleading to intervene in the case, asserting that he had anownership right in the property because he had lent money to the mortgagorto enable her to acquire and improve the property. His motion to cancel thesheriff's sale having been denied, he filed a pleading to vacate the sheriff<ssale after it occurred, naming the seizing creditor, its attorney and numerouscourt officials as defendants. This pleading alleged that the Louisianaexecutory process law is unconstitutional, that the sheriff's sale wasconsequently invalid and that his civil and constitutional rights had beenviolated. The trial court sustained an exception of no cause of action, and thecourt of appeal affirmed. Although the agent claimed to have lent money tothe mortgagor to purchase and improve the property and thus claimed anownership interest in the property, the evidence presented did not establishthat he had any ownership interest nor any privilege on the property. He alsodid not have a right of action on account of having the signed promissorynote and mortgage pursuant to a power of attorney.

First Bank and Trust v. Duwell, 2011-0104 (La. App. 4th Cir. 5/18/2011);70 So. 3d 15. A third party who was neither an owner of the mortgagedproperty nor a defendant sought to intervene to obtain a preliminaryinjunction to stop a sheriff<s sale. This third party alleged an interest in theproperty and the proceedings because he had lent money to the mortgagor,he had acted as her attorney-in-fact pursuant to a power of attorney and his"reputation was at stake." In a prior ruling, the court of appeal vacated apreliminary injunction that the trial court had issued, since the third party hadno ownership interest in the property and was not a defendant. Following thesale of the property at sheriff<s sale, the third party then filed a petition tovacate the sheriff's sale, unsuccessfully seeking to remove his own action tofederal court. The trial court sustained the seizing creditor<s exception of noright of action, and the court of appeal affirmed. Because the third party hadno legal interest in enjoining the seizure and sale of the property, a fortiori,he had no right or legal interest in annulling or vacating a completed sheriff'ssale. Just as the Fifth Circuit had held in similar litigation involving the samethird party claimant (see First Bank and Trust v. Duwell, 10-481 (La. App.5th Cir. 12/14/10); 57 So. 3d 1076, supra), the fact that he had lent money tothe mortgagor and had acted as her agent did not give him ownership rightsin the property or standing to allege in this suit that Louisiana's executoryprocess foreclosure mechanism is unconstitutional.

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4. Prior owner

U.S. Bank National Association v. Maranto, 2010-0766 (La. App. 1stCir. 10/29/10); 2010 WL 4272924. By a non-authentic act, the donordonated property to his parents, who subsequently mortgaged it to theplaintiff bank. The proceeds of the loan made by the plaintiff bank were usedto discharge $35,089 in indebtedness owed by the donor. After default, theplaintiff bank filed an executory process suit to enforce the mortgage, and thedonor intervened claiming that the donation was null and void for lack ofproper form. The value of the property at the time of the donation was$70,000. The trial court granted summary judgment in favor of the bank, andthe court of appeal affirmed. At the time the donation was executed, La. Civ.Code art. 1526 provided that the rules peculiar to donations do not apply toonerous donations "except when the value of the object given exceeds byone-half that of the charges or of the services." The latest expression by theLouisiana Supreme Court on the interpretation of this article, in Moore v.Sucher, 102 So. 2d 459 (La. 1958) found an onerous donation to exist (andthe requirement of an authentic act not to apply) where "the charge hereimposed on the donee exceeds one-half of the value of the object given."However, tn the prior case of Whitman v. Whitman, 18 So. 2d 633 (La.1944), the court had interpreted the article as providing that an onerousdonation exists where the value of the services exceeds two-thirds of thevalue of the property donated. This interpretation was codified in a 2009amendment to La. Civ. Code art. 1526, which now provides that an onerousdonation exists where "the cost of performing the obligation is less than two-thirds of the value of the thing donated." Even though the court of appealhad previously followed the Whitman interpretation and even though the2009 legislative revision stated in a comment that the language was notintended to change the law, the court found that it was bound to follow thelatest expression by the Louisiana Supreme Court in Moore and thereforeheld that the trial court did not err in concluding that the donation at issuewas valid.

C. Ordinary process foreclosure/collection actions

1. Required parties

United States v. Scott, 2010 WL 5439775 (W.D. La. 2010). In response toan "in rem" foreclosure proceeding filed by the Farm Service Agency, themortgagor filed a motion to dismiss, claiming that the FSA's failure to joinpersons who acquired interests in the property subsequent to the mortgage(such as the holders of rights of way, a lessee and the state under an order ofexpropriation) should result in the dismissal of the suit or an order requiringjoinder of those parties. The court denied the motion. La. Civ. Code art.3307 memorializes Louisiana's pact de non alienando, which allows amortgage creditor to disregard all transfers of the property subsequent to the

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mortgage. Moreover, even though the defendant did not argue the issue ofnotice as it related to constitutional due process concerns, La. R.S. 13:3886provides a means by which the possessor of a property interest may insurethat he receives notice in the event of a seizure of specified immovableproperty. None of the persons in question availed himself of this noticeprovision or sought to intervene. Since Louisiana law allows the governmentto enforce the mortgages by executory process, ignoring the subsequenttransactions, none of the persons in question is a "required party" underFederal Rule of Civil Procedure 19.

2. Default judgment

Moore Finance Company, Inc. v. Ebarb, 46, 392 (La. App. 2d Cir.5/18/11); 70 So. 3d 856. The plaintiff obtained a default judgment on apromissory note secured by a motor vehicle. The evidence supporting thedefault judgment was an affidavit of correctness stating the amount of thedebt owed, as well as unanswered requests for admissions that asked thedefendant to admit the balance of the debt, to admit that she had applied forthe loan, to admit that she had signed a promissory note and to admit thatinterest and attorney's fees were authorized. The defendant filed a timelyappeal from the default judgment, and the court of appeal reversed. Thedefendant<s arguments were premised upon the fact that the affidavit ofcorrectness spoke of an account, but did not mention a promissory note, thatthe affidavit did not show that the defendant had failed to pay theinstallments due under the note and did not show proof of amicable demand,that the affidavit did not itemize the payments made or show how the totalsued upon was calculated and that the affidavit did not mention any creditgiven for the premium for credit disability insurance and credit life insurance.Many of these contentions were in effect rejected by the court of appeal,which found that, while the affidavit of correctness did not refer to apromissory note, the unanswered request for admission of facts did.Furthermore, in the suit on a note, there is no requirement for an itemizationof payments made or showing of how the total amount sued upon wascalculated. Moreover, under the terms of the note in this case, there was norequirement of putting the defendant in default. However, though thepetition alleged that the defendant had failed to pay the debt for six months,neither the affidavit of correctness nor the requests for admission stated thatshe had failed to pay the debt thereby giving the plaintiff the right toaccelerate the unpaid balance. Thus, the plaintiff failed to establish its rightto find the defendant in default, accelerate the payments and sue for the entiredebt owing under the note.

3. Summary judgment

a. Deutsche Bank National Trust Company v. Thomas, 2010-1453(La. App. 1st Cir. 2/11/11); 57 So. 3d 1185. After conversion of anexecutory proceeding to ordinary process, the mortgagor filed an

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exception of prematurity and reconventional demand denying that shewas in default of her mortgage and asserting that the bank had createdan "artificial default" in violation of the federal Fair Debt CollectionPractices Act and Louisiana law. The bank then filed a motion forsummary judgment on both the main demand and the reconventionaldemand. At the same hearing, the trial court granted the mortgagee<smotion for summary judgment and denied the mortgagor<s exceptionof prematurity. The court of appeal reversed. Under La. C.C.P. art.929, a motion for summary judgment may be filed by the plaintiff atany time after the answer has been filed. The mortgagor in this casefiled an exception of prematurity rather than an answer, and a motionfor summary judgment on the main demand was thus not yet proper.The court rejected the bank<s contention that the assertion ofaffirmative defenses in the mortgagee<s reconventional demand wastantamount to an answer. The court also rejected the bank<s argumentthat the exception of prematurity had been waived because themortgagor did not include with it an order setting it for hearing. Withregard to the summary judgment on the reconventional demand, thecourt noted simply that, having found that the bank<s motion forsummary judgment was premature on the main demand requiring thejudgment be vacated, the trial court likewise erred in dismissing theplaintiff<s reconventional demand "pursuant to" its granting of thebank<s motion for summary judgment.

b. Gulf Coast Bank and Trust Company v. D'Orville, 2010-1237(La. App. 4th Cir. 1/26/11); 57 So. 3d 553. Following foreclosureby executory process on property mortgaged by the borrower, thecreditor sued to collect the deficiency from a guarantor, whoanswered with a general denial. The court of appeal affirmedsummary judgment in favor of the creditor. The guarantor'sopposition to the summary judgment was predicated primarily on anemail that he had sent to the bank president while in Australia,proposing that he would have his nephew enter a bid for the propertyfor $375,000 and that he would pay the balance to the bank.However, the only documented response from the bank president wasto direct the loan officer to forward this email to the bank's attorney.For procedural reasons, the court found that this was an insufficientdefense. The guarantor did not plead the affirmative defense ofextinguishment of the obligation, nor did the guarantor file anexception of res judicata. Thus, the matter of compromise was not anissue raised by the pleadings, and the evidence relied upon by theguarantor was irrelevant because it was of no consequence to thedetermination of the likelihood of whether the bank could make outa prima facie case that the debt was owed. In other words, the factualallegations made by the guarantor did not show the existence of amaterial fact. Since trial court had not afforded the guarantor anopportunity to amend his pleadings, the court of appeal found it

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necessary to go further to explain why the testimony of the guarantorin his affidavit did not support a remand. Under La. Civ. Code art.3072, a compromise must be in writing or recited in open court.Though a compromise need not be contained in a single writteninstrument, and even though the email might arguably be consideredthe guarantor's offer of compromise, the bank<s action in merelyhaving the email forwarded to its attorney surely did not constitute anacceptance. Thus, the guarantor had failed to raise a genuine issue ofmaterial fact because he had not identified a written compromise.The court also rejected, in a footnote, the guarantor's alternativeargument that the bank had agreed to a modification of his guaranty.Not only was this argument raised for the first time on appeal, andtherefore not proper for consideration for the court of appeal, theguarantor did not even mention this argument in passing until nearlytwo years after he was sued, despite numerous opportunities to amendhis answer.

4. Nullity of judgment

a. Whitney National Bank v. McFarland, 2010-0417 (La. App. 4thCir. 9/29/10); 49 So. 3d 454. In 2000, the plaintiff bank obtained aconsent judgment on an unsecured debt after the defendant's attorneysent a letter to him stating that he would not appear at the motion forsummary judgment hearing because his client had no defenses. Noappeal was taken. Two years later, the plaintiff bank filed a petitionto declare a transfer of certain community property to be asimulation. The defendants reconvened, alleging that the originaljudgment was "false and improper." The trial court denied theplaintiff bank's exceptions of no cause of action and motion forsummary judgment, noting that the pro se defendants appeared to bealleging a claim for malicious prosecution and were seeking to annulthe judgment obtained in the suit on the promissory note. Later,however, the trial court granted in favor of the bank a motion forpartial summary judgment, which was affirmed in a prior appeal. Amonth later, the trial court sustained an exception of prescription filedby the plaintiff bank. This ruling was the subject of the presentappeal. Under La. C.C.P. art. 2004, an action to annul a finaljudgment obtained by fraud or ill practices must be brought withinone year of the date that the claimants knew or should have known ofthe fraud or ill practices. The defendants' own pleadings alleged thatthey knew of the fraud or ill practices more than one year beforefiling the nullity action. The prescriptive period began to run whenthe claimants had this knowledge, not when they later obtained"undeniable evidence of fraud" upon reviewing the plaintiff bank'sloan file.

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b. Willis v. TMB Partnership, 45, 813 (La. App. 2d Cir. 12/15/10);56 So. 3d 324. Using a "fill in the blank" petition, a pro se litigantbrought suit in city court against an individual and "TMBPartnership." The individual was never a partner of the partnership,which had converted into a limited liability company in 1998. Theonly service return showed service on the individual, who filed ananswer in the form of a letter representing herself as the generalmanager of "TMB Partnership, LLC." After a money judgment wasrendered in favor of the plaintiff against the individual and "TMBPartnership," the plaintiff sought to seize property that was owned bythe limited liability company, which intervened asserting that thejudgment was an absolute nullity because the limited liabilitycompany had never been properly served. The city court denied thepetition without a hearing or any opinion addressing the limitedliability company's contentions. The court of appeal reversed. Ajudgment obtained without citation and service is absolutely null.Service on a limited liability company is made on any one of itsregistered agents for service of process, and only after some form ofdiligent effort has failed may an alternative method be used. The citycourt<s money judgment must be annulled on account of the plaintiff'sfailure to accurately identify the limited liability company and toobtain proper service. Moreover, just as other cases have held that anorder enjoining the execution of a judgment is improper whenrendered without a hearing, the city court<s denial of the injunction inthis case was likewise deficient for lack of an evidentiary hearing anda ruling on the merits of the limited liability company 's claims ofnullity.

5. Attorney's fees

Discover Bank v. Rusher, 2010-0850 (La. App. 4th Cir. 12/8/10); 53 So.3d 651. A summary judgment granted to a credit card issuer on a $20,000delinquent credit card balance also awarded the card issuer 20% of theprincipal and interest owing as attorney<s fees. The credit card agreement didnot call for percentage attorneys' fees but rather required the card holder topay "reasonable attorneys' fees . . . as actually incurred by us." In oppositionto the plaintiff<s motion for summary judgment, the defendant did not contestthe principal and interest balance owing but contended only that the amountof attorney<s fees demanded was unreasonable. Prior to the summaryjudgment hearing, the defendant's counsel had propounded discovery as tothe amount of time spent by the plaintiff<s counsel on the case, but was metwith an objection that the interrogatory called for a legal opinion or wasirrelevant. Rather than considering the factors set forth in Troth Corp. v.Deutsch, Kerrigan & Stiles, 951 So. 2d 1162 (La. App. 4th Cir. 2007), thetrial court observed that, in some collection cases involving smaller accountsthe attorney's fees awarded are not sufficient to cover the work done, so that

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by awarding a larger fee in other cases "it kinda works out." Finding that thetrial court had abused its discretion in setting the attorneys fees and had erredin failing to consider the pertinent factors, the court reduced the award to$1,000. Although the plaintiff<s counsel did not put forth any evidence as tothe time spent on the case, the record indicated that he had issued a demandletter, prepared a petition and requests for admission, prepared a motion forsummary judgment and supporting memorandum and made a brief courtappearance. The court of appeal found that $1,000 was an appropriate awardgiven the relative simplicity of the legal and factual issues involved in thecase and the amount of legal work done, and also considering the defendant<sinability to pay.

6. Forum selection clauses/personal jurisdiction

a. Garrity Printing, LLC v. M & M Mortgage, Inc., 10-290 (La.App. 5th Cir. 11/9/10); 54 So. 3d 81. After the one of thedefendants, a Georgia mortgage company, responded to a solicitationfor mortgage financing submitted on behalf of the plaintiff, themortgage company and plaintiff signed a broker fee agreementauthorizing the mortgage company to attempt to locate a lender toprovide the requested financing. At the same time, the parties signeda letter agreement setting forth the specific terms of the loan to besought. The broker fee agreement, but not the letter agreement,contained a forum selection clause providing that in the event of anydispute "the venue shall be in the state of Georgia." After a disputearose between the parties, the plaintiff filed suit in Jefferson Parishagainst both the mortgage company and its president. Thedefendants' exceptions of improper venue and lack of personaljurisdiction were sustained by the trial court and upheld on appeal.Forum selection clauses are legal and binding in Louisiana, except asspecifically prohibited by law. They are to be enforced unless theresisting party clearly proves that enforcement would beunreasonable and unjust or that enforcement would contravene astrong public policy of the forum where the suit is brought. The courtrejected the plaintiff's contention that the forum selection clause wasunenforceable because the broker fee agreement, unlike the letteragreement, was signed by only one of the members of the plaintiff'slimited liability company, since there was no indication in the recordthat the signing member lacked authority to sign on behalf of theplaintiff. The court also summarily rejected a contention that thedefendants< failure to arrange financing amounted to a lack of"performance" negating the forum selection clause. It was also of nomoment that the letter agreement contained no forum selectionclause, because the two agreements were related and not entirelyseparate agreements pertaining to a different business relationship.There is no requirement under the law that a forum selection clausebe contained in each document related to the same relationship in

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order to be valid.

The court of appeal then found that the lower court hadproperly found a lack of personal jurisdiction over the defendantcorporation, which was a Georgia corporation with its principal placeof business in Georgia. There was no evidence in the record that itmaintained an office, bank account, phone number or post office boxin Louisiana. The petition merely stated that a solicitation packagewas sent to numerous potential lenders, and the defendant corporationresponded. This did not establish that the defendant corporation or itsofficer purposefully solicited business in Louisiana.

b. Thompson Tree & Spraying Service, Inc. v. White-SpunnerConstruction, Inc., 2010-1187 (La. App. 3d Cir. 6/1/11); 68 So. 3d1142, writ denied, 71 So. 3d 290 (La. 2011). In a suit by an unpaidsubcontractor, the defendant contractor filed an exception ofimproper venue, based upon a forum selection clause in thesubcontract to the effect that any litigation between the parties wouldtake place in Mobile County, Alabama. The trial court held thatunder the forum selection clause the only proper venue was inAlabama. In reversing this holding, the court of appeal began itsanalysis by citing La. C.C.P. art. 44A, which provides that anobjection to venue may not be waived prior to the institution of anaction. La. R.S. 9:2779 invalidates foreign forum selection clauses(as well as the choice of foreign law) when one of the parties to aconstruction contract is domiciled in Louisiana. This statute was notapplicable to the present suit because none of the parties wasdomiciled in Louisiana. The court noted that several appellate courts,and even the Third Circuit itself in Calahan v. Haspel, 732 So. 2d 796(La. App. 3d Cir. 1999), had concluded that forum selection clausesare legal and binding in Louisiana unless the resisting party clearlyshows that the enforcement would be unreasonable and unjust or thatthe clause arises from fraud or overreaching or that the enforcementwould contravene a strong public policy. Although the LouisianaSupreme Court had observed in Power of Marketing Direct, Inc. v.Foster, 938 So. 2d 662 (La. 2006) that forum selection clauses aregenerally enforceable, the Third Circuit in the present casemaintained that this statement was not only dictum but also wasimproperly based upon a prior holding of the Louisiana SupremeCourt in an admiralty case. The court then cited law review articlesfrom former Justices Tate and Dennis to the effect that Louisianajudges are obliged to revisit prior judicial misconstructions of astatute. Freedom of contract is limited by the public policy of thisstate, as embodied in La. C.C.P. art. 44A, as well as by La. R.S.51:1407A. This latter statute, which invalidates forum selectionclauses to defeat an action brought by the Attorney General under theUnfair Trade Practices Act, is predicated upon an observation of "it

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being against the public policy of the state of Louisiana to allow acontractual selection of venue or jurisdiction contrary to theprovisions of the Louisiana Code of Civil Procedure." According tothe court, the statement of that policy within the Unfair TradePractices Act does not mean that it is not a public policy outside ofthe Unfair Trade Practices Act. Moreover, the fact that La. R.S.9:2779 invalidates forum selection clauses only in certain casesinvolving construction contracts does not mean that forum selectionclauses are otherwise enforceable, for this interpretation would renderLa. C.C.P. art. 44 nugatory as well as conflict with the explicitpronouncement in La. R.S. 51:1407A. The legislature's purpose inenacting La. R.S. 9:2779 was simply to broaden the policy clearlystated in those other statutes to the litigants that satisfy itsrequirements. Thus, the court held that forum selection clauses inadvance of suit are invalid in Louisiana, disavowing its prior holdingin Calahan v. Haspel, supra.

c. Eldred v. Fleming, 2010-0794 (La. App. 4th Cir. 1/20/11); 56 So.3d 432. After learning by happenstance that a California moneyjudgment against her had been domesticated in Louisiana, thejudgment debtor filed suit to annul both the California judgment andthe domesticated Louisiana judgment on the basis of lack of personaljurisdiction and fraud and ill practices. The trial court granted thejudgment debtor<s motion for summary judgment, and the court ofappeal affirmed. Under the rather complicated facts of the case, thejudgment debtor owned rental property in the French Quarter whichshe desired to rent. She allegedly allowed a California resident toadvertise the property on his ?passive? website on a non-exclusivebasis while she attempted to solicit renters from other sources. Afterviewing the property on the website, the prospective renter whowould later obtain the California judgment and his companion paidthe full rental to the person maintaining the website, though thatperson apparently did not remit the money to the owner. After stayingfor nine days at the property, the renter became satisfied and electedto leave, paying the owner only $75 to defray the cost of utilities. Hethen returned to California and filed a suit for damages of $25,000allegedly incurred as a result of his inability to perform his work asan attorney while vacationing in New Orleans. Upon being servedwith process in the California suit, the owner responded with amotion to quash service for lack of personal jurisdiction. Despite thisfiling, the California court entered a default judgment, which wasmailed to the owner at an incorrect address that was not the addressthe owner listed for herself in her California pleading.

Following a traditional personal jurisdiction analysis, thecourt found the absence of any basis for general jurisdiction andnoted that the only contacts alleged to support a finding of specific

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jurisdiction in California were the actions of the person maintainingthe website in placing the property on his passive website and hisactions in contracting, as the judgment debtor<s purported agent, forthe rental of the property with the judgment creditor<s companion.Following Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997), which was cited approvingly by theUnited States Fifth Circuit in Mink v. AAA Development, LLC, 190F. 3d 333 (5th Cir. 1999) the court applied the "sliding scalestandard" applicable to a foreign defendant's transaction of businessover the Internet. Where a defendant merely establishes a passivewebsite that does nothing more than advertise on the Internet,personal jurisdiction is not appropriate. Thus, the judgment creditor<sviewing of the website from his computer in California did notsupport the exercise of specific personal jurisdiction over theproperty owner. With regard to the judgment creditor<s assertion thatthe owner<s purported agent had acted in California, thus making heramenable to personal jurisdiction in that state, the court found that aclose reading of the judgment creditor's affidavit disclosed no basisupon which to base a finding of agency. To the contrary, thejudgment debtor<s affidavit pointed out that she acted only as apassive advertiser and never gave the purported agent any authorityto transact affairs on her behalf. Judge Tobias dissented in anopinion which, after detailing in great length the circumstances thatwould seem negate the existence of personal jurisdiction by theCalifornia court, nonetheless concluded that the judgment debtor hadfailed to satisfy her burden of showing the absence of any genuineissue of material fact since the California record was incomplete,thereby creating genuine issues of material fact.

7. Arbitration

a. FIA Card Services, N.A. v. Weaver, 2010-C-1372 (La. 3/15/2011);62 So. 3d 709. After a credit card holder failed to appear inarbitration proceedings, an arbitration award was issued against him.The credit card issuer then filed a petition to confirm the award indistrict court, submitting in support of its petition a copy of thearbitration award and the unsigned credit card agreement terms andconditions that contained an arbitration clause. No affidavit wassubmitting authenticating either the original credit card agreement orthe subsequent credit card terms and conditions that included thearbitration clause. In an opinion reported at 36 So. 3d 950, the courtof appeal, while noting conflicting decisions from other circuits, heldthat the credit card holder's failure to file a timely motion to vacatethe award within three months waived all affirmative defenses,including the defense that there was no valid arbitration agreement.The Supreme Court reversed.

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Applying the Federal Arbitration Act, 9 U.S.C. § 1 et seq.(because any inconsistency between the federal act and the LouisianaBinding Arbitration Law must necessarily be resolved in favor of thefederal act), the court noted that non-existence of an arbitrationagreement is not one of the enumerated grounds for a motion tovacate under 9 U.S.C. § 10. However, the court rejected thecreditor's contention that the failure of the other party to move tovacate an award within the statutorily prescribed deadline means thathe has waived all defenses, in essence legally requiring a court toconfirm the award as a purely ministerial act. Rather, the FederalArbitration Act requires a court faced with a petition to confirm tofirst ensure that there was an arbitration agreement between theparties covering the dispute. This requirement is inherent in thepetition to confirm and is independent of the statutory defenses whichmay be raised in a motion to vacate since 9 U.S.C. § 9 requires acourt to confirm an arbitration award "if the parties in their agreementhave agreed that a judgment of the court shall be entered upon theaward made pursuant to arbitration." Thus, the Federal ArbitrationAct presupposes an agreement to arbitrate as a necessary conditionfor confirmation of the arbitration award. Under United StatesSupreme Court precedent, the issue of the existence of a contractcontaining an arbitration clause must be decided by the court, not bythe arbitrator. This is why 9 U.S.C. § 13 requires the proponent ofthe arbitration award to file the arbitration agreement into the record,because it is the court's duty to rule on this issue, which is not leftsolely to the arbitrator's discretion.

Having disposed of the primary legal issue, the court thenturned to the issue of whether the credit card issuer had presentedsufficient evidence for the court to find the existence of a bindingagreement to arbitrate. The original credit card agreement containedno arbitration clause, and the credit card holder never actually signeda contract containing an arbitration clause. Though it is "black letterlaw" that, if a credit card company sends a notice of change in termsof a credit card agreement, the customer assents to the new terms byhis continued use of the card, in this case the credit card issuer didnot meet its burden. Neither the original agreement nor the purportedaddenda was authenticated by an accompanying affidavit or otherevidence, nor was there any evidence showing when and if noticeswere mailed to customers. Nor did the credit card issuer show that,after receiving these notices, the customer continued to use his card.In a footnote, the court pointed out that it was not necessary that theissuer prove that the defendant, specifically, received the notice; itwould have been sufficient to provide evidence that the notices weresent to all customers, including the defendant, on a certain day.Justice Guidry dissented, believing that the defendant's efforts tooverturn the arbitration award were both untimely and without merit.

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He failed to raise his objection until after expiration of the three-month time delay. Moreover, the defendant, as the attacking party,had the burden of proof in overturning the award. Arbitration isintended to be an inexpensive substitute for litigation, and themajority's reversal of the lower courts' confirmation of the awardfrustrates the policy furthered by alternative dispute resolution.

b. Regions Bank v. Weber, 2010-1169 (La. App. 4th Cir. 12/15/10);53 So. 3d 1284. In response to a suit on a commercial guaranty, theguarantor filed both an exception of prematurity and a motion to staypending arbitration. The underlying promissory note contained anagreement for arbitration; the commercial guaranty contained no suchagreement. After the trial court overruled both the exception and themotion, the guarantor re-urged his motion for a stay. The trial courtthen denied the motion, and the guarantor sought supervisory relief.The court of appeal first held that the failure to seek supervisoryreview of the original ruling was of no moment, because aninterlocutory judgment may be reconsidered upon proper motion atany time until the rendition of a final judgment. In support of hismotion for arbitration, the guarantor argued that the promissory note,which contained the arbitration agreement, was inextricably tied tothe dispute and that he was therefore entitled to arbitration. The courtof appeal agreed. Arbitration is favored under both state and federaljurisprudence. A strong presumption of arbitrability exists underboth state and federal law. Even when the scope of an arbitrationclause is fairly debatable or reasonably in doubt, the court shoulddecide the question in favor of arbitration. Federal jurisprudenceholds that the equitable estoppel doctrine allows a non-signatory toa contract containing an arbitration clause to compel arbitration underan equitable estoppel theory, including when the action is intertwinedwith and dependent on the contract containing the arbitration clause.In this case, the promissory note and commercial guaranty bore thesame date of execution and the same loan number. The bank wasseeking to collect the debt evidenced by the promissory note from theguarantor. Thus, the two documents were sufficiently intertwined tocompel arbitration at the election of the guarantor. Citing both thesupremacy clause of the United States Constitution and case lawholding that Louisiana courts look to federal law in interpreting theLouisiana arbitration law, the court found that the bank was equitablyestopped from objecting to the guarantor<s demand for arbitration.

8. Execution of judgment

Nesbitt v. Nesbitt, 46, 514 (La. App. 2d Cir. 9/21/11); ____ So. 3d ____(not yet released for publication in the permanent law reports). Indivorce proceedings, the defendant (a former Caddo Parish district judge)was cast in judgment for an equalizing payment of nearly $300,000. A

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subsequent partition judgment granted the defendant<s former wife a "lien"to secure this judgment, specifying that the collection of the lien would applyfirst to the defendant<s wine collection, then to the defendant<s share of thecommunity and finally to his separate property. After the defendant failedto satisfy the judgment, the former wife obtained a writ of fieri facias to seizethe wine collection. The defendant filed a rule for injunctive relief, arguingthat the proper procedure for the seizure was under a writ of sequestrationrather than a writ of fieri facias. This assertion was apparently based on hiscontention that the prior judgment was not a final money judgment. After thetrial court denied his request for injunctive relief, the defendant filed a ruleto determine the payoff of the judgment, depositing into the registry of thecourt $25,000, an amount far less than the amount the former wife claimedwas owing under the judgment. Without reasons, the trial court denied thedefendant<s request. The court of appeal affirmed and also awarded damagesagainst the defendant for a frivolous appeal. Contrary to the defendant<sassertions, the prior judgment was in fact a definitive money judgmentcasting him in judgment for a determined amount of money. The former wifewas entitled to execute upon this judgment through a writ of fieri facias. La.C.C.P. art 2298, which specifies the defenses available to a judgment debtorwhen faced with execution under a writ of fieri facias, specifically permitsthe judgment debtor to seek injunctive relief if the judgment has becomefully extinguished or to seek a reduction of the seizing creditor<s seizure inthe event of a partial satisfaction of the judgment. The rule to show cause didnot seek injunctive relief and did not assert that the judgment had becomeextinguished. Thus, the court of appeal noticed on its own an exception ofno cause of action and dismissed the rule on that basis. Moreover, despitethe fact that the former wife had not answered the appeal seeking damages,the court of appeal awarded her attorneys fees of $2,500, because thedefendant<s present pleading stated no cause of action and was repetitive ofhis prior assertions.

9. Revival of judgment

Goldsby v. Goldsby, 2010-1218 (La. App. 1st Cir. 8/9/11); 2011 WL3806281. In 1990, a judgment creditor filed a petition "to revive andreinscribe" a 1980 money judgment. Although a preliminary default wasentered in early 1991, no further steps were taken in prosecution or defenseof the revival suit until 2004, when a confirmation of the default judgmentwas rendered, reviving and reinscribing the 1980 judgment. A month laterthe judgment debtor signed a "notarial acceptance of service" in which heacknowledged acceptance of service of the notice of rendition of the revivaljudgment. Four years later, the judgment debtor<s succession representativefiled a petition to nullify the 2004 revival judgment on the ground that it wasrendered nearly four years after the ten year period for reinscribing ajudgment had elapsed and on the ground that the 1990 revival action hadbeen abandoned on account of the failure of the judgment creditor to take anyaction in that suit for fourteen years. The judgment creditor filed a

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peremptory exception of prescription, urging that the nullity action hadprescribed and also arguing that the acceptance of the notice of the judgmentby the judgment debtor constituted an acquiescence in the judgmentprecluding a subsequent nullity action. The court of appeal reversed the trialcourt<s judgment in favor of the judgment creditor. Following Evans v.Hamner, 24 So. 2d 814 (La. 1946), the court held that the judgment creditor<s1990 revival action became abandoned when there was no step taken in theprosecution or defense in that suit for the [then] five-year abandonmentperiod. Because the revival action was abandoned, the interruption of the tenyear prescriptive period running against the judgment was considered neverto have occurred. The court also brushed aside the judgment creditor<sargument that the action of the judgment debtor in signing the notarialacceptance of service constituted an acquiescence in the judgment. Onceabandonment occurs, no action by the plaintiff or inaction by the defendantcan revive the abandoned action.

VI. Revocatory actions

A. Forterra Capital, L.L.C. v. Mamal, Inc., 2010-0798 (La. App. 4th Cir. 1/13/11);55 So. 3d. 963. A consent judgment provided that the borrower and guarantor wouldcontinue to make loan payments as required by the loan documents and that theborrower and certain of its affiliates, including a separate corporation owned by theguarantor, would make payments to the creditor on an on-going basis based uponcertain barge work performed by this subsidiary and other affiliates. The followingyear, the judgment creditor filed a revocatory action contending that the borrowerand guarantor had transferred valuable movable equipment from this subsidiarycorporation to another entity controlled by them in order to frustrate the creditor'sattempt to collect the debt. The creditor premised its action not only on La. Civ.Code. art 2036, the revocatory action, but also La. Civ. Code arts. 3182 and 3183,which make a debtor<s property the common pledge of his creditors. The trial courtgranted summary judgment in favor of the defendants, and the court of appealaffirmed. On the common pledge argument, the court simply cited Gulf Refining Co.of Louisiana v. Glassell, 171 So. 846 (La. 1936) for the proposition that La. Civ.Code arts. 3182 and 3183 do not afford a creditor "specific relief?, such as themaintenance of a petitory action by a lessee against a third person in possession ofproperty. Turning to the revocatory action, the court observed that La. Civ. Code art.2036 allows a creditor to set aside a transaction of the debtor when it increases theinsolvency of the debtor on a dollar-for-dollar basis, without the necessity of havingto show receipt of less than reasonably equivalent value by the debtor as a thresholdcondition. Because an affidavit from the guarantor<s bankruptcy trustee indicatedthat the subsidiary's insolvency was $65,000 greater the day before the transfer thanthe day of the transfer, it could not be said that the transfer resulted in an increase inthe subsidiary's insolvency. Moreover, since the subsidiary was already insolventbefore the transfer, the creditor did not establish that the transfer in question causedthe subsidiary's insolvency. Finally, the subsidiary was not a signatory to thejudgment and, even if it were, the consent judgment purported to bind the subsidiaryonly with respect to certain contracts for transportation by barge work, of which it

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actually performed none. Judge Tobias dissented, pointing out that, as a matter oftechnical law, the majority opinion on its face might appear to be correct. Thoughthe affidavits relied upon by the court do not explain how the subsidiary's insolvencyapparently decreased, what actually occurred was that the subsidiary's insolvencyincreased, not decreased, because it transferred property in a non-arms< lengthtransaction for less than full value to another entity. Judge Tobias explains how thismight occur by giving the example of the transfer of a corporate asset for more thanits book value but less than its fair market value: the transferor<s books will show thatthe transfer made the company more solvent, when in fact the transfer increased thecompany's solvency.

B. Stirling Properties, Inc. v FDF #1, L.L.C., 2010-1575 (La. App. 1st Cir. 3/25/11).The judgment creditor of a limited liability company instituted garnishmentproceedings against its members, contending that they were indebted to the limitedliability company as a result of having received unauthorized and illegal distributionsfrom the limited liability company. The members of the limited liability companyanswered the garnishment interrogatories, stating that they did not have in theirpossession any assets belonging to the judgment debtor, and at the same time fileda dilatory exception of improper use of summary process. After answers to thegarnishment interrogatories were filed, the judgment creditor filed a rule forjudgment pro confesso. The trial court sustained the dilatory exception ofunauthorized use of summary process, and the court of appeal affirmed. Thejudgment creditor<s argument was premised on a contention that the petition forgarnishment actually asserted a revocatory or oblique action against the judgmentdebtor and the garnishees for receiving illegal distributions in violation of La. R.S.12:1328. The court rejected this contention because the judgment creditor had notasserted in any pleading that there was an act, failure to act or failure to exercise aright that caused or increased the judgment debtor<s insolvency. The judgmentcreditor also did not contend that it wished to revoke any action of the judgmentdebtor or to exercise any action that the judgment debtor had failed to exercise.Also, the judgment creditor had not made the judgment debtor a defendant to thepetition for garnishment, even though it would be a necessary party to any obliqueor revocatory action. The judgment creditor<s petition was properly treated as apetition for garnishment. Once the garnishees answered that they did not havepossession of any property belonging to the judgment debtor, the judgment creditorwas not entitled to proceed with a rule for judgment pro confesso. To the extent thatits rule to show cause could be construed as a motion to traverse, it was notauthorized because it was not filed within the delays provided in La. C.C.P. art.2414. It was also not error for the trial court to dismiss the petition rather thanallowing the judgment creditor the opportunity to amend, since the grounds for theobjection of unauthorized use of a summary proceeding could not be removed byamendment.

VII. Tax sales/Mennonite issues.

A. C&C Energy, LLC v. Cody Investments, LLC, 2009-2160 (La. 7/6/10); 41 So.3d 1134. On the basis of Mennonite Board of Missions v. Adams, 462 U.S. 791

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(1983), the Louisiana Supreme Court had previously held in Lewis v. Succession ofJohnson, 05-1192 (La. 4/4/06) 925 So. 2d 1172, that all co-owners must receivenotice of an impending tax sale. In the present case, the court of appeal, followingLewis, held that a tax sale is invalid even as to a co-owner who does receive notice,because that co-owner cannot pay his portion of the tax and prevent the sale of theproperty but instead must pay the entire tax amount. The Supreme Court affirmed,holding that, notwithstanding any inference that might be otherwise made from itsanalysis in Lewis, failure to provide the requisite notice of a tax sale to each co-owner of record results in the denial of due process to all co-owners and renders thetax sale null and void in its entirety with regard to all co-owners, including those whomight have received notice of the tax sale. Since a co-owner in indivision cannotgenerally pay his prorated portion of the taxes and thereby prevent the tax sale of theproperty, it stands to reason that a co-owner who does not receive his due processright of notice is precluded from stopping the tax sale and the alienation of theproperty. Such a result would place the co-owner who was not given requisite noticeof the tax sale in the untenable position of either having to pay additional penaltiesand interest to redeem the property, or perhaps worse, finding himself in co-ownership with a third party with adverse interests who may thereafter seek topartition the property. Although a co-owner may freely encumber his share of thething held in indivision, a tax sale is an involuntary transfer of ownership facilitatedby action of the state. Therefore, the both Fourteenth Amendment of the federalconstitution and the Louisiana constitution require proper notice to each owner inindivision to guard against a deprivation of property without due process of law.

B. Smitko v. Gulf South Shrimp, Inc., 2010-0531 (La. App. 1st Cir. 10/19/11); ____So. 3d ____ (not yet released for publication in the permanent law reports). InJune of 2003, the sheriff sold property at a parish tax sale. The only notice thatpreceded this sale was a notice sent by first class mail (rather than by certified mail)to the property owner at the mortgagee<s address. After the three-year redemptiveperiod had expired, the tax sale purchaser filed a petition to quiet tax title in late2006. The following month, the tax debtor filed an answer denying the allegationsof the plaintiff's petition and alleging that no notice was ever sent nor received of thetax delinquency. The next year, the mortgagee intervened, asserting that the tax salewas null not only for the failure of the sheriff to send notice to the property ownerbut also for the failure of the sheriff to notify other inferior lien holders. In April of2008, the tax debtor filed a reconventional demand asserting that the tax sale was anabsolute nullity on account of the same grounds that had been asserted in its answer. Finding that a timely reconventional demand for annulment of the tax sale had notbeen filed, the trial court granted summary judgment in favor of the plaintiff quietingthe tax title.

By a 3-2 vote, a five judge panel of the First Circuit affirmed. In the opinionof the court written by Judge Kuhn (apparently joined in only by himself), JudgeKuhn observed that Article VII, Section 25 of the Louisiana Constitution providesthat no sale of property for taxes shall be set aside for any cause (other than priorpayment of taxes) unless the proceeding to annul is instituted within six months afterservice of notice of sale. A suit by a tax purchaser to avail himself of the procedure

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to quiet tax titles does not place at issue the validity of his tax title; rather, he simplyinvites assault thereon. If no action to annul is brought within six months, the onlyjudgment that the court is authorized to render is one quieting the tax title. Theopinion rejected contentions that the six-month limitation should not be given effectbecause the tax sale was an absolute nullity. The court also found that raising aclaim of nullity in an answer as a defense is not sufficient to comply with theconstitutional requirement that a proceeding to annul be instituted within six months.The constitutional provision logically is interpreted as requiring either a separate suitor a reconventional demand. Moreover, the late filing of the reconventional demanddid not relate back to the date of filing of the original answer. The relation back ofa pleading cannot interfere with the running of a peremptive period, and a cause ofaction cannot be resurrected by filing a late supplemental and amending answer.Louisiana's longstanding policy to protect title to immovable property is served bya strict application of a constitutional limitation period.

The court then found that, even if a timely proceeding had been instituted, theappellants did not establish the invalidity of the tax sale. Due process does notrequire actual notice before the government may take property; the state mustattempt to provide actual notice. In this case, the sheriff mailed notice to theproperty owner at the address of the mortgagee and published general notices in thenewspaper as required by law. The appellants did not establish that the tax rollsreflected any address for the tax debtor other than the address to which the noticewas mailed. The appellants failed to establish that the tax debtor had another viableaddress that could have been reasonably ascertained by the sheriff. The sheriff madea reasonable calculation to provide notice by sending notice to the available address.No mail was returned to the sheriff, who was thus not on notice that additional stepsneeded to be taken to satisfy due process. Though the sheriff arguably violatedLouisiana law by failing to send the notice by certified mail, that failure did not meanthat the sheriff had deprived the tax debtor of procedural due process under the FifthAmendment [sic]. As the United States Supreme Court has held, the use of certifiedmail might make actual notice less likely in some cases. Finally, the court held thatthe appellants had not established the invalidity of the tax sale due to the lack ofnotice to other lienholders, since the appellants failed to establish that thoselienholders had complied with the request-notice provisions of former La. R.S.47:2180.1. Moreover, the appellants lacked standing to assert the invalidity of thetax sale on the basis that notice was not provided to other persons.

Judges Welch and Higginbotham dissented, believing that the tax debtor hadtimely preserved its claim that the tax sale was an absolute nullity by filing ananswer specifically pleading that no notice had been sent. Judge Higginbotham alsoobserved that it was uncontradicted that neither the property owner nor themortgagee received written notice of tax delinquency as required by former La. R.S.47:2180, which requires notice by certified mail. Further, the correct address forboth the tax debtor and the mortgagee were readily ascertainable. The sheriff madeno effort at all to notify the mortgagee of the impending tax sale. For this additionalreason, the tax sale was an absolute nullity.

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VIII. Lender liability

A. Flood insurance

1. Young v. Central Progressive Bank, 2010-1816 (La. App. 1st Cir.3/25/11); 2011 WL 1103877. In 2002, the plaintiffs executed a mortgagethat required them to maintain insurance on the property but stated that, ifthey failed to do so, the mortgagee "may purchase such insurance coverage."In August of 2002 (seven months after the loan was made) and again thefollowing August, the bank sent letters to the plaintiffs stating that if theyfailed to provide the bank with proof of insurance, insurance coverage wouldbe provided by the bank and the cost of the insurance would be added to theloan balance. Hurricane Katrina damaged the property in August 2005, whenthere was no flood insurance coverage on the property. The plaintiffs filedsuit against the bank claiming a breach of an alleged duty to purchase floodinsurance. The trial court granted the bank<s motion for summary judgmentand the court of appeal affirmed. Under the clear and unambiguous languageof the mortgage agreement, the bank owed no duty to the plaintiffs to provideflood insurance. Conceding that the bank had no contractual obligation toprovide insurance, the plaintiffs argued that the bank undertook a duty toplace flood insurance by requiring the plaintiffs to sign a flood insurancenotice prior to executing the loan and in sending to the letters to the plaintiffsregarding lapsed insurance. The flood insurance notice stated that, if themortgagor failed to purchase flood insurance, federal authorizes and requiresthe lender to do so. The letters the bank sent stated that, if the plaintiffsfailed to provide proof of flood insurance before the expiration date,"insurance coverage will be provided by the bank." The court distinguishedOliver v. Central Bank, 658 So. 2d 1316 (La. App. 2d Cir. 1995) andPaternostro v. Wells Fargo Home Mortgage, 30 So. 3d 45 (La. App. 5th Cir2009) on the ground that in those cases the mortgagee has not sent lettersaffirmatively stating that they would provide insurance if mortgagor failedto purchase it. However, the court found that there was nonetheless noassumption of duty in this case. The letters the bank sent clearly stated thatthe bank would be providing insurance only for the loan balance. Thus, noduty was created in favor of the plaintiffs. Though the plaintiffs would havebenefitted by the bank<s purchase of insurance because they would not owethe remainder of the loan, a duty is not created in favor of an incidentalbeneficiary. Moreover, the letters were sent only in 2002 and 2003. Evenif a duty had been created, it would have been limited to those years in whichthe mortgagors actually received the letters.

2. Blackstone v. Chase Manhattan Mortgage Corporation, ___F. Supp. 2d___ (E.D. La. 2011). At the time the mortgagor contracted her residentialmortgage loan, it was allegedly determined (by an unknown person) that theproperty was in a flood zone and the mortgagor was therefore required tomake escrow payments that included premiums for flood insurance. In 2003,the mortgagee sent the mortgagor a notice to the effect that her property was

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not in a special flood hazard area. After the mortgagor's home was damagedduring Hurricane Katrina and she later learned that no flood insurancecoverage was in place, she brought suit against the mortgagee, alleging thatat no time was she made aware that her home was not in a flood zone or thatthe mortgagee was not making payments on her flood insurance. She alsocontented that she continued to make escrow payments and that her paymentnever decreased. The mortgagor's suit was based on an asserted cause ofaction under the National Flood Insurance Act, as well as causes of action forbreach of contract and detrimental reliance. The court granted themortgagee's motion to dismiss for failure to state a cause of action. Thejurisprudence establishes that there is no federal private right of action for aborrower under the National Flood Insurance Act. If a mortgagee has dutyto make flood insurance payments, that duty does not arise under the federalact but rather from the terms of the underlying contract. Concerning thebreach of contract claim, the court noted that the only contractual provisionthat might have relevance was one requiring the borrower to pay themortgagee for premiums on all insurance required under the mortgage. Thisprovision, however, did not place on the mortgagee any obligation to payflood insurance premiums or to notify the mortgagor if her flood insurancewere cancelled. Since the plaintiff failed to point to any contractual promisethat the mortgagee breached, the court found that the plaintiff had not stateda claim for breach of contract. With respect to the mortgagor's claims fordetrimental reliance, the court first rejected the mortgagee's argument thatthose claims were prescribed by the passage of one year. As the Fifth Circuithas held, nonfeasance in the performance of an obligation creates a cause ofaction that prescribes in ten years, while misfeasance gives rise to a claim intort prescribing in one year. Moreover, the classical distinction between acontractual obligation versus a delictual obligation is that the former flowsfrom the breach of the special obligation contractually assumed by theobligor, whereas the latter flows from the violation of a general duty owedto all persons. Therefore, the plaintiff's claims for detrimental reliance weresubject to the ten-year prescriptive period. However, the court held that theplaintiff had failed to state of proper cause of action for detrimental reliancethat is plausible on its face, since the complaint did not allege anyrepresentation by the mortgagee upon which the mortgagor relied.

B. Credit agreement statute/fiduciary duty

1. Bass v. Chase Home Finance, LLC, 2010 WL 3922709 (E.D. La. 2010).According to the complaint, after becoming unable to afford payments ontheir mortgage, the plaintiffs contacted the bank for assistance in making"alternative arrangements." Allegedly the bank informed the plaintiff that inorder to qualify for an altered payment plan the mortgage had to bedelinquent by 60 days. Based upon that information, the plaintiffs stoppedmaking payments. The bank allegedly also instructed the plaintiffs toattempt a "short sale" of the mortgaged property. When an offer wasobtained on the property, it was submitted to the bank, which delayed action

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on the request, with the result that the purported purchaser purchased anotherproperty. After the bank foreclosed upon the property, the plaintiff filed suitalleging negligence, breach of contract, detrimental reliance and breach offiduciary duty. The court granted the bank's motion for summary judgment.The Louisiana Credit Agreement Statute, La. R.S. 6:1121, clearly applies tothe facts of the case, since the bank is a "creditor," the plaintiffs are"debtors," and any offer to modify the mortgage loan through a short salewould fall under the definition of a "credit agreement." Because theplaintiffs did not contend that any written credit agreement to modify themortgage existed, the Credit Agreement Statute precluded the plaintiffs frommaintaining any "action" against the bank. The Louisiana Supreme Courthas been clear that the credit agreement statute precludes all actions againsta creditor absent an agreement in writing. The plaintiffs' attempted relianceon Bizcapital Business & Industrial Development Corp. v. Union PlantersCorp., 884 So. 2d 623 (La. App. 4th Cir. 2004) was misplaced, since thatcase involved a financial institution's misrepresentation to another financialinstitution, rather than a debtor suing a bank on an oral agreement to modifya loan.

2. Mobile-One Auto Sound, Inc. v. Whitney National Bank, 2011-0535 (La.App. 4th Cir. 11/9/11); ___ So. 3d ___ (not yet released for publicationin the permanent law reports). After a commercial line of credit had beenextended numerous times, the bank indicated that the line of credit would notbe further extended unless additional collateral or a principal payment weremade. When no such arrangements were forthcoming, the loan was referredto the special assets division of the bank and, a few days afterward, the bankwithdrew $600,000 from an operating account maintained by the borrower.The borrower then filed a petition for damages against the bank and itsofficers. The trial court sustained the defendants' exception of no cause ofaction, and the court of appeal affirmed.

The borrower's claims were predicated upon a theory that, in order topursue any default remedies, the bank had a contractual or statutory duty togive the borrower notice of default. This argument was supported by anumber of contentions: (1) the promissory note required the lender to declarethe note to be in default prior to applying the post-default interest rate; (2)the borrower never waived notice of default, expressly or impliedly; (3) an"event of default" under the loan agreement can arise without the bankhaving any duty or obligation to exercise its rights of remedies, and (4)though the promissory note gave the bank the right to offset accounts, it gavethis right only "to the extent permitted by law," which the borrower arguedwas a reference to La. R.S. 6:316(C), which allegedly required formal noticeof default prior to the bank's having the right to proceed under the statute.Rejecting all of the borrower's contentions, the court observed that La. Civ.Code art. 1990 provides that when a term for the performance of anobligation is fixed or determinable by the circumstances, the obligor is putin default by the mere arrival of that term. In this case, the promissory note

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matured prior to the offset; thus, it was not unreasonable for the bank toconclude that the borrower defaulted on the promissory note. Moreover, thepromissory note contained language by which the borrower "waived demand,presentment for payment, protest, notice of protest and notice of nonpayment,and all pleas of division and discussion." Thus, the borrower waived theright to notice. Finally, the court held that the borrower failed to state acause of action for breach of verbal promises allegedly made by the bank,since the borrower had not alleged the existence of any written creditagreement as required by La. R.S. 6:1122. Judge Bonin concurred, pointingout that the bank was not required by law or written agreement to give formalnotice of default prior to exercising its right of offset. Moreover, he stressedthat the credit agreement statute protects not only the bank itself but alsoemployees of the bank, for a contrary holding would render the statuteeffectively meaningless and thwart the clear legislative intent expressed bythe statute.

3. Chase v. Resource Bank, 2010-0193 (La. App. 1st Cir. 9/10/10); 2010 WL3527567. A borrower and its shareholders filed suit against the bank that hadlent the borrower money to purchase immovable property, claiming that anappraisal the bank obtained at the time the loan was initially made "wasfraudulent and created false equity." The plaintiffs further alleged that thebank had breached its verbal promise to lend development funds. The bankfiled an exception of no cause of action, asserting that under La. R.S. 6:1122lending agreements must be in writing to be enforceable. The bank also filedan exception of prescription. The trial court sustained the exceptions, and thecourt of appeal affirmed. After first finding that the trial court had actedproperly in rejecting claims by the plaintiff that they were lulled into a beliefthat they did not need to appear at the hearing on the exceptions becausediscovery was outstanding, the court of appeal found that the sole issuepresented for its consideration on appeal was whether the plaintiff's claimshad prescribed. Under La. R.S. 6:1124, a claim for breach of fiduciaryresponsibility must be asserted within one year of the first occurrencethereof. According to the plaintiffs own petition, they were advised in Julyof 2006 that all equity in the property had been lost by land devaluation "andthere was minus equity now." The plaintiffs did not file suit until nearlythree years later, and their suit was therefore prescribed on its face. Havingfailed to appear at the hearing, the plaintiffs never submitted any evidencethat prescription was interrupted or suspended. Finally, the court rejected thebank's request for damages for frivolous appeal, since the plaintiffs wereserious in the position they advocated.

4. Thompson v. Bank One of Louisiana, N.A., 2010-1489 (La. App. 4th Cir.3/23/11). After a dispute arose between First Zion Baptist Church of NewOrleans and its pastor, the bank gave members of the church informationabout a $51,000 certificate of deposit that had been issued to First ZionBaptist Church. It was subsequently discovered that the information wasincorrect, because the certificate of deposit had in fact been issued to First

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Zion Baptist Church of Shreveport. Allegedly as a result of this erroneousinformation, the pastor was accused of using church funds to purchase apersonal certificate of deposit and was removed as pastor. He then broughtnegligence and defamation claims against the bank. The defamation claimshaving been previously dismissed, the trial court granted the bank<s motionfor summary judgment on the remaining negligence claims. The court ofappeal reversed. The bank's argument was that the plaintiff could notestablish a negligence claim against the bank because he was not a bankcustomer. Moreover, the bank claimed immunity under La. R.S. 6:1124.Even though the plaintiff did not have a personal account with the bank, hewas designated as an agent for the church's account. Thus, there was agenuine issue of material fact as to whether a sufficient nexus existedbetween him and the bank such that the bank owed a duty of care to him.Moreover, in enacting La. R.S. 6:1124, "the legislature did not intend tototally immunize banks from all legal duties in their relationships withcustomers and third parties."

C. Third party beneficiary/unjust enrichment

The Nature Conservancy v. Upland Properties, LLC, 2010-0516 (La. App. 1stCir. 10/29/10); 48 So. 3d 1257. In connection with a construction loan for aresidential community, the borrower entered into a mitigation participationagreement with the plaintiff, whereby the borrower agreed to make certain paymentsto the plaintiff to enhance and manage 150 acres of wetlands. The borrowerdefaulted on both the construction loan and the mitigation participation agreement.Upon foreclosure, the construction lender acquired the development in questionthrough an act of sale from the U.S. Marshal that also conveyed all "permits,licenses, franchises, certificates and other rights and privileges obtained inconnection with the land." A few months after the foreclosure sale, the plaintiff fileda petition for damages against both the borrower and the construction lender for theremaining balance of payments due under the mitigation participation agreement.The suit against the lender was based upon theories of unjust enrichment and thirdparty beneficiary of a contract. A default judgment rendered against the constructionlender was reversed on appeal. As the Louisiana Supreme Court held in Minyard v.Curtis Products, Inc., 205 So. 2d 422 (La. 1968), there are five prerequisites for acause of action for unjust enrichment: an enrichment, an impoverishment, aconnection between the two, an absence of justification or cause for the enrichmentand the impoverishment, and no other available remedy for the impoverished party.In this case, the plaintiff's impoverishment (preserving the wetlands) was justifiedor caused by the promise of the borrower to pay a sum of money. Moreover, theplaintiff has another available remedy at law, specifically, suit against the borrower.Despite the fact that the unpaid balance of the contract may be unrecoverable, thereis an obvious available legal remedy, and the plaintiff therefore has no cause ofaction against the lender for unjust enrichment. Concerning the claims based upona theory of third party beneficiary, the law does not allow the plaintiff to force thelender into a possession of a third party beneficiary for the purpose of binding it topay the debt of the borrower. Nor can the lender be forced to assume the obligations

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of the borrower under the permit issued by the U.S. Army Corps of Engineers. Alender does not step into the shoes of the borrower because it succeeds the borrowerthrough foreclosure and public auction.

D. Wrongful seizure

Bank of New York Mellon v. Smith, 2011-60 (La. App. 3d Cir. 6/29/11); 71 So.3d 1034. In 2004, Chase, as trustee for the mortgagee, bought an executory processforeclosure on a residential mortgage, arranging for the constructive seizure of theresidence. Upon being served with notice of seizure, the mortgagor, who wasrecently widowed, moved her family out of her home over the holidays and filed asuit for injunction to stop the seizure. Granting the injunction because Chase hadfailed to attach the original note to its petition, the trial court ordered Chase toconvert the suit to ordinary process. The order preserved the mortgagor<s claims ofwrongful seizure under state and federal law. Rather than appealing the judgment,Chase simply converted the foreclosure to ordinary process. A few monthsafterward, the mortgagor reconvened against Chase and its law firm, assertingwrongful seizure under Louisiana law as well as due process violations under 42U.S.C. §1983. The trial court dismissed the mortgagor<s claims, apparently onaccount of the mortgagor<s failure to effect proper service of the reconventionaldemand. While that dismissal was on appeal, the mortgagor re-asserted her demandsfor wrongful seizure, to which the defendant filed various exceptions. Withoutruling on the exceptions, the trial court dismissed the entire suit in August of 2009.A few days before, Mellon, which was Chase<s successor as trustee, filed suit toenforce the note and mortgage by executory process. The mortgagor responded withan exception of no right of action against Mellon and a reconventional demand, atthe same time asserting third party demands against Chase and the law firm that hadrepresented it in the foreclosure. The mortgagor's claims were again based uponwrongful seizure under state law and federal due process violations. The trial courtdenied the plaintiff's exception of no right of action and sustained several of theexceptions that had been asserted by Mellon and the third party defendants. Thecourt of appeal largely reversed.

With respect to the plaintiff's exception of no right of action directed toMellon's suit on the note and mortgage, the court pointed to detailed information thatMellon had filed in opposition to this exception, including evidence that Mellon hadreplaced Chase as trustee "with rights and obligations belonging thereto." Accordingto the court, this was sufficient to make Mellon "a person entitled to enforce" thenote under La. R.S. 10:3-301.

The court then turned to the exceptions of no cause of action that Chase andMellon had filed to the mortgagor's claims of due process violations. AlthoughLouisiana's executory process procedure itself was held to be constitutional inBuckner v. Carmack, 272 So. 2d 326 (La. 1973), the mortgagor was contending that,under the facts of this case, executory process was used in a manner that violated herdue process rights, since the evidence submitted in support of the petition forexecutory process was not authentic. Finding that the mortgagor's allegations were

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sufficient to state a cause of action for wrongful seizure and for federal due processviolations, the court discussed a number of contentions being made by themortgagor, without giving any clear indication of the legal sufficiency of the specificcontentions being made. She claimed that the evidence submitted by Chase to obtainthe order of executory process was not authentic. She also claimed that, despite theallegations of the executory process petition, she had not been given notice of defaultprior to acceleration as the mortgage required. The court also observed that theconfession of judgment contained in the mortgage did not include the words "if theobligation is not paid at maturity" as provided under La. C.C.P. art. 2632. Withrespect to the mortgagor's contention that there was inequality in bargaining powerin Chase's favor, the court observed that in Buckner the defendant had made nocontention of unequal bargaining power or overreaching by the creditor. Themortgagor also alleged that she warned Chase and its law firm not to proceed by useof a mechanism that deprived her of her constitutional right to a pre-seizure hearing,but they nonetheless did so. Chase had not appealed the judgment of injunction thathad been issued against the use of executory process, thus strongly indicating ananticipation that the court would rule the seizure of the mortgagor<s property illegal.The court also seemed to reject claims by Chase and its law firm that the use of astate court judge to effect an unlawful seizure removed them from the sphere ofprivate parties whose actions in invoking a statute are fairly attributable to the stateunder Section 1983.

With respect to Mellon's claims that it was not involved in the 2004 seizure,the court found this to be of no moment since Mellon's affidavit stated that it hadobtained the rights and obligations of Chase, which would render them solidaryobligors on the first foreclosure proceeding by Chase. The court also rejectedMellon's attempt to "make much of the fact that the initial seizure of Smith's homewas constructive only." Chase served the mortgagor with a notice of seizure thatcaused her to move her family. Although the seizure was constructive only, but forthe seizure notice, she would not have moved her family from her home or enduredfear, anxiety, inconvenience and worry.

The trial court had also granted Mellon's motion to strike the mortgagor<s jurydemand on the ground that the suit was on a promissory note for which jury trial isprecluded by La. C.C.P. art 1732, which provides that a jury trial is unavailable ina "suit on an unconditional promise to pay a specific sum of money." The courtagreed with the mortgagor that the claims asserted by Mellon were not on anunconditional obligation to pay a specific sum of money. The note provides formonthly payments of $612.88, to be applied first to interest on a per diem basis.Depending on when a payment is posted, the interest portion held out of the paymentgoes up and down, as does the portion applied to principal. This fluctuation rendersthe interest portion of the loan unknowable. Hence, according to the court, the notewas not an unconditional promise to pay a specific sum of money and thus both themain demand to enforce the note and the incidental demands were triable by jury.

Finally, the court rejected the law firm's exception of prescription, which wasbased upon an argument that prescription had not been interrupted against the law

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firm since it had not been named in the re-asserted demands filed against Chase.However, under La. C.C.P. art. 2324, a person who conspires with another to commitan intentional or willful act is answerable in solido for the damage caused by the act.In this case, the mortgagor asserted that her attorney told Chase and the law firm thatthey could not proceed via executory process and they willfully went forwardanyway in violation of her due process rights. Under 42 U.S.C. § 1983, the law firmis solidarily liable with Chase because it represented Chase in the executoryproceeding. Prescription was interrupted as to the law firm because it wasinterrupted as to Chase.

E. RESPA/HOEPA

1. Freeman v. Quicken Loans, Inc., 626 F. 3d 799 (5th Cir. 2010). At aresidential mortgage closing, the lender charged the borrower a "loanprocessing fee". The customer brought suit for a violation of Section 8(b) ofRESPA, contending that a loan discount fee may only be charged when thereis a corresponding interest rate reduction and that otherwise it is an unearnedfee for settlement services in violation of RESPA. According to the plaintiff,since the lender allegedly did not give the plaintiff the benefit of a decreasedinterest rate, the fee was unlawful. The lender moved for summaryjudgment, claiming that the borrower's claim was not actionable since the feein question was not split with another party. The district court granted thelender summary judgment, and the court of appeals affirmed.

Section 8(b) of RESPA provides that no person shall accept any"portion, split or percentage" of any charge made or received for therendering of a real estate settlement service other than for services actuallyperformed. HUD has issued a statement of policy identifying four types ofcharges that Section 8(b) could potentially cover: fee splitting, mark-ups,undivided unearned fees and overcharges. In cases interpreting RESPA, allcircuits have held that the statute prohibits fee splitting. Every circuit thathas addressed the issue has rejected the contention that simple overchargesare actionable. The circuits are split on whether mark-ups are prohibited.Only the Second Circuit has addressed whether undivided unearned fees areprohibited by RESPA and found that they are. The Fifth Circuit holds in thiscase that the language of Section 8(b) is unambiguous and does not coverundivided unearned fees. Use of the conjunctive "and" between thestatements that no person shall give and no person shall accept clearlyindicates something other than a unilateral act and contemplates two culpableactors. Moreover, use of the words "any portion, split or percentage" clearlycontemplates a sharing arrangement rather than a unilateral overcharge.Finally, when read in its entirety, RESPA is an anti-kickback statute, not ananti-price gouging statute. The court was also unpersuaded by an argumentthat it should give difference to HUD's interpretation of Section 8(b). Wherea statutory provision is clear on its face, there is no need to look to anyregulatory interpretation.

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2. Wilson v. Bank of America, 2011-0392 (La. App. 4th Cir. 9/20/11); ___So. 3d ___, (not yet released for publication in the permanent lawreports). The plaintiff, who admittedly had made no payment on herresidential mortgage loan for in excess of ten years, brought suit against herresidential mortgage loan servicer, claiming a violation of RESPA on accountof its failure to respond to her "qualified written request" within twenty daysas required by 12 U.S.C. § 2605. The plaintiff also claimed that the servicerhad violated its fiduciary duty to her by force-placing property insurance ata premium cost more than double the premium she had previously beenpaying. The servicer reconvened for the amount due under the note andmortgage. The trial court granted summary judgment in favor of the servicer,finding that it had fully complied with RESPA and that it was due allamounts claimed under the note and mortgage. The court of appeal affirmed.

Prior to suit, the parties had entered into a written forbearanceagreement, which the plaintiff admittedly breached. Following this breach,the servicer wrote to the plaintiff notifying her of her failure and of the totalamount required to bring the loan current. Within ten days from the date ofthat letter, the plaintiff sent the servicer that exact amount; however, theservicer rejected it because the arrearage had increased and the servicer wasunder no obligation to accept a partial payment. Although the court observedin a footnote that the servicer<s affidavit on the motion for summaryjudgment did not explain how the arrearage could increase, and that theservicer<s failure to notify her of a possible increase of which the servicingdefendant had prior knowledge might indicate a lack of good faith, the courtnonetheless held that the plaintiff had failed to raise a genuine issue ofmaterial fact on this issue because she did not prove that the payment was notshort.

In support of the RESPA claim, the plaintiff alleged that her attorneysent the servicing defendant a "notice of inquiry" letter on September 12,2000, which the servicer failed to acknowledge within twenty days, asrequired by RESPA. This letter generally referred to hazard insurance butmade no clear request for information concerning arrearage on the account.Since the letter failed to adequately express a request for informationconcerning the amount required to bring the account current, the courtconcluded that the servicing defendant was reasonable in not reading it asexpressing such a request. Moreover, the very next day, on September 13,2000, the servicing defendant sent the plaintiff a letter indicating that it wasremoving her optional insurance premium from her monthly mortgagepayment. The court found this letter to be a proper response to the plaintiff<snotice of inquiry, despite the plaintiff<s argument that the letter referred tooptional life and accidental death insurance rather than the mandatory hazardinsurance. The court of appeal found no error in the trial court<s ruling thatthe September 13 letter was a prompt response to the qualified writtenrequest sent the day before. Moreover, a few days later, the servicingdefendant sent a written payoff statement to the plaintiff. According to the

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court, these actions clearly acknowledged receipt of the qualified writtenreport not once but rather twice within the twenty day period mandated byRESPA.

Finally, the court rejected the plaintiff<s contention that the servicer<sdefault notice was defective because it was not sent by certified mail. Theprovision of the mortgage dealing with notices provided for certified mailonly as a safe harbor to eliminate disputes as to whether notice was given;mailing by certified mail was not an end in itself.

3. Bank of New York v. Parnell, 2010-0435 (La. 11/30/10); 56 So. 3d 160.After her mortgage loan had been satisfied with insurance proceeds receivedafter Hurricane Katrina, the mortgagor continued with a damage claim shehad previously filed against the mortgagee based on an asserted violation ofthe Federal Home Ownership and Equity Protection Act (HOEPA), whichallows a consumer to rescind a loan transaction if certain disclosures are notgiven. This rescission right exists if the loan satisfies either of the two testsset forth in 15 U.S.C. §1602(aa)(1); specifically, the annual percentage ratemust exceed a certain specified level or, as was relevant in the present case,the total "points and fees payable by the consumer at or before closing" mustexceed the greater of 8% of the total loan amount or $400. In theimplementation of this requirement, Regulation Z, 12 C.F.R.§226.32(b)(1)(ii), defines "points and fees" to include all compensation paidto mortgage brokers, including the "yield to spread premium" paid to thebroker. In this case, the yield to spread premium was actually paid to thebroker by the lender, but resulted in an increased interest rate payable by theborrower over the life of the loan. In a decision published at 32 So. 3d 877,the court of appeal reversed summary judgment in the mortgagee<s favor.Declining to follow cases to the effect that a yield spread premium paid andderived from the stream of interest generated over the life of the loan is notpayable by the consumer at or before the time of closing, the court of appealopted instead for the more consumer-friendly interpretation of other courts,which have held that "payable" should be interpreted as meaning "legallyenforceable" or "obligation to pay."

The Supreme Court reversed the court of appeal and reinstatedsummary judgment in favor of the mortgagee on this claim. To find that theyield spread premium paid by the lender to the broker, and ultimately to bepaid by the borrower to the lender over the course of the loan in the form ofan enhanced interest rate, is a fee "payable by the consumer at or before loanclosing" would be to overlook the letter of the law in order to enforce thespirit of the law. Only those fees that are "payable by the consumer at orbefore closing" are to be included. Where the yield spread premium is paidby the lender to the broker at the time of closing and the borrower'sobligation is payable in the form of a higher interest rate, not at or before theclosing, but over the course of the loan, the yield spread premium is notproperly included in the calculation of the 8% trigger. The Supreme Court

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found that this conclusion is supported not only by the majority of the caselaw but also by the fact that the recently enacted Dodd-Frank Wall StreetReform and Consumer Protection Act had addressed the indirect payment ofthe mortgage broker's fee: 15 U.S.C. § 1602 (aa)(1) has been amended byreplacing the words "points and fees payable by the consumer at or beforeclosing" with "points and fees payable in connection with the transaction."

F. Private parties as lenders

1. Derouen v. Malahmeh, 2010-1002 (La. App. 3d Cir. 2/9/11); 61 So. 3d693. A vendee habitually made untimely payments on a note given to hisvendor to evidence the purchase price of an immovable. After the vendeefailed to obtain hazard insurance, the vendor did so and later retainedinsurance proceeds from hurricane damage in a non-interest bearing accountuntil filing a collection suit on the note. The vendee reconvened, claimingmental damages from harassing, demeaning and belittling telephone callsmade during the vendor<s attempts to collect on the note. After a trial on themerits, the trial court rendered judgment on both the main demand and thereconventional demand in favor of the vendor, and the court of appealaffirmed. The trial court did not create manifest error in failing to givecredence to an amortization schedule that the vendee sought to introduce intoevidence, since that amortization schedule was prepared on the assumptionthat all payments would be made in a timely manner. With regard to thevendee<s argument that the parties' custom or practice of allowing the vendeeto make late payments modified the original agreement so as to preclude thevendor from seeking late charges, the court of appeal found that the trialcourt had reasonably rejected this claim based upon testimony from thevendor to the effect that the vendor had never told the vendee that latepayments were acceptable or that there would not be any late charges. Withregard to the vendee<s contention that the insurance proceeds should havebeen credited to the note on the day that they were paid to the vendor, thecourt observed that if the vendee had complied with his obligation to obtainthe insurance himself, he would have received the insurance proceeds.Therefore he was the party who caused the insurance proceeds not to bereceived on the day they were paid by the insurance company. Moreover, theinsurance proceeds had been placed in an account for the purpose ofallowing the vendee to make repairs to the property, which he failed to do.Finally, the court rejected the vendee<s contention that the vendor<s collectioncalls were abusive. Though Louisiana law provides that extreme andoutrageous debt collection effort will support recovery for intention inflictionof emotional distress, the court of appeal upheld the trial court<s finding thatthe vendor<s statement that "I guess we'll have to kick your ass out," was notdemeaning or abusive: according to the trial court "that's pretty much thelegal right you may have if you hold a mortgage on something." Finally, thecourt of appeal granted the vendor<s request for an increase of $2,500 inattorneys fees for work performed on appeal. Where an award for attorneysfees is granted at the trial level, additional attorneys fees for work on appeal

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are proper to keep the appellate judgment consistent with the underlyingjudgment.

2. Garrison v. Trost, 2010-16 (La. App. 3d Cir. 6/2/10); 2010 WL 2179759.A promissory note given in an owner financing transaction between privateparties both prohibited prepayment and stipulated that the penalty forprepayment was "the amount of the interest then due over the remainder ofthe life of the loan." When the buyer in this transaction sold the propertybefore maturity of the note, he incurred a penalty of $73,000, which he thennegotiated down to $44,000 while simultaneously demanding return of thepenalty. In opposition to his suit to recover the prepayment penalty, theholder of the note filed a motion for summary judgment, which was grantedby the trial court and affirmed on appeal. Because the holder of the note wasnot a bank regulated or insured by the federal government, nor a "creditor"as defined in the Federal Consumer Credit Protection Act, that act did notapply. Nor did the Louisiana Consumer Credit Law apply, since (i) theparties did not opt in to the law, (ii) the transaction in question was not aconsumer credit sale since it involved immovable property, and (iii) theholder of the note was not a licensed lender under the statute. In an attemptto escape penalties the plaintiff not only agreed to but negotiated downward,he was simply attempting inappropriately to apply law intended for banksand other lending institutions to an individual lender.

IX. Deposit accounts

A. Definition of "bank"

Brooks v. TransAmerica Financial Advisors, 45, 833 (La. App. 2d Cir. 2/2/11);57 So. 3d 1153. The plaintiff had a "Resource Checking" account that permitted herto write checks on her brokerage account maintained with TransAmerica. Pershingacted as clearing agent for TransAmerica, creating and mailing to account holdersmonthly statements showing brokerage transactions and check activity. Pershingretained Boston Safe Deposit and Trust Company (a bank) to manage the retailbanking aspects of the Resource Checking accounts. The standard procedure wasthat when a check was presented to Boston Safe for payment, it requested paymentfrom Pershing, which would ascertain whether there were sufficient funds in therelevant customer<s brokerage account to cover the check and, if so, would withdrawthe amount of the check and deposit the proceeds with Boston Safe for payment ofthe check. Beginning in 1999, the plaintiff allowed her longtime live-in companionto begin handling her finances. For five years, the plaintiff did not look at anystatements of her accounts. In 2004, while the companion was away, the plaintiffdiscovered that her companion had forged the plaintiff's name on numerous checksdrawn on the plaintiff<s brokerage account between February 2003 and March 2004.In November 2005, the plaintiff filed suit against TransAmerica and Boston Safe.In 2007, the plaintiff amended her petition to add Pershing as a defendant, butwithout explaining how Pershing was involved. Pershing and Boston Safe movedfor summary judgment, claiming that the plaintiff's claims were time-barred under

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La. R.S. 10:4-406(f), which precludes a customer from recovery for an unauthorizedsignature if he does not discover and report the signature within one year after astatement reflecting the item is made available to him. The trial court grantedsummary judgment in favor of Boston Safe, but denied Pershing's motion forsummary judgment on the ground that the evidence was not clear enough to establishPershing's relationship with the plaintiff (The trial court did, however, sustainPershing's exception of no cause of action, affording the plaintiff an opportunity toamend). The court of appeal granted Pershing's writ to review the denial of themotion for summary judgment, reversed the action of the trial court and enteredsummary judgment in favor of Pershing.

The sole issue was whether Pershing was a "bank" within the meaning ofSection 4-406. The plaintiff argued that Pershing was not a bank because it had notsought to comply with Louisiana's banking laws and had undertaken no commercialbanking duties with regard to her. La. R.S. 10:1-201(4) and 10:4-105(1) broadlydefine a "bank" to be "a person engaged in the business of banking." Followingjurisprudence from other states, the court held that it is not appropriate to use themore narrow definition of a bank under general banking laws and that a brokeragefirm that offers checking services to its customers is a ?bank? for UCC purposes.With regard to the plaintiff<s claim that there was no showing of any contractualrelationship between her and Pershing, the court pointed out that the ResourceChecking application the plaintiff had signed explained that Pershing was her agentfor the purpose of withdrawing funds from the brokerage account to pay checkspresented to Boston Safe and that this established her contractual relationship withPershing. Since the plaintiff did not notify Pershing, a "bank" entitled to the benefitof La. R.S. 10:4-406, of the forgeries before she added Pershing as a defendant inMarch 2007, she was precluded from asserting her unauthorized signatures againstPershing.

B. Other forged maker signature cases

1. Groue v. Capital One, 2010-0476 (La. App. 1st Cir. 9/10/10); 43 So. 3d1038. Over a period of three months, a person sharing the plaintiff's residenceforged his name on checks she had obtained from his home. She alsointercepted his bank statements, preventing him from detecting the fraud.Upon learning of the fraud, he brought suit against the depository bank,claiming that the instruments were not properly payable from his account inlight of the forgery. After a trial, the lower court rendered judgmentdismissing all claims against the bank, and the court of appeal affirmed. Thebank's defense was based upon its deposit account rules, which obligated thecustomer to report any alteration or unauthorized signature within 30 daysafter the item in question was made available to him. Although Section 4-406(f) of the UCC ordinarily allows a notification period of one year, theparties' agreement in this case required the depositor to notify the bank ofunauthorized items within 30 days. Because the depositor failed to do so andbecause the notification period was not manifestly unreasonable, the courtheld that the deposit account agreement precluded the plaintiff from

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recovering against the bank either the original forgery and any subsequentforgery by the same wrongdoer. In reaching this holding, the court refusedto follow the ruling of the Third Circuit in Prestridge v. Bank of Jena, 05-545(La. App. 3d Cir. 3/8/06), 924 So. 2d 1266, which had held that a similarprovision in a deposit account agreement was an impermissible shorteningof prescriptive period in violation of La. Civ. Code art. 3471. The one-yearbar provided in Section 4-406(f) is not a prescriptive period at all but insteadis a substantive element of a claim for a payment of forged check. The courtnoted that its holding on this point was in accord with jurisprudence fromother jurisdictions, enforcing contracts reducing the applicable notificationperiod. However, Section 4-103(a) prohibits a bank from disclaimingresponsibility arising from its failure to exercise ordinary care. Under Section4-406(c), if the customer proves that the bank failed to exercise ordinarycare, the loss is allocated between the customer and the bank. In this case, thecourt did not feel that the plaintiff had demonstrated the bank guilty ofnegligence, since the mere fact that a bank may have paid an item over aforged signature did not establish that it failed to exercise ordinary care. Thecourt also mentioned in the footnote that the plaintiff's claims fell within theambit of the Uniform Commercial Code, which displaced any potentialclaims arising in negligence under general Louisiana law.

2. Costello v. Citibank (South Dakota), N.A., 45,518 (La. App. 2d Cir.9/29/10); 48 So. 3d 1108. For 35 years, a bookkeeper handled the financialmatters of a farming operation, which maintained a deposit relationship withCapital One Bank. She was authorized to sign checks, post all checks anddeposits and reconcile bank statements, which were sent to her house at thedirection of the depositor. During a chance visit to the local bank branch, thedepositor noticed checks that had been written on his account to persons whowere not his creditors. After he confronted the bookkeeper about this, shecommitted suicide. His accountant later determined that, during a six yearperiod starting in 2000, large sums of money had been embezzled from thedepositor's account. The depositor brought suit within one year of hisdiscovery of the embezzlement scheme against numerous payees of thechecks and against Capital One as the depository bank. The trial courtsustained exceptions of prescription filed by the defendants, and the court ofappeal affirmed.

The depositor's claim against the payees was based upon the UniformFiduciaries Law, La. R.S. 9:3805, which does not itself contain a prescriptiveperiod. However, it was clear that the bookkeeper was guilty of conversion,a delictual act subject to a one-year prescriptive period. Moreover, thosepayees that were themselves financial institutions had no fiduciary dutyunder La. R.S. 6:1124. Thus, the depositor's assertion that his claims againstthem were subject to a ten year prescriptive period was without merit. Withrespect to the claims against Capital One, the court acknowledged that theysounded in breach of contract; however, Section 4-406(f) of the UCCimposes a one-year time limit for reporting a customer’s unauthorized

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signature of an item. Thus, the depositor’s claims against Capital One werealso prescribed. Following Peak Performance Physical Therapy and Fitness,L.L.C. v. Hibernia Corp., 07-2206 (La. App. 1st Cir. 6/6/08), 992 So. 2d 527,the court held that, in view of the purposes sought to be achieved by theUniform Commercial Code, the doctrine of contra non valentem "does notapply to suspend prescription of a cause of action for the conversion of anegotiable instrument under La. R.S. 10:3-420(f)," except in the case offraudulent concealment. The court also rejected arguments that the actionsof the defendants constituted a continuing tort, since it felt that eachdeposited check written by the bookkeeper constituted a separate conversionwith separate damages. Finally, the court rejected the depositor's claim thatthe “prescriptive period of three [sic] years provided for in La. C.C. art. 3498for actions on negotiable and non-negotiable instruments" should apply. Thissuit was not an action brought on a negotiable instrument but rather an actionunder the Uniform Fiduciaries Law.

3. Innovative Hospitality Systems, L.L.C. v. Abe's, Inc., 2010-509 (La. App.3d Cir. 12/8/10); 52 So. 3d 113, 73 UCC Rep. Serv. 2d 251. On a singleday, 108 replicated or fraudulent checks written on the plaintiff<s depositaccount at Chase were cashed at a grocery store, which deposited the checksthe next day into its account at the defendant bank. After the checks werepaid from the plaintiff<s account at Chase, the plaintiff filed suit against thedefendant bank, alleging that it was negligent in paying so many checks,many of which had the same check numbers and the same amounts, and wasotherwise negligent in failing to implement adequate check cashing protocolsand failing to implement appropriate systems to detect fraudulent checks.The trial court sustained the defendant bank's exception of no cause of action,and the court of appeal affirmed. Following ASP Enterprises, Inc. v.Guillory, 22 So. 3d 964 (La. App. 1st Cir. 2009), the court held that anynegligence-based action asserted by the plaintiff in its petition had beendisplaced by the Uniform Commercial Code and therefore did not support acause of action. Alternatively, the plaintiff claimed that the defendant bankowed it a duty in the form of a presentment warranty under La. R.S. 10:3-417. However, the court found that the warranty provided in paragraph A ofthat section is owed only to the drawee bank. Though there is a warrantyowed under paragraph D to the drawer, that warranty arises only when adishonored draft is presented for payment to the drawer. In this case, thechecks were not dishonored but were in fact paid by Chase. The court alsoheld that the plaintiff had no cause of action under La. R.S. 10:3-403, whichprovides that an unauthorized signature is ineffective. The remedy for thedrawer where payment is made pursuant to a forged or unauthorizedsignature is against the drawee bank, which is obligated to re-credit thecustomer<s account for any funds paid out on a forged endorsement.

4. Innovative Hospitality System, LLC v. Abraham, 2010-217 (La. App. 3dCir. 4/6/11); 61 So. 3d 740. The insurance company that had issued to Abe'sa policy of commercial general liability insurance filed motions for summary

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judgment against the plaintiff's claims and cross-claims from the banks,contending that its policy did not provide coverage for the losses sustainedbecause they did not constitute either "bodily injury" or "property damage."The trial court denied the insurer<s motion for summary judgment and thecourt of appeal denied writs. After the Supreme Court directed the court ofappeal to hear arguments and render a full opinion (see 51 So. 3d 1), thecourt of appeal issued this opinion denying the writ. The insurer<s argumentwas based upon the assertion that the object of the suit was to recoupintangible things and the its policy covers only losses to tangible personalproperty. The insurer argued that the depositor did not have actual dollarbills sitting in the bank and that the depositor never had ownership of theactual dollar bills that were paid out on the fraudulent checks. According tothe court, once Abe's presented cash in exchange for a check, the check wasconverted into actual funds which were corporeal movables. This actionresulted in a loss of use of funds by the plaintiff, and it is "ridiculous" toargue that the plaintiff had not lost actual cash as a result of the cashing offraudulent checks. As a result of Abe's cashing the checks, the plaintiffsuffered a "loss of use" of this cash, a corporeal movable, and thereforetangible property. Judge Gremillion dissented, reasoning that, until Abe'sbank presented the fraudulent check to the plaintiff's bank, and that bankhonored the check and debited the plaintiff's account, the plaintiff still haduse of its funds and therefore the plaintiff did not lose cash, but rather theright to use its funds. According to the dissent, though the plaintiff made avalid point that a check is considered a corporeal, it is not making a claim fordamage to the check itself but rather a claim for funds that were fraudulentlywithdrawn from its checking account.

C. Forged endorsements

1. Persons entitled to bring suit

Robertson v. Sun Life Financial, 2009-2275 (La. App. 1st Cir. 6/11/10);40 So. 3d 507. Styling himself as a "unlearned and trusting offshoreworker," the plaintiff alleged that, as part of a massive fraud scheme, he hadbeen cajoled by one of the defendants into placing his life's savings in anaccount in the plaintiff's name with Sun Life. The plaintiff alleged that inOctober 2005, Sun Life issued to his order a large check on which theschemer forged the plaintiff's endorsement when cashing the check at CapitalOne. When sued for cashing the check, Capital One responded withexceptions of no cause of action and prescription, asserting that the plaintiff'ssuit was a conversion action under Section 3-420(f) of the UCC subject to aone-year prescriptive period. Moreover, Capital One asserted that, since thecheck was never delivered to the plaintiff, he had no cause of action forconversion in any event. The trial court granted the exception of no cause ofaction and dismissed the suit, without ruling on the exception of prescription.In its opinion, the court of appeal found that the trial court's silence on theissue of prescription was deemed to be a denial of that exception, and

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therefore the court of appeal did not consider the plaintiff's arguments withregard to prescription. The court also refused to consider the plaintiff'sargument that that Capital One had failed to exercise reasonable bankingstandards, since the trial court's judgment was based strictly on its findingthat the plaintiff was not the proper party to bring a claim for conversion.The court then embarked upon a discussion of the difference between theexceptions of no cause of action and no right of action, finding that CapitalOne should have filed an exception of right of action since it was contendingthat the plaintiff was not within the class of persons entitled to bring a claimfor conversion. Treating Capital One's exception as an exception of no rightof action, the court then held that the plaintiff was not in the class of personsentitled to sue under Section 3-420.

Paragraph B of Section 3-420 provides that an action for conversionmay not be brought by a payee who did not receive delivery of the instrumenteither directly or through an agent or co-payee. Prior to the revision of thissection in 1992, the conversion action could be brought only by a "trueowner". According to the official revision comments, the reason for thechange was to resolve a split of authority on the issue of whether a payeewho never receives an instrument is a proper plaintiff in a conversion action.The rationale of the change was that, until delivery, the payee does not haveany interest in the check, but by the same token his claim against the obligoron the underlying claim is not prejudiced by the issuance or negotiation ofthe check. Thus, there is no reason to afford him any additional remedyagainst a bank that honors a forged endorsement. In the instant case, CapitalOne failed to present any evidence on the exception of no right of action, andthe court was therefore left to decide, on the basis of the plaintiff's allegationsalone, whether delivery of the check had been made. Because the plaintiff'spetition did not set forth sufficient facts to show that he ever receiveddelivery, the court affirmed that portion of the trial court's judgment thatmaintained the exception. However, the court of appeal held that the trialcourt had erred in dismissing the suit without allowing the plaintiff anopportunity to amend his petition to allege delivery.

2. Prescription/contra non valentem

a. Robertson v. Sun Life Financial, 2011-0172 (La. App. 1st Cir.6/10/11); 2011 WL 3558170. After remand, the plaintiff amendedhis petition to allege that the check in question was sent to him at hisaddress in Ponchatoula and that one of the defendants removed itfrom his mailbox, forged his signature and subsequently cashed it atCapital One. The bank responded with a second exception ofprescription, again contending that because the instrument wasnegotiated almost three years before suit was filed, the plaintiff'sclaims had prescribed. The trial court maintained the bank'sexception of prescription, and a court of appeal affirmed.

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At the outset, the court rejected the plaintiff<s contention thatthe trial court<s earlier denial of the bank's exception of prescriptionwas res judicata, precluding the court from reconsidering the issue.The overruling of a peremptory exception of prescription is aninterlocutory judgment that does not prevent a party asserting thedefense of prescription from reasserting it in another exception or atthe trial on the merits.

A claim for conversion under La. R.S. 10: 3-420(a) prescribesin one year. Since on the face of the plaintiff's petition the claim forconversion had prescribed, the plaintiff bore the burden ofdemonstrating that prescription was interrupted or suspended.Following Peak Performance Physical Therapy & Fitness, LLC v.Hibernia Corporation, 992 So. 2d 527 (La. App. 1st Cir. 2008) andASP Enterprises, Inc. v. Guillory, 22 So. 3d 964 (La. App. 1st Cir.2009), the court held that the equitable doctrine of contra nonvalentem does not apply to suspend prescription of a cause of actionfor conversion under Section 3-420 except in the event of fraudulentconcealment by the defendant. Since the plaintiff neither alleged norpresented evidence establishing any fraudulent concealment on thebank's part, the claim had prescribed. The court also held that theplaintiff<s attempt to assert a breach of warranty action under La. R.S.10:4-207 was misplaced, because the warranties made by a collectingbank under that section apply only to a transferee and subsequentcollecting bank and are not warranties made to the actual payee onthe instrument. Finally, the court rejected attempts by the plaintiff toassert general negligence claims grounded in general Louisiana law,because any such cause of action was displaced by the UniformCommercial Code.

b. Breaux v. Gulf Coast Bank, 2011-192 (La. App. 3d Cir. 10/5/11);2011 WL 4582503. More than a year after his personal injuryattorney forged his endorsement on a settlement check, the plaintiffbrought suit under La. R.S. 10:3-420 against the bank that honoredthe forged endorsement. The trial court sustained the bank<sexception of prescription, and the court of appeal affirmed. Thoughthe court cited Peak Performance Physical Therapy & Fitness, LLCv. Hibernia Corp. 992 So. 2d 527 (La. App. 1st Cir. 2008) andCostello v. Citibank (South Dakota), N.A., 48 So. 3d 1108 (La. App.2d Cir. 2010, both of which had held that the doctrine of contra nonvalentem does not apply to suspend prescription of a cause of actionfor the conversion of a negotiable instrument under La. R.S. 10:3-420except in the case of fraudulent concealment by the defendant, andeven though the court explained that the holding of Peak Performancewas based in large measure upon the policy of promoting certaintyand uniformity in commercial transactions, the court found itunnecessary "to adopt the more sweeping rule espoused by our

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colleagues in the other circuits" that contra non valentem is notavailable in where a UCC cause of action is neither known norreasonably knowable by the plaintiff but the plaintiff's ignorance wasnot induced by the defendant. Since attorneys routinely deposit itemsinto their trust accounts, a bank is not well-positioned to detectconversions by those attorneys. Thus, the court found itinappropriate to apply the doctrine of contra non valentem in thiscase.

D. Other conversion/breach of contract claims against depository banks

1. Richardson v. Capitol [sic] One, N.A., 11-CA-30 (La. App. 5th Cir.6/14/11); ____ So. 3d ____, 2011 WL 2328017 (not yet released forpublication in the permanent law reports). Accompanied by his caregiver,the elderly president of a family corporation took a suitcase full of cash to thebank, along with a deposit ticket that the caregiver had filled out. The bank'sbranch manager, who traditionally helped the elderly man with his banking,took the briefcase and the deposit ticket to another room and returned witha corrected deposit ticket showing that the prepared deposit slip was off byjust over $18. The total cash reflected on the corrected deposit slip wasnearly $1,400,000. The man did not tell his children about the depositbecause he felt that it was "none of their business." Until his death severalyears later, he continued to handle the corporation<s banking business,including making deposits and reviewing financial statements. After hisdeath, his children determined that the bank branch manager never made thedeposit but simply converted the cash. The corporation and children thensued the bank for conversion over the loss of the deposit. The trial courtgranted an exception of prescription, and the court of appeal affirmed. CitingMatthews v. Bank One Corp., 25 So. 3d 952 (La. App. 2d Cir. 2009), thecourt held that a conversion action against a bank is subject to a one-yearliberative prescriptive period. Thus, since the claim in this case wasprescribed on its face, the claimant had the burden of proving that the claimhad not prescribed. The court rejected the corporation<s attempt to meet thisburden by relying on the doctrine of contra non valentem, since thecorporation<s officer continued to receive bank statements and should havebeen aware that the deposit was never reflected. The bank did not performany act that would have prevented the corporation from availing itself of thecause of action; rather, by continuing to mail monthly account statements, ittook "proactive measures" which would have allowed the corporation todiscover the missing deposit. The court of appeal noted that insofar as thetrial court may have reached the correct result by applying the bankstatement rule contained in La. R.S. 10:4-406, this was error. Judge Edwardsdissented, believing that the trial court had in fact incorrectly relied on thebank statement rule of Section 4-406, which does not apply to deposits. Asthe creditor in a contractual creditor/debtor relationship with the bank, thedepositor had the right to demand the payment of the amount of the depositat any time. Prescription did not begin to run until the corporation first

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demanded the deposit and the bank refused to pay it, less than one yearbefore suit was filed.

2. Smith v. McGuire Funeral Home, Inc., 46,326 (La. App 2d Cir.6/1/2011); 70 So. 3d 873, writ denied 71 So. 3d 297 (La. 9/30/2011). In aclass action, several funeral home customers brought claims against a funeralhome and numerous banks, alleging that the funeral home sold prepaidfuneral services to the plaintiffs and other putative class members, depositingtheir payments into certificates of deposits with one or more of the banks.Most of the certificates of deposits were styled under the name of the funeralhome followed by either "POD" or "FBO" and the name of the individualwhose prepaid funeral services were being held on deposit. Withoutpresentation of a death certificate as required by La. R.S. 37:861, whichgoverns prepaid funeral services, the banks allowed the funeral home towithdraw the funds, which the funeral home then converted to its own use.The trial court sustained an exception of no right of action filed by one of thebanks, American Bank, since none of the plaintiffs had funds that weredeposited with that bank. The trial court also rendered judgment denying theplaintiffs< motion for class certification, finding that the requirements for aclass action had not been established. The court of appeal upheld the trialcourt's action on the exception of no cause of action against American Bank,since the plaintiffs did not allege a relationship with American Bank andthere was no allegation that their funds were ever deposited with AmericanBank. Though standing to sue a defendant with whom plaintiffs have hadno dealings may exist where the defendant<s conduct is part of a conspiracy,in this case no conspiracy had been alleged among the defendants.

However, the court of appeal reversed the trial court's judgmentdenying class certification. On the numerosity requirement, the court foundthat, even though only 100 potential class members had been alleged atpresent, the numerosity requirement was nonetheless satisfied because thereappeared to be significant challenges to the pursuit of individual claims bythe elderly class members. The commonality requirement was satisfied bythe question of whether the bank defendants were liable to the putative classmembers for having cashed their certificates of deposits without requiring adeath certificate. The typicality requirement was satisfied, even thoughdifferent banks' contracts were involved, since the underlying issue waswhether the defendant banks were required to comply with La. R.S. 37:861.Finally, on the analysis of whether common issues predominate, the courtfound that the predominate issue was whether the banks violated La. R.S.37:861 and can be held liable to the individual plaintiffs on the basis of thatprovision; the purported existence of individual issues concerning the bank'sdiffering contracts, policies and procedures was overstated. In sum, the courtfound that certifying the class would provide a fair and efficient adjudicationof the controversy for both plaintiffs and defendants, "whose vigorousopposition to certification shows that they are up to whatever challenges aclass action poses."

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3. Wood v. Omni Bancshares, Inc., 10-216 (La. App. 5th Cir. 4/26/11); 69So. 3d 475. At the time the plaintiff and her husband contracted a loan fromthe bank, they executed a limited liability company authorization resolutionpermitting either of them to exercise control over their limited liabilitycompany<s deposit account. Upon learning that her husband had executed anew authorization resolution removing her from the account, the plaintifffiled for divorce. Thereafter, the two spouses and the bank officer executedanother authorizing resolution that required the signatures of all three of themfor withdrawals from a newly opened deposit account. According to theplaintiff, there was an oral agreement between her and the bank officer thatall insurance proceeds received from damage to the collateral for the loanwould be deposited into that account alone. Though three insurance checkswere so deposited, two others were instead deposited into an account overwhich the husband had sole signatory authority, allegedly in contraventionof this oral agreement. Upon learning of this, the plaintiff filed breach ofcontract claims against the bank and its officer, who asserted third partydemands against the husband and the limited liability company. After firstdenying the defendants< exception of no cause of action, the trial court latersustained the exception of no cause of action when it learned that at asubsequent hearing the two former spouses had entered into a consentjudgment whereby the plaintiff was paid the enhanced value of the repairedproperty. The court also sustained exceptions of no cause of action filed bythe third party defendants. The court of appeal reversed both rulings.Although the overruling of a peremptory exception is an interlocutory orderthat the trial court may revisit at anytime, notwithstanding the law of the caserule, the trial court in this case erred by considering evidence extraneous tothe allegations made in the petition. The petition alleged the breach of anoral agreement between the bank and the plaintiff and therefore properlystated a cause of action. The bank<s third party demand also stated a causeof action against the third party defendants, since they would be liable forreimbursement of funds that the bank delivered to them in the event theplaintiff prevails in her claims.

E. Donations of bank deposits

Succession of Bella, 2011-0092 (La. App. 4th Cir. 10/12/11); ____ So. 3d ____(not yet released for publication in the permanent law reports). After HurricaneKatrina, a physically disabled woman and her full-time caregiver placed $130,000in joint bank accounts, contributing $100,000 and $30,000 respectively. They agreedto rent a house and live together and to pay their rent and other living expenses outof the joint account. They also agreed that the caregiver would care for the disabledwoman without compensation. Finally, they agreed that upon the death of either ofthem, the remaining funds would go to the survivor. This agreement was made tobenefit the disabled woman, who was substantially younger than the caregiver andwas expected to survive her. A year and a half after this arrangement was made, thedisabled woman died, and the caregiver transferred all of the remaining money to a

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certificate of deposit in her daughter's name at another bank. The disabled woman'suniversal legatee then filed suit to reclaim the money, obtaining a writ ofsequestration directed against the funds at both banks. The trial court found theexistence of a remunerative donation to the extent of $20,000, which was the valueof the services rendered up to the moment of deposit, but otherwise required returnof the funds. The caregiver took only a devolutive appeal from this judgment, butattempted to appeal suspensively a subsequent order of the trial court directing oneof the banks to release funds to satisfy the earlier judgment. The court of appealaffirmed.

In Louisiana, the general rule is that funds deposited into a joint bank accountremain the property of the original owner and form a part of the original owner'sestate at death, absent an authentic act of donation. The right of withdrawal of fundsfrom an account is not paramount to ownership. La. Civ. Code art. 1527 providesthat the rules peculiar to donations inter vivos do not apply to a donation that is madeto compensate for services rendered unless at the time of the donation the value ofthe services is less that two-thirds of the value of the thing donated. In this case, thecourt found that the intended remunerative donation was $20,000, which was theactual value of the services previously performed. Because the values were thesame, the two-thirds requirement of La. Civ. Code art. 1527 was satisfied without therequirement of an authentic act of donation. However, the remaining funds had notbeen validly donated.

The caregiver also argued on appeal that the trial court had erred by notawarding her damages for wrongful seizure under the writ of sequestration andexcessive seizure of her funds, since the legatee had acknowledged that at least$30,000 of the money was hers. Given the facts alleged in support of the writ ofsequestration, particularly that shortly after the decedent<s funeral the caregiver hadunlawfully liquidated the joint accounts and converted the funds for her own use, andthat she had the power to conceal and dispose of them, the trial court had sufficientgrounds to issue the writ of sequestration. Even though the legatee admitted that thecaregiver had deposited $30,000 of her own funds into the joint account, competingclaims to the remaining funds and claims for reimbursement were at issue. Thus, theseizure of all remaining funds was not excessive. Finally, the court held that thepurported suspensive appeal from the later order requiring one of the banks to turnthe funds over to satisfy the original judgment was without effect. If the caregiverhad wanted to prevent the release of the funds while she appealed the originaljudgment, she was required to perfect a suspensive appeal from that judgment, notto appeal suspensively from the subsequent order.

ENROLLED

Page 1 of 2

Regular Session, 2011

HOUSE CONCURRENT RESOLUTION NO. 15

BY REPRESENTATIVE THIBAUT

A CONCURRENT RESOLUTION

To authorize and direct the Louisiana State Law Institute to study all laws relative to

conventional, legal, and judicial mortgages and liens in order to create a purchase

money special mortgage and to make recommendations on or before January 1,

2013, as to the advisability of revising state laws in order to create a purchase money

special mortgage and to resolve any resulting conflicts between the laws relative to

conventional, legal, and judicial mortgages and liens.

WHEREAS, Civil Code Articles 3278 through 3313 and various other provisions of

law, such as those found in Code Titles XXI and XXII of Code Book III of Title 9 of the

Louisiana Revised Statutes of 1950, provide relative to mortgages and liens and to the effect

and rank of mortgages and liens; and

WHEREAS, judicial and legal mortgages burden all of the property of an obligor,

including property that the obligor owns when the mortgage is created and property that the

obligor acquires in the future; and

WHEREAS, judicial and legal mortgages existing at the time an obligor purchases

new property take priority over a mortgage created at the time of the purchase of the new

property; and

WHEREAS, the priority of existing judicial and legal mortgages over mortgages

created with the purchase of new property may prevent the extension of credit for the

purchase of the new property; and

WHEREAS, creation of a purchase money special mortgage would enable a

borrower to purchase immovable property, allowing the lender to have first priority and

giving the judicial or legal mortgage holder a second priority on new property that would not

have otherwise been acquired; and

ENROLLEDHCR NO. 15

Page 2 of 2

WHEREAS, the creation of a purchase money special mortgage may create conflicts

with the existing laws on conventional, legal, and judicial mortgages and liens which may

need to be resolved.

THEREFORE, BE IT RESOLVED that the Legislature of Louisiana does hereby

direct the Louisiana State Law Institute to study all laws relative to conventional, legal, and

judicial mortgages and liens and make specific recommendations as to the advisability of

revising state laws in order to create a purchase money special mortgage.

BE IT FURTHER RESOLVED that a suitable copy of this Resolution be transmitted

to the director of the Louisiana State Law Institute and that the Louisiana State Law Institute

report its findings and recommendations to the legislature on or before January 1, 2013.

SPEAKER OF THE HOUSE OF REPRESENTATIVES

PRESIDENT OF THE SENATE