Louisiana Security Devices Overview

LOUISIANA SECURITY DEVICES
Ally Champagne: Law List Outline + My notes Rubin 2013
LESSON #1: AN INTRODUCTION TO SECURITY DEVICES
Introduction to Security Devices
I. Introduction
a. Concept of security device: Accessory Right; It cannot exist alone, there must be a principal right.
i. A theoretical explication:
1. It is either:
a. Real Right right on a thing; this is a right to seek reimbursement through seizure
and sale of assets pursuant to a security device. Some security devices can attach
only to immovable property; others attach to movable property, and yet others can
attach to both; OR
b. Personal/Credit Right right against a person, The right to sue someone is called a
personal right.
2. Comes into being by:
a. Will volitional act of contract; OR
b. Law automatic privilege
3. Provides Rights: over and above rights normally enjoyed
ii. A practical explication
1. The plight of the unsecured creditor: There is a long process for payment if you are
not a secured creditor and you have no preference or priority
2. The rights of the unsecured creditor
Art. 3182: Debtors general liability Whoever has bound himself personally is obliged to
fulfill his engagements out of all his property, movable and immovable, present and future.
Art. 3183: Debtors property common pledge of creditors; exceptions to pro rata
distribution The property of the debtor is the common pledge of his creditors, and the
proceeds of its sale must be distributed among them ratably, unless there exist among the
creditors some lawful cause of preference.
a. Explication & enumeration thereof: There must be judicial action, which takes
time, and some personal property is exempt.
i. Exemption of seizure for Tools of the Trade (workmans tools)
b. Assessment thereof (a/k/a why these rights leave a lot to be desired):
i. Must share the property pro rata with third parties, so you probably will
not get what you are entitled to.
3. The solution(s) to this plight: Security Device: this give preference/priority and a special
guarantee for payment
a. C.C. Art. 3184. Lawful causes of preference. Lawful causes of preference are
privilege and mortgages.
b. C.C. Art. 3185. Privileges established only by law, stricti juris. Privileges can
be claimed only for those debts to which it is expressly granted in this Code.
c. C.C. Art. 3186. Privilege, definition. Privilege is a right, which the nature of a
debt gives to a creditor, and which entitles him to be preferred before other
creditors, even those who have mortgages.
Louisiana has a cubbyhole approach to privilegesonly certain ones are recognized and they are strictly construed
In analyzing whether a security exists, we are trying to determine whether the right is merely to sue someone to obtain
money, and as a result of the judgment rendered in that suit, seize assets, or (this is where there is a security right) where
there is a direct right to seize and sell either movable or immovable property.
TYPES OF CONTRACT NON- Personal Immovable Movable Immovables

SECURITY CONTRACT Right Only Only & Movables
INTEREST
Surety
Conventional
Mortgage
Legal Mortgage
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Judicial Mortgage
Privilege
UCC 9
Public Works Act
Private Works Act
Tax Liens
II. Classification of security devices

a. Summa divisio: classification according to the nature of that which supplies the security persons v.
things
i. Personal security: security in a person
4. Concept:
Creditor will be entitled to payment from another person, other than the debtor.
a. Instance: suretyship: (aka guarantor): Accessory Right against a person
ii. Real security: security in a thing
5. Concept:
A right that attaches to a thing; the thing may belong to the debtor or third person.
6. Subclassifications
a. Classification according to the nature of the thing in which the security lies
i. Movable security
1. Concept: Holder of the right gets first take from proceeds of the
sale of the thing
ii. Immovable security
1. Concept: Holder of the rights gets first proceeds from the sale
of immovable or personal property.
2. Illustrations: mortgages, certain statutory liens & privileges
b. Classification according to who controls the thing
i. Possessory security
1. Concept: Creditor takes possession of the collateral
2. Illustrations: pawn (now a kind of Article 9 security
interest), antichresis:
ii. Non-possessory security
1. Concept:Debtor may retain possession of the collateral
2. Illustrations: an Article 9 security interests based on a
security agreement , antichresis: E.g.: mortgages
c. Classification according to the source of the security: the will of the parties v.
the law
i. Volitional security
1. Concept: Security created by the voluntary will of the parties
(contract)
2. Illustrations: Article 9 security interests, conventional
mortgages
ii. Legal security
1. Concept:Security that is created by operation of law
2. Illustrations: various so-called statutory liens or privileges,
legal mortgages:
II. Introduction to Suretyship: Personal Security:
a. Concept: Accessory real right that attaches to a person, the surety
i. You expose your entire patrimony by becoming a surety
b. Limitations: Suretyship can be for anything; Receive payment, or to make someone perform a service.
c. Scope (what obligations can be secured by suretyship): Any obligation may be secured by suretyship
d. Formation requirements
i. General contractual formation requirements: Surety is a contract, thus must satisfy all elements
of a contract
1. Civil law elements; Capacity, Cause, Consent, Object
2. Common Law; Consideration
ii. Special formal requirements:
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1.Acceptance is presumed, no expressed requirement for acceptance.

2.Must be in writing (by private act or authentic act)
a. RS 9:2601 & 2607 Uniform Electronic Transmission Act: Electronic signature
may suffice for a law requiring a signature
3. Must be express.
a. Contract needs some language that is reasonably clear that the person meant to be
a surety. Try to use the word surety/suretyship and that you will pay in the
persons place, not make the person pay.
b. Ball Marketing v. Rainbow Tomato Co (1976): Take steps to assure payment by
Rainbow is not enough to be a surety.
iii. Interpretation:Co-obligor as Surety
1. If a party signs as a co-obligor but only intends to be a surety, then he will be treated as a
surety, but the creditor must have clear knowledge that the co-obligor intends to be a
surety.
2. CC Art. 3037. Surety Ostensibly Bound as a Principal with Another; Effect of
Knowledge of the Creditor a) One who ostensibly binds himself as a principal obligor to
satisfy the present or future obligations of another is nonetheless considered a surety if the
principal cause of the contract with the creditor is to guarantee performance of such
obligations. b) A creditor in whose favor a surety and principal obligor are bound together
as principal obligors in solido may presume they are equally concerned in the matter until
he clearly knows of their true relationship.
3. Explication:
a. This is related to the civil law of simulations. In Louisiana, we always treat the
contract as the real transaction, not the apparentwhat is on the face of the
document.
b. So for example, if parent signs on a loan so that kid can buy a car, because the
principal cause of the parent signing is to guarantee the kids payment, the parent
will be treated as a surety. This is true even though the parent signs on a line that
reads debtorwhich otherwise indicates principal obligor. However, the
creditor will have to be aware that the surety was really only signing as a surety.
c. The parties may agree that the parent will assume principal obligor liability, and
then he will not be treated as a surety. Its all a matter of what the parties agreed
to.
III. Classification
C.C. Art. 3035. Definition of Suretyship

Suretyship is an accessory contract by which a person binds himself to a creditor to fulfill the obligation of another upon the
failure of the latter to do so.
C.C. Art. 3036. Obligations for Which Suretyship May Be Established

Suretyship may be established for any lawful obligation, which, with respect to the suretyship, is the principal obligation.
C.C. Art. 3041. Kinds of Suretyship

There are 3 kinds of suretyship: commercial suretyship; legal suretyship; and ordinary suretyship.
C.C. Art. 3043. Legal Suretyship

A legal suretyship is one given pursuant to legislation, administrative act or regulation, or court order.
C.C. Art. 3044. Ordinary Suretyship; Interpretation

An ordinary suretyship is one that is neither a commercial suretyship nor a legal suretyship. An ordinary suretyship must be
strictly construed in favor of the surety.
C.C. Art. 3045. Liability of Sureties to Creditor; Division and Discussion Abolished
A surety or each surety when there is more than one, is liable to the creditor in accordance with the provisions of this Chapter,
for the full performance of the obligation of the principal obligor, without benefit of division or discussion, even in the absence
of an express agreement of solidarity.
This article means that the creditor can go straight after the surety, without suing debtor first.
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C.C. Art. 3046. Defenses Available to Surety

The surety may assert against the creditor any defense to the principal obligation that the principal obligor could assert except
lack of capacity or discharge in bankruptcy of the principal obligor.
C.C. Art. 3066. Legal Suretyship to conform to law.

A legal suretyship is deemed to conform to the requirements of the law or order pursuant to which it is given, except as
provided by article 3067.
a. Ordinary:Non-Commercial Surety This is the Default.

i. Strictly construed in favor of the surety. Other sureties do not get the benefit of such strict
construction. Gratuitous surety agreements are the most strictly construed of the ordinary sureties.
ii. There is no business relationship whatsoever between the parties and debtor and surety are non-
business persons.
b. Commercial:
i. C.C. Art. 3042. Commercial Suretyship: A commercial suretyship is one in which: 1) The surety
is engaged in a surety business; 2) The principal obligor or the surety is a business corporation,
partnership, or other business entity; 3) The principal obligation arises out of a commercial
transaction of the principal obligor; or 4) The suretyship arises out of a commercial transaction of
the surety.
1. Explication of Art. 3042 Suretyship is commercial if:
a. The principle obligation is a business obligation
b. The principle obligor is a business entity OR if the surety itself is a business entity
c. The principle obligation arises out of a commercial transaction of the principal
obligor; OR
d. The suretyship arises out of a commercial transaction of the surety
c. Legal: Suretyship given in conjunction with a legal or administration proceeding. The law sets forth the
requirements. Art. 3066 says you cannot draft around the law to form one.
i. While a legal surety is not allowed either division or discussion, the legal surety has a defense that
the commercial and ordinary sureties do not possess. Commercial and ordinary sureties may be
sued at any time, with or without a prior lawsuit against the debtor. Although a legal surety may be
sued, no judgment may be rendered against it until the creditor obtains a judgment against the
principal obligor. George v. Durpree: HELD: Legal surety cannot sue unless there is a final
judgment against the debtor.
ii. The surety must be a company licensed to do business as a surety entity in Louisiana to be a legal
surety or it must supply an affidavit from both the surety and the debtor that the surety has sufficient
equity in seizable property in the state to satisfy the debt.
IV. Formation
C.C. Art. 3038. Formal Requisites of Suretyship

Suretyship must be express and in writing.
C.C. Art. 1847. Debt of a 3rd Person and Debt Extinguished by Prescription
Parol evidence is inadmissible to establish either a promise to pay the debt of a 3rd person or a promise to pay a debt
extinguished by prescription.
a. Planiol-Traite Elementaire De Droit Civil: Suretyship is

I. Unilateralthe surety alone obligates himself toward the creditor
II. Gratuitous: the creditor (sometimes) furnishes nothing in exchange
III. An accessory contract,
iv. consensual,
v. express.
b. There are at least 3 contracts:
i. ONLY the relationship between the surety and the creditor must be in express and in writing
1. Parole evidence is inadmissible to establish the suretyship, the terms, or the extent. We
must ONLY look at the 4 corners of the document
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1
Creditor Debtor
2 3
Surety
Extent Of Suretyship: Suretyship cannot have another object or one which exceeds the principal obligation. An excessive
suretyship is not null as a whole; it is simply reducible.
c. What Has to Be in Writing For A Valid Suretyship Contract?

i. The Creditor-Surety Relationship
C.C. Art. 3039. Suretyship Requires No Formal Acceptance

Suretyship is established upon receipt by the creditor of the writing evidencing the suretys obligation. The creditors
acceptance is presumed and no notice of acceptance is required.
Art. 3039, the acceptance of a suretyship by a creditor is presumed once an offer is made by the surety.
Queen Insurance Company of America v. Bloomstiel (1936): FACTS: United Companies was the debtor. The Queen
Insurance Company is the surety. Surety is Bloomensteil, who said he did not have to honor suretyship agreement since the
principal (United Companies) did not sign the bond. HELD: Contract 2 (surety and creditor) has to be express and in writing.
The principal obligation does not according to C.C. art. 3039. As long as contract 1(debtor and creditor) is enforceable. An
oral agreement bw the principal and surety may constitute the basis for a valid contract of suretyship. Parol evidence may be
used to establish the relationship bw the debtor and the surety, just not bw the surety and the creditor.
Bond=suretyship K. The underlying K was for United Companies, who sold insurance policies for Queens and the surety was
in case the policies could not sell.
Texas Company v. Couvillon sale to Couvillon of 1,000 gallons of gasoline/30 gallons of motor oil. Thomas (surety) was
not being paid to be a surety; Planiol says "gratuitous" is sufficient. The guaranty said guarantee the payment of the
gasoline, which you delivered as the initial consignment. It will be further understood that the above amount of merchandise is
all that I am responsible for, and only until such a time as Mr. Couvillons name is placed on your credit list. Surety
argues that he was released bc plaintiff-creditor received and accepted payments in excess of the amount due for the initial
delivery of oil/gashe says he sold THAT gas and paid for it, what he owes is for OTHER gas!
Held: Suretyship contract cannot be extended by implication.Where guaranty restricted guarantor's obligation on gasoline and
oil until such time as guarantee would place principal on credit list, guarantee was obligated to determine within reasonable
time whether to extend credit to principal.
Point: we construe suretyship strictly. It is OK to limit it. Look to the 4 corners of the document.
The limitation of being the surety for the initial delivery until debtor was put on the credit list acts as a resolutory condition.
Once the debtor was put on the list, even if he hadnt paid for the initial delivery, the suretyship is extinguished.
Art. 3040. Rules may be varied. Suretyship may be qualified, conditioned, or limited in any lawful manner.
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LIFO - last in, first out: this would have been applied to where the last gas put in, was the first gas sold. The creditor is arguing
that this is what happenedthe initial delivery was put in, then some more in the top of the tank, and what was on top is what
was taken out first. Last widget that went into the barrel is the first widget to come out of the barrel.
FIFO first in, first out. In this case, OBrien thinks the writing implied this was the method contemplated by the parties
because the document limited the guarantee to the initial delivery, which in Profs opinion, implies he thinks initial means it
will be the first sold and paid for. The first widget into the barrel is the first widget out of the barrel.
The default in La. is FIFO unless the parties specify otherwise. Under the Civil Code, you impute the debt to the oldest
obligation unless there is agreement to the contrary. This case is FIFO, Thomas owes the initial consignment.
Notethis is a commercial suretyship because there is a gas station involved
Seashell, Inc. v. Simon: Issue: whether parol evidence may be admitted on behalf of Seashell, Inc., to prove that Simon
verbally agreed to become liable for the debts of Gulf Atlantic.
Gulf Atlantic charged purchase of shells on open account with Seashell, Inc. Gulf Atlantic did not pay and went bankrupt.
Seashell, Inc., alleges that it initially refused to extend credit to Gulf Atlantic but did so after Simon, Gulf Atlantic's president,
agreed to be personally liable for the debts of Gulf Atlantic in the event that Gulf Atlantic failed or refused to pay.
It is undisputed that no written agreement was ever entered into between Seashell, Inc., and Simon. Simon contends that parol
evidence cannot be introduced to prove a promise to pay the debt of a third person; therefore summary judgment was proper
because no written agreement was entered into. Mere pecuniary interest or business motivation on part of promisor is not
sufficient to take oral promise out of general rule that parol evidence may not be used to establish either suretyship or promise
to pay debt of another. Point of this case: NO PAROL EVIDENCE to prove existence or content of suretyship!!!
First Acadiana Bank v. Bollich (1988): FACTS: Attempting to use parol evidence on a continuing guarantee. Dad guarantees
debt of the son. Father thought the surety was limited to a single debt, which son paid. Son incurred other debts and defaulted.
ISSUES: Can parol evidence be used? HELD: Yes. First, there is parol evidence all over this case because the lawyers failed
to object. Had they objected at the proper time, perhaps parol (Dads testimony about his intent) would have never gotten in in
the first place. Second, parol evidence is admissible to prove ERROR, a vice of consent, as opposed to the existence of a
suretyship agreement.
Cosigner's erroneous belief, that when he cosigned note for son he was guaranteeing only a single loan rather than becoming a
continuing guarantor of son's other loans, went to principal cause of contract, and therefore, contract would be reformed to
reflect his intent. Here, there was enough error to vitiate consenthis intent was to guarantee only one loan.
Generally, if you are capable of reading you are presumed to have read what you signed.
Minca v. Kathryn Arnett Studio: Generally parol evidence is inadmissible to establish a promise to pay the debt of a third
person. There is an exception for instances wherein the oral promise to pay is prompted by a pecuniary or business motivation
on the part of the promisor where the promisor, by promising to pay the debt of a third person, assumes a primary obligation,
rather than a collateral or secondary obligation. If the guaranty agreement to pay debt of third person is not made primarily to
answer for another, but is impelled from the pecuniary or business motives of the promisor, then the promise to pay is, in effect,
a new and independent agreement, and parol evidence is admissible to establish the existence of the agreement
Notehow does this comport with Seashell? Prof says this case is an outlier. This is a Code class. Code says no parol to vary
the contents of a suretyship agreement. This is an incorrect decision, it does not accurately reflect parol evidence rule and
pecuniary interest exception.
Pecuniary interest exception: Writing is not required to prove a promise to pay the debt of the third person when the promisor
had material interest in making the promise and has received something in return. Parol evidence can be used in this case
because no writing is required. Requirement that you have to have a promise to be personally bound. Comments reach to
consideration, but Seymour says her pecuniary interest in what she receives in return.
Klein v. Collins: FACTS: The owner entered into a written contract with the contractors to erect an apartment house. The
contractors furnished a bond guaranteed by the surety. When the contractors were unable to complete the building, the surety
took over the contract instead of paying the ownerthinking why should I pay all this money when I can build it cheaper
myself? There were many problems with the building and the owner sued; the judgment rendered was more than the amount
of the bond.
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Issue: can parol be used to prove intent?
Held: surety took the contract over for the purpose of completing the building, it was liable for the cost of completing the
structure and for damages (generally, surety not liable for damages) for the delay in delivering it, without regard to the amount
for which it signed as surety, because it stood in the place of the contractorsthe surety BECAME the principal!! New
obligation and separate contract, core of the pecuniary interest exception.
Had the surety (presumably paid) and left it up to the owner to complete the work, the surety could not have been held liable
for more than the amount it had agreed to be bound for as surety.
As related to any indebtedness contracted prior to the taking over of the contract, the court held that the surety was liable as
surety on the bond.
Its not that parol evidence can never be introduced in a case involving a surety, but that parol evidence cannot be used to prove
a suretyship agreement. In particular, there are very narrow instances where a creditor can use parol evidence.
Notes:
Two Types of Commercial Sureties: 1) Performance Bond-guarantees If he doesnt build, I will. If General Contractor does
not build then the other party will, this does not make the party a surety, it makes the guarantor liable for the principal
obligation and 2) Payment Bond- guarantees if he doesnt pay, I will. If GC doesnt pay the subcontractor, surety will pay the
sub. This is a surety IF it is in writing. If this statement is not in writingthen it is not a surety and is not assuming principal
obligation
Hibernia National Bank v. Contractors Equipment and Supply: Cal Marine loaned big bucks to Contractor's Equipment. To
secure this loan, Contractor's Equipment, Charles Bankens, his wife Marcia Bankens, and his mother Barbara Bankens, each
executed a Continuing Guaranty. The continuing guaranty executed by Barbara Bankens in favor of Cal Marine secured the
principal obligation of Contractor's Equipment up to $1,600,000.00. Later, Barbara Bankens executed a second continuing
guaranty in favor of Cal Marine securing the principal obligation of Contractor's Equipment up to $750,000.00. According to
the agreement, this second continuing guaranty was cumulative with any other guaranty, bringing the total to $2,350,000.00.
Then, Barbara Bankens executed a third continuing guaranty in favor of Cal Marine securing the principal obligation of
Contractor's Equipment up to $2,250,000.00. This final guaranty executed by Barbara Bankens brought the total of the
guaranties executed by her to the amount of $4, 600,000.00. The principal obligation secured by the guaranties was for a term
of five years.
Subsequently, Hibernia National Bank purchased Cal Marine. At the end of the term, a balloon payment was due and Charles
Bankens wanted to refinance the indebtedness now owed to Hibernia and, ultimately did so with Hibernia. Hibernia and
Contractor's Equipment executed a new loan agreement. In the negotiations preceding the loan, Charles Bankens made it clear
he did not want his mother, Barbara Bankens, to be required to execute any continuing guaranties. When the loan was closed,
only Charles and Marcia Bankens signed a new continuing guaranty. Barbara Bankens was told she would not be liable to
Hibernia. After refinancing, Barbara Bankens is not mentioned in any of the banks records or memos pertaining to this loan and
was neither required nor requested to submit copies of her annual income tax returns to Hibernia as she had previously been
required to do. In fact, all notations made by bank employees regarding this loan reflect that Barbara Bankens was to be a
mortgagor only and not a guarantor of the loan.
Later, Contractor's Equipment defaulted on the loan and Hibernia filed suit for executory process, seizing the assets of the
company and those in the collateral mortgage agreement. The suit was then converted to ordinary process and Hibernia pursued
Charles, Marcia, and Barbara Bankens on the continuing guarantees. Court found in favor of Hibernia on the claims against
Contractor's Equipment, Charles and Marcia Bankens. He dismissed the claims against Barbara Bankens. Hibernia appeals that
portion of the judgment dismissing Barbara Bankens.
Refinancing documents demonstrating that debtor who was guarantor on initial loan was not named as guarantor on new loan
agreement were admissible under civil code provision, permitting admission of evidence to prove vice of consent, simulation,
or modification of written agreement by subsequent oral agreement, to prove that initial guaranty of debtor was vitiated by
subsequent agreement. LSA-C.C. art. 1848. Testimonial or other evidence may not be admitted to negate or vary the contents
of an authentic act or an act under private signature. Nevertheless, in the interest of justice, that evidence may be admitted to
prove such circumstances as a vice of consent, or a simulation, or to prove that the written act was modified by a subsequent
and valid oral agreement
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Evidence was sufficient to support finding that debtor who was guarantor on initial secured loan was not guarantor on
refinanced loan; refinancing documents showed that borrower was not named as guarantor on refinancing agreement.
Debtor who did not act as guarantor on secured loan was not personally liable for loan deficiency, after debtor defaulted on
loan, and lender seized collateral and sold it for less than total loan amount; debtor's obligation on loan was in rem in nature,
and thus debtor could not be held personally liable beyond value of collateral.
Cottonport Bank v. Reason: The couple signed a "consumer guaranty" agreement, for the benefit of their son. The couple
argued that a suretyship depends on the principal obligation for its validity. The couple tried to present evidence that they did
not intend to enter the continuing guarantee, but only for their sons debt for his trailer and lot, which had prescribed. They
argued there were not explained to that it was to be a continuing guarantee and that they did not intend to enter one.
Held: had the couple's contracts of guaranty been tied to a particular obligation, they might have won on prescription.
However, their guaranties were not tied to a specific debt but to all "present and future indebtedness," which debts comprised
the principal obligation. Parol evidence was not admissible to prove their intentan alleged oral agreement (the explanation of
what they entered into) may not be allowed to vary the clear and unambiguous terms of the written agreement. Additionally,
failure to read a document before signing it will bar relief for the error.
Pointgenerally, you are stuck with what is in the writing. No parol.
How does this comport with Bollich? Perhaps it was bc the surety in Bollich TOLD the banker he was in a hurry and that he
intended to guarantee only one loan. But, again, note that parol would not have come in on the intent issue had the attorney
properly objected.
Suretyship on a continuing guaranty is ongoing indefinitely until terminated. Until termination, the surety is still on the hook
for any loans made prior. Seymour recommends including termination language in surety agreement; eg. Notice given in
writing by particular manner. Then follow through so you can demonstrate effective termination. Civil code doesnt specify
method of terminating guaranty. The question is whether the creditor knew and understood, was on notice, that you are
terminating the guaranty.
Eclipse v. Telnet: Eclipse filed suit on open account for overdue payments pursuant to a contract for long distance telephone
service. Eclipse added the president of Telnet as defendant arguing he had personally guaranteed the debt of Telnet. After
reviewing the K, the court found that he entered the K on behalf of the company, and not in his individual capacity. There was
nothing in the surety contract to indicate that the telephone company president signed personally or guaranteed the debt and all
of the information given pertains to the corporation. Suretyship is strictly construed and cannot go out of the 4 corners to prove
intent to establish suretyship.
Notes on The Creditor-Surety Relationship
No Parol Evidence Should Be Admissible.
There are 3 instances in which parties may wish to use oral testimony: 1) Where the creditor wishes to delineate the
suretys responsibility; 2) Where the surety wishes to limit liability; 3) Where one surety seeks to clarify his rights as
against another surety.
Parol evidence is inadmissible in a creditor-surety relationship, but is admissible in a surety-surety relationship. There is
NO RULE to allow parol evidence to explain the extent of the suretys engagement, whether the explanation is offered
by the creditor or the debtor.
A written contract is required between the creditor and the surety in order to enforce a suretyship obligation. There is NO
EXCEPTION for the writing requirement.
Sureties are bound solely by virtue of the language of their written contract.
The parties can limit a suretyship agreement. C.C. Art. 3040. Rules May Be Varied: Suretyship may be qualified,
conditioned or limited in any lawful manner. A surety is liable on K2. The limitations must be express.
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Testimonial or other evidence may not be admitted to negate and vary the contents of an act under private signature. The
only exception is to prove error, fraud, or duress. Modification of a surety contract must be in writing.
ii. The Creditor-Debtor RelationshipUse of Parol Evidence
1. Parol May Be Used to Prove A Change In The Principal Obligation
d. What Language is Sufficient for a Contract of Suretyship?
The essence of the writing needs to be If the debtor doesnt pay I will.
Ball Marketing Enterprise v. Rainbow Tomato Company (1976): FACTS: Case involved an open account between Ball
Marketing, as creditor, and Rainbow Tomato as debtor. Ball Marketing sued Plant Industries, the alleged surety, which had
sent a letter to Ball concerning Rainbows debt. Ball claimed that Plant Industries had become a surety for Rainbows debt
through the letter, which provided, This will confirm our understanding with you that Plant Industries will take such steps are
necessary to assure payment to you by Rainbow. HELD: The court found that the language was insufficient to make Plant
Industries a surety for Rainbows debts. Plant was agreeing to encourage Rainbow to pay but did not state that Plant would
pay. The agreement must have the wording indicates that the surety is undertaking a personal obligation to pay. The agreement
must contain an absolute expression of intent to be bound, although there are no technical formalities required. Suretyship is
NOT presumed, although acceptance is.
Goal of suretyship is to get the surety to say he will pay for the debtors obligation if he does not pay. 3 magic
words/phrases: guarantee, suretyship, or "if he doesn't pay, I will."
The problem with the letter is that it doesnt expose the patrimony of the surety.
Blair Rubber Company, Inc. v Altra Coatings Technology, Inc. (1991): Letter sent by alleged surety said It is my
understanding that Altra will be purchasingin the near future. I am willing to personally guarantee the account of Altraup
to the amount of $50K.Alleged surety argues his had not made an explicit and precise promise to pay if Altra did not. HELD:
Contract of guaranty is equivalent to K of suretyship. Suretyship was established. The letter was a writing and acceptance by
the creditor is presumed; no formal notice of acceptance being required. The letter does not suggest any reservation, condition
or limit except for the $50k amount. A continuing guaranty agreement need not observe technical formalities, but must
embody an absolute expression of an intent to be bound. Here, the letter, in itself, clearly and unequivocally expressed the
intent to be bound personally for a (near) future debt.
American Bank and Trust v. Boggs and Thompson: Boggs represented the Washburns who were indebted to AB & T. In
connection with that indebtedness, AB & T had instituted foreclosure proceedings against the Washburns upon their default. In
response to the foreclosure lawsuit, Boggs wrote AB & T a letter which stated that Boggs and Thompson represented the
Washburns in some pending litigation and that:
Please allow this letter to serve as confirmation that in the event any funds are obtained regarding this litigation in the
form of settlement and/or judgment, that your institution will be satisfied regarding any outstanding loans with Denise and/or
Tommy Washburn....
After AB & T received the letter, the rep met with the Washburns informing them that he would not forebear on the
bank's foreclosure suit and would proceed to judgment; however, he agreed that AB & T would not execute any judgment
obtained pending the outcome of the litigation. In return, the Washburns agreed to make interim payments, which they initially
did, but stopped. AB & T then proceeded executing the judgment against them. Subsequently, the first litigation settled, from
which the Washburns received proceeds-none of which were paid to AB & T in satisfaction of the Washburns' debt.
AB & T filed a breach of contract lawsuit against Boggs, claiming that Boggs defaulted and/or breached an obligation created
in the letter.
Generally, parol evidence is not admissible to prove the suretyship or its terms. However, the plaintiff DID NOT object, so it
came in. In the parol testimony, the bank rep SAID he never believed that the lawyers intended to be personally bound. Point
if you dont object, parol is in!! It is up to the lawyers to object to its use.
Held: Letter by attorney that stated promise of payment from proceeds of another litigation was not a suretyship, where nothing
in letter indicated attorney's express intent to be personally bound if debtor failed to pay creditor out of litigation proceeds, and
intent could not be presumed. The promise originates from a settlement, not from the lawyers own patrimony.
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e. Personal Obligations in Contracts: Is there language that is sufficient to limit the suretyship to in rem
liability or must suretyship always be a personal obligation
Shell Offshore, Inc. v. M.H. Marr (1990): FACTS: Debtor argues that liability to the debtor was in rem, and he has no
personal liability bc of provision in the K that said shall pay back to Shell from the proceeds ofworking interest [in the
wells]. Debtor argues this was the exclusive method of satisfying the debt. AC held that the agreement failed to negate
personal responsibility for repayment of the loan. The provision that purportedly negated personal liability did nothing more
than tie in the collateral arrangement with the primary method and timing for repayment (which was personal).
HELD: The provision, read in pari materia w/all provisions of the K, simply fails to negate personal responsibility for
repayment of the loan.
Point: Generally, the Civil Code contemplates that the obligor is always personally boundso there is a presumption of
personal liability. However, in rem obligations CAN be contracted for. But, bc it is in derogation of the Codes contemplation
of personal responsibility, only express and unambiguous provisions will be sufficient to limit the personal liability of the
debtor. This also works for suretiesthe surety can limit his obligation to pay to in rem and does not have to be personally
bound but it MUST be clear. This case is just to demonstrate that a surety can limit the extent of his liability in any lawful
mannersince a principal debtor can limit his personal liability, so can a surety.
HELD: It is an in personam obligation for the agreement, read in its entirety, simply fails to negate personal responsibility for
repayment of the loan. Unless you have added language of restriction to your contract, most contracts begin with the
presumption of personal liability. The language in this case is that you will get your money from somewhere else, not from my
patrimony; therefore, not a surety.
To be a surety, you have to express your patrimony express and in writing. If you are the debtor, it is presumed that the
debt is personal.
f. When Does Suretyship Terminate? What language is sufficient to terminate a suretyship
C.C. Art. 1892. Remission of debt granted to the principal obligor releases the sureties.
Remission of debt granted to the sureties does not release the principal obligor.
Remission of debt granted to one surety releases the other sureties only to the extent of the contribution the other sureties might
have recovered from the surety to whom the remission was granted.
If the obligee grants a remission of debt to a surety in return for an advantage, that advantage will be imputed to the debt,
unless the surety and the obligee agree otherwise.
C.C. Art. 3058. Extinction of the Suretyship

The obligations of a surety are extinguished by the different manners in which conventional obligations are extinguished,
subject to the following modifications.
C.C. Art. 3059. Extinction of Principal Obligation

The extinction of the principal obligation extinguishes the suretyship.
C.C. Art. 3060. Prescription Of The Principal Obligation Extinguishes The Obligation Of The Surety Prescription of the
principal obligation extinguishes the obligation of the surety. A suretys action for contribution from his co-sureties and his
action for reimbursement from the principal obligor prescribe in ten years. The interruption of prescription against a surety is
effective against the principal obligor and other sureties only when such parties have mutally agreed to be bound together with
the surety against whom prescription was interrupted.
C.C. Art. 3061. Termination of Suretyship

A surety may terminate the suretyship by notice to the creditor. The termination does not affect the suretys liability for
obligations incurred by the principal obligor, or obligations the creditor is bound to permit the principal obligor (i.e.
construction contract) to incur at the time the notice is received, nor may it prejudice the creditor or principal obligor who has
changed his position in reliance on the surety. Knowledge of the death of a surety has the same effect on a creditor as would a
notice of termination received from the surety. A termination resulting from notice of the suretys death does not affect a
universal successor of the surety who thereafter unequivocally confirms his willingness to continue to be bound thereby. The
confirmation need not be in writing to be enforceable.
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C. C.Art. 3062. Effect of modifications of principal obligation

The modification or amendment of the principal obligation, or the impairment of real security held for it, by the creditor, in any
material manner and without the consent of the surety, has the following effects.
An ordinary suretyship is extinguished.
A commercial suretyship is extinguished to the extent the surety is prejudiced by the action of the creditor, unless the principal
obligation is one other than for the payment of money, and the surety should have contemplated that the creditor might take
such action in the ordinary course of performance of the obligation. The creditor has the burden of proving that the surety has
not been prejudiced or that the extent of the prejudice is less than the full amount of the surety's obligation.
i. The end (extinction & termination)

i. Extinction. Art. 3059
1. Accessorium non ducit sed sequitur suum principale
a. General principle: the end of the principal obligation is the end of the suretyship,
the accessory follows the principle
b. Particular applications
i. Prescription: not technically a mode of extinction, but kills the right to
bring suit against the obligation, which has the same effect as extinction.
Art. 3060
ii. Remission: Art. 1892 - Remission of debt allows that particular surety off
for his portion, and co-sureties are not responsible for that portion.
1. Of principal obligor: If the creditor remits the principle, then the
suretyship vanishes. (Accessory follows principle)
2. Of one of multiple sureties: Follow rules of solidarity- Sureties
will get a credit towards the obligation equal to the virale share
of the remitted obligor.
a. WDK if this can be waived Trahan thinks Yes,
because this is a rule of private order.
iii. Novation of the principal obligation: If the principle obligation is novated
then the surety is released. Novation is a modification, and if the
obligation is modified the surety is released.
iv. Occurrence of a condition
v. Confusion
2. Modification of the principal obligation. Art. 3062
a. Application:
i. Ordinary Suretyship: A modification or amendment to the obligation
without the consent of the surety kills the suretyship, it is extinguished
1. Ordinary sureties not only get the benefit of a strict reading of
their contract in their favor, they get out when alterations occur
in the principal obligation between the debtor and creditor. If
without consent of the surety, the principal obligation is
materially modified or amended then the ordinary suretyship is
completely extinguished.
2. The parties may contract to be bound despite a modification.
a. Most suretyship agreements contain clauses in which
the surety consents, to (1) a modification or alteration
of the principal obligation in any form or not; (2) an
extension of time of the principal obligation; (3) a
change in interest rate or payment terms of the
principal obligation; (4) a complete or partial release of
any real or personal security held by the creditor now
or in the future.
ii. Commerical Suretyship: A modification or amendment only kills the
suretyship to the extent it prejudices the commercial surety (i.e.
extension on debt that accrues interest more interest money is
prejudicial), it extinguishes it in the amount of prejudice
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1. Modification extinguishes to the extent of prejudice unless the

principal obligation is one other than for payment of money and
the surety would have contemplated that the creditor might take
such action in the ordinary course of the performance of the
obligation.
a. In terms of impairment of security, commercial sureties
are releases only to the extent of impairment, regarless
of whether the surety would have contemplated the
impairment
2. The creditor has the burden of proof.
b. Generally
i. Only modifications short of novation are contemplated.
ii. Examples
1. Extension of a suspensive term
2. Increase in the interest rate on the obligation
iii. The only modification that will exterminate the suretyship, regardless of
the type, is a material modification.
iv. Materiality depends on the circumstances.
1. Magnitude of the change in interest rate or term
a. An extension of time might help the surety because the
debt will not be due as soon, so the debtor would not be
in default as early
b. An extension of time might hurt the surety because at
the present time the debtor has sufficient assets, but the
debtor is depleting them, and if the debtor is not
required to pay until later on, the debtor might not have
sufficient assets and the surety might be called upon to
pay
c. Note, WDK but materiality probably does not mean
prejudice to the creditor (because this is a different
inquiry if the suretyship is commercial).
2. Material probably means significant.
3. No change in the manner or method of payment, the timing of
payment, no release of any security shall have an impact on my
liability as surety. This serves as a waiver of modification.
v. However, if the suretyship is commercial there is an additional
requirement: the surety must be prejudiced by the modification. The
suretyship is then extinguished only to the extent of the prejudice.
1. Prejudice: WDK, but probably dollar-for-dollar harm.
2. If debtor oversecured and the creditor modifies the agreement,
then the surety has probably not been prejudiced
3. Hypos
a. If the paying surety goes to get payment from the
debtor, and the debtor complies, the surety has not been
prejudiced by the creditors change of the principal
obligation. So there will be no extinguishment of the
suretyship.
b. If the extension of time does not harm the suretythe
debtor is just as insolvent as he was before the
modificationthere has been no prejudice to the
surety, and the suretyship is not extinguished.
3. Impairment of real security for the principal obligation. Art 3062
a. Concept: the principal obligation is not only secured by the suretyship agreement,
but also by real security provided by the principal obligor
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i. This prong of the article only comes into play if (a) there was real
security for the principal debt and (b) it was impairedan interference
with the suretys ability to assert those real security rights through
subrogation. Then, and only then, is the suretyship extinguished.
b. Examples of impairment
i. Release of the real security (e.g., creditor releases the debtor from the
mortgage)
ii. Creditor causes the real security to lapse (e.g., the creditor fails to file a
notice of reinscription of the mortgage or continuation statement of the
Article 9 security interest and the mortgage/device lapses, which impairs
the suretys ability to assert security rights bc the surety is merely
subrogated to the creditors rights should he pay the debtthe creditor
will not HAVE the rights if he fails to take the appropriate steps)
c. Effects: Same rules as for modification of the principal obligation
(extinguishment of ordinary suretyship, and extinguishment of commercial
suretyship to the extent the surety is prejudiced by the impairment of real
security).
d. Notes: (1) if the surety is very wealthy this impairment may not prejudice, (2) No
rule, but it is believed this can be waived
ii. Termination (Art. 3061)
1. Rule: upon notice to the creditor, for a continuing guaranty.
2. Non-traditional principal obligations may exist: securing a revolving line of credit (a
continuing guaranty). This is the only kind of suretyship addressed by 3061:
3. At any point in time, the surety may back out of the continuing guaranty. This doesnt
mean the surety can back out of securing obligations that have already been incurred or
will be incurred by contract (ex: construction contract) by the debtor, but it does mean that
the surety can, upon notice to the creditor, terminate the responsibility for securing future
principal obligations of the debtor that have not yet been incurred.
Custom-bilt Cabinet v. Quality Built: Quality Built Cabinets, Inc. frequently purchased supplies and materials from Custom-
Bilt Cabinet on open account. Peters and Hattaway (owners of Quality Built) executed a continuing guaranty to Custom-Bilt to
secure payment for the purchases. In 1996, Peters thought his family would be required to relocate, so he sold his interest in the
company to Hattaway. However, Peters did not leave the state and opened his own personal account at Custom-Bilt to purchase
materials. He did not resume his co-owner relationship with Hattaway. Later, Quality Built fell into arrears in payment of its
debt to Custom-Bilt. Custom-Bilt filed suit on open account against Quality Built and Hattaway and Peters, personally, by
virtue of the continuing guaranty, contending that Quality Built purchased materials and failed to pay.
Peters first argued that the language, due by me, does not create a personal liability (suretyship) for the debt of the company;
he says it only creates liability for his personal debt to Custom-bilt.
Peters also argued that he was not liable on the continuing guaranty bc Hattaway purchased his share of Quality Built, alleging
that after the sale, he worked on his own and not with Hattaway. According to Peters, at the time he sold his interest in Quality
Built to Hattaway, he contacted Custom-Bilt and learned that the credit balance for Quality Built was zero. He also alleged that
he told those working in the financial department of Custom-Bilt that he was no longer responsible for any debts owed by
Quality Built. Peters claimed that his responsibility on the continuing guaranty was canceled by the sale of his interest in
Quality Built to Hattaway.
Court first finds that there was a guarantee for the debt of the company. They looked at the language of the Kdue by me,
along with language saying the undersigned does hereby individually and personally guaranteethe payment of such sums
now owing or anytime due by me to [Custom-bilt] whether individually, partnership, or corporation is more than enough
to create the K of suretyship. Parol evidence is inadmissible and we look only to the 4 corners; here, the 4 corners SAID due by
Peters of ANY debts of Peters himself, or the partnership/corp.
The court found that there was no clear and unequivocal showing that the continuing guaranty had been revoked.
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Notes:
In the case of termination of the suretyship, notification that the suretyship is being terminated is necessary. First, it provides a
point of reference from which one can determine what obligations the surety has incurred. Second, it places the creditor on
notice that the surety will no longer be bound for future obligations of the principal debtor. This allows the creditor to make an
informed decision as to whether he will continue to extend funds to the principal debtor.
It is the responsibility of the guarantor to cancel the guaranty agreement, and further, to prove the cancellation.
Felix Bonura v. Christiana Bros. Poultry of Gretna, Inc. (1976): Language of This guaranty shall continue in full force and
effect until such time as you shall receive from us, Written notice of revocation, means that verbal notice of revocation of
continuing guarantee is not sufficient. Surety tried to argue that, if the parties had intended that written notice was the only way
to terminate the guaranty, then they would have put the words written notice only in the K. Court says no way to this
argument
Point: if you put in your K that indicates written notice of termination is requiredthat is what you will be stuck with!!!
g. Effects of Suretyship
i. Effects Generally
1. Relational between the surety and the obligee (creditor)
a. Nature and extent of suretys liability: depends on the language
b. When does surety have to perform, and how much to pay? Surety promises to
pay unconditionally if the debtor defaults;
Solidary Obligors (Principal and Surety)
c. Defenses:Surety may assert:
i. Any traditional Contract defense
ii. Any defense the debtor may assert
d. Special Defenses: Surety may assert:
i. Error of the surety agreement
ii. CANNOT assert incapacity or discharge in bankruptcy of the principal
obligor
iii. Surety may WAIVE the right to raise defenses of the principal obligor
2. Relations between the surety and the principle obligor
a. Suretys right of reimbursement
i. Concept: If the surety performs, he can get reimbursement from the
principal obligor (Indemnity).
ii. Prerequisites:
1. Principal obligation must be due and exigible
2. Any term must have been satisfied before due to be allowed to
claim reimbursement
3. If a payment is made for a thing not due, then the surety has a
claim against the creditor
iii. Limitations: If the debtor has a defense to the debt and it wasnt
asserted, and the debt by the surety, he can still get reimbursement.
1. Surety must: 1) Be in Good Faith 2) Notify the principal obligor
that creditor was demanding payment or he must have known
the creditor was making the surety pay
2. Point: Always notify the principal obligor before you pay!
b. Suretys right to subrogation
i. Concept:When the surety performs he is subrogated by law to the
creditors rights against the principle obligor
ii. Extent of subrogation: Beyond the right to be paid, you get creditors
accessory rights; such as accessory real rights in property
1. This occurs dollar-for-dollar as to how much of the debt the
surety pays
2. PRIORITY Of Partial Subrogation in a situation of partial
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subrogation the creditor has preference over the

paying/subrogated surety.
3. Remember the surety should notify the obligor before he pays
because if the debt is not yet due, has been extinguished, or is
subject to a defense and the surety pays, then he is NOT
subrogated.
iii. When the surety pays, he is subrogated to the creditors rights against the
debtor
1. How is this different from the suretys right of reimbursement
from the debtor? There is subrogation to all of the creditors
rights against the debtor. Therefore, if the debtors obligation
was secured by a mortgage, the surety is subrogated to the
creditors accessory right in the mortgage.
2. Also, if creditor and debtor had agreed that the creditor would
get attorney fees and additional interest if the creditor had to sue
the debtor; the surety is subrogated to these rights against the
debtor.
i. The latter example is stated directly in 3052:
The surety may recover by subrogation such
attorneys fees and interest as are owed with
respect to the principal obligation.
iv. If the surety doesnt pay the entire debt, he only gets subrogated for as
much as he paid. He cant obtain more from the debtor than what he paid
the creditor.
1. Additionally, if the surety doesnt pay the entire debt, the
creditor has priority in recovering from the debtor.
2. For example, surety pays 75k out of 100k principal obligation.
So creditor still is owed 25k from the debtor. Say that the
debtor only has one asset worth 10k. The law of subrogation
(Art. 1826) says that the original creditor has a preference.
Therefore, the creditor has the preference to get the remaining
10k that the creditor is owed. Therefore, the suretys right of
subrogation to the creditors right, in the amount of 75k, will go
unsatisfied in this scenario.
v. Limitation
1. This applies to both collection rights (reimbursement &
subrogation)
2. 3051 If the surety paid and did not notify the debtor that he paid,
and the debtor then pays, the surety gets neither reimbursement
nor subrogation.
3. The surety would have an unjust enrichment action against the
creditor (who got paid twice).
c. Right to demand security: Surety may demand security, before making payment,
from the obligor to guarantee reimbursement
i. Art. 3053: A surety, before making payment, may demand security from
the principal obligor to guarantee his reimbursement when:(1) The surety
is sued by the creditor; (2) The principal obligor is insolvent, unless the
principal obligation is such that its performance does not require his
solvency; (3) The principal obligor fails to perform an act promised in
return for the suretyship; or (4) The principal obligation is due or would
be due but for an extension of its term not consented to by the surety. The
principal obligor may refuse to give security if the principal obligation is
extinguished or if he has a defense against it
ii. Art. 3054. If, within ten days after the delivery of a written demand for
the security, the principal obligor fails to provide the required security or
fails to secure the discharge of the surety, the surety has an action to
require the principal obligor to deposit into the registry of the court
funds sufficient to satisfy the surety's obligation to the creditor as a
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pledge for the principal obligor's duty to reimburse the surety

1. Explication: Before he pays surety can sue the principal obligor
for security if he does not respond to the demand. Practically
speaking, Prof says it isnt very useful. If the surety is being
sued, it is bc the principal obligor hasnt paid his debt. If he
hasnt paid his debt, he probably doesnt have anything to put up
as security.
3. Relations among sureties (Co-Sureties)
a. Division of responsibilities:
Solidary obligors: (all on the hook for the entire debt)
b. Right to contribution
i. In general:Co-sureties are only liable for virale share.
ii. Where one surety pays part but obtains a release for all
1. Art. 3057: A surety who pays the creditor more than his share
may recover the excess from his co-sureties in proportion to the
amount of the obligation each is to bear as to him. If a surety
obtains the conventional discharge of other co-sureties by
paying the creditor, any reduction in the amount owed by those
released benefits them proportionately.
2. Explication: A surety who pays the creditor more than his share
may recover the excess from his co-sureties in proportion to the
amount of the obligation each is to bear as to him. Any
reduction benefits the sureties proportionally.
ii. Effects Articles
LESSON #2: THE EFFECTS OF SURETYSHIP: SUBROGATION AND INDEMNITY: COMPARING SURETYSHIP
WITH THE COMMERCIAL LAW SURETYSHIP & SOLIDARY OBLIGATIONS
C.C. Art. 1825. Subrogation Definition

Subrogation is the substitution of one person to the rights of another. It may be conventional or legal.
C.C. Art. 1826. Effects

When subrogation results from a persons performance of the obligation of another, that obligation subsists in favor of the
person who performed it who may avail himself of the action and security of the original obligee against the obligor, but is
extinguished for the original obligee.
An original obligee who has been paid only in part may exercise his right for the balance of the debt in preference to the new
obligee.
C.C. Art. 1827. Conventional subrogation by the obligee

An obligee who receives performance from a 3rd person may subrogate that person to the rights of the obligee, even without
the obligors consent. That subrogation is subject to the rules governing the assignment of rights.
Art. 1828. Conventional subrogation by the obligor

An obligor who pays a debt with money or other fungible things borrowed for that purpose may subrogate the lender to the
rights of the obligee, even without the obligee's consent.
The agreement for subrogation must be made in writing expressing that the purpose of the loan is to pay the debt.
Art. 1829. Subrogation by operation of law.

Subrogation takes place by operation of law:
(1) In favor of an obligee who pays another obligee whose right is preferred to his because of a privilege, pledge, mortgage, or
security interest;
(2) In favor of a purchaser of movable or immovable property who uses the purchase money to pay creditors holding any
privilege, pledge, mortgage, or security interest on the property;
(3) In favor of an obligor who pays a debt he owes with others or for others and who has recourse against those others as a
result of the payment;
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(4) In favor of a successor who pays estate debts with his own funds; and
(5) In the other cases provided by law.
Art. 1830. Effects of legal subrogation

When subrogation takes place by operation of law, the new obligee may recover from the obligor only to the extent of the
performance rendered to the original obligee. The new obligee may not recover more by invoking conventional subrogation.
C.C. Art. 3047. Rights of the Surety

A surety has the right of subrogation, the right of reimbursement, and the right to require security from the principal obligor.
C.C. Art. 3048. Suretys right of Subrogation.

The surety who pays the principal obligation is subrogated by operation of law to the rights of the creditor.
C.C. Art. 3049. Surety's right of reimbursement for payment of obligation

A surety who pays the creditor is entitled to reimbursement from the principal obligor. He may not recover reimbursement until
the principal obligation is due and exigible.
A surety for multiple solidary obligors may recover from any of them reimbursement of the whole amount he has paid the
creditor.
Art. 3050. Surety's right of reimbursement for payment of obligation not owed
A surety who in good faith pays the creditor when the principal obligation is extinguished, or when the principal obligor had
the means of defeating it, is nevertheless entitled to reimbursement from the principal obligor if the surety made a reasonable
effort to notify the principal obligor that the creditor was insisting on payment or if the principal obligor was apprised that the
creditor was insisting on payment.
The surety's rights against the creditor are not thereby excluded.
Art. 3051. Payment by debtor without notice of payment by surety

A surety may not recover from the principal obligor, by way of subrogation or reimbursement, the amount paid the creditor if
the principal obligor also pays the creditor for want of being warned by the surety of the previous payment.
In these circumstances, the surety may recover from the creditor.
Art. 3052. Limitation on right of surety to recover what he paid creditor

A surety may not recover from the principal obligor more than he paid to secure a discharge, but he may recover by
subrogation such attorney's fees and interest as are owed with respect to the principal obligation
The exception clause of this Article is new but is consistent with the principle upon which the jurisprudence was based--that a
surety should not profit by his contract at the expense of the debtor. Interest owed on monies paid by the surety and attorney's
fees incurred from the failure of the debtor to reimburse the surety are not excluded by the principle referred to. The courts
have also recognized a distinction between the surety's right to recover by way of subrogation and reimbursement. See Harrell,
Developments in the Law, 1982-1983, 44 La.L.Rev. 535 (1983). The action for reimbursement, being an independent
personal action, is subject to the usual rule that attorney's fees are not recoverable in the absence of a contract. The surety who
proceeds against the principal obligor by way of subrogation is entitled to the same rights the creditor could exercise, including
the creditor's right to collect attorney's fee and interest.
Art. 3053. Surety's right to require security

A surety, before making payment, may demand security from the principal obligor to guarantee his reimbursement when:
(1) The surety is sued by the creditor;
(2) The principal obligor is insolvent, unless the principal obligation is such that its performance does not require his solvency;
(3) The principal obligor fails to perform an act promised in return for the suretyship; or
(4) The principal obligation is due or would be due but for an extension of its term not consented to by the surety.
The principal obligor may refuse to give security if the principal obligation is extinguished or if he has a defense against it.
Art. 3054. Failure to provide security

If, within ten days after the delivery of a written demand for the security, the principal obligor fails to provide the required
security or fails to secure the discharge of the surety, the surety has an action to require the principal obligor to deposit into the
registry of the court funds sufficient to satisfy the surety's obligation to the creditor as a pledge for the principal obligor's duty
to reimburse the surety.
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Art. 3055. Liability among co-sureties

Co-sureties are those who are sureties for the same obligation of the same obligor. They are presumed to share the burden of
the principal obligation in proportion to their number unless the parties agreed otherwise or contemplated that he who bound
himself first would bear the entire burden of the obligation regardless of others who thereafter bind themselves independently
of and in reliance upon the obligation of the former
Art. 3056. Right of contribution among co-sureties

A surety who pays the creditor may proceed directly or by way of subrogation to recover from his co-sureties the share of the
principal obligation each is to bear. If a co-surety becomes insolvent, his share is to be borne by those who would have borne it
in his absence.
Art. 3057. Limitation upon right of contribution

A surety who pays the creditor more than his share may recover the excess from his co-sureties in proportion to the amount of
the obligation each is to bear as to him. If a surety obtains the conventional discharge of other co-sureties by paying the
creditor, any reduction in the amount owed by those released benefits them proportionately.
C.C. Art. 3503. Solidary obligors

When prescription is interrupted against a solidary obligor, the interruption is effective against all solidary obligors and their
successors. When prescription is interrupted against a successor of a solidary obligor, the interruption is effective against other
successors if the obligation is indivisible. If the obligation is divisible, the interruption is effective against other successors
only for the portions for which they are bound.
C.C. Art. 3504. Surety

When prescription is interrupted against the principal debtor, the interruption is effective against his surety.
C.C.P. Art. 921. Exception defined

An exception is a means of defense, other than a denial or avoidance of the demand, used by the defendant, whether in the
principal or an incidental action, to retard, dismiss, or defeat the demand brought against him.
C.C.P. Art. 922. Kinds of exceptions

Three exceptions and no others shall be allowed: the declinatory exception, the dilatory exception, and the peremptory
exception.
C.C.P Art. 923. Functions of exceptions

The function of the declinatory exception is to decline the jurisdiction of the court, while the dilatory exception merely retards
the progress of the action, but neither exception tends to defeat the action. The function of the peremptory exception is to have
the plaintiff's action declared legally nonexistent, or barred by effect of law, and hence this exception tends to dismiss or defeat
the action.
Construing the Suretyship Agreement
Distinction Between Solidary Obligors and Sureties

Two Rights Available Under the Prior Law
1) Divisionlooks at the relationship among the sureties and was a way to divide the rights among the sureties compelling
creditors to division. It was an affirmative defense.
2) Discussionright of surety to compel the creditor to look at the debtors assets and sue him first.
Division and discussion were often waived by binding the surety solidarily with the creditor. Thus which rules apply:
solidary obligations or suretyship rules or UCC 3.
Is the law different today? If there is a problem could I have contractually worked my way around it?
First National Bank of Jefferson Parish v. Dazat (1995): Bank made loan to firm and shareholders personally. One of the
shareholders doesnt pay his personal loans. The WRITTEN document says the shareholders personally guarantee ALL
indebtednesson their face, the guarantees did not restrict guarantees to the shareholder loans, nor did you guys terminate the
sureties after the business loans were paid off, so since there were no limits, IN THE DOCUMENT then it is unlimited
guarantee. Also, since there were 5 sureties, they are each bound for 1/5. Also notethere was parol evidence admitted on the
question of bank bad faith. Pointthere is NO parol evidence to prove the creditor/surety relationship or anything about it
(limits, etc), but it CAN and IS admitted for other purposesmaybe to prove debtor/surety relationship. Also, sometimes, parol
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evidence is admitted on the issue of the surety but that is bc the lawyer DID NOT object. HELD: The intent has to be on the
language of the contract itself. The language of the suretyship has to be clear on the four corners of the document.
Bickham v. Womack (1935): FACTS: State entered K w/Kershaw to build a highway. Kershaw gave a bond w/ Union as
surety. Kershaw gave the K to Womack, who gave a bond w/Globe as the surety. Surety guarantees to the state that it will get a
K free and clear of sub-contractor liens, meaning that if the general contractor does not pay the subs, the subs go against the
surety instead of the state. The state had promised to pay the general K w/cash, but then changed it to a script (an IOUit was
great depressionthe state had no money, so they said thank you for building the job, I have no money, here is an iou, come
back in a few years and maybe we can pay. In fact, the state never has to pay w/out appropriating the money) so the general did
not get paid (only got an iou) so he didnt pay his subs. When they sue, the surety argues that changing the method and media
of payment was a change that relieved the surety.
La. C. C. 3062. The modification or amendment of the principal obligation, or the impairment of real security held for it, by
the creditor, in any material manner and without the consent of the surety, has the following effects.
An ordinary suretyship is extinguished.
A commercial suretyship is extinguished to the extent the surety is prejudiced by the action of the creditor, unless the principal
obligation is one other than for the payment of money, and the surety should have contemplated that the creditor might take
such action in the ordinary course of performance of the obligation. The creditor has the burden of proving that the surety has
not been prejudiced or that the extent of the prejudice is less than the full amount of the surety's obligation
NOunder 3062, if there is a modification and it is an ordinary suretyship, then the suretyship is extinguished. But this was a
commercial suretyship and under same article, the commercial surety (surety was getting paid by state to guarantee) is released
ONLY to the extent of their impairmentand there was none here.
This was decided before 3062. But, Prof says this was a results oriented decisionit was great depression and if subs dont get
paid, they cant feed their families, so court made this decision to make sure they could feed their family. It was an earlier
acknowledgment that a paid surety does not get the same relief as an unpaid surety. The court says, The very reason for the
existence of this kind of corporations [is that it is their] business to take risks and expect losses. If, with their superior means
and facilities, they are to be permitted to take the risks, but avoid the losses, by the rule of strictissimi juris, we may expect the
courts to be constantly engaged in hearing their technical objections to contracts prepared by themselves. It is right, therefore,
to say to them that they must show injury done to them before they can ask to be relieved from contracts which they clamor to
execute. Here, they let parol in on the change in the method of payment, but it isnt enough of a change to relieve the surety.
They didnt suffer any prejudice.
Parol evidence is permissible in three other instances: 1) in the creditor-debtor relationship; 2) the surety-surety
relationship; and in the 3) surety-debtor relationship.
Creditor-debtor relationship need not be in writing.
Gates v. Renfroe (1852)
LESSON 3. SURETYSHIP AND THE RELATIONSHIP AMONG SURETIES

The Suretys Rights
iii. The Right of Reimbursement: the right of the surety to collect from the debtor if the debtor had
prior notice of payment and did not object is through an action for reimbursement.
1. A surety who pays the creditor without asking the debtor about legal enforceability of the
debt proceeds at his peril in subrogation, because the surety may find that when it comes
time to sue the debtor, the debtor has a valid defense to the debt. The surety is allowed the
right to collect from the debtor, despite the existence of a defense to the principal
obligation, if the debtor knew of the forthcoming payment and did not advise the surety of
the defense.
2. When such actions are taken and the debtor does not act to notify the surety of a valid
defense to the principal obligation, the surety who pays may collect from the debtor
although the debtor might have had a valid defense against the creditor.
3. The surety-debtor relationship is sometimes evidenced by a written act. Otherwise, the
relationship is controlled by operation of law.
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4.If the surety pays the creditor without notifying the debtor, and if the debtor has a defense,
then the surety may not obtain payment from the debtor, but the surety is not without
recourse. If the debtor has a defense, the surety should not pay.
5. If the surety pays the creditor and the debtor has a defense, the surety can go after the
creditorActio De In Rem Verso or Unjust Enrichment. Minyard v. Edmonson. There are
five requirements.
6. Right of reimbursement on contract 3. Art. 3053 allows them to demand guarantees before
making reimbursement.
iv. The Right to Subrogation (and Contribution from Co-sureties)
1. Surety must have paid something to get subrogation.
2. As among sureties, sureties have the right of contribution which is a subcategory of
subrogation. There are two limitations: 1) PAYMENT must be made; 2) Only get
contribution if you paid more than you virile share.
3. Surety only gets contribution if you have paid more than your share. 1st is what is your
shareart. 3055. (reimbursement is what the surety gets from the debtor, contribution is
what the sureties can get from each other)
4. Art. 3056. A surety who pays the creditor may proceed directly or by way of subrogation to
recover from his co-sureties the share of the principal obligation each is to bear. If a co-
surety becomes insolvent, his share is to be borne by those who would have borne it in his
absence.
a. This is contribution--its similar to subrogation
b. thus the surety may seek through contribution only virile share liability from each
co-surety, and he can do this only based on what he's actually paid the creditor
beyond his own virile share liability to the creditor.
c. you don't include the debtor in dividing virile share liability.
Leigh v. Wright (1935): FACTS: Doctor sued all sureties, based on solidary language in the K of suretyship, for a judgment in
solido, less his portion. He argues he became subrogated to all the rights of the creditor when he paid installments on the debt.
HELD: No.
As for subrogation, he is not entitled to the same judgment as the creditor would be able to get against him, which is what true
subrogation would allow. If this was so, there were 17 debtors total, so he would be entitled to a judgment of 16/17 judgment in
solido and could enforce it against any of the others. This contradicts the suretyship ideasthat each surety is bound for his
pro rata share, this guy cant get a judgment for the whole against any of themwhich is what the creditor COULD have done,
bc all of them bound themselves solidarily. He became solidary obligor by virtue of the K of suretyship, so we have to look at
the suretyship provisionsthey will control. Being bound in solido with others for payment of mortgage debt and paying the
installments, he might call on cosureties to contribute portion of debt paid, but he could not recover judgment in solido against
them. So my interpretation is that the creditor could get judgment in solido, and enforce the whole against him, but he is not
fully subrogated to the creditors rights. He can only get contribution from any one of the others, not enforce the whole as the
creditor could do.
Would it be the same under current law? Maybe. Article 3056. Contribution.
It makes no difference whether a cosurety pays part or all of the debt, for, whether he pays part of it or all of it, he is entitled
to contribution from each of the cosureties for his pro rata share of the amount paid
Notes: Art. 3055 says that sureties are presumed to be bound for their proportionate share (5 sureties, presumption is that each
are bound for 1/5). But they can agree to a different amountand the agreement bw the sureties themselves does not have to be
in writing and parol can come in to rebut the presumption. Parol is only precluded in K2 bw creditor and surety.
Elmer Candy Co., Inc. v. Baumann (1933): FACTS: Elmer Candy is the creditor. Three sureties agreed to secure the payment
up to $400 bound in solido. The debtor is Hill. $361 balance on the account. Elmer sues the sureties. Elmer released one of
the sureties and thus the remaining sureties want to be released. ISSUES: Are the sureties released or not? HELD: Court
applies the solidary obligation rules and releases the other sureties. The remission or conventional discharge in favor of one of
the codebtors in solido, discharges all the others, unless the creditor has expressly reserved his right against the latter. In the
latter case, he cannot claim the debt without making a deduction on the part of him to whom he has made the remission.
Notes: Art 1792 overturns this case.
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Art. 1827. Conventional subrogation by the obligee

An obligee who receives performance from a third person may subrogate that person to the rights of the obligee, even without
the obligor's consent. That subrogation is subject to the rules governing the assignment of rights.
C.C. Art. 1829. Subrogation by Operation of Law

Subrogation takes place by operation of law.
(1)In favor of an obligee who pays another obligee whose right is preferred to his because of a privilege, pledge, mortgage, or
security interest;
(2)In favor of a purchaser of movable or immovable property who uses the purchase money to pay creditors holding any
privilege, pledge, mortgage, or security interest on the property;
(3)In favor of an obligor who pays a debt he owes with others (co surety) or for others and who has recourse against those
others as a result of the payment;
(4)In favor of an heir with benefit of inventory who pays debts of the estate with his own funds; and
(5)In other cases provided by law.
C.C. Art. 1830. Effects of Legal Subrogation

When subrogation takes place by operation of law, the new obligee may recover from the obligor only to the extent of the
performance rendered to the original obligee. The new obligee may not recover more by invoking conventional subrogation.
Koeniger v. Lentz (1984): FACTS: Continuing guarantor who, in large part, paid principal debts he and coguarantors had
guaranteed and who was conventionally subrogated to all rights of creditor bank brought action against coguarantors on the
original notes and guarantees. He was demanding, specifically, the attorneys fees provided for in the original note. He was
trying to say that the original notes had not been dischargedbut that he had bought them and so he gets original creditors
rights against the co-sureties via assignment of rights.
RELATED DISCUSSION (from Boyter v. Shreveport Bank): A surety may not enlarge his right of contribution through
conventional subrogation. He may not purchase the note or otherwise contract for subrogation to the creditors rights and
recover more than a virile share from any other surety.If any one of the sureties could purchase the note (or otherwise
contractually subrogate to the creditors rights) and then collect the full amount of the note from a co-surety, the purchasing
surety would thereby escape liability for his virile portion of the debt. HELD: Continuing guarantor, who in large part paid
principal debt he and coguarantors had guaranteed, and who was conventionally subrogated to all rights of creditor bank, could
not sue on the discharged notes, and his rights against coguarantors were governed by rules of suretyship. So he cant get
attorneys fees, even if that is what original creditor would have gotten. This is not true subrogationhe is subrogated to the
rights of the creditor SUBJECT TO the limitations of the suretyship articlesand so he may only sue for virile shares.
Prof says there are only two ways in LA to get attorneys feesby K or by statute. In this case, there is certainly no statute.
And it isnt in the K, and so the paying surety is trying to get the fees by subrogation. NOPE.
v. The Right to Require Security.: A surety has a right to require security of the debtor to secure the
suretys right of reimbursement.
1. Who can secure?
a. Debtor could give a mortgage to the creditor to secure contract 1 (debtor v.
creditor)
b. Debtor could give a mortgage to secure contract 3 to surety (debtor v. surety)
c. Surety could give a mortgage to secure contract 2 (creditor v. surety)
d. Surety could give a mortgage to another surety to secure the right of contribution.
2. Surety may obtain security from a debtor in four separate instances: (1) when a suit is
brought by the creditor against the surety; (2) when the principal obligor is insolvent; (3)
when the principal obligor fails to perform an act promised in return for the suretyship; and
(4) when the principal obligation is due according to its terms and the surety has not
consented to an extension of time.
3. How it happens: Hey, I have been called upon to pay, Do you have a defense? And by the
way, I want security for reimbursement since I am about to pay. Principal Obligation on
contract 3 is formed.
vi. Problems with Solidary Suretyship: Release of A Surety
C.C. Art. 1792. Remission by one obligee

Remission by one solidary obligee releases the obligor but only for the portion of that obligee.
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C.C. Art. 1802. Renunciation of Solidarity

Renunciation of solidarity by the obligee in favor of one or more of his obligors must be express. An obligee who receives a
partial performance from an obligor separately preserves the solidary obligation against all his obligors after deduction of that
partial performance.
Art. 1892. Remission granted to sureties.

Remission of debt granted to the principal obligor releases the sureties.
Application of 1892: if any sureties are released from the obligation, that release benefits the other sureties in proportion to the
released surety's share of the principal obligation. CC 1792.
i.e. if there are three sureties on the line for a debt of 12k, and Surety 1 pays 1k and gets a release, the others are only on the
hook for 8k, their respective virile shares. Surety 1's release benefits them in this way.
But remember, this would only reduce the debtors liabilities in this way. The debtor's main obligation is only reduced by what
surety 1 actually paid, even though sureties 2 and 3 are down to 8k liability. Thus, the debtor remains at 11k liability.
But if the principal obligor were released, this would extinguish the principal obligation, and likewise the accessory suretyship
obligations, thus releasing the sureties too. But if the sureties were all released, the debtor would still be on the hook for the full
amount. If one of several sureties were granted a remission, the other sureties are supposed to be released to the extent of the
contribution the other sureties could have sought from him. CC 1892. However, its unclear if this is a rule of public order, or
if this can be contracted away.
Union National Bank v. Legendre (1883): FACTS: Legendre is Morris joint tortfeasor (he is an accomplice to Morriss
embezzlement). 2 of Morriss sureties pay $10K of the $15K and get released. Bank is suing Legendre, Morris, and Legendres
surety for the balance of $5K. Legendre argues that discharge of Morris surety discharges Legendre ISSUES: Is Legendre
released as surety? HELD: No. Legendre is not released. Morris debt and Legendres debt arose from two separate sources
(they were separate employees of the bank w/separate bonds), which means they were solidarily bound for the same object, but
there were 3 different juridical causes (breach of Legendres bond, breach of Morriss bond, and commission of tort). Co-
sureties are bound for the same debt of the same debtor (here, its like 3 different debtors). Since they are not co-sureties,
release of one surety on one bond does not release the principal or the sureties on the other. So discharge of Morris surety
would not discharge Legendres surety. Additionally, even if they were co-sureties (solidary), discharge of the surety does not
discharge the principal obligorso discharge of Morriss surety would not release Legendre (or Morris). BUT, the result would
be the same in modern articles under 1892 (3) even if they were in solido. (4 total sureties on debt of $15K2 for Legendre, 2
for Morris).
Release of the sureties doesnt necessarily mean the release of the principal obligor. The substance of the contract is suretyship
and even if the K says the sureties are bound in solido w/the principal obligor, we will look to what this really is, which is
suretyship. In suretyship, release of the accessory does not release the principal.
Today the following articles apply:
C.C. Art. 3037. Surety Ostensibly Bound as a Principal with Another; Effect of Knowledge of the Creditor
One who ostensibly binds himself as a principal obligor to satisfy the present or future obligations of another is nonetheless
considered a surety if the principal cause of the contract with the creditor is to guarantee performance of such obligations.
A creditor in whose favor a surety and principal obligor are bound together as principal obligors in solido may presume they
are equally concerned in the matter until he clearly knows of their true relationship.
Despite the language of solidary, the essence of the contract is surety. Release of the surety is not a release of the principal
obligor. If we cant tell whether there are surety, we can treat them as co-makers until we find out the true nature of their
relationship.
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USX Corporation v. Tanenbaum (1989): FACTS: Seven sureties, each signing separate identical agreements. While there is
no magic language required to create solidarity, the intent must be expressly stipulated. IT requires something more than
merely the tenor of the agreement to reflect solidarity.
Notes: Today, 3055 tells us that amongst themselves, if there are 5 sureties, they are liable by heads. Also, if one surety
becomes insolvent, the risk is borne by the other sureties (art. 3056). So if there are 5 solidary sureties and one goes bankrupt
then they each had liability for 1/5 but now they each bear liability
LESSON 4. SURETYSHIP AND SOLIDARITY: THE PRE-1988 LAW AND THE IMPLICATIONS OF SOLIDARY
SURETYSHIP
C.C. Art. 1786. Several, Joint and Solidary Obligations

When an obligation binds more than one obligor to one obligee, or binds one obligor to more than one obligee, or binds more
than one obligor to more than one obligee, the obligation may be several, joint or solidary.
C.C. Art. 1787. Several Obligations; Effects

When each of different obligors owes a separate performance to one obligee, the obligation is several for the obligors. When
one obligor owes a separate performance to each of different obligees, the obligation is several for the obligees. A several
obligation produces the same effects as a separate obligation owed to each obligee by an obligor or by each obligor to an
obligee.
C.C. Art. 1788. Joint Obligations for Obligors or Obligees

When different obligors owe together just one performance to one obligee, but neither is bound for the whole, the obligation is
joint for the obligors. When one obligor owes just one performance intended for the common benefit of different obligees,
neither of whom is entitled to the whole performance, the obligation is joint for the obligees.
C.C. Art. 1789. Divisible and Indivisible Joint Obligations

When a joint obligation is divisible, each joint obligor is bound to perform, and each joint obligee is entitled to receive, only
his portion. When a joint obligation is indivisible, joint obligors or obligees are subject to the rules governing solidary obligor
or solidary obligees.
C.C. Art. 1790. Solidary Obligations for Obligee

An obligation is solidary for the obligees when it gives each obligee the right to demand the whole performance from the
common obligor.
C.C. Art. 1791. Extinction of Obligation by Performance

Before a solidary obligee brings action for performance, the obligor may extinguish the obligation by rendering performance to
any of the solidary obligees.
C.C. Art. 1793. Interruption of Prescription

Any act that interrupts prescription for one of the solidary obligees benefits all the others.
C.C. Art. 1794. Solidary Obligation for obligors

An obligation is solidary for the obligors when each obligor is liable for the whole performance. A performance rendered by
one of the solidary obligors relieves the others of liability toward the obligee.
C.C. Art. 1795. Solidary obligor may not request division; action against one obligor after action against another.
An obligee at his choice, may demand the whole performance from any of his solidary obligors. A solidary obligor may not
request division of the debt. Unless the obligation is extinguished an obligee may institute action against any of his solidary
obligors even after institution of action against another solidary obligor.
C.C. Art. 1796. Solidarity not presumed

Solidarity of obligation shall not be presumed. A solidary obligation arises from a clear expression of the parties intent or
from the law.
C.C. Art. 1797. Solidarity obligation arising from different sources

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An obligation may be solidary though it derives from a different source for each obligor.
C.C. Art. 1798. Obligation subject to condition or term

An obligation may be solidary though for one of the obligors it is subject to a condition or term.
C.C. Art. 1799. Interruption of prescription

The interruption of prescription against one solidary obligor is effective against all solidary obligors and their heirs.
C.C. Art. 1800. Solidary liability for damages

A failure to perform a solidary obligation through the fault of one obligor renders all obligors solidarily liable for the resulting
damages. In that case, the obligors not at fault have their remedy against obligor at fault.
C.C. Art. 1801. Defenses that Solidary Obligor May Raise

A solidary obligor may raise against the obligee defenses that arise from the nature of the obligation, or that are personal to
him, or that are common to all the solidary obligors. He may not raise a defense that is personal to another solidary obligor.
C.C. Art. 1803. Remission of Debt to or Transaction or Compromise with the Obligor
Remission of debt by the obligee in favor of one obligor, or a transaction or compromise between the obligee and one obligor,
benefits the other solidary obligors in the amount of the portion of that obligor.
Surrender to one solidary obligor of the instrument evidencing the obligation gives rise to a presumption that the remission of
debt was intended for the benefit of all the solidary obligors.
C.C. Art. 1804. Liability of Solidarity Obligors Between Themselves

Among solidary obligors, each is liable for his virile portion. If the obligation arises from a contract or quasi-contract, virile
portions are equal in the absence of agreement or judgment to the contrary. If the obligation arises form an offense or quasi
offense, a virile portion is proportionate to the fault of each obligor. CONTRIBUTION Rights between the co-debtors.
Solidary obligor who has rendered the whole performance, though subrogated to the right of the obligee, may claim from the
other obligors no more than the virile portion of each.
If the circumstances giving rise to the solidary obligation concern only one of the obligors, that obligor is liable for the whole
to the other obligors who are then considered only as sureties. INDEMNIFICATION
C.C. Art. 1805. Enforcement of Contribution

A party sued on an obligation that would be solidary if it exists may seek to enforce contribution against any solidary co-
obligor by making him a third-party defendant according to the rules of procedure, whether or not that third party has been
initially sued, and whether the party seeking to enforce contribution admits or denies liability on the obligation alleged by
plaintiff.
C.C. Art. 1806. Insolvency of a Solidary Obligor

A loss arising from the insolvency of a solidary obligor must be borne by the other solidary obligors in proportion to their
portion.
Any obligor in whose favor solidarity has been renounced must nevertheless contribute to make up for the loss.
C.C. Art. 1903. Union of qualities of obligee and obligor

When the qualities of obligee and obligor are united in the same person, the obligation is extinguished by confusion.
C.C. Art. 1904. Obligation of the surety

Confusion of the qualities of the obligee and obligor in the person of the principal obligor extinguishes the obligation of the
surety. Confusion of the qualities of the obligee and obligor in the person of the surety does not extinguish the obligation of the
principal obligor.
C.C. Art. 1905. Solidary obligations

If a solidary obligor becomes an obligee, confusion extinguishes the obligation only for the portion of that obligor.
If a solidary obligee becomes an obligor, confusion extinguishes the obligation only for the portion of that obligee.
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Louisiana Bank and Trust Company, Crowley v. Boutte (1975): FACTS: 4 sureties are co-sureties with the principal debtor,
Rex Rice. Three sureties were released because reached a compromise. Principal debtor released as well. 4 th surety said I am
released because the principal debtor released. The parties signed a document entitled continuing guaranty in which they stated
that they bound themselves in solido with each other and the debtor. ISSUES: Is the surety released when the creditor
released the principal obligor? HELD: No, the 4th surety is not released. The compromise and release of the principal debtor,
Rex Rice, did not operate to release the 4 th solidary surety. The surety was not a simple surety but was bound in solido, and the
discharge of the other solidary sureties and the principal debtor did not discharge the remaining surety's obligation. When the
surety executed the continuing guaranty agreement, he agreed that the lender might, without notice, grant releases and
discharges without lessening the liability of any guarantor. Although neither creditor nor the court were confused about the
status of sureties as accessory obligors, the court held that the release of the principal obligor (and of other co-sureties) did not
release the sole remaining surety. The Court allowed the language of a contract, drafted by a creditor for the creditors benefit,
to blind it to the true relationship among the parties. Elmer does not apply because it stands for the release of one solidary
surety, or guarantor, without reservation released the other solidary guarantors. Between the creditor and the surety bound in
solido with the debtor, the obligations of the surety are governed by the rules of solidary obligors. Between the accessory
obligors, themselves, however, we held that the legal relationships may be governed by the rules of suretyship. However, the
principal debtor is included in calculating virile share when there is language of solidarityso there, it would be one fifth. The
court reasoned that when a surety is bound in solido w/the debtor then the suretys obligation to the debtor is governed by the
principles established for solidary debtors. This WOULD NOT be the case anymorenow the principal obligor is not counted
in determining virile share.
Notes: now, under 1892 discharge of the principal would have discharged the sureties. Additionally, now, 3055 is our default
rulethere were 4 sureties and one principalabsent agreement to the contrary, the sureties are liable by heads (so ) but
they could have agree to 1/5 (4 sureties and 1 principal) but we have nothing to tell us this is what they wanted. Notice also that
the sureties limited their guarantee to $200Kthe debt was around $400K but this is perfectly OK under the code to limit
guarantee (lawful).
3037 also importantwhat the creditor knows is important (generally, we are going to look to substance over form and treat a
surety as a surety. However, if a creditor thinks they are solidary obligors, he can treat them as so, until he learns otherwise)
we can put parol on for that but the other side is going to argue you cant bc it is proving content of the surety agreement, about
which parol is forbidden.
Terrible decision from a public policy standpoint. Everyone knows that it is the substance of the contract over the form of
the contract. Here, the magical language of the contract is governing the nature of the relationship
Language of the contract: In consideration is not needed for a suretyship contract but may need the language to enforce
the contract in other states. Any indebtedness direct or contingent language means broadly all the debts of Rex Rice
and any debts that Rex Rice becomes a surety on. Grant extensions language is a waiver of modification (Art. 3062).
Take and give securities means impairs the obligation. Accept composition means voluntary agreement between
creditors and bankers. Notice of demand and presentment means negotiable instrument defenses. Subordination
clause causes Right of subrogation must be held down by the surety until the creditor has collected in full.
When you enter a contract of suretyship where there is language of solidarity, the question is what law applies: suretyship
or solidarity? In Elmer, they were applying solidarity articles to suretyship. In Legendre, despite the interlocking
language of solidarity they applied suretyship law. Along comes Boutte where there was a release of the debtor, the court
said once we have the language of solidarity, the creditor gets to treat the sureties as solidary obligorsno accessory
obligation. Therefore the release of one does not release all.
Aiavolasiti v. Versailles Gardens Development Company (1979): FACTS: There are three obligations here. #1, a corporate
promissory note guaranteed by 5 shareholders, each giving a separate continuing guarantee. #2, a promissory note endorsed by
6 shareholders. #3, there are 6 sureties who signed as co-makers. All agreements have language of solidarity w/debtor. When
corp. defaulted, one of the alleged sureties paid and initiated suit for reimbursement.
#1 #2 #3
$574k $19K $50.7555k

C D C D C D
25
S S S
ISSUES: Can Aiavolasiti recover the full amount from any one of the other guarantors? HELD: Noonly virile portions.
DISCUSSION:
Art. 3055 governs Obligation #1 and #2. Obligation #1: AC said that one codebtor in solido who pays the whole can claim
from other codebtors no more than their individual parts and the principal obligor should be counted. SC says nothe
language may say that the guarantors made themselves bound in solido, but the real nature of the K is the K of surety. SC
discusses Bouttethat bw the creditor and surety bound in solido w/debtor, the obligations of the surety are governed by
solidary obligations but bw the sureties themselves, the legal relations are governed by suretyship. Court agrees w/Boutte that
the language of solidarity does not alter the effects of suretyship bw the sureties, if in essence, the K is an accessory promise to
pay the debt of a principal. The guarantors COULD, by expressing clear intention, completely nullify the suretyship nature of
the K and choose to be bound as solidary obligors. But, the language of the K does not express this intentinstead, it shows
the intent that the rights bw the guarantors should be governed by the rules of suretyship. Whether Boutte is right or wrong, it
was concerned about what the creditor saw. Here, Aiavolasiti is a surety trying to enforce against other suretiesso rule of
contribution applies and he cant get the whole amount from any bc bw themselves, they are not bound solidarily. Although the
creditor sees solidarity, among the sureties they see suretyship. This is why he can only recover 1/5 from any of the other
guarantors. Note that the principal obligor is NOT counted in determining virile share after this case. Court notes that this
remedy is separate from the remedy of any of the paying sureties recovering the whole amount from the principal obligor. The
court allowed a creditor, who was the drafter of the agreement, to treat the sureties and the debtor as solidary obligors, but the
sureties were bound by the rules of suretyship bw themselves. Obligation #2: Supreme Court overturned saying #2, the liability
is 1/6 rather than 1/7. It was the same issue as #1the lower court had tried to divide the debt bw the 6 sureties and the
principal obligor. Again, bw themselves, each is liable for the virile share and the surety that paid can recover 1/6 from each of
the other sureties. In #1, contract is clearly suretyship. Obligation #3: The agreement was not a suretyship. So he doesnt get
contribution via suretyshipthe alleged sureties WERE bound in solido as the principal. So he still gets only contribution of
each others virile share.
C.C. Art. 3055. Liability Among Co-Sureties

Co-sureties are those who are sureties for the same obligation of the same obligor. They are presumed to share the burden of
the principal obligation in proportion to their number unless the parties agreed otherwise or contemplated that he who bound
himself first would bear the entire burden of the obligation regardless of others who thereafter bind themselves independently
of an in reliance upon the obligation of the former.
The Boutte concept of a solidary surety was legislatively rejected in article 3037 which says that the substance of the
transaction and not the form controls, and the creditor may not hide behind the language of the contract when the creditor
knows of the true relationship among the partiesif the creditor KNOWS they are only suretiesthen that is what the
creditor will getno more hiding behind language he drafts.
Art. 1804. Liability of solidary obligors between themselves

Among solidary obligors, each is liable for his virile portion. If the obligation arises from a contract or quasi-contract, virile
portions are equal in the absence of agreement or judgment to the contrary. If the obligation arises from an offense or quasi-
offense, a virile portion is proportionate to the fault of each obligor.
A solidary obligor who has rendered the whole performance, though subrogated to the right of the obligee, may claim from the
other obligors no more than the virile portion of each.
If the circumstances giving rise to the solidary obligation concern only one of the obligors, that obligor is liable for the whole
to the other obligors who are then considered only as his sureties.
C.C. Art. 1828. Conventional subrogation by the obligor

An obligor who pays a debt with money or other fungible things borrowed for that purpose may subrogate the lender to the
rights of the obligee, even without the obligees consent.
The arrangement for subrogation must be made in writing expressing that purpose of the loan is to pay the debt.
C.C. Art. 3056. Right of Contribution Among Co-Sureties
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A surety who pays the creditor may proceed directly or by way of subrogation to recover from his co-sureties the share of the
principal obligation each is to bear. If a co-surety becomes insolvent, his share is to be borne by those who would have borne it
in his absence.
Contribution is the form of subrogation that sureties get.
C.C. Art. 3057. Limitation Upon Right of Contribution

A surety who pays the creditor more than his share may recover the excess from his co-sureties in proportion to the amount of
the obligation each is to bear as to him. If a surety obtains the conventional discharge of other co-sureties by paying the
creditor, any reduction in the amount owed by those released benefits them proportionately.
Effect of Contractual Language and the Release of A Surety

First National Bank of Crowley v. Green Garden Processing Company (1980): FACTS: Bank sued debtor for balance due
on promissory note and also sued three persons who had executed separate continuing guaranties. After suit was filed, one of
the guarantors received discharge in bankruptcy and another settled with the bank for a sum less than amount guaranteed. The
bank wants to recover more than the remaining guarantors virile share from him. He wants to be released since the other
guarantors were released.
LASC held that under continuing guaranty authorizing bank to release or discharge any guarantor without notice to other
guarantors, bank had right to release guarantor as it deemed appropriate without affecting its right to full recovery from the
other guarantor up to dollar limit set in the contract of guaranteethey look to the language of the K and it allowed this. A
creditor who releases one surety may still hold the remaining sureties liable for 100% of the outstanding principal obligation
with no reduction for the virile share of the released surety. (of course, this suretys liability will be reduced by the amount the
other surety paid to receive the discharge in bankruptcy, bc the bank will not be allowed to recover more than it is owed, but
this surety is liable for more than his virile share bc of the language of the K).
Court ignores Boutte case. Resting not upon creditor concepts of solidary suretyship, (as articulated by Boutte), despite the
fact that there seemed to be some language of solidarity, or upon a suretys contribution rights against co-sureties (as discussed
in Aiavolasitimy thoughtsperhaps it is distinguishable bc in Aiavolasiti, it was surety against surety, which is why they
discussed contribution. here it is creditor against surety and in Mr. As case, the court mentions that the creditor can treat the
sureties as solidary obligors if the language permits, it seems that is what they are doing here, without really discussing it), the
court still finds this one surety liable for the whole when the creditor sues (less what it already recovered).
The court relies on general obligations articlesfinding that where the K is silent on an issue, then we turn to the Code on
suretyship. BUT, where the K is not silent, the parties WILL BE BOUND by the contents of the K, as those contents have the
effect of law bw the parties. That is the whole purpose of a Kto get something enforced bw the parties in court.
How does this decision square with Art. 1892?
Art. 1892. Remission granted to sureties

Remission of debt granted to the principal obligor releases the sureties.
Arguments:
#1: Art. 1892 is the default rule and the parties can K around itthus, if they put language in the K that says release of one
does not release the other, then that is what they will get
#2: This case was decided before the revisions to the suretyship articles. Thus, the most recent expression of legislative will is
Art. 1892, which is the embodiment of public policy and rules of public policy cannot be Kd around. So the creditor should
only get virile share from remaining surety. Prof thinks this is the BEST answerit prevents a creditor who knows a judge
from getting the judge to do him a favor and stretch the language of the K. Prof thinks that this is public policy bc it allows a
creditor to release some sureties without consulting the remaining and BIND the remaining for the wholewithout HIS
CONSENT and beyond what he agreed to!!
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Note that this is an unresolved issueand as such, it will be on the exam!!!
Notes:
The fact that the remaining surety was unable to subrogated by the bank to its right to collect from the other guarantors did not
matter. The language in the K that said the guarantors were subrogated to right of the creditor to recover from the other
guarantors did not override the language of the K that said the bank could release, in its discretion, guarantors, and make any
other changes. This language was directly on pointthe stuff about the subrogation was less direct. Additionally, the
agreement said that the bank shall subrogate him to whatever security it may holdthis does NOT obligate the bank to
continue holding on to any security it may have once held.
The result of this case was to treat a surety as if he were at all times the sole surety. It allows the creditor to deal with
debtors and other sureties without even consulting the remaining surety and then HOOK the remaining surety for the
whole debtWITHOUT his consent!!
In response to this decision, most Louisiana commercial continuing guarantee agreements contain clauses that expressly
incorporate the holding of the case and allow the creditor to release collateral and sureties without notice to the remaining
surety without impacting the remaining sureties responsibility for 100% of the outstanding principal obligation.
Today, article 1892 mandates that the release of a surety benefits the other sureties by reducing their obligation to the
creditor in an amount equal to the virile share of the released party.
Delta Savings and Loan Association v. Hammond East Development Partnership (1990): eight parties signed continuing
guarantees in favor of plaintiff guaranteeing the loan of defendant. There was language that the sureties and debtor were bound
in solido with the debtor; there was even language that they were to be treated as if they had contracted for the debt themselves.
Some of the sureties were released. Debtor argues that release of the sureties releases him since they were bound in solido.
HELD: The continuing guaranties reveal that it was the intent of the guarantors to be guarantors and not co-debtors. The
guarantors have merely bound themselves in the interest of another and should be considered in relation to the principal debtor
only as sureties. The guarantors are co-sureties in solido with themselves and each in solidary surety with the principal obligor.
They are not co-debtors with the principal obligor and therefore the release or bankruptcy of any of the guarantors has no
bearing on the debt of the principal
vii. What is the Principal Obligation?
What Is the Principal Obligation When A Surety Gives Additional Collateral?
Boyter v. Shreveport Bank and Trust Company (1986): FACTS: Boyter used a collateral mortgage to guarantee a loan. He
also had some sureties. It was argued that the 2nd mortgage was to guarantee the suretyshipnot the principal obligation.
ISSUE: does the second mortgage guarantee the principal obligation or the suretyship K. This matters BIG time. IF it secures
the principalthen the banks subrogees get the entire amount. If it guarantees the suretyship, then the bank only gets the
amount that is agreed upon in the suretyship agreement, even though more is owed. It is all about relationship and who gets the
money. Facts are really complicatedbut here is the pointyou can limit the suretyship to the value of a piece of property,
you can also secure a suretyship w a mortgage on a piece of property. Pointas lawyers make damn sure we are CLEAR as to
WHAT a mortgage is securing!! In this case, you can allow parol IN, bc there is NO dispute that there is a suretyship. There is
NO doubt the surety is on the hook and for how muchonly WHO gets the money and WHY. Since it is the question of what
the mortgage was INTENDED to guarantee and not whether there is a surety or whether he is on the hook and the intent is not
clear from the documentparol is admissible. The court found that the 2 nd mortgage secured the suretyshipthus, when the
co-surety pays, he only gets each other suretys virile share.
Suretyship is a personal right, (not a real right) which is the right to seize and sell property.
If collateral mortgage secured only the principal obligation is given by the surety, the right of subrogation is on contract 1,
which is contributionvirile share. But the suretys right to collect from the debtor is 100% or from any other collateral
mortgage. Are you given that collateral mortgage in your capacity as a surety? At the time that it was given, he was not
giving it as a surety. In terms of collateral mortgage securing contract 1, he no different from X, a 3 rd party, and can
recover 100%.
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If collateral mortgage secured only the accessory obligation is given by the surety, the right of subrogation is on contract 2.
The collateral mortgage clearly insures the suretyship and not the principal obligation. What can they get from the
collateral mortgageno more than virile share. Surety-mortgage-limited-contribution.
If collateral mortgage secured the principal obligation and the accessory obligation is given by the surety, the suretyship
rules will trump. When the mortgage (real security-in rem) is given in both capacities, Xs personal liability trumps. It is
possible to give a mortgage in one capacity, a surety in another capacity, and a pledge in yet another capacity.
What happens among the sureties since they usually dont make contracts? The sureties want to get the maximum from
the other co-sureties. Make sure there are inter-agreements about what happens if one of you pays.
LESSON 5. WRAP UP ON SURETYSHIP

$20,000
C D
S1, 90%
S2, 8%
S3, 1%
S4, 1%
S1 CvD S1 v. S2 & S3 C v. S2 & S3

$5,000 $15,000 Contribution $15,000
$15,000 $5,000 $10,000 (+v.s.) $5,000
$1,000 $19,000 $0 $15,000
$20,000 0 Excess over virile share 0
FORMULA: total debt-release of surety 1=what creditor can recover from remaining sureties
HYPO 1: Creditor extends $20000 to debtor and there are 4 sureties, agreeing that the virile shares, 90%, 8%, 1%, and 1%.
HYPO 2: Article 3055 comment 2, the presumption is that parole evidence is admissible to show that liability would be
proportionally share. Surety gets contribution in excess of the virile share.
HYPO 3: Surety 1 pays $15000 and is released. The creditor can get $5000 from the debtor.
HYPO 4: Article 1892 paragraph 3, remission of debt of one surety, to the extent that the virile share is released. So if the
sureties changed from virile share to say 90%, then creditor has just released 90%. What can the creditor do? Get the surety to
affirmatively say what his virile share is. This may be hard to do because surety agreements are usually oral. Unless the
parties contemplated that the first two sureties bound themselves and that is the reason why surety 3 & 4 agreed to be bound.
Can one contract around the release of the surety? There is no answer. ARGUMENT: It is public policy and good order to not
allow the parties to contract around remission.
HYPO 5 (directly from OBrien): creditor is owed $120K. There are 3 sureties. One pays $40K. Can the one surety sue the
creditor and get money back? NO. Can he get money from debtor? YESvia reimbursement or subrogation. Can creditor go
against debtor? Yes--$80K, or whatever is left of the debt. Can surety 1 go against the other sureties? NOhe paid his share
and each surety is responsible for his share by head.
HYPO 6 (from OBrien): creditor is owed $120K. Three sureties, one pays $40K. So here 120K minus $40K (s1 virile
share)=$80K creditor can get from s2 and s3
C.C. Art. 1892. Remission Granted to Sureties

Remission of debt granted to the principal obligor releases the sureties. (Cant contract around this paragraph due to article
3037)
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HYPO 6: If the language of contract is continuing guarantee, then suretyship is most likely.
HYPO 7: Six sign as co-makers ostensibly and creditor releases debtor 2 for $1000. Are the others released? The effect of the
release of a solidary obligor releases debtor 2 to his virile share. So 1/6 of the debt is released.
HYPO 8: Can four persons who signed as accommodation parties be considered sureties? Follow the money. IF one can
show that all the money went to debtor 1s bank account, then it is clear that although on the face of the note there are co-
makers and the creditor knows of their true relationship (despite the language), the creditor must treat then as sureties. The
debtor is not released.
HYPO 9: X buys note from the creditor and debtor 4 is released but X doesnt know that the other debtors are sureties. But
article 3037 says someone who ostensibly binds himself as a principal obligor to satisfy the present or future obligations of
another is nonetheless considered a surety if the principal cause of the contract with the creditor is to guarantee performance of
such obligations. A creditor in whose favor a surety and principal obligor are bound together as principal obligors in solido
may presume they are equally concerned in the matter until he clearly knows of their true relationship. Must test 3037 at the
time I obligated myself.
Sureties are liable for the whole. Only when one starts talking about releases, are sureties liable for virile portions. Three ways
one can be surety:1) letter agreement; 2) sign a continuing guarantee; 3) sign on a note as an accommodation party. If chose
suretyship get one result (continuing guarantee), if I chose solidary obligations get another result, if I chose negotiable
instruments, I get yet another resultmust use the UCC 1st. If there is no clear rule in the UCC, you default to state law which
throws you into 3037.
HYPO 10: S1 paid $20,000. Creditor gets nothing from the debtor. S1 has to file suit to get his money from the debtor. Yes he
is subrogated. Can he get attorneys fees from co-sureties? See art. 3052. Can the surety get attorneys fees from debtor?
Absence of the statute means he probably cant get it unless they contracted for it. This issue is in the air. From a public policy
it makes a lot of sense because the surety voluntarily paid. NIL had two different views, if you pay on the instrument it is
extinguished. Jurisprudence says no attorneys fees in the absence of the contract. Thus, there must be an inter-suretyship
agreement. Here is the virile share, if I pay I get a high interest rate (disincentive for them not to pay), and attorneys fees
provisions. If there is a commercial deal there is not usury.
C.C. Art. 3052. Limitation on Right of Surety to Recover What He Paid Creditor
A surety may not recover from the principal obligor more than he paid to secure a discharge, but he may recover by
subrogation such attorneys fees and interest as are owed with respect to the principal obligation.
The Effect of the Release of a Debtor or Surety

Extinction of Principal Obligation. Because suretyship is an accessory obligation, the extinction of the principal obligation
releases the surety. If the extinction results from the payment by one surety, that surety still has contribution rights against the
sureties.
Release of Surety by Creditor. The release of the surety does not release the debtor at all, although any money paid by the
surety reduces the principal obligation to the extent of payment. Release of one surety does have an impact on other sureties,
because each surety has a right of contribution against the other sureties thereby releasing other sureties only to the extent of
the contribution the other sureties might have recovered from the released surety. A surety can collect contribution only to the
extent the surety has paid in excess of that suretys virile share and that sureties virile shares are presumed to be equal.
A. Example 1: Assume that Debtor owes a $120k debt to Creditor and that Sureties 1, 2, and 3 have all signed a single
continuing guaranty for the $120k. Further assume that virile shares of Sureties 1, 2, and 3 are equal.
(1) If the Creditor releases the Debtor, all the Sureties are released.
(2) If the Creditor voluntarily releases all the Sureties for no payment, the Debtor still remains bound for the $120k debt.
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(3) If the Creditor releases Surety 1 for a payment of $40k, the payment is imputed to the principal obligation and the
Debtor is only liable for $80k. Sureties 2 and 3 benefit from the release of Surety 1; however, because the payment by
Surety 1 equals Surety 1s virile share, Surety 1 has no contribution claim against Sureties 2 and 3 and Sureties 2 and
3 are each liable to the Creditor for $80k. The creditor may never collect more than the outstanding balance on the
principal obligation.
(4) If the Creditor releases Surety 1 for a payment of $10k, then the payment must be imputed to the principal obligation
and the Debtor is bound for $110k. Here the virile share calculation becomes importance, because the release of
Surety 1 under art. 1892, releases the other sureties to the extent of contribution they could have obtained. Because
the sureties have equal shares, the impact of the release of Surety 1 is to release a 1/3 virile share. Thus although the
Creditor can still collect $110k from the Debtor, the Creditor cannot collect more than $80k from Surety 2 and 3. The
result is just because the creditor is in control of the release of the surety and if the Creditor decides to accept less than
a suretys virile share, the Creditor should bear the risk of the loss of the remaining sureties lost contribution rights
against Surety 1. Creditors should ascertain what sureties virile shares are or at least seek a representation from the
surety as to the extent of that suretys virile share.
B. Example 2: Assume the same facts as above except that the sureties now, among themselves have unequal virile shares:
Surety 1 share is 10$, Surety 2s share is 45% and Surety 3s virile share is 45%.
(1) If the Creditor releases the Debtor, all the Sureties are released.
(2) If the Creditor voluntarily releases all the Sureties for no payment, the Debtor still remains bound for the $120k debt.
(3) If the Creditor releases Surety 1 for a payment of $40k, the payment is imputed to the principal obligation and the
Debtor is only liable for $80k. Surety 1 has been released for a payment or more than that Suretys virile share. The
payment also actually reduced the debt by more than that Suretys virile share; Therefore, Sureties 2 and 3 are each
liable for $80k, the extent of the principal obligation, although among themselves the virile share is 45% each.
Because Surety 1 paid more than Surety 1s 10% virile share, Surety 1 is entitled to get contribution form Sureties 2
and 3 for a total of $28k, the amount in excess of Surety 1s virile share.
(4) If Surety 1 pays $10k and is released, Surety 1 now has paid less than his virile share. The Debtor is liable to the
Creditor for $110k. Sureties 2 and 3 get the benefit of the release of Surety 1s virile share, but that is only 10% under
this Example. Therefore although the Creditor can sue the Debtor for $110k, the Creditor can sue the Sureties for only
$108k
Substance Not Form

The substance of the transaction controls, not the form, and the creditor may not hide behind the language of the contract when
the creditor knows the true relationship among the parties. Art. 3037.
A. EXAMPLE 1: Creditor advances money to Debtor, a corporate entity. Four of the corporations shareholders sign a single
continuing guaranty in which each state that each is bound in solido with each other and with the Debtor. The Creditor
then releases the Debtor and then attempts to holds the sureties liable. RESULT: All sureties are released. The Creditor
can collect nothing from any of the sureties. Despite the solidary language in the continuing guaranty document, the fact
that the document is labeled a continuing guaranty and the reference to a guarantee of the debt of another shows that all
parties know the principal cause of the contract with the Creditor is to guaranty performance of the obligation of another.
The Creditor may not hide behind the language of solidarity which the Creditor has inserted into the continuing guaranty.
B. EXAMPLE 2: Creditor advances money to Debtor, a corporate entity. Four of the corporations shareholders sign a
single continuing guaranty in which each state that each is bound in solido with each other and with the Debtor. The
Creditor then releases the Debtor and then attempts to holds the sureties liable. The Creditor has transferred the principal
obligation to Creditor 2. The transfer of the principal obligation carries with it all of the accessories to the principal
obligation, including the continuing guarantees of Sureties 1 and 2. RESULT: Creditor 2 may not treat the sureties as
solidary obligors. The fact that the document was labeled continuing guaranty shows that it is accessory in nature despite
the language of solidarity contained in the document itself.
C. EXAMPLE 3: The Creditor advances money on a note signed by X, Y and Z as comakers. The purpose of the loan is to
put money into Xs hands. RESULT: If the Creditor knows of X, Y and Zs relationship, and the Creditor knows that X is
going to use the money and not share it with Y or Z, then despite the fact that all three have signed a note as co-makers and
appeas to be obstensibly bound as principal obligors, the Creditors knowledge of their true relationship precludes treating
them as solidary obligors, notwithstanding the fact that the note may contain solidary language. The Creditor must treat X
as principal obligor and Y and Z as sureties.
D. EXAMPLE 4: The Creditor advances money on a note signed by X, Y and Z as comakers. The purpose of the loan is to
put money into Xs hands. Creditor transfers the note to Creditor 2, who has no knowledge of the relationship among X, Y
and Z. RESULT: Since the note appears on its fact to contain the signatures of three co-makers, and assuming Creditor 2
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has no knowledge of the relationship between X, Y and Z, Creditor 2 may presume they are equally concerned in the
matter until he clearly knows of their true relationship. Therefore, Creditor @ may treat all three as co-makers.
Surety v Debtor art 3052 even in the absence of a k, the surety who sues in subrogation or reimbursement, then
the surety can get atty fees and interest if the creditor could have gotten it.
No Supreme Ct case on point as to surety v surety.
LESSON 6. SECURITY INTEREST IN MOVABLES: INTRODUCTION TO PLEDGE/UCC

Pawn (pignus-Greek)pledge of movable property. It is an accessory contract requiring a valid principal obligation. The
pledge can be given by the debtor, a third party to secure the principal obligation, or by a surety. It is a real right. If the
principal obligation cannot be enforced the pledge obligation cannot either. Common Law Bailment is the term for pledge.
The pledge provisions of the Civil Code were superceded by the adoption of Louisianas version of UCC article 9. R.S. 10:9-
101 et seq. Thus, they have no effect on security interests in movables after 1990. Be careful, what is known colloquially as
pawn is actually sale w/right of redemption. In this class, the word pledge will refer to pawn.
Antichresispledge of immovable property allowing the creditor to collect the natural, and some civil, fruits of the property.
Questions to Ask:
1. Is it valid between the parties?
2. Is it valid as to 3ps?
3. When does it start to effect 3ps?
4. When does it cease affecting 3ps?
Hypothetical #1:
Rolex given as pledge for 500 dollar loan. Ask the questions:
1. Art
A collateral mortgage is not a mortgage. It is the pledge of a note secured by a mortgage.
Retroactive rank: Two people claim they have security interests in an item. When theres a default, we have to check who has
the privilege on the sale. 3183 says to follow the lawful cause of preference. Here, there is onethis is RANK. 3158 says that
your RANK is not the date you advance the moneyit is the date of the pledge. So you outrank everyone.
Art. 3133. Pledge, definition

The pledge is a contract by which one debtor gives something to his creditor as a security for his debt
Art. 3133.1. Relation to Chapter 9 of the Louisiana Commercial Laws

This Title shall apply to pledges of movables that are delivered prior to the time Chapter 9 of the Louisiana Commercial Laws1
becomes effective, including without limitation those pledges that may secure future obligations and lines of credit, as well as
to pledges entered into on or after the time Chapter 9 of the Louisiana Commercial Laws becomes effective that are exempt or
otherwise excluded from coverage thereunder.
Art. 3134. Kinds of pledge

There are two kinds of pledge:
The pawn.
The antichresis.
Art. 3135. Pawn and antichresis distinguished

A thing is said to be pawned when a movable thing is given as security; and the antichresis, when the security given consists in
immovables.
Art. 3136. Obligations enforceable by pledge

Every lawful obligation may be enforced by the auxiliary obligation of pledge.
Art. 3137. Conditional obligation as basis for pledge

If the principal obligation be conditional, that of the pledge is confirmed or extinguished with it.
Art. 3138. Effect of nullity of principal obligation

If the obligation is null, so also is the pledge
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Art. 3140. Object of principal obligation

Pledge may be given not only for an obligation consisting in money, but also for one having any other object; for example, a
surety. Nothing prevents one person from giving a pledge to another for becoming his surety with a third.
Art. 3141. Pledge for debt of another

A person may give a pledge, not only for his own debt, but for that of another also.
Art. 3142. Things susceptible of being pledged

A debtor may give in pledge whatever belongs to him.
But with regard to those things, in which he has an ownership which may be divested or which is subjected to incumbrance, he
can not confer on the creditor, by the pledge, any further right than he had himself.
Art. 3144. Subsequent acquisition of ownership of thing pledged

If at the time of the contract the debtor had not the ownership of the thing pledged, but has acquired it since, by what title
soever, his ownership shall relate back to the time of the contract, and the pledge shall stand good.
Art. 3145. Pledge of property of another, necessity for consent of owner

One person may pledge the property of another, provided it be with the express or tacit consent of the owner.
Art. 3146. Implied consent of owner

But this tacit consent must be inferred from circumstances, so strong as to have [leave] no doubt of the owner's intention; as if
he was present at the making of the contract, or if he himself delivered to the creditor the thing pawned.
Art. 3147. Binding effect of pledge of thing of another

Although the property of another can not be given in pledge without his consent, yet so long as the owner refrains from
claiming it, the debtor who has given it in pledge, can not seek to have it restored until his debt has been entirely discharged.
Art. 3152. Delivery and possession of thing pledged

It is essential to the contract of pledge that the creditor be put in possession of the thing given to him in pledge, and
consequently that actual delivery of it be made to him, unless he has possession of it already by some other right.
Art. 3153. Delivery of incorporeal rights

But this delivery is only necessary with respect to corporeal things; as to incorporeal rights, such as credits, which are given in
pledge, the delivery is merely fictitious and symbolical.
Art. 3154. Things subject to pawn

One may pawn every corporeal thing, which is susceptible of alienation.
One may even pawn money as a security for performing or refraining to perform an act.
Art. 3156. Claims against other persons

When a debtor wishes to pawn a claim on another person, he must make a transfer of it in the act of pledge, and deliver to the
creditor to whom it is transferred the note or instrument which proves its existence.
Art. 3157. Privilege and preference of pledge creditor

The pawn invests the creditor with the right of causing his debt to be satisfied by privilege and in preference to the other
creditors of his debtor, out of the product of the movable, corporeal or incorporeal, which has been thus burdened.
What Are the Effects of A Pledge?

Scott v. Corkern (1956): FACTS: P sues sue on 5 promissory notes executed by Ds husband. P had agreed to make the loans
to finance Ds husbands medical education. To secure the loan, Ds husband pledged a life insurance policy, making P the
beneficiary. Ds husband was the owner of the policy. D says the notes prescribed in five years and argues that the pledge had
been extinguished bc possession was returned to the owner (Ds husband). P died first, then D died. ISSUES: Had the notes
prescribed? HELD: No. Prescription never accrued on the notes bc the existence of the pledge operated to suspend or interrupt
the running of prescription. When the D took possession of the life insurance policy, he was precarious possessor, acting as a
trustee for the pledgee, the plaintiff, so the return of possession did not extinguish the pledge.
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Mistake #1 in this case: life insurance policy does not pass through succession.
Possession is essential to the validity of pledge, but physical possession need not always be held by the creditor. It is sufficient
that it be in someone who holds for account of creditor; and debtor himself may be considered as trustee for the creditor and
may be given possession of the thing, if his tenure is precarious and clearly for account of creditor. It is well-settled
jurisprudence of this state that prescription does not run in favor of the debtor whose debt is secured by a pledge, and that it
remains interrupted, as long as the thing pledged is in the possession of the pledgee.
Mere circumstance that pledged article was found in possession of pledgor would not justify conclusion that the pledge had
been extinguished. In absence of any evidence showing that parties had intended that pledge be terminated when pledgor came
into possession, it would be presumed that possession of pledgor was precarious or as agent pro hac vice. Civil Code
article requiring actual physical delivery to and possession in creditor or third person in order for privilege to subsist is not
applicable as between parties to pledge (in other words, physical possession is only to affect third parties).
Court mentions that if the insurance policy was assigned, the policy became the property of the P and it could not be regarded
as a pledge, effecting an interruption of prescription. But, bc P did not push for the court to find the policy was assigned, they
assume they abandoned this argument. In contract of pledge, debtor retains title of thing which he places, either actually or
constructively, in hands of his creditor as security for payment of debt. It is impossible to have an assignment and a pledge of
the same thing at the same time
Pledge acknowledges the validity of the principal obligation. It is a standing acknowledgment of the indebtedness. This
means that it STOPS prescription from running.
If third person is holding the pledge for the creditory, thats okay- (precarious possessor?)
What should we take out of this case? RETENTION OF THE ITEM PLEDGED STOPS PRESCRIPTION FROM EVER
STARTING RUNNING. PRESCRIPTION STARTS running the DAY the pledged item is returned!!
o This is what the court had to wiggle around. We know that returning the pledged item (relinquishing
possession) is one way to terminate a pledge. So the court finds he is a precarious possessor to get around
this. It was probably the right resultit was a small town, she helped him out in getting his education, and
we like people to pay their debts.
Three types of life insurance: term, whole life, universal.
Succession of Picard (1959): FACTS: Three notes: 1) $1450 secured by other notes, maturing 90 days after issue date, (I think
he secured his note w/ notes for a loan that others owed him) 2) $1800 secured by a pledge of corporate stock, maturing in 90
days; 3) $650 not secured, maturing in 30 days. P argues that the notes prescribed in 5 years (from maturity date I think).
ISSUES: Have the principal obligations prescribed because the pledged have? HELD: No. Even though the pledged note may
prescribe, the principal obligation will not as long as the creditor holds the pledge. A note can be secured by the pledge of
another note. A pledged note can interrupt prescription.
Here, the pledgee possessed all of the notes (which were pledged to secure his note). What happens is the principal obligor
signs a note promising to pay his debt and gives it to the creditor. Then, to secure this note, he gives the creditor some notes HE
HAS that someone gave him (their promise to pay him).
It is not the contract of act of pledge that interrupts prescription but rather the detention by the pledgee of the thing pledged,
such possession serving as a constant acknowledgement of the debt and hence a constant renunciation of prescription. P
argues that this principle of law is not applicable here bc all of the pledged property possessed by the pledgee was without
value bc they (the notes owed to pledger) had prescribed on their face on the date they were pledged. So he had given the notes
for the debts he was owed, but on the date he gave them to his creditor, they had no value bc they had already prescribed (they
were 25 years old at the time of this case).
it is the detention by the pledgee of the thingswhich serves as a continuing acknowledgementand constant renunciation of
prescription. It is not the detention of a thing of value
Prof notes: delivery of ANYTHING, even something that is totally WORTHLESS, is enough to interrupt prescription as LONG
AS THE CREDITOR has possession of the pledge item (although valueless at the time given or became valueless later). It is
the possession that is a constant acknowledgement of the debt!
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These two cases lead us to these concepts: 1) Pledge interrupts prescription on the principal obligation. 2) The pledge may
become valueless and nonetheless the prescription is interrupted. 3) IF the pledged object is a note it can prescribe and the
principal obligation wont.
If the court truly applied the rule (pledge interrupts prescription on principal obligation), most of these companies would have
gone bankrupt. And this case was during The Great Depression.
LSA-R.S. 9:5807. Interruption of prescription on pledged obligations by payment on obligation secured by pledge
A payment by a debtor of interest or principal of an obligation shall constitute an acknowledgement of all other obligations
including promissory notes of such debtor or his codebtors in solido pledged by the debtor or his codebtors in solido to secure
the obligation as to which payment is made. In all cases the party claiming an interruption of prescription of such pledged
obligation including a promissory note as a result of such acknowledgement shall have the burden of proving all of the
elements necessary to establish the same. For purposes of this Section, a "pledged obligation" shall include any obligation,
including a promissory note, in which a security interest has been granted under Chapter 9 of the Louisiana Commercial Laws
or the corresponding provisions of the Uniform Commercial Code as adopted in any other state, to the extent applicable.
Supposewe have a handnote and a pledged note. The handnote and the pledged note are from the same debtor. This
statute serves to say that if the debtor pays on the handnote, it interrupts prescription on the pledged notebut this only
works if they are the same debtor or co-debtors in solido. If the pledged note is one that was made by another person and
the debtor uses it to secure his handnote, then to interrupt prescription on the pledged note, you have to have the third
person (maker of the pledged note) acknowledge the pledged note.
Prof says: In a collateral mortgage package there are two notes. The first note represents the principal obligation (Note #1).
The second note is the collateral mortgage note (Note #2). A payment by the debtor on Note #1 interrupts prescription on Note
#1. R.S. 9:5807 concerns the interruption of prescription on the collateral mortgage note (Note #2). It addresses several
different factual scenarios:
In the first, the same person makes both Note #1 and Note #2. As the debtor on Note #1 is also the debtor on Note #2, then a
payment by the debtor on Note #1 interrupts prescription on Note #2.
In the second set of facts, the same person makes both notes, but someone else makes the payment on Note #1. If the
individual who makes the payment on Note #1 is liable in solido with the debtor, then prescription is interrupted on Note #2
(the collateral mortgage note).
In the third factual situation, if the individual making the payment on the principal obligation (Note #1) is not the debtor and is
not liable in solido with the debtor on Note #1, then prescription is not interrupted on Note #2.
In a fourth situation, the debtor on Note #1 makes a payment on Note #1. Note #2 is made by a separate entity. The payment
by the debtor on Note #1 does not interrupt prescription on Note #2 unless the maker of Note #2 is a co-debtor in solido with
the principal obligor.
Revisiting the Constant Acknowledgment Rule. Kaplan v. University Lake Corporation (1979): Mentions confusion about the
meaning of Picard. This court will continue to apply the rule that prescription does not run in favor of the debtor whose debt is
secured by a pledge, and that it remains interrupted, as long as the thing pledged is in the possession of the pledgee.
It is not the contract or act of pledge that interrupts prescription, but rather the detention by the pledgee of the thing pledged,
such possession serving as a constant acknowledgment of the debt and hence a constant renunciation of prescription.
However, when the pledgee loses possession of the thing pledged, prescription is no longer interrupted, despite the pledgees
continued detention of the written evidence of the thing pledged.
Distinguishes Picard: in that case, the thing pledged was the promisors obligation to pay as specified in the promissory note.
Court explains that although the Picard stocks lost value, the rights represented by the shares were still in existence and in
pledgees possession. When the actions became barred by prescription the civil action is extinguished, but a natural obligation
still subsists. In Picard, it was the pledgees continued detention of the obligation pledged, subsisting as a natural obligation,
which interrupted prescription, not merely his possession of the promissory note instrument. In my words, the instrument, a
corporeal thing, was merely evidence of the incorporeal obligation pledged. The object was not the thing pledged.
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Profs notes: if you lose possession of the pledged item itselfprescription is no longer interrupted. Just bc you have the
document evidencing the note is not enough. Exif you have the pledge, but not the actual promissory note (you lost it) then
prescription is not interrupted. In this case, the creditor had the security agreement that said I pledge to you X. But he no
longer had Xso prescription was not interrupted.
Hypo: what if I dont feel like holding the pledged item anymore? Suppose in Scott v. Corkern Ms. Scott had given the
insurance policy back to him, did not intend to release debt, like said you still owe me, but I dont want to hold this anymore.
Then prescription starts to run!!
Securing the Income Stream on Rented Real Estate

LSA-R.S. 9:4401. Conditional or collateral assignment of leases or rents MUST READ AND
MASTER!
1. If the creditor wants to perfect this to third parties, put it in the conveyance records. You can put it in the mortgage records
but it will only be there.
2. The tenant can continue to pay the landlord until notified specifically of the assignment.
3. It has to be renewed. Statute tells us how to renew it to affect third parties.
A. Any obligation may be secured by an assignment by a lessor or sublessor of leases or rents, or both leases and rents,
pertaining to immovable property. Such assignment may be expressed as a conditional or collateral assignment, and
may be effected in an act of mortgage, by a separate written instrument of assignment, or by a separate written
instrument of pledge, and may be referred to, denominated, or described as a pledge or an assignment, or both.
(Must be in Writing). The instrument shall state the amount of the obligation secured thereby or the maximum amount of
the obligation that may be outstanding at any time from time to time that such assignment secures. If such conditional or
collateral assignment is made, it shall become absolute upon the assignor's default in respect to the obligation thereby
secured or in accordance with the terms of the instrument creating such assignment, and shall become operative as to the
debtor upon written notice to the debtor from or on behalf of the assignee or the assignor that such assignment has so
become absolute. (1) An assignment relating to a lease or rent of an immovable is given the effect of recordation when an
original or a certified copy of the instrument creating the assignment is filed in the conveyance records of the parish in
which the immovable is situated; however, an assignment contained in an act of mortgage filed in the mortgage records of
such parish on or after September 1, 1995, shall be given the effect of recordation when, to the extent, and for so long as
the act of mortgage is given such effect, without the need for separate recordation in the conveyance records. An
assignment given the effect of recordation has such effect with regard to all obligations, present and future, secured
thereby notwithstanding the date of the incurrence of such obligations or the nature of such obligations. (2) Such
assignment may include all or any portion of the assignor's presently existing and anticipated future leases and rents
pertaining to the described immovable property. As future leases or rents of an immovable come into existence the
assignee's rights as to such leases and rents shall have effect as to third persons from the date of the filing of the
instrument. It shall not be necessary to specifically describe the presently existing or future arising leases or rents; to affect
the assignor, the assignee, the debtor, or other third parties the instrument shall suffice if it contains a general description of
the leases and rents together with a description of the immovable affected by the lease. The immovable property
description shall be the kind of description which, if contained in a mortgage of the immovable, would cause such
mortgage to be effective as to third persons if the mortgage were properly filed for record under the laws of this state. (3)
Once an assignment relating to leases or rents of an immovable is so filed, the assignee shall have a superior claim to the
leases and rents assigned and their proceeds as against all other creditors whose claims or security interests arise or are
perfected after the filing of the assignment, notwithstanding the fact that the debtor is not notified of or does not consent to
the assignment or that the assignee is not in possession of the immovable property. (4) Except for purposes of Subsection
G, the term "lease" as used in this Section includes a sublease.
B. This Section is intended to recognize one method of securing obligations, and shall not have the effect of repealing any
other provision of law in respect to pledge, pawn, and assignment of incorporeal rights.
C. This Section is remedial and shall be retroactive. All assignments of leases or rents heretofore made in compliance with the
provisions of this Section are hereby validated.
D. A landowner or mineral servitude owner may make a conditional or collateral assignment pursuant to this Section of rents,
royalties, delay rentals, shut-in payments, and other payments which are rent or rentals under Title 31 of the Louisiana
Revised Statutes attributable to the landowner's sale, lease, or other disposition of his right to explore and develop his land
for production of minerals or to the mineral servitude owner's sale, lease, or other disposition of his mineral right. This
Section shall not otherwise apply to rents, royalties, overriding royalties, bonuses, and other payments and other rights
under mineral leases and other contracts relating to minerals.
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E. This Section shall apply to assignments of leases of movable property subject to the Louisiana Lease of Movables Act
entered into prior to the time Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.) becomes effective,
including without limitation those assignments of leases that affect rights arising after the effective date of Chapter 9 and
those continuing assignments that may secure future obligations, lines of credit, and other ongoing credit facilities. This
Section shall further apply to assignments of leases of immovable property located in this state without regard to the time
Chapter 9 becomes effective.
F. (1) Except as otherwise agreed to by the parties, the assignee's interest in the leases or rents assigned continues in any
identifiable proceeds including collections received by the assignor. In the event of insolvency proceedings instituted by or
against an assignor, the assignee has a perfected security interest in proceeds of the leases or rents or both leases and rents
assigned, as follows: (a) In identifiable noncash proceeds and in separate deposit accounts containing only proceeds. (b) In
identifiable cash proceeds in the form of money which is neither commingled with other money nor deposited in a deposit
account prior to the insolvency proceedings. (c) In identifiable cash proceeds in the form of checks and the like which are
not deposited in a deposit account prior to the insolvency proceedings. (d) In all cash and deposit accounts of the assignor
in which proceeds have been commingled with other funds, but the perfected security interest under this Section is subject
to any right of set-off. It is further limited to an amount not greater than the amount of any cash proceeds received by the
assignor within ten days before the institution of the insolvency proceedings, less the sum of: (i) the payments to the
assignee on account of cash proceeds received by the assignor during such period; and (ii) the cash proceeds received by
the assignor during such period to which the assignee is entitled under Paragraphs (a) through (c) of Subsection F(2).
G. (1) The rights of an assignee against the debtor shall be subject to any dealing by the debtor with the assignor, any
other assignee, or other successor in interest of the assignor until the debtor receives written notice from or on behalf of the
assignee or the assignor that the assignment of the particular lease or rent of which he is debtor has become absolute. A
notification which does not reasonably identify the rights assigned is ineffective. If requested by the debtor, the assignee
must seasonably furnish reasonable proof that the assignment has been made and unless he does so the debtor may pay the
assignor.(2) Except as provided in this Subsection (G), a debtor who has received written notice that the assignment has
become absolute will not be discharged from his debt if he pays anyone other than the assignee. In any case in which
a debtor is not notified of the assignment made in compliance with the provisions of this Section and, in good faith, makes
payment of rent in whole or in part to the assignor or the assignor's successor, or to a subsequent assignee of the rent who
shall have notified the debtor of that assignment, then to the extent of payment, the debtor shall be exonerated of liability
to make payment to the first assignee; however, the person to whom payment was made shall be accountable and liable to
the assignee for the sums received. The debtor may, at its option, commence concursus proceedings instead of making
payment to the assignor or the assignee.(3) Notwithstanding the debtor's receipt of written notice of the assignment, a
modification of or substitution for the lease made in good faith and in accordance with reasonable commercial standards is
effective against an assignee, unless the debtor has otherwise agreed with the assignee. In either event the assignee
acquires rights under the modified or substituted lease corresponding to the assignee's rights under the original lease. No
termination or modification of or substitution for a lease shall be effective against an assignee as to the right to the
payment of rent or a part thereof under an assigned lease which has been fully earned by performance. The assignment
may provide that modification of or substitution for the lease is a default by the assignor.(4) A term in any lease between a
debtor and an assignor is ineffective if it prohibits assignment of rent or prohibits creation of a security right in rent due or
to become due or requires the debtor's consent to such assignment of rent or security interest in rent.(5) The mere existence
of a conditional or collateral assignment does not impose contract or tort liability upon the assignee for the assignor's acts
or omissions relating to such leases.
H. (1) The effect of recordation of all assignments recorded on or after September 1, 1990, ceases ten years after the date of
the instrument creating the assignment, except, that if an instrument creating an assignment describes the maturity of an
obligation secured thereby and if any part of the described obligation matures nine years or more after the date of the
instrument, the effect of recordation ceases six years after the described maturity date. A recorded instrument creating
an assignment may be reinscribed by filing a signed, written notice of reinscription. The notice shall state the name of
the assignor as it appears in the recorded instrument and recordation number or other appropriate recordation information
of the instrument or of a prior notice of reinscription and shall declare that the instrument is reinscribed. A notice of
reinscription that is filed before the effect of recordation ceases continues that effect for ten years from the date the notice
is filed. A notice of reinscription that is filed after the effect of recordation ceases produces the effects of recordation, but
only from the date the notice is filed. The method of reinscription provided in this Section is exclusive, and neither an
amendment of an instrument creating an assignment nor an acknowledgment of the existence of an assignment by the
assignor constitutes a reinscription of the instrument. Notwithstanding the foregoing, the effect of recordation of an
assignment contained in an act of mortgage filed on or after September 1, 1995, continues for so long as the act of
mortgage is given the effect of recordation. In such cases, reinscription of the act of mortgage constitutes reinscription of
the assignment contained therein. (2) Notwithstanding the foregoing provisions, the effect of registry of all assignments
recorded on or before August 31, 1990, shall be determined by the other laws of registry applicable thereto. (3) The
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recordation of an assignment may be cancelled by the consent of the assignee evidenced by any written release, under
private signature or otherwise. Cancellation or erasure of an act of mortgage containing an assignment constitutes
cancellation of the assignment contained therein, whether the act of mortgage was recorded in the mortgage records or
conveyance records, or both.
How does one give a pledge on rental income streams? In addition to mortgaging the rights in the land, a lessor also may
encumber the rental income stream of the property.
Perfection occurs only under this statute. There are two ways of perfecting the security interest:
1) If all the lender wants is a security interest in the rental stream, then the lender may file an act (denominated either as
an act of assignment or pledge) in the conveyance records of the parish where the immovable is located.
2) If the lender intends to take a mortgage on the lessors property interest as well as a security interest in the rental
stream, then the security interest may be contained in the act of mortgage itself. A lender who has included a right to
the rents in the mortgage need file the document only in the mortgage records.
Assignment in Louisiana refers to a transfer of ownership and is a species of sale. Louisiana does not have a concept of
transferring title to secure a loan.
The rents that may be assigned are not limited to existing lease income. Anticipated and future rents may be the subject of
assignment and no special language is required. It is sufficient if the instrument contains a general description of the
leases and rents.
There is a special requirement that the immovable property by carefully described in order that the security interest in rents
be effective against third parties; the property description must be one which if contained in a mortgage of the
immovable, would cause such mortgage to be effective as to third persons if the mortgage were properly filed for record
under the laws of the state. Rent assignment must also state the amount of the obligation secured thereby or the
maximum amount of the obligation that may be outstanding at any time from time to time that such assignment secures.
Length of Time that the inscription of the rental assignment affects 3rd parties depends upon whether it is contained in post
9/95 mortgage.
1) Post-1995IF it is then the effect continues as long as the mortgage continues to affect 3rd parties. Genl Rule: if the
obligation the mortgage described is due less than nine years from the date of the document, the effect of inscription
lasts ten years from the date of the document (not 10 years from inscription in the public records). If the obligation
the mortgage describes is due nine or more years from the date of the document, then the inscription lasts six years
from the maturity date described. A timely reinscription preserves its original rant, (it ranks from the date it was filed)
and extends the time of inscription ten years from the date of reinscription.
2) Pre-1995 the same timeframes set forth above for reinscription apply but now the inscription must be in the
conveyance records.
Reinscription. A written notice of reinscription may be done by the lender and no signature of the lessor is required. No
notary or witnesses are necessary. The notice must state the name of the assignor as it appears in the recorded instrument
and recordation number and shall declare that the instrument is reinscribed. IF it is filed too late it remains valid but
instead of retaining the original ranking date, the lender gets a new ranking date starting with the untimely reinscription.
A Louisiana Assignment of rents gives a lender tracing rights in the rental stream equivalent to the rights of a secured
lender under UCC 9. An assignment of rents allows a lender to assert a security interest in any identifiable proceeds
including collections and cash on hand.
Because a rent assignment may be absolute or conditional or collateral a tenant has no obligation to remit rents to
the secured party until notified in writing. Louisiana law specifically prohibits any clause in a lease contract that prohibits
the assignment of rents or that requires prior notice to the tenant before creating the assignment.
Security agreement: pg. 59 of form book.
UCC 1 does not go in conyance records or mortgage records. UCC 1 goes in the UCC RECORDS.
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2. NOT EVERYTHING can be done by the filing of the UCC 1. There are crtain things that uCC 1 wont work on. Most
importantly, collateral mortgages.
Art. 3158. Formalities and contents of pledge; requirements for pledge of promissory notes and
other written obligations
A. But this privilege shall take place against third persons only in case the pledge is proved by some written instrument, in
which shall be stated the amount of the debt intended to be secured thereby, and the species and nature of the thing given
in pledge; or the description of the thing pledged may be contained in a list or statement annexed to the instrument of pledge
and giving its number, weight, or descriptive marks.
B.(1) When a debtor wishes to pledge promissory notes, bills of exchange, bills of lading, stocks, bonds, policies of life
insurance, or written obligations of any kind, he shall deliver to the creditor the notes, bills of exchange, bills of lading, stocks,
bonds, policies of life insurance, or other written obligations, so pledged, and such pledge so made, except as hereinafter
provided with regard to life insurance policies, shall without further formalities be valid as well against third persons as against
the pledgor thereof, if made in good faith.
(2)(a) All pledges may be made by private writing of any kind if only the intention to pledge be shown in writing, but all
pledges, except of a life insurance policy in favor of the insurer, must be accompanied by actual delivery.
(b) The pledge of a life insurance policy must also be evidenced by a written assignment thereof as security to the pledgee and
by delivery of the pledge or assignment to the insurer and, unless the beneficiary thereof may be changed upon the sole request
of the insured, or unless pledge or assignment without the consent of the beneficiary be specifically provided for in the policy,
must be accompanied by the consent of any named beneficiary who is not the insured or his estate.
C.(1) Whenever a pledge of any instrument or item of the kind listed in this Article is made or has been made to secure a
particular loan or debt, or to secure advances to be made up to a certain amount, and, if so desired or provided, to secure any
other obligations or liabilities of the pledgor or any other person, to the pledgee, or its successor, then existing or thereafter
arising, up to the limit of the pledge, such as may be included in a cross-collateralization clause, and the pledged instrument or
item remains and has remained in the hands of the pledgee or its successor, the instrument or item may remain in pledge to the
pledgee or its successor, or without withdrawal from the hands of the pledgee or its successor, be repledged to the pledgee or its
successor to secure at any time any renewal or renewals of the original loan or any part thereof or any new or additional loans,
even though the original loan has been reduced or paid, up to the total limit which it was agreed should be secured by the
pledge, and, if so desired or provided, to secure any other obligations or liabilities of the pledgor or any other person to the
pledgee or its successor, then existing or thereafter arising, up to the limit of the pledge, without any added notification or other
formality, and the pledge shall be valid as well against third persons as against the pledgor thereof, if made in good faith; and
such renewals, additional loans and advances or other obligations or liabilities shall be secured by the collateral to the same
extent as if they came into existence when the instrument or item was originally pledged and the pledge was made to secure
them.
(2) Such cross-collateralization clauses include but are not limited to pledges securing obligations of more than one person;
pledges securing more than one obligation or future obligations; or any combination of these, whether such obligations are
direct or indirect, absolute or contingent, liquidated or unliquidated, or otherwise. Such clauses are not and never have been
against the public policy of Louisiana.
D.(1) The assignment or transfer of the principal obligation does not: extinguish the pledge; constitute a new pledge or
issuance; or affect the retroactive effect given by this Article for obligations to the original pledgee or its successor. In all
cases, if the pledge at the time of its delivery, issuance, or reissuance was intended to secure obligations that may arise in the
future, the pledge relates back to the time of delivery, issuance, or reissuance if and when such future obligations are incurred,
as long as the pledgee, the pledgee's agents, or the pledgee's successors have maintained possession of the pledged item.
(2) Such future obligations include but are not limited to:
(a) Lines of credit;
(b) Situations where monies have been advanced, paid in whole or in part, one or more times, and readvanced pursuant to one
or more obligations that the pledge was given to secure; or
(c) Situations in which the pledgor or any other persons could not have required the pledgee or its successors to advance funds
under one or more obligations that the pledge was given to secure.
E. The delivery of property on deposit in a warehouse, cotton press, or on storage with a third person, or represented by a bill
of lading, shall pass to the pledgee by the mere delivery of the warehouse receipt, cotton press receipt, bill of lading, or storage
receipt, showing the number, quantity or weight of the thing pledged; and such pledge so made, without further formalities,
shall be valid as well against third persons as against the pledger thereof, if made in good faith. Such receipts shall be valid
and binding in the order of time in which they are issued for the number, quantity, or weight of the things pledged, if there
should not be enough to meet all receipts so issued.
F. Nothing herein contained shall be construed to repeal any part of Title 9, Sections 4301 to 4382, both inclusive of the
Louisiana Revised Statutes of 1950.
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U.C.C. Article 9 Notes...
Uniform code promulgated by uniform law commission. La adopted article 9 in 1990. It is a statute that takes an entirely
different approach than Louisiana law. You need:
(1) Document explaining what the loan is why, whats it for: the deal document.
(2) Name is really important, description of creditor and collateral,
(3) Where to file? Individual: Residence of debtor, or Business: where the business/corporation was formed,
(4)
LESSON 7. SECURITY INTEREST IN MOVABLES: TECHNICALITIES OF HOW TO PLEDGE; THE EFFECTS

OF PLEDGE
UCC Art. 9 Security Interests
Statute applies to ALL movable property, both tangible and intangible, all the incorporeal and corporeal rights that attach
and the proceeds of such. It does not apply to immovable property and its rights; to ships; to airplanes themselves but it
does apply to certain portions of airplanes; to wage assignments.
It allows one to create any type of security interest you want. Whereas in Louisiana there is a cubbyhole theory of law in
Louisiana. The UCC adopted a consent theory. Recordation is simplified with a single form sufficing for almost every
kind of security interest and a single place to record.
Definitions: the UCC definitions of collateral fall into these 7 main categories
1) GOODSapplies to all tangible movables that have intrinsic value except standing timber, minerals before extraction, and
growing crops. More on Goodsgoods are the primary collateral for much commercial and retail lending and are divided
into five categories:
a) Consumer Goods: items primarily for personal, family or household purposes. EX: television, stereo, car, boat,
bedroom furniture
b) Inventory: broad category including items for sale or lease, as well as raw materials used for work in progress and
materials consumed in a business. TEST: whether the item is for sale, lease, or manufacturing in the ordinary course
of business
c) Farm Products: includes agricultural commodities (like soybeans), supplies used or produced in farming operations
(like cattle feed), livestock, and products of commodities or livestock (like ginned cotton, eggs, milk, molasses) if they
are in the possession of one engaged in farming operations. NOT INCLUDED: standing timber
d) Equipment: (residual category) Goods used in business that are not inventory, consumer goods, or farm products. The
catch all category. EX: typewriters, office equipment, office furniture. GENERALLY: when they are fixed assets or
have, as identifiable units, a relatively long period of use. These items are inventory if, although not held for sale, are
used up or consumed in a short period of time in the production of some end product.
e) Does not include things that have value bc they represent a valuable right, such as money, negotiable notes, bills of
lading, patents, etc
2) GENERAL INTANGIBLEScopyrights, patents, trademarks, things that cant be seen or touch, such as goodwill,
copyrights, causes of action, patents and trademarks.
a) Does not include: money, accounts, chattel paper, documents or instruments
3) ACCOUNTSa type of intangible. a form of intangible that includes, but is broader than, accounts receivables. Any right
to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance. (Only for movables, cant use for immovable like a landlords rent
money. See: RS 9:4401. Does not include tort claims, bank accounts, rights to payments evidenced by chattel paper or an
instrument (negotiable notes), etc.)
4) INSTRUMENTSa broad definition that includes negotiable instruments, commercial paper, certificated securities (not
stocks which is covered in article 8), or any other writing which evidences a right to the payment of money and is not itself
a security agreement or lease and is of a type which is in the ordinary course of business transferred by delivery with any
necessary endorsement or assignment.
5) DOCUMENTSwarehouse receipts and bills of lading (allows one to get merchandise off a ship)
6) CHATTEL PAPERone or more documents together that evidence both a monetary obligation and a security interest.
a) INCLUDES: single form note, chattel mortgage, installment sales contract w/a security interest
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b) MAY INCLUDE: collateral chattel mortgage, but this was not used after 1990
7) FIXTURESGoods other than consumer goods and manufactured homes; essentially component parts of a building, land,
and other constructions and which are used in the conduct of a trade, business, occupation or other commercial or
industrial activity. C.C. art. 466 & 467 component part codes: part of the immovable. Mortgage affects all component parts
of the property. A fixture filing allows you to keep it as a component part of the immovable. [trap] - BUT 1. Works only on
commercial property bc consumer goods cannot be fixture filings. AND 2. To be effective as to the 3rd parties, it must be
filed before attachment.
8) PROCEEDS-when the item is sold, traded, or converted into cash, the security interest attaches to the cash, and when the
cash is used to buy other items, it can attach to that as well.
Not Fixed Things can change between categories.

*In yard being cut to be sold is inventory. The inventory is then sold to a furniture manufacturer on credit to be paid in 30 days.
Meaning it has been transferred into an accounts receivable. When collected, they now have cash = proceeds. So youll need a
security interest in the inventory, accounts receivable and proceeds.
*Lumber is manufactured into tables and chairs = inventory. Sold to a retailer who gives them accounts receivable which may
become proceeds.
*The retailer has it on sale in his showroom = inventory. He also has bookcases. A consumer buys the table and chairs =
consumer goods. The bookcase is sold to a CPA who installs it to a wall with bolts = fixture. A restaurant buys the table and
chairs for its business = equipment.
Security Interest Can Be Given In Many Ways

1) Collateralthe items (goods and intangibles) subject to a security interest
2) Secured Partythe creditor with the security interest
3) Debtorbroad terms that includes the borrower(s) obligated on the secured indebtedness. It does not include sureties who
are secondarily liable
Attachmentthe earliest concurrence of the point at which the debtor has rights in the collateral and the creditor obtains a
security interest, as bw the parties (does not matter whether it affects third parties) in the collateral for value. concept where
the debtor has right in the collateral and the creditor obtains security in it.
Perfectionthe point at which the security is perfected as against the world. Something can be attached but not perfected.
Recorded the act of sale makes the security interest effective as to third parties. A creditor must perfect the security interest if
he is to have any rights in the collateral against 3rd P
Financing Statementthe UCC1. This is the short form notice that is filed w/the Clerk of Court. Note that a faxed copy will do
as long as it is legible.
RankingPurchase Money Security Interestthose who grant credit to purchase items have special super rank
To Get Security Interest One Must Have

1) Attachment:
1) A security agreement, in writing, signed by the debtor, containing a description of the collateral. It should also contain
the debtors address, a description of the loan, debtors SS, and a representation by the debtor that the info given is
correct, though this is not required. It is the written evidence of the agreement; it is not filed. OR THE CREDITOR
MUST HAVE--
2) Possession of the collateralnote that this can be done by written agreement if the creditor does not have possession
of the collateral AND
3) Value has been given AND
4) The debtor has rights in the collateral
2) Perfection:
1) Possession of the Collateral OR filing of a financial statement
A financing statement is filed to give notice to the world; it is called a UCC1. Louisiana, though the last state to adopt UCC 9,
is the most progressive state on financing statement. Most states have a dual filing system (county and secretary of state).
Louisiana allows one to file the financing statement in any parish you want and the index is kept by the secretary of stateany
clerk will suffice (exception, Orleans Parish, where it must be filed w/mortgage records). Also note, it needs to be filed in the
right recordit MUST be filed in the UCC records, not mortgage/conveyance record. But once you start to file in one parish
you must file subsequent continuation statements there. The reason for this is that filings are not kept w/the Sec of State; the
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Sec only keeps an index or names and information, no originals. So the idea is that once one ascertains where an original is
located (using the index system at Sec. of State), you can then go to that clerks office and get all of the related documents. DO
NOT MISFILE!! Note that not everything requires filing. Some things you only have to possess. In fact, we need to be very
sure we know the specific rules, bc some security interests can only be perfected by actual possession.
*You can Never Perfect a collateral mortgage note under the UCC.
Ex: if the creditor is given physical possession of the debtors stock certificate in order to secure a loan, the creditor has an
attached security interest in the stock cert even though nothing is in writing. However, if the bank wants a security interest in a
widget, which is inventory on companys premises, the bank must have a written security agreement
Filing Traps for the Unwary

1) Fixturesonly applies in the context of non-consumer goods and before it becomes a component parts one can get a
security interest filing.
2) Accountscan be done only by filing and the account is not necessary filed in the local state. It must be filed in the state
where the principal place of business is located.
3) Goodsthat move across state lines must be refiled in the state that they have been relocated within 120 days. If the
debtor moves the security interest must be refilled where the debtor moved within 120 days.
4) Uncertificated securities must be filed in the state of incorporation of the company.
5) Time Limits To Keep Perfection Alive --Continuation Statements-must reinscribe no earlier than six months before the
lapse and no later than the lapse. It must be filed in the same parish as the original.
6) Trailer Collateral-Cash and Non-cash proceeds, goods, accounts, inventory when the items is transformed into these
things. If you list all these things in the UCC 1 then you might have a better ranking. Inventory and non-cash and cash
proceeds wording allows one to pick up all the transformations along the way.
What Does One Do With The Security Interest?
More on the contents of the security agreement:
Grant of continuing interest: the word grant should be used bc it is standard language to indicate the giving of a security
interest. Should also say continuing to pick up all collateral whether now or existing in the future
Standards for Remedies: this alleviates creditor pain of having to use judicial process to foreclose. Now, under UCC 9, the
creditor can notify the debtor under the instrument to make payment, sell collateral after default, and can lease it after default in
any commercially reasonable manner. So it is important to specify in advance in the K what is commercially reasonable
Confession of Judgment: still necessary to use executory process, so if creditor wants the option to use, there needs to be a
confession of judgment contained in the security agreement
Cross-Collateralization Clause: obligations covered by a security agreement may include future advances. So, to pick up all
kinds of future loans, we need this to be in the security agreement.
Waiver of Pre-existing defenses: banks are hit w/numerous lender liability claims so the creditor should put a clause in the
security agreement in which the debtor agrees to waive any defenses he might have to any events prior to the signing of the
agreement
Due on Sale Clause: this accelerates the loan if the debtor sells the collateral. While the creditor is usually protected bc the
agreement usually contains a clause that says the debtor will not sell to the prejudice of the creditor the creditor will want to
have this clause if he wants to be able to accelerate the debt. This is bc not every sale will prejudice the creditor, and so not
every to the prejudice clause is construed as a due on sale. For example, a sale of equipment with a security interest is not
necessarily prejudicial to the creditorthe security interest follows the equipment, but it is possible the third party will use it
and not damage it. So if the creditor really wants to protect themselves, they need the magic language of due on sale.
Reservation of Rights: creditor should have a clause that says the creditors failure to take action does not result in waiver of
right to take action later. In LA, where a creditor has acquiesced to a course of conduct, a reservation of rights clause might not
be enough; the creditor might need to send notice that the acquiescence has stopped.
How long does filing last?
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5 years from date of filing. But note that a continuation statement must be filed in the same clerk of court where the original
UCC1 is filed. Continuation statement no earlier than 6 months before the time elapses.
What is so great about a UCC security interest: once there is a properly perfected interest, transformation of the collateral will
not deprive the secured party of the security interestcreditor can still get the proceeds.
Deficiency Judgment Act. In Louisiana one does not become owner of the collateral, just the right to seize, sell the property and
to the proceeds from such. UCC9just like it allowed you to create any security device, it allows you to foreclose on the
property in the manner you like as long as it is commercially reasonable. Commercial reasonability is measured by the price
and not the procedure. Creditor has the burden of proof in proving commercially reasonable.
UCC9 is creditor friendly. The statute clearly favors creditors.
Can you get a security interest in a tort claim? Accounts, in the footnote, does not include tort claims. Litigious rights? King
says you cannot involuntarily sieze someones right to sue to collect a debt. Court says no. Cannot seize the right involuntarily,
but we can perhaps voluntarily give the right through the UCC. Difference between seizing the right and assigning the right.
Conerly says if you can do it at all, heres how you do it.
King v. Illinois National Insurance Co. Insured's judgment creditor got writ of fifa and had sheriff seize her (the insureds)
unexercised right to institute litigation against her insurer for bad faith failure to settle within policy limits. An individual's
inchoate right to file suit is a strictly personal right not subject to involuntary relinquishment, such as seizure by writ of fieri
facias, unless expressly provided for under the law
The Conerly Corp. v. Regions Bank: Contractor's claim against developer's bank and its officer for bad faith breach of alleged
oral contract sounded in contract, rather than tort, and thus, regardless of potential consequential damages, claim was
assignable (so, my thought, can be seized). Bc it was a contractual right, is not strictly personal.
LESSON 8. SECURITY INTERESTS IN MOVABLESINTERACTION OF PRE-UCC LAW; ANTICHRESIS
La.C.C.P. Art. 1092. Third person asserting ownership of, or mortgage or privilege on, seized property
A third person claiming ownership of, or a mortgage or privilege on, property seized may assert his claim by intervention. If
the third person asserts ownership of the seized property, the intervention may be filed at any time prior to the judicial sale of
the seized property, and the court may grant him injunctive relief to prevent such sale before an adjudication of his claim of
ownership.
If the third person claims a mortgage or privilege on the entire property seized, whether superior or inferior to that of the
seizing creditor, the intervention may be filed at any time prior to the distribution by the sheriff of the proceeds of the sale of
the seized property, and the court shall order the sheriff to hold such proceeds subject to its further orders. When the intervener
claims such a mortgage or privilege only on part of the property seized, and the intervention is filed prior to the judicial sale,
the court may order the separate sale of the property on which the intervener claims a mortgage or privilege; or if a separate
sale thereof is not feasible or necessary, or the intervener has no right thereto, the court may order the separate appraisement of
the entire property seized and of the part thereof on which the intervener claims a mortgage or privilege.
An intervener claiming the proceeds of a judicial sale does not thereby admit judicially the validity, nor is he estopped from
asserting the invalidity, of the claim of the seizing creditor.
Art. 2655. Giving in payment, definition

Giving in payment is a contract whereby an obligor gives a thing to the obligee, who accepts it in payment of a debt.
Art. 2656. Delivery essential to giving in payment

Delivery of the thing is essential to the perfection of a giving in payment.
Art. 3162. Delivery to creditor or to third person

In no case does this privilege subsist on the pledge, except when the thing pledged, if it be a corporeal movable or the evidence
of the credit if it be a note or other instrument under private signature, has been actually put and remained in the possession of
the creditor, or of a third person agreed on by the parties.
Art. 3163. Partial payment of debt secured by pledge of several things

When several things have been pawned, the owner can not retake one of these without satisfying the whole debt, though he
offers to pay a certain amount of it in proportion to the thing which he wishes to get.
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Art. 3164. Right of retention until payment of debt

The creditor who is in possession of the pledge, can only be compelled to return it, but when he has received the whole
payment of the principal as well as the interest and costs.
Art. 3165. Rights of pledgee on default of debtor; procedure

The creditor cannot, in case of failure of payment, dispose of the pledge; but when there have been pledges of stock, bonds or
other property, for the payment of any debt or obligation, it shall be necessary before such stocks, bonds or other property so
pledged shall be sold for the payment of the debt, for which such pledge was made, that the holder of such pledge be compelled
to obtain a judgment in the ordinary course of law, and the same formalities in all respects shall be observed in the sale of
property so pledged as in ordinary cases; but in all pledges of movable property, or rights, or credits, stocks, bonds or other
movable property, it shall be lawful for the pledger to authorize the sale or other disposition of the property pledged, in such
manner as may be agreed upon by the parties without the intervention of courts of justice; provided, that all existing pledges
shall remain in force and be subject to the provisions of this act.
Art. 3166. Ownership of thing pledged

Until the debtor be divested from his property (if it is the case), he remains the proprietor of the pledge, which is in the hands
of the creditor only as a deposit to secure his privilege on it.
Art. 3170. Pledgee's right to enforce payment of credit pledged; imputation of proceeds
If the credit which has been given in pledge becomes due before it is redeemed by the person pawning it, the creditor, by virtue
of the transfer which has been made to him, shall be justified in receiving the amount, and in taking measures to recover it.
When received, he must apply it to the payment of the debt due to himself, and restore the surplus, should there be any, to the
person from whom he held it in pledge.
Art. 3172. Surplus or deficiency after sale

If the proceeds of the sale exceed the debt, the surplus shall be restored to the owner; if, on the contrary, they are not sufficient
to satisfy it, the creditor is entitled to claim the balance out of the debtor's other property.
Factoring: when a biz allows a charge account, they represent the money owed on these accounts receivables in a ledger book,
invoices, computer generated accounts, etc. Although the money has not yet been received, it is a profit for the biz. To get some
cash flow, they often sell these accounts for less than their face value or use them as collateral for loans. This is called
factoring. The factor is the company that buys up the accounts and collects the money from the debtor. The factors profit is the
difference in the amount he bought the account for and what he collects. Banks will also loan money secured by these accounts.
The biz agrees to pay the loan out of the cash received when the account is collected. But, these accounts are not always fully
collectible or are not paid timely, so banks have special criteria when dealing with receivables. They often only want accounts
that are current (less than 30 days old), and will pay no more than 80% of face value. They will often want to know how long it
takes to collectif it is a long time, they will often pay much less than 80%. There will also be audit requirements set by the
lender. Notea UCC1 must be filed in the bizs PPB, not the lender or factors home state.
HYPO #1: Debtor gives creditor 1 a UCC filed security interest pledge on diamonds. D also gives Creditor 2 a UCC 9
diamonds filed. D is in default with C2. C2 asks C1 for the diamonds. What can C1 do? C1 must give it to the sheriff and get
a receipt. C1 must go into court and get a ranking on the proceeds. LA. C.C.P. art. 1092.
Horner v. Dennis (1882): FACTS: Horner held a note that Utz had pledged to him. Horner is asking the court to issue an
injunction stopping Utzs other creditor from seizing the note. The injunction was dissolved. HELD: It is now well settled in
our jurisprudence, that the property of any nature, held in pledge by a creditor, may be seized from his possession by another
creditor of the common debtor, and sold subject to the pledgee's claim. The only right which the law secures to the pledgee is to
satisfy his debt by privilege and in preference to the other creditors of his debtor, out of the product of the movable, corporeal
or incorporeal, which has been thus burdened. Nothing in the nature of the contract can authorize the pledgee to hold
indefinitely the property pledged, which is usually far in excess of the amount thereby secured, and to thus deprive other
creditors of their recourse on the debtor's property. Were it otherwise, the creditor in possession would become by his own
wrong the proprietor of the pledge, and that in open violation of the law which prohibits him from acquiring it by such means,
and expressly declares that it is only a deposit to secure his debt
Must intervene, under CCP 1092, before the distribution by the sheriff of the sale. Right is: to get a privilege on the proceeds of
the sale.
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HYPO #2: C1 decides to sell the diamonds and/or give it away. What can the debtor do? An agreement can be done after the
default has occurred but not before the debt comes due. Dation en paiement is ok however where the debtor agrees to make the
creditor the owner. The privilege is on the proceeds of the sale and not the item itself.
Alcolea v. Smith (1922): FACTS: Smith loaned Alcolea some money. The contract provided that if the plaintiff failed to pay
the loan w/in the term, the pledged diamonds would then be owned by defendant-pledgee. HELD: If the debtor defaults on
payment, the thing pledged can NEVER become the property of the creditor-pledgee without further action on the part
of the creditor. Court notes that it all civil law countries, it is considered contra bones mores. This is to prevent odious
speculations by those that have money, at the expense of those who need itespecially bc it is common for the thing to have
value much greater than the debt. However, the parties could agree, AFTER the payment comes due, that the pledgee may keep
the pledged items in satisfaction of the debt.
Cant agree before default. Can agree after default. In Pomez, transfer to creditor happened after default, obligation became due
before sought. Here, transfer happened before default, obligation became due after transfer. Designed to protect consumers.
What do you do if you have a pledge and want to have a sale? 3165 says you cant become owner but you can dispose of it.
Elmer v. Elmer (1967): HELD: Pledgee sold stock to himself without notice to the pledger. There were provisions in the
promissory notes authorizing to sell pledged securities in the event of default at private sale without recourse to judicial
proceedings, with no demand or notice required. The notes also authorized holder to become purchaser at such sale. These
provisions are not in themselves invalid, however, such provisions may not be used as a cloak for what amounts to an
appropriation or forfeiture by pledgee of the pledged item. A mere literal compliance with the terms of the pledge is not in itself
sufficient to render valid the sale and purchase by the pledgee of the subject of the pledge, since the pledgee occupies a
fiduciary relation to the pledgor. Where pledgee of stock given as security for loan had no interest in payment of note or in
conducting fair sale of stock upon default but was solely interested in acquiring the stock for himself and he sold stock to
himself without notice to pledgor at purported private sale which consisted of three documents prepared over the weekend by
pledgee's attorney, pledgee dealt with the property in manner incompatible with his fiduciary character and the pretended sale
amounted to no more than an appropriation by pledgee of subject of pledge to serve his own personal need and was set aside.
The sale of the stock for the price and in the manner and for the purpose it was made shows a dealing with the property
incompatible with the pledgees fiduciary character.
UCC9 requires todaya secured party after default may sell, lease, or otherwise dispose of any or all of the collateral in
its then condition or following any commercially reasonable preparation or processing. Reasonable notification of the
time place of any public sale or reasonable notification of the time after which any private sale or other intended
disposition is to be made shall be sent by the secured party to the debtor. In the case of consumer goods no other
notification need be sent. The fact that a better price could have been obtained by a sale at a different time or in a different
method from that selected by the secured party is not of itself sufficient to establish that the sale was not made in a
commercially reasonable manner. If the secured party either sells the collateral in the usual manner in any
recognized market therefore or if he sells at the price current in such market at the time of his sale, he has sold in a
commercially reasonable manner.
*Book value = cost of assets depreciation of assets (no relation to stock price)
*Market vlue = willing buyer, willing seller, not compelled to buy
Avoyelles Trust & Savings Bank v. Estate of Liliedahl (1977): FACTS Stock were pledged. When debtor defaulted, pursuant
to a money judgment, a writ of fifa was issued to seize the stock. Notice of sheriffs sale published. Shareholders intervened in
the sale arguing that there was a provision that no shareholder shall sell his stock without first notifying the corp and allowing
the corp to decide whether to purchase the stock (corp had right of first refusal). In the present situation, the bank is not seeking
to be recognized as owner of the stock, it is simply attempting to enforce a right of sale under the laws of pledge. Case
concerns the effect and enforceability of the corporate stock restriction in a judicial sale. HELD: Stock restriction is
meaningless unless we apply it to both voluntary and involuntary transfers. Since there are no public policy implications here,
the restriction stands especially since the parties will be irreparably harmed (the irreparable harm is that the shareholders had
intended a closed corp, with only themselves, their spouses and heirs as members). Louisiana allows corporations to restrict
the transfer of stock, provided that the restrictions placed on such transfers are plainly printed on the stock certificate or
sufficient information is given of the restriction on the certificate so as to alert third parties.
Discussion notes:
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It can be argued that the corporation could have prevented the present situation by forbidding stockholders the right to pledge
their shares. However, since restrictions of trade are not favored in law, it would perhaps be wise not to hold the corporation to
such a duty
However, the bank could also have foreseen such a situation when it accepted the pledge, and it was clearly warned of the
prohibition by the warning on the certificates.
Antichresis pledge of immovable property where the creditor gets the fruits. One can have a mortgage and antichresis.
Antichresis plays no role today.
Gautreaux v. Harang (1938): A notarial act transferring a tract of land, in the form of a cash sale, but providing that this sale
is made to secure a debt, for recited consideration equal to amount due to purported vendee on outstanding mortgage notes,
was a pledge of an immovable or antichresis. An antichresis is only an ancillary contract, and must be supported by a
debt or principal obligation, whether such obligation be pre-existing or be incurred in the making of the antichresis. The
validity of a sale as constituting a contract of antichresis was not affected by fact that vendee already had a mortgage on the
same property. An act of pledge or antichresis did not modify previous act of mortgage in favor of beneficiary thereof, who
could select which of the two he would enforce.
LESSON 9: INTRODUCTION TO MORTGAGE

Substance over Form.
Is the K effective between the parties?
Is it effective as to third parties?
Effective- Start? - Effective- Stop?
La. C.C. Art. 1839. Transfer of immovable property

A transfer of immovable property must be made by authentic act or by act under private signature. Nevertheless, an oral
transfer is valid between the parties when the property has been actually delivered and the transferor recognizes the transfer
when interrogated on oath.
An instrument involving immovable property shall have effect against third persons only from the time it is filed for registry in
the parish where the property is located.
La. C.C. Art. 2561. Dissolution of sale for nonpayment of price

If the buyer fails to pay the price, the seller may sue for dissolution of the sale. If the seller has given credit for the price and
transfers that credit to another person, the right of dissolution is transferred together with the credit. In case of multiple credit
holders all must join in the suit for dissolution, but if any credit holder refuses to join, the others may subrogate themselves to
his right by paying the amount due to him.
If a promissory note or other instrument has been given for the price, the right to dissolution prescribes at the same time and in
the same period as the note or other instrument.
Art. 3249. Special privileges on immovables

Creditors who have a privilege on immovables, are:
1. The vendor on the estate by him sold, for the payment of the price or so much of it as is unpaid, whether it was sold on or
without a credit.
La. C.C. Art. 3278. Mortgage defined

Mortgage is a nonpossessory right created over property to secure the performance of an obligation.
La. C.C. Art. 3279. Rights created by mortgage

Mortgage gives the mortgagee, upon failure of the obligor to perform the obligation that the mortgage secures, the right to
cause the property to be seized and sold in the manner provided by law and to have the proceeds applied toward the satisfaction
of the obligation in preference to claims of others.
Art. 3280. Mortgage is an indivisible real right

Mortgage is an indivisible real right that burdens the entirety of the mortgaged property and that follows the property into
whatever hands the property may pass.
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La. C.C. Art. 3281. Mortgage established only in authorized cases

Mortgage may be established only as authorized by legislation.
La. C.C. Art. 3282. Accessory nature

Mortgage is accessory to the obligation that it secures. Consequently, except as provided by law, the mortgagee may enforce
the mortgage only to the extent that he may enforce any obligation it secures.
La. C.C. Art. 3283. Kinds of mortgages

Mortgage is conventional, legal, or judicial, and with respect to the manner in which it burdens property, it is general or special.
La. C.C. Art. 3284. Conventional, legal, and judicial mortgages

A conventional mortgage is established by contract.
A legal mortgage is established by operation of law.
A judicial mortgage is established by law to secure a judgment.
La. C.C. Art. 3285. General and special mortgages distinguished

A general mortgage burdens all present and future property of the mortgagor.
A special mortgage burdens only certain specified property of the mortgagor.
La. C.C. Art. 3286. Property susceptible of mortgage

The only things susceptible of mortgage are:
(1) A corporeal immovable with its component parts. (466)
(2) A usufruct of a corporeal immovable.
(3) A servitude of right of use with the rights that the holder of the servitude may have in the buildings and other constructions
on the land.
(4) The lessee's rights in a lease of an immovable with his rights in the buildings and other constructions on the immovable.
(5) Property made susceptible of conventional mortgage by special law.
Landlord can mortgage the land, can give a security interest in the rental stream (r.s.) and tenants can mortgage the rights in the
lease.
La. C.C. Art. 3287. Conventional mortgage
A conventional mortgage may be established only by written contract. No special words are necessary to establish a
conventional mortgage.
La. C.C. Art. 3288. Requirements of contract of mortgage

A contract of mortgage must state precisely the nature and situation of each of the immovables or other property over which it
is granted; state the amount of the obligation, or the maximum amount of the obligations that may be outstanding at any time
and from time to time that the mortgage secures; and be signed by the mortgagor.
La. C.C. Art. 3289. Acceptance

A contract of mortgage need not be signed by the mortgagee, whose consent is presumed and whose acceptance may be tacit.
La. C.C. Art. 3290. Power to mortgage

A conventional mortgage may be established only by a person having the power to alienate the property mortgaged.
La. C.C. Art. 3291. Presumption that things are subject to conventional mortgage
A conventional mortgage of a corporeal immovable, servitude of right of use, or lease, as the case may be, includes the things
made susceptible of mortgage with them by Article 3286, unless the parties expressly agree to the contrary.
La. C.C. Art. 3292. Mortgage of future property permitted in certain cases
A special mortgage given over property the mortgagor does not own is established when the property is acquired by the
mortgagor. A general conventional mortgage is permitted only when expressly provided by law.
La. C.C. Art. 3293. Obligations for which mortgage may be established
A conventional mortgage may be established to secure performance of any lawful obligation, even one for the performance of
an act. The obligation may have a term and be subject to a condition.
La. C.C. Art. 3294. Mortgage securing obligation that is not for the payment of money
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A mortgage that secures an obligation other than one for the payment of money secures the claim of the mortgagee for the
damages he may suffer from a breach of the obligation, up to the amount stated in the mortgage.
La. C.C. Art. 3295. Mortgage securing another's obligation

A person may establish a mortgage over his property to secure the obligations of another. In such a case, the mortgagor may
assert against the mortgagee any defense to the obligation which the mortgage secures that the obligor could assert except lack
of capacity or discharge in bankruptcy of the obligor.
La. C.C. Art. 3296. Right of mortgagor to raise defenses

Neither the mortgagor nor a third person may claim that the mortgage is extinguished or is unenforceable because the
obligation the mortgage secures is extinguished or is unenforceable unless the obligor may assert against the mortgagee the
extinction or unenforceability of the obligation that the mortgage secures.
La. C.C. Art. 3297. Restrictions upon recourse of mortgagee (In Rem Mortgage)
The mortgagee's recourse for the satisfaction of an obligation secured by a mortgage may be limited in whole or in part to the
property over which the mortgage is established.
Art. 3298. Mortgage may secure future obligations

A. A mortgage may secure obligations that may arise in the future.
B. As to all obligations, present and future, secured by the mortgage, notwithstanding the nature of such obligations or the date
they arise, the mortgage has effect between the parties from the time the mortgage is established and as to third persons from
the time the contract of mortgage is filed for registry.
C. A promissory note or other evidence of indebtedness secured by a mortgage need not be paraphed for identification with the
mortgage and need not recite that it is secured by the mortgage.
D. The mortgage may be terminated by the mortgagor or his successor upon reasonable notice to the mortgagee when an
obligation does not exist and neither the mortgagor nor the mortgagee is bound to the other or to a third person to permit an
obligation secured by the mortgage to be incurred. Parties may contract with reference to what constitutes reasonable notice.
E. The mortgage continues until it is terminated by the mortgagor or his successor in the manner provided in Paragraph D of
this Article, or until the mortgage is extinguished in some other lawful manner. The effect of recordation of the mortgage ceases
in accordance with the provisions of Articles 3357 and 3358.
La. C.C. Art. 3299. Judicial and legal mortgages

A judicial mortgage secures a judgment for the payment of money. A legal mortgage secures an obligation specified by the law
that provides for the mortgage.
La. C.C. Art. 3300. Creation of judicial mortgage

A judicial mortgage is created by filing a judgment with the recorder of mortgages.
La. C.C. Art. 3301. Creation of legal mortgage

A legal mortgage is created by complying with the law providing for it.
La. C.C. Art. 3302. Property burdened by judicial and legal mortgages
Judicial and legal mortgages burden all the property of the obligor that is made susceptible of mortgage by Paragraphs 1
through 4 of Article 3286 or that is expressly made subject to judicial or legal mortgage by other law.
La. C.C. Art. 3303. Nature of judicial and legal mortgages

Judicial and legal mortgages are general mortgages. They are established over property that the obligor owns when the
mortgage is created and over future property of the obligor when he acquires it.
La. C.C. Art. 3304. Judgment; suspensive appeal

A judicial mortgage is not affected or suspended by a suspensive appeal or stay of execution of the judgment.
La. C.C. Art. 3305. Judgments of other jurisdictions

The filing of an authenticated copy of a judgment of a court of a jurisdiction foreign to this state, such as the United States,
another state, or another country, creates a judicial mortgage only when so provided by special legislation, or when
accompanied by a certified copy of a judgment or order of a Louisiana court recognizing it and ordering it executed according
to law.
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In all other cases the judgment of a court of a jurisdiction foreign to this state creates a judicial mortgage only when a
Louisiana court has rendered a judgment making the foreign judgment the judgment of the Louisiana court, and the Louisiana
judgment has been filed in the same manner as other judgments.
La. C.C. Art. 3306. Judgment against person deceased

A judicial mortgage burdens the property of the judgment debtor only and does not burden other property of his heirs or
legatees who have accepted his succession.
Art. 3307. The effect and rank of mortgages

A mortgage has the following effects:
(1) Upon failure of the obligor to perform the obligation secured by the mortgage, the mortgagee may cause the mortgaged
property to be seized and sold in the manner provided by law and have the proceeds applied toward the satisfaction of the
obligation.
(2) The mortgaged property may not be transferred or encumbered to the prejudice of the mortgage.
(3) The mortgagee is preferred to the unsecured creditors of the mortgagor and to others whose rights become effective after
the mortgage becomes effective as to them.
La. C.C. Art. 3311. Mortgage securing several obligations

In the absence of contrary agreement, the proceeds realized from enforcement of the mortgage shall be apportioned among
several obligations secured by the mortgage in proportion to the amount owed on each at the time of enforcement.
La. C.C. Art. 3312. Transfer of the secured obligation

A transfer of an obligation secured by a mortgage includes the transfer of the mortgage. In such a case, the transferor warrants
the existence, validity and enforceability of the mortgage only to the extent that he warrants the existence, validity, or
enforceability of the obligation.
La. C.C. Art. 3313. Transfer does not imply subordination

A transferor of part of an obligation secured by a mortgage does not subordinate his rights to those of the transferee with
respect to the portion of the mortgaged obligation he retains.
Art. 3338. Instruments creating real rights in immovables; recordation required to affect third persons
The rights and obligations established or created by the following written instruments are without effect as to a third person
unless the instrument is registered by recording it in the appropriate mortgage or conveyance records pursuant to the provisions
of this Title:
(1) An instrument that transfers an immovable or establishes a real right in or over an immovable.
(2) The lease of an immovable.
(3) An option or right of first refusal, or a contract to buy, sell, or lease an immovable or to establish a real right in or over an
immovable.
(4) An instrument that modifies, terminates, or transfers the rights created or evidenced by the instruments described in
Subparagraphs (1) through (3) of this Article.
Art. 3339. Matters not of record

A matter of capacity or authority, the occurrence of a suspensive or a resolutory condition, the exercise of an option or right of
first refusal, a tacit acceptance, a termination of rights that depends upon the occurrence of a condition, and a similar matter
pertaining to rights and obligations evidenced by a recorded instrument are effective as to a third person although not
evidenced of record.
Art. 3340. Effect of recording other documents

If the law or a recorded instrument expressly makes the recordation of an act or instrument a condition to the creation,
extinction, or modification of rights or obligations, such act or instrument is not effective as to a third person until it is
recorded.
The recordation of a document, other than an instrument described in Article 3338, that is required by law to be registered,
filed, or otherwise recorded with the clerk of court or recorder of conveyances or of mortgages or in the conveyance or
mortgage records shall have only the effect provided for by such law.
Art. 3341. Limits on the effect of recordation

The recordation of an instrument:
(1) Does not create a presumption that the instrument is valid or genuine.
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(2) Does not create a presumption as to the capacity or status of the parties.
(3) Has no effect unless the law expressly provides for its recordation.
(4) Is effective only with respect to immovables located in the parish where the instrument is recorded.
Art. 3342. Parties to an instrument are precluded from raising certain matters
A party to a recorded instrument may not contradict the terms of the instrument or statements of fact it contains to the prejudice
of a third person who after its recordation acquires an interest in or over the immovable to which the instrument relates.
Art. 3343. Third person defined

A third person is a person who is not a party to or personally bound by an instrument.
A witness to an act is a third person with respect to it.
A person who by contract assumes an obligation or is bound by contract to recognize a right is not a third person with respect
to the obligation or right or to the instrument creating or establishing it.
Art. 3344. Refusal for failure of original signature or proper certification; effect of recordation; necessity of proof of
signature recordation of a duplicate
A. The recorder shall refuse to record:
(1) An instrument that does not bear the original signature of a party.
(2) A judgment, administrative decree, or other act of a governmental agency that is not properly certified in a manner provided
by law.
B. Recordation does not dispense with the necessity of proving that the signatures are genuine unless they are authenticated in
the manner provided by law.
Art. 3345. Recordation of a duplicate

The recordation of a duplicate of an instrument, as defined in Code of Evidence Article 1001(5), that does not bear the original
signature of a party, shall nonetheless have the same effect as recordation of the original instrument. Recordation does not
dispense with proving that the recorded instrument is a duplicate.
Art. 3346. Place of recordation; duty of the recorder

A. An instrument creating, establishing, or relating to a mortgage or privilege over an immovable is recorded in the mortgage
records of the parish in which the immovable is located. All other instruments are recorded in the conveyance records of that
parish.
B. The recorder shall maintain in the manner prescribed by law all instruments that are recorded with him.
Art. 3347. Effect of recordation arises upon filing

The effect of recordation arises when an instrument is filed with the recorder and is unaffected by subsequent errors or
omissions of the recorder. An instrument is filed with a recorder when he accepts it for recordation in his office.
Art. 3348. Time of filing; determination

Upon acceptance of an instrument the recorder shall immediately write upon or stamp it with the date and time it is filed and
the registry number assigned to it.
Art. 3349. Failure to endorse; effect

If the recorder upon acceptance of an instrument fails to endorse an instrument with the date and time of filing or if it bears the
same date and time of filing as another instrument, it is presumed that the instrument was filed with respect to other
instruments in the order indicated by their registry numbers and that the filing of the instrument occurred immediately before
an instrument bearing the next consecutive registry number.
Art. 3350. Presumption as to time of filing

When the date and time of filing cannot be determined under Articles 3348 and 3349, it is presumed that the instrument was
filed at the first determinable date and time that it appears in the records of the recorder.
Art. 3351. Ancient documents; presumptions

An instrument that has been recorded for at least ten years is presumed to have been signed by all persons whose purported
signatures are affixed thereto, and, if a judgment, that it was rendered by a court of competent jurisdiction.
Three Kinds of Mortgages: (1) Conventional, (2) Judicial, (3) Legal. Conventional mortgages are always specific. Legal
and judicial mortgages, because they arise by operation of law and may describe property to be acquired in the future, are
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general. There are 3 categories of conventional mortgages: 1) ordinary mortgage; 2) future advance mortgage (old law and
C.C. 3298); and 3) collateral mortgage.
Art. 3278 states that a mortgage is a non-possessory right used to secure an obligation so there MUST be a valid principal
obligation.
Art. 3279 reminds us of the rights created by mortgage. Mortgage gives the creditor, upon the failure of the obligor to
perform the obligation the mortgage secures, the right to cause the property to be seized and sold in the manner provided
by law.
Art. 3280 reminds us that a mortgage is an indivisible right. It follows the property wherever it goes.
Art. 3281 reminds us the cubbyhole theory of commercial law. If it doesnt fall into a specifically authorized type of
mortgage, it cant be done.
Art. 3282 reminds us mortgage is accessory and that the creditor CAN NEVER get more than the amount of the principal
obligation.
Art. 3284 tells us that there are three types, the judicial, where a judgment creditor takes his judgment and files it in the
mortgage records, it only affects property were filed, but affects ALL of the property in that parish.
Art. 3286 tells us about things susceptible of mortgage including corporeal immovable; usufructs; Naked owners can
mortgage their rights; Servitude of right of use[ used all the time to finance pipelines]; and a lessee can mortgage his lease
of rights of use, occupancy and possession. . If the thing is not in one of these groups, it cannot be mortgaged unless it fits
in the last category, which says that there can be special legislation to allow the establishment of mortgage over other
things.
Art. 3287 tells us that Conventional mortgages can only be established by contract, so all the normal requirements must be
met
Art. 3288 gives us the bare minimum for a valid mortgage. The mortgage must state the amount of the obligation and must
be signed by the mortgagor. It need not be signed by the creditor, be witnessed, or be in authentic form. The lack of these
things, however, may lead to a title defect. There is a difference between an ineffective mortgage and a title defect. A title
defect doesnt make the mortgage ineffective. The mortgage is still enforceable among 3rd parties.
o Really, all it has to say is I, homeowner, mortgage Lot whatever, Kensington Estates, to Hancock Bank for
$100K. Signed
o Note: mortgage CAN be limited in amount. WE KNOW this bc this article requires a dollar amount be stated
Art. 3289 tells us that contract of mortgage need not be signed by the mortgagee. The mortgagees acceptance is
presumed.
Art. 3290 The person who owns the property has the power to alienate the property mortgage.
Art. 3291 when you mortgage property you automatically pick up all the component parts.
Art. 3292 You cant give a conventional mortgage over property that you dont currently own. But this article does allow
the typical mortgage to be established where a first time homebuyer goes in and buys and gives mortgage on same day.
Art. 3294 Mortgage can be established to secure any lawful obligation, even one that doesnt relate to money. It may be
subject to a condition.
Art. 3295 It may secure the obligations of another. EX: son wants to borrow money from bank, but bank wont lend w/out
security. He asks dear old dad to secure it. Dad has no cash, so he uses his house. What effect? If son does not pay, it gives
bank the right to sell dads house to collect the debt. Suppose debt is only 100K and house is appraised and sold for $200K
well bank gets $100K and dad gets rest.
Art. 3296 says one cant claim the mortgage has fallen when the principal obligation has fallen unless the principal obligor
can claim that principal obligation has fallen.
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Miller v. Shotwell (1886): FACTS: Shotwell sells to Hatch on Oct. 17, 1860. Hatch then sells to Miller, then sells same
property back to Shotwell. Miller filed first. But Shotwell wins. Why? From the October 17,1860 contract we know that the
creditor is Hatch and the debtor is Shotwell. ISSUES: What is the proper construction and legal effect of the deed of October
17, 1860, between Hatch and the defendants? HELD: Court looked to the intention of the parties when they entered into the
contract on October 1860here the seller was the debtor and the buyer is the creditor. Miller loses because Hatch never had
titlethe document dated Oct. 17, 1860 that was purportedly a sale was a simulation. It was actually a mortgage, so it never
transferred title to Hatch. This contract is a mortgage due to the wording we are desirous to secure the payment of said
purchase money in the contract. On the face of the document the seller is the debtor and this is what makes the document a
mortgage.
Cant have a debtor sell to a creditor to secure a debt- we do not allow conditional sales or transfer of title to secure a debt.
Despite the fact that its styled as an act of sale, it must be a mortgage because the debtor is the seller.
o Substance over form = the transfer of an obligation to secure a debt therefore the lender never gets title, he
only has an accessory right which he can use to seize and sell the land in a judicial sale.
o Therefore, Miller loses because its an absolute nullity, Hatch never had title. Shotwell never lost title.
9:2721: McDuffy v. Walker, which stood for the proposition that First in time filing, first in right, is codified by this
statute.
Shotwell, the debtor, was never divested of ownership of his property. The title never leaves the debtor. SO when we have
the debtor selling to a creditor on the face and there is a sale to secure a debt, then that contract will be construed as a
mortgage.
As between the parties, despite the wording of the document, we look at possession to ascertain whether there was a
mortgage or sale.
C.C. Art. 3328. Duration of inscription; general ruleExcept as otherwise expressly provided by legislation, the effect
of recordation of a document creating a mortgage or evidencing a privilege ceases 10 years after the date of the
document.
So what did the Millers get? Hatchs securitythe mortgage. They never had title to the propertyall they had was
Hatchs rights to foreclose if the Shotwells didnt pay.
Sale of the Right of Redemption

La. C.C. Art. 2567. Right of redemption, definition
The parties to a contract of sale may agree that the seller shall have the right of redemption, which is the right to take back the
thing from the buyer.
La. C.C. Art. 2568. Limitation on duration

The right of redemption may not be reserved for more than ten years when the thing sold is immovable, or more than five
years when the thing sold is movable. If a longer time for redemption has been stipulated in the contract that time must be
reduced to either ten or five years, depending on the nature of the thing sold.
La. C.C. Art. 2569. Redemption, presumption of security

A sale with right of redemption is a simulation when the surrounding circumstances show that the true intent of the
parties was to make a contract of security. When such is the case, any monies, fruits or other benefit received by the buyer
as rent or otherwise may be regarded as interest subject to the usury laws.
La. C.C. Art. 2570. Effect of failure to exercise right within time stipulated
If the seller does not exercise the right of redemption within the time allowed by law, the buyer becomes unconditional owner
of the thing sold.
La. C.C. Art. 2571. Application of time limit against all persons including minors
The period for redemption is peremptive and runs against all persons including minors. It may not be extended by the court.
La. C.C. Art. 2572. Redemption against second purchaser

When the thing is immovable, the right of redemption is effective against third persons only from the time the instrument that
contains it is filed for registry in the parish where the immovable is located.
When the thing is movable, the right of redemption is effective against third persons who, at the time of purchase, had actual
knowledge of the existence of that right.
La. C.C. Art. 2574. Buyer's benefit of discussion against creditors of the seller
A buyer under redemption may avail himself of the right of discussion against creditors of the seller.
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La. C.C. Art. 2575. Ownership of fruits and products pending redemption
The fruits and products of a thing sold with right of redemption belong to the buyer.
La. C.C. Art. 2577. Ownership of improvements and augmentations pending redemption
The buyer is entitled to all improvements he made on the thing that can be removed when the seller exercises the right of
redemption. If such improvements cannot be removed, the buyer is entitled to the enhancement of the value of the thing
resulting from the improvements. The buyer is also entitled to the enhancement of the value of the thing resulting from
ungathered fruits and unharvested crops.
If the thing sold under right of redemption is naturally increased by accession, alluvion, or accretion before the redeeming
seller exercises the right, the increase belongs to the seller.
La. C.C. Art. 2578. Liability for deterioration at the time of redemption
During the time allowed for redemption, the buyer must administer the thing sold with the degree of care of a prudent
administrator. He is liable to the redeeming seller for any deterioration of the thing caused by the lack of such care.
La. C.C. Art. 2584. Multiple successors, applicability of rules governing lesion
If more than one seller concurred in the sale with right of redemption of an immovable, or if a seller has died leaving more than
one successor, the exercise of the right of redemption is governed by the rules provided for the division of the action for lesion
among multiple sellers, or among successors of the seller or of the buyer.
La. C.C. Art. 2587. Reimbursement to buyer on redemption

A seller who exercises the right of redemption must reimburse the buyer for all expenses of the sale and for the cost of repairs
necessary for the preservation of the thing.
La. C.C. Art. 2588. Encumbrances created by buyer

The seller who exercises the right of redemption is entitled to recover the thing free of any encumbrances placed upon it by the
buyer. Nevertheless, when the thing is an immovable, the interests of third persons are governed by the laws of registry.
Right of Redemption is an agreement by which the vendor reserves to himself the power of taking back the thing sold by
returning the price paid for it. The seller alone has the choice whether to exercise the right to redeem. The vendee has no
choice should the seller choose to redeem. Redemption is a resolutory condition which operates to dissolve the original sale.
Though title actually transfers to the buyer at the time of the sale, permanency of ownership is in question for as long as the
term to exercise the right lasts. Once the ten year delay has run without the seller having exercised his right to redeem the
thing, the resolutory condition vanishes and the buyer is then the irrevocable owner. This resolutory condition of ownership
follows the thing into the hands of all purchasers and the vendor may even exercise his right of redemption against a second
purchaser whether or not the right was mentioned in the second sale.
Latiolais v. Breaux (1924): FACTS: The alleged seller was indebted to the alleged buyer. So seller sold his land to buyer in
light of the debt, w/the right to redeem within two years. The seller brought action to have a sale w/right of redemption
declared to be a mortgage from the putative buyer to the putative seller. TC entered judgment for the buyer, and seller appealed.
AC affirmed, holding that the fact that the seller had turned around and leased the property from the buyer after the expiration
of the delay for redemption established the buyer's ownership and right of possession to the land. On its face it appears to be a
sale with the right of redemption. ISSUES: Is this a sale with the right of redemption or a mortgage? HELD: The one test by
which to determine whether a contract evidences a real sale with right of redemption, or a mere contract of security, is whether
the purchaser has gone into actual possession. To have a redemption sale declared a mere contract of security, the plaintiff
should allege that the purchaser never took actual possession. Here, the buyer DID go into possession, so it was NOT a
mortgage, and it was AFTER the time expired to exercise the right of redemption, so it was an acknowledgment of title vesting
in the buyer. Where property is sold with the right of redemption, the purchaser's title is perfected by delivery of actual
possession, and, if such delivery takes place before the delay for redemption has expired, the vendor preserves his right of
redemption; but, if vendor delivers after the delay for redemption has expired, the sale becomes absolute. By such delivery the
vendor acknowledges that the thing belongs to the purchaser, and he cannot thereafter be heard to deny the latter's title.
Possession includes physical possession or the acknowledging of the possession of another. Possession makes it a sale. If
there is no physical possession or acknowledgment of possession, then it may be worded like a sale w/right of redemption,
but it is a mortgage.
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AS BETWEEN THE PARTIES, the sale with a RoR may be a mortgage. How do we know? Seller remains in possession
AS OWNER: mortage. If seller remains in possession as owner and takes some act to acknowledge new ownership of
buyer like a lease, then its a sale with RoR.
BUT THIRD PARTIES wouldnt know any of this. Therefore they may treat it as a sale with a RoR. They are subject to it
for up to RoR. When third party buys it, the debtor may seek property from third party through the RoR by paying the
redemptive price which has nothing to do with the value of the property.
If no third parties involved, you revert to the mortgage articles or redemptive articles, no case on point.
art.2567 is the starting point. In a sale w/right of redemption, the BUYER gets possession. IF THE SELLER remains in
possessionit IS SOMETHING else, but not sale w/right of redemption. Question in this caseis this mortgage or sale
w/right of redemption. Seller allegedly sells w/right of redemption (for 2 years). Seller retains possession. 2 years later
the seller then leases the home from the buyer (and finally puts buyer in possession after alleged redemption period was
over). When the seller signed the lease, title THEN passes to buyerbc it means she didnt pay his mortgage.
RECAP: X buys property. The K has the language of a sale with the right of redemption. If the K in the public record says
it is a sale with right of redemption then, as between the parties, it can either be a mortgage or a sale, with possession being
the critical link. If the seller relinquishes possession or acknowledges the possession of another then as between the
parties it is a sale with the right of redemption.
o As to 3rd parties, possession is irrelevant and if, on the face the contract, it says it is a sale with the right of
redemption then buyer has title subject to 10 or less year right of redemption. If we can see on the face that
the sale secured the debtor and the seller is the debtor then we have a mortgage, even as to 3rd parties.
Potts v. Spatofora: The seller signed a deed conveying the property to the buyer. Buyer and seller also signed an agreement
that the land would be reconveyed to the seller upon payment of a certain amount within a certain period of time. The
documents were executed at separate times, but are read together bc executed so close in time, and together they constituted a
sale w/right of redemption. The seller continued to live on a small portion of the property. It is well settled that a sale of
immovable property will be regarded as a security K if the seller reserves the right of redemption and retains possession of the
property. But, what distinguishes this case from Latiolais is that the buyer leased a large part of the property to someone else.
The court found this to be possession on behalf of the buyer. And since possession was delivered to buyer (via the lessees
possession for him), title was perfected in the buyer, and so this WAS a sale w/rt of redemption. The seller's spouse and heirs
brought a suit to have the conveyance declared a security device and for reconveyance of the property. TC rendered judgment
in favor of the buyer. AC affirmed, finding buyer voluntarily relinquished possession after the time for redemption had expired,
thereby perfecting the buyer's title to the property.
Seller retained possession of a small part of the land and the house he had been living in. However, this was with the
permission of the buyer, so it was still a sale w/rt of redemption, bc his possession was ON BEHALF OF THE BUYER.
Louis Werner Saw Mill Co. v. White (1944): FACTS: sawmill sold property to White on June 23, 1930. $400 cash and $400
note secured by a mortgagenote matured (due) June 23, 1931. (Note rx 6/23/36. Mtg ceases to affect 3rd parties 6/23/40).
Note was secured by mortgage and vendors lien. Both were recorded. Balance was not paid. The buyer sold the land to his
daughter more than 10 years after the sale (and recordation) but less than 10 years after the maturity of the note (on 11/12/40).
On a note, prescription runs in 5 years from maturity date bw the partieshere June 23, 1936. But to rescind the sale, it is a
personal action, subject to liberative prescription of 10 years. The mortgage and vendors privilege on the 1st sale ceased to
affect 3rd parties on 6/23/40. ISSUE: whether or not the resolutory condition in an act of sale can be enforced ten years after the
date of the recordation of the mortgage, but within 10 years of the maturity of the note. The note prescribed. Point of this case:
when there is seller financingcreditor has 4 options:
1. Resolutory condition: puts parties BACK where they were, this was remedy in this case, seller gets property back,
buyer gets his $400 cash back. This totally undoes the sale as if it never happened. Independent of the note. Prior to
the amendment of the civil code. 10 years from the date the note is due. SO in this case they beat rx by 13 days.
Old rule: 10 years. New rule: cant enforce it if the note ceases to exists (cant enforce after note prescribes).
2. Vendors privilege: he can foreclose on the vendors privilege which arises by operation of law any time on the face of
the public records there is a creditor sale and it is recorded in the mortgage records, this is a method of enforcing the
sale itself and compelling the debtor to pay for it.
3. Mortgage: foreclose, seize and sell property and get privilege on proceeds of sale, another method of enforcing the
sale
4. Note: sue on the note and get money judgment, a third method of enforcing the sale
Today, under 2561, the note and resolutory condition prescribe at the same time5 years. It used to be 10 years to sue on
resolutory condition from time note matured and 5 years on note. Now, the only reason to advise your client to sue on the
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resolutory condition is if they want the property back. Also, you have to judge the resolutory condition based on the time the
note was formed (could be 30 years ago!)
So, there would be a different result under 2561after 1995 the resolutory conditions prescribe with the note. Since the note
had prescribed in five years, the seller could not dissolve the sale bc it too had prescribed.
Remember for documents dated before 1/1/95, the old rule applies. Comment (f) to article 2561 says that the sellers right to
sue for dissolution under this article is not dependent upon the existence of a security device, such as a mortgage or a privilege.
Thus, recordation in the conveyance record is all you need.
The phrase ne varietur, Latin for it must not be altered, is traditionally used in the paraph. Paraphing means that the notary
signs the note with his official signature, thereby certifying to the note's genuineness. By paraphing the note `ne varietur,' the
notary binds and identifies the note with the act of mortgage.
Example:
2 tracts of land owned by seller. Road to the west of tract 1 and to the east of tract 2. Sellers sells tract 1 to buyer with
condition: if you ever develop this property, I want a right of access to the road. This is a resolutory condition.
I sell you property with the condition of using as a park or to build a buildingresolutory condition.
Mortgage does not give rise to a resolutory condition if the creditor is not the seller. Gotta have a sale. ??
LA. C.C. Art. 2561. Dissolution of sale for nonpayment of price

Art. 3498. Actions on negotiable and nonnegotiable instruments

Actions on instruments, whether negotiable or not, and on promissory notes, whether negotiable or not, are subject to a
liberative prescription of five years. This prescription commences to run from the day payment is exigible (due).
Art. 3499. Personal action

Unless otherwise provided by legislation, a personal action is subject to a liberative prescription of ten years.
HELD: The resolutory condition can be enforced even when the prescription had run on the mortgage and vendors privilege.
A suit to dissolve sale of realty for nonpayment of purchase price is a personal action and is prescribed by ten years, but
prescription is not tied to the note, but the default. Vendor's right of action to dissolve sale for nonpayment of purchase price
accrues at moment purchaser defaults in payment of credit portion of price and prescribes 10 years from that day.
NOTES: the fact that the vendor has losthis vendors lien, or mortgage, presents no sort of obstacle to the exercise of this
right of resolution.
Every time you see a document where something remains to be paid [i.e. a credit sale] there is a resolutory condition associated
with the documentthe condition of paying the price. This case was decided under the old law where resolutory conditions
prescribed at a different time than the note.
The right to dissolve or set aside a sale for nonpayment of purchase price is an independent substantive remedy and is not
dependent upon existence of a mortgage or a privilege.
The failure of vendee to pay price is a dissolving condition or a resolutory condition and is an event which gives vendor
absolute right to sue for dissolution of sale which right is inherent in all credit sales.
Merely having a mortgage is not evidence of a resolutory condition, although there are credit sales often associated with
mortgages. The resolutory condition, where failure may result in rescission of the sale, is to pay the price. So there has to
be a sale on credit, not merely a mortgage (which can be used to secure an obligation other than the credit sale).
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If the buyer borrows from the bank (and pays seller off completely), the only remedies the bank has is the note and the
mortgage. The resolutory condition and vendor privilege exist ONLY in the actual seller. If BANK was also the seller, we
would have different resultoption of all 4 remedies
Louis Werner hypo: in jan 1990 seller to buyer for $10K cash and $90K note which matures jan. 1994, recorded Jan. 1990
Go through EACH. 1) Note prescribes: jan. 19995 years from maturity. 2) Mortgage: bw parties10 years from
recordation so Jan. 2000, As to 3rd parties: 10 years from recordation so Jan. 2000 3) Vendors priv: 10 years from
recordation of sale so Jan. 2000 4) Resolutory condition: old law was 10 years from maturity, so Jan. 2004, and we have
to use old law here bc sale was pre-1995. If this had been under the new law, then the resolutory condition would have
prescribed with the note, so jan. 1999 (See how beneficial old law was to sue on resolutory condition?)
My thoughts: how is the resolutory condition on a credit sale different than sale w/right of redemption? Bc in sale w/right of
redemption, seller can redeem at his choice, and when he exercises that choice, the sale is dissolved. Here, the only way the
seller can dissolve the sale is if the buyer fails to pay the price. It is also different than a conditional sale, bc in a conditional
sale, title only transfers once the price is PAID.
Robertson v. Buoni (1987): Robertson sold property to the Buonis. They agreed to assume her mortgage , pay a deposit, and
executed a promissory note for the balance of $40K. They didnt pay the mortgage or her. Seller continued to pay the mortgage
to avoid foreclosure. DISCUSSION: Civil code provides several remedies for a vendor who has not received payment of the
price: 1) The vendor has a privilege on things sold for payment (vendors privilege) and 2) Unpaid vendor has the right to
demand judicial dissolution of the sale.
Vendors privilege and the right of dissolution are distinguishable from and independent of each other. Enforcement of the
vendors privilege is an affirmation of the contract whereas the exercise of the right of dissolution places matters in the same
state as though the obligation had not existed. In the sale of immovable, the resolutory action of dissolution exists against the
original purchasers and also 3rd persons acquiring real rights or title to the property.
However, contracts should not be dissolved lightly. Litvinoff suggests consideration of the following factors: 1) extent and
gravity of the failure to perform alleged by the complaining party (here, it was pretty serious harm, she had to pay the taxes and
mortgage on property she didnt even own anymore), 2) the nature of the obligors fault (here, pretty big againthey just
abandoned the place, no payments, stuck her in a bad situation) 3) the good or bad faith of the parties involved, 4) the
surrounding economic circumstances that may make dissolution opportune or not (here, pretty big also, if they dont dissolve,
she has paid on property that wasnt hers, and no one could find the buyers to get them to court on this, so it is certainly
unlikely that they would show for court to get a judgment entered against them to enforce the sale and make them pay the
price. But, by dissolving, note that she will have to return the deposit and anything else she did get paid. So the economic
issues do weight slightly against herexcept that she will get credit for the taxes and mortgage she paid)
The vendee is entitled to restoration of any partial payment. The remedy is in no way dependent upon the existence of a
security device such as a mortgage or a privilege.
LESSON 10. THE CONVENTIONAL MORTGAGE
Seller sells on credit and Buyer doesnt pay. Sellers four options:
(1) Enforce resolutory condition- dissolve the sale
(2) Enforce Vendors privilege- privilege on proceeds of sheriffs sale
(3) Foreclose on mortgage- privilege on proceeds of sheriffs sale
(4) Sue on note and ignore the security interest
First Right of Refusal v Right of Redemption
Travis v. Felker (1985): FACTS: P sold some property to her sister for $100 and other valuable consideration and said, if
property ever offered for sale, he has the right to buy interest back if for $4000. One of the buyers heirs sold a piece of the
property. Now seller wants to enforce the clause. Court questioned characterization of the clausedoes it create sale w/right of
redemption or right of first refusal?
First, court wondersif it is right of redemption, we have a problem bc sale price and repurchase price are vastly different
(Prof sayshow do we know they arent close in value? What was other valuable consideration?).
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On remand, trial court took more evidence and found it was a sale w/right of redemption. On appeal again, appellate court finds
that it was not a sale w/right of redemptionbc in this type of sale, the seller retains right to take back the thing by returning
priceit rests solely on the sellers wants!! It is so clearly the sellers power, that the seller can even exercise the redemption
against a second buyer!! It is an unqualified right to demand return of the property. But it is only an option for 10 yearsafter
10 years the seller can no longer redeem.
In right of first refusalthe power is the BUYERsthe seller can only buy back the property IF the buyer decides to sell. It is
a preferred right to buy property back from another IF he ever decides to sell. Since in this clause, the seller could only exercise
IF buyer soldthen it was right of first refusal, not right of redemption. Even if sale and repurchase values were close, but the
power of the option is the buyers, it is a right of first refusal.
Today, the right of first refusal extends 10 years according to article 2628 after 1995. Before 1995, the right of refusal is
inprescriptable. CC Art. 2628 says an option or a right of 1st refusal that concerns an immovable thing may not be granted
for a term longer than ten years. If the option or right of first refusal is granted in connection with a contract that gives rise
to obligations of continuous or periodic performance, an option or a right of 1st refusal may be granted for as long as a
period required for the performance of those obligations.
Lesion beyond moiety and rights of 1st refusal. S sells property for $1000 in 1980 to B. B sells the property in 2000 for
$50000 to X. This is one of the premium public policies. Even if both is in good faith, we will unwind the sale because it
is unconscionable. There is a strong argument that lesion might even trump the right of 1st refusal. One must look
carefully at negotiating this for the seller who may be exposed to lesion.
HYPO: A has a mortgage of $100,000 on Tract I worth $90,000. B has a mortgage on Tract II for $10,000 worth $15000. B
wants A to foreclose on Tract I first. Can B compel A to foreclose on Tract I 1st? NO
Marshaling of assets is omitted.
Lesion beyond moiety is the ability of a seller of immovable property to rescind that sale if the price paid for the property is
less than (usually half of) the actual value of the property at the time of the sale.
Louisiana Civil Code Article 2589 is entitled "Rescission for lesion beyond moiety" and states that the seller may rescind the
sale of an immovable when the price, or the property it is exchanged for, is less than one half of the fair market value. Special
rules apply to exchanges that have one party exchanging immovable property for a mixture of immovable or movable property,
and cashthe party exchanging the mixture of property has the right to rescind the exchange, not the party exchanging the
immovable.
Relevant Articles: 2567-2588; 3249(1), 3278-3307, 3338-3351, and others
Art. 2628. Time limitation for option and right of first refusal
An option or a right of first refusal that concerns an immovable thing may not be granted for a term longer than ten years. If a
longer time for an option or a right of first refusal has been stipulated in a contract, that time shall be reduced to ten years.
Nevertheless, if the option or right of first refusal is granted in connection with a contract that gives rise to obligations of
continuous or periodic performance, an option or a right of first refusal may be granted for as long a period as required for the
performance of those obligations. >Amended 1993, changes the law by providing a 10 yr date due to Travis v Felker, before
never prescribed
*In the 1990s, a lot of rules changed. Right of first refusal changed in the 1990s. Before it was good forever, now its only good
for 10 years.
Art. 3352. Recorded acts; required information

A. An instrument shall contain the following information when appropriate for its type and nature:
(1) The full name, domicile, and permanent mailing address of the parties.
(2) The marital status of all of the parties who are individuals, including the full name of the present spouse or a declaration
that the party is unmarried.
(3) A declaration as to whether there has been a change in the marital status of any party who is a transferor of the immovable
or interest or right since he acquired it, and if so, when and in what manner the change occurred.
(4) The municipal number or postal address of the property, if it has one.
(5) The last four digits of the social security number or the taxpayer identification number of the mortgagor, whichever is
applicable.
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(6) The notary's identification number or the attorney's bar roll number and the typed, printed, or stamped name of the notary
and witnesses if the instrument is an authentic act of, or an authenticated act by, a notary.
B. The recorder shall not refuse to record an instrument because it does not contain the information required by this Article.
The omission of that information does not impair the validity of an instrument or the effect given to its recordation.
C. The recorder shall only display the last four digits of the social security numbers listed on instruments that his office makes
available for viewing on the Internet.
Art. 3353. Effect of indefinite or incomplete name

A recorded instrument is effective with respect to 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 whole reasonably alerts a person examining the records that the
instrument may be that of the party.
Art. 3354. Applicability

The provisions of this Chapter apply only to the mortgage records.
Art. 3355. Mortgage or privilege affecting property in several parishes

An act of mortgage, instrument evidencing a privilege, or other instrument that affects property located in more than one parish
may be executed in multiple originals for recordation in each of the several parishes. An original that is filed with a recorder
need only describe property that is within the parish in which it is filed.
A certified copy of an instrument that is recorded in the records of a parish need only describe property that is within the parish
in which it is filed.
Art. 3356. Transfers, amendments, and releases

A. A transferee of an obligation secured by a mortgage is not bound by any unrecorded act releasing, amending, or otherwise
modifying the mortgage if he is a third person with respect to that unrecorded act.
B. A recorded transfer, modification, amendment, or release of a mortgage or privilege made by the obligee of record is
effective as to a third person notwithstanding that the obligation secured by the mortgage or privilege has been transferred to
another.
C. For the purpose of this Chapter, the obligee of record of a mortgage or privilege is the person identified by the mortgage
records as the obligee of the secured obligation.
La. R.S. 2941. Bond for deed defined

A bond for deed is a contract to sell real property, in which the purchase price is to be paid by the buyer to the seller in
installments and in which the seller after payment of a stipulated sum agrees to deliver title to the buyer.
Bond for Deed
Bond for deed is the only type of conditional sale in LA. The seller remains the owner of the property, the buyer goes into
possession but does not own the property, and the buyers rights can be terminated unilaterally by the seller without going to
judicial proceeding. It is also unique in that the courts have not required strict adherence to the statutory requirements. This has
resulted in problems where, after a lengthy bond for deed K the buyer defaults and thus, the property returns to the seller. As a
result, the buyer is left without the equity and without a place to live.
When a document is filed as a lease w/option to purchase, but there is no additional consideration required at the end of the
term of the lease, courts have construed this as a bond for deed. While we have special statutory provisions allowing leases
w/option to purchase in movables, there is no equivalent rule for immovable. So we have a problemwhen there is a purported
lease w/option to purchase, but there is no additional considerationdo we treat it as a true lease w/option to purchase or bond
for deed. Is there any in between?
In general, with the exception of bond for deed, in LA, we ignore the conditioning upon the paying of the price and say that the
sale was perfected, and ownership transferred, at agreement on the thing and the price.
Montz. V. Theard: Buyer couldnt get financing so seller agreed to finance. The parties intended to confect a Bond for Deed K.
When the attorneys went to draft the documents, they discovered that there was already a mortgage w/ a due on sale clause. A
bond for deed K would trigger this clause (bc of some federal regulation that says so), which the parties did not want. The
attorney TRIED to draft around it.
The buyer defaulted and after several notices, the sellers tried to evict her.
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Trial court found that the K was a prohibited conditional sale that resulted in an immediate transfer of title.
Appellate court disagreed finding that, bc none of the parties thought (nor intended) the documents to make an immediate
transfer of title, title did not change hands. The documents provided that title was not to be delivered to the buyer until the full
purchase price had been paid. Regardless of how the transaction was characterized, the seller had a right to regain possession of
the property upon the buyer's default.
Case notes:
Conditional sale- title passes immediately to buyer but buyer pays in specified increments. Like a bond for deed but title passes
immediately. This is prohibited in Louisiana.
LA courts often find agreements such as this one to be Bond for Deed, regardless of the characterization by the parties, even
when the documents dont strictly follow all the statutory requirements, LASC made it clear that a K can be a Bond for Deed
despite its failure to comply to statutory requirements, especially where, as here, the party for whom the omitted protections are
designed does not complain about their absence. The label put on the transaction is not determinative.
In a bond for deed K, payments must be made to an escrow agent and seller obtain guarantee from the mortgage holder to
release the mortgage and privileges to release property after payment of stipulate price. The parties didnt do that here (bc they
didnt want to trigger the clause). So bc it did not meet statutory requirements, it was NOT a bond for deed.
The parties are not arguing the documents created something against public policy and even agree that the documents were
effective bw them, so it is NOT a prohibited conditional sale.
But it WAS another type of innominate K. And bc the parties did not intend to transfer title, and do not contest that the
documents are effective bw them, the only issue is WHAT consequences the documents have as to the default.
And so the court held that the K provisions must be evaluated in terms of the jurisprudentially expressed public policy related
to conditional sales in Bond for Deed contract transactions. So even though it ISNT a bond for deed (bc did not adhere to
statute), it was NOT a prohibited conditional sale (bc the parties agree it has effect bw them) SO, it will be treated as a bond for
deed.
The parties may put penalty/forfeiture clauses in the K, but regardless, the seller in Bond for Deed K cannot retain all monies
paid by buyer. Prior cases interpreting bond for deed found these clauses should be regarded as null and void since they are
inequitable, unreasonable and represent an illegal attempt to recover punitive rather than compensatory damages. For the same
equitable and public policy reasons, the forfeiture clause in this K is unenforceable, even if the transaction is interpreted as an
innominate contract distinct from a Bond for Deed.
Instead, buyer is entitled to the return of all moneys paid on the purchase price, including the down payment and monthly
installments, the insurance premiums, and the taxes paid. But, the seller is entitled to an allowance for the fair rental value of
the property during the period of plaintiff's occupancy. Prof notes that this is where the buyer often gets screwed. When the
seller pays back the money paid by the buyerthe court will subtract the fair rental valueand usually, it is the amount the
buyer paid (which is usually more than they would have actually paid for rent) and they lose any equity!!
Seller will argue that the revised statutes does not provide for return of all monies paid and it was contracted around. Buyer will
argue in equity. Very harsh for the buyer. A buyer would prefer a mortgage, not a bond for deed.
Levine v. First National Bank of Commerce: Physician purchased a home and secured it w/mortgage that contained a due on
sale clause. The due on sale clause indicated that if all or any part of the Property any interest in it is sold or transferred, all
payments are immediately due. Subsequently, the physician and his wife decided to relocate. The physician found a buyer for
his home, but the buyer could not qualify for a conventional home loan bc he was recently self-employed. The physician and
the buyer entered into a bond for deed K (there is no argument about this). The bank eventually learned that someone other
than the physician was making payments on the mortgage. The bank's seizure of the property was not wrongful. The due-on-
sale clause was a federally protected provision, where bond for deed triggered, even if state law said the contrary. Under the
terms of the bond for deed executed, although the buyer did not convey full ownership, obtained rights in the property, namely,
the immediate right of possession and right to demand specific performancecertainly interests in the property. A sale of the
entirety of the mortgaged property was not necessary to trigger the due-on-sale clause in the mortgage under Louisiana law.
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Profs info on the case: Dr. Levine bought a house. Secured with a mortgage and a due on sale clause (everything else left on
balance becomes immediately due). He puts house on market and eventually has a buyerCarrarras who had bond for deed (so
Levine still owns). The house was not sold for the purposes of the due on sale, but was certainly transferred. Cararras pays
into escrow, who then pays the mortgage. Mortgage co finds out bc the payments are now coming from escrow agent. Court
finds that the transfer of the interest in the property (even if not full title) violates the due on sale clause as written in the K.
Levine could not pay the now due mortgage so the bank foreclosescourt finds this is OK (not wrongful seizure) bc the bond
for deed triggered the due on sale clause bc an interest was transferred.
Thomas v. King: After almost five years of making installment payments to an escrow agent to cover mortgage payments on
the property, the purchasers received a letter from the sellers indicating the purchasers were in default and that the entire
balance of the indebtedness was due. Thereafter, the sellers recorded a cancellation of the bond and garnered an eviction order.
If the buyer under a bond for deed contract fails to make the payments in accordance with its terms and conditions, the seller
could have the bond for deed cancelled by proper registry in the conveyance records, provided he has first caused the escrow
agent to serve notice upon the buyer, that unless payment was made as provided in the bond for deed within 45 days from the
mailing date of the notice, the bond for deed would be cancelled. Prior cases had found the notice provision to be clear and
mandatory. The appellate court held the purchasers' failure to comply with the notice requirements of La. Rev. Stat. Ann.
9:2945(A) rendered the cancellation void and the eviction improper.
Profs take on this case: seller is trying to evict bond for deed buyerbut seller does not follow the bond for deed statute
eviction procedures PRECISELY and so they cant evict the buyer. This case is used to show us that we are really really strict
on following the statute bc it is so harsh on the buyer we want to make sure we are doing it right.
Bond for deed (big payment in the beginning with periodic payments after) v lease with option to purchase (periodic payments
with one big payment at the end)
**Dont just go off of what a K is named. Substance over form!
Deed of Trust in common law- title is transferred immediately to an escrow agent. In La, we dont have this. Title isnt
transferred until the end.
Due on sales clauses used by lenders to protect their interest.
Bond for deeds are used to get around due on sales clauses- as long as it doesnt fall into the federal housing act (?)
Dont want to use the language in Levine- Wanna use the language on the formulary p 30 to specifically say that a bond for
deed will trigger the due on sales clauses
If mortgage comes after bond for deed, the bond for deed will outrank the mortgage. They can foreclose and seek the payments
or wait till the bond for deed guy defaults (hopefully).
Marshaling of assets - When assets and Securities are marshalled, the two-fund doctrine is frequently applied. It provides that
when one claimant has two possible funds in the hands of a debtor to whom the claimant is able to resort to satisfy his or her
demand, and a second claimant has an interest in only one of the funds, the second claimant can force the first to satisfy the
claims out of the fund in which he or she, the second claimant, has no lien.
Federal Land Bank v. Rester P held a mortgage on two tracks of land owned by D. Gladney and Bank of BR held a second
mortgage. The first mortgage holder gets to choose what track to sell. In Louisiana, mortgages are indivisible (art 3280). So the
first creditor can chose what it would seize and sell. Gladney, the Bank of BR, and the D have no right of action to intervene or
have any say so in it. The first mortgage holder knows that its rights supersede the rights of the second mortgage holder. Law
favors predictability. Second mortgage holder can see in the public record that there is a first mortgage and can then after chose
whether or not to grant the second one.
The In Rem Mortgage: AKA non-recourse mortgage
Art. 3297. Restrictions upon recourse of mortgagee

The mortgagee's recourse for the satisfaction of an obligation secured by a mortgage may be limited in whole or in part to the
property over which the mortgage is established.
Civil code Art. 3297 allows the creation of a mortgage where there is no personal right of recourse against the mortgagor.
Prior to 1992 there was some question in Louisiana whether a non-recourse mortgage could be created.
Non Recourse:
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If the home goes into foreclosure and the loan is a non recourse mortgage, only the home can be seized by the lender to
pay off the debt. Even if the home is not worth the balance of the loan, the lender must take the loss. The mortgage holder
is not allowed to go after any other asset besides the property.
Use if you think the property will be worth more or if you think the property wll be leased out and then you can get a hold
of the income stream.
New Orleans Canal & Banking Co. v. Hagan (1846): FACTS: D took several loans on behalf of his corporations. To secure
the debts, the firms gave collateral securities (they are pledged). For another loan to one of the firms, he gave a promissory note
and a mortgage to secure it. P is trying to hold him personally liable. P argued there was confession of judgment language in
the contract thus D personally liable. D argued that by the act he did nothing more than mortgage his property.
Whether a mortgagor, who executes a mortgage to secure the fulfillment of an obligation of a third person, intends to bind
himself personally, is a question of intention, to be determined by a just and reasonable construction of the whole instrument.
The insertion in a mortgage, executed to secure a debt due by a third person, of a clause by which the mortgagor confesses
judgment for the amount of the debt, and agrees, in case of its nonpayment as provided by the act, that the law in such cases
made and provided may be strictly enforced and summarily put in execution, is not evidence that the mortgagor intended to
bind himself personally for the payment of the debt, but the clause was intended merely to give the remedy by executory
process against the hypothecated property; and it does not authorize the taking out of a fi. fa. against other property of the
mortgagor, nor the registry of the act, so as to operate as a judicial mortgage.
ISSUES: Is Hagan personally liable? HELD: NO. A confession of judgment is not indicative of personal liability for this
clause is to give in distinct terms the remedy of executory process against the landa procedural vehicle having nothing to do
with personal liability [La. C.C. P. Art. 2635(3)].
Today we can take an in rem mortgage by simply taking a note and putting on it, this note is in rem and the maker is not
personally liable. Prior to 1992, one would have to go through an executory process.
Confession of judgment clause is important!
Property Description in a Mortgage

A description of immovable property in an act of sale is sufficient if it enables a person to locate and identify the property.
LSA-R.S. 50:11 Land Measurements and LSA-R.S. 35:17. Must have description in the public records of the property sold.
Describe the tracts by meets and bounds and the prior sale and the surrounding tracts. All conventional mortgages must
contain a property description; a conventional mortgage must state precisely the nature and situation of each of the immovables
or other property over which it is granted
Street address is not in and of itself sufficient. Beware of language that says all property I own because that resemble more of a
general mortgage which isnt allowed. Conventional mortgages are special mortgages meaning you must be specific to what
the property is.
The Language of a Mortgage.
Kavanaugh v. Berkett (1981): FACTS: Berkett co-owned some land w/family. Kavanaugh wanted to lease it. Berkett was an
attorney and prepared a lease to where the lessors agreed to allow the lessees to mortgage the leased property to finance
some physical improvements as long as the mortgage did not require personal liability for the lessors (in other words, the terms
only allowed an in rem mortgage, one that bears only against the portion of the land mortgaged). The documents also required
the lessors consent for the lessees to encumber the property.
When it came time to do the mortgage documents, the lessors refused to execute the mortgage documents bc they contained a
confession of judgment clause and waiver of notice and appraisement. Then lessees sued lessors for declaratory judgment
asking the court to interpret the lease to require the lessors to sign a commercially acceptable in rem mortgage on the leased
property. The lessor argues that the term to mortgage means only a simple mortgage.
TC rendered judgment for lessees interpreting to mortgage to mean a commercially feasible mortgage.
AC reversed, finding that the lessors were not obligated to execute this type of mortgage, holding that because minors were
involved, the execution of the lease required only the execution of a simple mortgage by the lessors, that is, one not containing
a confession of judgment and waiver of notice and appraisement.
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LASC finds that the parties knew and intended the lease to be used for commercial development. Several experts testified that
commercial lenders require usual and customary clauses in mortgages and that failure to include these would render a
mortgage unacceptable to them. The experts also testified that real estate lawyers understand the term mortgage to include
usual and customary security clauses, like the ones at issue. As a result, LASC finds that the term to mortgage in the lease
means a mortgage containing the usual and customary security clauses.
LASC does note that the lessors are not obligated to accept ANY mortgage submitted by a commercial lender, they ARE
obligated to permit the lessees to mortgage the property with an in rem mortgage containing the usual and customary security
clauses such as confession of judgment and waiver of notice/appraisment.
Qualities of a commercial reasonable mortgage includes a confession of judgment (gives the right to an executory process)
and a waiver of notice and appraisement of the property (because if go by ordinary process we must have an appraisal). As
a practical matter a number of other things are needed including a due on sale clause (if you sell, lease or transfer without
my consent then I get to accelerate the mortgage allowing the lender to prevent you from doing these things without
accelerating the mortgage); clause about taxes and insurance on the property and proof of insurance; clause about other
encumbrances like you may not put a 2nd or 3rd mortgage without my consent alerting the lender that the mortgagor is
getting into too much debt; clauses about possession; certain kinds of notices to the lender on a regular basis such as
financial statements from the borrower certified.
Today every lease should say that the landlord will give a commercially reasonable mortgage including all of the
abovementioned clauses.
Page 5 of formulary- second to last paragraph, second sentence not saying you cant sell, saying you cant sale to
my prejudice
The Leasehold Mortgage
There was a lease and the lessee mortgaged the leasehold estate (term not defined in la civil law). Issue: When the lessee
defaulted, the bank foreclosed on the leasehold estate. What exactly is the leasehold estate?
Court said that the term meant something less than the full lease- the right to occupy and use the property but it did not carry
with it the obligation to pay rent.
SO if you see the term leasehold estate or right of occupancy use or enjoyment- then they dont have the full lease rights, they
dont have the obligation to pay rent, and no rights and obligations of a tenant.
Several rights to give a security interest in: 1) landlord grant a mortgage on the immovable 2) 9: 4401 security interest in the
rental stream 3) tenant could give a mortgage on the tenants rights 4) tenants give a UCC 9 security interest in the movable 5)
landlord give a UCC on fixtures on commercial property before the component parts become attached.
When the tenant mortgages his or her interest in the property what does the landlord get? Addresses the rights of a landlord
who has a tenant who has created a mortgage on just the tenants rights.
Carriere v. Bank of Louisiana (1996): FACTS: Lessee built a restaurant and parking lot with a loan from BOL. To secure the
loan, he mortgaged the leasehold estate (ground lease) and the improvements. He stopped paying the rent (to the lessors) and
the mortgage payments (to the bank). The lessors began filed notice of default and when he still failed to pay, they filed suit to
terminate the lease and evict him. Bank foreclosed on the mortgage. At sheriffs sale, bank purchase the mortgaged property
the leasehold estate and the improvements. Then, the lessors tried to evict the bank, demanding the lease be terminated and
premises vacated, but lose. So now, they want rental payments from the bank, retro to the date of the sheriffs sale.
Court reminds us that lease is a synallagmatic K where one party binds himself to give the other enjoyment of the thing, while
the other binds himself to pay a stipulated price. But, it is established that the right of occupancy, use and enjoyment possessed
by the lessee can be severed from the lessees obligation to pay rent.
A lessee who has availed himself of the statutory right to mortgage his interests in his lease may mortgage either: 1) his entire
lease, which includes ALL of the lessees rights, duties and obligations, including the obligation to pay rent or 2) only his right
of occupancy, use and enjoyment.
If the lessee mortgages his entire lease, defaults and the mortgagee forecloses, the buyer at the Sheriffs sale becomes the
owner of the lease and acquires all of the rights and duties, including the duty to pay rent. If this is not intended, it needs to be
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specific and unambiguous subordination by the lessor. Otherwise the buyer acquires the obligation to pay rents and gets all of
the other rights, including right to use, etc and options to extend lease and/or purchase (if the original lessee had these rights).
If the lessee mortgages only his right to occupancy, use and enjoyment, defaults, and mortgagee forecloses, the buyer at
Sheriffs sale becomes the owner of only the original lessees right of occupancy, use and enjoyment and the original lessee
RETAINS THE OBLIGATION TO PAY RENT. In this situation, if the original lessor doesnt pay the rent, the owner of the
right to use, occupy, and enjoy may lose his right to remain on the leased premises, should the lessor cause the lease to be
terminated for non-payment of rents. If this happens, the lessor is also free, not only to demand vacation, but to compel
removal of the improvements.
Lessors argue that, if the lease is still in effect, when the bank began occupying the property, is stepping into the shoes of the
original lessee and has BECOME the lessee, so they are responsible for rent.
Bank argues the lease is terminated bc of the letters the lessors sent to the lessee about his default OR that only the right of
occupancy was mortgaged and so they acquired no obligation to pay rent. They argue that the step into shoes clause in the
lease was optional and it did not do so, so they do not owe rent.
Court says that the lower court had settled the lease continuing issueand found it was still in effect. But that doesnt solve
whether the bank owed rent. The court finds this is two issues:
2) The lease said that the lessor WAIVED the right to collect rent from any MORTGAGEE. So for the period the bank was
the mortgagee, they owed nothing.
3) Did the bank, as 3rd P purchaser of the mortgaged estate and improvements, become liable for rental payments original
lessor was failing to make? Court finds that the language in the mortgage documents granting a mortgage over that
leasehold estate created and existing by virtue of a ground lease created a mortgage of less than the entire interest. The
language does not explicitly state, nor reasonably imply, that a mortgage of the entire lease was intended or even
contemplated. Court refuses to require that specific language stating that the right of occupancy, use and enjoyment be
used. HELD: the language leasing that leasehold estate created and existing by virtue of a ground lease creates a
mortgage ONLY of rights to occupancy, use and enjoyment, so that when the bank purchased at foreclosure liability for
rental payments remained with the original lessor.
Landlord should put the following clauses in the lease to prevent the above the result: Get the lender to agree to pay for the
lease during the time he occupied it if there is a foreclosure on the property. This is a deal that can close.
Attornment Clause creditor and landlord wants lender if you foreclose I will let you continue to occupy the property and
will not terminate the lease. In exchange one gets
Subordination and Non-Disturbance Agreement (SND Clause) landlord subordinates his rights and liens to the lenders
rights and agrees that I wont disturb you in your occupancy of the property.
Unfair but legally correct result. When dealing with real property law we proceed at our perile if we deal in equity.
LESSON 11. CONVENTIONAL MORTGAGES: THE PRE-1992 FUTURE ADVANCE MORTGAGE; COUNTER
LETTERS; INTRODUCTION TO RECORDATION
Art. 3278-3314, 3338-3356 and the following Code articles/statutes are relevant to this lesson.
Also relevant: R.S. 14:133 (making it criminal to file false records, such as any forged document, any wrongfully altered
document and any document containing a false statement or false representation of a material fact.
Conventional Mortgage
Non possessory 3278
Written 3287
Signed by mortgagor 3288
Accessory -3282
Amount of obligation 3288
Describe property 3288
Acceptance is presumed - 3289
La. R.S. 2721. Filing in office of parish recorder
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B. An act of sale of immovable property or attachment thereto filed for registry in the office of the parish recorder pursuant to
Subsection A of this Section shall designate the name of the person responsible for all property taxes and assessments and
include the address where property tax and assessment notices are to be mailed. The person responsible for the taxes and
assessments of the immovable being transferred shall provide the above information to the tax assessor for the parish in
which the immovable property is located for the purpose of issuing tax and assessment notices.
La. R.S. 2723. Operation
This Chapter is remedial, and is for the benefit of all such third persons or third parties heretofore as well as those hereafter
dealing with immovables or real or personal rights therein on the faith of the public records.
La. R.S. 2724. Liens or privileges not dependent upon recordation for existence or priority
This Chapter shall not derogate from or otherwise affect the existence or priority of any lien or privilege which, under existing
law, is not dependent upon recordation for its existence or priority.
La. R.S. 2758. Notarial certified copy of lost original

When the original title or record is no longer in being, a copy is good proof, and supplies the want of the original, when it is
certified as being conformable to the record, by the notary who has received it, or by one of his successors, or by any other
public officer, with whom the record was deposited and who had authority to give certified copies of it, provided the loss of the
original be previously proved.
La. R.S. 2759. Lost original, certified copy from public record
When an original title, by authentic act, or by private signature duly acknowledged, has been recorded in any public office, by
an officer duly authorized, either by the laws of this State, or of the United States, to make such record, the copy of such
record, duly authenticated, shall be received in evidence, on proving the loss of the original, or showing circumstances
supported by the oath of the party, to render such loss probable.
La. R.S. 4422. Obligations secured by mortgages or privileges; signatures and writings deemed authentic for purposes
of foreclosure
The following shall apply when foreclosure by executory process is instituted by the transferee, assignee, or pledgee of any
negotiable instrument or instrument that would be negotiable but for a limitation of personal liability of the maker or any
comaker secured by a mortgage or privilege:
(1) All signatures of the following persons or entities are presumed to be genuine and no further evidence is required of those
signatures for the purposes of executory process: endorsers, guarantors, and other persons whose signatures appear on or are
affixed to such instrument secured by the mortgage or privilege.
(2) The assignment, pledge, negotiation, or other transfer of any obligation secured by a mortgage or privilege may be proven
by any form of private writing, and such writing shall be deemed authentic for the purposes of executory process.
(3) The holder of any negotiable instrument or instrument that would be negotiable but for a limitation of personal liability to
the maker or any comaker under this Section may enforce the mortgage or privilege securing such instrument without authentic
evidence of the signatures, assignment, pledge, negotiation, or transfer thereof.
La. R.S. 5163. United States agencies mortgagees of record; no cancellation or subordination without notice
Mortgages and the recordation in which any agency or instrumentality of the United States, lending on mortgages secured by
real estate is the mortgagee of record, cannot be cancelled, removed from the public records, or in any manner affected, by any
sale in any succession, liquidation, insolvency, receivership, or partition proceeding, in any court, unless previous to the
application or petition for sale, written notice thereof is given to the agency or instrumentality of the United States, the
mortgagee of record. The notice unless waived in writing by the agency or instrumentality of the United States, the mortgagee
of record, before or after the sale, must be filed in the proceeding, and a certified copy thereof served on the agency or
instrumentality, the mortgagee of record, not less than ten days previous to the filing of the petition or application for the sale.
In no event shall the mortgage held by the agency or instrumentality be made secondary to, or ranked or primed by any costs or
fees in the proceedings, with the exception of the costs immediately and directly incident to the advertising and selling of the
property.
La. R.S. 5251. Preservation of rights of mortgage holder in sales held in certain proceedings
Except as otherwise provided in Civil Code Articles 813 and 815, no conventional or judicial mortgage, or chattel mortgage, or
security interest under Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101 et seq.), shall be cancelled, removed from
the public records, or in any manner affected by any public or private sale of property subject thereto in any succession,
liquidation, insolvency, receivership, bankruptcy, or partition proceeding. The provisions of this Section shall not apply to the
execution of judgments governed by Book IV of the Louisiana Code of Civil Procedure, Article 2251 et seq., or to judicial
sales in executory proceedings under the Louisiana Code of Civil Procedure, Article 2631 et seq.
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Art. 3357. Duration; general rule

Except as otherwise expressly provided by law, the effect of recordation of an instrument creating a mortgage or evidencing a
privilege ceases ten years after the date of the instrument.
Art. 3358. Duration of recordation of certain mortgages and vendor's privileges

If an instrument creating a mortgage or evidencing a vendor's privilege describes the maturity of any obligation secured by the
mortgage or privilege and if any part of the described obligation matures nine years or more after the date of the instrument, the
effect of recordation ceases six years after the latest maturity date described in the instrument.
Art. 3359. Duration of recordation of judicial mortgage

The effect of recordation of a judgment creating a judicial mortgage ceases ten years after the date of the judgment.
Art. 3360. Duration of recordation of mortgage given by tutor, curator, or succession representative
A. The effect of recordation of a legal mortgage over the property of a natural tutor, or of a special mortgage given for the
faithful performance of his duties by a tutor or a curator of an interdict, ceases four years after the tutorship or curatorship
terminates, or, if the tutor or curator resigns or is removed, four years after the judgment that authorizes the resignation or
removal.
B. The effect of recordation of a special mortgage given for the faithful performance of his duties by a curator of an absent
person or by a succession representative ceases four years after homologation of his final account, or, if the curator or
representative resigns or is removed, four years after the judgment that authorizes that resignation or removal. In any event, the
effect of recordation ceases ten years after the date of the act of mortgage.
Art. 3361. Effect of amendment

If before the effect of recordation ceases an instrument is recorded that amends a recorded mortgage or privilege to describe or
modify the maturity of a particular obligation that it secures, then the time of cessation of the effect of the recordation is
determined by reference to the maturity of the obligation last becoming due described in the mortgage or privilege as amended.
Art. 3362. Method of reinscription

A person may reinscribe a recorded instrument creating a mortgage or evidencing a vendor's privilege by recording a signed
written notice of reinscription. The notice shall state the name of the mortgagor or obligor of the debt secured by the privilege
as it appears in the recorded instrument and registry number or other appropriate recordation information of the instrument or
of a prior notice of reinscription, and shall declare that the instrument is reinscribed.
Art. 3363. Method of reinscription exclusive

The method of reinscription provided in this Chapter is exclusive. Neither an amendment of an instrument creating a mortgage
or evidencing a privilege nor an acknowledgment of the existence of a mortgage or privilege by the mortgagor or the obligor
constitutes a reinscription of the instrument.
Art. 3364. Effect of timely recordation of notice of reinscription

A notice of reinscription that is recorded before the effect of recordation ceases continues that effect for ten years from the date
the notice is recorded.
Art. 3365. Effect of request recorded after cessation of effect of recordation

A. A notice of reinscription that is recorded after the effect of recordation of the instrument sought to be reinscribed has ceased,
again produces the effects of recordation, but only from the time the notice of reinscription is recorded. The effect of
recordation pursuant to this Paragraph shall continue for ten years from the date on which the notice of reinscription is
recorded, and the instrument may be reinscribed thereafter from time to time as provided by Article 3362.
B. Reinscription pursuant to Paragraph A of this Article does not require that the mortgage or evidence of privilege be again
recorded, even if the original recordation is cancelled.
Art. 3366. Cancellation upon written request; form and content

A. The recorder of mortgages shall cancel, in whole or in part and in the manner prescribed by law, the recordation of a
mortgage or privilege upon receipt of a written request for cancellation in a form prescribed by law and that:
(1) Identifies the mortgage or privilege by reference to the place in the records where it is recorded; and
(2) Is signed by the person requesting the cancellation.
B. The effect of recordation of the instrument ceases upon cancellation by the recorder pursuant to the provisions of this
Article.
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Art. 3367. Cancellation of recordation after effect of recordation has ceased

If the effect of recordation of a mortgage or privilege has ceased for lack of reinscription, the recorder upon receipt of a written
signed application shall cancel its recordation.
Art. 3368. Cancellation of prescribed judicial mortgage

The recorder shall cancel from his records a judicial mortgage created by the filing of a judgment of a court of this state that
has been reinscribed, upon the written request of any person to which is attached a certificate from the clerk of the court
rendering the judgment that no suit or motion has been filed for its revival within the time required by Article 3501 or of a
certified copy of a final judgment of the court rejecting the demands of the plaintiff in a suit or motion to revive the judgment.
Three Types of Mortgages

1) Ordinary Mortgage (aka simple) Prof calls this the all at one time mortgage, where the note connected to the mortgage
represents the sum that has been advanced. It is a mortgage given to secure a particular, existing debtone obligation at
one time. Once the note is paid down the note is extinguishes and so you cannot borrow more on the mortgage. You get it
all at once, execute mortgage same day usually. Ex: I borrow $100K, I pay down $50K and want to borrow an additional
$35K. I can do it, but NOT with this mortgage. Buying a home is an example of this type.
2) Future Advance Mortgage (aka barrel of money) Old one (not 3298): is a mortgage given to secure a debt not yet in
existence and the money is advanced in stages where the note represents money that will be advanced in the future.
Couldnt NOT secure fluctuating lines of credit bc of the idea that paying back extinguishes each part that is paid back.
a. to illustratethe bank has a barrel of money and they write the borrowers name on it
i. the bank and debtor agree that the debtor can borrow from this barrel ANY time, today, tomorrow,
or 42 weeks from now, UP to a certain amount. Usually, the bank sets up certain milestones that
need to be met to borrow (like building a house, so some will be disbursed when frame goes up,
some when roof goes up, etc) or certain amounts will be disbursed on certain dates.
ii. Heres the keythere is a certain amount in the barrel, when the debtor pays some money back, IT
DOES NOT GO BACK IN BARREL, it goes to bank to LOAN TO SOMEONE ELSE!!! EX:
debtor borrows $25K from $100K barrel. He pays that back. Now he wants to borrow $100K. But
the $25K he paid back is not in his barrel. All that is in his barrel is $75K.
iii. Building a home is an example of this type of mortgage.
3) Future advance: art 3298, this is home equity line of credit. You can borrow and pay back, borrow and pay back, up to a
certain dollar amount.
Future Advance Mortgage. Pickersgill & Co. v. Brown (1852): FACTS: Plaintiff says that the mortgages were for loans and
advances already made and so loans made after the date of the mortgage execution were not secured by the mortgage.
Defendant says the mortgage was not for securing only existing advances but any advances that might be made after the
execution of the mortgage.
ISSUE: So this leaves us with two questions: can a mortgage, under LA law, be given to secure debts having no existence at the
date of the mortgage? If so, must the mortgage say, on its face (in regards to third persons) that it is to secure a future debt or
can it describe an obligation already existing. (My translationmust it SAY this is for a future debt or can it be written like the
debt has already occurred, yet still be for future debt?)
HELD: the conventional mortgage may be used to secure an obligation that is not yet in existence. It does not have to say on its
face that it is a future advance mortgage. The mortgage can be used to secure future advances, even though it is written like it
secures a past obligation as long as the mortgage is recorded.
Prof says the mortgage does not have to say on its face whether it is for all at one time or whether it is a barrel of money--you
have to look at intent of parties. How do you determine intent? Parol evidence, which is permissible here. Parol is always ok
for intent EXCEPT where specifically prohibited (like security agreement bw surety and creditor).
There is no way to tell from the public records how much of a mortgage has been paid or advanced so one must be assumed
that nothing has been paid down and all has been advanced. 3rd parties are put on notice by recordationthey are aware that
the debtor has a mortgage out there.
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So, if there is a piece of property worth $18K and debtor wants to borrow money. 2nd bank will go to public records and see I,
John, mortgage this property to Bank 1 for $10K. 2nd bank should assume the worst and only loan $8K, unless John can prove
he made payments or otherwise does not owe $10K. Else, bank 2 should get some other kind of security.
Thrift Funds Canal Inc. v. Foy (1972): FACTS: Debtor gave a mortgage First National on Feb. 14, 1963, duly recorded, for
$10K, which was fully advanced. On Dec. 20, 1966, he had substantially reduced the principaland took a second loan from
First National. On the back of the promissory note for this second loan it said, This note is secured by a mortgage executed
under date of 2-14-63 together with the said mortgage note. It being understood that the mortgage and note shall remain in full
force and effect as collateral security to this note. On December 19, 1968, Foy gave a second mortgage on the same property
to Thrift Funds Canal, Inc. Foy did not pay Thrift Funds, so Thrift foreclosed on the property. ISSUE: rank the mortgages.
Thrift says they outrank the second mortgage from First National.
First National argues that the first mortgage secures the later note, contending that the language in the note that says the said
mortgage note, or notesand all other indebtedness secured hereby,(this was a default payment clause that listed conditions
that would cause the notes to become immediately due), makes the mortgage broad enough to be a mortgage to secure future
advances. First argues the reference to the plural and other indebtedness does the trick.
The mortgage said the money was this day loaned, describes the $10K note, and says that the mortgage was to secure the
above described note.
Court says:
A collateral mortgage secures, not an existing debt, but a mortgage note pledged for security for a debt or succession of debts.
This is not a collateral mortgage bc it evidences and directly secures an existing debt and has none of the formal characteristics
of a collateral mortgage.
We have to look at the language as a wholewhat the parties specifically intended. Look at their course of conduct and what
was specifically advanced. Here, court says that the language First is relying on is in a default provisiononly describing
Firsts rights. The reference to the plural was only language used in case there were plural notes executed with/described in the
mortgage (boiler plate terms, standard bank forms). This is clear by the immediately preceding language THE SAID (which
means ONE). Reference to any future holder only recognizes that someone other than the original bank may hold the note at
the time of default by the mortgagor. The reference to other indebtedness means NOT future notes, but allowable expense items
that may be incurred by the mortgagee to protect its security such as taxes, insurance premiums, etc.
Court acknowledges that a mortgage need not say on its face that it is for future advances (Pickersgill) but we have to look at
the intent of the parties. If they intend that is secure future advances, we will do so. In Pickersgill, though the mortgage was
phrased in terms of an existing debt, the mortgage was really for partly existing and partly futureand the later advances were
ACTUALLY MADE (I think this is the court finding intent). Here, the court thinks that the fact that the bank gave all the
money already indicates that the parties intended it to secure an existing debt, one loan made contemporaneously with the
execution of the mortgage
After a note has been partially paid, the debtor cannot secure a second note with the earlier mortgage to the prejudice of later
mortgagees. This is bc after a specific debt secured by a mortgage has been paid, the mortgage is extinguishes. No later
advances can revive the note. When partial payment is made on a specific debt secured by a mortgage, the payment of
installments extinguishes THAT PORTION of the debt. Thereafter, the debt burden CANNOT be increased to the prejudice of
the junior mortgages.
RESULT: the second loan from First National is ranked AFTER the Thrift loan.
PROF SAYS: Case comes down on thisif you create a simple mortgage, you cant change it later. This makes good common
sensesomeone goes to check the records and see a mortgage of one type, we arent going to let them change it later to
someone elses detriment.
Art. 3298. Mortgage may secure future obligations (Future Advance Mortgage!)
A. A mortgage may secure obligations that may arise in the future.
B. As to all obligations, present and future, secured by the mortgage, notwithstanding the nature of such obligations or the date
they arise, the mortgage has effect between the parties from the time the mortgage is established and as to third persons from
the time the contract of mortgage is filed for registry.
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C. A promissory note or other evidence of indebtedness secured by a mortgage need not be paraphed for identification with the
mortgage and need not recite that it is secured by the mortgage.
D. The mortgage may be terminated by the mortgagor or his successor upon reasonable notice to the mortgagee when an
obligation does not exist and neither the mortgagor nor the mortgagee is bound to the other or to a third person to permit an
obligation secured by the mortgage to be incurred. Parties may contract with reference to what constitutes reasonable notice.
E. The mortgage continues until it is terminated by the mortgagor or his successor in the manner provided in Paragraph D of
this Article, or until the mortgage is extinguished in some other lawful manner. The effect of recordation of the mortgage
ceases in accordance with the provisions of Articles 3357 and 3358.
If theres no information, you presume you pay the oldest debt first.
Linton v. Purdon (1845): FACTS: Involves a mortgage to secure a suretyship. HELD: If mortgage is securing already existing
debt, the mortgage MUST SAY SO ON ITS FACE!!! Mortgage to secure pre-existing debt must be spelled out EXPLICITLY.
It MUST say the exact amount and acknowledge that it is for debt already existing.
This is CLEARLY for the purpose of giving notice to third persons of the amounts which the debtor owes secured by
conventional mortgages. Subsequent creditors NEED to know the amount of earlier mortgages on the property.
Inconsistent with Pickersgill, which says that the mortgage to secure a future advance can look like a past advance.
Linton says a mortgage to secure a past advance must say so.
Rule: Any mortgage for a past loan must state the amount of the past loan on its face.
Counter Letters. Counterletter is something that people put down in writing in a transaction that denotes the true nature of the
transaction. And its used whenever those same people to the transaction put something in the public records thats NOT
indicative of the true nature of the transaction. Whittington v. Bienvenu (1989): Today, it is forbidden in Louisiana law
to use counter letters. Filing in the public records of a document which on its face which misstates a material fact is a
crime.
Hypo 1- Lesson 11
A pledge secures a revolving line of credit. Why? As long as Im holding the collateral, Im secured.
Records effective against third parties when its filed.
The Process of Registry. Except in Orleans Parish (where you must give it to the right clerk), the Clerks Office maintains
three separate books:
1) Originals
Step 1: Filing is the act of handing the original to the clerk (Recorder of Mortgages) at the usual and customary place at the
clerks office.
Step 2: assembling into chronologically bound volume
Step 3: creating the indexEes of the clerks office read the document and extract names which are put in the index
Step 4: Actual recordation: copy of the original is put in the right book
2) Conveyance Recordsare always copies of documents that are originals; recordation is the making of the copy of the
original. Conveyances were always effective upon filing even if never recorded.
3) Mortgage Recordscopies of the originals. There are four distinct steps in placing a mortgage on the public records.
Mortgages were effective upon recordation.
If you file it in the wrong records, theyll take it and the money it costs to file it. It has no impact though. Theyll take it but its
worthless. Has to be filed in the right place to be effective, so must file with the right clerk. When it is filed and recorded, the
clerks office creates indexes. This is how you go back to research a chain of title. They create vendor-vendee and mortgagor-
mortgagee records.
Mortgages or conveyances which were properly filed but not properly put into the indexes are still effective.
? Wayside Development v. Post: Service contractor argued that clause giving him % of the rental of each lease renewal acted
as an assignment to him of the right to receive a percentage of the rents generated by all leases. The court found that the
agreement was merely a contract for the contractor to perform services in return for a stipulated sum of money per year,
together with a percentage of income generated by the leases. The court found that the contract was devoid of language
assigning the contractor a real interest in the immovable property to be developed. So he didnt need to file anything. What
happens if you file something that doesnt need to be filedso WHAT? Just bc something is filed doesnt mean it has effect.
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Kinnebrew v. Tri-Con: Kinnebrew sells to Tri-Con who sells to Leblanc who sells to Falkin. TriCon secured loan by
mortgage/lien. Tri-con doesnt pay. Sales filed on the following: from Kinnebrew to Tri-Con filed at 3:37 pm on August 5,
1960. Tri-con to Leblanc at 3:40 pm on August 5, 1960. Leblanc to Falkin at 3:42 pm on August 5, 1960.
Problem: Kinnebrews document was never recorded only filed. They cant tell the recording date but note that the document
immediately preceding Kinnebrews is dated Aug. 8, 1960. Although they cannot tell the exact date, the court assumes this is
the earliest possible recordation date and the latest could have been no more than a few days after this (about 7 days at the very
latest).
Kinnebrew wins. This case tells us that filing and recordation within time limits is retroactive. If it is RECORDED (put in the
book) within 7 days of FILING (bringing it to clerk) then recordation is retroactive to date of filing.
Opelousas Finance Co v. Reddell: Sale on Sept. 24, 1926 with mortgage. Filing complied with. Clerk screwed up and failed to
record until March 14, 1928. BUT, on Dec. 31, 1926 debtor mortgaged same property. This mortgage was recorded Jan. 5,
1927. Court says the recordation of the first mortgage was too far to be retro to date of filing. Court says that recordation is a
substantive, not merely form. A document that is filed but never recorded will have no effect on third persons. Filing DOES
NOT =recordation. HELD: when registry is promptly and actually madethe registry retroacts to the date, hour, minute
when the act was deposited. Mortgage EXECUTED AND FILED second wins bc it was RECORDED first. The first
mortgage was not promptly and actually made
Notes on prior two cases: Kinnebrew and Opelousas tell us that 7 days is enough to make it retro but that 18 months is too
long, but leaves us with the questionwhat about time in between. And it is going to matter according to the circumstancesit
will depend on whose mistake, what is reasonable in the circumstances, if someone is trying to pull a fast one on a buyer etc.
On the examthe answer will depend on who you represent. Exif we get a case where it is 90 days, and the exam says I
am the law clerk advising the judge, then I will need to explain the two competing cases and what factors we should look at.
Note alsofiling does not equal recordation UNLESS it finally makes it to the correct record book in a reasonable amount of
time.
Godchaux Sugars v. Leon Boudreaux and Bros: Delivering an instrument to the proper officer at a place other than the
office where it is required to be filed is not sufficient, even though the officer indorse it as properly filed. In other words, dont
mess aroundbring it to the clerk AT THE OFFICE. Not outside the courtroom, not outside the officeONLY at the right
place.
Gulf South Bank & Trust v. Demarest (1978): Homeowners bought a house when fraudulent cancellations made it appear that
the property was freed of those mortgages. HELD: The presence of fraudulent releases of mortgages in the records entitle
homeowners only to introduce the releases into evidence, as against third persons, but the releases remained forgeries, still
radically invalid and incapable of waiving the mortgagees' rights or of thereby freeing the home from the mortgages. Despite
the fact that the homeowners lack of fault, they cannot rely on the presence of the cancellation of the mortgage, especially to
the detriment of an equally fault free mortgage holder. A person can rely upon the absence from the records (non-recordation)
as guaranteeing ineffectiveness of an instrument required to be recorded. But one cannot rely upon the presence in the records
(recordation) of the instrument to make it effective as to third person, because the only effect of recordation is admissibility
into evidence.
One cannot rely upon a cancellation which may be fraudulent.
Three ways to cancel a mortgage: mark paid but this could be fraudulent; writ of mandamus to cancel; private act of
cancellation.
Public records is not a constructive notice. One can only rely upon its absence. Once it is present it affects you. The only
way it ceases to have effect is when the time is lapsed.
EXAMPLES
1/1/84 1/1/85 1/1/90
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X sells to S S sells to B B sells to C

Sale w/ Act of Mtg Sale w/ Act of Mtg Sale w/ Act of Mtg
Note Due: 1/1/85 Note Due: 1/1/95 Note Due 1/1/91

Amendment 1/1/96
Rx in 5 yrs:1/1/90 Rx in 5 yrs: 1/1/00 Rx in 5 yrs: 1/1/96

(Assumes no Interruption of Rx)
Mtg. Ceases to Mtg. Ceases to Mtg. Ceases to

Effect 3rd parties Effect 3rd parties Effect 3rd parties
In 10 yrs:1/1/94 In 6 yrs:1/1/01 10 yrs. From date of
Document regardless
If Ob < 9, then of when document is
10 yrs from recorded, so 1/1/00
Date of Maturity
If Ob > 9, then
6 yrs from
Date of Maturity
Resolutory CodnResolutory Codn

Lasts 10 yrs from Lasts 10 yrs from
Date Note Is Due Date Note Is Due
1/1/05 1/1/01
Does the effect of the mortgage lasts longer than the note? Cant tell from the face of the public records how much is left on
the note and in fact when the note prescription. The note might have been acknowledged (9:5807). The failure of the parties to
reinscribe the mortgage is the only thing we can rely.
Look to date of the act that creates the resolutory condition. Something that remains to be done in a sale and not a loana sale
with the act of mortgage. If less than 9, 6 years from maturity of date of sale. Never from the date of filing.
Now we have an act of reinscription signed by X. Does the borrower have to sign? No--Art. 3333, the creditor can do the
reinscription. Note due in 1/1/85. Does the resolutory condition change? No the due date hasnt change. The resolutory
condition need not be in the public records and not affected by the reinscription. It does extend the effect of the note, it only
extends the effect of inscription. Since 3rd parties cant tell what is going on they must assume the note is valid. Reinscription
only says what out this note must be valid until you find out to the contrary. The only thing that protect you is cancellation of
reinscription.
Wede v. Niche Marketing: James is the owner of the propertyhe bought it from Whitney. But on Dec. 8, 2005 Wede had
gotten a default judgment against Whitney and secured a lien (mortgage) against the property. Wede tried to record the
mortgagehe brought his record to the clerk of court and then the girl mislabeled the electronic fileshe put it in the
conveyance records instead of the mortgage records. Whitney then sold the same property to the James (who probably had an
attorney search the mortgage records and found nothing) on Feb. 2, 2007. Then Wedes attorney went to enforce the judgment
of default and discovered the mistake. Supreme Court says well, too bad, you tried to record, but it has no effect until the
document is scanned into the proper file (put in the right book in the old days), it is like you didnt record, so James wins.
Notethis was another long caselike Opelousas v. Reddell.
Prof Trahan from sales does not like this. He thinks 3347 and 3348 are dispositive of this issue.
3347 tells us that effect of recordation arises when an instrument is filed with the recorder and is unaffected by subsequent
errors or omissions of the recorder. An instrument is filed with the recorder when he accepts it for recordation in his office.
Meaning that JUST DROPPING IT AT THE RECORDERS OFFICE IS ENOUGH. But, this is not what Wede helddespite
this article. The court said filing is the act of scanning it to the CORRECT file. They rely on 3338, which says that the a
document must be recorded IN THE APPROPRIATE book or the document is WITHOUT EFFECT AS TO THIRD PERSONS
Problems are going to arise from this:

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Put it wrong book. Wede answers this. Filer not protected

Put under wrong name (indexed incorrectly) in the right book. Trahan thinks that Wede answers this tooit was IN
the RIGHT book, and courts have repeatedly held that the indexes are not part of the law. So we would protect Wede
in a situation like this. Filer is protected.
Delaying scanning: got a lazy little clerk girl. Shes watching Oprah and texting when the filer comes in. Then she
forgets about it for 3 months. After 3 months, she scans it in and it DOES go to the right book and is indexed properly.
But before she does, someone else buys the property
o Well, 3347 tells us that the document should have effect and the filer is protected. Trahan also thinks that
Wede would give it effect and the filer would be protected bc it made it to the right book.
o But he says that argument could be made that Wede says no, filer not protectedit didnt make it to the book
before the second sale (however, he is not ready to embrace this argument, as he said).
Lost document before it was scanned. 3347 tells us the document should protect the recorder, but Wede seems to
indicate noit never made it to the book and it has to make it to the book under Wede to protect the filer. Trahan
thinks filer not protected.
My thoughts on what Wede, Kinnebrew, and Reddell leave us with: Wede is the most recent expression of the court, but the
problem w/Wede is that it NEVER made it to the right book. So this is keyit must make it to the right bookthis seems to
me to be the actually made part of the equation from Reddell. If it is actually made (that is, in the right book) it must be
prompt to have retro effect on third persons. Kinnebrew tells us that 7 days is prompt enough. Reddell tells us that 18 months is
too long.
Point: the law is in conflictwe have the JP that tells us recordation is effective only when scanned into the book. And then we
have the Code that tells us it is when the recorder drops the record into the hands of the recording official
LESSON 12. HOW LONG DOES AN INSCRIPTION AFFECT 3RD PARTIES? REINSCRIPTION AND ERASURE
OF RECORDATION; INTRODUCTION TO COLLATERAL MORTGAGES
Notes:
Is it a sale? Does something remain to be done or paid by the buyer? If so, then theres privilege and resolutory condition.
Vendors privilege and mortgage cease at same time. Is the note due in more than 9 years from the expiration date?
-No ven priv or res cond with a loan or right of redemption (bc up to seller, not buyer), only w a sale/transfer of title.
Right of first refusal is imprescriptible until mid 90s where it changed to only 10 years, but you can contract for less.
Negotiable notes prescribe 5 years after maturity.
If not prescribes, accessory obligation falls.
Prescription may be interrupted by payment, possession of a pledge,
Rely on 3358 in the absence of reinscription (6 years after maturity).
Anytime there is a resolutory condition, runs 10 years from the date the obligation is due.
Have to say mortgage to have a mortgage, dont need to say vendors priv to have it.
Sales and resolutory conditions are to be recorded into the conveyance records, only.
If we cant tell when a note prescribes from the record, we assume the note has not.
Mortgage prescription see 3358 (6 years after last date of maturity)
p.52 formulary barrel of money mortgage.... secure any and all notes
Later future advances relate back to date of original mortgage date and beats other mortgages that came after that date
3rd party does not know outstanding balance or amount paid back so must assume the worst, assume all is out and none has
been paid back. Our rule of public records doctrine is not one of equity. We dont look for the fair way to allocate results, we
have assurance of ?? making ours more predictable.
Judgment mortgage prescribes 1- years from date of judgment, cant reinscribe a judgment. Can only revive suit before ten
years runs by filing suit.
3357 10 yrs runs date doc is made, not recorded. A later transaction is recoded before lender bank so home equity wins. Earlier
filed and recorded.
A third person may rely on the absence of a document
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Once a document is filed (and recorded) third persons are affected.
There are only two ways a document will cease to affect third persons: 1) it must be cancelled (but this is risky, bc the
cancellation may be fraudulent and fraudulent cancellation is of no effect and the document remains in effect against 3 rd
persons) 2) rely upon duration of inscription lapsing (this is the ONLY absolutely reliable way that a third party can ignore a
document, it will absolutely have no effect on 3rd persons)
Other relevant Code Articles: 3338-3368
La. C.C. Art. 3327. Certificate of encumbrances to be issued by recorder

A. The recorder shall deliver a certificate of encumbrances to any person who requests it in writing.
B. The certificate shall list, in the order of their filing, all the unerased mortgages and acts evidencing privileges that
appear in the recorder's records and that identify the persons designated in the request as the mortgagor or obligor of the
privilege. If no unerased mortgage or act evidencing a privilege exists, the certificate shall declare that fact.
C. The certificate shall exclude mortgages or privileges arising from the filing of the ad valorem tax rolls.
D. The recorder is liable for any loss caused by his failure to mention a mortgage or privilege in the certificate or by his
mentioning a mortgage or privilege that has been erased from the records, unless the error proceeds from a want of exactness in
the description of the property or in the name of the mortgagor or obligor of the privilege given to the recorder in the request.
C.C. Art. 3328. Duration of inscription; general rule

Except as otherwise expressly provided by legislation, the effect of recordation of a document creating a mortgage or
evidencing a privilege ceases 10 years after the date of the document.
La. C.C. Art. 3329. Duration of inscription of certain mortgages and vendor's privileges
If a document creating a mortgage or evidencing a vendor's privilege describes the maturity of any obligation secured by the
mortgage or privilege and if any part of the described obligation matures nine years or more after the date of the document, the
effect of recordation ceases six years after the described maturity date.
La. C.C. Art. 3330. Duration of inscription of judicial mortgage

The effect of recordation of a judgment creating a judicial mortgage ceases ten years after the date of the judgment.
La. C.C. Art. 3332. Effect of amendment to act of mortgage and sale
If before the effect of recordation ceases a document is recorded that amends the recorded act in order to describe or modify the
maturity of a particular obligation that it secures, then the time of cessation of the effect of the recordation is determined by
reference to the maturity of the obligation described in the act as amended.
La. C.C. Art. 3333. Method of reinscription

A person may reinscribe a recorded document creating a mortgage or evidencing a privilege by filing with a recorder a signed,
written notice of reinscription. The notice shall state the name of the mortgagor or obligor of the privilege as it appears in the
recorded document and recordation number or other appropriate recordation information of the document or of a prior notice of
reinscription, and shall declare that the document is reinscribed.
La. C.C. Art. 3334. Effect of timely filed notice of reinscription

A notice of reinscription that is filed before the effect of recordation ceases continues that effect for ten years from the day the
notice is filed.
La. C.C. Art. 3335. Effect of request filed after cessation of effect of recordation
A notice of reinscription that is filed after the effect of recordation ceases produces the effects of recordation, but only from the
day the notice is filed.
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La. C.C. Art. 3336. Method of reinscription exclusive

The method of reinscription provided in this Chapter is exclusive. Neither an amendment of a document creating a mortgage or
evidencing a privilege nor an acknowledgement of the existence of a mortgage or privilege by the mortgagor or the
obligor constitutes a reinscription of the document.
La. C.C. Art. 3337. Cancellation or erasure of mortgages and privileges from the records
The recorder shall cancel or erase a mortgage or privilege from his records as prescribed by legislation when: 1) Proper
evidence that the mortgage or privilege is extinguished is filed with him. 2) He is directed to do so by the mortgagee. 3) The
effect of registry ceases as provided by Articles 3328 through 3331 and the recorder is directed to cancel the mortgage or
privilege. 4) The cancellation or erasure is ordered by a judgment.
A 3rd person may rely upon the absence of a document from the public registry. If a document is filed (and recorded if
required) however then a 3rd person is affected by the document.
For a document to cease to affect 3rd parties, one of two things must happen: 1) it must be cancelled by one with proper
authority to cancel it. A fraudulent cancellation is of no effect and 3rd parties remain affected. Lawyers and title
companies make a business judgment to rely upon the cancellations as being valid knowing they take the risk of fraudulent
cancellation; 2) The only absolutely reliable way that a 3rd party can ignore a document that has been filed is to rely upon
the duration of inscription lapsing.
LSA-R.S. 9:5141. Recorder to endorse time of filing; effective from time of filing
A. All acts or instruments of writing which import mortgage or privilege, when filed for record with the recorder of
mortgages, shall be immediately indorsed by him with the date, hour, and minute of filing which indorsement shall be
recorded with the registry of the instrument.
B. All such instruments shall be effective against all persons from the time of their filing.
C. All such instruments filed after December 31, 1991, shall include the Social Security number or the taxpayer identification
number of the mortgagor, whichever is applicable. Failure to include such numbers shall not affect the validity of the
instruments.
D. No clerk of court or recorder of mortgages shall refuse to accept for recordation any instrument which does not contain the
social security number or taxpayer identification number as prescribed in this Section.
o This statute was to make mortgages like conveyances but it has to be timely recorded. So a document dated
1/1/80 and filed 6/1/80 and recorded a time later. Are 3rd parties affected prior to recordation. 3 days is
sufficient and 18 months is insufficient. This is still the rule as to privileges which still needs recordation.
Some will argue that the amendment to 5141 in 1993 language from the time of their filing is the same as
before the amendment. It is unclear whether privileges must be recorded as opposed to filed. There mere act
of filing makes the conveyance and mortgage effective but may not may the vendors privilege effective until
recorded in the mortgage records. Filing is all you need for the resolutory condition in the conveyance
records.
o The clerks office takes all the records filed and put in a box and then they create an index by reading through
the documents. At the end of every day the index is printed out and put in the day book. If checking public
records, one must start with the current owner and run up the current owner in the dendee records, takes all
the names and run it down the vendor records. Then run it in the mortgagor. Remember you are effect by
conveyances up filing and the mortgages upon filing, so you must look at the day books and also through the
boxes that the documents are put in before indexed.
o Major deals are closed into escrow.
o If you cannot tell the day and time of filing then everything ranks equally.
5163. United States agencies mortgagees of record; no cancellation or subordination without notice
Mortgages and the recordation in which any agency or instrumentality of the United States, lending on mortgages secured by
real estate is the mortgagee of record, cannot be cancelled, removed from the public records, or in any manner affected, by any
sale in any succession, liquidation, insolvency, receivership, or partition proceeding, in any court, unless previous to the
application or petition for sale, written notice thereof is given to the agency or instrumentality of the United States, the
mortgagee of record. The notice unless waived in writing by the agency or instrumentality of the United States, the mortgagee
of record, before or after the sale, must be filed in the proceeding, and a certified copy thereof served on the agency or
instrumentality, the mortgagee of record, not less than ten days previous to the filing of the petition or application for the sale.
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In no event shall the mortgage held by the agency or instrumentality be made secondary to, or ranked or primed by any costs or
fees in the proceedings, with the exception of the costs immediately and directly incident to the advertising and selling of the
property.
5167. Cancellation of mortgage or vendor's privilege by affidavit of notary or title insurer where paraphed note or
other evidence is lost or destroyed
A. (1) When a promissory note paraphed for identification with a mortgage or act creating a vendor's privilege on immovable
property has been lost or destroyed after receipt by the notary public who satisfied the promissory note out of the proceeds of
an act of sale or mortgage executed before him, or with funds given to him for that purpose, the clerk of court or recorder of
mortgages may cancel the mortgage or vendor's privilege upon receipt of an affidavit from the notary public. The affidavit shall
set forth all of the following:
5167.1. Cancellation of mortgage inscription by affidavit; penalties

A. A mortgagee shall execute and deliver sufficient acceptable documentation, as required by the clerk of court and ex officio
recorder of mortgages for the cancellation of a mortgage, to the mortgagor or the mortgagor's designated agent within sixty
days after the date of receipt of full payment of the balance owed on the debt secured by the mortgage in accordance with a
payoff statement. The payoff statement shall be furnished by the mortgagee or its mortgage servicer. If the mortgagee fails to
execute and deliver acceptable documentation, an authorized officer of a title insurance business, the closing notary public, or
the notary public for the person or entity which made the payment may, on behalf of the mortgagor or an owner of the property
encumbered by the mortgage, execute an affidavit that complies with the requirements of this Section and record the affidavit
in the mortgage records of each parish in which the mortgage was recorded.
5167.2. Cancellation of mortgage inscription

A. A mortgagee servicing agent or any holder of the note shall execute and deliver sufficient acceptable documentation,
including the original note or notes, and instructions regarding the cancellation of mortgage inscriptions to the mortgagor or the
mortgagor's designated agent within sixty days after the date of receipt of full payment of the balance owed on the debt secured
by the mortgage in accordance with a payoff statement. The payoff statement shall be furnished by the mortgagee or its
mortgage servicer.
B. The provisions of this Section shall apply only to residential mortgages, where a mortgage has been granted by a consumer
on one-to-four family residential immovable property, including a mortgage to finance the initial construction of the one-to-
four family residential immovable property.
C. This Section shall not apply to collateral mortgages as defined in R.S. 9:5550 nor to mortgages to secure future advances as
defined in Civil Code Article 3298.
Art. 2031. Revival of judgments

A. A money judgment may be revived at any time before it prescribes by an interested party by the filing of an ex parte motion
brought in the court and suit in which the judgment was rendered. The filing of the motion to revive interrupts the prescriptive
period applicable to the judgment. The motion to revive judgment shall be accompanied by an affidavit of the holder and owner
of the judgment, stating that the original judgment has not been satisfied. A judgment shall thereupon be rendered reviving the
original judgment. No citation or service of process of the motion to revive shall be required. The court may order the judgment
debtor to pay additional court costs and reasonable attorney fees in connection with the judgment revival action. Notice of
signing of the judgment of revival shall be mailed by the clerk of court to the judgment debtor at his last known address as
reflected in the suit record.
B. At any time after the signing of the judgment of revival, the judgment debtor may, by contradictory motion, have the
judgment of revival annulled, upon showing that the judgment which has been revived was in fact satisfied prior to the signing
of the judgment of revival. If the judgment debtor proves that the judgment has been satisfied prior to the filing of the motion
to revive the judgment, the holder or owner of the judgment shall pay all court costs, fees, and attorney fees incurred by the
judgment debtor in opposing the ex parte order of revival and the cancellation of the judgment from the mortgage records.
The Effects of Registry and Its Duration. Commercial Nat. Bank of Shreveport v. McDaniel (1934): FACTS: Defendant
purchased land from Kerr on May 8, 1923 for $341. For the price, he gave 3 promissory notes, each due in one, two or three
years. The notes were secured by a mortgage and vendors lien. The sale and mortgage were recorded. They were reinscribed
on Sept. 28, 1933. Smith purchased the notes from Kerr (likely at a discount). This makes Smith McDaniels creditor. The one
that matured in one year was paid to Smith and the note was returned to defendant. Smith took the other notes and pledged
them as security for his own debt to Commercial Nat. Bank. Smith defaulted on his obligation to Commercial. So Smith then
transfers ownership of the notes to Commercial. Prof says the bank should now be treated as McDaniels creditor. So the bank
wants to foreclose McDaniels mortgage (I think McDaniel didnt pay too). McDaniel had acknowledged the notes and they are
still viable.
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Defendant argues that since 10 years have lapsed since inscription and reinscription, the instrument ceased to have any effect
whatsoever. Court says NOthe primary obligation (McDaniels notes) had not prescribed (and since the mortgage and
vendors lien were accessory, they too had not prescribed). As long as the notes were alive, so was the accessory obligations
securing the primarys payment and continued IN FULL FORCE and EFFECT bw the parties EVEN WITHOUT reinscription.
Court notes that the law itself is clear in saying that the effect of the registry ceases after ten years unless reinscription takes
place and NOT the effect of the mortgage itself. Neither inscription nor reinscription is necessary, so far as the parties to the
mortgage or their heirs are concerned.Neither the contracting parties not their heirscan take advantage of the non-
inscription of the mortgage.
My interpretation: this case is basically saying, dude it may be true that the mortgage holder did not reinscribe the mortgage,
but it has effect ON YOU even without reinsciption. Your notes had not prescribed and so the mortgage was not prescribed and
just bc mortgage holder didnt reinscribe, you cannot get out of it.
HELD: Mortgages securing payment of notes continued in full force as between parties thereto so long as notes were not
prescribed, though over ten years elapsed between original inscription and reinscription of mortgages in records. Conventional
mortgage does not prescribe in ten years. But, the effect of registry of mortgage, not effect of mortgage itself, ceases after ten
years without reinscription thereof. It has been held many times that if ten years to lapse without reinscribing a mortgage or
lien, the rank of such is lost and a subsequent reinscription will give it effect only from the date of the reinscription.
Schutzman v. Dobrowolski (1939):HELD: Mortages between the parties to the contract of mortgage have effect whether
recorded, reinscribed or not. The issue of recording ONLY has to do w/effect on third persons.
GSX v. Sonnier: (W.D.La 2009) FACTS: On April 30, 1996, GSK sold the property to First Summit via credit sale, which
gave GSK a vendors lien, which was properly recorded. It has never been reinscribed. The note associated with the credit sale
called for payment in full on or before April 30, 2001. The credit sale was amended on two occasions. The first amendment did
not affect the maturity date of the obligation. The second amendment extended the maturity date of First Summit's obligation
by three years, with full payment due eight years from the date of the original sale. Then First Summit got a development loan
from Whitney bank, and a mortgage was granted to secure the loan. Whitney had insisted on having first mortgage, so they
insisted on a subordination clause, subordinating First Summits vendors lien to Whitneys mortgage. Whitneys mortgage was
recorded. First Summit went into bankruptcy and GSK is asserting secured claim by their vendors privilege and Whitney by
the mortgage.
First Summit says the signatures on the subordination agreement in Whitneys favor were fraudulent. Thus, bc full payment
was never received, GSK still has the right to dissolution of the sale and maintains priority over Whitney. GSK also argues that
the amendments to the mortgage would place a reasonable person on notice of the existence and continued viability of the
mortgage and vendors lien.
Whitney responded saying that GSK did not timely reinscribe its vendors lien, and so GSX lost priority (ten years from sale
date) even if the subordination agreement was invalid.
Court notes that it has been consistently held that failure to reinscribe a mortgage causes the mortgage to lose priority.
HELD: recordation and resincription are not about VALIDITY. GSK STILL has a VALID lien. VALIDITY is a separate
issuing from RANKING. Regardless of the validity of the underlying lien, the lien LOST its PRIORITY vis--vis mortgage
holders who subsequently record.
Inscription, Reinscription, and the Federal Gov: Federal Deposit Insurance Corp. v. McFarland: FACTS: McFarland
borrowed money in 1984 from Bank of Commerce and secured it w/pledged notes, secured w/a mineral lease mortgage and by
assigning his interest in the minerals produced from the mortgaged leasehold/mineral interests. FDIC had not reinscribed the
mortgage until 1995. However, Bank One had obtained a judgment against McFarland in Aug. 1990 which was properly
recorded in 1991, and Jump obtained judgment against McFarland in Oct.1991 and properly recorded in 1992. Bank of
Commerce went under and FDIC took over the Commerces assets, including the pledged notes, mortgage and assignment.
FDIC filed suit to collect debt owed by McFarland, including the mortgage and assignment.
Jump and Bank One argue that FDICs failure to reinscribe the 1984 mortgage within 10 years of execution resulted in a loss of
ranking and thus, Jump had priority over FDIC.
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TC found that LA law required FDIC to reinscribe the 1984 mortgage by 1994.Since it was not done until 1995 it was
untimely, depriving FDIC (actually, its assignee) of priority rank.
The issue in this case is that in 1993, there was a bankruptcy judgment entered declaring FDIC owner and entitled to all
funds from the leases in question. Assignee of Bank Ones interest argues that this judgment vested FDIC w/priority lien
status.
Court rejects this argument. There was a dispute over what the 1993 judgment meantso court finds that litigation bw the
mortgage creditors does not dispense from reinscription. The inscription must continue until the proceeds of the property
mortgaged are reduced to possession. Court notes that LA law mandates reinscription w/in 10 year period (so you cant get out
of it). Beyond that, the LA civil code tells us that the method of reinscription is exclusivethe mortgage holder must file a
signed, written notice of reinsciption, which shall declare that the document is reinscribed. The 1993 judgment could not have
substituted for thiseven if filing the 1993 judgment was a request for reinscription, the method for doing so must still be
followed. The judgment would have to have been signed by an FDIC rep and declare that that the document was reinsribed. So
the judgment, given the failure to comply with the requirements for reinscription, was not a reinsciption.
Bottom line: feds must abide LA law on reinscription to maintain their priority
whether the Federal Deposit Insurance Corporation (FDIC) as receiver must abide by Louisiana reinscription rules to preserve
its liens.
What Constitutes Reinscription? Life Ins. Co. of Virginia v. Nolan (1935): HELD: It is not necessary that the original act of
mortgage be recopied in its entirety in the mortgage records since the act of acknowledgment and correction, which was
recorded in full contained all the substantial recital of the original act of mortgage. That the inscription was notice to the world
that the mortgagor continued to admit his indebtedness, and that the mortgagee continued to maintain its mortgage on the
property described.
Cancellation of Mortgages. A mortgage may be cancelled in its entirety. Likewise a mortgage creditor may refuse to cancel on
any portion of the property until the debt is paid in full. The parties may contractually agree to partial cancellations
[subdivisions].
Cheleno v. Selby (1989): FACTS: On April 29, 1986, a money judgment was rendered in favor of plaintiff and against
defendant. That judgment was recorded in the mortgage records on May 14, 1986. Subsequently, defendant obtained an order
to take a suspensive appeal of the judgment . On July 17, 1986, the Recorder of Mortgages was presented with certified copies
of the suspensive appeal order and of the bond and requested to cancel the inscription of the judgment. He complied with this
request. On October 2, 1987, the suspensive appeal was dismissed because defendant failed to pay the additional appeal costs
due the Clerk of Civil District Court for the Parish of Orleans. HELD: Inscription of mortgage can only be erased by the
consent of the parties to the mortgage or by a judgment decreeing such erasure. The erasure of the mortgage in this case was
not obtained by consent of the parties or judgment. Erasure of inscription of judicial mortgage by recorder of mortgages upon
being presented with documents showing that debtor had perfected suspensive appeal was fatally defective, in that erasure was
not obtained by consent of parties or by judgment. Remedy for improper erasure of inscription of judgment by recorder of
mortgages was reinstatement of judgment as of original date of recordation.
Outline of Collateral Mortgages. Until the advent of C.C. Art. 3298 in the 1990s, the only way to secure a fluctuating line of
credit was with a collateral mortgage which is a pledge of a note secured by a mortgage.
A typical conventional mortgage has a note, which represents money that has been advanced or will be advanced, paraphed for
identification with an act of mortgage. The mortgage directly secures the paraphed note and since the note represents the
monies that had been or will be advanced, the mortgage directly secures the debt.
In a collateral mortgage package the collateral mortgage secures a pledged note; the pledged note does not represent monies
that had been or will be advanced but rather is pledged to secure the principal obligation (the actual loan). The fact that one
cannot tell from the face of a collateral mortgage package how much has been lent or how much remains outstanding should
not cause concern. What the documents disclose on any conventional mortgage is the property upon which the mortgage exists
and the maximum amount of debt being securedthis is no different in the collateral mortgagewe see what property has
been mortgaged and the maximum amount. You cant tell from any mortgage how much remains outstanding.
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(1) Prior to 1990 a collateral mortgage package Consisted of 4 documents; two of which were required and two of which
were optional but were usually done:
(a) the collateral mortage (required);
(b) the collateral mortgage note (sometimes referred to as the ne varietur note) paraphed for identification with the
collateral mortgage (required);
(c) a collateral pledge agreement, a written instrument showing the intent of the parties at the time of the giving of the
pledge (not required); and
(d) the hand note (not required). This term is a common usage for the notes that evidence actual advances on the
principal obligation. Remember a pledge can secure any obligation, but historically, when advances are made on the
loan the parties agreed to, the lender had the debtor execute a note representing the advance.
To perfect a security interest in a collateral mortgage package prior to 1990, one had to perfect a pledge of the handnote
(under 3158) and make the collateral mortgage effective as to 3rd parties by filing for recordation. A collateral mortgage
package was then effective against third parties from the earliest concurrence of the pledge of the collateral mortgage note
and the filing and timely recordation of the collateral mortgage.
(2) After 1990 a collateral mortgage note is not pledged; rather a security interest is obtained in it pursuant to Louisianas
UCC 9. After 1990, a collateral mortgage package is effective against 3rd parties from the earliest concurrence of a
perfected security interest in the collateral mortgage note and from the filing of the collateral mortgage.
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LESSON 13. THE COVENTIONAL MORTGAGE AND THE FUTURE ADVANCE MORTGAGE. COMPARING
THE TYPES OF MORTGAGES
Hypo OLD LAW: Bank wants security, Guy says I dont have any, but my uncle has a lot of money! Bank says give me
suretyship, but Guy says no, Ill give you a note. Lets do a fluctuating line of credit up to $100,000, and X will give you a note
for up to 100K. Is this enforceable under UCC? Yes, because its given for value (securing debt of another). Bank asks for real
security from Uncle X, who says okay, Ill give you a mortgage on my unencumbered million-dollar mansion. Level I (3358c,
guy and bank), Level II (plege, Uncle Xs note), Level III (real security interest, mortgage). III secures II which secures I. If
theres a pledge, interruption of prescription might apply. If theres a default, Bank can sue Guy (Level I), Bank can sue Uncle
X on his note (this changed with current law, will look at later), or Bank can foreclose on Level IIIs mortgage property
(convery property into cash at sheriffs sale, apply mortgage to pledge note, now we have cash instead of pledge note, so we
have cash at Level II, now well use it for Level I). So why cant we just have Guy secure his own note? Just a second set of
obligations?
CANNOT get to Level III without hitting Level II.
RULES CHANGED IN 1990

NEED TO KNOW 3158 (PRE 1990) AND RS 9:5550 (AFTER 1990)
TYPE RANKS FROM NOTE PRESCRIBES CEASES TO AFFECT 3RD

PARTIES
ORDINARY Recordation (filing) 5 years from last payment. 10 years after date of
Art. 3498 (3328: for non- document or judgment; if
negotiable instrument there is notefor more than 9 years,
a six-year prescription) 6 yrs from maturity date or
last installment called for in
the note. Arts. 3329, 3330,
3331, 3332, 3336
FUTURE ADVANCE
Pre-1991 only future Recordation (filing) 5 years from last payment 10 years after date of
advance (barrel of money) document or judgment; if
After 1991 future advance notefor more than 9 years,
or fluctuating line of credit 6 yrs from maturity date or
last installment called for in
the note.
COLLATERAL Earliest concurrence of filing Handnote never prescribes. 10 years from execution of
MORTGAGE [before 1990] of the collateral mortgage Collateral mortgage note collateral mortgage note. Art.
plus perfection of a security prescribes in 5 years but 3328
interest in the collateral interruption each time
mortgage note under UCC 9. payment made on handnote.
COLLATERAL Earliest concurrence Handnote never prescribes. 10 years from execution of

MORTGAGE [after 1990] recordation (filing) plus Collateral mortgage note collateral mortgage note. Art.
pledge plus intent to secure prescribes in 5 years but 3328
future loans interruption each time
payment made on handnote.
HYPO: S sells to B $15Ok Buyer gives Bank Buyer gets 2nd Mtg. Lender $60k
Sale w/ Act of Mtg 1st Mtg
1/1/95
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Pre 1990 the pledge of a note delivery of the note to the creditor is effective without further formality. CC Art 3158(c)
may be used to secure specific debt, barrel of money, or fluctuating line of credit if the pledge remains in the hands of
the creditor/pledgee or his successor, it may be re-pledged (new debt) to secure original loans or new loans up to the limit.
Must have specific intent.
Does the bank outrank the 2nd lender and the borrower is up to $150k? 9:5551A says a collateral mortgage becomes
effective as to 3rd parties, subject to the requirements of registry of the collateral mortgage, when a security interest is
perfected in the obligation secured by the collateral mortgage in accordance with the provisions of Chapter 9 of the LA
Commercial Law. If the bank can prove it was pledged and perfected it will outrank.
HYPO 2: Filed 2/27/95 but the clerk did not record until 9/1/95. UCC 9 Security interest perfected on 1/2/95. Does the
bank outrank the 2nd lender. La. Const. Carried forward as an unnumbered statute was filing + recordation to make effect
mortgages. Now, Art. 3308 recordation as to mortgages is irrelevant, filing is all you need. Can the bank enforce the
collateral note today? The bank should have a collateral mortgage note on demand always because it cannot sell the
collateral mortgage note if it is due in a number of years rather than on demand.
Security interest interrupts prescription on the principal obligation and thus never prescribes. Succession of Picard, Scott v.
Corkern. Even if one has a prescribed pledged note nonetheless interrupts prescription because a prescribed note is a
principal obligation which otherwise would have prescribed if secured by a pledge never prescribes.
The collateral mortgage secured the collateral mortgage note. The pledge in the collateral mortgage note secures the
principal obligation.
BEFORE 1990 AFTER 1990

Collateral Mortgage Note paraphed ne varietur for SAME
identification with an act of collateral mortgage
Recordation of collateral mortgage in mortgage records SAME
Act of pledge of collateral mortgage note; art. 3158 Act of delivery of collateral mortgage note to create a
security interest. UCC 9.
Intent of the parties of what loans is secured. It could be UCC 9 presumes all loans are secured, although good
oral, although a careful lawyer used a collateral pledge practice indicates you should state your intent to secure
agreement to show intent. Intent could be for past loans, future loans in the security agreement.
for present loans, for specific future loans, or for a
fluctuating line of credit. Art. 3158
Language in the collateral mortgage note or collateral Language in the collateral mortgage note or collateral
mortgage does not show intent at the time of the pledge. mortgage does not show intent at the time of a perfection
of the UCC 9 security interest.
A collateral mortgage package is effective as against third A collateral mortgage package is effective as against third
parties from the earliest concurrence of: 1) pledge of the parties from the earliest concurrence of: 1) delivery of the
collateral mortgage note of the creditor; 2) Intent (Alford collateral mortgage note the creditor to create a perfected
& Silversmith); 3) Recordation of the collateral mortgage security agreement in the collateral mortgage note; 2)
in the mortgage records perfection under UCC 9 (which requires value being
given); 3) filing for registry of the collateral mortgage in
the mortgage records
How to get value under UCC: 1) common law
consideration. 2) binding obligation of lender to advance.
3) giving a note of security for debt of third party.
RANK of collateral mortgage package can change when RANK of a collateral mortgage package continues as long
intent changes; if a single loan is intended to be secured, as there is perfection in the collateral mortgage note, or as
the collateral mortgage package will not, by its nature, long as the original secured party or its successor hold the
secure future loans. note.
Rank can be transferred to another; however, transfer Rank can be transferred.
may only be for current debt, not future advances, if the
parties are not careful in the documentation.
The principal obligation never prescribesdue to the SAME
constant acknowledgement rule.
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The collateral mortgage note can prescribe- when the SAME

collateral mortgage note is extinguished.
Thus after 1990, we no longer have pledge. SO to get a security interest after 1990 one has to do a number of steps: 1)
delivery of the note; 2) Must have Value [some nominal advance to prove value) is binding offer to lend (under 3158 prior
to 1990 you could give a collateral mortgage without any money being lent); 3) Intent at time of the pledge.. of either a
binding obligation to advance funds (not gunna happen) or a contemporaneous advance of funds.
In real world- on the day a creditor receives the pledge note (UCC9 note), creditor advances money and then is handed
back to the creditor.
Creditor loans money to Debtor who gets a note from his uncle. Creditor can sue the debtor or uncle. X is a real note
given for value and consideration. Now X gives a mortgage to secure the note. D pledges own note to secure the principal
obligation. Creditor can sue the debtor, sue X on the note, foreclose on the property and use the cash to pay off the
principal obligation that the pledge secures.
Why would a debtor give two notes? To get a fluctuating line of credit.
P 259-260:
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p. 80 in form book financing statement. DONT use this for collateral mortgage.
p. 59 in form book security agreement. Deal between the parties. Do we need to have this for collateral mortgage? No case in
LA on it. Theres an argument that you dont need it because CM is possessory security interest. Nonetheless, how will you
prove intent if you dont have it?!
Practical problem of enforcement has nothing to do with the notes validity.

HAND NOTE COLLATERAL PROPERTY SELLS FOR CREDITOR 1 CREDITOR 2 DEBTOR
MORTGAGE NOTE AT SHERIFFS SALE
$15,000 $15,000 $20,000 $15,000 $3,000 $2,000
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$10,000 $15,000 $15,000 $10,000 $3,000 $2,000

$15,000 $10,000 $15,000 $10,000 $3,000 $2,000
$10,000 + $10,000 + 12% interest rate
21% interest
rate
Sell collateral mortgage by sheriff to get cash to pay off CMN to pay off principal obligation. Mortgage only secures
collateral mortgage note and not the debt.
Any money left over goes to inferior creditors.
Creditor can never collect more than he is owed with handnote (evidence of money advances).
Usually discrepancy in interest between handnote and collateral mortgage note. Handnote is usually based on floating
interest rate while collateral mortgage note is usually based on prime rate and never floating interest rate.
Interest runs on collateral mortgage note from date that it is made (with fixed interest rate12% is fixed interest rate in
(A).
R.S. 9:3509 give interest rates and pay that loans subject to federal laws have no usury rates.
More can also be discrepancy in attorneys fees between handnote and collateral mortgage noteCourt will only award
reasonable attorneys fees.
RULE: A C is secured to the lesser of: (1) Principal plus interest on collateral mortgage note; or (2) Principal plus interest
on hand note.
Principal obligation shown in handnote only flows through to collateral mortgage note.
Attorney should not have collateral mortgage note that is to hand note and this could be malpractice by attorney since
fluctuating interest rate is generally not the same as fixed rate. Thus the rule is always make CMN 150% of what the hand
note is. EX. If hand note is $100M, then CMN should be $150K. Collateral mortgage is most common form of LA
financing today.
Art. 3298 allows future advance mortgage without having to go through collateral mortgage. This mortgage secures a
fluctuating line of credit called a multiple indebtedness mortgage. A provides that filing is all that is needed. It requires no
note at all. Even though this is no simple process, most attorneys dont use this procedure.
Four questions:
1. Effective between the parties: (1) form (3288)requires a certain form. For conventional mortgages, need specific
property description and description of debt or maximum amount secured. It can be a calculable amount. If you dont
have those two things, it is not valid. Legal and judicial mortgages are general and do not require description of
property. Can I mortgage specific property that I dont own? Yes, but it doesnt become effective until after I own it.
(2) must remain valid. If I have a note due on demand made in 1999 secured by a mortgage and we record it in the
public records, we know 3rd parties are effected in 2009. Is this effective between parties? We need more information.
Its a demand note so it ends in 5 yearsbut if theres been payment on note, then prescription is interrupted. New 5
year paymentcalled acknowledgement. Could have had an active acknowledgement (Im not paying you but I
know I owe you the money). Or we could have that note secured by pledge of a watchconstant acknowledgment
(Succession of Picard, University Lakes v. Kaplan, Scott v. Corcoran)(so it wouldnt prescribe). If the note is
unenforceable because it prescribed or a vice of consent or creditor relinquished it, then the mortgage falls because its
accessory.
a. Hypo: D sells property to X and X assumes mortgage. A couple of things happen: the mortgage follows X,
the sale from D doesnt release D from note. But novation articles say that creditor can release debtor and
allow X to assume (requires someone specifically assume the mortgage) without extinguishment of the
mortgage.
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2. Effective between third parties: protected by the public record doctrine. Rules of registry dont create rights, but
third parties (LOOK AT CIVIL CODE) can ignore their actual knowledge and may rely on ABSENCE in public
records of those things that should be there. What has to be there to effect third parties? Sales and mortgages (there are
exceptions, will chat about it later). If its in public records, does it effect you? Ask: (1) does it have the necessary
form? Needs amount and property description. If doesnt have it, you can ignore it. (2) Is it put in the right location?
Know rules of filing, recordation, conveyance records, mortgage records. (3) Okay, so its effective as to third parties.
When does it start to effect me?
3. Start date as to 3rd parties: Rules of filing and recordation. Reed case changed what lawyers thought happened.
Historically, conveyance effective upon filing; mortgage effective upon recording. When constitution rewritten in
1970s, Article 19, Section 19 became unnumbered statute. But language broad. Rule: if its not record, aint effecting
third parties. When does it start? Mortgages, if recorded, relate back to date of filing if they are timely. Untimely
recordation gives you a start date of recording. What is timely? One case says 3 days, one case says 18 months is
untimely. So we dont know. Big partishes record in 24-36 hours.
a. 3183 CC: debtors property is the common pledge of his creditors. 3184.
4. Stop date as to 3rd parties: Cannot rely upon cancellation. Because if its fraudulent, doesnt effect third parties. Can
only rely upon expiration fo time of effect. 3357 (not peremption, not prescrition)cessation of time of effective
recordation. THREE SPECIAL RULES FOR FEDSFirst special rule: Federal debt collections act (page 255 case).
If feds file suit to collect debt, their judicial mortgage has specia rules. Second: federal forfeiture rule (REPO):
Jefferson/Naimer case (p 253). If you see notice of lis pendens for the federals, its like the property is transferred to
them retroactively when they get their judgment. Third: conventional mortgages held by federal entities (farms, home,
loan administration): Oliver, Morehead (p 250). Oliver: Oliver argues that, if the Court accepts the position of the
FmHA, the FmHA has an imprescriptable right to foreclose upon security property, Court says THIS IS RIGHT.
Whose viewpoint are we looking from? That matters when you ask these questions.
7 days to file for new trial. 30 days to file for suspensive appeal. Put up your suspensive appeal bond (legal suretyship).
Judicial mortgage effective as soon as you file it, and only noneffective if the other wins the suspensive appeal.
I am walking to file a judgment that creates a judicial mortgage.
Levy v. Ford (1989): Look to p. 38 in form book. This was the mortgage noteits obsolete but know it. P 11 of form book:
level II: collateral mortgage also called averiture note. Stamp on bottom left hand side is naveriture stamp. P. 48 in form
(level III) book: the said note having been duly paraphed Paraph: swirl designed to prevent forgery.
FACTS: In 1886, Ford executed a mortgage note for $7K, due in 12 months, and payable to his own order and endorsed it and
delivered it to McWilliams, as collateral security for an already existing account, which was overdrawn by $10K. In 1887,
Ford paid the debt and the bank surrendered the collateral.
Then, Ford borrowed money from Cahn in the amount of $3610.20. He executed a note payable to himself and endorsed it and
delivered it to Cahn to secure this debt. He also gave Cahn the $7K mortgage note as collateral security. He leased his
warehouse and the lessee gave notes for the rent. When he needed cash, he sold the notes at a discount to Winter, but Winter
wanted security for buying up the rent notes at a discount. So he asked Cahn for the $7K note back. Cahn gave him the note
and Ford gave it to Winter to secure the bought up rent notes. Winter agreed that once the rents (and other indebtedness of
Ford) had been paid, he would give the $7K note back to Cahn.
Meanwhile, Ford had continued to do biz w/McWilliams bank (heir). And, in 1887, before the transaction w/Winter, Ford
executed a $10k mortgage note to the bank. In 1888, after the Winter transaction, he executed a $5K mortgage note to the
bank. Both of these notes were collaterals for his account. Ford transferred all his biz to the plaintiff bank and then executed
two notes of $10K each to the new bank.
The issue is: could Ford reissue the mortgage note? Over and over again? YES!!!
Court notes: The notewas issued only as collateral security. At the date of its issuanceFord did not owe [at all on THIS
note]. When [McWilliams] received them, he placed them with his bank as collateral security for Fords [already existing]
account. We held that where notes are executed and used as collateral security, upon payment of the debt secured, and their [the
notes] return to the maker, it was legal and competent for him to reissue them as collateral security, before their maturity. It is
equally clear that it may be reissued after maturity as other paperwhere it was reissued before maturity to another creditor,
the creditor may pass it on after maturity, where such transferee will be protected by the good faith of the transferor.
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Profs notes: how can you tell if this is a regular mortgage or a collateral mortgage? Here, you have a note that says, in essence,
I O U $, signed, the borrower. There was an ALREADY existing account (overdrawn by $10K). The existing account is the
principal obligation. The note was used to SECURE THE EXISTING OBLIGATIONwhich indicates it was level 2the
pledge bc there was nothing advanced on it bc the money HAD ALREADY BEEN advanced. And the mortgage was used to
secure the pledge. Here, we are looking at intent of the partiesthe note was executed with NOTHING owed ON THIS NOTE
which indicates it was security and not the principal.
The difference in mortgage (money actually owed) and collateral is that if there is NO MONEY advanced on THAT note (it is a
fictitious note), then it is collateral. The handnotewhich is the one the money is exchanged onis the principal obligation.
The collateral notesays I O U some X amount of money and this is used to secure the first noteno money is actually
advanced on the collateral note. Any time we see a note w/no money advanced on it, we should be red flagged that the note is
collateral. One clue is where, like this case, there is money already owed and no more money given on the executed note.
Mente & Company v. Levy (1926): FACTS: The creditor had a judgment against debtor and seized some of his property,
consisting of two lots of land and a car. The mortgage on the first lot was for $10,000, represented by two notes of $5K. The
notes and the mortgage were executed on Feb. 3, 1920. The notes were payable to the maker's own order and indorsed in blank,
but the mortgage to secure the payment of said notes was made to the Commercial Bank of Rayne. The mortgage on the second
lot was in favor of Webb to secure a note for $3,000.The mortgage on the automobile was to secure a note for $1,000 payable
to the maker's own order.
The successful bidder bid the appraised value. But the sheriff refused the bids bc the appraised value and the amount of the bids
was much less than the amount of the outstanding mortgages. The creditor claims the mortgages had been discharged and, thus,
the sale to the successful bidder should be compelled.
But, there was no evidence of a discharge of the mortgages on the car and to Webb, so the court does not need to address these.
When the bank had received the $5K notes, they entered them on the liability register, evidencing the fact that the notes were
an asset to the bank and a direct obligation and liability of Levy. The mortgaged property burned and Levy paid off the debt
w/the payoff from the insurance company, in the exact amount of the principal and interest due. The bank even took the two
notes and marked them paid.
When he had paid the bank off on the mortgage, he still owed over $11K to the same bank. So he executed another note for the
remaining balance. He used the two $5K mortgage notes as collateral for this new note. After this, these notes pop up
everywhere as collateral to various other notes. At no time after the payoff mentioned above did the notes appear in the banks
books as representing the original $10K.
It is true that the bank never ACTUALLY returned the notes to him, but the evidence clearly shows that the original notes were
marked paid. Thus, the notes were thereafter held NOT as an original obligation, but as COLLATERAL to other notes. The fact
that the bank retained possession does not indicate that he didnt pay the original obligation and it does not mean that the bank
did not hold the notes later only as collateral. Level II cannot represent sums that have been advanced or will be advanced.
While he had every right to reissue the notes as collateral on other debt, as to the original debt: by the payment of the original
debt, the mortgage was extinguished and could not be revived and substituted for a new debt by a reissue of the notes.
So they sheriff is directed to complete the sale to the original successful bidder as to this piece of property and give the
proceeds to the creditor.
Prof notes: the difference bw this case and Ford is that the notes in question (the $5K notes) are the ones that money was
ACTUALLY advanced onwhich indicates that it is the principal obligation. So it WAS NOT a collateral mortgage.
Document does not have to say collateral mortgage on it. It is the pledge of real securitysomething else to collect
against.
Intent at time of giving of pledge makes collateral mortgage.
Difference Between Collateral Mortgage and Future Advance Mortgage. Cameron Brown South, Inc. v. East Glen Oaks
(1976): FACTS: East Glen Oaks, Inc., is the maker of a certain ne varietur mortgage note which was payable to the order of
itself and which was endorsed in blank by the maker. Trial Judge considered this construction mortgage to be a classical
collateral mortgage.
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Court notes that bc both future advance and collateral mortgages can be used to secure future advances, there is confusion bw
the two. (Note that this case was decided before modern art. 3298).
Court tells us that a future advance mortgage is used to secure SPECIFIC future advancessuch as stages of constructing a
building. Each advance are secured by the mortgage originally granted and relate back to the original date of the mortgage. If
this mortgage debt is reduced, it is reduced pro tanto and cannot be increased thereafter.
Court tells us that a collateral mortgage differs bc money is not directly advanced on the promissory note that is paraphed for
identification with the act of mortgage, rather the package is pledged to secure an indebtedness that can be one which is pre-
existing, contemporaneous, or future. The full amount of the CMN secures the principal AND any other indebtedness of the
handnote, including interest, and attorneys fees. The CMN does not represent the indebtedness, it is security that is pledged to
secure another note. The other note is usually a handnote, which actually represents the indebtedness. The true indebtedness is
the debt that the CMN is pledged to secure.
BUT, for the purpose of executory process, the CMN is the instrument that evidences the obligation secured by the mortgage.
In a prior case, the handnotes were not presented to prove the debt and mortgagor tried to say that they were actually evidence
of actual indebtedness and since they were not presented, seizure and sale was invalid. Court says nothe very purpose of the
collateral mortgage is to avoid the necessity of paraphing the mortgage with each hand note as an advance is made.
HELD: This mortgage is one for specific future advances. There was no pledge thus no collateral mortgage. We find that the ne
varietur note and the construction mortgage involved in the instant suit do not possess the vital characteristics necessary to a
categorizing of this mortgage as a collateral mortgage. RUBIN was the lawyer in this case. He misunderstood collateral
mortgages for future advance mortgages. Didnt know difference. The sums described were for future advances. This was
barrel of money theory. NOT a collateral mortgage because NOTE represents SUMS that would be advanced.
Profs notes on this case: this is a case about intent. The note was given to secure a specific debtthe intent to secure future
advances was not there. What happens here is that we have notes (draw notes) that say I O U and the bank is trying to say
these were handnotes. What is missing is that there was no evidence that there was a pledge. If there is no pledge, there is no
collateral mortgage.
Ne varietur note, act of pledge, collateral pledge mortgage dont have to be in authentic form.
Two ways to evidence advances in the old days: draw notes and grid notes with the far column being the balance. Today,
electronic entry or withdrawal over the phone is how the advances are made. Banks set up a demand deposit account
specifically for this loan only and then the borrower can write checks.
How do you tell the difference between future advance mortgage (Cameron) from a collateral mortgage? In many
instances, the public records will have the document and on its face, it will tell you whats going on. P 47 in form book is
collateral mortgage. Dont have to use that form. Can use form at p. 38 (secures present advance). Can you tell this form
present advance or future advance? NO. Cant tell by looking at it. Dont sure if the note secures a loan that was advanced in
the past or that will be advanced in the future. SO what can you tell from the public records? Property description, the note that
it secures, that date of filing and recordation. So how do you know what it is? Look at form book pg. 38. Not future if present
advances or future advances. THINK THE WORSTall the money was advanced and none was paid back (On Day1 that
mortgage recorded, all the money was taken out). Youll know how long it will lasts. Youll know when the note lasts until for
third parties (10 years- CHECK THIS). If facts say in addition to pg. 38 form, the actual advances were represented by
SEPARATE notes, STILL DONT KNOW ENOUGH! Because it could be a CM or a FAM. How can I tell the difference?
NOT in public records. What other facts might inform you? Does the note that the mortgage describes represent sums that
HAVE been advanced (its an ordinary mortgage) or WILL be advanced? (old future advance mortgage-barrel of money) If you
determine that the note that the mortgage describes does NOT represent sums that had been advanced or will be advanced, but
were nonetheless pledged (UCC security interest), then you have a collateral mortgage. If you see that the note was
PLEDGED, you have a collateral mortgage. A CMP can secure a specific advance, can secure a barrel of money, or fluctuating
line of credit. It requires intent of the parties at the time of the pledge or protecting security interest (Alford). Does the note that
the mortgage describesdoe it represent sums that HAVE been advanced or WILL be advanced? If so, not a CM. If it doesnt
and you find evidence that it was pledged/UCC 9 encumbered, you have a CMP.
First Guaranty Bank v. Alford (1978): FACTS: Dr. A borrowed $155K from the bank, signing a promissory note (the
handnote) payable one year thereafter. To secure the debt, he had his wife encumber her separate real estate, by execution of a
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collateral mortgage note (ne varietur note, a demand promissory note for $155K payable to the debtors and endorsed in blank),
a collateral mortgage, and an act of pledge (pledging the ne varietur note), each of which was signed by both the husband and
the wife. The promissory note was cancelled and returned to the husband about one year later (bc he renewed the debt by
executing a second promissory note for it). However, the CMN remained in possession of the bank, which sued the wife after
the husband defaulted on the payment of his obligations. HELD: the bank's retention of the collateral mortgage note after
extinguishment of the first ancillary debt note, without either an outset pledge to secure future obligations or a subsequent
pledge by the wife, gave the bank no security interest in the collateral mortgage note.
Discussion:
A collateral mortgage consists of at least three documents, and takes several steps to complete. First, there is a promissory note,
usually called a CMN or a ne varietur note. The CMN is secured by a mortgage, the so-called collateral mortgage. The
mortgage provides the creditor with security in the enforcement of the CMN. Up to this point, a collateral mortgage appears to
be identical to both a mortgage to secure future advances and an ordinary mortgage. But a distinction arises in the collateral
mortgage situation bc money is not directly advanced on the note that is paraphed for identification with the act of mortgage.
Rather, the CMN and the mortgage which secures it are pledged to secure a debt.
This case turns on WHETHER Mrs. A DID IN FACT pledge her CMN to secure any other debt besides the $155K and the
court finds she did not.
Court notes that language that the language in the CMN and the CM say that this is a CMN secured by a CM and may be
placed as collateral security for any hand note or notesand may be issued and re-issuedand its validity will not be affected
by the fact that the original indebtedness for which it was issued is paid but That the note may be reissued does not require
the conclusion that it was. And there WAS NO second or subsequent pledge by Mrs. Ashe did not give the CMN to Dr. A
for his use in providing security for his obligations. Instead, she pledged her separate property as security for a LIMITED
obligation.
3158 said only covers what you intend for it to cover. Your agreement with the bank said this was a depositary. No rights to
collateral mortgage. Doesnt secure anything.
Prof thinks the real issue was that it was Mrs. As separate propertythis was the right result.
Note: In Cameron Brown South, it implies that CM is used to secure UNSPECIFIED future debts. Yet this case tells us that the
CM here was for a SPECIFIC obligation. I think it doesnt turn on whether the debt is specific or unspecified but whether there
was a pledge. The pledge is crucial. Here, the CMN was NOT his to pledge; it was her separate property. And there was no
indication that she did.
So, my thoughts, to determine if there is a CM:

a) Was money actually advanced on the note paraphed for indentification w/the mortgage (the answer is no if there is
already an existing account when the note is executed bc that means that money was already advanced and not w/the
note)
b) Was there a pledge (and was it the pledgors note to pledge, consistent w/Alford)
Prior to 1990, intent at the time of the giving of the pledge proved what the debtor intended to give as security; there are 4
documents:
2) Hand Notes If creditor wants to be assured of what the intent is a document is nice to have although not required.
These handnotes are not essential the CM package
3) Ne Varietur Note For a valid collateral mortgage package one must have the collateral mortgage and ne varietur
note. 3158B did not require the existence of the handnotes.
Art. 3158B provides (1) When a debtor wishes to pledge promissory notes, bills of exchange, bills of lading,
stocks, bonds, policies of life insurance, or written obligations of any kind, he shall deliver to the creditor
the notes, bills of exchange, bills of lading, stocks, bonds, policies of life insurance, or other written
obligations, so pledged, and such pledge so made, except as hereinafter provided with regard to life
insurance policies, shall without further formalities be valid as well against third persons as against the
pledgor thereof, if made in good faith. This is the only way to make that document effective as to 3rd parties
it must be delivered.
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After 1990, there must be a perfected UCC9 security interest in the CMN, which requires the giving of value
and delivery of the CMN. Caselaw is split as to whether there must be a written (not oral) Security
Agreement when perfection occurs solely by delivery.
4) Collateral Mortgage Collateral mortgage to be effective must be put in the mortgage record according to 9:2721.
5) act of pledge for said note. Bank should have had a definition in the document. This should secure the
Indebtednessa fluctuating line of credit.
If there is evidence (a handnote) of the debt secured by the CM package, the creditor has 2 choices: 1) enforce the handnote by
suing on it 2) enforcing his privilege upon the CMN. This makes it clear that a creditor who advances on a handnote is secured,
not by any specific mortgage for THAT handnote, but rather by the pledge (pre-1990) or security interest (after 1990) of the ne
varietur note (which is secured by the mortgage).
Bc of this, there is actually no need to sue the debtor on the handnote itself. Rather, the creditor can proceed by executory
process. However, this does require special pleadings.
As there is no need for a handnote to begin with, it makes perfect sense that the handnote does not need to be in authentic form
and does not need to be introduced into executory proceedings. This is bc the creditor is NOT suing on the handnote, but is
suing to enforce the pledge. Practically speaking, most attorneys do attach the handnote to the pleadings.
When does a collateral mortgage begin to effect 3rd parties? An effective collateral mortgage needs the following:
Ranks From earliest concurrence recordation (filing) plus pledge plus intent to secure future loans. 1st step is a pledge
otherwise there is no claim against X. Reason we have this rulethe mortgage secures the ne varietur note and must be
recorded in the mortgage record. Pledge cant affect 3rd parties until it is perfected. 3rd party has no way of knowing when
the pledge was done. Assume is pledge prior in time to mortgage or simultaneously. 3rd parties must assume that the
pledge occurred simultaneously but in litigation the creditor must prove his rank upon proving the validity of the pledge as
well as the validity of the mortgage.
Note Prescribeshandnote never prescribes. Collateral mortgage note prescribes in 5 years but interruption each time
payment made on handnote.
Affect as to 3rd Parties Ceases 10 years from execution of collateral mortgage note.
Noteif the collateral mortgage note is for a face amount LESS than the principal obligation (the max amount that can be
withdrawn via handnotes) then if the creditor seizes and sells the houseall the creditor can get from the sale is the amount of
the CMN. For the deficiencyhe has to go after the debtor. The creditor can get the lesser of the two of the amount of the
handnotes (bc this was actually borrowed) or the amount of the CMN (what was actually secured)
Some examples of how the money worksthis is about WHY the bank wants a mortgageit has to do with how the money is
distributed from the sale.
Hand note: $5k, CMN=$5K, Sale=$5K. Creditor gets $5K from the sheriffs sale. Creditor v. Debtor=Creditor gets $0.
Excess is $0
HN=$5K. CMN=$11K. Sale=$11K. Creditor gets $5K. creditor v. debtor=creditor gets $0. Excess of $6K excess
HN=$10K. CMN=$6K. Sale=$6k. Creditor gets $6K. Creditor v. Debtor=creditor get$4K deficiency. Debtor gets
nothing bc there is no excess
HN=$10K. CMN=$20. Sale=$6K. creditor gets $6K. creditor v. debtor=creditor gets $6K. creditor v debtor=creditor
can go after debtor personally for $4K. There is no excess so debtor gets nothing
HN=$10K. CMN=$15K. Sale=$20K. creditor gets $10K bc this is what was borrowed. Creditor v. debtor=creditor
gets nothing bc what was actually borrowed and paid by the sale. Creditor gets lesser of handnote OR CMN. Debtor
gets the excess from the sale of $10K
HN=$25K. CMN=$15K. Sale=$20K. Creditor gets from the sale $15K. in Creditor v. debtor personally, creditor can
sue for $10K, the rest of what is owed on the handnote. Debtor gets $5K from the sheriffs sale. Prof notesthis is
counterintuitive to usthe debtor still owes money, but he is getting proceeds from the sale. Remember that a
mortgage is about priority!! It is about WHO gets paid and in WHAT order from a sale. It does NOTmean that the
debtor does not owe the rest of his obligationit just means the creditor only gets what he secured. Creditor COULD
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have secured the restbut he didnt. So he is not first paid on the unsecured amount. Security is about getting paid
FIRST.
LESSON 14. RANKING THE COLLATERAL MORTGAGE
Some cases are before 1990 so they use pledges.

Some cases are after 1990 but involve 1990 obligations, so they use pledges.
Some use current rules (level 2 perfect by ucc 9)
Hypothetical 1:
1. Principal obligation: LOAN AGREEMENT that tells you it is a fluctuating line of credit. Is there a maximum amount?
YES. Put an end date. Dont put an interest rate because interest rates might change.
2. Collateral mortgage note: Put the amount up to this note is securing the principal obligation. Put an interest rate. Look
at page 11 in form book. THAT is a CMN. Pg. 59need a UCC security agreement (this replaced pledge agreement).
(1) Need delivery of the note, need agreement (might be oral, not sure). UCC 9 security agreement is NOT recorded;
kept in the creditors pocket. Security agreement describes what the parties intend to do with this fluctuating line of
credit. (2) Need value now (difference between pre-1990 cases and post-1990 cases). Value could mean common-law
consideration OR the giving of the security to secure the debt of another (Dining Services or Alfrod) or a binding
obligation of the creditor to lend. It needs to be a bearer document (so it can be transferred merely by delivery) and
due on demand. Why? Because if level 1 becomes due, you want to immediately foreclose on the property.
a. Level II (again): Look to Lesson 13 (p. 259-260). Need a perfected UCC 9 security interest in Level II. How
do you get at level 2 UCC 9 security interest? 1) delivery of CMN to creditor or agent. Why? Because UCC
in LAW says you need to do this. 2) you need value. 3) you need to have intentsome agreement. It is
theoretically possible to have it oral because you when you have a CMN that is a possessory security interest
then it is OKAY under ucc 9there is some indication under ucc 9 that you dont need a security agreement
for a possessory security interest. But it is ill-practice to do that for two reasons: 1) how will you prove
intent? 2) you dont want to be in litigation to argue this! You want something hard to show this intent.
3. Collateral mortgage. Need an act of mortgage. Need to describe the collateral mortgage note. DONT need to paraph
anymore (difference between CC 3325 [notaries should paraph] and RS 9:5305[should paraph] and RS 9:5555). What
should the CM describe? Look at pg. 47 in form book. Go to page 38 of form book (would this work today? Yes.
Pickersfield: mortgage that appears to secure present advance can secure future advances even if third parties cant
tell. Why? Because the difference for third parties is irrelevant. The question is not the language at level 3 and level 2,
prior to 1990, the key was the INTENT at the time I pledged level 2 (could be shown orally).
a. This will rank against third parties at earliest occurrence of 1) perfected UCC 9 security interest at level II
and 2) registry of mortgage.
b. Legal minimum: 3288 of the CC. Maximum amount and a property description. Signature of mortgagor.
Dont need mortgagee to sign. Dont need witnesses; dont need notary. Without a witness and notary, you
wont have a self-proving document and you dont have executory process.
c. Exactly how much you should make level II for as opposed to level I? Will go through it next lesson.
Hypothetical 2:
1. When does this start affecting third parties? From the earliest concurrence of: 1) delivery of CMN to perfect CMN, 2)
perfection under UCC 9 which requires value being given and recording in mortgage records. So here, February 2,
1996. How long do the effects of a CMN last? 3359 (10 years-3357) because 3358 doesnt apply to hand notes.
a. How do you keep LEVEL II alive? Acknowledgement or payment.
Hypothetical 3: written on sheet.
Also relevant to this lesson: Arts. 3357-3365
Art. 1887. Discharge of any prior obligor does not affect security
If the new obligor has assumed the obligation and acquired the thing given as security, the discharge of any prior obligor by the
obligee does not affect the security or its rank.
Art. 3325. Paraph of notes or written obligations secured by a mortgage, privilege, or other encumbrance
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A. Except as provided in Paragraph B of this Article, a note or other written obligation which is secured by an act of mortgage,
or an act evidencing a privilege or other encumbrance, need not be paraphed for identification with such mortgage, privilege, or
other encumbrance, and need not recite that it is secured by such mortgage, privilege, or other encumbrance.
B. A notary before whom is passed an act of mortgage, or an act evidencing a privilege or other encumbrance that secures a
note or other written obligation, shall paraph the obligation for identification with his act if the obligation is presented to him
for that purpose. The paraph shall state the date of the act and shall be signed by the notary. The notary shall also mention in his
act that he has paraphed the obligation. Failure to do so shall render the paraph ineffective. The paraph is prima facie evidence
that the paraphed obligation is the one described in the act.
LSA-R.S. 5382. Right of mortgage holder to recover for disposal or conversion of property
The holder of a conventional mortgage shall have the same rights, privileges, and actions as the mortgagor land owner to
recover against any person who, without the written consent of the mortgagee, buys, sells, cuts, removes, holds, disposes of,
changes the form of, or otherwise converts to the use of himself or another, any trees, buildings, or other immovables covered
by the mortgage.
Recovery by the mortgagee may not be for more than the unpaid portion of the secured indebtedness, plus interest, advances,
court costs, and attorney's fees, provided such recovery may be had severally or jointly with the mortgagor land owner.
LSA-R.S. 5384. Assumption of a mortgage on immovable property by a third person

An original vendor's privilege or first mortgage, or both, is not extinguished nor is its ranking subordinated to any other
mortgage, lien, privilege, or encumbrance when the obligation it secures is assumed by a new obligor, notwithstanding the
release of the original obligor.
LSA-RS 5385. Satisfaction of mortgage; production of promissory note or release for cancellation; liability
A. When the obligation secured by a mortgage has been fully satisfied, the mortgagee, the servicing agent, or any holder of the
note shall, within thirty days of receipt of written demand by the person providing full satisfaction, produce the satisfied
promissory note or an instrument of release in a form sufficient to bring about the cancellation of the inscription of the recorded
mortgage to the person providing full satisfaction. However, if the note is held by a federal agency or instrumentality, or a
federally sponsored or supported lender, or any nonoriginating secondary mortgage market lender domiciled outside the state
of Louisiana, the holder of the note shall, within sixty days after receipt of notice of the satisfaction from the servicing agent,
produce the satisfied promissory note or an instrument of release to the servicing agent.
B. If the mortgagee, the servicing agent, or any holder of the note fails to produce the satisfied promissory note or an
instrument of release in a form sufficient to bring about cancellation of the mortgage within thirty days after receipt of written
demand by the person providing full payment of the balance of the note, the mortgagee and the servicing agent or the
mortgagee and any holder of the note shall be liable in solido to the person providing full satisfaction for all damages and costs
resulting therefrom, including reasonable attorney fees. However, if the note is held by a federal agency or instrumentality, or a
federally sponsored or supported lender, or any nonoriginating secondary mortgage market lender domiciled outside the state
of Louisiana, the servicing agency shall, within thirty days of receipt of the satisfied promissory note or an instrument of
release from the holder of the note, produce the note or instrument to the person providing full satisfaction.
C. For purposes of this Section, person shall include the mortgagor acting in his own behalf, or a notary public or any person,
firm, or corporation acting in place of or on behalf of the mortgagor.
LSA RS 5389. Additional funds advanced under mortgage or security agreement

A. A mortgage or security interest shall secure additional funds that may be advanced by the mortgagee or secured party for the
protection, preservation, repair, or recovery of the mortgaged or encumbered property, or the protection and preservation of the
mortgagee's mortgage or secured party's security interest thereunder. A mortgage or security agreement may provide that the
mortgagee or secured party may, at its sole election, purchase insurance or pay taxes on the mortgaged or encumbered property
should the mortgagor or debtor fail to comply with its contractual obligations to do so.
B. Unless the mortgage or security agreement provides otherwise, all additional sums advanced by the mortgagee or secured
party under the provisions of Subsection A are deemed to bear interest at the rate provided under the mortgage note or other
secured indebtedness from the date of each such advance until repaid in full by the mortgagor or debtor.
C. Unless the mortgage or security agreement provides otherwise, the mortgage or security interest is deemed without further
action to secure additional funds advanced by the mortgagee or secured party under the provisions of Subsection A, together
with interest thereon.
LSA-RS 5390. Amendment, renewal, or refinancing of mortgage and mortgage note

A. The effectiveness, validity, enforceability, and priority of a conventional mortgage, conventional chattel mortgage, or
security agreement are not adversely affected by a change in the terms of the note or notes secured thereby, including but not
limited to such changes as an extension of the maturity of the note or notes, an increase or decrease of the interest rate
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stipulated in the note or notes, or the agreement that the unpaid accrued interest of the note or notes would be converted to
principal and thereafter bear interest. It shall not be necessary to amend the mortgage or security agreement to reflect such
changes in the terms of the note or notes secured thereby in order to foreclose thereunder through executory process or
otherwise. However, if the mortgage or security agreement is amended to reflect such changes, the effectiveness, validity,
enforceability, and priority thereof shall not be adversely affected.
B. When the mortgage so provides, a conventional mortgage or conventional chattel mortgage automatically secures payment
of a renewal or refinancing note or notes delivered in substitution for the note or notes then secured by the mortgage even
though the renewal or refinancing note or notes reflect a change in the terms of such note or notes, including but not limited to
such changes as an extension of the maturity of the note or notes, an increase or decrease of the interest rate stipulated in such
note or notes, or the fact that the unpaid accrued interest under the note or notes has been converted to principal and will
thereafter bear interest, and the effectiveness, validity, enforceability, and priority of the mortgage shall not be affected by the
delivery of such renewal or refinancing note or notes. To the extent that the renewal or refinancing note or notes evidence an
increase in the secured principal indebtedness (other than the increase that results from the conversion of unpaid accrued
interest to principal), the mortgage with respect to the increase in the secured principal indebtedness shall rank from the date of
the filing of an amendment to the mortgage reflecting the execution and delivery of such renewal or refinancing note or notes.
LSA RS 5391. Additions, accessions, and natural increases subject to mortgage

A mortgage of immovable property without further action attaches to present and future component parts thereof and
accessions thereto, without further description and without the necessity of subsequently amending the mortgage agreement.
LSA RS 5392. Continuation of mortgage after judgment

A mortgage shall continue when the mortgagee has reduced to judgment any obligation thereby secured, and shall secure such
judgment without interruption, whether it expressly recognizes the mortgage, except to the extent that the judgment expressly
provides to the contrary.
LSA-R.S. 9:5393. Combination forms

A. A mortgage note and mortgage or a promissory note and security agreement under Chapter 9 of the Louisiana Commercial
Laws (R.S. 10:9-101, et seq.) may be combined under a single form, with the maker/mortgagor or debtor signing in one
location on the face of the form, agreeing to the note and mortgage or security agreement covenants on the face and
reverse sides thereof.
B. When one form combines the mortgage and mortgage note under the provisions of Subsection A, it is not necessary to
paraph the mortgage note "Ne Varietur" for identification with the mortgage.
C. The combining of the mortgage note and mortgage or the note and security agreement under one form, with only one
combined signature by the maker/mortgagor/debtor, has no effect on the validity or enforceability of the note or the
mortgage or security agreement, or on the mortgagee's or secured party's rights to foreclose under the mortgage or security
agreement by means of executory process.
LSA-R.S. 9:5394. Applicability

To the extent not otherwise governed under Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.), R.S. 9:5386
through R.S. 9:5393 shall apply to all mortgages and security interests, including collateral mortgages, chattel mortgages, and
collateral chattel mortgages, and further including without limitation, blanket equipment collateral chattel mortgages
previously subject to R.S. 9:5367, et seq., Louisiana ship mortgages subject to R.S. 9:5521, et seq., and motor vehicle chattel
mortgages and floor plan collateral chattel mortgages subject to R.S. 32:710. The provisions of R.S. 9:5388 also apply to other
types of security agreements, including pledge agreements and collateral assignments.
L.S.A-R.S. 5550 Definitions

The following words, phrases, and terms as used in this Part shall be defined and construed as follows:
(1) Collateral mortgage shall mean a mortgage that is given to secure a written obligation, such as a collateral mortgage note,
negotiable or nonnegotiable instrument, or other written evidence of debt, that is issued, pledged, or otherwise used as security
for another obligation. A collateral mortgage or collateral chattel mortgage may provide on its face that the mortgage is granted
in favor of a designated mortgagee and any future holder or holders of the collateral mortgage note.
(2) Vendor's privilege shall mean a vendor's lien or vendor's privilege on immovable property that secures a written
obligation, such as a collateral mortgage note, negotiable or nonnegotiable instrument, or other written evidence of debt.
R.S. 5551. Effective date of a collateral mortgage (contemplates transfer)
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A. A collateral mortgage becomes effective as to third parties, subject to the requirements of registry of the collateral mortgage,
when a security interest is perfected in the obligation secured by the collateral mortgage in accordance with the provisions of
Chapter 9 of the Louisiana Commercial Laws, R.S. 10:9-101 et seq.
B. A collateral mortgage takes its rank and priority from the time it becomes effective as to third parties. Once it becomes
effective, as long as the effects of recordation continues in accordance with Articles 3328 through 3334 of the Civil Code, a
collateral mortgage remains effective as to third parties (notwithstanding any intermediate period when the security interest in
the secured obligation becomes unperfected) as long as the secured party or his agent or his successor [contemplates
transfer if the parties show intent] retains possession of the collateral mortgage note or other written obligation, or the
obligation secured by the mortgage otherwise remains enforceable according to its terms, by the secured party or his successor.
C. As long as the effects of registry of the collateral mortgage continue, in accordance with Articles 3328 through 3334 of the
Civil Code, if there is a termination, remission, or release of possession of the written obligation, a collateral mortgage takes its
rank and priority from the time a new security interest is perfected in the written obligation, regardless of whether the secured
party is the original secured party, his successor, or a new or different secured party.
D. The provisions of this Section shall become effective on January 1, 1990.
R.S. 5552. Defenses to enforcement of a collateral mortgage

A. If the obligor of the written obligation that the collateral mortgage secures does not raise the following defenses or claim the
extinction of the collateral mortgage, then the mortgagor may not raise as a defense to the enforcement or claim the extinction
of the collateral mortgage for any cause, other than forged signatures, based on the invalidity or unenforceability of the written
obligation, or the extinction of the written obligation.
B. If neither the obligor of the written obligation that the collateral mortgage secures nor the mortgagor raises the following
defenses or claims the extinction of the collateral mortgage, then, as long as the effects of registry continue in accordance with
Article 3369 of the Civil Code, third persons may not raise as a defense to the enforcement or claim the extinction of the
collateral mortgage for any cause, other than forged signatures, based on the invalidity or unenforceability of the written
obligation, or the extinction of the written obligation.
5553. Defenses to enforcement of a vendor's privilege

If the obligor of the written obligation that the vendor's privilege secures does not raise the following defenses or claim the
extinction of the vendor's privilege, then, as long as the effects of recordation continue in accordance with Articles 3328
through 3334 of the Civil Code, third persons may not raise as a defense to the enforcement or claim the extinction of the
vendor's privilege for any cause, other than forged signatures, based on: the invalidity of the written obligation; the extinction
of the written obligation; or the lack of registry or any deficiency in registry of any transfer, assignment, or pledge of the
written obligation from the original vendee.
5554. No requirement of registry of transfer, assignment, pledge, or security interest in or of the written obligation,
collateral mortgage, or vendor's privilege
There is no requirement that there be registry of:
(1) Any evidence of pledge of the written obligation secured by a collateral mortgage or a vendor's privilege.
(2) Any transfer or assignment of the written obligation secured by a collateral mortgage or a vendor's privilege, or of the
collateral mortgage or vendor's privilege.
(3) Any security interest in a collateral mortgage or vendor's privilege or written obligation secured by either.
5555. Executory process in the case of notes or other obligations not paraphed for identification with the mortgage
A. In accordance with Code of Civil Procedure Article 2636(8), there is no requirement that a note or other written obligation
secured by a mortgage be paraphed for identification with the mortgage in order for the mortgagee to have the right to
foreclose under the mortgage utilizing Louisiana executory process procedures. For purposes of executory process, the
existence, amount, terms, and maturity of the note or other written obligation not evidenced by an instrument paraphed for
identification with the act of mortgage or privilege may be proved by affidavit or verified petition.
B. The affidavit or verified petition may be based upon personal knowledge or upon information and belief derived from the
records kept in the ordinary course of business of the mortgagee, the creditor whose claim is secured by the privilege, or any
other person. The affidavit or verified petition need not particularize or specifically identify the records or date upon which
such knowledge, information or belief is based.
C. The affidavit shall be deemed to provide authentic evidence of the existence, amount, terms, and maturity of the obligation
for executory process purposes.
New Orleans Silversmiths, Inc. v. Toups (1972): FACTS: 1ST (June 1967): $150k collateral mortgage to secure a loan of $75k
from Hibernia. 2nd (Oct 1968).:$50k collateral mortgage on the same property as #1 to secure loan of $35k from Silversmith.
3rd (May 1969): Another draw secured by the same $150k collateral mortgage from Hibernia, in the name of his corporation.
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4th (June 1969): another draw in name of his corporation from Hibernia secured by same $150K CM. 5th(Dec. 1968): renewal
(w/new handnote) of June 1967 loan, presently in default. D is also in default on #2
The CMN was in possession of the bank when loans 3 and 4 were drawn, but it was repledged to guarantee them.
There is no question that the CM were pledged to Hibernia and P, and were validly confected. Only question is rank respective
to each other.
P does not argue that the 1st loan should rank after them. Even though the note was renewed, it was not a novation, but merely
an extension of the maturity date. Thus, Hibernia retained priority ranking retro to June 1967.
In order that the pledgee be entitled under article 3158 to retroactive ranking to the date of the initial loan for all subsequent
advances to the pledgor, must prove that:
1)The initial pledge was properly confected;
2)The parties mutually agreed at the time of the original pledge that the pledge would also secure
obligations then existing or thereafter arising;
3)Each subsequent loan was specifically secured by the pledge of the original collateral mortgage
note;
4)The pledged instrument has continuously remained in the hands of the pledgee; and
5)The parties act in the good faith.
Hibernia argues that under art. 3158s retroactive provision, its two 1969 loans to the corporation prime Silversmiths loan, bc
they date back to June 1967, the date of the pledge of the CMN.
P argues You only had $75k draw in the 1st transaction but P says I outrank you in the 2nd through 4th mortgages bc they were
drawn later.
Court looks at the language of the K for loans 3 and 4. The language says these notes and any extensions or renewals thereof
and every other debtwhether direct or indirectdue or to become due, and whether now existing or hereafter arising shall be
secured by the pledge and this note is identified with and secured by pledge agreement. The pledge agreement (pledging the
CMN note) and the individual loan instrument from June 1967 all said the same exact thing. (So what happened is that attached
to each handnote was the pledge agreement for the June 1967 note and all the documents had the whether now existing and
hereafter arising.)
This is a pure question of intent and the court finds that the language in the loan instruments make it clear and unambiguous
that the intent is to fully utilize the retrospective privilege of 3158.
Prof says:this case is about the intent of the parties at the time they confected the 1st mortgagewas it intended to be collateral
mortgage. Rule is that if collateral mortgage is properly donethe handnote advances go retro to date of perfection.
Hand notes and ne varietur notes look the same with the exception of the hand stamp.
The intent of the debtor will not be indicated in the mortgage document. The collateral mortgage note wont tell you what
it is securing. It is the intent at the time at the giving of the pledge is crucial: oral testimony or collateral pledge. Even if
this $75k loan starts and paid off and borrowed again and again they still outrank because the debtor intended for this to be
a future advance loan. Silversmith has to assume that the prior loan is still outstanding fullyall later creditors should.
Can One Buy Anothers Rank?

Odom v. Cherokee Homes (1977): FACTS: Cherokee bought 4 parcels of land from 4 sellers.
Tracts A, B, C were acquired by credit sale, for which Cherokee gave a purchase money note secured by vendors lien and
mortgages. The 4th parcel was bought with cash.
Morgan loaned money to Cherokee to put the down payment on the credit sales. Morgan secured this debt w/a pledge of 4
CMNs, which were secured by mortgages on Tracts A, B, and C.
Cherokee needed more money for construction and borrowed money from Tillman. The loan from Tillman was secured by a
CMN, which was secured by mortgages on Tracts A, B, and C. These CM to Tillman were inferior the mortgages resulting
from the credit sale and the CMs to secure the loan from Morgan.
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Morgan wanted out. So Odom, the plaintiff, intends to take Morgan out by paying him the money he had loaned Cherokee
for the down payment. But Odom wanted the same security Morgan had.
Cherokee gave Odom a new note. Then Cherokee defaulted on the new note to Odom. So Odom foreclosed on the mortgages
that secured the CMNs.
Tillman intervened, arguing his mortgage primed Odom bc at the Morgan-Odom transaction, the CMN were returned to
Cherokee and then were repledged by Cherokee to Odom. Tillman claims this bumps the ranking date from date of recordation
to the date of repledge.
Odom says he purchased the CMN and so the mortgage securing them were ranked to the date of the original recordation.
Here is what actually happned: Odom paid Morgan by checks. In exchange for the checks, Morgan gave Odom the 4 CMNs he
had held in pledge. On the same day, Cherokee gave Odom a handnote for $120K secured by pledge of the 4 notes. Prof says
the problem was this: the handnote (from Cherokee to Morgan) is missing. But, even though we do not need an actual handnote
(oral testimony is fine to prove the principal obligation) Odom wants a piece of paper, so Cherokee issues a brand new note and
a new pledge agreement.
Court says:
Morgan did not own the notes, they were merely pledged to him. He could not sell something he didnt own. It cannot be
argued that Odom bought the notes bc on the same day they were repledged by Cherokee as security for their note. It is true
that Cherokee may have never ACTUALLY gained possession, but to repledge them, they must have at least had constructive
possession.
Court says that, they may have intended that this not be a novation, but intent does not matter if their actions have a different
legal effect. Court finds what happened was not a sale of collateral to Odom, but was a payment of the debt to Morgan by
Cherokee with funds loaned to it by Odom. But, regardless of whether it is characterized as a novation or a payoff, the
transaction EXTINGUISHED the original debt.
A pledge cannot exist without a principal obligation. So when Morgan was paid off, the pledge ceased to exist and so the
CMNs constructively came into the hands of Cherokee (even if creditor 2 had actual possession).
Prof says: this is another question of intent of the partiescourt says here, the intent of the parties was to pay off the first
obligation and get a new onewhich is a novation.
To transfer a collateral mortgage packagethe key is that you HAVE to transfer the principal obligationwhich means you
MUST sit down and figure out WHAT paper represents the principal obligation. To do what Odom wanted, the handnote would
have had to have been transferred to him.
Bottom line: So in effect, Odom is ranked below Tilman bc Morgans obligation was extinguishedit was paid off.
Legally, this is what happened (although it differs from what actually happened, this was all constructive)
1. Creditor 2 advances the money to the debtor
2. Debtor pays creditor 1
3. Creditor 1 cancels all debts and
4. Creditor 1 returns the collateral mortgage note to debtor
5. Debtor repledges the note to creditor 2 which is tantamount to a new rank.
Richey v. Venture Oil & Gas Corporation (1977): FACTS: ISSUES: HELD: Here the hand note was transferred and since
the collateral mortgage is accessory to the hand note that everything follows with the hand note and the rank is preserved.
Texas Bank of Beaumone v. Bozorg (1984): FACTS:
Aug. 1975Bozorg executed a $200K handnote. Same day he executed CMN and CM for $200K and pledged the CMN to
First Metro Bank to secure the handnote.
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Sept. 1978, executed another CMN for $344K, which was pledged the same day to secure a handnote drawn from MFI for the
same amount.
Jan. 1980, First Metro sold all its rights, priority, privilege in connection w/1975 handnote to Texas Bank of Beaumont for
$88K (which was the balance on the $200K handnote).
Feb. 1980, Bozorg executed another handnote for $200K and pledged the 1975 CMN to Texas bank to secure this handnote. He
defaulted on this handnote. Texas bank is seeking for foreclose on the mortgaged property from the 1975 CM.
MFI intervenes, claiming their 1978 mortgage is superior to Texas Banks mortgage. Texas Bank is making a big deal out of
this bc they want to outrank the 9/1978 mortgage bc there isnt enough money for them to get paid if they are ranked after
9/1978.
Court notes that CMN takes effect against 3rd persons (as to future loans) from the date of the initial K of pledge, as long as the
parties mutually agreed in the initial K of pledge that the pledge was to secure obligations thereafter arising (relying on New
Orleans Silversmiths v. Toups)
IF the Jan. 1980 was a transaction was an assignment, payment w/subrogation, or novation w/reservation of pledge privilege
and mortgage of Bozorgs PRINCIPAL obligation, then Texas Bank would have gotten all the rights of First Metro. If however,
the transaction was a payoff of the principal obligationthen the accessory obligation was also extinguished and Texas Bank
would rank only from the date the CMN was repledged to secure the new obligation.
Texas Bank did prove that it paid the principal obligation WITH SUBROGATION to First Metros privileges and mortgages.
This was proven by testimony by a Texas bank officer who said Texas bank intended to buy First Metros collateral position
which means that the debt was not proven to be assigned, but that they paid the debt on the condition that First Metros rights
in the CM were transferred to Texas Bank. Given this, the result is, whether Texas Bank purchased Bozorgs indebtedness or
lent Bozorg the money to pay his indebtedness, Texas Bank remained secured at all times by the 1975 pledge. So, they were
secured for the $88K from the Jan. 1980 transaction.
The last question is what about retroactive ranking in respect to the Feb. 1980 handnote. Following New Orleans Silversmiths,
to have retro ranking, all 5 Silversmith elements have to be present. Here, Texas Bank was not entitled to retro ranking bc they
could not prove that First Metro and Bozorg agreed in the 1975 K of pledge that the pledge would also secure Bozorgs
subsequently arising obligations
Prof notes: First, the First Metro screwed upthey should have made the CMN for 150% of debt. Second, we would probably
actually consider the 1975 deal a ordinary specific debt mortgage, bc the handnote and CMN were issued same day.
Creditor 1 And Creditor 3 Should Document This Way To Make It Right The transfer agreement should say that the
debtor and creditor intended that the mortgage was to secure future advances and that is what they always intended and
that this is what they are transferring. It should also say in this agreement the principal obligation is broader than the hand
note, which is mere evidence of how much the debtor has borrowed. If all the creditor has done is assign the hand note
then all the creditor gets is the rank on the hand note and no future loan. One must assign all of the rights of the lender and
the borrower in the principal obligationASSIGN THE PRINCIPAL OBLIGATION to get retroactive rank.
Representations and Warranties Must be done by somebody and for somebody
(1) The initial pledge was properly confected [creditor 1];
(2) The parties mutually [creditor 1, debtor] agreed at the time of the original pledge that the pledge would also
secure obligations thereafter arising;
(3) Each subsequent loan was specifically secured by the pledge of the original collateral mortgage note [want
creditor 1 and debtor to say that];
(4) The pledged collateral has continuously remained in the hands of the pledgee; and
(5) The parties act in the good faith[creditor 1 and debtor].
La. C.C. Art. 3158(C) (1) Whenever a pledge of any instrument or item of the kind listed in this Article is made or has been
made to secure a particular loan or debt, or to secure advances to be made up to a certain amount [future advance mortgage],
and, if so desired or provided must have intent at the front end], to secure any other obligations or liabilities of the pledgor or
any other person, to the pledgee, or its successor [creditor 2], then existing or thereafter arising, up to the limit of the pledge,
such as may be included in a cross- collateralization clause [a collateral that secures more than one thing], and the pledged
instrument or item remains and has remained in the hands [#4] of the pledgee [creditor] or its successor, the instrument or
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item[pledged note] may remain in pledge to the pledgee or its successor, or without withdrawal from the hands of the pledgee
or its successor, be repledged to the pledgee or its successor to secure at any time any renewal or renewals of the original loan
or any part thereof or any new or additional loans, even though the original loan has been reduced or paid, up to the total limit
which it was agreed should be secured by the pledge, and, if so desired or provided, to secure any other obligations or liabilities
of the pledgor or any other person to the pledgee or its successor, then existing or thereafter arising, up to the limit of the
pledge, without any added notification or other formality, and the pledge shall be valid as well against third persons as against
the pledgor thereof, if made in good faith; and such renewals, additional loans and advances or other obligations or liabilities
shall be secured by the collateral to the same extent as if they came into existence when the instrument or item was originally
pledged and the pledge was made to secure them. (2) Such cross-collateralization clauses include but are not limited to pledges
securing obligations of more than one person; pledges securing more than one obligation or future obligations; or any
combination of these, whether such obligations are direct or indirect, absolute or contingent, liquidated or unliquidated, or
otherwise. Such clauses are not and never have been against the public policy of Louisiana.
LESSON 15. WRAP UP ON COLLATERAL MORTGAGES AND C.C. art. 3298 MORTGAGES
A hand note is NOT security; but evidence of the principal obligation. A hand note is NOT required for a collateral mortgage to
be in effect. The CMN is the ACTUAL security.
Always want CMN due on demand and for 150-200% of the principal obligation.
On the exam, when you see given a note on demandnot every demand note is CMN. But if it looks like it, its probably a
CMN. Big hint.
9:5807. If my debtor makes payments on the underlying obligation (be it principal or interest), that interrupts precsciption on
my security (CMN).
Prescription can be interrupted on CMN in two ways:

1. Payment on principal obligation (provided it doesnt fall within 9:5807 exception)
2. Acknowledgement of debtor
If CMN prescribes, the principal obligation is still there; its just not secured.
After you buy an entire obligation, the security goes with the obligation. So you must transfer the entire obligation. How? All
parties to this transaction have to come into one document together. Debtor, creditors. Debtors love it because the get new
financing. Be carefulin order to keep rank of original CM, Bank 2 (bank who is buying it, who is getting transfer) cant just
pay off loan and use CM to secure that pay not (this would extinguish original debt and creating new debt and rankng from new
date). This is BAD. (9:5551-2). The deal has to be Im buying the obligation; Im assuming the obligation.
With every transfer, you do not have to record.
When you transfer, whoever is the lender will sign the note to you (buyer).
Also relevant to this lesson: Arts. 1887, 3357-3365, La. R.S. 9:5550-5555, 9:5381-5395, 9:5807
Art. 1886. Delegation of performance

A delegation of performance by an obligor to a third person is effective when that person binds himself to perform.
A delegation effects a novation only when the obligee expressly discharges the original obligor.
R.S. 5301. Conventional mortgage to secure several obligations

A conventional mortgage may be given to secure the payment of the principal and interest of two or more notes, bonds, or other
obligations of the mortgagor or of any third person.
R.S. 5303. Creditors' interests under mortgage

The interest of the holders of the obligations shall be in common and indivisible, and in case of the enforcement of the
mortgage, the holders shall be entitled to participate pro rata in the proceeds of the mortgaged property.
R.S. 5304. Enforcement of mortgage; limitations
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In case of default, the mortgage may be enforced by seizure and sale or otherwise, as the fiduciary shall deem expedient for the
protection of the debt. However, the act of mortgage may provide that in the event of default, the fiduciary shall not be obliged
to proceed to sell the property unless the holders of a designated portion of the obligations secured shall request the fiduciary to
enforce the mortgage and agree to indemnify him against all costs and expenses incurred. The mortgagor may restrict the right
of the fiduciary to foreclose or sell in the event of default.
R.S. 5305. Paraph unnecessary; proviso

The notes, bonds, or other obligations secured by the mortgage need not be paraphed if the act of mortgage identifies them by
date, number, amount, and date when payable.
R.S. 5306. Act of mortgage may include pledge

The act of mortgage may include a pledge of incorporeal movables and may provide for the deposit thereof with the fiduciary.
La.R.S. 9:5555--Tells us how to get executory process on a future advance mortgage article 3298. Dont need a written
obligation. Affidavit or verified petition may be based upon personal knowledge or upon information and belief derived
from the records.
How does one cancel a collateral or future advance mortgage? 1) Collateral Mortgages: Mark paid on the ne varietur
[paraphed note] note or if lost file a writ of mandamus from the clerk of court. 2) Future Advance Mortgages: How do you
cancel future advance mortgage of 3298. 9:5556 tells you a direction to cancel or release a mortgage by the mortgagee or
record shall be accepted by the recorder. But 9:5557, creditor 1 should give a written act that I transferred the act to
creditor 2 the right to cancel as a practical matter. Creditor 3 puts in all the documents that he is mortgagee of record.
Central Bank v. Bishop (1977): FACTS: March 1973: Bishop borrowed $12K (evidenced by a handnote), which was secured
by a $10K CMN. The handnote was renewed (rolled over) several times, each time he made a new note reflecting the pledge of
the CMN. Finally, in Dec. 1974, he executed a handnote for $13K (included the original principal, plus unpaid interest). He
defaulted on this last note. Central Bank sued Bishop seeking a money judgment in the amount of $13K on a indebtedness
allegedly evidenced by a hand note in that amount. Central Bank is also seeking to foreclose a collateral mortgage securing a
CMN in the amount of $10000 allegedly pledged to the bank to secure the hand note. Central Bank says that the two notes had
been lost. After suit was filed, Bishop, who had possession of the CMN, presented it to the clerk of court and had the mortgage
canceled in the records.
Then, Bishop answered Central Banks petition denying the indebtedness and that the note had been lost and pleading payment.
Bank records firmly establish that he never paid any amount on the Dec. 1974 note. When the bank mentioned foreclosing, he
never disputed the debt. It looks like he stole the note when a bank officer came out to his (mortgaged) house to reappraise it
(the bank officer had checked the notes out of the file, I guess in case Bishop disputed the debt). Defendant was deposed and
said that he found the CMN in one of his filed AFTER the suit was filed.
HELD: When a promissory note is returned to the maker there is a presumption that the note has been paid and the burden of
proof shifts to the payee to prove that the note has not been paid, which burden may be met by an explanation of the makers
possession of the note. BUT, the presumption was not applicable to the hand note here because Bishop did not have
possession of it. Central Bank proved by an overwhelming preponderance of the evidence that it did not voluntarily release the
mortgage note from the pledge nor did it voluntarily deliver possession of the mortgage note to Bishop. Instead, he was a
precarious possessor!!
Profs notes: what is really going on is the guy had the note the whole time and is trying to win on a technicality. Courts hate
technicality.
Can you ever pay off a collateral mortgage note? Nothere is nothing advanced on thatit is fake. You can pay off a
handnote. Bank proves the principal obligationthere is no problem with proving the principal with parol evidence. But the
key is that the bank had to retain possession of the CMN for the pledge to still be good. So the court went all the way back to
Scott v. Corkern and said the debtor was the agent of the creditor and was precarious possessor of the note. They did this to
avoid unfairness!!!
If the bank didnt have the collateral mortgage bc they lost the pledge, then they could still seize the dudes propertybut they
would have had to have gone and gotten writ of fifa and they have NO preference in getting paidit is split bw all the creditors
ratably. The CM gives them the right to be paid first. Alsocourt says fraudulent cancellation of mortgage is no good. Note
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the debtor is still liable for the debt if there is a screw up on the CMit is just harder to get paid and there is no preference bw
creditors. Also, if Bishops dad had executed the CMN could the bank go after him? NOhe was not principal obligorit was
in rem as to him.
Bank of New Orleans Trust Company v. H.P.B., Jr. (1983): FACTS: Bank of NOLA made loan of $1.8 mill to Marcello.
H.P.B was a third person who secured the loan to Marcello, via a pledge of a CMN and a CM. The handnote (Marcellos note)
was for a 5 year term, which matured on its face on Feb. 3, 1981. Bank of NOLA sued before the note had matured. The Bank
argued that the CMN was approaching the 5 year prescription. Marcellos failure to have the CMN acknowledged impaired
their security, activating the acceleration clause.
Court says: The ne varietur note can prescribe and being a demand note will do so in five years unless the mortgagor signs a
written acknowledgment on the ne varietur note within five years after execution of the note. To prevent the ne varietur note
from becoming prescribed, it is necessary to repeat the acknowledgment within five-year periods; otherwise upon prescription
of the ne varietur note (collateral mortgage note) there remains no outstanding mortgage against the subject property.
Consequently the mortgage pledged to secure the hand note is lost and the hand note becomes purely personal obligation of its
maker. Bc of this, the acceleration of the note was valid.
But, defendant argues there was no impairment bc Marcello made at least one principal payment and several interest payments
on the handnote (principal obligation), relying on 9:5807. No, they applied the statute wrong.
The effect of 9:5807 on collateral mortgages is that a debtors payment of principal or interest on the hand note operates to
interrupt five-year prescription not only on that note, but also on the collateral mortgage note pledged by him or his
codebtors in solido to secure the hand note.
(b) The concept here is that when the debtor is the maker of the CM and the principal obligation this article works great.
Payment of principal or interest on the handnote interrupts prescription on the collateral mortgage note. It is only as to
promissory notes of the debtors or his co-debtors in solido.
(c) IF the CM note maker is not the debtor or a solidary obligor the statute is not helpful to you. In Boyter where the
collateral mortgage note secures the suretyship, cant treat the debtor as solidary with the surety. The creditor shall
have the BOP. The creditor will want to diary the files so that when 3rd parties buy the note; they will build in power
of attorney that gives the holder the right to acknowledge it on the debtors behalf; clause any default in the collateral
failure of X to acknowledge shall be in effect a default and creditor shall have the right to accelerate.
(d) When the maker of of the note is a 3rd person, payment of the principal by the debtor does not interrupt prescription on
the CMN. The solution is to have the maker acknowledge the note.
The collateral mortgage note was not a note pledged by the debtor or his co-debtors in solido within the technical wording of
the statute, since the pledge was by H.P.B. and H.P.B. was not a codebtor in solido. H.P.B executed the back of the hand note
only to effectuate the pledge of the collateral mortgage note secured by the collateral mortgage, as recited, and H.P.B. did not
execute or endorse as a co-maker or solidary surety. In other words, H.P.B.S mortgage was in rem and it had no in personam
liability to BNO.
Prof says: What to take out of this caseif the CMN note prescribes, the CM falls. BUT the principal obligation does not fall
bc of constant acknowledgement rule!! There is still a personal action against the debtor it is just no longer secured.
Durham v. 1st Guaranty Bank of Hammond (1976): MORTGAGE CASE! HELD: The accepted method to connect the hand
note to the security of the collateral mortgage is to designate on the face of the hand note that it is secured by the pledge of the
mortgage. Where a handnote contained no reference to collateral mortgage and CMN and language of mortgage provided that
it was given to secure future advances, but made no reference to preexisting note, and bank listed no collateralization for
preexisting note in its ledgor, the preexisting note was not connected to or secured by collateral mortgage. The very language of
the mortgage, to secure future advances made by the holder or future holder, indicates that it was not given as security for the
pre-existing $17k debt. The pledge of a collateral mortgage note to secure an indebtedness is a contract and secures only that
debt or debts contemplated in the contract between the pledgor and pledgee. Debt could have admitted the intent was to secure
the past note, but he would not.
Prof says: can a CMN secure a past issued handnote? Mortgage can secure a past debtbut it has to be clear on the face that it
is securing preexisting debt. Here, there was indication it was for future advance. They could have used it to secure the past
debtbut it has to say so on its face.
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Caballero v. Wilkerson (1979): FACTS: Defendant borrows $10K from American Budget, executing 2 handnotes , secured by
CMN and 2 mortgages for sum 0f $10K (2 pieces of property). American Budget borrowed $30K from Levy (Caballero acted
for Levy in loaning this money). To secure this debt, American budget pledged the notes from Defendants. Caballero held the
notes as agent for Levy and accepted payments on the loan. American Budget defaulted and plaintiff is suing on the note from
Defendants to American Budget. Defendants say they refinanced the debts, executing 2 new mortgages on the properties. When
they closed these new loans, the mortgage notes held by American were paid and the mortgages cancelled. The Pres of
American had received payment, payable to his order, one of which was marked pay out of collateral mortgage and
referenced the original date of the loan, the other not referenced. Both the checks went to his personal account. The problem
arises bc the checks were made to the Pres instead of the company and the handnotes were not marked paid. Additionally,
before the refinance, the notes matured and American Budget agreed to extend the notes in exchange for payment of $250/m,
of which 20 payments were made.
First issue, the holder of the note can sue in his own name (and transfer, negotiate, discharge or enforce payment) and payment
to him discharges the instrument.
Second issue, was American Budget the agent of the plaintiff for collection of the note? IF so, was the note paid to American?
Yes, the defendants had no knowledge that their notes had been pledged (so they had no idea they were supposed to pay
someone else). When they made the monthly payments and paid it off, they thought they were paying the holder of the notes.
Thus, they paid American through its agent, the Pres, and this was equivalent to payment to holder.
Profs notes: Court did not like that a debtors paid their debt and got screwed by a scumbagso the court wants to take the poor
debtors out and force the plaintiff to stick it to the thief--so the court gets around the problem by saying there was no notice that
debtor should have been paying someone else and that the person they paid was an agent for the holder who was supposed to
be paid. If we were lawyers for the Cerdesonce they paid, advise them to get the note back and cancel the CM bc merely
paying the principal obligation does not get rid of the CMN bc it can be pledged and repledgedthey need to actually cancel if
they dont want it to secure any more money.
Kaplan v. University Lake Corporation (1980): FACTS: The court originally held the purchaser liable on the hand note,
despite the finding that the CMN, given in security therefor, had prescribed at the time that the purchaser bought the property
and assumed all mortgages. On rehearing, the court determined that the holding was in error. The court held that upon
prescription of a CMN given in security for a hand note, the hand note reverted to a purely personal obligation of its maker and
no longer represented a viable claim against the property subject to the prescribed CMN. The court noted that at the time of
purchase, the buyer assumed only mortgages, liens, and judgments extant (outstanding and enforceable) against the property it
purchased, on the date of its acquisition. The purchaser did not undertake to assume any personal obligation of its vendor or
any other antecedent owner of the property in question and neither endorsed the hand note nor expressly agreed to pay it. If it
had agreed to do so, the court held that the obligation had to be in writing under La. Civ. Code Ann. arts. 2278(3) and 3039.
Prof notes: since the note prescribed, so did the CMbc it is accessory. So they bought it free and clear. The mortgage was not
enforceable. This reiterates the point in H.P.B.
McGill v. Thigpen: FACTS: Thigpen Estates executed a promissory note for $115K to Commercial National Bank and
Thigpen Land Development pledged 2 CMN (for $50K and $120K) secured by CM to secure Thigpen Estates debt. The CMNs
were executed on May 26, 1982 and February 29, 1984, respectively. The hand note was payable on April 27, 1987.
Commercial National assigned all of its interests in these instruments to Mcgill. Mcgill is trying to foreclose on the mortgaged
property, claiming no payments were made on the handnote. The original instruments were lost in all the mergers and
assignments.
CMNs and hand notes are promissory notes and so they are subject to a prescriptive period of 5 years as per Art. 3498. The
CMNs are demand notes and prescription begins to run on a note payable on demand from the date of execution of the note. So
all these notes are prescribed.
A mortgage is accessory to the obligation it secures and may be enforced only extent that the obligation it secures may be
enforced. On rehearing in Kaplan v. University Lake Corp, LASC held that upon prescription of a CMN secured by a
mortgage, no outstanding mortgage remains against the property. Consequently, upon prescription of the collateral mortgage
note which secures a hand note, the hand note reverts to a purely personal obligation of its maker and no viable claim remains
against the mortgaged property subject to the prescribed CMN.
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The ne varietur note itself can prescribe, and being a demand note, the prescriptive period on the ne varietur note is five
years. For that reason, until recently, it has been the customary practice to have the mortgagor sign a written acknowledgment
on the ne varietur note within five years after execution of the note (and thereafter to repeat the procedure within five year
periods) to prevent prescription from running. If he failed to do so, the ne varietur note prescribed, and while the hand note
would nonetheless remain a valid obligation, it would no longer be secured by a mortgage and would simply reflect an
unsecured debt (not unsecured legally, but unsecured practically in the sense that the security is virtually worthless, being the
pledge of a prescribed note.).
Prof says: there were no payments on the principal, which means that there was no acknowledgement, which means that
prescription is not interrupted on the CMN. Additionally, back to Scott V. Corkernthe creditor lost the CMN and so if that
falls, then so does the mortgage. So the CMN falls on prescription and the CM falls on failure of the pledge. So the only
recourse the bank has is to go to court, no executory process.
First State Bank&Trust of EBR Parish v. Seven Gables, Inc: FACTS: Jan. 1977, the Davidsons borrowed $350K (handnote
executed Jan. 20) from First State Bank and signed a guaranty for the loan (for a handnote dated Jan. 19). The Davidsons
company, Quality Building Supply executed a CMN and CM on property the company owned. The next year, Quality sold all
its assets to Seven Gables. Pursuant to this sale, Seven Gables assumed the payment of the balance due on the CMN and all
obligations imposed on Quality in the mortgage and CMN. When the loan became delinquent, the bank sued the Davidsons
and Seven Gables.
THE SURETYSHIP
The Davidsons essentially make three arguments to prevent the introduction of extrinsic evidence to show that they guaranteed
payment of the hand note. The first argument is based on the writing requirement, the second on the rule of strict construction,
and the third on the parol evidence rule.
Prof says: back to parol evidenceit cant be used to prove K of suretyship. Even if the court had found Davidsons were not
liable, it does not affect whether Seven Gables is liable. The point is that parol cant be used to vary contents of suretyship, but
its OK for anything else.
As the Davidsons correctly note, a contract of suretyship must be in writing to be provable. In addition, suretyship cannot be
presumed. An agreement to become a surety must be expressed, and must be construed within the limits intended by the parties
to the agreement. Finally, parol evidence may not be admitted to prove any promise to pay the debt of a third person, and
may not be admitted against or beyond what is contained in the acts, nor on what may have been said before, or at the time of
making them, or since. Though correct statements of the law, these propositions do not prohibit the evidence introduced by the
Bank.
The SBA guaranty was written, its terms were explicit, and it was signed by the Davidsons. The writing requirement was
satisfied. The evidence offered by the Bank was not offered to broadly construe the guaranty, or to prove the promise, or to
vary the terms of the guaranty. To the contrary, the evidence showed that the contract of guaranty, as reduced to writing, did not
accurately reflect the true agreement and intent of the parties, and should therefore be reformed or corrected. As such, the strict
construction rule and the parol evidence rule are inapplicable.
A written instrument may be reformed against the original parties and their privies to correct an error or mistake in the contract,
so as to make it accurately express the true intent and agreement of the parties. The error or mistake must be mutual. Before an
instrument will be reformed, there must be clear proof of the antecedent agreement as well as the error in committing it to
writing. The burden is on the one seeking reformation to prove the error alleged by clear and convincing evidence. The parol
evidence is not offered to vary the terms of the written instrument but rather to show that the writing does not express the true
intent or agreement of the parties.). As one commentator has noted: Because mistake in expressing the terms of a written
transaction is so common, it would be intolerable to refuse correction of the writing.
The evidence presented at trial is clear and convincing that the Davidsons and the Bank agreed and intended that the Davidsons
would guarantee payment of the hand note. The discrepancy contained in the SBA guaranty, in referring to a note dated January
19, 1977 rather than January 20, 1977, was clearly a mutual mistake.
THE MORTGAGE
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Seven Gables essentially makes three arguments, similar to those made by the Davidsons to prevent the introduction of
extrinsic evidence to show that they assumed the obligation of Quality evidenced by the handnote.
Seven Gables is correct that the assumption of the obligation of another must be in writing to be enforceable by the obligee
against a third person, that security devices (such as CMN) must be strictly construed, and that parol evidence is not
admissible (generally) to alter the terms of a written instrument. However, the terms were written, explicit, and signed by
Seven Gables. The bank offered evidence to show that the act of pledge, as reduced to writing, did not accurately reflect the
true agreement and intent of the partiesand should be reformed or corrected. Thus, the rule of strict construction and the
parol evidence rule are inapplicable. However, an instrument may not be reformed or corrected to the prejudice of third
partiesbut bc Seven Gables is the successor of Qualitys obligation, it is privy to the act of pledge and so the act of pledge
may be reformed or corrected. The parol evidence is not offered to vary the terms of the written instrument, but rather, to show
that the writing does not express the true intentof the parties.
As for the rule that there must be some evidence of connection bw a pledged CMN and the handnote, generally, the accepted
methodis to designate on the face of the handnote that it is secured by the pledge of the CMN. That was not done here, but it
is undisputed that there was only one $350K loan to Quality. The Bank presented the handnote as the assumed obligation.
There was no evidence presented by Seven Gables that any alternate promissory note dated Jan. 19 was ever executed. The
references in the act of pledge concerning the principal amount, the payee, the interest rate, and the installments conform to the
terms of the handnote and, despite the one-day date discrepancy, clearly prove the connection. As such, it is clear that Seven
Gables assumed Qualitys obligation and the act of pledge will be reformed accordingly.
As one of the conditions of the sale of Quality Building Supply's assets, Seven Gables specifically assumed, and agreed to hold
Quality Building Supply harmless from, the payment of the balance due on the collateral mortgage note, which was paraphed
ne varietur with the collateral mortgage on the three pieces of property Seven Gables bought. The Sale With Mortgage
document made clear that the BUYER herein [Seven Gables] [was] assuming all of the obligations imposed on the SELLER
[Quality Building Supply] in the said note and mortgage. It is well-settled in Louisiana, as in other jurisdictions, that a person
who assumes a mortgage becomes personally obligated and a co-debtor on the obligation secured by the mortgage. To the
contrary, one who purchases property subject to a mortgage incurs no personal liability.
Distinguishes Kaplan: on which Bank relies. In Kaplan, the defendant purchased a piece of property, which had previously
secured a collateral mortgage, and assumed and obligated itself to pay all mortgages then extant, that is, to pay all mortgages
existing at the time it purchased the property. LASC held that there were no mortgages extant at the time the defendant
purchased the property because the collateral mortgage note had prescribed, thereby extinguishing the mortgage. Because the
defendant had not personally undertaken the payment of the hand note, which the collateral mortgage note was pledged to
secure, the defendant was not obligated to pay the debt.
Kaplan is simply inapplicable to this case. Here, it is undisputed that there was an existing and valid collateral mortgage and
CMN at the time Seven Gables purchased the property. The CMN was pledged to secure the obligation of Quality Building
Supply to the Bank. Seven Gables assumed and agreed to hold Quality Building Supply harmless from the payment of the
balance due on the CMN, and specifically assumed all of the obligations imposed on Quality Building Supply in the CMN
and CM. As the CM was recorded before the sale, Seven Gables would have been liable in rem, up to the value of the property,
even had it made no agreement at all with Quality Building Supply. The language of the assumption, as well as the evidence
presented at trial, provides clear and convincing proof that both parties to the sale intended that Seven Gables would undertake
the payment of the entire balance due on the loan.
Prof says: IF the assumer takes subject to the mortgage, they have no personal liability, it is an in rem liability, but point is there
is still in rem recourse. If its properly recorded, the assumer takes it with notice of the debt, so they get in rem liability. If they
dont take subject to the mortgage, they get in rem and in personam.
Central Bank v. Bishop: The only issue in this case is the proper date from which interest should be calculated on a CMN.
These are the same facts from above case. Prior to the March 1973 loan (which he rolled over several times and never paid),
Bishop had executed the CMN on July 7, 1971 for $10K w/10% interest, which he used to secure the 1973 debt. Trial court
said that the interest should be calculated from March 1973when the note was pledged. Defendants attorney says interest
should be calculated from when the underlying obligation is due. Central Bank says it should be calculated from the date of
execution of the CMN. Court finds Central is right. Although the pledge was not effective until March 1973, the CMN is a
separate negotiable instrument which is enforceable on its own termsand this CMN said interest was from date of execution.
When Bishop pledged this note, he obligated himself to pay the $10K plus 10% interest from execution date (in the event the
March 1973 note was pledged). Since he didnt pay, the bank is entitled to collect the amount owed on the underlying
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obligation UP TO the full amount stipulated on the face of the CMN. True, Civil Code prohibits interest on interestbut that is
not what this isthis is interest on the thing pledged and it has no relationship to the interest owed on the underlying
obligation.
Central Progressive Bank v. Doerner (1978): FACTS: 2 mortgages, Central (1st) and Cumberland (2nd). Central=CMN for
$10.5K +10% interest+25% attorney fees pledged for handnote of $17.5K.Defendants defaulted when balance was $12K and
Central is suing for the balance, interest and attorney fees. Property sold for $18.6K. Cumberland wants a cut of the sale
proceeds. HELD: In a suit on a CM the seizing creditor can recover a sum no greater than that represented by the CMN. So
here, the secured amount was $10.5K, with interest on this amount and attorneys fees on this amount (and interest) for total
that Central gets of $13, 674. So the creditor secured is ONLY secured for the amount on the CMN and the interest/attorneys
fees provided for IN THE CMN. So at sale, this is all the creditor getsthe secured amount. As for Cumberland, at the time of
the suit, they were owed $6.7K But there isnt enough to fully pay both creditors. The property sold for $18.6K. Costs of the
sale ($1103.50) were deducted from this amount. Central gets $13674.50 as first mortgagee. That leaves $3822 for
Cumberland. Also, when the property was sold, Cumberland intervened. A temp restraining order against disbursement of the
proceeds was issued, but the trial judge didnt do it correctly (he issued it for 10 days from date hereof instead of until
further order of the court) and so the sheriff gave the proceeds to Central. So this order is for CENTRAL to give
CUMBERLAND the balance owed to them.
Prof says: why did intervenor get judgment against the bank? Bc the bank was only entitled to the lesser of the CMN or the
balance due on principal obligation. The intervenor should have gotten a TRO or request deposit in the registry. Notethere
was no problem with sale during litigation, you can do this. The the only way to stop a sheriffs sale is injunction or appeal.
This case also drives home that the CMN should be 150% the principal obligation to make sure creditor gets what they are
owed. If they dont, it could have HUGE consequences when you are dealing with big real estate.
American Bank & Trust Co. in Monroe v. F&W Construction (1978):
FACTS:
July 7, 1976: FW is going to build a house for someone. They executed a CM to secure a CMN payable to any future holder.
July 15, 1976: above mortgage is filed
July 21, 1976: first materials delivered to lot where house was to be constructed
July 22, 1976: FW pledged the CMN under a written pledge agreement to American Bank to secure construction advances;
same day the first advance is made and a handnote was given to the bank for the amount borrowed
FW did not pay for the materials and the material men timely filed liens on the property. American is seeking to foreclose on
the property mortgaged for FWs failure to pay the construction advances.
ISSUES: Is a collateral mortgage superior to the liens of unpaid materialmen under the private works act where materials are
delivered to the mortgaged property after the collateral mortgage is recorded but before the mortgage note is pledged to the
lender?
DISCUSSION:
Regarding the PWA privilege, The said privilege shall be superior to all other claims against the land and improvements
excepta bona fide mortgagerecorded before the work or labor is begun or any material furnished.
Material men argue that the mortgage does not outrank them bc bona fide and existing until the CMN was pledged to the
lender.
Previous cases had defined a bona fide mortgage means valid in law.
In the situation of ordinary conventional mortgage, where the debt is either in existence or comes into existence at the same
time as the execution of the mortgage, the mortgage is effective as to third persons from the time that the act of mortgage is
filed for recordation, provided that it is thereafter promptly and actually recorded in the mortgage books. (first in time, first in
rank, rule).
Except for the fact that filing and recordation are essential for the mortgage to be effective as to third persons at all, neither
filing nor recordation time determines rank; it is the date of issuance (or reissuance) of the ne varietur note identified with the
mortgage that determines the ranking of the collateral mortgage.
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The pledge of the ne varietur note to secure the hand note is commonly referred to as issuance. The term issuance is
important for, unlike the ordinary conventional mortgage, the act of collateral mortgage may be recorded and remain
dormant for months, if not years and only obtains ranking against third parties from the time of issuance when the ne
varietur note is pledged to secure the debt.
HELD: the materialmen win.
Prof says: bottom line-- no effect to third parties until the thing is pledged, meaning the whole thing is perfectedthe UCC
security, possession, recordation
Peoples Bank & Trust v. Campbell (1979): FACTS: Case involves ranking of privileges between a collateral mortgage and a
materialmans lien. ISSUES: What constitutes a pledge of the mortgage and note to the Bank? HELD: Unlike the other two
forms of conventional mortgages, a collateral mortgage is not a pure mortgage; rather it is the result of judicial recognition that
one can pledge a note secured by a mortgage and use this pledge to secure yet another debt. Pledge is a contract and it must
be considered as such. Mere delivery of the collateral mortgage and mortgage note to the Bank in itself may not be sufficient
to constitute a contract. What is needed is a meeting of the minds that the delivery of the mortgage and note is intended as a
pledge to secure a loan, present or future. In order for such a delivery to constitute a pledge, it must be accompanied by an
agreement to stand as security for repayment of a debt, either presently existing or contemplated to be made in the future.
A collateral mortgage indirectly secures a debt via a pledge. It consists of three documents: (1) there is a promissory note,
usually called a collateral mortgage note or a ne varietur note; (2) the collateral mortgage note is secured by a mortgage,
the so-called collateral mortgage; the mortgage provides the creditor with security in the enforcement of the collateral
mortgage note.
Money is not directly advanced on the note that is paraphed for identification with the act of mortgage. Rather the
collateral mortgage note and the mortgage which secures it are pledged to secure a debt.
As long as the borrower and the secured creditor agreed that the borrowers pre-1990 collateral mortgage note would
secure a loan or loans to be extended at some undetermined future time, and the parties acted in good faith, then the fact
that there may have been some delay in the initial extension of credit should not have had the effect of reordering the
priority rights of a first filed and properly perfected pre-1990 collateral mortgage against the rights of a competing creditor
that filed a junior mortgage or lien against the same property during the interim period.
Prof says: goes bank to intent, there has to be intent to secure future advance to get retroactive rank and ideally, you want a
WRITTEN security agreement to prove the intent, although being WRITTEN is not required as long as there is some
agreement bw the parties to secure a future advance.
LESSON 16. FORECLOSURE, EXECUTORY PROCESS AND DUE PROCESS
How To Foreclose on Mortgage
Also relevant to this lesson: Art. 3295-3297, 3325, La.R.S. 9:5305, 5550-5555
La. R.S. 9:3500. Rates of legal and conventional interest; usury

A. Interest is either legal or conventional.
B. Legal interest is fixed at the following rates, to wit:
(1) At the rate fixed in R.S. 13:4202 on all sums which are the object of a judicial demand, whence this is called judicial
interest; and
(2) On sums discounted at banks at the rate established by their charters.
C. (1) The amount of the conventional interest cannot exceed twelve percent per annum. The same must be fixed in writing;
testimonial proof of it is not admitted in any case.
(2) Except in the cases herein provided, if any person shall pay on any contract a higher rate of interest than the above, as
discount or otherwise, the same may be sued for and recovered within two years from the time of such payment.
(3)(a) The owner or discounter of any note or bond or other written evidence of debt for the payment of money, payable to
order or bearer or by assignment, shall have the right to claim and recover the full amount of such note, bond, or other written
evidence of debt and all interest not beyond twelve percent per annum interest that may accrue thereon, notwithstanding that
the rate of interest or discount at which the same may be or may have been discounted has been beyond the rate of twelve
percent per annum interest or discount.
(b) This provision shall not apply to the banking institutions of this state in operation under existing laws or to a consumer
credit transaction as defined by the Louisiana Consumer Credit Law.
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(4)(a) The owner of any promissory note, bond, or other written evidence of debt for the payment of money to order or bearer
or transferable by assignment shall have the right to collect the whole amount of such promissory note, bond, or other written
evidence of debt for the payment of money, notwithstanding such promissory note, bond, or other written evidence of debt for
the payment of money may include a greater rate of interest or discount than twelve percent per annum; such obligation shall
not bear more than twelve percent per annum after maturity until paid.
(b) This provision shall not apply to a consumer credit transaction as defined by the Louisiana Consumer Credit Law.
(c) Where usury is a defense to a suit on a promissory note or other contract of similar character, it is permissible for the
defendant to show the usury whether same was given by way of discount or otherwise, by any competent evidence.
D. The provisions of this Article shall not apply to a loan made for commercial or business purposes or deferring payment of an
obligation for commercial or business purposes.
La.R.S. 9:3501. Forfeiture of interest

Any contract for the payment of interest in excess of that authorized by law shall result in the forfeiture of the entire interest so
contracted.
La.R.S. 9:3502. Statement of policy

It is declared to be the public policy of this state to encourage the free flow of money into Louisiana; to allow this state to
compete in the national money market; to promote and stimulate residential construction and to allow those retirement systems
who desire it to continue to invest in first mortgage loans.
La.R.S. 9: 3503. Maximum rate of conventional interest on certain loans

Unless otherwise provided, the amount of simple conventional interest on obligations bearing interest from date and secured in
whole or in part, directly or indirectly, by a mortgage on immovable property, shall not exceed twelve percent per annum. The
same must be fixed in writing. Testimonial proof of it is not admitted in any case.
La. R.S. 9: 3505. Items or charges not considered interest

Notwithstanding any other law to the contrary, particularly but not exclusively R.S. 9:3500, and in addition to those fees,
charges, costs and expenses ordinarily not considered interest and not included in the calculation of interest, the following
charges, fees, costs and expenses shall not be considered interest on any conventional obligation covered by R.S. 9:3502-
9:3506:
(1) Charges for the pre-payment of the loan, or any installment or part thereof, prior to the time fixed for the payment of same;
(2) Charges assessed because of the nonpayment of the loan or any installment or part thereof after said loan or any installment
of principal or interest thereof has become delinquent and is not timely paid, including cost of collecting and a reasonable
attorney's fee, provided that such charges or the methods of fixing same are provided in writing in either the note or the
mortgage securing same;
(3) Brokerage fees, discount fees, service fees, origination fees, commitment fees, warehousing fees, lender's fees, or other
similar fees or charges paid by anyone on a loan secured directly or indirectly, in whole or in part, by a mortgage on immovable
property;
(4) Fees or charges paid by the borrower to a mortgage broker or agent retained by the borrower to obtain a loan for the
borrower from a lender, even though the loan may be closed in the name of such mortgage agent or broker;
(5) Fees, taxes, charges and other expenses incurred in making the loan which are collected from or paid by the borrower or on
his behalf, if such fees, taxes, charges and other expenses are actually paid to or are payable to persons other than the lender or
the person making the loan or any employee of such lender or person making the loan;
(6) Charges or premiums for credit life insurance actually written on the life of any borrower or endorser;
(7) The listing herein of certain fees and charges shall not be construed as exclusive, but shall be in addition to any fees,
charges, costs and expenses not ordinarily considered interest.
LSA-R.S. 9:3506.1 Time for accrual of interest; penalties

A. Notwithstanding the provisions of R.S. 9:3506 or any other law to the contrary, interest on the principal obligation of a
promissory note, evidencing a closed-end loan secured by a mortgage on immovable property, including any improvements
thereon, shall not commence to accrue prior to the date upon which the loan proceeds have been made available for
disbursement. In such case, when funds are to be disbursed to or for the account of a vendor, borrower, or purchaser, the
lending institution shall make the loan proceeds available to the notary public or licensed title company for disbursement at the
time of execution of the act of sale or act of mortgage.
B. The provisions of Subsection A of this Section shall not apply (a) if the loan proceeds are paid or made available, as the case
may be, in cash or by check, cashier's check, share draft, traveler's check, or money order issued by, or drawn on, a financial
institution, the accounts of which are insured by an agency or instrumentality of the United States, and which has an office in
this state from which payment shall be obtained, or (b) if the notary public or licensed title company fails to comply with the
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lending institution's written closing instructions. The provisions of Subsection A of this Section also shall not apply to open-end
lines of credit, including without limitation, revolving loan accounts, subject to the Louisiana Consumer Credit Law.
C. The provisions of Subsection A of this Section shall not apply to any transaction in which a right of rescission applies
pursuant to the provisions of Regulation Z, specifically 12 CFR Section 226.15 and 12 CFR Section 226.23, issued pursuant to
the Truth in Lending Act, 15 U.S.C. 1601 et seq.
D. If a lending institution fails to comply with the provisions of Subsection A of this Section, the offending lending institution
shall, upon written demand of the borrower, vendor, or purchaser, pay a penalty of one thousand dollars to the borrower,
vendor, or purchaser. If a lending institution fails to comply with the provisions of this Subsection within thirty days after
receipt of the written demand, the lending institution shall be liable for reasonable attorney fees for the prosecution of the
borrower's, vendor's, or purchaser's claim, either amicably or in a judicial proceeding. In the event that a lending institution is
liable for the payment of any penalties or attorney fees due to the failure of the notary public or licensed title company to
comply with the lending institution's written closing instructions, the notary public or licensed title company shall be liable for
any penalties or attorney fees which may be owed to the vendor, borrower, or purchaser.
C.C.P. Art. 2631. Use of executory proceedings

Executory proceedings are those which are used to effect the seizure and sale of property, without previous citation and
judgment, to enforce a mortgage or privilege thereon evidenced by an authentic act importing a confession of judgment, and in
other cases allowed by law.
C.C.P. Art. 2632. Act importing a confession of judgment

An act evidencing a mortgage or privilege imports a confession of judgment when the obligor therein acknowledges the
obligation secured thereby, whether then existing or to arise thereafter, and confesses judgment thereon if the obligation is not
paid at maturity.
C.C. P. Art. 2633. Venue

An executory proceeding to enforce a mortgage or privilege may be brought either in the parish where the property is situated,
or as provided in the applicable provision of Article 42 only.
C.C. P. Art. 2634. Petition

A person seeking to enforce a mortgage or privilege on property in an executory proceeding shall file a petition therefor,
praying for the seizure and sale of the property affected by the mortgage or privilege. This petition shall comply with Article
891, and the plaintiff shall submit therewith the exhibits mentioned in Article 2635.
C.C. P. Art. 2635. Authentic evidence submitted with petition

A. In order for a plaintiff to prove his right to use executory process to enforce the mortgage, security agreement, or privilege,
it is necessary only for the plaintiff to submit with his petition authentic evidence of:
(1) The note, bond, or other instrument evidencing the obligation secured by the mortgage, security agreement, or privilege.
[0000022] (Note: pg. 11 in form book)
(2) The authentic act of mortgage or privilege on immovable property importing a confession of judgment.
(3) The act of mortgage or privilege on movable property importing a confession of judgment whether by authentic act or by
private signature duly acknowledged.[0000027]
B. This requirement of authentic evidence is necessary only in those cases, and to the extent, provided by law. A variance
between the recitals of the note and of the mortgage or security agreement regarding the obligation to pay attorney's fees shall
not preclude the use of executory process.
Only the note and mortgage have to be in authentic form. But if the note has been paraphed, you dont need mortgage in
an authentic form.
C.C.P. Art. 2636. Authentic evidence

The following documentary evidence shall be deemed to be authentic for purposes of executory process:
1) The note, bond, or other instrument evidencing the obligation secured by the mortgage, security agreement, or privilege,
paraphed for identification with the act of mortgage or privilege by the notary or other officer before whom it is executed,
with the exception that a paraph is not necessary in connection with a note secured by a security agreement subject to
Chapter 9 of the Louisiana Commercial Laws;
2) A certified copy or a duplicate original of an authentic act;
3) A certified copy of any judgment, judicial letters, or order of court;
4) A copy of a resolution of the board of directors, or other governing board of a corporation, authorizing or ratifying the
execution of a mortgage on its property, certified in accordance with the provisions of R.S. 13:4103;
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5) A security agreement subject to Chapter 9 of the Louisiana Commercial Laws, which need not be executed or
acknowledged before a notary.
6) A certified copy of the limited liability company's articles of organization filed with the secretary of state or a written
consent or extract of minutes of a meeting of the persons specified in R.S. 13:4103.1, in each case authorizing or ratifying
the execution of an act of mortgage on its property and in the form required by R.S. 13:4103.1, certified as provided in
R.S. 12:1317(C).[ partnership cant act through resolutions]
7) A certified copy of the contract of partnership authorizing the execution of an act of mortgage filed for registry with the
secretary of state.
8) All other documentary evidence recognized by law as authentic.
Ne varietur makes it deemed authentic.

A certified copy of the mortgage is all that you need.
To prove the authority of the authority to act the resolutory must be certified in accordance with statute.
C.C. P. Art. 2637. Evidence which need not be authentic

A. Evidence as to the proper party defendant, or as to the necessity for appointing an attorney at law to represent an
unrepresented defendant, or of any agreement to extend or modify the obligation to pay or of written notification of
default, or of the breach or occurrence of a condition of the act of mortgage, or of the security agreement, or privilege
securing the obligation, or of advances made by the holder of a collateral mortgage note or note for future advances, or of
an obligation secured under Chapter 9 of the Louisiana Commercial Laws, need not be submitted in authentic form. These
facts may be proved by the verified petition, or supplemental petition, or by affidavits submitted therewith.
B. If a mortgage sought to be enforced secures the repayment of any advances for the payment of taxes, insurance premiums,
or special assessments on, or repairs to, or maintenance of, the property affected by the mortgage or security agreement,
the existence, date, and amount of these advances may be proved by the verified petition, or supplemental petition, or by
affidavits submitted therewith.
C. If a mortgage sought to be enforced is a collateral mortgage on movable or immovable property, or if the security
agreement sought to be enforced secured multiple or other and future indebtedness of the debtor, the existence of the
actual indebtedness may be proved by the verified petition or supplemental petition, with the handnote, handnotes, or
other evidence representing the actual indebtedness attached as an exhibit to the petition.
D. Evidence of a name change, merger, purchase and assumption, or similar disposition or acquisition, of a financial or
lending institution may be proved by a verified petition or supplemental petition, or by an affidavit or affidavits submitted
therewith by an appropriate officer of the successor entity.
E. Evidence of the name change or death of any party need not be submitted in authentic form, but may be proved by verified
petition or supplemental petition, or by affidavit submitted therewith.
C.C. P. Art. 2638. Order for issuance of writ of seizure and sale
If the plaintiff is entitled thereto, the court shall order the issuance of a writ of seizure and sale commanding the sheriff to seize
and sell the property affected by the mortgage or privilege, as prayed for and according to law.
C.C. P. Art. 2640. Citation unnecessary; service of demand for payment

Citation is not necessary in an executory proceeding.
C.C. P. Art. 2641. Service upon, and seizure and sale prosecuted against, attorney for unrepresented defendant
In all cases governed by Article 2674, all demands, notices, and other documents required to be served upon the defendant in
an executory proceeding shall be served upon the attorney at law appointed by the court to represent him, against whom the
seizure and sale shall be prosecuted contradictorily.
C.C. P. Art. 2642. Assertion of defenses; appeal

Defenses and procedural objections to an executory proceeding may be asserted either through an injunction proceeding to
arrest the seizure and sale as provided in Articles 2751 through 2754, or a suspensive appeal from the order directing the
issuance of the writ of seizure and sale, or both.
A suspensive appeal from an order directing the issuance of a writ of seizure and sale shall be taken within fifteen days of the
signing of the order. The appeal is governed by the provisions of Articles 2081 through 2086, 2088 through 2122, and 2124
through 2167, except that the security therefor shall be for an amount exceeding by one-half the balance due on the debt
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secured by the mortgage or privilege sought to be enforced, including principal, interest to date of the order of appeal, and
attorney's fee, but exclusive of court costs.
C.C. P. Art. 2643. Third person claiming mortgage, security interest, or privilege on property seized
A third person claiming a mortgage, security interest, or privilege on the property seized in an executory proceeding may assert
his right to share in the distribution of the proceeds of the sale of the property by intervention, as provided in Article 1092. The
intervention shall be served as provided in Article 1093 and shall be tried summarily.
C.C. P. Art. 2644. Conversion to ordinary proceeding

The plaintiff in an executory proceeding may convert it into an ordinary proceeding by amending his petition so as to pray that
the defendant be cited and for judgment against him on the obligation secured by the mortgage or privilege.
The plaintiff in an ordinary proceeding may not convert it into an executory proceeding.
C.C. P. Art. 2721. Seizure of property; notice

A. The sheriff shall seize the property affected by the mortgage, security agreement, or privilege immediately upon receiving
the writ of seizure and sale, but not before the expiration of the delay allowed for payment in the demand required by Article
2639, unless this demand has been waived.
B. The sheriff shall serve upon the defendant a written notice of the seizure of the property.
C. Since secured collateral subject to a security interest under Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et
seq.) need only be reasonably described in the debtor's security agreement (R.S. 10:9-110), the sheriff shall have no liability to
the debtor or to any third party for wrongful or improper seizure of the debtor's or third party's property of the same general
type as described in the debtor's security agreement. If necessary, the sheriff shall request the secured creditor to identify the
property subject to the security agreement and shall act pursuant to the secured creditor's instructions. The debtor's and other
owner's sole remedy for the wrongful or improper seizure of the property shall be for actual losses sustained under R.S. 10:9-
507(1) against the secured creditor on whose behalf and pursuant to whose instructions the sheriff may act.
C.C. P. Art. 2722. Advertisement of sale

After the seizure of the property, the sheriff shall proceed to advertise the sale of the property, in accordance with the
provisions of the first paragraph of Article 2331.
C.C. P. Art. 2723. Appraisal of property, unless waived

Prior to the sale, the property seized must be appraised in accordance with law, unless appraisal has been waived in the act
evidencing the mortgage, the security agreement, or the document creating the privilege and plaintiff has prayed that the
property be sold without appraisal, and the order directing the issuance of the writ of seizure and sale has directed that the
property be sold as prayed for. There is no requirement that seized property subject to a security interest under Chapter 9 of the
Louisiana Commercial Laws (R.S. 10:9-101, et seq.), be appraised prior to the judicial sale thereof.
C.C. P. Art. 2724. Articles relating to sales under fieri facias applicable
A. The provisions of Paragraphs A and C of Article 2293, Articles 2333 through 2335, and 2337 through 2381, relating to
a sale of property under the writ of fieri facias, shall apply to a sale of property under the writ of seizure and sale.
B. The provisions of Article 2336 shall also apply to a sale of property under the writ of seizure and sale, unless
appraisement has been waived, as provided in Article 2723.
LSA-R.S. 9:5305. Paraph unnecessary; proviso

The notes, bonds, or other obligations secured by the mortgage need not be paraphed if the act of mortgage identifies them by
date, number, amount, and date when payable.
LSA-R.S. 5306. Act of mortgage may include pledge

The act of mortgage may include a pledge of incorporeal movables and may provide for the deposit thereof with the fiduciary.
LSA-R.S. 13:3886. Request for notice of seizure on specific property; notification by sheriff; failure to notify
A. Any person desiring to be notified of the seizure of specific immovable property or of a fixture located upon specific
immovable property shall file a request for notice of seizure in the mortgage records of the parish where the immovable
property is located. The request for notice of seizure shall state the legal description of the immovable property, the owner of
the property, and the name and address of the person desiring notice of seizure. The person requesting notice of seizure shall
pay the sum of ten dollars to the sheriff.
B. (1) Any interested person may request, by simple written application to the sheriff, that a written notice of seizure be given
to any other person or persons. A fee of seven dollars and fifty cents for each person to be notified by mail, or, fifteen dollars
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for each person to be notified by service shall accompany the request for notice. After his receipt of the request and the
appropriate fee, the sheriff shall, upon the seizure of the property, promptly give the requested notices. (2) Additionally, in the
event of seizure of immovable property or a fixture, the sheriff shall give written notice of the seizure and a list of the property
seized to each person who, prior to the filing of the notice of seizure, has requested notice under the provisions of Subsection A
and who has paid the fee required therein.
C. In the event of seizure of immovable property or a fixture, the sheriff shall request from the clerk of court, or the recorder of
mortgages for the parish of Orleans, at least twenty-one days prior to the first scheduled sheriff's sale, a mortgage certificate
effective as of the date and time of the filing of the notice of seizure. The mortgage certificate shall include any requests for
notice of seizure. Upon receipt of the mortgage certificate the sheriff shall notify, at least ten days prior to the first scheduled
sheriff's sale, those persons requesting notice of the seizure. The notice of seizure shall be by certified mail, return receipt
requested, actual delivery, or any manner provided for service of citation, and shall include the name and address of the seizing
creditor, the method of seizure and the sum owed, and the date of the first scheduled sheriff's sale.
D. Notices under this Section may be given by certified mail, return receipt requested, actual delivery, or by any manner
provided by service of citation. Each notice shall be mailed or served at least ten days before the first scheduled date of the
sheriff's sale, and shall include the time, date, and place of such sale.
E. Neither the clerk of court nor the sheriff, or any of their officers, agents, or employees, shall be held liable if a reasonable
attempt has been made to mail or deliver the notice to the address provided in the request.
F. The failure of the sheriff to notify a person requesting notice of seizure shall not affect the rights of the seizing creditor nor
invalidate the sheriff's sale.
LSA-R.S. 13:3886.1. Failure to notify

A. The failure to notify any lienholder or other interested person having an interest in the property shall not affect the rights of
the seizing creditor nor invalidate the sheriff's sale; nor shall any lien, privilege, or other encumbrance that is inferior to the
rank of the lien of the seizing creditor affect the property after the sheriff's adjudication. The exclusive remedy for any person
affected by the provisions of this Subsection shall be to institute a claim by summary pleadings, within one year from the date
of the sheriff's adjudication, proving that he has been damaged by the failure to notify him. In connection with any such claim,
the court shall consider and the person
claiming damages shall have the burden of proving all of the following:
(1) That his name and address were reasonably ascertainable through the exercise of reasonable diligence.
(2) That he lacked actual knowledge of the seizure.
(3) The respective ranking and amounts of all liens, privileges, and other encumbrances affecting the property as of the date of
the sheriff's adjudication.
(4) The value of such respective rights.
(5) The value of the property as of the date of the sheriff's adjudication.
(6) The respective positions the parties would have occupied had the required notice been given.
(7) His ability and capacity to have obtained funds to purchase the property at the foreclosure sale had the required notice been
given.
(8) That in such circumstances he would have bid on the property in such an amount as to have prevented him from suffering
the alleged damages, either by such bid being successful or by such bid leading to a higher bid by another party.
B. In no event shall the claim of any such person exceed the value of the interest he possessed on the date of the sheriff's
adjudication.
C. The provisions of this Section shall be applied both retrospectively and
prospectively; however, any action for which the time period for bringing such action would otherwise be shortened by the
provisions hereof shall be instituted within one year from July 17, 1991, and any suit not instituted within that time and any
claims relating thereto shall be forever barred.
LSA-R.S. 13:3887. Request for notice of assessment on specific property

A. Any mortgagee desiring to be notified in the event specific immovable property is assessed by a local governmental entity
shall file a request for notice of assessment in the mortgage records of the parish where the immovable property is located. The
request for notice of assessment shall state the legal description of the immovable property, the owner of the property, and the
name and address of the person desiring notice of assessment. The mortgagee desiring notice of an assessment shall pay the
sum of ten dollars to the clerk of court, or the recorder of mortgages for the parish of Orleans, for deposit in the office general
fund, to defray the cost of providing the notice of
assessment as hereinafter provided.
B. In the event of assessment of immovable property for improvements, the clerk of court or the recorder of mortgages for the
parish of Orleans shall notify, within thirty days of the filing of the assessment, those mortgagees requesting notice of the
assessment. The notice of assessment shall be by certified mail or actual delivery.
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C. Neither the clerk of court nor the recorder of mortgages for the parish of Orleans, nor any of their officers, agents, or
employees shall be held liable if a reasonable attempt has been made to mail or deliver the notice to the address provided in the
request.
LSA-R.S. 13:3888. Filing of notice of seizure; effect of subsequent acts and cancellation of notice
A. Upon the sheriff's filing of the notice of seizure required by Article 2293 of the Code of Civil Procedure, no sale, contract,
counter letter, privilege, lien, mortgage, judgment, surface lease, oil, gas, or mineral lease, or other instrument or writing
relating to or purporting to affect immovable property that has not been filed previously for registry shall effectively create,
transfer, or encumber any interest in the immovable property under seizure. Following the registry of the sheriff's deed, any
such instrument or writing that may have been filed after the filing of the notice of seizure
shall be cancelled by the clerk of court upon the request by affidavit of any interested party. However, if the notice of seizure is
cancelled other than as a result of the ensuing sheriff's sale, all such acts shall thereupon be accorded such effect as the law
would have allowed if the notice of seizure had never been filed.
B. This Section shall not prevent the effective reinscription or preservation of a mortgage, privilege, or other right that arises
under or is evidenced by an instrument which had been duly filed for registry before filing of the notice of seizure or the
effective exercise of a right or option that arises under or is evidenced by such an instrument.
LSA-R.S. 13:3852. Notices of seizure

A. The sheriff to whom the writ is directed shall make three notices setting forth the title of the action or proceeding, its docket
number, the court which issued the writ, the amount of the judgment or claim specified in the writ, an exact copy of the
description of the immovable property furnished him in accordance with R.S. 13:3851, and the fact that the sheriff is seizing
the described property, in accordance with Code of Civil Procedure Article 2293, and, if applicable, the date of the first
scheduled sale of the property. If the immovable property to be seized is owned by more than one party, the sheriff shall make
an additional notice for each additional party.
2 Ways to Foreclose on Property in Louisiana
Ordinary Process Put suit in court, need citation, service of process. ordinary lawsuit- C can sue D personally and get in
personam jurisdiction. Judgment on C can get in rem. Jurisdiction only to foreclose on property and no personal liability.
Requires petition with service of process (7 days usually). Then D has 15 days. If no answer can get preliminary default
judgment in 2 days and then confirmation of judgment 3 days after this. All of this takes one month. But if D files an answer,
then more motions, discovery, etc., normal lawsuit on average takes 1 year before C can get judgment and then delays for an
appeal. 7 days for new trial. 30 days for suspensive appeal. Must get writ issued to seize property; writ must be served (7
days). Then must set sheriffs sale with minimum 30 days notice in the newspaper with minimum of 2 appraisals. Then you
have sale. Then you get property. Thus, typical is 4 months from filing suit to foreclosure if no response by D. If response,
then time is over 3 years. This process is too long and leads C to use executory process.
Executory Process Take executory process suit to clerk (no citation, no service of process, not all the steps in ordinary
proceeding). You have form, certified copy, affidavit, original note. You get your copies back, go to judges office, get him to
sign it, then its a judgment. Put judgment in clekrs office. C gets judgment before D even knows what has happened since
generally there is only 6 day delay. This allows the creditor to get in rem jurisdiction but not in personam liability. Quick sale
of property through judicial process. It allows you to seize and sell the property and jump right to execution of the judgment. It
is a pre-judgment remedy that is constitutional. It allows you to get an in rem judgement. After executory proceeding you may
convert to an ordinary proceeding. No Citation. No Service. No Answer. Prelimin Default. Confirmation of Default. New Trial.
1st Step Need a Confession of Judgment. 2nd Step Authentic Evidence is Needed. Executory process is the only way to avoid
appraisal of property; ordinary process requires appraisement. If get an executory process there are two types of notice: 1) 3
day demand for payment (may be waived) or 2) the 3 day notice of seizure (may not be waived) as long as a judge oversees the
process. Creditor has the right to pay the taxes. 2637(b) can be proved by verified petition. Ipso facto clause says any default
we accelerate the whole mortgage. CMN should always be payable on demand. Under Private Works Act & Privileges, some
liens can outrank first mortgage recorded earlier. Since 1992, must have an exact amount or a calculable amount for maximum
amount.
A MORTGAGE SIGNED ONLY BY THE MORTGAGOR IS VALID, BUT CANNOT GET EXECUTORY PROCESS.
Unless you fall into RS 9:5555.
Court used to say that everything had to be in authentic form unless an exception, but the statute changed.
So what do we do about the note thats not in authentic form? CCP 2636 says that the paraph deems it to be authentic. Helps us
with exectuory process.
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What about a note that is not paraphed? Is it authetnic? Yes, RS 9:5555Have to get an affidavit. Helps us with exectuory
process.
2635: says mortgage needs to be brought to judge. How do you get authetnic evidence of the mortgage? 2636(2)a certified
copy of an authentic act or duplicate original. So go to clerk of court and get certified copy and thats what you need for
exectuory process.
What if youre dealing with authority of someone to act? Orders of court. How do you prove authority of board of directors to
act? 2636(4)copy of resolution.
What if I have a UCC 9 security instrument (movable) and want ot use executory process? Take a look at pg. 59 in form
(secuity agreement). No notary or wintesses. Can we get exectuory process? YES. 2636 (5)A.
RS 9:5555 in accordance with provisions of CC article 2636Adeemed authentic.
If you have something authentic or deemed authentic, you can get executory process.
Issue: If we have to foreclose using the court system, then the due process rules apply. What is exectuory process? It is a pre-
judgment seizure. How is this constitutional? How is this valid? We have due process issues. Go to the cases
OVERVIEW OF THE EXECUTORY PROCESS

A. Basic Requirements.
1. An Authentic act containing a confession of judgment (C.C.P. 2632, 2635(A)(2)
a. On Movables, it may be by authentic act or by private act duly acknowledged.(C.C.P 3635(A)(3)
b. Special forms on chattel mortgages.
2. Submission only of evidence that is required to be:
a. Authentic. (CCP 2635)
b. Is deemed authentic. (CCP 2636, RS 13:4102(B-D), 13:4103
c. Need not be authentic (usually a verified petition or an affidavit will suffice) (CCP 2637, RS 13:4102)
B. Basic Requirements Court and Clerk and Sheriff.

1. Court orders writ of seizure issued. (CCP 2638)
2. Before issuing the writ, the Clerk must issue a demand for payment unless waived in the act of mortgage or privilege.
(CCP 2639)
3. Sheriff seizes the property and issues a notice of seizure. (CCP 2639)
C. Basic Rights of Debtor
1. Injunction against seizure and sale. (CCP 2642, 2751-2754) Special rules on bonds. (CCP 2754)
2. Or suspensive appeal from order, but it must be within 15 days of the signing of the order plus bond. (CCP 2642)
D. Basic Rights of Current Owner who is not mortgagor and who did not assume the security being foreclosed upon.
1. Pay the balance due and get legal subrogation. (CCP 2703, CC 1829)
2. Enjoin the sale for any reason that the mortgagor could use. (CCP 2703, 2751)
3. Enjoin the sale because of non-recordation or peremption of recordation. (CCP 2703, CC 3308, 3309, 3320, 3321,
3328-3336, RS 9:2721-2723)
4. Intervene and claim third party possessor statute. (CCP 2703, CC 3315, 3318)
5. Bring action in warranty against seller. (CC 2500-2519)
6. If its a legal or judicial mortgage that is being foreclosed on, can claim discussion. (CCP 151, 5154-5156, 926)
E. Basic Rights of the Current Owner who Assumed the Mortgage.

1. Pay the balance due and get legal subrogation. (CCP 2702, CC 1829)
2. Enjoin the sale for any reason that the mortgagor could use. (CCP 2702, 2751)
F. Basic Rights of Superior Creditor.

1. Intervene and claim rights. (CCP 2643, 1092)
2. If the superior creditor has rights on all the property seized, the intervention may be filed at any time before the
sheriffs distribution of proceeds. (CCP 1092)
3. If the superior creditor has rights on only part of the property seized, a separate sale can be ordered if the intervention
comes before the judicial sale; a separate appraisement can also be ordered. (CCP 1092)
4. Do nothing; the property is sold subject to the superior creditors rights. (CCP 2372)
G. Basic Rights of an Inferior Creditor.

1. Intervene and claim rights. (CCP 2643, 1092)
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2. If the inferior creditor has rights on all the property seized, the intervention may be filed at any time before the
sheriffs distribution of proceeds. (CCP 1092)
3. If the inferior creditor has rights on only part of the property seizes, he must intervene prior to the sale. His mortgage
is extinguished and he is relegated to proceeds, if any. (CCP 2376, 2377) Since he is inferior to the seizing creditor a
separate sale may not be possible. If the inferior creditor wants any proceeds, the intervention must come before the
judicial sale and a separate appraisement should be ordered (CCP 1092)
Notes:
a. Procedures for enforcement of payment

i. Ordinary process: Judgment on the loan agreement, and then ask for writ
of fifa (or sequestration) and go through the entire rigmarole. But this
should be avoided if possible.
ii. Executory process: bringing suit to enforce security rights
1. As a prerequisite, the creditor must establish in court that the
debtor has in fact defaulted. Sometimes have to use ordinary
process, sometimes not.
2. When would the secured creditor not need to use ordinary
process to prove the default? When having done everything in
advance.
3. Advantages
a. La. CCP art. 2640 Debtor need not be served or cited.
This saves time and money.
b. Get the judgment automatically on the basis of an
affidavit. To be able to get this, meet requirement: the
loan documents must have had a confession of
judgment in which the debtor swears that he is in
default.
4. Form required: authenticincludes a security agreement
properly executed under Art. 9, or a civil law-type authentic
act. Therefore, the note and the mortgage/security agreement
must be in authentic form.
5. Then judge issues writ of sale and seizure.
4. (2) Foreclosure of the right to redeem the collateral
a. Generally
i. Laymens term: cut off
ii. History
1. English Chancellor said that even after creditor repossessed, the
debtor had the right to redeem the property by paying what is
owed. If debtor did that, he could redeem the property.
2. But at some point, the right to redeem was foreclosed.
b. Involuntary
i. Through judicial disposition
1. The sheriff who has seized must now sell the property at a
public auction. There is a minimum bid at the first auction: 2/3
of the appraised value of the property. At a second sale, there is
no minimum bid.
2. Anybody can bid on the property, including the creditor. Its
usually the creditor who buys the property (buying in). The
creditor doesnt really have to payhe credit bids the amount
he is owed.
ii. Through creditor disposition
1. This applies if creditor repossessed through self-help, or debtor
turned over custody of the property to the creditor (voluntary
dispossession).
2. Creditor can sell the property himself, without having to go
through a sheriffs sale.
3. However, creditor must sell commercially reasonably.
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a. Creditor can credit bid, if there is an external

mechanism for determining if the bid is for a fair price:
need a free market for the collateral (stock, oil, etc.)
c. Voluntary: collateral for debt exchange: dation en paiement (giving in payment)
i. The dation is a separate juridical act: an agreement whereby creditor
forgives debt completely in return for the debtor transferring ownership
to the creditor
ii. Called a workout deal in lay terms. At common law, called strict
foreclosure.
iii. There are strict rules in the common law that protect the debtor,
including: creditor must give notice to everyone with an interest in the
collateral, and they have veto power over the dation
1. In Louisiana, we do not have these strict rules.
5. (3) Collection of the deficiency
a. Defined: proceeds were not enough to pay off the amount of indebtedness
b. General rule: permitted without restriction
i. The creditor can pursue the debtor for a deficiency. But this is heavily
regulated because of the common-law influence in Louisiana.
ii. Deficiency Judgment Act imposes requirements on a mortgagee for
getting the rest of the value. The Act is the exceptions, infra.
c. Exceptions: excluded or at least restricted
i. Under mortgage law
1. Before sale, there must be an independent appraisal, to later
obtain a deficiency
2. Creditor must give the debtor credit for at least 50% of the
appraised value, regardless of how much the sale actually yields
ii. Under Chapter 9
1. As to some collateral, there can be no deficiency judgment:
accounts, chattel paper, payment intangibles, and promissory
notes
iii. If the sale was not commercially reasonable, the deficiency is lost
Prof. OBriens summary: There is a debtor with a mortgage on a house. The debtor owes 300k on the mortgage. Debtor
defaults. Creditor has right to execute executory process and does. House appraises for 200k. At first judicial sale there is no
bid for 2/3 appraisal value.
What happens at second sale?

The property is sold with the minimum bid being costs. The debtor is credited with the larger of the actual sale proceeds
or 1/2 the appraised value.
Same scenario but this time there is a 2nd (junior) creditor who has a
mortgage for 50k on the house.
What happens at second sale?

Same result. If there is not enough money to pay of the seizing creditor, the junior creditor is wiped out.
DUE PROCESS CASES
Every mortgage drafter should consider: if the borrower defaults, how is the creditor to obtain control of the collateral so that
the property can be sold and the creditor get a privilege on the proceeds of the sale. LA does not allow self-help; foreclosure is
through court proceedingseither ordinary (normal suit w/citation and SOP that seeks personal judgment against the
borrower) or executory process (which results in an in rem judgment allowing quick seizure and sale). So we want to make
sure that we can draft it so that the creditor CAN use executory process. At a minimum, this requires a mortgage in authentic
form containing a confession of judgment. Often a waiver of appraisal is included so that the creditor has the option of
proceeding with or without appraisal. We must also be sure that we have complied with all procedural AND constitutional
requirements to ensure valid foreclosure sale.
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In ordinary proceedings, suit cannot begin until there is citation and SOP on the debtor. In executory proceedings, there is no
citation and no SOP and if the creditor has the right documents, he can obtain judgment the day he goes to court.
But, the debtor does get notice of seizure as per CCP 2721 and this cannot be waived. Demand for payment, former CCP 2639,
could be waived. (It was likely that it was repealed bc nearly every mortgage had a clause waiving this requirement). However,
notice of seizure is not required to third persons in possession (although they have some important rights).
Sniadach v. Family Finance Corp. of Bay View Defendant did not pay a promissory note and her wages were garnished.
There was a statute that gave plaintiff-creditor 10 days in which to serve the summons and complaint on the defendant after
service on the garnishee (the employer from which they were taking wages, essentially, this means the garnishee gets notice
before the debtor). The creditors lawyer requests summons and this summons is served on the garnisheeit is this that sets
motion the machinery by which the wages are frozen. Defendant argues this violated 14th amend DP bc notice and opportunity
to be heard are not given before in rem seizure of the wages. HELD: It is true [the wages may] be unfrozen if the trial of the
main suit is ever had and the wage earner wins on the merits. But in the interim, the wage earner is deprived of his enjoyment
of earned wages without any opportunity to be heard and to tender any defense he may haveIn this case the sole question is
whether there has been a taking of property without that procedural due process that is required by the 14th Amendment. The
Court held that a pre-judgment garnishment procedure that takes a persons property violates the fundamental principles of
due process. CANNOT get garnishment without notice to the debtor.
Fuentes v. Shevin (1972) who could issue the order? Neutral official. Case involved a writ of replevin [quick taking statute
under common law]. The writ statutes did not provide for a notice to the possessor of the property nor give the possessor an
opportunity to challenge via a hearing prior to the seizure. There was opportunity for a hearing AFTER the seizure. Court says:
if the right to notice and hearing is to serve its full purpose, then, it is clear that it must be granted at a time when the
deprivation can still be prevented. At a later hearing, an individuals possessions can be returned to himBut no later hearing
and no damage award can undo the fact that the arbitrary takinghas already occurred. The right to a prior hearingis the
only true effective safeguard against arbitrary deprivation of property. While the existence of other, less effective, safeguards
may be among the considerations that affect the form of hearing demanded by DP, they are far from enough by themselves to
obviate the right to a prior hearing of some kind. Also, this court did not like that a court official, as opposed to a judge, was
issuing the order to seize. FAMOUS LINE The minimal deterrent of a bond requirement is no substitute for an informed
evaluation by a neutral official.
Mitchell v. W.T. Grant (1974) Louisiana sequestration (two ways to get property: sequestration [I got a right in the property
and Im afraid theyre going to abscond the state and take the property that I have a right in] and attachment [Pennoyer v. Neff:
quasi in rem jdx]) procedure which makes available to mortgage or lien holder, on ex parte application without notice to debtor
or opportunity for hearing a writ of sequestration to forestall waste or alienation of the encumbered property and pursuant to
which seller with vendor's lien on refrigerator, stove and washer obtained sequestration of the property after default by buyer
on installment payments is not invalid, either on its face or as applied, and effects a constitutional accommodation of the
respective interests of the buyer and seller. ISSUE: Can you get sequestration in LA which allows you to seize property before
you have a judgment? YES. NO PROBLEM HERE. Moreover in the parish where this case arose, the requisite showing must
be made to a judge, and judicial authorization obtained. Mitchell was not at the unsupervised mercy of the creditor and court
functionaries [clerk of court; Snidard].
Court liked that the debtor was not at the unsupervised mercy of the creditor and court functionaries. The LA law provides for
judicial control of the process from beginning to end. This is what appears to save the LA sequestrationthe review of the
pleadings by a judge.
DISCUSSION: Resolution of the due process question must take account not only of the interests of the buyer of the property
but those of the seller as well.
With this duality in mind, we are convinced that the Louisiana sequestration procedure is not invalid, either on its face or as
applied. Sequestration under the Louisiana statutes is the modern counterpart of an ancient civil law device to resolve
conflicting claims to property. Historically, the two principal concerns have been that, pending resolution of the dispute, the
property would deteriorate or be wasted in the hands of the possessor and that the latter might sell or otherwise dispose of the
goods. A minor theme was that official intervention would forestall violent self-help and retaliation.
Louisiana statutes provide for sequestration where one claims the ownership or right to possession of property, or a mortgage,
lien, or privilege thereon . . . if it is within the power of the defendant to conceal, dispose of, or waste the property or the
revenues therefrom, or remove the property from the parish, during the pendency of the action. The writ, however, will not
issue on the conclusory allegation of ownership or possessory rights. Article 35014 provides that the writ of sequestration shall
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issue only when the nature of the claim and the amount thereof, if any, and the grounds relied upon for the issuance of the writ
clearly appear from specific facts' shown by a verified petition or affidavit. In the parish where this case arose, the clear
showing required must be made to a judge, and the writ will issue only upon his authorization and only after the creditor
seeking the writ has filed a sufficient bond to protect the vendee against all damages in the event the sequestration is shown to
have been improvident
Flagg Bros. v. Brooks (1978)This is like Storage Wars. Concerned whether a warehousemans sale of goods under private
sale provisions of UCC 7 violated procedural DP. Court held that there was no violation of procedural due process because
although the state had enacted laws allowing for private sales, the state had not acted to deprive the debtors of their interest in
the goods. Basicallyno state actor so no deprivation of rights. Action by a private party pursuant to a state statute without
something more was not sufficient to justify a characterization of that private party as a state actor. No due process (5 th 14th
amendments; we have to find state action; a private sale doesnt trigger DP; a judicial sale does trigger DP)
Lugar v. Edmondson Oil (1982) says one must have state officials and state action. Court distinguished between the
obviously related concepts of state action and under the color of state law and found that a state writ of attachment issued by a
clerk of a state court violated procedural due process. Court noted that constitutional requirements of due process apply
whenever officers of the state jointly act with the creditor in securing the property in dispute. Court distinguishes Flagg, noting
that Flagg was proper bc action by a private party pursuant to state statute without something more (like action by a state
official) was not sufficient to justify characterization of the private party action as a state actor. In other words, just bc state
allowed the action by law does not mean a private party taking action under that statute is a state action.
Buckner v. Carmack (1972)court issues and there is a change to be heard because the 3-day notice of seizure cannot be
waived. Court upheld the constitutionality of Louisiana executory proceedings citing an 1893 case and Fuentes.
Distinguishing the situation from Fuentes , this court noted that the plaintiff must make a proper showing to the reviewing
judge. Court rested its finding primarily upon the judges evaluation, as well as the confession of judgment clause and also
because Louisiana law provides a battery of other remedies including a suspensive appeal from the order of seizure and sale
and an injunction with and an action in nullity. Executory process is CONSTITUTIONAL. This was a planned case. Why is it
constitutional? LA EP makes you go before a judge and you have a battery of other remedies. The judge must satisfy himself
that the Ps petition is supported by authentic evidence. P. 347.
Bonner v. B-W Utilities (1978) involved an in rem mortgage to secure the installation and operation of a water distribution
system. Bonner buys the property subject to the mortgage (no personal liability). Although the plaintiffs claim that they sent
several demand letters to Bonner concerning the foreclosure on the mortgage, Bonner denied receiving the notices. He also
was not given any direct notice of the executory proceeding and 1st learned of the sale several months after the fact. Did
Bonner have a right to object to the foreclosure? Yes. One must have some kind of notice at least before one has a sale. Court
held that because a 3rd party possessor has a number of important rights, the due process clause of the 14th required that the 3rd
possessors be given actual notice of the proceedings prior to the sale. Court noted that absent actual notice statutory rights to
assert defenses or pay the indebtedness become meaningless. Notice by advertisement is insufficient, citing Mullane. Guy was
current owner who was not a mortgagor and did not assume security. He had a lot of remedies. (3.4 on page 327)
Mennonite Board of Missions v. Adams (1983) Involves a tax sale. Plaintiff held the mortgage and the debtor paid the
mortgage but not the property taxes (as was required). Statute allowed an annual sale of real property on which taxes had not
been paid. Prior to the sale, the county auditor must post notice in the county courthouse and publish weekly notice for three
consecutive weeks. The owner of the property is entitled to notice by certified mail to his last known address. Until 1980, the
law did not provide for notice by mail or personal service to the morgagees of property that was to be sold. After the notice is
met, the property is sold, subject to a 2 year redemption period. If not redeemed, the purchaser can apply for a deed. Before the
deed is issued, the county had to notify the former owner that he still had a chance to redeem it. Again, no notice to the
mortgagee. After this last chance to redeem, deed is given to the purchaser, who may institute action to quiet title. At this point,
on one can redeem. The only way the title can be defeated is to show that the tax assessment had been invalid, the taxes had
already been paid, or the property had been redeemed.
Here, debtor never told the mortgagee about the tax sale and even continued to pay the mortgage note after the tax sale, so
Mennonite never realized property had been sold.
Court goes back to Mullaneto comport w/DP notice must be reasonably calculated, under all the circumstances, to apprise
interested parties of the pendency of the action and afford them an opportunity to present their objections. In Mullane, notice
by publication was not enough for interested parties whose names and addresses were actually known. This case is controlled
by Mullane
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A mortgagee possesses a substantial property interest that is significantly affected by a tax sale. Court lists several reasons what
makes a mortgage a substantial interest including the fact that the mortgagees security takes priority over other claims/liens.
And since the purchaser may take the property free and clear at the conclusion of the sale, it may result in complete
nullification of the mortgagees interest.
Since a mortgagee clearly has a legally protected property interest, he is entitle to notice to comport w/Mullane.
Rule: When the mortgagee is identified in a mortgage that is publicly recorded, constructive notice by publication must be
supplemented by notice mailed to the mortgagees last known available address, or by personal service. But unless the
mortgagee is not reasonably identifiable, constructive notice alone does not satisfy the mandate of Mullane. Notice by mail
or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will
adversely affect the liberty or property interests of any partyif its name and address are reasonably ascertainable.
Court notes that the publication notice is not desirous of actually informing the mortgagee; it is really to attract potential
buyers. And while sophisticated creditors may have means available to them to determine if taxes have been paid, mortgagees
are not always sophisticated, knowledgeable creditor. Notice to a property owner is not enough bc a property owner who has
failed to preserve his own property interest is unlikely to let the mortgagee know. And just bc a sophisticated creditor may have
means to find out about the failure to pay taxes and preserve their interests, this does not relieve the state of its constitutional
obligation.
Bottom line: must give notice to the owner, and those w/property interest if they are reasonably identifiable or reasonably
ascertainable. Notice that taxes are delinquent is not enough.
Is mail notice sufficient? Maybeespecially given that it would have likely resulted in actual notice (given that postal workers
often get mail properly delivered even when defectively addressed).
This language is so broad that it has been extended to private foreclosures.
IMPORTANT LANGUAGE: p. 356.
Is Mennonite retroactive? YES! Look at Magee
Magee v. Amiss (1987)How far back do we have to look to give notice pre-1983 conveyances? Case involves a spouse
whose husband purchases property under old head and master rules. Holding that a foreclosure under the current community
property regime requires notice to the spouse the Court held that a foreclosure without notice would not deprive the spouse of
her property interest. Court cited Mennonite as its authority although the foreclosure sale occurred in 1980, 3 years before the
decision was rendered. Worker seizes and sell the house. H let the house be sold for 1800 to pay the worker. W did not get
notice and foreclosure occurred before 1980. Sale occurred in 1980. Court said one cant foreclosure on your interest.
Therefore Mennonite is retroactive affecting sales and foreclosures pre-1983. Doesnt extend back to 1900, 1914 for tax
sales. Not sure about mortgages. We arent sure how back it goesat least until 1980.
Davis Oil Company v. Mills (1989)lessees dont have to be notified if addresses not reasonably ascertainable. Must look in
both the mortgage and conveyance records. Held that while there might be circumstances under which you need not notify all
of those with an interest in the property (such as mineral leases) the general rule ought to be to notify everybody whose name
appears on the public records either in the conveyance or mortgage records. DO NOT have to give notice for mineral lessees.
This case is restricted to mineral leseases.
Sterling v. BlockDoesnt decide how far back it goes but clearly Mennonite notice is retroactive. What do you do about a
foreclosure sale in 1980, 1975, or 1973? Is this a constitutional problem? As to holders of mortgages or security interest
problems solved if reinscription dates 3328-3333 have lapsed dont worry about it. 2ndly insofar as owners and others
13:3886.1 if there is a failure to notify preexisting 1991 you have one year from the date of the statute to give notice [can have
a year fix on constitutional rights] and to future ones where notice is not had this statute is the right to get damages Must Prove
if name and address were reasonably ascertainable and that not had actual notice, ranking privileges, equity in the property,
could have obtained the funds and that you would have come in to obtain the bid.
Quantum Resources Management LLC, v. Pirate Lake Oil Corp.: p. 365.
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Allain v. Martco Partnership: What kind of notice? Mail.
Jones v. Flowers: First case that Justice Roberts wrote as SC Chief Justice. Rubin says strange opinion. Look at Public Records
and phone book. If not there, dont worry about it.
Tietjen v. City of Shreveport: p. 373. 2010. Mennomite is alive and well in LA. If you dont give notiec, invalid sale. What do
you do if you dont give notice? RS 13:3886.1
Rapides Parish Police Jury v. Catahoula Duck Club: RS 13:3886.1 works! If you didnt get notice, (1) you have a right to
bring your claim (2) what do you have to prove? Name and address are reasonably identifiable; that I didnt have notice; hows
everyone else rank; is there equity? Was I really damaged?; I could have bought it or found someone else to preserve the
value; look at 3886.1! If you dont bring this claim, lose Mennomite claim.
C&C Energy, LLC v. Cody Investments: Notice case that says mennmite is alive and well.
The Bank of New York Mellon v. Whitney Blaine Smith: A lawyer who brings an improper suit for executory process is a state-
actor. And if youre a state actor, you can be sued under 1983 for damages. KNOW WHAT YOURE DOING.
What does this have to do with us? CCP 2635 (2) must import a confession of judgment. Buckner talked about this. What is
it? A procedural clause that you put into your contract by statute. Confessions of judgments REQUIRED in mortgages for
executory process.
THURSDAY HYPOTHETICAL! Sit with law firms. Talk about problems and how to fix them.
Lesson notes:
SCOTUS has said that a statute of limitations may bar assertion of constitutional claims in both civil and criminal trials. A
constitutional right may be forfeitedby the failure to make timely assertion of the right before a tribunal having jurisdiction
to determine it.
HYPO: Filed, Signed, Recorded on the same day. A sells to B in 1/1/80. Sale with act of mortgage. Louis Werner Saw Mill.
Mortgage with resolutory condition. Note is due on in 1992. B sells to C in 1/1/90 cash sale. C borrows money with 30 year
mortgage. C sells to D in 1/1/95 subject to mortgages. Bonner v. BW Utility sale. The Savings and Loan gave a pure loan and
therefore no resolutory conditions and vendors privileges since no credit sale. The bank just has a pure mortgage. C provided
a surety. D grants a lease of the house to E in 1/1/2000 that is recorded in the conveyance records. In addition D grants to F a
9:4401 privilegea leasehold interest filed in the conveyance records. Who is Mennonite notice required of when Savings and
Loan Forecloses against C although D is the current owner? Mennonite does not require that more s be named. As a
practical implication lawyers normally do name current owners as s to prove later in a court that you actually gave notice.
Must notice C of the sale and not the suit. D because he is a current owner and has a property right. The tenant because Es
lease is recorded. F because he has a property right in the rents. Also lenders who have rights to movables in UCC has to have
notice. One does not have to give notice to A whose rights will not be impacted. Does surety have Mennonite notice?
When Foreclosing What Public Records Do You Check? Mortgage and Conveyance records have to be check from the date of
their mortgage forward. Also check backwards in order to check rank exposure. How far back? Sterling and Maghee (1980
sale that Mennonite notice was applied) says go back. There might be a 1st right of refusal since it is imprescriptible. SO go
back to the patent. If you see a foreclosure sale after 1950 get concerned. For mortgages, vendors privileges ones salvation is
3328 and following because one didnt reinscribe you are protected. If sale before 19513:3886.1 and
LESSON #17. WRAP UP ON FORECLOSURE ISSUES; LEGAL AND JUDICIAL MORTGAGES
Also relevant to this lesson: La. Civ. Code 3311, 3335, 3338-3368, 3501. La. C.C.P 2631-2644, 2721-2724, La. R.S. 9:5390-
5393
LA. C.C.P. Art. 1911. Final judgment; partial final judgment; signing; appeals
Except as otherwise provided by law, every final judgment shall be signed by the judge. For the purpose of an appeal as
provided in Article 2083, no appeal may be taken from a final judgment until the requirement of this Article has been fulfilled.
No appeal may be taken from a partial final judgment under Article 1915(B) until the judgment has been designated a final
115
judgment under Article 1915(B). An appeal may be taken from a final judgment under Article 1915(A) without the judgment
being so designated.
La. C.C.P Art. 1912. Final judgment; multi-parish districts, signing in any parish in the state
A final judgment may be signed in any parish within the state and shall be sent to the clerk of the parish in which the case is
pending.
La. C.C.P Art. 1913. Notice of judgment

A. Except as otherwise provided by law, notice of the signing of a final judgment, including a partial final judgment under
Article 1915, is required in all contested cases, and shall be mailed by the clerk of court to the counsel of record for each party,
and to each party not represented by counsel.
B. Notice of the signing of a default judgment against a defendant on whom citation was not served personally, or on whom
citation was served through the secretary of state, and who filed no exceptions or answer, shall be served on the defendant by
the sheriff, by either personal or domiciliary service, or in the case of a defendant originally served through the secretary of
state, by service on the secretary of state.
C. Notice of the signing of a default judgment against a defendant on whom citation was served personally, and who filed no
exceptions or answer, shall be mailed by the clerk of court to the defendant at the address where personal service was obtained
or to the last known address of the defendant.
D. The clerk shall file a certificate in the record showing the date on which, and the counsel and parties to whom, notice of the
signing of the judgment was mailed.
Art. 3319. Methods of extinction

A mortgage is extinguished:
(1) By the extinction or destruction of the thing mortgaged.
(2) By confusion as a result of the obligee's acquiring ownership of the thing mortgaged.
(3) By prescription of all the obligations that the mortgage secures.
(4) By discharge through execution or other judicial proceeding in accordance with the law.
(5) By consent of the mortgagee.
(6) By termination of the mortgage in the manner provided by Paragraph D of Article 3298.
(7) When all the obligations, present and future, for which the mortgage is established have been incurred and extinguished.
LA. C.C.P. Art. 2082. Definition of appeal

Appeal is the exercise of the right of a party to have a judgment of a trial court revised, modified, set aside, or reversed by an
appellate court.
LA. C.C.P. Art. 2083. Judgments appealable

A. An appeal may be taken from a final judgment rendered in causes in which appeals are given by law whether rendered
after hearing or by default, from an interlocutory judgment which may cause irreparable injury, and from a judgment
reformed in accordance with a remittitur or additur under Article 1814.
B. In reviewing a judgment reformed in accordance with a remittitur or additur, the court shall consider the reasonableness of
the underlying jury verdict.
C. An interlocutory judgment is appealable only when expressly provided by law.
La. C.C.P Art. 2084. Legal representative may appeal

A legal representative may appeal any appealable judgment rendered against him or affecting the property which he is
administering, for the benefit of the person whose property he administers or whom he represents, whenever he considers an
appeal necessary or advisable.
LA. C.C.P. Art. 2085. Limitations on appeals

An appeal cannot be taken by a party who confessed judgment in the proceedings in the trial court or who voluntarily and
unconditionally acquiesced in a judgment rendered against him. Confession of or acquiescence in part of a divisible judgment
or in a favorable part of an indivisible judgment does not preclude an appeal as to other parts of such judgment.
LA. C.C.P. Art. 2086. Right of third person to appeal

A person who could have intervened in the trial court may appeal, whether or not any other appeal has been taken.
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LA. C.C.P. Art. 2087. Delay for taking devolutive appeal

A. Except as otherwise provided in this Article or by other law, an appeal which does not suspend the effect or the execution
of an appealable order or judgment may be taken within sixty days of any of the following: (1) The expiration of the delay
for applying for a new trial or judgment notwithstanding the verdict, as provided by Article 1974 and Article 1811, if no
application has been filed timely. (2) The date of the mailing of notice of the court's refusal to grant a timely application
for a new trial or judgment notwithstanding the verdict, as provided under Article 1914.
B. When a devolutive appeal has been taken timely, an appellee who seeks to have the judgment appealed from modified,
revised, or reversed as to any party may take a devolutive appeal therefrom within the delays allowed in Paragraph A of
this Article or within ten days of the mailing by the clerk of the notice of the first devolutive appeal in the case, whichever
is later.
C. When one or more parties file motions for new trial or for judgment notwithstanding the verdict, the delay periods
specified herein shall commence for all parties at the time they commence for the party whose motion is last to be acted
upon by the trial court.
D. An order of appeal is premature if granted before the court disposes of all timely filed motions for new trial or judgment
notwithstanding the verdict. The order becomes effective upon the denial of such motions.
E. The time within which to take a devolutive appeal under the provisions of this Article is interrupted for all parties upon the
filing of a notice of removal in a district court of the United States, pursuant to the provisions of 28 U.S.C. 1446, and
commences anew on the date the proceeding is remanded.
LA. C.C.P. Art. 2088. Divesting of jurisdiction of trial court

The jurisdiction of the trial court over all matters in the case reviewable under the appeal is divested, and that of the appellate
court attaches, on the granting of the order of appeal and the timely filing of the appeal bond, in the case of a suspensive appeal
or on the granting of the order of appeal, in the case of a devolutive appeal. Thereafter, the trial court has jurisdiction in the
case only over those matters not reviewable under the appeal, including the right to:
(1) Allow the taking of a deposition, as provided in Article 1433;
(2) Extend the return day of the appeal, as provided in Article 2125;
(3) Make, or permit the making of, a written narrative of the facts of the case, as provided in Article 2131;
(4) Correct any misstatement, irregularity, informality, or omission of the trial record, as provided in Article 2132;
(5) Test the solvency of the surety on the appeal bond as of the date of its filing or subsequently, consider objections to the
form, substance, and sufficiency of the appeal bond, and permit the curing thereof, as provided in Articles 5123, 5124, and
5126;
(6) Grant an appeal to another party;
(7) Execute or give effect to the judgment when its execution or effect is not suspended by the appeal;
(8) Enter orders permitting the deposit of sums of money within the meaning of Article 4658 of this Code;
(9) Impose the penalties provided by Article 2126, or dismiss the appeal, when the appellant fails to timely pay the estimated
costs or the difference between the estimated costs and the actual costs of the appeal; or
(10) Set and tax costs and expert witness fees.
LA. C.C.P. Art. 2089. Description required of immovable property affected by judgments or decrees
All judgments and decrees which affect title to immovable property shall describe with particularity the immovable property
affected.
LA. C.C.P. Art. 2121. Method of appealing

An appeal is taken by obtaining an order therefor, within the delay allowed, from the court which rendered the judgment.
An order of appeal may be granted on oral motion in open court, on written motion, or on petition. This order shall show the
return day of the appeal in the appellate court and shall provide the amount of security to be furnished, when the law requires
the determination thereof by the court.
When the order is granted, the clerk of court shall mail a notice of appeal to counsel of record of all other parties, to the
respective appellate court, and to other parties not represented by counsel. The failure of the clerk to mail the notice does not
affect the validity of the appeal.
LA. C.C.P. Art. 2122. Appointment or removal of legal representative not suspended by appeal; effect of vacating
appointment on appeal
A judgment or order of a trial court appointing or removing a legal representative shall be executed provisionally
notwithstanding an appeal therefrom.
A judgment rendered on appeal vacating a judgment or order of the trial court appointing a legal representative does not
invalidate any of his official acts performed prior to the rendition of the judgment of the appellate court.
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LA. C.C.P. Art. 2123. Delay for taking suspensive appeal

A. Except as otherwise provided by law, an appeal that suspends the effect or the execution of an appealable order or
judgment may be taken, and the security therefor furnished, only within thirty days of any of the following: (1) The
expiration of the delay for applying for a new trial or judgment notwithstanding the verdict, as provided by Article 1974
and Article 1811, if no application has been filed timely. (2) The date of the mailing of notice of the court's refusal to grant
a timely application for a new trial or judgment notwithstanding the verdict, as provided under Article 1914.
B. Whenever one or more parties file motions for a new trial or for judgment notwithstanding the verdict, the delay periods
specified herein commence for all parties at the time they commence for the party whose motion is last to be acted upon by
the trial court.
C. An order of appeal is premature if granted before the court disposes of all timely filed motions for new trial or judgment
notwithstanding the verdict. The order becomes effective upon the denial of such motions.
D. The time within which to take a suspensive appeal under the provisions of this Article is interrupted for all parties upon the
filing of a notice of removal in a district court of the United States, pursuant to the provisions of 28 U.S.C. 1446, and
commences anew on the date the proceeding is remanded.
LA. C.C.P. Art. 2124. Security to be furnished for an appeal

A. No security is required for a devolutive appeal.
B. The security to be furnished for a suspensive appeal is determined in accordance with the following rules:(1) When the
judgment is for a sum of money, the amount of the security shall be equal to the amount of the judgment, including the
interest allowed by the judgment to the date the security is furnished, exclusive of the costs. (2) When the judgment
distributes a fund in custodia legis, only security sufficient to secure the payment of costs is required. (3) In all other cases,
the security shall be fixed by the trial court at an amount sufficient to assure the satisfaction of the judgment, together with
damages for the delay resulting from the suspension of the execution.
C. For good cause shown, the trial judge in the case of the appeal of a money judgment to be secured by a surety bond may
fix the amount of the security at an amount not to exceed one hundred fifty percent of the amount of the judgment,
including the interest allowed by the judgment to the date the security is furnished, exclusive of the costs.
D. A suspensive appeal bond shall provide, in substance, that it is furnished as security that the appellant will prosecute his
appeal, that any judgment against him will be paid or satisfied from the proceeds of the sale of his property, or that
otherwise the surety is liable for the amount of the judgment.
La. C.C.P Art. 2251. Execution only in trial court; appellate court judgment
A judgment can be executed only by a trial court.
A party seeking to execute a judgment of an appellate court must first file a certified copy with the clerk of the trial court. This
filing may be made without prior notice to the adverse party.
La. C. C. P. Art. 2252. Delay before proceeding with execution

A judgment creditor may proceed with the execution of a judgment only after the delay for a suspensive appeal therefrom has
elapsed; however, recordation of a judgment in the mortgage records prior to the lapsing of the delay for a suspensive appeal
does not begin proceedings for the execution of the judgment.
LA. C.C.P. Art. 2254. Execution by sheriff; return; wrongful seizure

A. The sheriff shall proceed promptly to execute the writ and make a return to the clerk who issued it, stating the manner in
which it was executed.
B. Since secured collateral subject to a security interest under Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101,
et seq.) need only be reasonably described in the debtor's security agreement (R.S. 10:9-110), the sheriff shall have no
liability to the debtor or to any third party for wrongful or improper seizure of the debtor's or third party's property of the
same general type as described in the debtor's security agreement. If necessary, the sheriff shall request the secured creditor
to identify the property subject to the security agreement and shall act pursuant to the secured creditor's instructions. The
debtor's and other owner's sole remedy for the wrongful or improper seizure of the property shall be for actual losses
sustained under R.S. 10:9-507(1) against the secured creditor on whose behalf and pursuant to whose instructions the
sheriff may act.
La. C.C. P. Art. 2291. Money judgment; fieri facias
A judgment for the payment of money may be executed by a writ of fieri facias directing the seizure and sale of property of the
judgment debtor.
La. C.C.P. Art. 2292. Privilege of creditor on seized property; successive seizures
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A. To the extent not otherwise governed under Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.), a seizing
creditor, by the mere act of seizure, acquires a privilege on the property seized, which entitles him to a preference over ordinary
creditors.
B. When several seizures of the same property are made by ordinary creditors, the seizing creditors acquire a privilege and are
entitled to a preference among themselves according to the order of their seizures.
La.C.C.P. Art. 2295. Order of sale; sale in globo

If several items of property have been seized, or if one item of property which is divisible into portions has been seized, the
judgment debtor, at any time prior to the first advertisement, may designate the order in which the items or portions of property
will be sold, except that the judgment creditor can direct the sale of property on which he has a mortgage, or a privilege other
than that resulting from the seizure.
If the judgment debtor does not designate the order of sale, the order of sale shall be at the discretion of the sheriff.
When property is offered by items or portions and the total price bid is insufficient to satisfy the judgment, with interest and
costs, or if the judgment debtor so requests, the property shall be offered in globo and thus sold if a higher bid is obtained.
La.C.C.P Art. 2671. Proceeding against surviving spouse in community

When a mortgage, security interest, or privilege has been granted on community property to secure an obligation of the
community, and one of the spouses in community has died subsequently, an executory proceeding to enforce the mortgage,
security agreement, or privilege may be brought against the surviving spouse in community. It shall not be necessary to make
the succession representative, heirs, or legatees of the deceased spouse parties to the proceeding.
La.C.C.P Art. 2672. Proceeding against heirs or legatees

When the original debtor is dead, and his heirs or legatees have accepted his succession, the executory proceeding may be
brought against his heirs or legatees.
If an heir or legatee is dead, incompetent, or absent, his heirs, legatees, succession, or legal representative may be made a party
defendant to the executory proceeding as provided above and in Articles 2673 and 2674, as the case may be.
La.C.C.P. Art. 2673. Proceeding against legal representative

When the property of the original debtor is under the administration of a legal representative, the executory proceeding may be
brought against his legal representative, and no other person need be made a party to the proceeding.
La.C.C.P Art. 2674. Attorney appointed to represent unrepresented defendant

The court shall appoint an attorney at law to represent the unrepresented defendant in an executory proceeding under the
following circumstances:
(1) When the defendant is an absentee;
(2) When the debtor is dead, no succession representative has been appointed, and his heirs and legatees have not been sent into
possession;
(3) When the debtor's property is under the administration of a legal representative, but the latter has died, resigned, or been
removed from office, and no successor thereof has qualified;
(4) When the defendant is a corporation or a partnership upon which process cannot be served for any reason; and
(5) When the defendant is a minor, or a mental incompetent, who has no legal representative at the time of the institution of the
proceeding.
La.C.C.P. Art. 2675. Case falling within application of two or more articles; plaintiff may bring proceeding under any
applicable article
If a case falls within the provisions of two or more of Articles 2671 through 2674, the plaintiff may bring the executory
proceeding under any applicable article.
La.C.C.P. Art. 2701. Alienation of property to third person disregarded

A mortgage or privilege evidenced by authentic act importing a confession of judgment, affecting property sold by the original
debtor or his legal successor to a third person, may be enforced against the property without reference to any sale or alienation
to the third person. The executory proceeding may be brought against the original debtor, his surviving spouse in community,
heirs, legatees, or legal representative, as the case may be. The third person who then owns and is in possession of the property
need not be made a party to the proceeding.
LA. C.C.P. Art. 2702. Rights of third person who has acquired property and assumed indebtedness
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When property sold or otherwise alienated by the original debtor or his legal successor has been seized and is about to be sold
under executory process, a person who has acquired the property and assumed the indebtedness secured by the mortgage or
privilege thereon may:
(1) Pay the balance due on the indebtedness, in principal, interest, attorney's fees, and costs; or
(2) Arrest the seizure and sale on any of the grounds mentioned in Article
2751.
LA. C.C.P. Art. 2703. Rights of third possessor

When property sold or otherwise alienated by the original debtor or his legal successor has been seized and is about to be sold
under executory process, a person who has acquired the property subject to the mortgage or privilege thereon and who has not
assumed the payment of the indebtedness secured thereby may:
(1)Pay the balance due on the indebtedness, in principal, interest, attorney's fees, and costs;
(2)Arrest the seizure and sale on any of the grounds mentioned in Article 2751, or on the ground that the mortgage or privilege
was not recorded, or that the inscription of the recordation thereof had perempted; or,
(3)Intervene in the executory proceeding to assert any claim which he has to the enhanced value of the property due to
improvements placed on the property by him, or by any prior third possessor through whom he claims ownership of the
property. This intervention shall be a summary proceeding initiated by a petition complying with Article 891.
LA. C.C.P. Art. 2781. When judgments may be made executory by other courts
A judgment rendered in a Louisiana court may be made executory in any other Louisiana court of competent jurisdiction, if its
execution has not been and may not be suspended by appeal.
LA. C.C.P. Art. 2782. Procedure; execution of executory judgment

A creditor wishing to have a judgment of a Louisiana court made executory, as provided in Article 2781, may file an ex parte
petition complying with Article 891, with a certified copy of the judgment annexed, praying that the judgment be made
executory. The court shall immediately render and sign its judgment making the judgment of the other Louisiana court
executory.
The judgment thus made executory may be executed or enforced immediately as if it had been a judgment of that court
rendered in an ordinary proceeding.
LA. C.C.P. Art. 2783. Injunction to arrest execution of judgment made executory
The execution of a judgment made executory under the provisions of Article 2782 may be arrested by injunction if the
judgment is extinguished, prescribed, or is otherwise legally unenforceable. No temporary restraining order or a preliminary
writ of injunction may be issued, however, unless the applicant therefor furnishes security as provided in Article 3610.
LA. C.C.P. Art. 3721. Methods of enforcing mortgage

A conventional mortgage is enforced by ordinary or executory proceedings.
La.C.C.P. Art. 3722. Enforcement by ordinary proceeding

When the mortgagee enforces a conventional mortgage by an ordinary proceeding, he must first obtain a judgment against the
mortgagor and then execute the judgment. If it is not possible to obtain a personal judgment against the mortgagor, then the
judgment shall be in rem.
LA. C.C.P. Art. 3723. Enforcement by executory proceeding

When the mortgagee enforces a conventional mortgage by an executory proceeding, he must comply with Articles 2631
through 2724.
La. C.C.P. Art. 3741. Right of enforcement

A legal mortgage, after judgment on the original obligation has been obtained, a judicial mortgage, or a conventional mortgage
may be enforced without reference to any alienation or transfer of the mortgaged property from the original debtor, and the
creditor may cause the property to be seized and sold as though it were still owned by the original debtor and in his possession.
La.C.C.P. Art. 3742. Notice of seizure

When property subject to a legal or a judicial mortgage is no longer owned by the original debtor, the seizing creditor shall
cause notices of the seizure to be served by the sheriff upon both the original debtor and the present owner.
La.C.C.P. Art. 3743. Rights of third possessor
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When property subject to a legal or a judicial mortgage is seized to enforce the mortgage, or is about to be seized for this
purpose, and the property is no longer owned by the original debtor, the third possessor has the following rights:
(1) To arrest the seizure, or threatened seizure, and consequent judicial sale of the property by injunction on the grounds that
the mortgage was not recorded, that the inscription of its recordation had perempted, or that the debt secured by the mortgage is
prescribed or extinguished, or to plead discussion as provided in Articles 5154 and 5155; and
(2) All of the rights granted a third possessor under Article 2703 (1) and (3).
LA. C.C.P. Art. 4061. Natural tutor; general obligations

Before a natural tutor enters upon the performance of his official duties, he must take an oath to discharge faithfully the duties
of his office, cause an inventory to be taken or a detailed descriptive list to be prepared, and cause a legal mortgage in favor of
the minor to be inscribed, or furnish security, in the manner provided by law.
LA. C.C.P. Art. 4101. Inventory and appraisement or descriptive list

A. When any person applies to be appointed as tutor, the court shall order either the taking of an inventory and an appraisal of
the minor's property or the preparation of a detailed descriptive list of his property in accordance with Article 4462.
B. If an inventory is ordered, it shall be begun not later than ten days after the order is signed. The court shall appoint a notary
of each parish in which property of the minor has a situs to take the inventory of such property in that parish.
LA. C.C.P. Art. 4102. Procedure for inventory; proces verbal; return
In so far as applicable, Articles 3131 through 3134 shall govern the procedure for the taking of the inventory, proces verbal,
and the return and effect of the proces verbal.
LA. C.C.P. Art. 4131. Amount

A. The person appointed tutor, except the natural tutor, shall furnish security for the faithful performance of his duties in an
amount equal to the total value of the minor's movable property as shown by the inventory or detailed descriptive list, plus
such additional sum as the court may consider sufficient to cover any loss or damage which may be caused by the bad
administration of the tutor.
B. Upon proper showing that the security required is substantially in excess of that needed for the protection of the minor, the
court may fix the security at any amount which it considers sufficient for the protection of the minor.
C. The court may order the security to be increased or diminished at any time as the movable property may increase or
diminish in value, or for other circumstances which the court may consider proper.
D. When the only asset of the minor is a contested claim for damages, the court may postpone the furnishing of security until
the claim is recovered, at which time the tutor shall provide security as required by this Article.
LA. C.C.P. Art. 4132. Nature of security

A. The security required by Article 4131 shall be in the form of a bond, to be approved by the court, and secured by: (1) A
surety company authorized to do business in this state; (2) Bonds of this state or of any political subdivision or any
municipality thereof, or of the United States, or certificates of deposit in any bank, savings bank, or trust company
chartered under the laws of Louisiana or National Banking Association domiciled in this state and insured by the Federal
Deposit Insurance Corporation, or shares of any building or loan or homestead association domiciled in this state and
insured by an agency of the United States, in an amount at par value equal at least to the amount of the security required;
or (3) No less than two personal sureties signing in solido who are residents of this state and who each have unencumbered
property located in this state in an amount amply sufficient to secure the amount of the bonds notwithstanding the
provisions of Civil Code Article 3042 or any other law to the contrary.
B. Bonds or homestead shares or certificates of deposit of a bank posted as security shall be deposited for safekeeping with
the clerk of court or in a bank or other recognized depository as directed by the court, and may not be withdrawn without
an order of court. The form of the act under which such bonds or shares are given in security shall be substantially that of a
bond, in which the principal binds himself and declares that instead of furnishing sureties, he deposits, as directed by the
court, such bonds or shares to be subject to any claim the minor may have.
C. Insured homestead shares or certificates of deposit of a bank may not be furnished as security in excess of the amount
insured.
D. The bond shall not be recorded in the mortgage records nor operate as a mortgage.
LA. C.C.P. Art. 4133. Special mortgage instead of bond

Instead of the security required by Articles 4131 and 4132, the tutor may furnish a special mortgage in favor of the minor on
immovable property otherwise unencumbered. The mortgage shall be for the same amount as the security required by Article
4131 and shall be approved by the court as provided in Article 4271. The costs occasioned by the furnishing of a special
mortgage shall be borne by the tutor.
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LA. C.C.P. Art. 4134. Natural tutor; bond; recordation of certificate of inventory or detailed descriptive list
A. Except as provided in Article 4135, a natural tutor shall not be required to furnish bond, but shall record in the mortgage
records of the parish of his domicile a certificate of the clerk setting forth the total value of the minor's property according
to the inventory or detailed descriptive list filed in the tutorship proceeding. A certificate of the recorder of mortgages
setting forth the recordation of the clerk's certificate shall be filed in the tutorship proceedings before the tutor is appointed
or letters of tutorship are issued.
B. Within thirty days after his appointment, the natural tutor shall cause the clerk's certificate to be recorded in the mortgage
records of every other parish in the state in which he owns immovable property.
C. The recordation operates as a legal mortgage in favor of the minor on all the immovable property of the tutor situated
within any parish where recorded.
LA. C.C.P. Art. 4135. Security instead of legal mortgage

Instead of the legal mortgage provided in Article 4134, a natural tutor may furnish bond in the amount provided by Article
4131 and of the nature provided by Article 4132, or a special mortgage as provided in Article 4133.
If the court determines that the legal mortgage will not be sufficient protection for the minor, and that substantial loss to the
minor may result unless a bond is furnished, the court may order that the natural tutor furnish a bond or a special mortgage
instead of the legal mortgage.
LA. C.C.P. Art. 4136. Substitution of one kind of security for another
Any tutor who desires to give bond or security and thus release from an existing general or special mortgage the whole or a
portion of the property covered thereby may do so with the approval of the court as provided in Article 4271, provided the
bond or security tendered fully protects the minor.
Any of the securities enumerated in Articles 4132 and 4133 may be substituted at any time either in whole or in part for any
other kind, at the option of the tutor, and with the approval of the court as provided in Article 4271, which shall enter the
necessary orders to render the substitutions effective. If other security has been furnished instead of a general mortgage, the
tutor may not revert to a general mortgage.
When a bond or security is substituted only in part for the general or special mortgage, the amount thereof may be
proportionately smaller based on the value of the property to be released from mortgage.
LA. C.C.P. Art. 4361. Adjudication of minor's interest to parent co-owner

The parent of a minor who owns property in common with him may obtain a judgment adjudicating the share of the minor
either in all of the property or any part thereof to the parent at a price fixed under oath by experts appointed by the court. The
adjudication may be made even though there are other co- owners. The proposed adjudication must be approved by the court
after compliance with Article 4271.
Art. 4362. Recordation of judgment; mortgage in favor of minor

A judgment adjudicating immovable property shall be effective only after it is recorded in the mortgage records of the parish
where the property is situated. The recordation shall operate as a mortgage and vendor's privilege against the property
adjudicated in favor of the minor, for the price of the adjudication.
LA. C.C.P. Art. 4363. Security instead of mortgage

Instead of the mortgage provided in Article 4362, the parent may furnish security as provided in Article 4132 or a special
mortgage as provided in Article 4133. The amount of the security or special mortgage shall be equal to the price of the
adjudication.
LA. C.C.P. Art. 5151. Discussion defined

Discussion is the right of a secondary obligor to compel the creditor to enforce the obligation against the property of the
primary obligor or, if the obligation is a legal or judicial mortgage, against other property affected thereby, before enforcing it
against the property of the secondary obligor.
LA. C.C.P. Art. 5152. Surety's right to plead

When a surety is sued by the creditor on the suretyship obligation, the surety may plead discussion to compel the creditor to
obtain and execute a judgment against the principal before executing a judgment against the surety.
Discussion may not be pleaded by a surety who is obligated solidarily with the principal, or who has renounced the benefit of
discussion.
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LA. C.C.P. Art. 5153. Transferee in revocatory action; right to plead discussion
When a revocatory action is brought by a creditor to set aside a transfer of property made by his debtor, the transferee may
plead discussion to compel the creditor to obtain and execute a judgment against the debtor before setting the transfer aside.
LA. C.C.P. Art. 5154. Third possessor's right to plead

When a legal or judicial mortgage securing an indebtedness due by a former owner of property is sought to be enforced against
the property after its acquisition by a third possessor, the latter may plead discussion to compel the mortgagee to enforce the
mortgage against other property affected thereby, which is owned by the mortgagor, or which has been acquired from the
mortgagor by a third person after the third possessor acquired his property.
LA. C.C.P. Art. 5155. Pleading discussion

A third possessor may plead discussion in an injunction suit to restrain the enforcement of a legal or judicial mortgage against
his property. Discussion may be pleaded by a surety or transferee in a revocatory action only in the dilatory exception.
In pleading discussion, the secondary obligor shall: (1) Point out by a description sufficient to identify it, property in the state
belonging to the primary obligor, or otherwise subject to discussion, which is not in litigation, is not exempt from seizure, is
free of mortgages and privileges, and is worth more than the total amount of the judgment or mortgage; and (2) Deposit into
the registry of the court, for the use of the creditor, an amount sufficient to defray the costs of executing the judgment or
enforcing the mortgage against the property discussed.
LA. C.C.P. Art. 5156. Effect of discussion

When discussion is pleaded successfully by a third possessor, or by the transferee in a revocatory action, the court shall stay
proceedings against the third possessor or transferee until the creditor has executed his judgment against the property
discussed.
When discussion is pleaded successfully by a surety and the principal is joined, the court may render judgment against both the
principal and the surety, but shall order the creditor to execute his judgment against the property discussed. If the principal is
not joined in the action initially,
the court shall order his joinder if he is subject to its jurisdiction, and may then proceed as provided in this paragraph.
If the creditor is not able to satisfy his judgment out of the proceeds of the judicial sale of the property discussed, he may
thereafter proceed as if discussion had not been pleaded.
LSA-R.S.9:5501. Affidavit of distinction; acknowledgment; contents; damages

A. (1) An owner of immovable property with a name similar to that of a debtor against whom a judgment has been obtained
and recorded may execute an affidavit of distinction before a notary public or before any authorized employee of the clerk
of court's office on a form provided by the clerk of court to clarify that he is not the same person as named in the judgment.
The affidavit shall be duly recorded and thereafter the judgment shall not affect title to any property the person may own or
acquire. (2) The notary public or clerk of court or any employee of the clerk shall be immune from civil or criminal
liability as a result of providing the affidavit, assisting in the completion of the affidavit, or recording of the affidavit form
as prescribed in R.S. 9:5501.1.
B. The judgment creditor shall sign the acknowledgment in the affidavit of distinction as provided in R.S. 9:5501.1 within ten
days after the date of receipt of the affidavit, after ascertaining that the affiant is not the debtor named in the judgment. The
judgment creditor shall be liable for any damages, attorney fees, and expenses arising out of his failure to sign the
acknowledgment without good cause. The affiant shall be liable for any damages, attorney fees, and expenses occasioned
by a fraudulently executed affidavit of distinction.
C. The procedure established in this Section for executing an affidavit of distinction shall not be the exclusive means of
clarifying that an owner of immovable property with a name similar to that of a judgment debtor is not the same person as
such judgment debtor.
LSA-R.S.9:5502. Judicial mortgages; effect of revival of judgment upon reinscription; cancellation for failure to revive
A. The filing of a notice of reinscription of a judicial mortgage pursuant to the provisions of Civil Code Article 3334
continues the effect of the mortgage without the necessity of filing a judgment reviving the original judgment creating the
mortgage.
B. The recorder shall cancel and erase from his records a judicial mortgage created by the filing of a judgment of a court of
this state that has been reinscribed, upon the written request of any person to which is attached a certificate from the clerk
of the court rendering the judgment that no suit has been filed for its revival within the time required by Article 3501 of the
Civil Code or of a certified copy of a final judgment of the court rejecting the demands of the plaintiff in a suit to revive
the judgment.
LSA-R.S.9:5503. Affidavit of identity; content; effect; penalty for falsifying

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A. If the judgment creditor cannot be located or does not comply with R.S. 9:5501, any person may execute before a notary
public or any authorized employee of the clerk's office on a form provided by the clerk of court and file for record in the
office of clerk of court or the office of the recorder of mortgages an affidavit of identity as set forth in R.S. 9:5501.1 to
establish that he is not the same person identified as the debtor in one or more recorded judgments, liens, privileges,
mortgages, or other such documents.
B. The affiant shall mail a copy of the affidavit to each judgment creditor listed in the affidavit at his last known address by
registered mail. The clerk of court or recorder of mortgages shall not record the affidavit unless the affiant can show proof
of mailing.
C. The intentional falsification of information by the affiant in an affidavit of identity filed in the office of a recorder of
mortgages constitutes the crime of injuring public records. The affiant shall also be liable for any damages, attorney fees,
and expenses occasioned by a fraudulently executed affidavit of identity.
D. The procedure established in this Section for executing the affidavit of identity shall not be the exclusive means of
clarifying that an individual with a name similar to that of a judgment debtor is not the same person as such judgment
debtor.
E. The clerk of court or recorder of mortgages may not charge more than eighteen dollars to prepare and record the first page
of the affidavit filed by a single affiant including the acknowledgment returned by those judgment creditors designated by
the affiant, executed pursuant to R.S. 9:5501 or this Section, plus six dollars for each subsequent page, and three dollars
for each name after the first name that is required to be indexed.
LSA-R.S. 13:4204 United States courts; recorded judgments as judicial mortgages

All judgments rendered by United States courts of original jurisdiction in Louisiana, or those registered in accordance with 28
U.S.C. 1963, when recorded in the mortgage records of any parish shall rank as judicial mortgages against all of the
immovable property of the judgment debtor situated in the parish to the same extent and effect given by Louisiana law to the
recorded judgments of the courts of this state.
LSA-R.S. 13:4205 Same; recordation fees

The same fees allowed by law for the recordation of state judgments shall apply to judgments of the United States Courts.
LSA-R.S.13:4241. Definition
In this Part "foreign judgment" means any judgment, decree, or order of a court of the United States or of any other court which
is entitled to full faith and credit in this state.
LSA-R.S.13:4242. Filing and status of foreign judgments

A copy of any foreign judgment authenticated in accordance with an act of congress or the statutes of this state may be annexed
to and filed with an ex parte petition complying with Code of Civil Procedure Article 891 and praying that the judgment be
made executory in a court of this state. The foreign judgment shall be treated in the same manner as a judgment of a court of
this state. It shall have the same effect and be subject to the same procedures, and defenses, for reopening, vacating, or staying
as a judgment of a court of this state and may be enforced in the same manner
LSA-R.S.13:4243. Notice of filing

A. At the time of the filing of the petition and foreign judgment, the judgment creditor shall file with the court an affidavit
setting forth the name and last known address of the judgment debtor and the judgment creditor.
B. Promptly upon the filing of the petition, the foreign judgment, and the affidavit, the clerk shall send a notice by certified
mail to the judgment debtor at the address given and shall make a note of the mailing in the record. The notice shall
include the name and address of the judgment creditor and his attorney, if any. In addition, the judgment creditor may mail
a notice of the filing to the judgment debtor and may file proof of mailing with the clerk. Failure to mail notice of filing by
the clerk shall not affect the enforcement proceedings if proof of mailing by the judgment creditor has been filed. In cases
where the petitioner is seeking to enforce the provisions of a protective order as referred to in R.S. 46:2136 or Children's
Code Article 1570, the address of the petitioner may remain confidential with the court.
C. No execution or other process for enforcement of a foreign judgment filed hereunder shall issue until thirty days after the
mailing of the notice of the filing of the foreign judgment.
LSA-R.S.13:4244. Stay
A. If the judgment debtor proves on contradictory motion that an appeal from the foreign judgment is pending or will be
taken, or that a stay of execution has been granted, the court shall stay enforcement of the foreign judgment until the
appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated, upon proof that the
judgment debtor has furnished the security for the satisfaction of the judgment required by the state in which it was
rendered.
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B. If the judgment debtor proves on contradictory motion any ground upon which the execution of a judgment of a court of
this state would be stayed, the court shall stay enforcement of the foreign judgment upon requiring security for satisfaction
of the judgment as is required in this state.
LSA-R.S. 13:4245 Fees

Fees for filing and enforcing a foreign judgment shall be as provided by law.
LSA-R.S. 13:4246 Optional procedure
The right of a judgment creditor to bring an action to enforce the judgment under Article 2541 of the Code of Civil Procedure
is preserved.
LSA-R.S. 13:4359 Portion of price to be paid on adjudication

In all judicial sales when the terms of the sale are not fixed in the writ, judgment, or order of sale, before the advertisement the
party provoking the sale may instruct the officer conducting the sale as to what portion of the purchase price is to be paid at the
moment of adjudication. In default of such instruction, the officer may fix the amount, which in no case shall be less than ten
per cent. The portion of the purchase price to be paid at the adjudication shall be stated in the advertisement.
LSA-R.S.13:4363. Appointment of appraisers

A. Not less than seven days, exclusive of holidays, before the sale of seized property, the sheriff shall serve written notice on
the debtor and on the seizing creditor, in the manner provided for the service of a citation, directing each to name an
appraiser to value the property and to notify the sheriff of his appointment prior to the time stated in the notice, which shall
be at least four days, exclusive of holidays, prior to the time of the sale. The appraisal of the debtor and seizing creditor
shall be made and delivered to the sheriff at least two days, exclusive of holidays, prior to the time of the sale.
B. If there are two or more debtors or seizing creditors and these parties cannot agree as to which should act as or appoint an
appraiser, and in any case where an appraisal is required prior to the judicial sale and which is not otherwise provided for
in this Section, on the ex parte application of the sheriff or of any interested party, the court shall designate the party to act
as or appoint the appraiser, and the notice required by Sub-section A of this Section shall be served on the party so
designated.
To get an executory process one needs to have documents in a certain form. 2635 says note evidencing the obligation
secured by the mortgage. The note is the collateral mortgage note and not the principal obligation which is secured by the
pledge in the collateral mortgage note. But collateral mortgage notes are evidenced by ne varietur stamps. Dont need to
have a note for future advance mortgages to do executory process. But collateral mortgages a note is needed. CMN is
deemed authentic if paraphed for the purposes for executory process.
A certified copy of a collateral mortgage with a confession of judgment. It is necessary only for the plaintiff. 2637
reminds you that certain things dont have to be in authentic form. Hand note are not needed but are evidence of
indebtedness in court of law.
2721 demand can be waived in Buckner so that demand for payment is not needed. Appraisal has been waived of one has
to get.
1092 3rd person knows when to come into court to assert this mortgage or privilege.
3721 Hypothecary action is an old form of foreclosure.
2295 1st Financial Bank can creditor or debtor direct order of sale? The creditor can direct order of sale. The judgment
debtor prior to 1st advertisement can designate order of sale. 1092 is how the procedure works. The except clause that the
judgment creditor can direct the sale of property on which he has a mortgage (judicial, conventional or legal), or a
privilege other than that resulting from the seizure. A right result from seizure is an unsecure creditor executed from a
writ of fieri facias. Debtor wants a document to release the mortgage as he sells the property piecemeal. SO negotiate a
release price upfront. When checking the title on lot 5 you want to make sure the mortgage has been released from the
entire tract. Get the mortgage erased and amend the mortgage to release the tract from the property description otherwise
its indivisible. Create an act of release. If the mortgage is paraphed for identification the holder may be holding the note
that has been paraphed. Debtor should ask the creditor for a ne varietur note back to amend.
Allonge is when note gets filled up with partial releases and when there is no more room to put a ne varietur stamp. An
allonge is an additional sheet of paper and the stamps is put crosswise to cover both sheets and go to the lender with the act
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of partial release and money. Record the partial release but still not done all you can do. Now need to check to see
whether the road has been released because may end up with a landlocked piece of property.
Abstracting Work one gets a base abstract and run it down from the patent to the day the tract was assembled. Having
the base abstract saves a lot of time. Hunter Forest is right the creditor doesnt have to sell in a particular order because
they within the exception of 2295 of code of civil procedure.
Notary is governed under title 35. Christian name, description, street address, marital status (does affect the act if not had).
One of big attacks is that the document is not done in notaries form or a private act duly acknowledged.
Allys Notes:
o A UCC private sale does NOT trigger due process. Its a judicial sale.
o State statutes
o HYPO: One requires notice to the debtor. So if I have a mortgage and (Q sold to Debtor) Debtor
sells property to X who sells it to Y who sells it to Z and each subject to mortgage.
o Four ways to sell property if theres a pre existing mortgage:
Quick claim: not guaranteeing anything (title, anything). Purchaser has no personal
liability.
Cash sale: not telling you anything about title. Purchaser has no personal liability.
Subject-to sale: I am warranting title but Im telling you about a pre-existing mortgage. Im
warning you about this mortgage. This makes the purchaser not responsible.
Sale with assumption: I, as purchaser, am agreeing to buy myself of all terms and
conditions of mortgage and obligation it secures. So if Im assuming a CM, Im assuming
Level 1, too!
Go back to Lesson 16. Paragraphs 3.4-3.5 (p. 327) gives you those rights.
Why do we care? WHO WE MUST NOTIFY BY LA STATUTE is ONLY the named
DEBTOR. Bonner case. But constitutionally, I have to notify everyone else who has
interest in property under 5th amendment. Who would have interest? Current owners and
those with security interests.
o Back to hypo: Z is owner but Creditor takes second mortgage out. Creditor must notify Z. Before
you begin foreclosure, you must do title search. Run it date from my mortgage DOWN in both
mortgage and conveyance records. If you dont give notice, you violate constitutional rights.
o What about other lien and encumberances? What if D bought property from Qdoes Z have to
notify people above him? No. No constitutional notice. As a practical matter, give them notice for 2
reasons: (1) if you dont give them notice, and Im a successful creditor at foreclosure sale, the bank
can foreclose because their mortgage wasnt extinguished! (2) is there really equity in property? I
dont know! (3) Minimum bid at foreclosure sale is 2/3 of the appraised value or superior liens and
encumberances (whichever is greater)Deficiency judgment act (two lessons away).
o Federal statutes:
o What judgments create judicial mortgage? Every state court judgment. What language do you need?
Judgment, name of plaintiff, name of the debtor, amount granted. In collection matters, put last 4 digits of
SSN. If person uses multiple names, give his nicknames. Send it to opposing side and get their comments.
Certify to court that you sent to opposing court, and got comments.
o When you have a judgment from a state appellate court? This can also create judicial mortgage. State
Supreme Court judgment can create judicial mortgage. Dont have to wait for suspensive appeal delays to
file judicial mortgage from trial court judgment. So if D files suspensive appeal, also move to remove any
judgments and have them attach to bond. If I have a judgment in EBR, can record it in ANY parish and create
a judicial mortgage. What about family court judgments? Only family court judgments that can create JM are
those for final judgments and for arrerages for monthly payments.
o What about federal court judgments? If the federal court has original jdx in LA, any federal court judgment
can be recorded in any parish to create judicial mortgage.
o What about out of state judgments? Must be made executory in LAbring separate law suit in LA to make it
executory, then record that executory judgment. Baker case.
o What about out of country judgment? File a brand new lawsuit. Baker case.
o What about out of state federal judgment? Deutsch, 28 USC 1963, and 13:4204.
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o Can you get a judgment against a state for state entity? Yes. Does it create JM? Well, you cant execute on it.
Holly and Smith. How will you get paid then? Convince a legislator to put up a bill to use the state funds to
pay you. This means you have 1 shot every year during legislative session.
o What does a judicial mortgage affect? Only whats susceptible for mortgages. What is susceptible of
mortgages? CC 3286 tells you those things: immovable property, component parts (466-467), usufructs,
servitudes, leases, a lessees rights. JM does NOT affect movables. If you have a judgment, how do you
collect from movables? Writ of FIFA.
o Legal mortgages:
o If youre a curator, you have to record an inventory of minors property in mortgage records. This
recordation creates a legal mortgage. Impacts all property they own and might own. Theyll never
be able to buy a home because no bank will finance them because theres a pre-existing legal
mortgage. It essentially takes out of commerce the Debtors property. This is why every statute that
creates LM that allows Debtor (Tutor/Curator) to put up a bond (legal suretyship) so we will relieve
their property from the LM. If you represents someone as a tutor, you have to tell them about this!
So if I have a judicial mortgage and I record it in EBR and they later have property in Ascension, I dont get that Ascension
land. A judicial mortgage lasts for 10 years. Good against 3rd parties from its DATE (not recordation) for 10 years. Theres a
potential change in law coming. On section of judicial mortgage, he says only way to reinscribe is by recording the judgment
there is a proposed law institute bill that is going to say that the law has always been (not sure this is true) that the only way to
reinscribe a JM on public records is with an act of reinscription. Look at article 3357 and following. 3362. Rubin not sure
judgment creates a mortgage; he thinks judgment evidences obligation. But code a little confused. Rubin uncertain, so doing it
both ways (re-recording judgment, act of revival, and act of reinscription).
Whether you have a judicial mortgage or legal mortgage, you still must give notice. Run title down date of judicial mortgage
(for Mmenonmite notice) and up for those who might prime you.
Why are we giving notice to all of these people?

o Go back to Lesson 16. Can the debtor order a sale of property in a certain fashion? Tract of land: 1 and 2. Creditor A
has mortgage (125K) on both tracts. Can Debtor tell Creditor I want you to foreclose on Tract 2 first? NO. Why?
Not only because EPits because of 2295 of CCP. If several items of property have been seized, or if one item of
property which is divisible into portions has been seized, the judgment debtor, at any time prior to the first
advertisement, may designate the order in which the items or portions of property will be sold, except that the
judgment creditor can direct the sale of property on which he has a mortgage, or a privilege other than that
resulting from the seizure.(FIFA) Every judicial, legal and conventional mortgage is in this bolded category. Debtor
can NEVER order sale for JM, LM, and CM. What if B has second mortgage on Tract 2 (30K) and Tract 1 is worth
$110K and B is owed 10K? B would like to tell A to foreclose Tract 1 first so B would get $$ from Tract 2. CANNOT
DO IT. No marshalling of assets by inferior creditors. Creditor A chooses.
o 3.4-3.7 in materials. If youre current owner, not mortgagor, didnt assume: look at all of your rights! Can pay balance
due to get legal subrogation, enjoin because of non-recordation or preemption, intervene and claim third party
possessor status, bring action in warranty, can claim discussion. If you assume mortgage (youre a party), your rights
are in the materials, too.
Bank of Benton v. Keith Howard Real Estate: Keith Howard sold lots to a corporation, which executed a promissory to the
them, which created a vendor's lien. Keith Howard executed a promissory note in favor of Bank of Benton in exchange for a
loan. As security, Keith Howard executed a collateral pledge agreement pledging the corporation's promissory note and secured
by the vendor's lien. The pledge agreement was never recorded. The corporation sold the lots to individuals, and obtained
partial releases of the vendor's liens. Keith Howard received money from the partial releases, and defaulted on the note to Bank
of Benton. Bank of Benton sought a declaratory action against Keith Howards individual buyers of the lots, the United States
as holder of their mortgages under the Farmers Home Administration, and Keith Howard company. HELD: under LA law,
Keith Howards note to the bank was null and void as against third parties because it affected immovable property and had not
been recorded as required by the state recordation statute. An unrecorded pledge of promissory note secured by vendors lien
on real property is void under LA PRD, except as bw pledger and pledgee. Point: you can rely on the absence of documents
from the public records. IF it isnt there, it is like the document (and the bank it secured) never existedas to third parties. The
effect only exists as bw the parties.
First Financial Bank v. Hunter Forest Ltd. : Mortgagee-Bank foreclosed by executory process under special mortgage
affecting tract containing over 115 condominiums, lots, and parcels of land. Mortgagor-Partnership moved for, and obtained,
order designating that each condominium, lot and parcel be sold individually rather than in globo and bank moved court to
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rescind its order of sale. TC denied bank's motion, and bank appealed. LASC 1) mortgagor was not entitled to designate which
items and what order the items were to be sold even though property seized under the mortgage was divided or divisible, since
statute permitting this is not applicable to executory proceedings.
Art. 2295 is not applicable to executory proceedings. Executory proceedings are those which are used to effect the seizure and
sale of property, without previous citation and judgment, to enforce a mortgage or privilege thereon evidenced by an authentic
act importing a confession of judgment, and in other cases allowed by law. When a person seeking to enforce a mortgage or
property in an executory proceeding files a petition therefor, praying for the seizure and sale of the property affected by the
mortgage, and submitting the exhibits required by law and the plaintiff is entitled thereto, the court shall order the issuance of a
writ of seizure to seize and sell the property affected by the mortgage or privilege, as prayed for and according to law.
La.C.C.P. art. 2638.
The express provision by article 2724 that certain articles relating to sales under fieri facias shall be applicable to executory
proceedings strongly implies that the other articles on execution of judgments do not govern sales by executory process. This
implication is reinforced in the case of articles 2295 and 2296 by the language of the articles and their function of regulating
otherwise unfocused seizures and sales.
A writ of fieri facias may be issued for the payment of a money judgment directing the seizure and sale of the property of the
debtor which may be found in the parish. La.C.C.P. art. 2291. Unlike a writ of seizure and sale under executory process, it may
not be issued before judgment and its operation is not restricted to property affected by a mortgage or privilege. For this reason,
articles 2295 and 2296 permit a judgment debtor to designate the order in which the items or portions of his property will be
sold and to obtain the release of items or portions seized that are not reasonably necessary to satisfy the judgment, with the
exception of property on which the judgment creditor has a mortgage or privilege other than that resulting from the seizure.
Apparently, the legislature did not see fit to make articles 2295 and 2296 applicable to executory proceedings because the risk
of an excessive seizure or unreasonable order of sale therein is limited in that an executory proceeding usually is confined to
the enforcement of a specific mortgage or privilege
Notes: Prof thinks J. Dennis got it right, but not the analysis. He thinks the plain language of 2295 get us there on its face for
both ordinary and executory process (and the judgment creditor gets to direct the order of sale).
Southern Casualty Co. v Ross et al:

May 1919: Ross purchased property and for credit part of purchase price executed a note for $10K, secured by mortgage and
vendors lien.
March 1927: Ross made a continuing guarantee to Southern Casualty to guarantee the obligations of NOLA Underwriters
Agency (to whom he was indebted). To further secure the obligations of NOLA, he issued a note for $17.5K secured by a
mortgage. Southern Casualty was aware this was a 2nd mortgage.
June 1929: Ross refinanced the first note. No lender would buy the note, but agreed to make him a new loan for same amount,
secured by a mortgage. So Ross executed a series of notes equaling $10K and an act of mortgage to secure these notes. This
mortgage was recorded June 6. The company checked the public records (applied for a mortgage certificate) and the mortgage
to Southern Casualty was not shown. Why? Bc the mortgage was not entered on the index card!! So this company had NO
IDEA about the 2nd mortgage and Ross did not tell them about it.
June 26, 1929: the first note was paid, and the lender marked the note paid and surrendered it.
June 29: act of cancellation of the mortgage for first loan
July 15: inscription of the mortgage was cancelled.
Court says:
Since the first note was cancelled, the March 1927 mortgage in favor of Southern Casualty became the first mortgage on the
property. Southern Casualty filed foreclosure proceedings.
Prof notes: 3 mortgages, all properly recorded. First to record should win. Problem: the Clerk creates an index (takes names of
mortgagor, mortgagee, vendor, vendee). Here, the 3rd mortgagee looked at the indicesTHAT IS NOT the public records!! You
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cannot rely on the index!! So the 3rd mortgagee loses. The document WAS THERE IN THE RECORDSthey just didnt see it
bc they only looked at the indexthey should have looked through the books.
Notes on judicial mortgages (see p. 354): they are general mortgages affecting all of the judgment debtors property in the
parish the judgment is recorded. Thus, there will not be a property description. Instead, you will have a name. Name is critical
the name MUST match the name that the property is recorded under. There must be a judge signed judgmentwith the
name of the plaintiff, name of debtor, and a dollar amount. It affects third persons at time of recording. It is effective bw parties
at time of signing by judge. It prescribes 10 years from signature of judge?? (Check on this) It is effective even if there is an
appeal. Attaches only to the debtornot the succession.
LESSON 18. THE EFFECT OF MORTGAGES ON 3RD PERSONS AND 3RD PARTY POSSESSORS
Overview:
If Im third party to a mortgage, I have certain rights. There are third party possessor statutes and cases (Glass). If Im a third
party (havent assumed mortgage), what rights do I have and how do I assert them?
o Rights: I have the right to get value of improvements before the superior creditor gets theirs. Glass.
Executory process is an in rem remedy.
Rubin and Seymour Deficiency Judgment Act.
Also relevant to this lesson: La. Civ. Code 3307-3314, 3338-3343, 3366-3368, La.C.C.P. 2701-2703, 3721-3743, La.R.S.
9:5384
La. C.C. Art. 3315. 3rd possessor defined

A third possessor is one who acquires mortgaged property and who is not personally bound for the obligation the mortgage
secures.
La. C.C. Art. 3316. Liability of third possessor

The deteriorations, which proceed from the deed or neglect of the third possessor to the prejudice of the creditors who have a
privilege or a mortgage, give rise against the former to an action of indemnification.
La. C.C. Art. 3317. Rights of 3rd possessor

A third possessor who performs the obligation secured by the mortgage is subrogated to the rights of the obligee. In such a
case, the mortgage is not extinguished by confusion as to other mortgages, privileges, or charges burdening the mortgaged
property when the third possessor acquired the mortgaged property and for which he is not personally bound.
La. C.C. Art. 3318. Right of 3rd possessor for costs of improvements. (Incorporates Glass v. Ives in comments)
A third possessor may recover the cost of any improvements he has made to the property to the extent the improvements have
enhanced the value of the property, out of the proceeds realized from enforcement of the mortgage, after the mortgagee has
received the unenhanced value of the property.
La. C.C. Art. 3506(32). General definitions of terms

Whenever the terms of law, employed in this Code, have not been particularly defined therein, they shall be understood as
follows:
32. Third Persons.--With respect to a contract or judgment, third persons are all who are not parties to it. In case of failure, third
persons are, particularly, those creditors of the debtor who contracted with him without knowledge of the rights which he had
transferred to another.
La.C.C.P. Art. 1091. Third person may intervene

A third person having an interest therein may intervene in a pending action to enforce a right related to or connected with the
object of the pending action against one or more of the parties thereto by:
(1) Joining with plaintiff in demanding the same or similar relief against the defendant;
(2) Uniting with defendant in resisting the plaintiff's demand; or
(3) Opposing both plaintiff and defendant.
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LA. C.C.P. Art. 2751. Grounds for arresting seizure and sale; damages
The defendant in the executory proceeding may arrest the seizure and sale of the property by injunction when the debt secured
by the security interest, mortgage, or privilege is extinguished, or is legally unenforceable, or if the procedure required by law
for an executory proceeding has not been followed.
Prof says: remember that when we are distributing the money, the sheriff and the court get their money FIRSTwithout fail.
Then, if there is no preference, pro ratanot by heads, but by amount owed. If there is preference, we go in the preference
order.
GENERALLY: A mortgages property to bank

A sells to X
A tells X about mortgage
o Sells subject to mortgage: X will be a 3rd PP and X cannot sue A. A is still liable for the debt and if he does
not pay, bank can still seize and X has no recourse against A. We like to say there is no magic language that
will do something, but almost ALWAYSwhen we see Subject to the mortgage, X will be a 3rd PP.
o Assumes mortgage: X becomes personally liable and has no recourse against A
A does not tell X about the mortgage: X is a 3rd PP, but X can sue A for breach of the warranty of title
HYPO: On 1/1/90, S sells to B. Sale w/act of mtg. Note is due 1/1/96. It is today, 10/3/00. Lot 5 is being bought in a
subdivisiona vacant lot. In 1/1/2000 B sells to X cash sale. Theres been a default. Foreclosure proceeding against B and X
has not been notified. X has started developing his dream home. What should X do? Pay off the mortgage and get subrogated.
Intervene in the suit and get value for the improvements he made on the property. Note prescribed in five years. Mortgages
last as to third parties for 10 years after the date of the document, 1/1/00. But resolutory conditions last 10 years from the
maturity which is 1/1/06. Have C.C. 2703 rights. So, C.C.P. 2751, if the mortgage is extinguished but the resolutory condition
is not, or is legally unenforceable, or if the procedure required by law for an executory proceeding has not been followed. X
has a constitutional right to Mennonite notice which says there is a requirement to give notice of sale. There is no statute right
to give X notice of sale. So X can intervene and claim costs.
HYPO: Now the note is due 1/1/06 so mortgage ceases to effect 6 years after maturity in 1/1/12. Now the mortgage is extant.
At the time of the foreclosure, S is owed $100k and the property appraises for $200k. How is X going to intervene? C.C.P.
1092, X can get a separate appraisement of property and separate sale. Say vacant lot today is worth $110k and the lot with
house is worth $200k. How does the sheriff distribute the proceeds? S gets up to the amount owed on the debt.
Glass v. Ives (1930): FACTS: gives a four-step process by which to distribute the proceeds. Debtor sold the property to Ives,
subject to the judicial mortgage. Judgment creditors are suing to have the purchaser pay the judgments or surrender the
property to be sold to satisfy the judgments. Purchasers cost in replacing parts of the improvements that were damaged by a
fire and insurances on the building were not allowed. (court says he is not entitled to be credited for these improvements twice
merely bc they were partially destroyed by fire). HELD: The owner must intervene and in time to get a separate appraisal to
get value of the lot versus the entire property. The owner must prove his costs. Then the four step process. Court costs come
off the top, then
Plaintiffs judgments totaled $17355.52. In all total due to purchaser was $2960. Property is worth $6K now but was worth
only $1500 before the improvements.
Purchaser concedes he is not entitled to anymore that he spent in improving the property.
Court holds: the net proceeds of the sale, after deducting the court costs should be applied first to the payment of the plaintiffs
judgments, pro rata, to the extent of $1500; the remainder of the proceeds, if there by any, should be applied to the
reimbursement due to Ives, to the extent of $2960, if the remainder amounts to that much, and if it amounts to more than that,
the surplus should be applied pro rata to the payment of the balances still due on the plaintiffs adjustments, and if, by any
chance, the proceeds of the sale should amount to more than enough to pay the plaintiffs judgments in full and to reimburse
the purchaser for improvements, the surplus should go to the owner of the party.
1) Foreclosing creditor gets the lesser of unimproved value or the debt outstanding. If privilege vendor
intervenes they become the foreclosing vendor up here.
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2) Third possessors [owners or the owners mortgage holder] under 3318 get the lesser of costs or enhancement
value.
3) Remainder of monies goes to foreclosing creditor who is still owed.
4) Remainder To the owner or inferior creditors. So the remaining goes to the bank with a 2nd mortgage.
Inferior creditors must intervene and they must prove how much they are owed.
HYPO: X sells to Y. Y grants mortgage A of $100K. Y sells to Z, subject to the mortgage (so he has no liability). Z grants
$60K mortgage B and builds house. Z, to protect his third party interests, needs to get two appraisalsone for the lot, and one
for the improvements. Third party possessor (or the third possessors mortgage holder) gets the lesser of the cost to build OR
improvement appraisal, but NEVER more than is owed to them!!! Alsodont forget that mortgage holder A gets the lot
appraisal amount.
Mtg A Mtg B Sale Lot App. Improv. Build Cost Bank hold Bank hold Remaining
App A B
100000 60000 140000 30000 110000 45000 30000 45000 65000 goes
to bank A
to satisfy
the $70K
left on mtg
Y is still going to be liable for the $5K owed on mortgage A. Z is going to be liable for $15K owed on mortgage B. Alsodo
NOT forget that the sheriff/court gets his money first!
100000 60000 300000 30000 110000 45000 30000 45000 Remaining

is
distributed
A=70000
B=$15000
Z=whatever
is left
Note that the sale proceeds satisfy all amounts owed, so Z and X will not have any personal liability
100K 60K 140K 30K 75K 100K 30K 60Kthis is 15K to Z

the
curveball. B
would
normally get
lesser of
improvement
appraisal OR
cost to build,
but never
more than is
owed. Here,
he would get
75K except
that he is
only owed
60K
Who Is A 3rd Party Possessor? Now suppose, When X built his house he didnt have the money so he took out a future advance
mortgage from lender on 1/3/00. Now we have S, bank as 2nd mortgage holder, lender as 3rd mortgage holder. Where does
lender fall in the four-step process?
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Federal Land Bank of New Orleans v. Cook (1934): FACTS: On October 4, 1922, Louis M. Cook executed a mortgage on
land to Fed Land Bank of NOLA. Then, Cook sold the mortgaged property to Mrs. Mary E. Graves, who sold to Norman.
Norman sold to the Coenens, who sold to Turner. Turner sold to the Richland Planting Company, Inc. Each of the purchasers
expressly assumed and agreed to pay the mortgage in favor of the Federal Land Bank. In 1929, Turner built a residence on the
mortgaged property. In 1930, the Richland Planting Company granted a second mortgage on the property in favor of the
Richland State Bank. Federal Land Bank sued to enforce its against Louis M. Cook by executory process, the original
mortgagor. Richland State Bank, holder of the second mortgage, filed an intervention in the foreclosure proceeding, claiming
the proceeds to be derived from the sale of the residence erected on the property and obtained an ex parte order directing the
sheriff to separately appraise and sell the residence.
Discussion: The conventional mortgage, when once established on an immovable, includes all of the improvements which it
may afterwards receive. So it follows that the residence erectedis included in the mortgage.
A vendee who assumes and binds himself to pay mortgages or obligations placed on the property by his vendor thereby
becomes a codebtor with the original obligor.
One who is personally liable for the mortgage debt cannot be considered as a third possessor in the strictest sense of the term. It
is of the essence of third possession, that the possessor, not being liable for the debt, has the faculty of discharging himself by
abandoning the mortgaged premises. But he must either give up the property or discharge the mortgage debt.
Turner, who built the house and his vendee (which granted the 2nd mortgage) specifically assumed and agreed to pay as part of
the purchase price the first mortgage bearing upon the property. The stipulation was made for the benefit of plaintiff, a third
person
Under the stipulation plaintiff has not only acquired the right of exercising its mortgage on the property subject thereto, but also
on enforcing its claim personally against those who assumed and agreed to pay its debt. Where all purchasers assumed and
agreed to pay mortgage on land and one of them erected residence thereon and gave a second mortgage, all the purchasers were
personally liable for first mortgage debt and none of them were in the position of a third possessor, so as to enable junior
mortgagee to be reimbursed for improvements placed on land. A 3rd possessor who is personally liable to pay the debt is not
entitled to the exceptions which he might otherwise oppose against the creditors hypothecary action and cannot relinquish the
mortgaged property.
Point to take from all this: If you assume the mortgage, you're not a third party possessor. You're a co-debtor and you'll assume
personal liability on the mortgage. But, a person who acquires property subject to a mortgage and who has not assumed the
payment of the indebtedness secured by the mortgage is referred to as a third possessor. So if you see language on the test
"subject to a mortgage" thats third party possessor language. Or if he buys it in a cash sale, hes a third party possessor.
Citizens Bank of LA. v. Miller (1893): FACTS: Citizens Bank owned a mortgage on a plantation given to it by Miller, the
owner at the time. Eventually, the plantation was sold to Excelsior corp, which executed a 2nd mortgage in favor of its vendors.
Citizens Bank foreclosed. Excelsior, as third possessors, claimed a portion of the proceeds of the sale bc they had built
improvements that enhanced the value. HELD: This court decided that the pact de non alienando did not prevent the alienation
of the mortgaged property, its effect only being to permit the mortgage creditor to seize the property in the hands of a third
possessor, by proceedings directed against the original mortgagor, without notice to third possessors, or other preliminary
proceedings required in the ordinary hypothecation, and that a purchaser of property containing this pact was a third possessor
and entitled to claim compensation for his improvements to the extent they have enhanced the value of the mortgage security.
The rule: Property mortgaged with the pact de non alienando stipulated in the act of mortgage, and then sold, and the vendee
mortgages it, and, while in his possession as third possessor, he puts improvements on it, which enhances the value of the
property, the second mortgage creditor, the mortgagee of the third possessor, is entitled to the benefit of this enhanced value to
satisfy his mortgage debt.
Dennis v. Graham (1925): FACTS: 3 persons executed a promissory note in favor of Bullock and to secure the payment
executed a mortgage on each of their lots containing the pact de non alienado. Note was not paid in full at maturity. Bullock
prayed property be seized less portions released from mortgage. W of one of the note makers intervenes alleging she acquired
undivided interest in lot (H used the interest to pay her back for use of her paraphernal funds). She alleges that the
mortgage was executed only for the purpose of securing the debt to Bullock of one of the notemakers and that her husband and
the other notemaker signed the note and executed the mortgage on their respective properties merely as sureties for the
principal debtor (the one notemaker who actually owed Bullock). Lastly, W argues that after she acquired her interest from H,
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Bullock released the mortgage on the property owned by her husband and that this release operated as a release against her
property too, bc it was owned indivision.
Discussion:
As to whether W has cause to complain about the release depends upon whether, on paying the balance, she would be entitled
to be subrogated by operation of law to the rights of Bullock under the mortgage and if she would be whether Bullock was
called upon the preserve intact the mortgage, so that she make payment, subrogation would take place fully as if there had been
no release of a part of the mortgage. In considering these questions, it should be borne in mind that intervener is not a party to
the mortgage, and that she is not bound personally, in any manner whatsoever on the indebtedness secured by it, but is merely
the third possessor of property incumbered with the mortgage.
However, while she is not personally bound on the indebtedness, yet her property is bound for it. As her property is bound for
the indebtedness, she had an interest in paying the indebtedness to save her property from being sold to satisfy it. Because of
that interest the law would subrogate her, in event she should pay the indebtedness, to the rights of the mortgage creditor.
While, therefore, the law would subrogate intervener to the rights of Bullock, should she pay the mortgage, yet the
determination of that question still leaves to be decided whether intervener was discharged from the mortgage by the release of
the property of Thomas F. Dennis from it. Unquestionably, should intervener pay the mortgage, she would not be subrogated to
all of the rights of Bullock as they existed at the time the mortgage was granted, due to the fact that the mortgage has been
canceled as to a part of the property originally hypothecated. But does that fact call for the release of the property owned by
intervener? The law grants to the surety a discharge, when, by the act of the creditor, the subrogation to his rights, mortgages,
and privileges can no longer be operated in favor of the surety.
However, as we have seen, intervener is not a surety, but is merely the third possessor of a part of the property originally
mortgaged. Hence, it may be said that the article cited has no application to her. We know of no law that grants to the third
possessor of a mortgaged property a release of the property hypothecated and owned by him, because the creditor has released
other property secured by the same mortgage, even though, as in this instance, the release was granted, after the third possessor
acquired the property. In our view, the third possessor, in the absence of any law to the contrary, has no right to demand that the
mortgage, as originally granted, be kept intact, as a condition to its continued existence on that part of the property acquired by
him, so that, in the event he should conclude to pay the mortgage, he would be subrogated, on paying it, to the rights of the
creditor, as they existed at the time the mortgage was granted. All that the third possessor may look for, upon making payment,
is to be subrogated to the rights of the mortgage creditor as they exist at the time the payment is made.
Bottom line: Where intervener acquired property from husband, subsequent to its mortgage by him as surety, she was neither a
surety or in privity with mortgagee, but a third party possessor, and was not entitled to have property released from such
mortgage because mortgage creditor released property of other surety covered by same mortgage.
Is the current owner a 3rd party possessor as to the foreclosing creditor? Must find this step to get under 3318. If the
answer is yes then go into third party possessor analysis. If third party possessor holds a mortgage then X may assert the
rights of a 3rd party possessor because the mortgage attaches to the immovable. He only gets to do this if X is a 3 rd party
possessor to the foreclosing creditor. C.C.P. 3506(2) says 9:2721 talks about affect on 3rd person. C.C.P. 2703 says
buying property subject to a mortgage doesnt mean a person has assumed the payment of the mortgage and thus has no
personal liability for the mortgage but might have an act in warranty against the seller. When one assumes the mortgage it
allows them to remain a third party.
Third party possessor status is obtained when he buys property subject to a mortgage or buys by cash sale.
When one assumes a mortgage they are assuming the principal obligation and because the mortgage is accessory they are
buying that too. It is crucial to ask to see the note which the mortgage is paraphed because the act of assumption is
binding you to all things not on the public record. C.C.P. 2702 is contrast saying if you have paid the mortgage you can
arrest the seizure. Under 2703 one is a 3rd party and thus gets there public record doctrine. Under C.C.P. 2702 one is
personal liability and is not a third party. Look at pages 251 252.
Bonner v. B-W Utilities (1973) (1) when property owned by a 3rd P is secured by an in rem mortgage or is valued in excess of
any secured indebtedness, service of notice of seizure upon the original debtors accomplishes nothing; it is the 3rdP whose
interest ought to be protected, and where his name and address are known to the seizing creditor, it is a denial of due process
not to direct some form of notice of the judicial proceedings to the property owner in addition to general publication, and (2)
even assuming that plaintiff, the mortgagors' transferee, acquiesced in all waivers of rights entered by the transferors as
133
mortgagors, there was no contractual language which would amount to a waiver of notice by plaintiff of judicial proceedings to
seize and sell the property.
Prof says: this case is in here because if inferior creditor or 3rd party is not notified of the sale how are they to know who to pay
off the balance and claim their ownership rights. Failure to give notice results in a void foreclosure. The holding can be
extended to say that if, on the face of the public records there is a 3PP who may have made improvements, the 3PP must have
notice also. This is the reason if you are doing a foreclosure, you need to check both the conveyance records and the mortgage
records!!!
Who are the creditors, recorded rights, when they begin to rank, when does it cease ranking. Then what are the 3rd party
possessor who must be a current owner and a 3rd party possessor as to the foreclosing creditor [remember one can assume
the mortgage]; can anybody claim his 3d party rights by his putting on another mortgage.
A 3rd Possessor Who Learns Of Executory Proceedings Against His Property may:
Pay the balance due on the indebtedness, in principal, interest, attorneys fees and costs;
Arrest the seizure and sale when the debt secured by the mortgage is extinguished, or is legally unenforceable, or if the
procedure required by law for an executory proceeding has not been followed; or on the ground that the mortgage was not
recorded, or that the inscription on the recordation thereof had preempted; or
Intervene in the executory proceeding to assert any claim which he has to the enhanced value of the property due to
improvements placed on the property by him or by any prior 3rd possessor through which he claims ownership of the
property.
Cancellation of Mortgages: 3366-3368 and R.S. 9:5163 deal w/cancellation. In actuality, nothing is ever physically erased
from the records. Cancellation is actually just having the Clerk write/stamp in red across the document in the mortgage book
(not the original) that the mortgage has been cancelled/erased/released (or whole or part), or an act of cancellation is
recorded and indexed.
LESSON 19. THE EFFECT OF MORTGAGES: TRANSFER OF SECURED OBLIGATIONS; MORTGAGE

FORECLOSURE AND DISTRIBUTION OF SALE PROCEEDS
JUDGMENT ACT
Also relevant to this lesson: Art. 1887, 3312-3313.
LSA-C.C. Art. 1821 Assumption by agreement between obligor and third person
An obligor and a third person may agree to an assumption by the latter of an obligation of the former. To be enforceable by the
obligee against the third person, the agreement must be made in writing.
The obligee's consent to the agreement does not effect a release of the obligor.
The unreleased obligor remains solidarily bound with the third person.
La. C.C. Art. 1822. Third person bound for amount assumed
A person who, by agreement with the obligor, assumes the obligation of the latter is bound only to the extent of his assumption.
The assuming obligor may raise any defense based on the contract by which the assumption was made.
La.C.C. Art. 1823. Assumption by agreement between obligee and third person
An obligee and a third person may agree on an assumption by the latter of an obligation owed by another to the former. That
agreement must be made in writing. That agreement does not effect a release of the original obligor.
La. C.C. Art. 1824. Defenses

A person who, by agreement with the obligee, has assumed another's obligation may not raise against the obligee any defense
based on the relationship between the assuming obligor and the original obligor.
The assuming obligor may raise any defense based on the relationship between the original obligor and obligee. He may not
invoke compensation based on an obligation owed by the obligee to the original obligor.
LA. C.C.P. Art. 2331. Publication of notice of sale

Notice of the sale of property under a writ of fieri facias shall be published at least once for movable property, and at least
twice for immovable property, in the manner provided by law. The court may order additional publications.
The sheriff shall not order the advertisement of the sale of the property seized until three days, exclusive of holidays, have
elapsed after service on the judgment debtor of the notice of seizure, as provided in Article 2293.
2331 start of publication of sale.
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LA. C.C.P. Art. 2332. Appraisal

The property seized must be appraised according to law prior to the sale. However, there is no requirement that collateral
subject to a security interest under Chapter 9 of the Louisiana Commercial Laws be appraised prior to the sale.
2332 UCC has its own commercially reasonable rule. Every privilege, judicial and legal mortgages fall under the auspices
of this rule.
LA. C.C.P. Art. 2333. Sale of perishable property

The court, at the request of a party, may order the immediate sale at public auction, without advertisement or appraisement, of
property that is perishable and subject to loss or deterioration pending compliance with the usual formalities. Notice of the time
and place of the sale shall be given to all parties. The property shall be sold for cash to the highest bidder.
LA. C.C.P. Art. 2334. Reading of advertisement and certificates

At the time and place designated for the sale, the sheriff shall read aloud the advertisement describing the property, and shall
read aloud a mortgage certificate and any other certificate required by law.
2334 sheriff must read allow a mortgage certificate which is not worth the paper its written on. Sheriff runs a certificate in
the name of the current owner.
LA. C.C.P. Art. 2335. Superior mortgage or privilege

The sheriff shall announce that the property is to be sold for cash subject to any security interest, mortgage, lien, or privilege
thereon superior to that of the seizing creditor.
2335 sheriff shall announce property shall be sold for cash subject to security liens. Bs foreclosure wipes out mortgages
for C, D, and E but not A. The purchaser becomes a 3rd party possessor who gets the rights under Glass v. Ives for property
improvements.
LA. C.C.P. Art. 2336. Minimum price; second offering

The property shall not be sold if the price bid by the highest bidder is less than two-thirds of the appraised value. In that event,
the sheriff shall re- advertise the sale of the property in the same manner as for an original sale, and the same delay must
elapse. At the second offering, the property shall be sold for cash for whatever it will bring, except as provided in Article 2337.
The debt owed to the seizing creditor shall not be reduced by the costs of the sale, but shall be reduced by the greater of either
one-half of the appraised value, less superior security interests, mortgages, liens, and privileges, or the amount by which the
price bid exceeds superior security interests, mortgages, liens, and privileges.
2336 the property will not be sold if the minimum bid is under 2/3 of appraised value. [Old law-- Assume B is a bank
which has a $50k mortgage outstanding on the property and that the property appraises for $300k. The minimum bid is
$200k. If no adverse bidding in the second sale, the minimum bid can be cost and nothing has been applied to the debt.
Debtor cant get credit for costs. So the bank gets the property worth $300k and can still get a deficiency judgment].
LA. C.C.P. Art. 2337. Price insufficient to discharge superior privileges; property not sold
If the price offered by the highest bidder at the first or subsequent offering is not sufficient to discharge the costs of the sale and
the security interests, mortgages, liens, and privileges superior to that of the seizing creditor, the property shall not be sold.
2337 the minimum bid at the 1st sale in an appraisal situation is the greater of 2/3 of the appraised value OR superior liens
and encumbrances. Here the appraisal is $300k, the minimum bid is $200k which is greater than the superior lien to that
of the seizing creditor, $100k. 2336 & 2337 must be applied together. The minimum bid at the 2nd sale is still superior
liens and encumbrances but there is not 2/3 of appraised value limitation. But the foreclosing creditor must give a credit.
Compare costs and superior liens, the greater of the two is the minimum bid, in the case where there is no adverse bidder.
If the minimum bid is cost because there are no superior liens the bank must give the Greater of either of appraised
value [here $150k and it extinguishes the debt].
LA. C.C.P. Art. 2338. Judgment creditor having superior privilege; price insufficient to satisfy inferior mortgage
A. If the security interest, mortgage, lien, or privilege of the seizing creditor is superior to other security interests, mortgages,
liens, and privileges on the property, he may require that the property be sold, even though the price is not sufficient to satisfy
his or the inferior security interests, mortgages, liens, and privileges.
B. If the seizing creditor is not present or represented at the sale, the property shall not be sold for less than the amount
necessary to fully satisfy
his writ plus the costs.
LA. C.C.P. Art. 2339. Judgment debtor and creditor may bid
The judgment debtor and the seizing creditor may bid for the property.
135
LA. C.C.P. Art. 2340. Payment of debt prior to adjudication

The sale of the property may be prevented at any time prior to the adjudication by payment to the sheriff of the judgment, with
interest and costs.
LA. C.C.P. Art. 2341. Sale when installment not due

When the seizing creditor has a security interest, mortgage, lien, or privilege on the property seized, for a debt of which all the
installments are not due, he may demand that the property be sold for the entire debt, on the same terms for the payment of
unmatured installments as provided in the original contract.
LA. C.C.P. Art. 2342. Act of sale by sheriff

Within fifteen days after the adjudication, the sheriff shall pass an act of sale to the purchaser, in the manner and form provided
by law.
The act of sale adds nothing to the force and effect of the adjudication, but is only intended to afford proof of it.
LA. C.C.P. Art. 2343. Sheriff's return after sale

The sheriff shall make a signed return to the clerk who issued the writ, showing that all formalities have been complied with
and stating the manner in which the writ was executed, a description of the property sold, the name of the purchaser, the
purchase price, and the disposition thereof.
LA. C.C.P. Art. 2374

. Property subject to superior mortgage; payment of price
If there is a security interest, mortgage, lien, or privilege on the property superior to that of the seizing creditor, the purchaser
shall pay to the sheriff only that portion of the sale price which exceeds the amount of the superior security interest, mortgage,
lien, or privilege.
LA. C.C.P. Art. 2375. Purchaser's liability; property subject to inferior mortgages
The purchaser is liable for nothing beyond the purchase price. He shall pay the full purchase price to the sheriff, despite the
existence of a mortgage, lien, or privilege on the property inferior to that of the seizing creditor.
LSA-C.C.P. Art. 2376 Release of inferior mortgages

The sheriff shall give the purchaser a release from the security interest, mortgage, lien, or privilege of the seizing creditor, and
from all inferior security interests, mortgages, liens, and privileges, and he shall direct the recorder of mortgages or proper
filing officer to cancel their inscriptions in so far as they affect the property sold.
LA. C.C.P. Art. 2377. Inferior mortgages; payment; reference to proceeds

The sheriff shall pay the inferior security interests, mortgages, liens, and privileges, after payment of the costs and the amount
due the seizing creditor. When the sum remaining after payment of the costs and the amount due the seizing creditor is
insufficient to pay such inferior claims in full, the sheriff may deposit the remainder with the court and proceed by
contradictory motion against the inferior creditors to have their claims referred to the proceeds of the sale.
LA. C.C.P. 2771. When deficiency judgment obtainable

Unless otherwise provided by law, the creditor may obtain a judgment against the debtor for any deficiency due on the debt
after the distribution of the proceeds of the judicial sale only if the property has been sold under the executory proceeding after
appraisal in accordance with the provisions of Article 2723.
LA. C.C.P. Art. 2772. Procedure to obtain deficiency judgment

A creditor may obtain a deficiency judgment against the debtor either by converting the executory proceeding into an ordinary
proceeding as provided in Article 2644, or by a separate suit. In either case, the defendant must be cited, and all of the delays
and formalities required in ordinary proceedings must be observed.
LSA-C.C.P. Art. 2781 When judgments may be made executory by other courts
A judgment rendered in a Louisiana court may be made executory in any other Louisiana court of competent jurisdiction, if its
execution has not been and may not be suspended by appeal.
LSA-C.C.P. Art. 2782 Procedure; execution of executory judgment

A creditor wishing to have a judgment of a Louisiana court made executory, as provided in Article 2781, may file an ex parte
petition complying with Article 891, with a certified copy of the judgment annexed, praying that the judgment be made
136
executory. The court shall immediately render and sign its judgment making the judgment of the other Louisiana court
executory.
The judgment thus made executory may be executed or enforced immediately as if it had been a judgment of that court
rendered in an ordinary proceeding.
LSA-C.C.P. Art. 2783 Injunction to arrest execution of judgment made executory

The execution of a judgment made executory under the provisions of Article 2782 may be arrested by injunction if the
judgment is extinguished, prescribed, or is otherwise legally unenforceable. No temporary restraining order or a preliminary
writ of injunction may be issued, however, unless the applicant therefor furnishes security as provided in Article 3610.
LSA-R.S. 13:4102. Executory process; bearer paper, movable or immovable property, authentic evidence; certification
of documents
A. Whenever the holder of bearer paper, such as a note, bond, or other instrument evidencing an obligation secured by a
mortgage or privilege on movable or immovable property, seeks to foreclose by executory process, all requirements for
authentic evidence regarding the transfer, assignment, pledge, or negotiation shall be inapplicable, provided that all other
requirements for authentic evidence have been satisfied.
B. Whenever the holder of a note, bond, or other instrument evidencing an obligation secured by a mortgage or privilege on
movable property seeks to foreclose by executory process, the transfer, assignment, pledge, or negotiation of such
document by private act, duly acknowledged in any manner provided by law, shall be deemed to be authentic evidence and
in compliance with Code of Civil Procedure Article 2636.
C. Whenever the holder of a note, bond, or other instrument evidencing an obligation secured by a mortgage or privilege on
movable property approves the sale of the property from one person to another, such approval may be made by private act,
duly acknowledged in any manner provided by law, and shall be deemed to be authentic evidence and in compliance with
Code of Civil Procedure Article 2636.
D. (1) Whenever the law requires a certified copy of any document, including a photographic, photostatic, or miniature
photographic copy or reproduction of such document, for purposes of executory process, a notary public who has the
original or a copy of such document on file in his office, custodian of notarial records, or clerk of court shall note on the
copy of the document that it is a correct copy and may include words such as "certified copy", "true copy", or any other
words which reasonably indicate that the copy of the document is a certified copy, and the copy so certified shall be
deemed authentic evidence. (2) A document containing a certificate reading substantially as follows shall satisfy the
requirements of (1) above and shall be deemed authentic:
LA R.S. 13:4103. Executory process against mortgaged corporation property; proof of authority to execute mortgage
A. The following shall be deemed to constitute authentic evidence for purposes of an executory proceeding to enforce a
mortgage, chattel mortgage, or other security agreement against a corporate debtor:
(1) The consent of the shareholders evidenced as provided in R.S. 12:76 authorizing or ratifying the granting of such a
mortgage, chattel mortgage, or other security agreement.
(2) An extract of the minutes of the meeting of the board of directors or other governing body of the corporation, or a
written consent by the shareholders or directors of the corporation, signed and certified by the corporate secretary or
any assistant secretary, setting forth the resolution or resolutions authorizing or ratifying the granting of such a
mortgage or other security agreement or security interest, whether the specific transaction, mortgage, or security
agreement or security interest is described with particularity, or more general authority is granted or ratified.
(3) A photocopy of the extract of minutes provided in Subsection (2) above, certified either by:
(a) A notary before whom the mortgage, chattel mortgage, or other security agreement was passed or acknowledged,
or (b) By the custodian of notarial archives for the parish of Orleans if the mortgage, chattel mortgage, or other
security agreement, together with a certified copy of the extract of minutes, has been recorded in Orleans Parish, or by
the clerk of the district court of any other parish in which the mortgage, chattel mortgage, or other security agreement,
together with a certified copy of the extract of minutes, has been recorded.
B. The right of an interested party to question or attack the authority of the purported officer or agent to execute the mortgage
is not affected in any manner by the provisions of this Section.
LSA-R.S. 13:4104. Variance between act of mortgage and note; correction

The right to an order for executory process shall exist when there is a variance between a notarial act of mortgage and the note
or notes issued in connection therewith, when such variance is due to a clerical error and the fact that such variance is so due is
certified on the note or notes or on the act of mortgage, or both, over the official signature of the notary before whom the
mortgage was passed.
13:4104 talks about variances in the mortgages.
137
LSA-R.S. 13:4105. Notarial act acknowledging error, when sufficient

In any case where such variance exists and it is not possible to secure the certificate referred to in R.S. 13:4104, the right to an
order for executory process will lie upon execution by the debtor or by his heirs, executors, administrators, or assigns, of a
notarial act acknowledging the clerical error.
LSA-R.S. 13:4106. Deficiency judgment prohibited if sale made without appraisement

A. Unless otherwise provided by law, if a mortgagee or other creditor takes advantage of a waiver of appraisement of his
property, movable, immovable, or both, by a debtor, and the proceeds of the judicial sale thereof are insufficient to satisfy
the debt for which the property was sold, the debt nevertheless shall stand fully satisfied and discharged insofar as it
constitutes a personal obligation of the debtor. The mortgagee or other creditor shall not have a right thereafter to proceed
against the debtor or any of his other property for such deficiency, except as otherwise provided by law or as provided in
the next subsection.
B. If a mortgage or pledge affects two or more properties, movable, immovable, or both, the judicial sale of any property so
affected without appraisement shall not prevent the enforcement of the mortgage or pledge in rem against any other
property affected thereby.
C. This Section is limited to judicial sales of mortgaged property and shall not apply to public or private sales of collateral
subject to Chapter 9 of the Louisiana Commercial Laws or any similar statute.
13:4106 if mortgagee takes advantage of a waiver of appraisement the debt nonetheless stands fully discharged insofar as
the debtor stands personally liable. Language of statute is in the context of executory proceedings of judicial sales. In
Home Finance the Judge interprets and says this applies to private sales as well. 13:4106B says if a single note is secured
by two mortgages and mortgage A is foreclosed on without an appraisement, one cannot enforce against the principal
obligation.
LSA-R.S. 13:4107. R.S. 13:4106 cannot be waived; operation prospective

R.S. 13:4106 declares a public policy and the provisions thereof can not, and shall not be waived by a debtor, but it shall only
apply to mortgages, contracts, debts or other obligations made, or arising on or after August 1, 1934.
13:4107 cannot pursue the debtor any further it means you have converted the obligation to in rem from in personam.
LSA-R.S. 13:4108. Transactions which do not bar deficiency judgment (Exceptions to deficiency judgment act. Each rule
is based on a case. Not all of them are in the materials.)
Notwithstanding any other law to the contrary, including but not limited to R.S. 13:4106 and 4107, none of the following
actions by a mortgagee or other creditor shall prohibit the mortgagee or other creditor from obtaining a deficiency judgment
against any debtor, guarantor, or surety, notwithstanding the fact that a sale of property or collateral may have occurred at a
judicial sale without appraisal, at a public or private sale with or without appraisal, or at a judicial sale with a defective
appraisal:
(1) A sale through the New York Stock Exchange, the American Stock Exchange, or the NASDAQ, of any pledged stock,
bonds, or options registered or traded on such exchanges. (Whats the best price of Apple stock? Do we need an appraisal?
The value is the value right ow at the trading date because its so fluid.)
(2) A sale through the Chicago Commodity Exchange of any pledged options registered or traded on such exchange. (Same
concept as 1)
(3) A sale pursuant to an order of a United States Bankruptcy Court, or of a United States District Court sitting in bankruptcy.
(Bankruptcy courts have their own rules. Exchange National Bank v. Spelida).
(4) The mortgagee's or other creditor's exercise of its rights against property subject to a mortgage, pledge, privilege, security
interest, or encumbrance in favor of such creditor, when the property or collateral is located outside the state of Louisiana,
and the creditor has elected to proceed under the laws of the state, county, or territory where the property or collateral is
then located to seize or sell such property or collateral. (If outside of LA, how will you foreclose with appraisal? You sell if
outside of LA with a court with its own rules.)
(5) The collection or receipt of: (a) Any proceeds of any pledged negotiable or nonnegotiable note;
(b) Any funds through the offset of any pledged deposit of cash, whether in the form of a demand deposit account with any
institution insured by any agency of the federal government, certificate of deposit, or otherwise; (c) Any proceeds of any
pledge or assignment of accounts receivable; or (d) Any proceeds of any pledge or assignment of the right to receive
income under any lease or rent of movable property or immovable property. (Involves cash or cash equivalents. Dont need
to value cashcash is cash!)
(6) Collection or receipt of insurance proceeds under a simple or standard loss-payee clause. (Overrules Russian case. Two
kinds of insurance policies that protect creditors: standard and simple. So if you see standard in a form, its a special
kind of policy.
HYPO: Debtor given mortgage on commercial building; creditor wants to be protected if building burns downso is
building insured? Creditor wants proceeds to pay off mortgage or rebuild building. There are two ways to get that
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document simple endorseent [insurer says I agree to pay you, creditor, instead of debtor and you can choose. Problem:
debtor commits arson. What is theres a defense to debtors actions? Fraud, which ruins policy. Now creditor cant collect
and its beyond his control. So creditor wants STANDARD] and standard [creditor is insured. Standard new york
clause. Look at p. 39 of form.]
Propety worth 900K. If you go to EP sale, minimum bid is 2/3 600K. If creditor goes in and bids 600K and gets property,
creditor has property worth 900K, paid 600K, and can collect 300K. But they already have property worth 900K! So they
will ultimately collect 1.2 million! Creditors get windfall! Same occurs at ordinary sale. But SC said in Guaranty Bank v.
Bambou that deficiency judgment act doesnt apply. At the time, it made sense because CCP didnt allow appraisals in
ordinary process. 13:4106 doesnt make distinction between OP and EP. So this remains an OPEN QUESTION FOR
FUTURE.
(7) Collection or receipt of the return of any unearned premiums of any insurance policy.
13:4108 Even if you dont have an appraisal, or didnt use executory process, there are certain things that will not mess up
a deficiency judgment. Sale of stock doesnt need an appraisal. Proceedings in bankruptcy courts protect debtors and
approve every thing associated with the debtor and the deficiency act doesnt apply. In out of state situations rights are
preserved in paragraph 4. Paragraph 5 are cash equivalent rules when those are pledged no appraisal is necessary and
deficiency judgment act doesnt apply. Paragraph 6 and 7 relate to insurance companies.
LSA-R.S. 13:4108.1. Deficiency judgment when obligations based upon commercial transaction (private sale provisions.
COMMERCIAL transactions.)
A. As an exception to R.S. 13:4106 and 4107, if a mortgagee or other creditor holds a mortgage, pledge, security interest, or
privilege which secures an obligation in a commercial transaction, the mortgagee or other creditor may collect from or
pursue any debtor, guarantor, or surety for a deficiency judgment on the secured obligation whether or not the mortgagee
or other creditor has foreclosed on all or any of the property and sold such property at a judicial, public, or private sale,
with or without appraisal, regardless of the minimum bid, and whether or not the mortgagee or other creditor has acquired
such property from any debtor, guarantor, or surety pursuant to a complete or partial dation en paiement. However, other
than with regard to a secured transaction subject to Chapter 9 of the Louisiana Commercial Laws, a mortgagee or other
creditor may not pursue any debtor, guarantor, or surety for more than the secured obligation, minus the reasonably
equivalent value of the property sold.
B. For the purpose of this Section, the terms "commercial transaction" and "reasonably equivalent value" shall have the
following meanings: (1) "Commercial transaction" means any transaction entered into primarily for business or
commercial purposes. (2) "Reasonably equivalent value" means the value that the owner and the mortgagee or other
creditor of the property being sold or otherwise disposed of agree to attribute to the property for the purposes of reducing
the secured debt.
LSA-R.S. 13:4108.2. Deficiency judgment when obligations based on consumer transaction (private sale provision.
CONSUMER transactions.)
1. Notwithstanding any other law to the contrary, including but not limited to R.S. 13:4106 and 4107, if a mortgagee or other
creditor holds a mortgage, pledge, security interest, or privilege which secures an obligation in a consumer transaction, the
mortgagee or other creditor may obtain a deficiency judgment on the secured obligation against the debtor for the amount
of the secured obligation less the reasonably equivalent value of property acquired from the debtor without appraisal or
any other legal proceeding concerning such property acquired, only if the mortgagee or other creditor has acquired such
property from the debtor pursuant to a written agreement with the debtor to waive the debtor's rights to a judicial appraisal
and sale and to voluntarily surrender title to the property to the creditor. The debtor must agree to the value to be attributed
to the property transferred and must agree that a deficiency judgment for the amount of the secured obligations minus such
value may be obtained by the mortgagee or creditor without appraisal of or any other legal proceeding concerning the
property transferred. The debtor may obtain an appraisal for the purpose of determining the value of the property and if he
does so the value assigned to the property may not be less than three-fourths of the appraised value.
2. For the purposes of this Section, the following terms shall have the following meanings:
(1) "Consumer transaction" means any transaction entered into for personal, family, or household (noncommercial) purposes
and particularly includes transactions that are secured by residential immovable property, but excluding secured
transactions for consumer purposes that are subject to Chapter 9 of the Louisiana Commercial Laws.
(2) "Reasonably equivalent value" means the value which the owner and the mortgagee or other creditor expressly agree to
attribute to the property transferred, as provided in Subsection A of this Section.
3. This Section shall not be construed as prohibiting a debtor from selling his property to a third party purchaser and signing
a promissory note to a mortgagee or other creditor for all or part of the balance due on the secured debt.
4. Every agreement for a voluntary surrender of title to property in connection with a consumer transaction as defined above
shall contain a statement which notifies the debtor in laymen's terms: (1)(a) That he has a right to obtain an appraisal, and
(b) That the value of the property assigned has to be three-quarters of the appraised value, and (2)(a) That by agreeing to
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the surrender of the property without judicial appraisal and sale, the debtor is waiving any rights he might have under the
law to further judicial proceedings governing the judicial sale of his property, (b) That he is waiving his right to a judicial
appraisal and sale, and (c) That the creditor may obtain a judgment to collect any remaining amount due under the
obligation after subtracting the agreed upon value of the property.
13: 4108.1 & 13:4108.2 Deal with work outs. Debtor and creditor cant voluntarily get together and do a work out. Can
agree after the debt becomes due. These are partial dations situations arising after the debt becomes due where the debtor
remains personally liable for a portion of the debt. Debtor and creditor must mutually agree as to the reasonably
equivalent value after the default [echos of bankruptcy] and this value applies to the debt. Document that say that the
parties opt in to 13:4801.1 and are advised of their rights and an appraisal is attached.
Reasonably equivalent valuebankruptcy talk. Confusing. 1) We want parties to reach agreement in advance of sale. 2)
We want them to reach agreement as to what maximum deficiency will be in advance of sale.
In the real world, you have an agreement in writing before sale that follows 4108.1 or 4108.2. Attach an appraisal. Agree upon
appraiser, attach appraisal, and agree this is a reasonably equivalent value.
LSA-R.S. 13:4108.3. Relation to Chapter 9 of the Louisiana Commercial Laws

The rights or absence thereof of a secured creditor to pursue and collect a deficiency from a debtor, guarantor, or surety in
connection with a secured transaction subject to Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.) shall be
exclusively subject to the provisions of Chapter 9.
LSA-R.S. 13:4363. Appointment of appraisers

A. Not less than seven days, exclusive of holidays, before the sale of seized property, the sheriff shall serve written notice on
the debtor and on the seizing creditor, in the manner provided for the service of a citation, directing each to name an
appraiser to value the property and to notify the sheriff of his appointment prior to the time stated in the notice, which shall
be at least four days, exclusive of holidays, prior to the time of the sale. The appraisal of the debtor and seizing creditor
shall be made and delivered to the sheriff at least two days, exclusive of holidays, prior to the time of the sale.
B. If there are two or more debtors or seizing creditors and these parties cannot agree as to which should act as or appoint an
appraiser, and in any case where an appraisal is required prior to the judicial sale and which is not otherwise provided for
in this Section, on the ex parte application of the sheriff or of any interested party, the court shall designate the party to act
as or appoint the appraiser, and the notice required by Sub-section A of this Section shall be served on the party so
designated.
LSA-R.S. 13:4364 Sheriff to appoint appraiser if party does not appoint; delivery of appraisal
A. If a party neglects to appoint an appraiser or to notify the sheriff within the time designated, the sheriff shall appoint an
appraiser for him.
B. The appraisal of any appraiser appointed by the sheriff shall be made and delivered to the sheriff at a time prior to the sale.
LSA-R.S. 13:4365 Oaths of appraisers; sheriff appoints third appraiser if two cannot agree; minute, written appraisal;
delivery
A. The appraisers shall take an oath to make a true and just appraisal of the property.
B. If the appraisers cannot agree, and (1) the difference in value between the two appraisals does not exceed two hundred and
fifty thousand dollars, and (2) the value assigned by the lower of the two appraisers is at least ninety percent of the value
assigned by the higher of the two appraisers, then the sheriff shall average the two figures and use the average as the appraised
value for purposes of determining the opening bid. In those cases where the two appraisers do not agree and the values are not
within the averaging limits, then the sheriff shall appoint a third appraiser, who shall also be sworn, and whose decision shall
be final.
C. The property seized must be appraised with such minuteness that it can be sold together or separately.
D. The appraisers shall reduce their appraisal to writing, sign it, and deliver it to the sheriff.
E. The appraisal of any appraiser appointed by the sheriff shall be made and delivered to the sheriff at a time prior to the sale.
LA R.S. 20:1. Declaration of homestead; exemption from seizure and sale; debts excluded from exemption; waiver (1)
The bona fide homestead consists of a residence occupied by the owner and the land on which the residence is located,
including any building and appurtenances located thereon, and any contiguous tracts up to a total of five acres if the residence
is within a municipality, or up to a total of two hundred acres of land if the residence is not located in a municipality. (2) The
homestead is exempt from seizure and sale under any writ, mandate, or process whatsoever, except as provided by Subsections
C and D of this Section. This exemption extends to twenty-five thousand dollars in value of the homestead, except in the case
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of obligations arising directly as a result of a catastrophic or terminal illness or injury, in which case the exemption shall apply
to the full value of the homestead based upon its value one year before such seizure. (3) For the purposes of this Section,
"catastrophic or terminal illness or injury" shall mean an illness or injury which creates uninsured obligations to health care
providers of more than ten thousand dollars and which are greater than fifty percent of the annual adjusted gross income of the
debtor, as established by an average of federal income tax returns for the three preceding years.
A. The exemption provided in Subsection A shall extend to the surviving spouse or minor children of a deceased owner
and shall apply when the homestead is occupied as such and title to it is in either the husband or wife but not to more
than one homestead owned by the husband or the wife. The exemption shall continue to apply to a homestead
otherwise eligible while owned in indivision by the spouses, and occupied by either of them, when the community
property regime of which the homestead is a part is dissolved by judgment which so provides, pursuant to R.S. 9:381
et seq., or Article 159 or 2375 of the Louisiana Civil Code. If either spouse becomes the sole owner and continues to
occupy the homestead as such, the exemption as to that spouse shall be deemed to have continued uninterrupted.
B. This exemption shall not apply to any of the following debts: (1) For the purchase price of property or any part of such
purchase price. (2) For labor, money, and material furnished for building, repairing, or improving the homestead. (3)
For liabilities incurred by any public officer, or fiduciary, or any attorney at law, for money collected or received on
deposits. (4) For taxes or assessments. (5) For rent which bears a privilege upon said property. (6) For the amount
which may be due a homestead or building and loan association for a loan made by it on the security of the property;
provided, that if at the time of making such loan the borrower be married, and not separated from bed and board from
the other spouse, the latter shall have consented thereto. (7) For the amount which may be due for money advanced on
the security of a mortgage on said property; provided, that if at the time of granting such mortgage the mortgagor be
married, and not separated from bed and board from the other spouse, the latter shall have consented thereto. (8) For
any obligation arising from the conviction of a felony or misdemeanor which has the possibility of imprisonment of at
least six months.
The right to sell voluntarily any property that is exempt as a homestead shall be preserved; but no sale shall destroy or impair
any rights of creditors thereon. Any person entitled to a homestead may waive same, in whole or in part, by signing a written
waiver thereof; a copy of such waiver shall be provided to the homeowner; however if the person is married, and not separated
from bed and board from the other spouse, then the waiver shall not be effective unless signed by the latter, and all such
waivers shall be recorded in the mortgage records of the parish where the homestead is situated. The waiver may be either
general or special, and shall have effect from the time of recording. The waiver shall not be required or permitted for the
rendering of medical treatment, medical services, or hospitalization.
LA is different from the 49 other stateshere, the mortgage follows the transfer of the principal obligation, it is automatic.
Thus, the question always becomes, WHAT is the principal obligation? Usually, it is the note. But, w/a collateral mortgage, the
pledged note must be transferred to interrupt prescription on the principal obligation.
Leonard v. Brooks (1925): THE LAW HAS CHANGED!!! FACTS: Leonard owns property that he agrees to sell to Andrews.
Andrews wants to sell to Brooks for more. At Andrews request, Leonard made the sale directly to Brooks. Brooks made a
down payment and issued 19 annual notes secured by mortgage and vendors lien. There was an acceleration clause in the
deed. Leonard and Andrews agreed that Leonard should be paid first. So Leonard takes notes 1-13 (earlier maturing) and
Andrews gets notes 14-end note (later maturing). Then, Andrews sold his notes and the transferee is saying he should be paid in
preference to the Leonards (I guess it was like Leonards got all the notes, then transferred to Andrews who then transferred
again so under old rule Leonard lost preference as transferor). ISSUES: How do you rank several notes? HELD: Old rules
said you cannot claim preference over the person you sold the notes toif you transferred, you are subordinated to their
preference. Court doesnt follow this. Set the way for the new law. Under new law, 3313, if you are going to be subordinated to
your transferee, it has to be explicit. Without explicitly saying so, a transfer does not make the transferor automatically
subordinate to this transferreeinstead, he STAYS in preference, unless said otherwise.
p. 39 in form book. Standard mortgage form. First paragraph after white space.
1ST Federal Savings & Loan of Winnfield v. Blake (1985): FACTS: Blake executed a promissory note for $16K to First
Federal to finance the purchase of their family home. The note provided for monthly installments. The note was secured by a
mortgage on the property in favor of First Federal. The Blakes separated and he left the home. Mrs. B continued to live in the
houseshe didnt pay for almost a year. The property was sold at sheriffs sale and Mrs. B herself was the highest bidder. She
paid the sheriffs costs but not pay the bid price. Instead, she executed another mortgage in favor of First Federalwho is not
proceeding for deficiency judgment. Mr. B filed suit to declare the sale null and void.
DISCUSSION:
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Executory proceedings in this state are actions ... in rem by the holder of a mortgage or privilege evidenced by an authentic
act importing a confession of judgment to effect the seizure and sale of the encumbered property.... It is a civil law remedy,
having no counterpart in the common law. Its procedural bases are the debtor's confession of judgment ... supporting authentic
evidence; and a determination by a judge that the submissions are adequate for the seizure and sale of the encumbered property
to satisfy the debt. Executory proceedings provide ... a simple, expeditious, and inexpensive procedure by which creditors
may seize and sell property upon which they enjoy a mortgage or privilege.
Plaintiff argues that under LSA-C.C.P. Art. 2375, Pam Blake, as the purchaser of the property, was required to pay the price bid
at the sale to the sheriff and her failure to do so should act to nullify the sheriff's sale.
As noted previously, the costs of the sale were paid and the payment of the purchase price was handled directly between Pam
Blake and First Federal. At the trial, there was testimony by Cass Moss, an official of First Federal, that the obligation was
considered to be satisfied after the sale. Vera Smith testified that allowing the parties to handle the obligation between
themselves was not unusual procedure in the sheriff's department.
An examination of LSA-C.C.P. Art. 2375 compels the conclusion that plaintiff's argument is without merit. The article states in
part that the purchaser ... shall pay the full purchase price to the sheriff, despite the existence of a mortgage, lien, or privilege
on the property inferior to that of the seizing creditor. A reading of the comments to the article reveals the intent behind the
article.
The comments note that under the old Code of Practice, the purchaser paid only the costs and claim of the seizing creditor,
retaining the balance for payment of the inferior claimants. The purchaser was also allowed to provoke a rule to refer the
inferior claimants to the proceeds and thus obtain a cancellation of the inferior mortgages. LSA-C.C.P. Arts. 2375-2377 were
enacted to introduce a new system of dealing with inferior mortgages in that they shift the burden of distributing the proceeds
to the sheriff and give the purchaser a clear title in all cases.
It is clear that the article was designed primarily for the protection of the purchaser from claims of holders of inferior liens and
to provide immediate clear title to the property. It is apparent that the intent of the law was to shift the cumbersome duty of
settling the inferior claims to the property from the purchaser to the sheriff, thus the requirement that the funds be fully paid to
the sheriff rather than being retained by the purchaser. However, in a case such as this, when the seizing creditor is the only
secured creditor and there are no inferior claimants, there is no practical reason that the price bid should be paid to the
sheriff in order to effect a valid sale and to obtain clear title to the property.
Prof says: to effect executory process, an appraisal is required. Although not advisable, the sheriff can be paid in this manner.
Appraisal Process Is Required. The appraisal process requires that the sheriff notify the debtor and the creditor of the right
to appoint an appraiser. If not appointed by either the sheriffs appoints an appraiser [who gets $75 in this case]. Market
approach, income approach, replacement value approach are ways to appraise property to get to the fair market value of
the property where a willing buyer and seller would pay and sell when not under compunction. If the appraisal is less than
$250k apart then split the difference. If more than $250k the sheriff appoints a 3rd appraiser. The minimum bid at the
auction is 2/3 of the appraised value. If $200k is bid where does the money go? This depends upon the person doing the
bidding. First, one wants a cash sale rather than a credit sale. Sheriff has the authority to grant credit to a purchase at the
foreclosure sale. If the creditor doesnt get the money the sheriff is liable.
Wright v. Assurance Co. of America: FACTS: After the sheriffs sale and a fire that destroyed the home after a fire, owners
brought action to recover proceeds from a homeowners insurance policy. After the sale, the sheriff did not require the
immediate payment of the bid price. A couple days later the buyer sent the check, but asked the sheriff to withhold paying the
lienholder until the dispute about the amount required to payoff the lienholder was settled. There were no instructions telling
the sheriff not to deposit the check. But, the sheriff was bogged down w/workload and did not deposit the check and finish
processing the sale until after the fire.
The foreclosed mortgagors argued they maintained an insurable interest in the home bc the sale had not been completedthe
sheriffs deed had not been executed, the lienholders dispute had not been settled, and payment of sales price had not been
made.
Court considers La.C.C.P Art 2371 and 2342 and La.R.S. 13:4360. Court says that this statute allows a seizing creditor to offer
the property up for a 2nd sale when there is non-payment and it is as if the first adjudication was never made. But, cases
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interpreting this statute have said that short delays caused by the sheriffs receipt of a check instead of cash and the delay in
clearing the check do not destroy the 2371 adjudication.
HELD: The payment [of the bid price] and the transfer of property were complete as if the judgment debtor had sold the
property (art. 2371).
Prof says: what is important for this class is that the transfer is complete when the bid price is paidthat is, when the sheriff
gets the check
Who Can Complain About the Sheriffs Sale? Brown v. Associated Insurance Consultants The shareholders argue that they
have a direct interest in preventing waste of assetsand as such, they have a right to seek to enjoin the sale and transfer of the
mortgage notes in question HELD: A right of action does not exist in favor of shareholder entities when there has been an order
of liquidation to seek to enjoin the sale of assets.
Poland v. Poland: Mortgage on large tract of land, which was used to secure the note on the purchase price. Then, partition by
licitation. Then property was foreclosed.
DISCUSSION: When property is subject to a real right, such as a mortgage, the partition of the property will not affect the real
right.
Prof says: Argument is that when the property was partitioned, it prevented the mortgage from affecting one piece of it. NO
of course this isnt so. Mortgage affects the whole. You can split it up however you want, but if the mortgage is on the whole,
and you sell a piece, the mortgage follows the piece. It wouldnt work here bc of the partition by licitation and succession
issues, but generally, if you want to sell a piece of land where the whole is subject to the mortgage, you want to get release of
the mortgage for each piece.
Intro to Deficiency Judgment Act:
LA lawtension bw allowing creditor to collect debt and protecting debtors right to fair valuation of the collateral. If every
sheriffs sale always brought a fair price, there would be no need to worry about the appraisal process or the bid amount. The
DJA in its original form was narrowif a creditor proceeded to judicial foreclosure without appraisal, the creditor was
prohibited from obtaining a deficiencywhatever the collateral brought at sale was all the creditor could getnothing more
from debtor after the sale. Now, it has expanded to all salesprivate or public, judicial or non-judicial.
LA law looks to procedural rule (2/3 minimum bid of first sale.
LESSON 20. THE DEFICIENCY JUDGMENT ACT
Also relevant to this lesson: La.C.C.P. 2331-2343, 2771-2783, La.R.S. 13:4102-4108.3, 13:4363-4365
LSA-C.C.P. Art. 2293 Notice to judgment debtor; appointment of attorney

A. Upon making a seizure of immovable property, the sheriff shall file with the recorder of mortgages of the parish in which
the immovable property is located a notice of seizure setting forth the title and docket number of the action out of which the
writ issued, the judicial district and parish in which the action is pending, and a description of the immovable property.
B. (1) After the seizure of property, the sheriff shall serve promptly upon the judgment debtor a written notice of the seizure
and a list of the property seized, in the manner provided for service of citation. If service cannot be made on the judgment
debtor or his attorney of record, the court shall appoint an attorney upon whom service may be made.
(2) In addition to the written notice of seizure to be served on the judgment debtor as provided in Subparagraph (1) of this
Paragraph, the sheriff shall also serve upon the occupants of the seized property a written notice stating that the subject
property has been seized. Such service shall be accomplished by directing the notice to occupants of the seized premises and
if the notice cannot be served personally or by domiciliary service upon the occupants, such service shall be accomplished by
posting the notice upon the main entrance to the seized premises. The failure to serve the notices as provided herein shall not
invalidate the sheriff's sale; however, such failure shall prevent the purchaser at the sheriff's sale from availing himself of the
provisions of R.S. 13:4346 as it applies to the ejectment or eviction of any occupants of the seized premises other than the
judgment debtor. The failure to serve the notices required in this Paragraph shall not affect the rights of the foreclosing creditor
or of the purchaser at the sheriff's sale under Code of Civil Procedure Articles 4701 et seq.
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(3)(a) If the premises foreclosed upon consists of more than ten units, instead of giving notice as provided in Subparagraph (2)
of this Paragraph, the foreclosing creditor shall have the option of causing a sign or signs to be posted by the sheriff measuring
not less than two feet high and three feet wide posted in such a manner as to notify residents of the building containing the
following language or words to this effect: __________ JUDICIAL DISTRICT COURT FOR THE PARISH OF __________,
DOCKET NUMBER __________. THIS PROPERTY HAS BEEN SEIZED AND SHALL BE SOLD IN ACCORDANCE
WITH LAW ON OR AFTER __________, 200__/s/ SHERIFF __________, PARISH. Any person who removes or damages
this notice is subject to prosecution in accordance with R.S. 14:56. The cost of preparation of such sign shall be borne by the
foreclosing creditor and the fee of the sheriff in connection with the posting of such sign shall be determined in accordance
with the provisions of R.S. 13:5530(A)(14).
(b) An affidavit of the creditor shall be filed of record in the foreclosure proceeding stating that such sign was posted, which
affidavit shall be prima facie evidence that the sign was posted in accordance with this Subparagraph.
(4) The provisions of Subparagraphs (2) and (3) of this Paragraph shall apply only to foreclosure proceedings on immovable
property which is occupied or intended for occupancy as a residence and shall not apply to foreclosure proceedings on property
subject to time share operations, hotels, motels, inns, guest houses, rooming houses, bed and breakfasts, camp sites,
campgrounds, and other lodging establishments intended for the temporary housing of guests.
C. After the seizure of property, the sheriff shall give notice of the seizure to persons other than the judgment debtor in the
manner and to the extent provided by R.S. 13:3886. The sheriff shall file with the clerk who issued the writ his affidavit setting
forth the name of each person to whom the notices were given and the address or addresses to which the notices were sent. The
affidavit, when received by the clerk, shall form part of the record and shall be considered prima facie correct.
D. Cancellation of a mortgage, whether legal, judicial, or conventional, shall allow any interested party to cancel the notice of
seizure of property affected by the mortgage upon submitting a request to cancel evidencing that the mortgage has been
cancelled and upon submission of proof that all costs due the clerk of court and the sheriff have been paid. Nevertheless, a
notice of seizure shall prescribe ten years after the date of recordation unless reinscribed in the same manner as an instrument
creating a mortgage under Civil Code Article 3362. Any interested party may obtain cancellation of the notice of seizure on the
basis of prescription of ten years without submitting evidence that all costs due to the clerk of court and sheriff have been paid
in full.
Home Finance Service v. Walmsley: Does the Deficiency Judgment Act apply only to judicial sales? NO! It is clearit has
been declared to be against the public policy of this state for any holder of a mortgage to provoke a judicial sale without first
having the encumbered property appraised, and that, if such mortgage holder does not foreclose without appraisal, he is
prohibited from thereafter proceeding against the mortgagor for any deficiency remaining on the debt.
First Guaranty Bank v. Baton Rouge Petroleum (1988) FACTS: First Guaranty Bank filed a petition for executory process
and obtained a writ of seizure and sale. The property was then sold at a sheriff's sale to First Guaranty for the required
minimum of two-thirds the appraised property value. The debtor did not oppose the sale by seeking an injunction or filing a
suspensive appeal. Then, First Guaranty filed a petition for deficiency judgment to obtain the remaining balance plus interest
and attorney's fees. In its answer Baton Rouge Petroleum Center, Inc. alleged the executory process, which was the basis for
the deficiency judgment, was defective because First Guaranty had failed to attach to its petition therefor a certified copy of a
resolution of the board of directors authorizing the execution of the mortgage. The parties have stipulated the resolution was
filed in the public records at the time the property was mortgaged and there is no question the agent of the corporation had
actual authority to execute the mortgage.
This case overrules League Central and Buckner v. Carmack. League Central has created an affirmative defense to a
deficiency judgment action which has nothing to do with whether the property was sold after a valid appraisal or whether just
deficiency is due, but rather whether the mortgagee complied [with every procedural requirement] as to the form of authentic
evidence required in the executory proceeding.
What was happening: Debtor gets notice of seizure. So the debtor starts to look for defects but doesnt raise the defects in the
executory process because the creditor can cure them if he does. So the debtor waits and defends by finding a substantial
defect in the process so that the deficiency wont be entered against him even though he may lose the property.
Baton Rouge Petroleum says the debtor must raise procedural defects at the executory proceeding or waive them. Substantive
defects [like the amount is not owed] are not waived by not raising them at the executory proceeding.
J.Dennis discussion: nicely explains how deficiency judgment works w/executory and ordinary proceedings
An executory proceeding in Louisiana is an in rem action; it provides a simple, expeditious, and inexpensive procedure by
which creditors may seize and sell property upon which they enjoy a mortgage or privilege.By an executory proceeding, a
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creditor may effect ex parte the seizure and sale of property, without previous citation and judgment, to enforce a mortgage or
privilege thereon evidenced by an authentic act importing a confession of judgment .... La.C.Civ.P. Art. 2631.
To exercise his right to obtain this ex parte order from the court, La.C.Civ.P. art. 2638, the creditor must submit with his
petition authentic evidence or its statutory equivalent necessary to prove his right to use executory process. La.C.Civ.P.
art. 2635. This requirement includes not only the instruments evidencing (1) the obligation secured by the mortgage or
privilege and (2) the mortgage or privilege importing a confession of judgment, but also (3) all evidence necessary to
complete the proof of plaintiff's right to use executory process.
Art. 2636 lists certain documentary evidence deemed to be authenticArt. 2637 then lists the evidence which need not be
authentic, but which may be proved by a verified petition or by affidavit instead of by authentic acts.
The defendant may raise defenses and procedural objections to an executory proceeding either by suspensive appeal or by an
injunction. He may enjoin the sale if the procedure required by law for an executory proceeding has not been followed. (citing
art. 2751) Executory process, which entitles creditor to seize debtor's property without citation or usual delays or formal
judgment, is harsh remedy, and its use requires creditor's strict compliance with letter of law.
When debtor successfully asserts defense to executory proceeding, either through injunction or suspensive appeal, creditor may
convert proceeding into ordinary proceeding and enforce claim thereunder, in absence of valid defense to ordinary proceeding.
When creditor improperly causes debtor's property to be sold without complying with all requirements for executory
proceedings, debtor may, under certain circumstances, have sale annulled even though he has failed to prevent it by injunction
or suspensive appeal; although debtor cannot annul sale if property has been sold to innocent third person, he may annul sale if
property is sold to creditor and creditor is still in possession of that property.
When the property has been sold under the executory proceedings after appraisal and in accordance with statutory provisions
governing appraisal, the creditor may obtain a personal judgment against the mortgagor for any deficiency remaining after the
application of the net proceeds of sale to the secured debt. La.C.Civ.P. art. 2771. However, the creditor can do so only by
converting the executory proceeding into an ordinary one, or by instituting a new suit against the mortgagor. La.C.Civ.P. arts.
2644, 2772. Under either method, the new proceeding is a personal action, in which the defendant has all of the rights of a
defendant in an ordinary proceeding, e.g. he must be subjected personally to the jurisdiction of the court and process must be
served on him. The confession of judgment, having served its purpose in the executory proceeding, has become functus officio,
and the mortgagee must prove the indebtedness asserted by the usual modes of proof.
To obtain a deficiency judgment, the creditor first must affirmatively plead and prove the existence of the obligation giving rise
to the debt, La.C.C. art. 1831, and the grounds of non-performance entitling him to maintain his judicial action. La.C.C. art.
1994. Further, he must aver and establish by evidence that the property was sold under the executory proceeding after appraisal
in accordance with the provisions of article 2723 of the Code of Civil Procedure and that the proceeds received were
insufficient to satisfy the balance of the performance then due. La.C.Civ.P. art. 27714; La.R.S. 13:4106; 4107.5 The appraisal
procedures of article 2723 require that prior to the sale, the property seized must be appraised in accordance with law, and the
order directing the issuance of the writ of seizure and sale must have directed that the property be sold as prayed for. Other
statutory law sets forth the procedures for written notices to the debtor and seizing creditor, the appointment of appraisers, the
sheriff's appointment of an appraiser if a party neglects to do so, delivery of appraisals, oaths of appraisers, and the form of the
appraisals. La.R.S. 13:43634365.
The debtor, on the other hand, may assert both negative and affirmative defenses against the deficiency judgment action. He
may defend by demonstrating the creditor's failure to prove one of the aforementioned elements of his case or by rebutting the
existence of such an element. Additionally, the debtor may assert that an obligation is null, or that it has been modified or
extinguished, but in such a case the debtor must prove the facts or acts giving rise to the nullity, modification, or extinction.
Objections as to lack of authentic evidence or as to minor defects of form or procedure may not be used as grounds for action
to annul judicial sale of immovable property by executory process. Creditor's failure, in prior executory proceeding, to submit
authentic evidence[here, there creditor completely failed to submit one piece of evidence, it just wasnt thereeven in
defective form] did not constitute defense to creditor's subsequent separate action for deficiency judgment; overruling League
Central Credit Union v. Montgomery
Foreclosing creditor can get a deficiency judgment but will not get more than 1/3 because the 2/3 is credited (mandatory
minimum to be received at sale). Artificial limit on a creditors deficiency judgment.
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Prof says: gist of Baton Rouge Petroleum is that a debtor who has knowledge in the defect of a minor procedural defect in an
executory process action must raise that minor procedural defect during the executory process portion of the action. the
debtor cannot wait to raise the issue until the creditor seeks a deficiency judgment in hopes of the court ruling there will be no
deficiency. Under Baton Rouge Petroleum substantive defects are not deemed waived if not raised.
Concerning a claim that the appraisal is invalid, the debtor cannot just prove that the appraisal is too low, but must show that he
was prejudiced by the failure to correctly perform an appraisal. See the following case. Attacking the appraisal is not
procedural which is waived, but is substantive, but must show more than appraisal was too low.
American Bank and Trust v. Price: Purpose of deficiency judgment law, which mandates strict compliance with notice and
appraisal requirements for obtaining deficiency judgment, is to protect debtor from possible abuse, gross injustice or
overreaching by creditor, which may occur if property securing debt is sold without such notice or appraisal. LSA-R.S.
13:4106. Under deficiency judgment law, to preserve its right to deficiency judgment, creditor must act in substantial, but not
necessarily flawless, compliance with statute; in other words, not every defect in executory proceeding, but only fundamental
or obviously prejudicial defect, will bar deficiency action. LSA-R.S. 13:4106. For purposes of deficiency judgment,
fundamental defect, as in appraisal, necessarily entails unfairness, injustice or prejudice to debtor. LSA-R.S. 13:4106.
One whose property has been sold by executory process with benefit of appraisal may attack appraisal of property in later
action for deficiency judgment.
Because foreclosure sale with proper notice and with benefit of appraisal that is valid on face of executory process and sheriff's
record is legally presumed to have been conducted as law directs, she who asserts, in deficiency proceeding, lack of
qualifications of appraisers bears burden of proof, which is a heavy or substantial burden. LSA-R.S. 13:4106.
Debtor's mere supposition or argument in deficiency proceeding, that appraisal is or was unfairly or unjustly prejudicial to
debtor and thus invalid, without some evidence to establish that fact, will not be deemed to satisfy substantial burden of proof
and rebut presumption that sale was conducted as law directs.
Appraiser's employment by foreclosing bank did not disqualify him from appraising property for bank.
Mortgagor did not meet her substantial burden of proving that foreclosure appraisal was invalid, which would prevent bank
from obtaining deficiency judgment, though bank's appraiser was also bank employee, where appraiser presented testimony
about his qualifications and explained how he reached his appraisal figure after licensed federal appraiser formally appraised
property at twice that much four years earlier, mortgagor did not show that her home's value had increased or remained the
same over those four years, appraiser had 13 years' experience working for banks, making mortgage loans, making foreclosure
appraisals, and as contract specialist for Federal Deposit Insurance Corporation (FDIC), mortgagor's appraiser appraised
property at only $2,000 more than bank's appraiser, and mortgagor did not suggest that her appraiser's appraisal was unjust or
defective. LSA-R.S. 13:4106.
To overcome presumption of validity of appraisal process, defendant in deficiency judgment action must show that appraisal
was fundamentally defective, i.e., unjust, unfair appraisal by unqualified appraiser without visual knowledge of physical
condition of property.
Fall out from Baton Rouge Petroleum caseAssumes the appraisal was valid. So now the debtor attacks the appraisal validity
but not at the executory proceeding but at the deficiency judgment (he will still have lost the immovable, but is trying to avoid
personal judgment for the rest). All the debtor has to show is that the appraisal is of the wrong property (this is unfair, unjust?).
If it the wrong amount, the court says too bad debtor you had the opportunity to appoint your own appraiser. But, American
Bank v. Price says even if the appraiser is not a trained appraiser, the debtor must prove that the appraisal was wrong or too low
(a procedural issue) but that it also unfair, unjust, prejudicial (a substantive issue) the debtor.
John Deer v. Luther: appraiser must be qualified to give the appraisal. Here, the appraiser was a used car expert but knew
nothing about the equipment being appraised in this case. This does not meet the minimum standards of fairness.
Federal Savings and Loan v. Tri-Parish Ventures: Creditor who fails to assure that notice of seizure and notice for
appointment of appraisers are served on debtor may not thereafter obtain deficiency judgment against debtor. But, mortgage
debtor must act timely to enjoin executory proceeding if there are formal or procedural defects in that proceeding, rather than
reserve such complaints for defense to a suit for deficiency judgment.
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Nice discussion of policy behind DJA: Most mortgage instruments in Louisiana contain a provision which gives the mortgagee
the option to foreclose without benefit of appraisal. When a foreclosure sale of mortgaged property is made without any
minimum price requirement, as is the situation when property is sold without benefit of appraisal, the mortgagee may buy the
property at a price substantially less than its actual market value. Prior to adoption of the Deficiency Judgment Act, a
mortgagee could obtain a deficiency judgment for the full apparent deficiency, resell or retain the property, and realize a total
sum far in excess of the balance due on the mortgage.
Gulf Coast Bank v. GS&R Properties: held that: (1) improper service of notice to mortgagor of right to appoint appraiser prior
to foreclosure sale precluded deficiency judgment, and (2) irregularities in property description and appraisal process of
executory proceeding precluded deficiency judgment.
Leaving executory process pleadings with former partner's clerical employee at former partner's place of business was not
sufficient service on the partnership, and thus deficiency judgment against the partnership as mortgagor was precluded
following sale of mortgaged property, although evidence suggested that partnership did conduct business at the former partner's
place of business.
Deficiency Judgment--Generally
Tests: Procedural Test--Did you have an appraisal? If yes, did you sell for 2/3? If not, then no deficiency judgment. The
lender is entitled to collect the balance from the debtor as long as the deficiency results from a commercially reasonable sale
and what are the damages. Burden on the creditor in the UCC. Louisiana statute converts all to in rem. Does not cut off the
rights of the deficiency?
Does It Apply To Sureties? Issue is--do we have to give the surety any notice of the foreclosure. If debtor uses the Act as a
defense can the surety raise this defense?
Notice. We know when there is a property right interest that will be affected then Mennonite notice is required. One might
argue that the surety has a right of subrogation but no case has held that the surety has an interest in the salethere is no
property interest.
LESSON #21. MORE ON THE DEFICIENCY JUDGMENT ACT
LA R.S. 13:4106. Deficiency judgment prohibited if sale made without appraisement

A. Unless otherwise provided by law, if a mortgagee or other creditor takes advantage of a waiver of appraisement of his
property, movable, immovable, or both, by a debtor, and the proceeds of the judicial sale thereof are insufficient to satisfy the
debt for which the property was sold, the debt nevertheless shall stand fully satisfied and discharged insofar as it constitutes a
personal obligation of the debtor. The mortgagee or other creditor shall not have a right thereafter to proceed against the debtor
or any of his other property for such deficiency, except as otherwise provided by law or as provided in the next subsection.
B. If a mortgage or pledge affects two or more properties, movable, immovable, or both, the judicial sale of any property so
affected without appraisement shall not prevent the enforcement of the mortgage or pledge in rem against any other property
affected thereby.
C. This Section is limited to judicial sales of mortgaged property and shall not apply to public or private sales of collateral
subject to Chapter 9 of the Louisiana Commercial Laws or any similar statute.
LA R.S. 13:4107. R.S. 13:4106 cannot be waived; operation prospective

R.S. 13:4106 declares a public policy and the provisions thereof can not, and shall not be waived by a debtor, but it shall only
apply to mortgages, contracts, debts or other obligations made, or arising on or after August 1, 1934.
Relevant Law: La.C.C.P. 1092, 2331-2343, 2771-2781, La.R.S. 13:4102-4108, 4359, 4363
Can a surety be liable for a deficiency judgment if the principal obligor would not be liable bc of violations by the foreclosing
creditor of the DFA?
Farmerville Bank v. Scheen (1955): FACTS:

HELD: Note holder's private sale of mortgaged automobile without appraisal, after repossession, on request of both maker
and guarantor of note because of maker's inability to make payments, completely discharged maker's debt, and no deficiency
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could thereafter be claimed by creditor against the debtor, even though debtor agreed to do so in writing. However, the surety
IS liable!! Referring to R.S. 13:4106.
DISCUSSION:
In Home Finance Service v. Walmsley, that a mortgagee's suit for the balance due on a note secured by mortgage, after
crediting proceeds of a private sale of the mortgaged property, without appraisal, pursuant to a collateral contract, was
prohibited by the deficiency judgment statute as being inimicable to the public policy of the state. The action for a deficiency
judgment against the defendant Scheen, the maker of the note and the mortgagor of the automobile, under the facts and
circumstances of this case, comes clearly within the prohibition of the statute. SO, no deficiency judgment against principal
obligor bc there was no appraisal.
Where endorser of note actively promoted and negotiated sale of repossessed mortgaged automobile by holder of note at
private sale, without appraisal, under promise that holder would be paid any deficiency on note arising from such sale, under
provisions of Deficiency Judgment Act, endorser was liable for deficiency resulting from such sale, even if principal debtor
was not.
The legislature declared as a public policy of this state that where any mortgage or other creditor takes advantage of the
waiver of appraisement of the debtor and provokes a judicial sale, without the benefit of appraisement, of the encumbered
property, whether the same be real or personal, or of both characters; and the proceeds of such sale are insufficient to satisfy the
debt for which said property is sold, said debt shall nevertheless stand fully satisfied and discharged, and such mortgage or
other creditor shall not thereafter have the right to proceed against the debtor or any other of his property for such
deficiency, in no manner whatsoever.
Unquestionably this act was enacted for the benefit and protection of the mortgage debtorAs stated by the Supreme Court,
the deficiency judgment statute was enacted for the benefit and protection of the mortgage debtor and nowhere does the statute
refer to or mention public policy towards or relief for parties secondarily or otherwise obligated for the indebtedness, such as
an endorser. Therefore, provisions of the statute pronouncing the principle of public policy is inapplicable under the facts and
circumstances of this case to an endorser, whose rights and remedies are prescribed and governed by other applicable laws,
particularly the articles of the Code pertaining to suretyship.
Bottom line: If guarantor knew of the private sale then the guarantor is liable. 13:4106 property being referred to in the statute
is the debtors property. The statute was intended to protect the debtor. There is nothing in the language that says the creditor
cant go against the surety.
Unquestionably this act was enacted for the benefit and protection of the mortgage debtor p. 454 bottom. NOT for the
sureties. Rubin says, even if the creditor takes action that would bar deficiency against debtor, youve bought yourself litigation
on whether youre liable for th deficiency. Therefore, contractually build into suretyship agreement either prior notice of
judicial sale or some kind of release if theres a bar for debtor liability for deficiency.
So what kind of appraisal is necessary? Foreclosure, pray for sale with appraisal, creditor ha chance to appoint appraiser,
debtor has chance to appoint appraiser, if debtor doesntsheriff appoints one, if appraisals less than 250K apartsplit. If
more than 250K apartthird appraiser. If debtor didnt get his own appraisal, tough luck! Cant complain.
o HYPO: Three tracts of land. Creditors appraisal says each are 300K so 900K total. Creditor sells one off. Then
debtor comes and says appraisals are invalid! Court said, too bad, you didnt get your own appraiser. If you represent
debtors, GET YOUR OWN APPRAISAL!!! Case in book on this First Bank v. Tedesco
On the other the hand the Smith case says it is unfair that the debtor gets off for the deficiency but the surety gets tagged.
GMAC v. Smith (1981): HELD: Creditor cannot collect from surety, even if surety agrees that a discharge of the debtor does
not affect the suretys liability.
DISCUSSION:
It is a matter of public policy that a debt shall stand fully satisfied and discharged insofar as it constitutes a personal obligation
of debtor whenever creditor sells debtor's property other than by judicial sale with appraisement and such public policy cannot
be waived by debtor. LSA-R.S. 13:4106, 13:4107.
4107 tells us that 4106 is the public policy of this state and that it cannot be waived.
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Court says the issue in this case is: does our public policy, which expressly prohibits a judgment against the debtor for the
balance of the debt allegedly remaining after crediting some amount as proceeds of the unappraised sale, also prohibits such
deficiency judgment against the debtors surety, when the surety contracted that his liability would not be affected by the
discharge of the principal.
The logic of the full discharge is simple: because sales without appraisal often produce an unfair price (often with the creditor
as the buyer), that price should not be treated as the equivalent of a price produced by a sale with appraisal, which must bring
two-thirds of the appraised value or be readvertised. The unappraised sale thus having no price providing an acceptable
measure for deduction from the debt, the legislature has taken the position that an unappraised sale will be treated as if its
proceeds were sufficient to pay off the debt entirely, save, since, the 1952 amendment, the in rem liability of other pledged or
mortgaged property. The public policy of R.S. 13:4106 is so strong and unwaivable that it prevents even a judgment by default
for the deficiency in the absence of allegation and proof of sale with appraisal.
Creditor argues that the surety contracted that his liability shall not be affected by discharge of the debtor and that it was fair bc
the surety could still collect from the debtor via reimbursement. Court says NOthat is in effect, a judgment against the
debtor!! Court says that the debtor cannot waive the declared public policyso why should the surety be allowed to waive the
public policy FOR the debtor!!
In The Farmerville Bank v. Scheen, the 2nd circuit let off a debtor whose property was sold at a private sale (arranged by the
surety), because the debtor wasn't given notice. But the surety was held liable on the balance even while the debtor was held
discharged from deficiency due to this defect--presumably because the surety arranged the sale. However in General Motors
Acceptance Corp. v. Smith, the 4th Circuit let a surety off the hook when the debtor was let off the hook through the deficiency
judgment act--the court found that holding the surety liable would result in holding the debtor liable, as he would seek recourse
from the debtor for what he had to pay.
But Acts purpose is to extinguish personal obligationsurety can be for any obligation. Rushing v. Dairyland Company
(1984): FACTS: guy bought a truck from Ford, with credit portion of the purchase price was represented by a promissory note
secured by a chattel mortgage on the truck. Guy bought insurance and had the creditor named as the loss payee (so the
insurance co was his surety?). The truck was wrecked and guy filed suit against his insurance co. While this suit was pending,
Ford instituted executory proceedings and had the truck sold at public auction without appraisal. Alleging outstanding balance
on the loan, Ford intervened in the suit against the insurance co to recover the proceeds as loss payee.
ISSUE: Whether a mortgage who has provoked a sale without appraisal of the mortgaged property may recover as a loss payee
under its debtors insurance policy.
HELD: (1) pursuant to the Deficiency Judgment Act, debt owed to mortgagee stood fully satisfied and discharged, where it
was undisputed that mortgagee took advantage of debtor's waiver of appraisal and sold the truck without appraisal, and (2)
mortgagee could not recover as loss payee under debtor's automobile policy, since extinguishment of the mortgage debt
terminated mortgagee's right to proceeds under the loss payable clause of the policy.
DISCUSSION: creditor argues that there was legislative intent to allow an action like this onebc the suit is not directly
against the debtor.
Simple Loss-Payee ClauseInsurance provides a lender with coverage only if his borrower can collect the insurance
policy, this type of clause only provides that the mortgagee will be paid first only to the extent of his interest. The interest
that is ACTUALLY insured is the debtors interest in the mortgaged property. When an insured loss occurs, the insurer is
liable for the value of the loss (up to the policy limits) and must direct payment to the loss payee up to the balance of the
mortgage debt. If the mortgage debt no longer exists, the loss payee (mortgagee) is not entitled to the proceeds.
Standard Loss-Payee Clause the lenders rights are not controlled by the borrowers actions or inactions and its purpose
is to provide a separate contractual relationship between the creditor and the insurance company. Lender is entitled to
collect regardless. This type protects the mortgagee himself against loss from any act or neglect of the mortgagor or owner.
Has been overruled by 13:4108(6) wording under a simple or standard policy. Does not strip a deficiency judgment act. (7)
collection or receipt of any unearned premium on the insurance policy. Creditor wants the right to collect the unearned
premiumsput in the contract.
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Rushing was superseded by statute. Subsequent to the Rushing decision, the Louisiana Legislature amended the LDJA, which
amendment specifically allowed mortgagees to recover insurance proceeds despite foreclosure and sale without appraisal.).
Barwick v. State Farm Fire & Cas. Ins. Co., 2011-Ohio-5689
Arguments
SURETY ARGUMENT. If representing surety and want to limit liability at a private sale with no appraisal. Smith is the right
answerto allow the surety to be liable is to evade the Act and this is against the public policy principles of the Act. Public
policy can not be waived. 13:4107 ought to stop the creditor from collecting from the surety. It is a terrible thing surety gets
off. 407. Circumvents by allowing collection of the windfall.
CREDITOR ARGUMENT. Surety agreed that he would pay if debtor didnt and he knew the defenses he could raise including
not the personal ones. Sheen says the act only applies to the debtor and Green Garden allows sureties to be liable even when
others are release and the articles says that sureties are liable for principal obligation which includes in personam. If surety
didnt get own security from the debtor shame on him. Surety therefore is liable. It is voluntary, consensual, unilateral contract
that runs upstream. Surety should put it in the contract. If Green Garden means anything it is that the surety should be liable
for 100% of debt. When there is law later than that then that legislature didnt contemplate it.
Public Policy Competing: Freedom of contract principles and evasion of Acts principles. Remember
Deficiency Judgment Act does not ask any substantive questions, only procedural ones. Harsh rule because the creditor could
be acting commercially reasonable under UCC 9.
Does the Deficiency Judgment Act Apply to Foreclosures by Ordinary Process? Case doesnt pass the smell test because the
bank president guaranteed the loan and then wanted to get out of it. Guaranty Bank of Mamou v. Community Rice Mill, Inc.
(1987): FACTS: Bank sought recovery against heirs and estate of continuing guarantor of promissory notes owed by rice mill
to bank subsequent to judicial sale of mill's assets. Art. 2332 requires that property seized under writ of fifa be appraised and
13:4363(A) required that the appraisals be delivered to the sheriff two days before sale. In this case, the appraisal was delivered
to the sheriff one the day of the sale, so it was not timely. Surety tried to get out of the deficiency judgment due to the
appraisal defect
DISCUSSION:
Writ of fieri facias, directing sheriff to seize and sell certain of judgment debtor's property after creditor has obtained
judgment in ordinary proceeding against debtor, is simply form of execution of judgment.
Deficiency Judgment Act is intended to apply to situations in which executory proceedings are used and does not apply when
debtor's property is sold pursuant to writ of fieri facias; Act refers to debtor, creditor, and debt, not judgment debtor, judgment
creditor, and judgment
The first sentence of La.R.S. 13:4106 refers to a mortgagee or other creditor, the debt for which the property was sold and
the debt [standing] fully satisfied and discharged insofar as it constitutes a personal obligation of the debtor. In an executory
proceeding, the term debt appropriately describes the nature of the creditor's claim against the debtor at the time the debtor's
property is sold pursuant to a writ of seizure and sale. This is because at the time of the judicial sale under executory
proceeding, there has been no judgment rendered in favor of the creditor. However, *1071 when the debtor's property is sold
pursuant to a writ of fi.fa., the debtor is a judgment debtor, that is, the debt has been replaced by a judgment procured in an
ordinary proceeding in favor of the judgment creditor. By using the terms debtor, creditor, and debt in the Act without
any reference to judgment debtor, judgment creditor, and judgment, the legislature has evidenced an intent that the Act
apply to executory proceedings.
HELD: (1) judgment rendered against heirs was not deficiency judgment, as bank had not utilized executory proceedings, and
Deficiency Judgment Act was inapplicable where debtor's property had been sold in ordinary proceeding pursuant to writ fieri
facias, and (2) continuing guaranty was valid and enforceable against estate and heirs
Bottom line: cant use 13:4106 in ordinary proceedings.
Dixon, concurr: Nevertheless, the lack of an appraisal results in the discharge of the debt sued on only insofar as it
constitutes a personal obligation of the debtor, and need not discharge the continuing guarantors.
Hypo: So if creditor buys 900K land for 600K and creditor later sells it for 3 million, creditor STILL collects 300K from
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debtor. This is different in private sale. If I sell you property yesterday for 900K and you sell it tomorrow for 3 million, I have
potential lesion beyond moety (great in LA! But does NOT apply to judicial sales).
What does a debtor do in Deficiency Judgment Proceeding? Well, what does debtor do BEFORE deficiency judgment
proceedingduring EP proceeding. Claim: 1) documents arent in proper form/authentic. Object. If youre a 3P, can come in
and say prescription. If you lose, debtor should take IMMEDIATE appeal or injunction. Once sale goes through, creditor turns
around and does deficiency judgment. Possibility that creditor files declaratory judgment action alleging deficiency judgment
problems and alleging no persona liability. Citizens Savings case on p. 470 (brand new case. BIG on bar exam)
Citizens Savings Bank v. G&C Development, L.L.C., 2012-1034 (La.App.1Cir. 2/15/13), 113 So.3d 1085 (p. 470): READ!
creditors make counterclaim for deficiency or you might be barred. This could be a compulsory counterclaim.
LESSON #22. INTRODUCTION TO PRIVILEGES
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LSA-R.S. 13:3881. General exemptions from seizure

A. The following income or property of a debtor is exempt from seizure under any writ, mandate, or process whatsoever,
except as otherwise herein provided:
(1)(a) Seventy-five percent of his disposable earnings for any week, but in no case shall this exemption be less than an amount
in disposable earnings which is equal to thirty times the federal minimum hourly wage in effect at the time the earnings
are payable or a multiple or fraction thereof, according to whether the employee's pay period is greater or less than one
week. However, the exemption from disposable earnings for the payment of a current or past due support obligation, or
both, for a child or children is fifty percent of disposable earnings, and the exemption from seizure of the disposable
earnings for the payment of a current or past due support obligation, or both, for a spouse or former spouse is sixty
percent of the disposable earnings. For purposes of this Subsection, if the Department of Children and Family Services is
providing support enforcement services to the spouse and a judgment or order for support includes an obligation for both
a child or children and a spouse or former spouse, or in any case wherein the judgment or order does not clearly indicate
which amount is attributable to support of the child or children and which amount is attributable to support of the spouse
or former spouse, the support obligation shall be treated as if it is exclusively for the support of a child or children.
(b) The term disposable earnings means that part of the earnings of any individual remaining after the deduction from those
earnings of any amounts required by law to be withheld and which amounts are reasonable and are being deducted in the
usual course of business at the time the garnishment is served upon the employer for the purpose of providing benefits for
retirement, medical insurance coverage, life insurance coverage and which amounts are legally due or owed to the
employer in the usual course of business at the time the garnishment is served.
(2) That property necessary to the exercise of a trade, calling, or profession by which he earns his livelihood, which shall be
limited to the following:
(a) Tools.
(b) Instruments.
(c) Books.
(d) One utility trailer.
(e) One firearm with a maximum value of five hundred dollars.
(3) The personal servitude of habitation and the usufruct under Article 223 of the Civil Code.
(4)(a) The clothing, bedding, linen, chinaware, nonsterling silverware, glassware, living room, bedroom, and dining room
furniture, cooking stove, heating and cooling equipment, one noncommercial sewing machine, equipment for required
therapy, kitchen utensils, pressing irons, washers, dryers, refrigerators, deep freezers, electric or otherwise, used by him or
a member of his family.
(b) The family portraits.
(c) His arms and military accoutrements.
(d) The musical instruments played or practiced on by him or a member of his family.
(e) The poultry, fowl, and one cow kept by him for the use of his family.
(f) All dogs, cats, and other household pets.
(5) Any wedding or engagement rings worn by either spouse, provided the value of the ring does not exceed five thousand
dollars.
(6) Federal earned income tax credit, except for seizure by the Department of Revenue or arrears in child support payments.
(7) Seven thousand five hundred dollars in equity value for one motor vehicle per household used by the debtor and his family
household for any purpose. The equity value of the motor vehicle shall be based on the NADA retail value for the
particular year, make, and model.
(8) Seven thousand five hundred dollars in equity value for one motor vehicle per household which vehicle is substantially
modified, equipped, or fitted for the purposes of adapting its use to the physical disability of the debtor or his family and
is used by the debtor or his family for the transporting of such disabled person for any use.
(9) The proceeds from a property insurance policy received as a result of damage caused by a gubernatorially declared disaster
to an asset considered exempt under this Section and that are held separately in an escrow account identified as insurance
proceeds paid from the damage of an exempt asset shall be considered exempt to the same extent that the value of the
underlying asset is considered exempt.
B. (1) In cases instituted under the provisions of Title 11 of the United States Code, entitled Bankruptcy, there shall be
exempt from the property of the estate of an individual debtor only that property and income which is exempt under the
laws of the state of Louisiana and under federal laws other than Subsection (d) of Section 522 of said Title 11 of the
United States Code.
(2) No property upon which a debtor has voluntarily granted a lien shall, to the extent of the balance due on the debt secured
thereby, be subject to the provisions of this Chapter or be exempt from forced sale under process of law.
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(3) Proceeds from the involuntary sale or distribution of personal property that is exempt from seizure under the laws of this
state, made at or after the filing of a petition under any Chapter of Title 11 of the United States Code, shall remain exempt
for purposes of state law exemptions, as applicable under 11 U.S.C.A. 522(b)(2)(A). For purposes of this Subsection,
involuntary sale shall mean any non-consensual sale or disposition of property.
C. The state of Louisiana expressly waives any immunity from suit insofar as the garnishment of the nonexempt portion of the
wages, salaries, commissions, or other compensation of public officials, whether elected or appointed, public employees,
or contractors is concerned, of itself, its agencies, boards, commissions, political subdivisions, public corporations, and
municipal corporations.
D. (1) Except as provided in Paragraph (2) of this Subsection and in R.S. 11:292, the following shall be exempt from all
liability for any debt except alimony and child support: all pensions, all tax-deferred arrangements, annuity contracts, and
all proceeds of and payments under all tax-deferred arrangements and annuity contracts, as defined in Paragraph (3) of
this Subsection.
(2) No contribution to a tax-deferred arrangement or to an annuity contract, as defined in Paragraph 3 of this Subsection, shall
be exempt if made less than one calendar year of the date of filing for bankruptcy, whether voluntary or involuntary, or
the date writs of seizure are filed against the tax-deferred arrangement or annuity contract. A transfer from one tax-
deferred arrangement to another or from one annuity contract to another shall not be considered a contribution for
purposes of this Paragraph.
(3) The term tax-deferred arrangement includes all individual retirement accounts or individual retirement annuities of any
variety or name, whether authorized now or in the future in the Internal Revenue Code of 1986, or the corresponding
provisions of any future United States income tax law, including balances rolled over from any other tax- deferred
arrangement as defined herein, money purchase pension plans, defined benefit plans, defined contribution plans, Keogh
plans, simplified employee pension (SEP) plans, simple retirement account (SIMPLE) plans, Roth IRAs, or any other
plan of any variety or name, whether authorized now or in the future in the Internal Revenue Code of 1986, or the
corresponding provisions of any future United States income tax law, under which United States income tax on the tax-
deferred arrangement is deferred. The term annuity contract shall have the same definition as defined in R.S. 22:912(B).
LA. C.C. Art. 3182. Debtor's general liability

Whoever has bound himself personally, is obliged to fulfill his engagements out of all his property, movable and immovable,
present and future.
LA. C.C. Art. 3183. Debtor's property common pledge of creditors; exceptions to pro rata distribution
The property of the debtor is the common pledge of his creditors, and the proceeds of its sale must be distributed among them
ratably, unless there exist among the creditors some lawful causes of preference. (unchanged since 1870. Preferences are
privileges and mortgageswe have more now, but these are the ones were studying.)
We have special privileges (only apply to certain things) and general privileges (3191 CC and 3252 CC; apply to all assets of
debtors, some are general on immovables, some are general on movables, some are general on both)
LA. C.C. Art. 3184. Lawful causes of preference

Lawful causes of preference are privilege and mortgages.
LA. C.C. Art. 3185. Privileges established only by law, stricti juris
Privilege can be claimed only for those debts to which it is expressly granted in this Code.
LA. C.C. Art. 3186. Privilege, definition

Privilege is a right, which the nature of a debt gives to a creditor, and which entitles him to be preferred before other creditors,
even those who have mortgages.
Art.3186. The nature of the debt which gives the person the right to be preferred.
General PrivilegesOver all property of a particular kind (such as on immovable property); ie burial expenses, last illness
o These were considered to further the greatest societal interest
Special Privilegesover specific property
o Generally, these protect certain basic commercial interests; ie for those who sold on credit, vendors, lessors,
etc
Privileges were over immovables or movables or both.
Privileges are not contracted and arise by operation of law. No consent required of the debtor and no intent to create a
security interest is required of the creditor.
These are ranks created by the nature of the debt, as opposed to rankings created by time (mortgages, who filed first).
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oThose deemed most important will rank above lesser important societal interests, regardless of time arising or
recordation
Narrowly construed, these are exceptions to general rules
Immovables Movables Both

General Privilege Arts. 3191-3215 Funeral
No CC Arts. Last Illness
3252-3253
Special Privilege Public Works Act 9:4801 Vendors Rights No CC Arts.
3249 3216-3248
LA. C.C. Art. 3187. Basis of preferences among privileges

Among creditors who are privileged, the preference is settled by the different nature of their privileges.
LA. C.C. Art. 3188. Concurrent privileges

The creditors who are in the same rank of privileges, are paid in concurrence, that is on an equal footing.
3188 creditors of the same rank which means same nature
LA. C.C. Art. 3189. Property affected by privileges

Privileges may exist, either on movables or immovables, or on both at once.
LA. C.C. Art. 3190. General or special privileges on movables

Privileges are either general, or special on certain movables.
LA. C.C. Art. 3191. General privileges on all movables, enumeration and ranking (Law Institute changing this. Will likely
change in January 2015 or January 2016. Think of time period that this article was enacted. Reconstruction1870).
The debts which are privileged on all the movables in general, are those hereafter enumerated, and are paid in the following
order:
1. Funeral charges (the extent of the funeral privilege is only $500, headstone is not included in the funeral charge, if a third
party pays the funeral charges, that person is subrogated to the obligee/funeral partys rightsmeaning they maintain that
privilege against the obligor up to the amount of $500). The case on this held that this privilege wins over mortgageit
will be paid before the mortgage
2. Law/Judicial charges
1. Arise from two different sources: 1) the ones incurred from a succession, but not attorneys
fees and 2) those that are incurred from court, like expert witness fees, court costs.
2. Look at article 3276The charges against a succession, such as funeral charges, law
charges, lawyer fees for settling the succession, the thousand dollars secured in certain
cases to the surviving spouse or minor heirs of the deceased, and all claims against the
succession originating after the death of the person whose succession is under
administration, are to be paid before the debts contracted by the deceased person, except as
otherwise provided for herein, and they are not required to be recorded.
3. Charges, of whatever nature, occasioned by the last sickness, concurrently among those to whom they are due, arts. 3199-
3204, does not need to be recorded
1. This only applies to the illness of which the person died
2. Chronic illness: only applies from the day they can no longer tend to their own biz and they
are bedridden
3. Privilege is only for one year
4. Judge has to approve these charges
4. The wages of servants for the year past, and so much as is due for the current year.
1. Remember the time period1870, Reconstruction. Basically useless now after Jim Crow
era.
2. This only applies to IN HOME servants, like valets, butlers, live in maids, cooks, etc.
These are the people who were freed during Civil War but still living with families. Were
protecting them! If not paid, can seize and sell entire plantationprobably wont work
because theyll be lynched if they bring this lawsuit.
5. Supplies of provisions made to the debtor or his family, during the last six months, by retail dealers, such as bakers,
butchers, grocers; and, during the last year, by keepers of boarding houses and taverns.
1. At the time, all the stores had open accounts.
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2. Prof doesnt know of any bakers that allow people to buy on credit anymore, but if they
do, they fall in here, and it is only credit to the FAMILY, not a biz.
3. Rubin doesnt think its credit cards. Courts would be reluctant, but maybe a possibility.
Problem because most credit cards elect state law outside of LA.
4. Boarding houses were hotels. Now, we have different rules for hotels. They make you pay
before.
5. Teachers and preceptors: if you teach students in your home.
6. The salaries of clerks, secretaries, and other persons of that kind.
1. This is not the law clerk in an office, this is the person who comes in home and manages all
the books for the home, like Mr. Scrooges ER.
2. Case law in 1930s, must be a clerk or secretarynot a teacher. Limited it.
3. Hypo: X calls you, thinks his employee is embezzling, X wants to fire him today because
at-will state. Today is the 29th and we pay on the 30th. Ill fire him, and pay him on the 30th.
NO!!! Special statute requires you to pay someone when fired.
Now look at 3252basically the same list.
LSA-C.C. Art. 3252. General privileges on both movables and immovables

The privileges which extend alike to movables and immovables are the following:
1. Funeral charges.
2. Judicial charges.
3. Expenses of last illness.
4. The wages of servants.
5. The salaries of secretaries, clerks and other agents of that kind.
Whenever a surviving spouse or minor children of a deceased person shall be left in necessitous circumstances, and not possess
in their own rights property to the amount of one thousand dollars, the surviving spouse or the legal representatives of the
children, shall be entitled to demand and receive from the succession of the deceased spouse or parent, a sum which added to
the amount of property owned by them, or either of them, in their own right, will make up the sum of one thousand dollars, and
which amount shall be paid in preference to all other debts, except those secured by the vendor's privilege on both movables
and immovables, conventional mortgages, and expenses incurred in selling the property. The surviving spouse shall have and
enjoy the usufruct of the amount so received from the deceased spouse's succession, until remarriage, which amount shall
afterwards vest in and belong to the children or other descendants of the deceased spouse.
Movables: funeral, law charges, last illness, seal, clerks and secretaries. Look at 3271.
This article tells us that we go to movables first to satisfy privileges, then if there is not enough to satisfy the privileges, then
we go to Art. 3252 immovables, and the 3252 privileges will be paid before the mortgage. Privileges are paid FIRST!!
LA. C.C. Art. 3192. Funeral charges, definition

Funeral charges are those which are incurred for the interment of a person deceased.
LA. C.C. Art. 3193. Reduction of funeral charges of insolvent decedent

If the property of the deceased is so incumbered as not to suffice for the payment of his creditors, the funeral charges may,
upon the request of any of them, be reduced by the judge to a reasonable rate, regard being had to the station in life which the
deceased held and which his family holds. (Station in life: class in society. This is trick on the bar exam.)
LA. C.C. Art. 3194. Limitation in event of reduction

But, in case of the reduction, the judge can never allow, at the expense of the estate, on any account whatever, more than Five
Hundred Dollars for all the expenses occasioned by the interment of the deceased.
Funeral Privilege. It is for separate and immovable property. It does not apply to tombstones. Alter v. OBrien p. 474 (1879):
HELD: Funeral charges are secured by a privilege which extends to movables and immovable alike. Husband had given a
mortgage on community immovable. The mortgagee caused the property to be seized and sold. The undertaker is making a
claim against the proceeds. Its for everything, but may not cover the tombstone. Were it not for the privilege which the law
allows to those who dig the grave, furnish the coffin and drive the hearse, many a lifeless frame, deprived of sepulture, would
rot in unnoted or forsaken homes. Were it not for that privilege, when Death enters a city and knocks at every door watchful
and indefatigable as it is, Charity would inevitably be unequal to the increased task which -- otherwise -- would be imposed
upon it.
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The Code expressly provides that privilege is a right, which the nature of a debt gives to a creditor, and which entitles him to be
preferred before other creditors, even those who have mortgages-C. C. 3186 (3153). Funeral charges are secured by a privilege
which extends alike to movables and immovables. C. C. 3252 (3219.) Though the lessor's right on the movables found on the
place leased, is of a higher nature than a mere privilege-C. C. 3218-(3185)-that extraordinary right yields to the privilege for
the funeral expenses of the debtor and of his family, when there is no other source from which they can be paid. C. C. 3257
(3224).
This is just: were it not for the privilege which the law allows to those who dig the grave, furnish the coffin and drive the
hearse, many a lifeless frame, deprived of sepulture, would rot in unnoted or forsaken homes
In whomsoever may be the title to the property, whether in the husband or the community, howsoever encumbered it may be,
the proceeds of the sale of the property can-under no circumstances-be applied to the satisfaction of a conventional mortgage,
to the exclusion of the funeral expenses incurred, not only for the debtor, but for his family, when-in the language of the Code-
there is no other source from which they can be paid.
The funeral expenses of a debtor, or of his wife and children, operate as a privilege on the real estate of the community, when
there is no other source from which those expenses can be paid, and this privilege ranks any mortgage on such real estate.
Where there is no source from which funeral expenses of a debtor can be paid other than the community's real estate, on which
there is a mortgage, to a proceeding by an undertaker claiming a lien on the mortgaged property, a representative of the
succession of the wife is not a necessary party
Art. 3193 & 3194. Not much use this privilege today because limited to $500 dollars.
Can someone pay funeral expenses and get subrogated? Not generally. Most laws prohibit subrogation on privileges, BUT
exception on funeral expenses and sickness. Why? We want people to take care of the sick and dead. Succession of Holstun
case. Cap on privileges. What is covered by last illness? 3202.
LA. C.C. Art. 3195. Law charges, definition

Law charges are such as are occasioned by the prosecution of a suit before the courts. But this name applies more particularly
to the costs, which the party cast has to pay to the party gaining the cause. It is in favor of these only that the laws [law]
grants the privilege.
Law Charges. Art. 3195. Clerks fees, sheriff fees, jury bond. Deposition is privilege if taxed as costs by the court.
Handling of succession can be taxed as cost under 3197. 3198 says if not taxed as cost then you are unsecured creditor.
LA. C.C. Art. 3196. Costs which enjoy privilege

The creditor enjoys this privilege, not with regard to all the expenses which he is obliged to incur in obtaining judgment against
his debtor, but with regard only to such as are taxed according to law, and such as arise from the execution of the judgment.
LA. C.C. Art. 3197. Costs for the general benefit of creditors
The cost of affixing seals and making inventories for the better preservation of the debtor's property, those which occur in cases
of failure or cession of property, for the general benefit of creditors, such as fees to lawyers appointed by the court to represent
absent creditors, commissions to syndics; and finally, costs incurred for the administration of estates which are either vacant or
belonging to absent heirs, enjoy the privileges established in favor of law charges.
LA. C.C. Art. 3198. Costs not taxed in suit

Not only has the creditor no privilege for the costs which are not taxed, or which are not included among those mentioned
above, but he has no right to demand them even from the debtor.
LA. C.C. Art. 3199. Last sickness, definition

The last sickness is considered to be that of which the debtor died; the expenses of this sickness enjoy the privilege.
LA. C.C. Art. 3200. Chronic sickness

But if the sickness with which the deceased was attacked and of which he died, was a chronic disease, the progress of which
was slow and which only occasioned death after a long while, then the privilege shall only commence from the time when the
malady became so serious as to prevent the deceased from attending to his business and confined him to his bed or chamber.
156
LA. C.C. Art. 3201. Maximum period of privileged expenses

However long the sickness may have lasted after arriving at the point which prevented him from attending to his affairs, the
privilege granted for the expense it has occasioned, can only extend to one year before the decease.
LA. C.C. Art. 3202. List of expenses privileged

The expenses of the last sickness comprehend the fees of physicians and surgeons, the wages of nurses, and the
price due to the apothecary (drug store) for medicines supplied by him to the deceased for his personal use during
his last illness. PELICAN STATE ASSOCIATES, INC. v. WINDER case talks about modern medical procedures and
essentially everything medical is covered. Hospice care, hospital care. 3203.
LA. C.C. Art. 3203. Amount due for expenses, fixed by contract or by judge
The accounts relating to these expenses must be fixed by the judge, in case of dispute, after hearing testimony as to the value of
the services rendered or care afforded, or as to the true value of the medicines supplied, (doctor joke. Doctors overcharge!
How good of treatment can it be? HE DIED!!!) unless there has been a contract between the parties, in which case it must be
observed.
TRICK: If you see question where child is ill, this is a trick question. Because you have a last illness privilege if child dies! Its
not recorded and it beats mortgages!!! HUGE.
LA. C.C. Art. 3204. Last sickness of debtor's children

This privilege subsists, not only for the expenses of the last sickness of the debtor, it subsists also for those of the last sickness
of children, under his authority, but it is exercised subject to the rules laid down above.
LA. C.C. Art. 3205. Servants, definition

Servants or domestics are those who receive wages, and stay in the house of the person paying and employing them for his
service or that of his family; such are valets, footmen, cooks, butlers, and others who reside in the house.
LA. C.C. Art. 3206. Prescription of action; extent of privilege

Domestics or servants must make a demand of their wages within a year from the time when they left service, but their
privilege is only for the year past, and so much as is due for the present year.
LA. C.C. Art. 3207. Wages recoverable but not privileged

As to the wages of preceding years which may be due, the wages may be recovered, if there is any balanced account, note or
obligation of the debtor, but they enjoy no privilege. They form an ordinary debt, for which domestics or servants come in by
contribution with other ordinary creditors.
LA. C.C. Art. 3208. Supplies furnished by retail dealers

Such supplies of provisions as confer a privilege, are those which are made by retail dealers; that is, persons keeping an open
shop, and selling, by small portions, provisions and liquors.
LA. C.C. Art. 3209. Prescription of action; extent of privilege

Retail dealers who have furnished such supplies, ought to demand their money within a year from the time of the first supply;
but they have a privilege only for the last six months, and for the rest they are placed on the footing of ordinary creditors.
LA. C.C. Art. 3210. Wholesale dealers

Dealers by wholesale in provisions and liquors do not enjoy any privilege on the property of their debtor, further than what they
have acquired by mortgage, or by a judgment duly recorded.
LA. C.C. Art. 3211. Innkeepers and masters of boarding houses

It is not keepers of taverns and hotels alone, who are comprehended in the term masters of boarding houses, and who enjoy a
privilege for their supplies, but all persons who make a business of receiving persons at board for a fixed price.
LA. C.C. Art. 3212. Teachers and preceptors

Teachers and preceptors, who receive into their houses young persons to be brought up, fed and instructed, enjoy the same
privilege which is given to keepers of boarding houses.
157
LA. C.C. Art. 3213. Extent of privilege for supplies

The privilege of keepers of boarding houses, taverns, and other persons comprised in this class, extends to the last year due,
and so much as has expired of the current year.
LA. C.C. Art. 3214. Clerks and secretaries, extent and rank of privilege for salaries
Although clerks, secretaries and other agents of that sort can not be included under the denomination of servants, yet a
privilege is granted them for their salaries for the last year elapsed, and so much as has elapsed of the current year. This
privilege, however, can not be enforced until after that of the furnishers of provisions.
CREDITOR PRIVILEGES
LA. C.C. Art. 3220. Privilege of pledgee
The creditor acquires the right of possessing and retaining the movable which he has received in pledge, as a security for his
debt, and may cause it to be sold for the payment of the same.
Hence proceeds the privilege which he enjoys on the thing.
LA. C.C. Art. 3221. Enforcement of pledge

For the exercise of this privilege it is necessary that all the requisites stated in the title: Of Pledge, should be fulfilled.
13:3881 are exemptions for certain items from seizures from all privileges. These rights are waivable. If one puts a consensual
security device on these items one cant avail himself of these exemptions.
(1)(a) if wages are garnished, 25% of income can be garnished. It doesnt include child support.
(2) idea that people need certain property to operation. 3185 says privileges are strictly and narrowly construed. The
exemptions are to be narrowly construed.
(3) personal servitude of habitation and the usufruct--Moms right to live in house after daddys death.
(4) day-to-day items to live are exempt.
LSA-C.C. Art. 3273. Recordation, effect against third persons

Privileges are valid against third persons, from the date of the recording of the act or evidence of indebtedness as provided by
law
LSA-C.C. Art. 3274. Time and place of recordation; effectiveness

No privilege shall have effect against third persons, unless recorded in the manner required by law in the parish where the
property to be affected is situated. It shall confer no preference on the creditor who holds it, over creditors who have acquired a
mortgage, unless the act or other evidence of the debt is recorded within seven days from the date of the act or obligation of
indebtedness when the registry is required to be made in the parish where the act was passed or the indebtedness originated and
within fifteen days, if the registry is required to be made in any other parish of this State. It shall, however, have effect against
all parties from date of registry.
LSA-C.C. Art. 3275. Inclusion of date of birth of parties

In addition to any other requirement that may be provided by general or special law, every act or other document evidencing a
privilege that is filed for recordation in accordance with this Chapter shall contain the date of birth of all parties named in the
act or document. The failure to include the date of birth of all parties shall not affect the validity of the act or instrument. No
clerk of court or recorder of mortgages shall refuse to accept for recordation any act or instrument which does not contain the
date of birth of all parties.
LSA-C.C. Art. 3277. Methods of extinction

Privileges become extinct:
1. By the extinction of the thing subject to the privilege.
2. By the creditor acquiring the thing subject to it.
3. By the extinction of debt which gave birth to it.
4. By prescription.
Notes of Decisions (23)
13:3886 is the request for notice under Mennonite. Statute doesnt help because notice of sale is constitutional right. This
statute does not trump Mennonite.
158
Privileges That Affects Movables and Immovables Together
In Order of Rank Immovables Movables

Funeral (dont require recordation to affect 3rd parties)
Law
Last Illness(dont require recordation to affect 3rd parties)
Service Wages
Retail Supplies
Salaries & Clerks & Secretaries
Necessitous Spouse
All privileges are accessory to some principal obligation--In 3201, however long the illness lasted the privilege can only extend
one year before the deceased so--doctor may be undersecured.
Servants and Domestics. Art. 3205-3206. Privilege extends plus the year past and so much as due for the present year. Title 22
says you must pay them all wages and benefits accrued within 72 hours or you are liable for 90 days of wages plus attorneys
fees.
Suppliers of Provisions. Retail suppliers on open accounts. Only last six months and doesnt apply to wholesale dealers and
teachers and preceptors.
Clerks and Secretaries. General privileges and affects immovables and movables and lasts year and some. Not a teacher,
worker or day laborer. It really is a clerk.
Necessitous Spouse Privileges. 3252. Surviving spouse left with necessitous circumstances shall get $1000.
How Are the Privileges To Be Arranged?

3254 involves the ranking of privileges. Civil Code has nothing to do with ranking against non-Codal ranks of UCC 9 and
chattel mortgages.
Way To Analyze and Rank when there are multiple things going on:
When does the mortgage or security interest begin to effect 3rd parties?
When does the principal obligation prescribe and can you tell from public records?
When does the mortgage cease and can you tell from public records?
Cash sales or sales subject to means you have a 3rd party involved. Assumption means no third party.
If sale with mortgage got sellers mortgage, vendors privilege and resolutory condition (which is different in before and after
1995)
Look whether there is first right of refusal which was prescriptable before 1995.
Sale with right of redemption as between the parties and as to third parties
Look to see whether or not the sale on its face reveal it is merely a security interest. Miller v. Shotwell.
Now start looking at foreclosure process. The Mennonite notice, the rights.
Succession of Holstun: lady dies and there isnt enough money in the succession to pay all the debts.
Telephone bill made during testatrix' last illness held properly disallowed as privileged claim. LSA-C.C. art. 2161.
Only those enumerated by statute are, without conventional subrogation, entitled to privileged claims for debts paid for
succession. LSA-C.C. art. 2161.
Brother incurring expenses and furnishing sanitarium services for sister during her last illness held entitled, without
conventional subrogation, to privileged claim therefor. LSA-C.C. art. 2161.Decedent's brother, who paid for shroud, digging
grave, and casket, held entitled, without conventional subrogation, to privileged claim therefor. LSA-C.C. arts. 2161, 3193,
3194, 3276; LSA-Const.1921, art. 19, 19.
Expenses of last illness, such as hospital and sanitarium bills, held not required to be recorded to be privileged claims. LSA-
C.C. arts. 2161, 3274, 3276; LSA-
$200 held maximum amount allowable as privileged claim for funeral charges against insolvent succession. (Now it is $500)
159
Cost of tombstone held not allowable as privileged claim against insolvent succession
Doctors' and nurse's bills incurred during decedent's last illness held not required to be recorded to be recognized without
conventional subrogation as privileged claims against succession.
Attorney's fees and court costs incurred for benefit of succession held privileged without claimant's formal subrogation to
rights of those who received such sums.
State, parish, and town taxes, curator's fees, and executor's commission held privileged claims against insolvent succession.
Last Illness. Pelican State Associates, Inc. v. Winder (1969): FACTS: guy dies in hospital after having been admitted one
month earlier. ISSUE: what are expenses for last sickness?
DISCUSSION:
Argument is that the hospital expenses were not specifically enumerated in 3202 as an expense of last illness and so these costs
are not privileged.
Art. 3202 is illustrative, not definitive.
It is clear the redactors did not intend to so limit the scope of the term expenses of last illness as to include only those listed in
3202, but rather as pointed out above when considered in the light of the several pertinent articles it was intended to encompass
and include any expense incurred during the last illness of the decedent except where specifically limited.
This is supported by the fact that 3191(addressing privileged debts on movables) says that charges, of whatever nature,
occasioned by the last sickness are one of the privileged debts on movables.
HELD: held that where decedent was admitted to hospital one month prior to his demise and at time of his death he owed
hospital for room and board, etc., claim based upon such debt was for expense of last illness within articles giving such debt
privileged status, but that suit was barred by three-year prescription where suit was instituted more than eight years after
succession was opened.
Privilege is for last illness that was chronic and commences from time malady becomes so severe as to be the one that
causes death. Cancer and AIDS. 20:1 is the homestead exemption amended two years ago to say that hospitals cant take
your home. 3202 limits the amount of the medical services rendered by the judge valuing the doctors services and can
reduce them. Debtors property is also responsible for the childs last illness. Art. 3276 says are not required to be
recorded.
Cook &Morehouse v. Dodge &Johnson: Servants employed in a large hotel are not entitled to the privilege allowed by LSA-
C.C. art. 3172. That article applies only to such servants as are employed in the service of a family or the private establishment
of a person keeping house. The privilege accorded by for supplies or provisions furnished to the debtor or his family, does not
apply to such supplies when furnished to a hotel.
Lloyd v. Succession of Lloyd: Under statute providing that, whenever widow or minor children of a deceased person shall be
left in necessitous circumstances and does not possess property to the amount of $1,000, the widow or the legal representative
of the children shall be entitled to demand and receive from the succession of deceased husband or father a sum which when
added to property owned would total $1,000, the surviving widow is entitled primarily and in the first instance to the benefits
conferred and by preference and priority over minor children (even over step-children, but she has to give security)
This provision is called the widows homestead. The idea is to keep the widow/children from turning to public assistance. So,
the result is this privilege, which allows the widow/children to prime most other succession creditors. Courts have been VERY
strict in this privilege, only one time even allowing it to apply where the mother died!! But, the necessitous circumstances
has also been applied narrowly. Courts have even made deductions from the $1000 for insurance proceeds the wife received as
a beneficiary, rent received by the widow , charitable contributions to the wife. Even furniture and bedding that belong to the
wife and children have been considered. Class materials argue that stricti juris is important, but being so strictly construed
frustrates the intent of the privilege, which is welfare purpose.
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LESSON #23: PRIVILEGES ON MOVABLES: CROPS AND REPAIRMEN
C.C 3216-3248
C.C.P. 3541-3576
PRIVILEGES ON MOVABLES
LA. C.C. Art. 3216. Special privileges on movables

The privileges enumerated in the preceding section, extend to all the movables of the debtor, without distinction.
There are some which act only on particular movables and no other; and it is of these last that we shall treat in this and the
following sections.
LA. C.C. Art. 3217. List of special privileges on particular movables

The debts which are privileged on certain movables, are the following:
7. The appointments or salaries of the overseer for the current year, on the crops of the year and the proceeds thereof; debts
due for necessary supplies furnished to any farm or plantation, and debts due for money actually advanced and used for the
purchase of necessary supplies and the payment of necessary expenses for any farm or plantation, on the crops of the year
and the proceeds thereof.
8. The debt of a workman or artisan for the price of his labor, on the movable which he has repaired or made, if the thing
continues still in his possession.
9. The rents of immovables and the wages of laborers employed in working the same, on the crops of the year, and on the
furniture, which is found in the house let, or on the farm, and on every thing which serves to the working of the farm.
10. The debt, on the pledge which is in the creditor's possession.
11. That of a depositor, on the price of the sale of the thing by him deposited.
12. The debt due for money laid out in preserving the thing.
13. The price due on movable effects, if they are yet in the possession of the purchaser.
14. The things which have been furnished by an innkeeper, on the property of the traveler which has been carried to his inn.
15. The carrier's charges and the accessory expenses, on the thing carried, including necessary charges and expenses paid by
carriers; such as taxes, storage and privileged claims required to be paid before moving the thing; and in case the thing
carried be lost or destroyed without the fault of the carrier, this privilege for money paid by the carrier shall attach to
insurance effected on the thing for the benefit of the owner, provided written notice of the amount so paid by the carrier
and for whose account, with a description of the property lost or destroyed, be given to the insurer or his agent within
thirty days after the loss, or if it be impracticable to give the notice in that time, it shall be sufficient to give the notice at
any time before the money is paid over.
The privilege hereinbefore granted to the overseer, the laborers, the furnishers of supplies and the party advancing money
necessary to carry on any farm or plantation, shall be concurrent and shall not be divested by any prior mortgage, whether
conventional, legal or judicial, or by any seizure and sale of the land while the crop is on it.
The privileges granted by this article, on the growing crop, in favor of the classes of persons mentioned shall be concurrent,
except the privilege in favor of the laborer, which shall be ranked as the first privilege on the crop.
LA. C.C. Art. 3220. Privilege of pledgee

The creditor acquires the right of possessing and retaining the movable which he has received in pledge, as a security for his
debt, and may cause it to be sold for the payment of the same.
Hence proceeds the privilege which he enjoys on the thing.
LA. C.C. Art. 3221. Enforcement of pledge

For the exercise of this privilege it is necessary that all the requisites stated in the title: Of Pledge, should be fulfilled.
DEPOSITOR PRIVILEGES
LA. C.C. Art. 3222. Privilege of depositor on thing deposited

He who deposits a thing in the hands of another still remains the owner of it.
Consequently his claim to it is preferred to that of the other creditors of the depositary, and he may demand the restitution of it,
if he can prove the deposit, in the same manner as is required in agreements for sums of money, and if the thing reclaimed be
identically the same which he deposited.
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LA. C.C. Art. 3223. Depositor's privilege on price in case of sale

If the depositary abuses his trust, by alienating the thing confided to his care, or if his heirs sell it, not knowing that it had been
given in deposit, the depositor retains his privilege on the price which shall be due.
OF EXPENSES INCURRED FOR THE PRESERVATION OF THE THING
LA. C.C. Art. 3224. Preservation of property of another

He who, having in his possession the property of another, whether in deposit or on loan or otherwise, has been obliged to incur
any expense for its preservation, acquires on this property two species of rights.
LA. C.C. Art. 3225. Rights of pledge and retention against owner
Against the owner of the thing, his right is in the nature of that of pledge, by virtue of which he may retain the thing until the
expenses, which he has incurred, are repaid.
He possesses this qualified right of pledge, even against the creditors of the owner, if they seek to have the thing sold. He may
refuse to restore it, unless they either refund his advance, or give him security that the thing
LA. C.C. Art. 3226. Right of preference against creditors

Finally, he who has incurred these expenses has a privilege against these same creditors, by virtue of which he has preference
over them out of the price of the thing sold, for the amount of such necessary charges as he shall have incurred for its
preservation. This is the privilege in question in the present paragraph.
LA. C.C.P. Art. 3541. Grounds for attachment

A writ of attachment may be obtained when the defendant:
(1) Has concealed himself to avoid service of citation;
(2) Has granted a security interest under Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.), or has
mortgaged, assigned, or disposed of his property or some part thereof, or is about to do any of these acts, with intent to
defraud his creditors or give an unfair preference to one or more of them;
(3) Has converted or is about to convert his property into money or evidences of debt, with intent to place it beyond the reach
of his creditors;
(4) Has left the state permanently, or is about to do so before a judgment can be obtained and executed against him; or
(5) Is a nonresident who has no duly appointed agent for service of process within the state.
LA. C.C.P. Art. 3542. Actions in which attachment can issue

A writ of attachment may be obtained in any action for a money judgment, whether against a resident or a nonresident,
regardless of the nature, character, or origin of the claim, whether it is for a certain or uncertain amount, and whether it is
liquidated or unliquidated.
LA. C.C.P. Art. 3543. Issuance of a writ of attachment before debt due
A writ of attachment may be obtained before the debt sued upon is due. If the debt is paid when it becomes due, the costs of the
seizure shall be paid by the plaintiff.
LA. C.C.P. Art. 3544. Plaintiff's security

The security required for the issuance of a writ of attachment shall be for the amount of the plaintiff's demand, exclusive of
interest and costs. If the writ is obtained on the sole ground that the defendant is a nonresident, the security shall not exceed
two hundred fifty dollars, but on proper showing the court may increase the security to any amount not exceeding the amount
of the demand.
LA. C.C.P. Art. 3545. Nonresident attachment; venue

An action in which a writ of attachment is sought on the sole ground that the defendant is a nonresident may be brought in any
parish where the property to be attached is situated.
LA. C.C.P. Art. 3571. Grounds for sequestration

When one claims the ownership or right to possession of property, or a mortgage, security interest, lien, or privilege thereon, he
may have the property seized under a writ of sequestration, if it is within the power of the defendant to conceal, dispose of, or
waste the property or the revenues therefrom, or remove the property from the parish, during the pendency of the action.
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LA. C.C.P. Art. 3572. Sequestration before rent due

A sequestration based upon a lessor's privilege may be obtained before the rent is due, if the lessor has good reason to believe
that the lessee will remove the property subject to the lessor's privilege. If the rent is paid when it becomes due, the costs shall
be paid by the plaintiff.
LA. C.C.P. Art. 3573. Sequestration by court on its own motion

The court on its own motion may order the sequestration of property the ownership of which is in dispute without requiring
security when one of the parties does not appear to have a better right to possession than the other.

An applicant for a writ of sequestration shall furnish security for an amount determined by the court to be sufficient to protect
the defendant against any damage resulting from a wrongful issuance, unless security is dispensed with by law.
LA. C.C.P. Art. 3575. Lessor's privilege

A writ of sequestration to enforce a lessor's privilege shall issue without the furnishing of security.
LA. C.C.P. Art. 3576. Release of property under sequestration

If the defendant does not effect the release of property seized under a writ of sequestration, as permitted by Article 3507, within
ten days of the seizure, the plaintiff may effect the release thereof by furnishing the security required by Article 3508.
LSA-R.S. 9:4501. Repairman's privilege on automobiles and other machinery (special privileges) Look to CC 3216
[The privileges enumerated in the preceding section, extend to all the movables of the debtor, without distinction.
There are some which act only on particular movables and no other; and it is of these last that we shall treat in this
and the following sections])
A. Any person operating a garage or other place where automobiles or other machinery are repaired, or parts therefor are
made or furnished, has a privilege upon the automobile or other machinery for the amount of the cost of repairs made,
parts made or furnished, and labor performed. If an estimate was given by the repairman for the repairs, then in order for
the amount of the privilege to exceed the amount of the estimate, the repairman must secure authorization to exceed the
amount of the estimate. This privilege is effective for a period of one hundred twenty days from the last day on which
materials were furnished or labor was performed if the thing affected by such privilege is removed from the place of
business where such labor was performed or materials were furnished; provided that if the thing affected by such privilege
remains in the place of business of the person who furnished such materials or performed such labor, such privilege
continues as long as such thing remains in such place of business. For the purposes of this Section, it is immaterial where
the automobile or other machinery may have been located at the time or by whom the parts may have been attached.
o So If I get item on premises on day 1, do work on day 2, removes 90 days later, when does 120 day start? Day 2. How
do you enforce this? Writ of sequestration.
B. This privilege may be enforced by the writ of sequestration, without the repairman having to furnish security therefor;
and the exemptions from seizure granted by R.S. 13:3881 shall not be applicable to objects or property subject to this
privilege for purposes of enforcing the privilege. This privilege is superior to all other privileges except for a vendor's
privilege, a chattel mortgage previously recorded, a previously perfected security interest under Chapter 9 of
Louisiana Commercial Laws [time ranking], or against a bona fide purchaser to whom possession has been
delivered and who has paid the purchase price without previous notice of the existence of the privilege.
o Look at 4501. Remember Mitchell case in due process section of materials. Sequestration is what you get when you
have mortgage, privilege, ownership interest. Which means what? Due process rules apply. Do you need a bond?
Normally, yes, but in case, says bond is not sufficient due process requirements. Must give notice to a judge and NO
BOND. How do you rank this privilege? Contained in 4501(b) WARNING: KNOW THIS STATUTE FOR
LESSORS PRIVILEGE. BOOM. Exceptions from seizure dont apply. Outranks all privileges except vendors
privilege (on movables), tettle mortgages, previously perfected interest on Chapter 9, or bona fide purchaser in good
faith. Ranking has nothing to do with timeits the NATURE of these ranks.
C. If the automobile or other machinery is seized and sold by the holder of a vendor's privilege or previously recorded chattel
mortgage, then any proceeds over and above the balance due on the vendor's privilege and previously recorded chattel
mortgage, plus costs of court including costs of the sheriff, constable, or marshal, shall be paid to the garage or repairman,
not to exceed the amount of the repairman's privilege.
Camp D Motor case important here.
Whats purchaser do if in repair shop? Heart enterprises.
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What repair shop do if owner of vehicle? Put motor in and floor mats and new lights and owner doesnt pay. What do you pay?
Can you take it out? Not if it become an accessory! Floor mats, yes. Engine, no. No self-help. Martinez case. Hoggins is more
of the same.
If 4501 doesnt apply, you use 4502. 4502 has private sale provision under certain conditions under (c).
Can you get EP for this? NO. Nothing in writing. No confession of judgment.
Repair shops have a lien on your car AS LONG AS IT IS IN THE SHOP. Once they release it, they have to go through judicial
proceedings, which costs moneywe do not allow self-help, where the creditor can go seize your car. That is why repair shops
will hang on to your car until you pay the bill.
The repair shop has 120 days for the right of pursuit. If they want the privilege, and an estimate was given, they have to call
you to tell you the actual cost.
Part B is very important. Our general rule is that UCC privileges win. This rule is an exception. This rule says that UCC that is
first, then it wins, but repair privilege beats UCC privilege later in date. Like other areas of law, good faith third party
purchasers are also protected.
HYPO: Car comes to repair shop. Repairs begin day 3 and day 5 car leaves the shop. Day 6 owner gives to bank a UCC 9
security interest on the car. Day 9 owner sells car.
Repair man beats the UCC9 because he is first but is inferior to the 3rd party owner because the 3rd party owner ranks
above. What happens if UCC 9 was put on the car before the repairs. We know UCC 9 beats the repair man and the bona
fide purchaser. But bona fide purchaser beats the repair man under the statute.
Time ranking (between UCC9 and repairman) and nature ranking(bona fide purchaser and repairman)
PART I. MAKING AND REPAIRING MOVABLES
LSA-R.S. 9:4502. Privilege for making or repairing movable goods, commodities, equipment, merchandise, machinery,
and other movable objects
A. (1) Any person engaged in the making or repairing of movable goods, furniture, upholstery, commodities, equipment,
merchandise, machinery, or movable objects or movable property of any type or description, has a privilege on the thing
for the debt due him for materials furnished or labor performed. This privilege is effective for a period of one hundred
twenty days from the last day on which materials were furnished or labor was performed, if the thing affected by such
privilege is removed from the place of business where such labor was performed or materials furnished; provided that if
the thing affected by such privilege remains in the place of business of the person who furnished such materials or
performed such labor, such privilege continues as long as such thing remains in such place of business.
B. This privilege is effective for a period of twelve months from the last day on which materials were furnished or labor was
performed on any farm equipment or machinery, if said thing affected by such privilege is removed from the place of
business where such labor was performed or materials furnished; provided, further, that this special farm privilege shall not
be effective for more than one hundred twenty days as against third parties who purchase the equipment or machinery, or
who lend money secured by the equipment or machinery, in good faith without knowledge of the existence of any
privilege.
C. This privilege may be enforced by the writ of sequestration, without the necessity of the creditor furnishing security
Therefore, if the debtor is first given ten days written notice by registered mail, and the exemptions from seizure granted
by R.S. 13:3881 shall not be applicable to objects or property subject to this privilege for purposes of enforcing this
privilege.
D. This privilege is inferior to a vendors privilege, a chattel mortgage previously recorded, a previously perfected security
interest under Chapter 9 of the Louisiana Commercial Laws, [FN1] or against a bona fide purchaser to whom possession
has been delivered and who has paid the purchase price without previous notice of the existence of the privilege.
E. In addition to the remedy above granted, when the thing affected by the privilege remains in the place of business of the
person having such privilege and the debt due thereon remains unpaid for more than ninety days from the date on which
the last labor was performed or last material was furnished, the holder of such privilege may sell such property at private
sale and without appraisement, after advertising such property for ten days as provided by law in case of judicial sales of
movables. If the thing affected by such privilege and subject to such sale is of a value of ten dollars or less, to be shown by
written estimate made and signed by two disinterested appraisers, then it shall not be necessary to advertise such property
for sale, but in lieu thereof the privilege holder shall, at least ten days prior to such sale, mail by registered mail to the
owner or apparent owner at his last known address a notice stating the intention to sell such property and giving the date,
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time and place of the sale. From the proceeds of any such sale, the amount of the debt secured by such privilege shall be
satisfied, including all reasonable charges for registered notices, advertisement or charges for appraisers and costs of the
sale; and the balance, if any, shall be held for the benefit of the owner for a period of six months, after which time, if it
remains unclaimed, it shall be paid to the state treasury.
F. This Section shall not be construed as repealing any of the provisions of R.S. 9:4501 or of any other law which grants a
privilege, or grants another remedy for the enforcement thereof. However, the remedy granted by Subsection C of this
Section is not available to any person who is granted a remedy for the enforcement of his privilege under any other Section
of this Title. When property to which the privilege granted by R.S. 9:4501 does not apply, but for which a certificate of
title from the office of motor vehicles of the Department of Public Safety is required, is sold at private sale pursuant to
Subsection C, the office of motor vehicles shall issue a new certificate of title to the purchaser, if the application therefore
is accompanied by an authentic act of sale and proof of compliance with the advertisement or notice requirement, as the
case may be.
Privilege may be enforced without a writ of sequestration. If you want to sequester without a bond you must give notice
under 4501 you do not.
12 month option for heavy equipment?
Private sale probably not trigger a Mennonite notice because no state action just using state statute but using state court is
state action. Might require a state due process notice but not a federal due process notice.
(D) reminds you that this is a catchall provision if 4501 can not be used.
Rights of A Repair Shop Against A Purchaser of the Vehicle. Campti Motor Company v. Box (1932): FACTS: ISSUES:
whether or not plaintiff's lien and privilege for accessories furnished and labor performed for repairs upon defendant's truck and
trailer could be enforced subsequent to the sale of the truck by defendant to intervenor. HELD: bc the sale was to a bona fide
purchaser for value, the privilege did not attach. The buyer asked about liens and was told nothing about this repairmans lien
he was in good faith. Sale of truck and trailer subject to lien for accessories and labor, though taking place only few hours
before seizure under lien, held not defeated in favor of holder of lien.
Right of A Purchaser Against A Repair Shop. Hart Enterprise Electrical Co. v. Stewart (1936): FACTS: Company A tells
repair shop to fix machines and that they will let the repair shop sell the machines and keep the first $150. Then A sells to B
while it is sitting in the repair shop, and B wants to take the machines and not pay for repairs. ISSUES: HELD: court says no
the repair shop has a lien, but the repair shop cannot get a personal judgment on B, it is a lien on the property only, so the
repair shop gets to retain possession.
Notes from this case: court does not address bona fide purchaserProf does not know why
Sheriff goes and seizes property from repair shop. Court found that this was not enough for the repair shop to LOSE possession
(remember, the repairman only has the privilege as long as it retains possession, once possession is lost they have a limited 120
day right of pursuit)seizure by the sheriff is almost like possession on behalf of the repair shop and the lien will continue bc
it is as if the repair shop never lost possession.
This case is the one we go to to determine what a part IS for the purpose of the repair shop privilege. Rugs were not considered
partsProf suggests nothing cosmetic will be, such as cargo covers and nets, rugs, etc, but anything mechanical will be.
Rights of A Repair Shop Against An Owner of the Vehicle. Van-trow Olds Cadillac, Inc. v. Kahn (1977): FACTS: Repairman
obtained writ of sequestration under 9:4501 and defendant moves to dissolve the writ as wrongfully issued.
DISCUSSION: the privilege created by the statute exists only upon the particular automobile which is repaired or for which
parts are made or furnished. Floor mats are not parts within the meaning of the statute creating the repairmans privilege. The
sale of a minor accessory which is not attached to the automobile does not amount to the furnishing of parts.
This case is the one we go to to determine what a part IS for the purpose of the repair shop privilege. Rugs were not considered
partsProf suggests nothing cosmetic will be, such as cargo covers and nets, rugs, etc, but anything mechanical will be.
Martinez v. Therma-King and Service Division: there is a truck stuck in the mud with an air conditioning unit. Repairman
comes and repairs the unit while the truck is in the mud, then leaves. He doesnt get paid and goes and takes the unit off the
truck, which is still stuck in the mud. Plaintiff brought an action for conversion against repairman alleging that repairman
converted to its own use a cooling unit that was attached to plaintiff's tractor-trailer.
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DISCUSSION:
All statutory liens and privileges are stricti juris, in derogation of common rights and, as with statutes creating them, are strictly
construed; their effect may not be extended by analogy or implication.
The repairmans privilege upon which the [repairman] should have relied is contained in La.R.S. 9:4502. In this case, LSA-
R.S. 9:4502 adequately protected the defendant. It did not have to reclaim the thing to protect its rights. Under this statute, it
is not necessary that the thing repaired remain in the repairman's custody or place of business. Even without retaining
possession, the repairman has 90 days after the repairs have been made to assert its privilege. This is accomplished by giving
the debtor 10 days' written notice by registered mail, and then enforcement of the privilege by writ of sequestration without the
necessity of furnishing a bond.
The repairman, under the law, was required to use legal machinery in seizing the repaired thing and in asserting its privilege. It
chose not to do so; instead, it resorted to self-help and removed the cooling unit to its shop. Had the repairer properly used
9:4502, the thing repaired would then be conserved under the auspices of the law until the repairman had an opportunity to
prove the indebtedness and judgment on the merits had been rendered. In view of the requirement that these privilege statutes
must be strictly construed, we hold that a repairman has no right to merely reclaim possession of a repaired thing once it has
left his possession; his proper remedy is to assert his privilege through legal machinery during the statutory period.
HELD: Court says NOLA does not allow self-help here. You cant just go take the thing back off of it!!
Rights of A Repair Shop Against A Vendor of the Vehicle. Guaranty Bank & Trust Company v. Hoggins (1977): FACTS:
Engine seller/repairman sold and installed engine into car. Bank had a mortgage on a car. Owner didnt pay the notes. Bank
seizes car. Engine seller tries to dissolve the engine sale for failure to pay the price and take his engine back. Court says no--
HELD: The engine has lost its individual characterit has now become a part of the car and the seller can no longer dissolve
the sale. The repairman still has a lien and privilege, but it is against the whole car and it loses to the mortgage that was
previously executed. This case deals w/9:4502.
Crop Privileges
R.S. 9:4501-4790
LSA-R.S. 9:4511 Privilege; aircraft

Any person who repairs, restores, performs maintenance work or other services to or on an aircraft, or provides fuel or
materials in connection therewith has the privilege on the aircraft for either of the following:
(1) The amount due under the contract for the repairs or maintenance performed and the fuel or materials in connection
therewith.
(2) If no amount is specified by contract, an amount that is reasonable under the circumstances.
LSA-R.S. 9:4512 Notice of privilege

A. (1) Any person claiming a privilege on an aircraft under R.S. 9:4511 may record the privilege on the aircraft by filing a
notice or a claim with the Federal Aviation Administration - Aircraft Registry not later than the ninetieth day after the labor,
services, fuel, and materials were furnished.
(2) Any privilege claimed on an aircraft under R.S. 9:4511 is enforceable when a verified notice of privilege has been recorded
with the recorder of mortgages for the parish where the aircraft was located at the time of labor, services, fuel, or materials
were last furnished.
(3) The notice shall state the names of the person asserting the privilege, the name of the owner of the aircraft, a description of
the aircraft upon which the person is asserting the privilege, the amount expended for labor, services, fuel, or material for
which the privilege is being claimed, and the date the repairs or changes were furnished.
(4) The privilege may be enforced by writ of sequestration, without the necessity of the creditor furnishing security therefor, if
the debtor is first given fifteen days written notice by registered mail. This privilege is inferior to a vendor's privilege, a chattel
mortgage, or security interest recorded prior to the commencement of work or services on the aircraft or the provision of fuel
and materials in connection therewith, or against the bona fide purchaser to whom possession has been delivered and who has
paid the purchase price without previous notice of the existence of the privilege. Recordation of the notice of privilege in any
manner provided for in this Section shall constitute the requisite notice to prospective purchasers of the aircraft.
B. In addition to the remedy provided in this Section, when the aircraft remains in the possession of the privilege holder, and
the debt due thereon remains unpaid for more than ninety days from the date on which the last labor was performed or last fuel
or material was furnished, the holder of such privilege may sell such property at private sale and without appraisement, after
advertising such property for ten days as provided by law in case of judicial sale of movables. From the proceeds of any such
sale, the amount of the debts secured by such privilege shall be satisfied, including all reasonable charges for registered notices,
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advertisement or charges for appraisers and cost of the sale, including reasonable attorney fees incurred by the privilege holder
in connection therewith; and the balance, if any, shall be held for the benefit of the owner for a period of six months, after
which time, if it remains unclaimed, it shall be paid to the clerk of court for the parish in which the sale took place.
C. The privilege holder may retain possession of the aircraft subject to the privilege until the amount due is paid in full.
D. Upon payment of the debt owed to the privilege holder by or on behalf of the registered owner of the aircraft or other
property subject to the privilege, or by the customer, the privilege holder shall cause to be filed with the Federal Aviation
Administration-Aircraft Registry a notice of cancellation of the privilege. The filing of this notice of cancellation shall
terminate all interest of the privilege holder. The privilege holder shall not be foreclosed from asserting an additional privilege
against the aircraft for the payment of amounts owed for work or services performed, or fuel materials furnished to the aircraft
after the cancellation.
LSA-R.S. 9:4513 Privilege; storage of aircraft

A. Any person who stores an aircraft, whether or not in connection with the performance of repairs, restoration, or maintenance
work on said aircraft, has a privilege on the aircraft for either of the following:
(1) The amount due under the contract for storage.
(2) If no amount was specified by contract, the reasonable and usual compensation for the storage.
B. The rights and remedies provided to the privilege holder under this provision shall be identical to those provided in R.S.
9:4511 and R.S. 9:4512 with the exception that the amount due to the privilege holder under this provision shall include storage
costs or fees up to the day judgment is obtained, the aircraft is sold, or the possession of the aircraft is relinquished, whichever
first occurs. However, in the event the aircraft remains in the possession of the privilege holder, the privilege holder shall not
be precluded from asserting the same privilege for any subsequent storage fees or costs incurred
LSA-R.S. 9:4522 Water furnished to grow crops

Any person who furnishes water to another for the purpose of assisting him in growing or maturing a crop has a privilege
coequal with the privilege for supplies upon the crop to secure the payment of the agreed compensation therefor.
LSA-R.S. 9:4522.1 Water furnished under crop share agreement; exempt

In all cases where an agreement exists for the supplying of irrigation water to any farmer in consideration for a share of the
crop, the portion of the crop which the water supplier is to receive under the terms of such agreement shall be considered at all
times the property of the water supplier and no privilege for any debt of the farmer shall affect the agreed share of the water
supplier.
LSA-R.S. 9:4523 Threshermen's, combinemen's, and grain drier's privilege

Threshermen, combinemen and grain driers have a privilege for services rendered on the crop which they have threshed,
combined or dried.
LSA-R.S. 9:4541 Seller of agricultural products in chartered cities and towns

Any person who sells agricultural products of the United States in any chartered city or town of this state has a privilege
thereon to secure the payment of the purchase money for five days after the day of delivery, within which time the vendor may
seize the same in whatever hands or place it may be found, and his claim for the purchase money has preference over any
warehouse privilege or claim for warehouse charges, or any privilege or claim by the holder of any warehouse receipt. If the
vendor gives a written order for the delivery of any such produce and says therein that it is to be delivered without vendor's
privilege, then no privilege attaches thereto.
LSA-R.S. 9:4542 Seller of cotton seed on manufactured products

In addition to the other privileges accorded by law, the seller of cotton seed to any manufacturer has a privilege for the amount
of the unpaid purchase price of the cotton seed on all the cotton seed products manufactured by the purchaser during the season
to the amount of the value of the cotton seed sold. This privilege bears upon the products as long as they remain upon the
premises where manufactured.
This privilege is concurrent in favor of all unpaid vendors of cotton seed and is next in rank to the laborer's privilege.
LSA-R.S. 9:4543 Seller of sugar cane on manufactured products

In addition to the other privileges accorded by law, the seller of sugar cane to any manufacturer of sugar has a privilege for the
amount of the unpaid purchase price on the syrup, sugar, and molasses manufactured during the season by the purchaser to the
amount of the product of the cane sold, which quantity is fixed as that portion of the products of the season which bears the
same proportion to the entire product of the season as the cane sold and unpaid for bears to the entire quantity of cane
manufactured during the season. This privilege exists as long as the said syrup, sugar, and molasses remain in the possession
and custody of the manufacturer.
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This privilege is concurrent in favor of all unpaid sellers of sugar cane during the season and is next in rank to the laborer's
privilege given by R.S. 9:4721.
LSA-R.S. 9:4544 Vegetables, seafood, and other perishable items

No vendor's privilege or lien shall be applicable to any fresh or frozen vegetables, seafood, or other perishable food products.
LSA-R.S. 9:4561 Sewing machines and pianos subject to seizure

Sewing machines and pianos may be seized to enforce the vendor's privilege thereon.
LSA-R.S. 9:4563 Entry and removal of property

It is unlawful for the vendors or transferors of any movable property exempt from general seizure to enter the premises of any
person to whom such property has been sold or transferred with the object of removing the property under the assumption that
the buyer or transferee has by agreement given the right of entry or removal.
LSA-R.S. 9:4564. Penalty for violation

Any person guilty of entering and removing any property in violation of R.S. 9:4563 shall be fined not more than two hundred
dollars or imprisoned for not more than three months or both. Nothing in this Section shall deprive the party injured of his civil
action in damages. Nothing in R.S. 9:4561 through 9:4563 shall be construed to prevent the seizing officer from entering and
taking under proper legal process, property not exempt from seizure, and which, although exempt from general seizure, is
liable to be levied on for the enforcement of the vendor's privilege when existing.
9: 4582. Notice to insurer and to assured; deposit in court
In order to protect the privilege provided in R.S. 9:4581, the vendor, his heirs, or assigns shall give, at any time prior to the
payment of the amount due under the policies, written notice to the insurer of the existence of the claim and state under oath
the amount thereof. On the receipt of this notice the insurer shall give written notice to the assured of the filing of the vendor's
claim, and in the event of a dispute between the vendor and his vendee, or of any one claiming adverse interest under oath, the
insurer shall deposit, subject to the right of all parties in interest, the amount due under the policies in the registry of the court
having jurisdiction in any suit that may be brought on the policies to recover the amount due thereunder. Having made the
deposit, the insurer shall be relieved of further responsibility.
LSA-R.S. 9:4601 Hauling or trucking

A. Any person engaged in the business of hauling has a privilege on the property hauled for the charges or labor performed in
connection therewith for a period of one hundred eighty days from the last day of hauling or performing such labor.
B. This privilege may be enforced by the writ of sequestration, without the necessity of furnishing security therefor. This
privilege is inferior to a vendor's privilege, a chattel mortgage previously recorded, a previously perfected security interest
under Chapter 9 of the Louisiana Commercial Laws,1 or against a bona fide purchaser to whom possession has been delivered
and who has paid the purchase price without previous notice of the existence of the privilege.
LSA-R.S. 9:4621 Logs and products manufactured therefrom

The debts which are privileged on logs and on products manufactured therefrom, are the following:
(1) The debt due any land owner or stumpage owner for the price, on the logs sold and on the poles and cross ties manufactured
therefrom.
(2) The debt due any person for money advanced or supplies furnished to enable another to deaden, cut, load, or transport any
logs or to manufacture poles or cross ties, on the logs and on the poles and cross ties manufactured therefrom.
(3) The debt due any person for the price of his labor or services in deadening, cutting, loading, or transporting any logs, staves,
poles, or cross ties, or in manufacturing poles, cross ties, lumber, staves, hoops, boxes, shingles, doors, blinds, or window
sashes, as well as the debt due any person cooking for persons so engaged, on the logs and on the poles, ties, lumber, and other
manufactured products.
LSA-R.S. 9:4622Effective period; rank; sequestration

The privileges conferred by R.S. 9:4621 are effective for a period of ninety days from the maturity of the debt, are concurrent,
and may be enforced by the writ of sequestration, without the necessity of furnishing security therefor. These privileges have
no effect against a bona fide purchaser to whom possession has been delivered and who has paid the purchase price without
previous notice of the existence of the privilege. In no event shall the seizing officer seize more than is sufficient to satisfy the
claim and all probable costs.
LSA-R.S. 9:4641 Laborers and furnishers of supplies

Laborers engaged in gathering, saving, and preparing moss for market, have a privilege on the moss for their wages. Persons
advancing money or furnishing supplies to enable another to gather, save, and prepare moss for market, have a privilege on the
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moss for the advances and supplies.

The laborer's privilege ranks first and that of the furnisher of supplies second.
LSA-R.S. 9:4661 Feed, medicine, and veterinary services for horses

Any person who furnishes feed or medicines for a horse or horses, or any licensed veterinarian who furnishes medical services
for a horse or horses, to or upon the order of the owner, has a privilege for the unpaid portion of the price thereof upon the
horse or horses of the owner, which received the feed, medicine, or medical services. This privilege is effective for a period of
six months from the dates of the respective deliveries and may be enforced by the writ of sequestration. This privilege is
superior to all claims, privileges, and mortgages, whether recorded or unrecorded, which theretofore may have been or
thereafter may be created against such horse or horses, and to the claims of any and all purchasers thereof.
LSA-R.S. 9:4681 Carpets and rugs, cleaning and storage

Any person conducting the business of cleaning carpets and rugs and storing them at his place of business after cleaning until
delivery to the owner, has a privilege upon the carpets and rugs for all lawful charges for services rendered in the cleaning,
storage, and preservation of the goods, as well as for all lawful claims for money advanced, interest, insurance, transportation,
labor, and other charges and expenses in relation to the goods, and also for all reasonable charges and expenses in
advertisements of sale and for the sale of the goods where default has been made in satisfying the privilege.
LSA-R.S. 9:4682 Loss of privilege

The privilege holder loses the privilege by surrendering possession of the goods, or by refusing to deliver them when demand
is made with which he is bound to comply under the provisions of R.S. 9:4686. However, he may refuse to deliver the goods
until the privilege is satisfied.
LSA-R.S. 9:4683 Other remedies

Whether or not the person has a privilege upon the goods, he is entitled to all remedies allowed by law for the collection from
the depositor of all charges and advances which the depositor has expressly or impliedly contracted with him to pay.
LSA-R.S. 9:4684 Satisfaction of privilege; procedure; sale

Whenever any carpets or rugs are left for cleaning and storage until delivery, with any person engaged in the business of
cleaning carpets and rugs, and the charges which have accrued thereon are due and unpaid for a period of six months, the
person in whose custody the rugs or carpets are deposited for cleaning and storage, may satisfy the privilege as follows: By
giving written notice to the person on whose account the goods are held, either by delivery in person or by registered letter
addressed to his last known place of business or residence. This notice shall contain:
(1) An itemized statement of the claim, showing the sum due at the time of the notice and the date or dates when it became due.
(2) A demand, that the amount of the claim as stated in the notice, and of such further claim as shall accrue shall be paid on or
before a day mentioned, not less than ten days from the delivery of the notice if it is personally delivered, or from the time
when the notice should reach its destination according to the due course of the mails, if the notice is sent by mail.
(3) A statement that unless the claim is paid within the time specified, the goods will be sold.
In accordance with the terms of the notice, the goods may then be sold to satisfy any valid claim for which there may be a
privilege, either at private sale or public auction, at the option of the privilege holder, without appraisement, and without limit
or reserve.
If the sale should be at public auction, it may be cried by the privilege holder.
LSA-R.S. 9:4685. Proceeds, disposition of
From the proceeds of the sale, the amount of the privilege shall be satisfied, including all reasonable charges of notice,
advertisement, and sale. The balance if any, shall be credited on the books of the seller to the person who deposited the goods
for storing and cleaning.
LSA-R.S. 9:4686 Claimant may pay charges and acquire possession

Any time before the goods are sold, any person claiming the right of property or possession therein may pay the amount
necessary to satisfy the privilege, including reasonable expenses incurred in serving notice, advertising, and preparing for the
sale up to the time of payment. Upon tender of this amount, the goods shall be delivered to the person making the demand, if
he should be entitled to the possession, upon payment of the charges. Otherwise, the goods shall be retained according to the
terms of the original contract, and shall be sold as specified.
LSA-R.S. 9:4687 Clothing or household goods; procedures for sale

A. As used in this Section, the term person means a natural person, partnership, corporation or other legal entity.
B. Any garment, clothing, wearing apparel or household goods which have been repaired, altered, dyed, cleaned, pressed,
glazed or laundered, which remain in the possession of a person for a period of ninety days or more, may be sold to pay
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reasonable or agreed charges, together with any costs or expenses provided for in this Section; provided, however, that the
person to whom such charges are due and payable shall first notify the owner or owners of the proposed sale of the articles
belonging to them and the amount of the charges due thereon, and provided, further, that no property that is to be placed in
storage after any of the services or labors mentioned herein have been performed shall be subject to sale under the provisions
of this Subsection.
C. All garments, clothing, wearing apparel or household goods placed in storage or on which any of the services or labors
mentioned in Subsection B of this Section have been performed and which then are placed in storage by agreement which
remain in the possession of a person without the reasonable or agreed charges having been paid for a period of twelve months,
may be sold to pay said charges, provided, however, that the person with whom any of these is stored first shall notify the
owner or owners thereof of the time and place of such sale, and provided, further, that the provisions of this Subsection shall
not apply to any person operating as a warehouse or warehouseman.
D. Where any of the articles listed in the Subsection B of this Section are in possession of any person on July 27, 1966, for the
purpose of being repaired, altered, dyed, cleaned, pressed, glazed or laundered, and such services have been performed and the
charges therefor have become due and are unpaid and the possession thereof for that purpose has continued or shall continue
for ninety days or more, and where, on July 27, 1966, such articles are in the possession of any person for the purposes stated
in Subsection C, and such services have been performed and the charges therefor have become due and are unpaid, and such
possession has continued or shall continue for a period of twelve months or more, then the person so holding such articles may,
after ninety days from July 27, 1966 in the case of those articles already held for the periods above prescribed, and after ninety
days from the time such periods shall expire in each case as above prescribed, proceed to give the notices and to sell such
articles for the purposes and pursuant to the terms and provisions of this Section, and dispose of the proceeds of such sales as
provided in R.S. 9:4688.
E. The mailing by United States mail of a letter, with a return address marked thereon, addressed to the owner or owners at
their address given at the time of delivery of such articles to the person shall constitute notice under the provisions of this
Section. Said notice shall be mailed at least ten days before the articles belonging to the owner or owners may be sold for
charges due thereon. The cost of mailing said letter shall be added to the charges.
If the chattel or chattels are not redeemed prior to the date set for the sale, the person may sell such articles on the day and at
the time and place specified in such letter. Such sales may be made either at public auction or by private sale.
F. All persons taking advantage of the provisions of this Section must keep posted at all times, in a prominent place in their
receiving office or offices, two notices which shall read as follows: All articles cleaned, pressed, glazed, laundered, washed,
altered, dyed or repaired, and not called for in ninety days, will be sold to pay charges, and All articles which are stored by
agreement and upon which the charges are not paid for twelve months, will be sold to pay charges.
G. The purpose and intent of this Section is to provide an inexpensive means of enforcing liens for small amounts, and to that
end the provisions of this Section shall be deemed to create a lien in addition to, but shall not exclude, any liens which may
exist by virtue of any other statute of the State of Louisiana.
LSA-R.S. 9:4688 Proceeds, disposition of
The proceeds of the sale in excess of the charges and necessary expenses of the procedure required by this Section, shall be
held by the person for a period of six months, and if not reclaimed by the owner thereof within that time shall escheat to the
parish and shall be paid over to the parish treasurer and shall be placed by him in the general fund of the parish in which the
sale was held.
LSA-R.S. 9:4689 Clothing or household goods; disposition of other than by sale

Any unclaimed garments, clothing, wearing apparel or household goods which the person holding them feels could not be sold
for an amount sufficient to pay the charges and expenses involved in the procedure for sale provided for in R.S. 9:4687 and
9:4688 of this Part plus the amount owed to the cleaning or laundry establishment may be given by the person holding them to
any charitable organization willing to accept them.
LSA-R.S. 9:4701 Private sale of unclaimed goods of less than $10

Whenever any goods, jewelry, gems, precious stones, watches, or any other article or articles usually handled, sold, or made by
jewelers, jewelry manufacturers, watchmakers, and dealers are deposited with any person so engaged for repairing, cleaning,
inspection, or appraisement, and are repaired, cleaned, inspected, or appraised and are not claimed by their owners within six
months from the date of deposit, the person with whom they are deposited may offer by private sale any or all of the unclaimed
goods for a price of not less than the amount due for the services, provided the goods are appraised at less than ten dollars by
two sworn disinterested appraisers.
LSA-R.S. 9:4702 Notice to owner

The person with whom the goods are deposited shall first notify the apparent owner by registered mail at his last known
address that the unclaimed goods are to be placed on sale. The notice shall be given at least thirty days prior to the sale and
shall set forth the date, time, and place of the sale.
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LSA-R.S. 9:4721 Sugar refinery and mill employees

All managers, mechanics, or laborers employed in sugar refineries, sugar mills, or syrup mills have a privilege on all sugar,
syrup, or molasses manufactured during the season by the refineries or mills where they are employed for the payment of their
salaries or wages for a period of thirty days from the maturity of the debt.
This privilege may be enforced by the writ of sequestration, without the necessity of furnishing security therefor. This privilege
has no effect against bona fide purchasers, but it is superior to the privilege granted by R.S. 9:4543 to unpaid vendors of sugar
cane during the season.
LSA-R.S. 9:4741 Canal toll fees

The owners of private canals within the state have a privilege on all vessels for the payment of the toll or canal fees. This
privilege is of equal rank with those granted by Civil Code Article 3237.
This privilege exists for six months from the date the toll becomes due.
LSA-R.S. 9:4751 Definitions

As used in this Part:
(1) Ambulance service means any person who through the use of one or more ambulances and certified emergency medical
technicians as defined in R.S. 40:1231, provides transportation of sick or injured persons as a part of a regular course of
conduct or business.
(2) Health care provider means a person, partnership, corporation, facility, or institution licensed by this state to provide
health care or professional services as a physician, dentist, chiropractor, podiatrist, optometrist, pharmacist, dietician, physical
therapist, occupational therapist, or psychologist.
(3) Hospital means an institution licensed as such by the state of Louisiana.
(4) Person means any individual, partnership, association, corporation, government, political subdivision, or governmental
agency.
LSA-R.S. 9:4752 Privilege on net proceeds collected from third party in favor of medical providers for services and
supplies furnished injured persons
A health care provider, hospital, or ambulance service that furnishes services or supplies to any injured person shall have a
privilege for the reasonable charges or fees of such health care provider, hospital, or ambulance service on the net amount
payable to the injured person, his heirs, or legal representatives, out of the total amount of any recovery or sum had, collected,
or to be collected, whether by judgment or by settlement or compromise, from another person on account of such injuries, and
on the net amount payable by any insurance company under any contract providing for indemnity or compensation to the
injured person. The privilege of an attorney shall have precedence over the privilege created under this Section.
LSA-R.S. 9:4753 Written notice

A. The privilege created by R.S. 9:4752 shall become effective if, prior to the payment of insurance proceeds, or to the
payment of any judgment, settlement, or compromise on account of injuries, a written notice containing the name and address
of the injured person and the name and location of the interested health care provider, hospital, or ambulance service is
delivered by certified mail, return receipt requested, or by facsimile transmission with proof of receipt of transmission by the
interested health care provider, hospital, or ambulance services, or the attorney or agent for the interested health care provider,
hospital, or ambulance service, to the injured person, to his attorney, to the person alleged to be liable to the injured person on
account of the injuries sustained, to any insurance carrier which has insured such person against liability, and to any insurance
company obligated by contract to pay indemnity or compensation to the injured person. This privilege shall be effective against
all persons given notice according to the provisions of this Section and shall not be defeated nor rendered ineffective as against
any person that has been given the required notice because of failure to give the notice to all those persons named in this
Subsection.
B. If delivery of the notice required by this Section is made by facsimile transmission, and the sender fails to obtain a signed
proof or receipt within seven days, then delivery shall be made by certified mail, return receipt requested, and costs of mailing
shall be taxed as court costs.
LSA-R.S. 9:4754 Failure to pay over monies after notice

Any person who, having received notice in accordance with the provisions hereof, pays over any monies subject to the
privilege created herein, to any injured person, or to the attorney, heirs, or legal representatives of any injured person, shall be
liable to the licensed health care provider, hospital, or ambulance service having such privilege for the amount thereof, not to
exceed the net amount paid.
LSA-R.S. 9:4755 Itemized statements

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A. Upon receipt of a written request, mailed by certified mail, return receipt requested, from any person who has been given
notice, the licensed health care provider, hospital, or ambulance service having the privilege shall, within thirty days after
receipt of such request, furnish an itemized statement of all charges having reference to the injured person.
B. If such licensed health care provider, hospital, or ambulance service fails to comply with the provisions of this Section, the
privilege created shall be dissolved and ineffective.
LSA-R.S. 9:4756 Short title

This Act shall be known as the Self-Service Storage Facility Act.

As used in this Part, unless the context clearly requires otherwise:
(1) Self-service storage facility means any real property designed and used for the purpose of renting or leasing individual
storage space to lessees who are to have access to such for the purpose of storing and removing movable property. No lessee
shall use a self-service storage facility for residential purposes. A self-service storage facility shall not be considered as a
warehouse subject to the provisions of Title 10 of the Louisiana Revised Statutes; however, if an owner issues any warehouse
receipt, bill of lading, or other document of title for the movable property stored, the owner and the lessees shall be subject to
the provisions of Title 10 of the Louisiana Revised Statutes and the provisions of this Part shall not apply.
(2) Owner means the owner, operator, lessor, or sublessor of a self-service storage facility, his agent, or any other person
authorized by him to manage the facility or to receive rent from a lessee under a rental agreement.
(3) Lessee means a person, his sublessee, successor, or assign, entitled to the use of storage space at a self-service storage
facility under a rental agreement, to the exclusion of others.
(4) Rental agreement means any agreement or lease, written or oral, entered into between the owner and a lessee, that
establishes or modifies the terms, conditions, rules, or any other provisions concerning the use of self-service storage facility.
(5) Last known address means that address provided by the lessee in the most recent rental agreement or the address
provided by the lessee in a subsequent written notice of a change of address.
LSA-R.S. 9:4758 Privilege

The owner of a self-service storage facility, his heirs, executors, administrators, successors, and assigns has a privilege upon all
movable property stored at a self-service storage facility for the debt due him for rent, and for all reasonable charges and
expenses necessary for the preservation of movable property stored at a self-service storage facility, and for expenses
reasonably incurred in the enforcement of this privilege, including, but not limited to, the cost of removing and replacing any
locks, preparing a brief and general description of the movable property upon which the privilege is claimed, sending notices,
and advertising, by sale of movable property or other disposition pursuant to this Part. The privilege granted herein attaches as
of the date the movable property is brought to the self-service storage facility. This privilege is superior to and shall take
priority over any other privileges or security interests, except the privilege shall be inferior to a vendor's privilege, or a chattel
mortgage previously issued and recorded in the manner provided by law, or a previously perfected security interest under
Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.). The exemption from seizure granted by R.S. 13:3881
shall not be applicable to property subject to this privilege.
LSA-R.S. 9:4759 Options of owner upon lessee's default

In the event of default by the lessee, the owner of a self-service storage facility has the option to enforce judicially all of his
rights under the rental agreement, including, if the agreement so provides, his right to accelerate all rentals that will become
due in the future for the full term of the lease or to cancel the lease and enforce his privilege for the debt due him, as follows:
(1) Upon default by the lessee, the owner shall be authorized to remove any lock on the rented self-service storage space in
order to compile a brief and general description of the movable property upon which a privilege is claimed and shall be entitled
to place his own lock upon such space until his privilege is satisfied.
(2) The lessee shall be notified of the owner's intention to enforce his privilege.
(3) The notice shall be delivered in person to the lessee or sent by certified mail to the last known address of the lessee.
(4) The notice shall include:
(a) A copy of any written rental agreement between the owner and defaulting lessee, or, if the rental agreement is verbal, a
summary of its terms and conditions.
(b) An itemized statement of the owner's claim, showing the sum due at the time of the notice and the date when the sum
became due.
(c) A brief and general description of the movable property upon which a privilege is claimed. The description shall be
reasonably adequate to permit the person notified to identify it, except that any container, including, but not limited to, a trunk,
valise, or box that is locked, fastened, sealed, or tied in a manner which deters immediate access to its contents may be
described as such without describing its contents.
(d) Notification that the lessee has been or shall be denied access to the movable property, if such denial is permitted under the
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terms of the rental agreement, with the name, street address, and telephone number of the owner or his designated agent whom
the lessee may contact to respond to the notice.
(e) A demand for payment within a specified time not less than ten days after the date of mailing or delivery of the notice.
(f) A statement that the contents of the lessee's rented space are subject to the owner's privilege and that, unless the claim is
paid within the time stated in the notice, the movable property is to be advertised for sale or other disposition and to be sold or
otherwise disposed of to satisfy the owner's privilege for rent due and other charges at a specified time and place.
(5) Actual receipt of the notice made pursuant to this Section shall not be required. Within ten days after receipt of the notice,
or within ten days after its mailing, whichever is earlier, an advertisement of the sale or other disposition of movable property
subject to the privilege shall be published on at least one occasion in a newspaper of general circulation where the self-service
storage facility is located. The advertisement shall include:
(a) A brief and general description of the movable property reasonably adequate to permit its identification as provided for in
Paragraph (4)(c) of this Section.
(b) The address of the self-service storage facility and the number, if any, of the space where the movable property is located
and the name of the lessee.
(c) The time, place, and manner of the sale or other disposition.
(6) The sale or other disposition of movable property shall take place not sooner than ten days following publication as
required herein.
(7) Any sale or other disposition of the movable property shall conform to the terms of the notification as provided for in this
Section.
(8) Any sale or other disposition of the movable property shall be held at the self-service storage facility, or at the nearest
suitable place to where the movable property is held or stored, as indicated in the notice required herein. The owner shall sell
the movable property to the highest bidder, if any. If there are no bidders, the owner may purchase the movable property for a
price at least sufficient to satisfy his claim for rent due and all other charges, or he may donate the movable property to charity.
(9) Prior to any sale or other disposition of movable property to enforce the privilege granted by this Section, the lessee may
pay the amount necessary to satisfy the privilege, including all reasonable expenses incurred under this Section, and thereby
redeem the movable property. Upon receipt of such payment, the owner shall have no liability to any person with respect to
such movable property.
(10) A purchaser in good faith of movable property sold by an owner to enforce the privilege granted herein takes the property
free of any claims or rights of persons against whom the privilege was valid, despite noncompliance by the owner with the
requirements of this Section.
(11) In the event of a sale held pursuant to this Section, the owner may satisfy his privilege from the proceeds of the sale, but
shall hold the balance, if any, as a credit in the name of the lessee whose property was sold. The lessee may claim the balance
of the proceeds within two years of the date of sale, without any interest thereon, and if unclaimed within the two year period,
the credit shall become the property of the owner, without further recourse by the lessee. If the sale or other disposition of
movable property made pursuant to this Part does not satisfy the owner's claim for rent due and other charges, the owner may
proceed by ordinary proceedings to collect the balance owed.
LSA-R.S. 9:4760 Supplemental nature of act

Nothing in this Part shall be construed as in any manner impairing or affecting the right of parties to create additional privileges
by special contract or agreement, nor shall it in any manner affect or impair other privileges created by any other law of this
state.
LSA-R.S. 9:4770. Conflicts with Chapter 9 of the Uniform Commercial Code

A. This Code Title (Code Title XXI of Code Book III, R.S. 9:4501 et seq.), Part 8 of Chapter 7 of the Louisiana Mineral Code
(R.S. 31:146 through 148), and Title XXI of Book III of the Louisiana Civil Code (Arts. 3182 through 3277) shall be
interpreted and applied in a manner consistent with Chapter 9 of the Uniform Commercial Code. Any conflict between the
priority ranking of privileges under this Title, Part 8 of Chapter 7 of the Louisiana Mineral Code, or Title XXI of Book III of
the Louisiana Civil Code with the priority rules of Chapter 9 of the Uniform Commercial Code shall be resolved by application
of the priority rules of Chapter 9 of the Uniform Commercial Code.
B. The rights of a vendor under Civil Code Articles 2561, 3217(7), and 3227 or of a lessor under Civil Code Article 2707 or
Mineral Code Article 146 are subordinate to the rights of a secured party with a security interest under Chapter 9 of the
Uniform Commercial Code except as otherwise provided by R.S. 10:9-322(g).
LSA-R.S. 9:4780. Short title

This Act shall be known as the Marina and Boatyard Storage Act.

For the purposes of this Part, the following terms shall have the following meanings unless the context clearly requires
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otherwise:
(1) Default means the failure to pay obligations incurred by the storage of a boat, boat motor, boat trailer, or any other
accessories thereto.
(2) Last known address means that address provided by the lessee in the most recent rental agreement or the address
provided by the lessee in a subsequent written notice of a change of address.
(3) Lessee means a person, his sub-lessee, successor, or assign, entitled to the use of a space in a marina under a rental
agreement, to the exclusion of others.
(4) Lienholder means a person who claims an interest in or privilege on the property pursuant to a mortgage properly
recorded in the parish wherein the marina is located.
(5) Marina means a marina, boatyard, or marine repair yard that provides, as part of its commercial operation, the storage of
boats, boat motors, or boat trailers.
(6) Owner means the owner, operator lessor, or sub-lessor of a marina, his agent, or any other person authorized by him to
manage the facility or to receive rent from a lessee under a rental agreement.
(7) Property means a boat, boat motor, boat trailer, or any other boat accessories in storage at a marina.
(8) Rental agreement means any written agreement or lease, entered into between the marina owner and a lessee that
establishes or modifies the terms, conditions, rules, or any other provisions concerning use of the marina.
LSA-R.S. 9:4782 Privilege

A. Privilege created. A marina owner has a privilege on property stored at that marina for rent, labor, or other charges and for
expenses reasonably incurred in the sale of that property under the provisions of this Part.
B. Exclusion. This Part does not create a privilege on a documented vessel subject to a preferred ship mortgage or other
preferred maritime privilege pursuant to 46 U.S.C. Chapter 131.
LSA-R.S. 9:4783 Notice of privilege

A. A property owner must be notified of the privilege created by this Part before enforcement of the privilege by a marina
owner. Notification of the privilege created by this Part is satisfied by:
(1) Written storage agreement. A written rental agreement signed by the property owner that includes a notice of the privilege
created by this Part; or
(2) Written notice of privilege. Written notification of the privilege sent by the marina owner to the property owner.
B. A marina owner who does not have a written rental agreement that includes a notice of the privilege created by this Part may
not initiate an enforcement action under R.S. 9:4784 until thirty days after the written notice of a privilege required by
Paragraph (A)(2) of this Section is delivered to the property owner.
LSA-R.S. 9:4784 Enforcement of privilege

A. A marina owner may enforce a privilege created by this Part only if the property owner has been notified of the privilege as
required by R.S. 9:4783.
(1) Sale; use of proceeds. If a property owner is in default for a period of more than one hundred eighty days, a marina owner
may enforce a privilege by selling the stored property at a commercially reasonable public sale for cash. As used in this
Section, commercially reasonable has the same meaning as in the Commercial Laws, R.S. 10:1-101 through 9-710. The
proceeds of the sale must be applied in the following order:
(a) To the reasonable expenses of the sale incurred by the marina owner including, to the extent not prohibited by law,
reasonable attorney's fees and legal expenses.
(b) To the satisfaction of all superior mortgages on the property held by mortgage holders of record to be paid in the order of
priority.
(c) To the satisfaction of the privilege created by this Part.
(d) To the satisfaction of all other mortgages and privileges on the property held by all lienholders of record to be paid in the
order of priority.
(e) To the extent that the proceeds of sale exceed the sum of the foregoing, the surplus must be paid by the marina owner to the
property owner.
(2) If proceeds of the sale are not sufficient to satisfy the property owner's outstanding obligations to the marina owner or any
lienholder of record, the property owner remains liable to the marina owner or lienholder for the deficiency.
B. Advertisement; notice of default. Before conducting a sale under this Section, the marina owner shall:
(1) Send a notice of default to the property owner. The marina owner shall provide a copy of the notice to each lienholder of
record. The notice must include:
(a) A statement that the property is subject to a privilege held by the marina owner.
(b) A statement of the marina owner's claim indicating the charges due on the date of the notice, the amount of any additional
charges that will become due before the date of sale, and the date those additional charges will become due.
(c) A demand for payment of the charges due within a specified time not less than thirty days after the date the notice is
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delivered to the property owner.

(d) A statement that unless the claim is paid within the time stated, the property will be sold, specifying the time and place of
the sale.
(e) The name, street address, and telephone number of the marina owner, or the marina owner's designated agent, whom the
property owner may contact to respond to the notice.
(2) After the expiration of the thirty day period set forth in Subparagraph (1)(c) of this Subsection, publish an advertisement of
the sale once a week for two consecutive weeks in a newspaper of general circulation in the area where the sale is to be held.
The advertisement must include a general description of the property, the name of the property owner, and the time and place
of the sale. The date of the sale must be more than fifteen days after the date the first advertisement of the sale is published.
C. Location of sale. A sale under this Part must be held at the marina or at the nearest suitable location.
D. Purchasers. A purchaser of property sold at a commercially reasonable sale pursuant to this Part takes the property free and
clear of any rights of persons against whom the privilege was valid and all other lienholders of record. The purchase of a boat
sold pursuant to this Part shall require a notarized bill of sale signed by the buyer and a representative of the marina, clearly
identifying the marina as the seller, and shall state that the boat was sold pursuant to the Marina and Boatyard Storage Act. The
marina shall attach to the bill of sale the proof of notice and sale requirements, including proof of all publications.
E. Marina owner liability. If the marina owner complies with the provisions of this Part, the marina owner's liability is as
follows:
(1) To a lienholder of record, the marina owner's liability is limited to payment from the net proceeds received from the sale of
the property.
(2) To the property owner, the marina owner's liability is limited to the net proceeds received from the sale of the property after
payment in full of all lienholders of record.
F. Denying access to marina. A marina owner may deny a property owner who has been notified under Subsection B of this
Section access to the marina, except that the property owner is entitled to access to the marina during normal business hours for
the purpose of satisfying the privilege or viewing and verifying the condition of the property.
G. Notices. Except as otherwise provided, all notices required by this Part must be sent by registered or certified mail, return
receipt requested, or by commercial courier as defined by R.S. 13:3204(D). Notices sent to a marina owner must be sent to the
owner's business address or to the address of the owner's designated representative. Notices to a property owner must be sent to
the property owner at the property owner's last known address. Notices to a lienholder of record must be sent to the address of
the lienholder as provided in the public record that serves to perfect the lienholder's interest in the property. Notices are
considered delivered on either of the following dates:
(1) The date the recipient of the notice signs the return receipt or, if the notice is undeliverable, the date the post office last
attempts to deliver the notice.
(2) The date of delivery as indicated on the signed receipt of delivery obtained by the commercial courier.
LSA-R.S. 9:4785. Cessation of enforcement actions

A marina owner shall cease enforcement actions immediately if:
(1) Payment by owner. The property owner pays the marina owner the full amount necessary to satisfy the privilege. At any
time before the conclusion of a sale conducted under this Part, the property owner may redeem the property by paying the full
amount necessary to satisfy the privilege; or
(2) Payment by other lienholders. A person other than the marina owner who has a lien on the property pays the marina
owner the full amount necessary to satisfy the privilege held by the marina owner. Upon payment by a lienholder of record, the
marina owner shall hold the property for the benefit of and at the direction of that lienholder and may not deliver possession of
the property to the property owner. Unless the marina owner and the lienholder enter into a new rental agreement, the
lienholder shall arrange removal of the property from the marina.
LSA-R.S. 9:4790 Child support arrearages; privilege on motor vehicles

An obligee who has a judgment ordering the payment of past due child support may file the judgment with the office of motor
vehicles in accordance with R.S. 32:708.1 and subject to the provisions of R.S. 13:3881. The judgment, when filed, shall
operate as privilege on any titled motor vehicle, as defined in R.S. 10:9-102(d)(19), owned by the support obligor at the time
deficient child support judgment is filed with the office of motor vehicles, and shall not affect liens, privileges, chattel
mortgages, or security interests as provided in R.S. 10:9-101 et seq. or mortgages already affecting or encumbering the motor
vehicle at the date of the filing. The motor vehicle shall be subject to seizure and sale for the payment of the judgment
according to the preference and rank of the privilege securing its payment. The privilege for child support shall be legally
subordinate to motor vehicle purchase money security interests.
Key is LA R.S. 9:4770 link between CC privileges and LA law and UCC 9 security interests. How do you rank UCC 9
versus privileges? Go to the UCC. In essence, UCC says:
1. UCC always beats lessor and vendor of immovable.
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2. For all other statutory liens, the UCC rule applies. Bayou Farms case. UCC will beat a privilege unless the privilege
expressly says it beats UCC AND possessory privilege.
LA R.S. 9:4770. Conflicts with Chapter 9 of the Uniform Commercial Code

R.S. 13:3881: General exemptions from seizure

A. The following income or property of a debtor is exempt from seizure under any writ, mandate, or process whatsoever,
except as otherwise herein provided:
(1)(a) Seventy-five percent of his disposable earnings for any week, but in no case shall this exemption be less than an
amount in disposable earnings which is equal to thirty times the federal minimum hourly wage in effect at the time the
earnings are payable or a multiple or fraction thereof, according to whether the employee's pay period is greater or less
than one week. However, the exemption from disposable earnings for the payment of a current or past due support
obligation, or both, for a child or children is fifty percent of disposable earnings, and the exemption from seizure of
the disposable earnings for the payment of a current or past due support obligation, or both, for a spouse or former
spouse is sixty percent of the disposable earnings. For purposes of this Subsection, if the Department of Children and
Family Services is providing support enforcement services to the spouse and a judgment or order for support includes
an obligation for both a child or children and a spouse or former spouse, or in any case wherein the judgment or order
does not clearly indicate which amount is attributable to support of the child or children and which amount is
attributable to support of the spouse or former spouse, the support obligation shall be treated as if it is exclusively for
the support of a child or children.
(b) The term disposable earnings means that part of the earnings of any individual remaining after the deduction
from those earnings of any amounts required by law to be withheld and which amounts are reasonable and are being
deducted in the usual course of business at the time the garnishment is served upon the employer for the purpose of
providing benefits for retirement, medical insurance coverage, life insurance coverage and which amounts are legally
due or owed to the employer in the usual course of business at the time the garnishment is served.
(2) That property necessary to the exercise of a trade, calling, or profession by which he earns his livelihood, which
shall be limited to the following:
(a) Tools.
(b) Instruments.
(c) Books.
(d) One utility trailer.
(e) One firearm with a maximum value of five hundred dollars.
(3) The personal servitude of habitation and the usufruct under Article 223 of the Civil Code.
(4)(a) The clothing, bedding, linen, chinaware, nonsterling silverware, glassware, living room, bedroom, and dining
room furniture, cooking stove, heating and cooling equipment, one noncommercial sewing machine, equipment for
required therapy, kitchen utensils, pressing irons, washers, dryers, refrigerators, deep freezers, electric or otherwise,
used by him or a member of his family.
(b) The family portraits.
(c) His arms and military accoutrements.
(d) The musical instruments played or practiced on by him or a member of his family.
(e) The poultry, fowl, and one cow kept by him for the use of his family.
(f) All dogs, cats, and other household pets.
(5) Any wedding or engagement rings worn by either spouse, provided the value of the ring does not exceed five
thousand dollars.
(6) Federal earned income tax credit, except for seizure by the Department of Revenue or arrears in child support
payments.
(7) Seven thousand five hundred dollars in equity value for one motor vehicle per household used by the debtor and
his family household for any purpose. The equity value of the motor vehicle shall be based on the NADA retail value
for the particular year, make, and model.
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(8) Seven thousand five hundred dollars in equity value for one motor vehicle per household which vehicle is
substantially modified, equipped, or fitted for the purposes of adapting its use to the physical disability of the debtor or
his family and is used by the debtor or his family for the transporting of such disabled person for any use. (This is a
cap on vehicles so people cant say they need 4 jaguars to get to work)
(9) The proceeds from a property insurance policy received as a result of damage caused by a gubernatorially declared
disaster to an asset considered exempt under this Section and that are held separately in an escrow account identified
as insurance proceeds paid from the damage of an exempt asset shall be considered exempt to the same extent that the
value of the underlying asset is considered exempt.
B. (1) In cases instituted under the provisions of Title 11 of the United States Code, entitled Bankruptcy, there shall be
exempt from the property of the estate of an individual debtor only that property and income which is exempt under the laws of
the state of Louisiana and under federal laws other than Subsection (d) of Section 522 of said Title 11 of the United States
Code.
(2) No property upon which a debtor has voluntarily granted a lien shall, to the extent of the balance due on the debt
secured thereby, be subject to the provisions of this Chapter or be exempt from forced sale under process of law.
(3) Proceeds from the involuntary sale or distribution of personal property that is exempt from seizure under the laws
of this state, made at or after the filing of a petition under any Chapter of Title 11 of the United States Code, shall
remain exempt for purposes of state law exemptions, as applicable under 11 U.S.C.A. 522(b)(2)(A). For purposes of
this Subsection, involuntary sale shall mean any non-consensual sale or disposition of property.
C. The state of Louisiana expressly waives any immunity from suit insofar as the garnishment of the nonexempt portion of the
wages, salaries, commissions, or other compensation of public officials, whether elected or appointed, public employees, or
contractors is concerned, of itself, its agencies, boards, commissions, political subdivisions, public corporations, and municipal
corporations.
D. (1) Except as provided in Paragraph (2) of this Subsection and in R.S. 11:292, the following shall be exempt from all
liability for any debt except alimony and child support: all pensions, all tax-deferred arrangements, annuity contracts, and all
proceeds of and payments under all tax-deferred arrangements and annuity contracts, as defined in Paragraph (3) of this
Subsection.
(2) No contribution to a tax-deferred arrangement or to an annuity contract, as defined in Paragraph 3 of this
Subsection, shall be exempt if made less than one calendar year of the date of filing for bankruptcy, whether voluntary
or involuntary, or the date writs of seizure are filed against the tax-deferred arrangement or annuity contract. A transfer
from one tax-deferred arrangement to another or from one annuity contract to another shall not be considered a
contribution for purposes of this Paragraph.
(3) The term tax-deferred arrangement includes all individual retirement accounts or individual retirement annuities
of any variety or name, whether authorized now or in the future in the Internal Revenue Code of 1986, or the
corresponding provisions of any future United States income tax law, including balances rolled over from any other
tax- deferred arrangement as defined herein, money purchase pension plans, defined benefit plans, defined
contribution plans, Keogh plans, simplified employee pension (SEP) plans, simple retirement account (SIMPLE)
plans, Roth IRAs, or any other plan of any variety or name, whether authorized now or in the future in the Internal
Revenue Code of 1986, or the corresponding provisions of any future United States income tax law, under which
United States income tax on the tax-deferred arrangement is deferred. The term annuity contract shall have the same
definition as defined in R.S. 22:912(B).
So we have general mortgages and privileges and we have special mortgages and privileges. We have things that affect
movables, affect immovables, and affected both.
1. Is it effective between parties? If not, not effective against third parties!
2. Is it effective between third parties?
3. When does it start as to third parties?
4. When does it stop as to third parties?
5. Once you do 1-4, consider rank.
6. Cannot rank immovables and movables. Put them in TWO buckets. Rank movables on one side and rank immovables
on the other. They rank separately. So you have to know which security interests affect what.
7. Go through ranking provisions. For most mortgages, effective upon filing + time of recordation (special rules for
collateral mortgages). Some privileges require recordation to affect immovables, some dont.
8. Hypo: funeral privilege beats 30-year mortgage, but capped at $500.
LEASE ARTICLES CHANGED IN 2000! So be careful when you read the cases.
Go back and look at Carrier case. 4401.
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We are now putting the course together.
LESSON #24. THE LESSORS PRIVILEGE
2705 in the lessors articles in the civil code. 2705 2707 gives you the rules of lessors privilegesnarrowly construed:
2) Property of Tenant: lessor has a right of pledge of the movables found on the initially on the property leased.
Lessee shall be entitled to retain (an exemption from seizure) certain items. Tenant can keep the good stuff.
This has to be read with 2709 which says that the lessor may seize the objects before or may pursue the
objects up to 15 days right of pursuit. UCC9 trumps it all.
3) Property of 3rd Parties (2707): lessor may lawfully seize movables when contained in the house or store by
his consent. Tenants car in the driveway can be seized but the 3rd party cannot. UCC9 trumps it all.
4) Property of Subtenant (2707): Insofar as the subtenant is indebted to the tenant the landlord can get. So if
subtenant is current he cannot seize anything. Landlord should refuse subleasing in its documents. Under
9:4770 the UCC 9 a later recorded will beat the lessors rights unless the statute in question creates a
possessory right and a ranking against UCC9.
Also relevant: La. C.C. 3263, La.R.S. 13:3881
La. C.C Art. 2704. Nonpayment of rent

If the lessee fails to pay the rent when due, the lessor may, in accordance with the provisions of the Title Conventional
Obligations or Contracts, dissolve the lease and may regain possession in the manner provided by law.
LA. C.C. Art. 2706. Lessor's privilege and pledge on movables of sublessee
This right of pledge includes, not only the effects of the principal lessee or tenant, but those of the undertenant, so far as the
latter is indebted to the principal lessee, at the time when the proprietor chooses to exercise his right. A payment made in
anticipation, by the undertenant to his principal, does not release him from the owner's claim.
LA. C.C. Art. 2707. Art. 2707. Lessor's privilege

To secure the payment of rent and other obligations arising from the lease of an immovable, the lessor has a privilege on the
lessee's movables that are found in or upon the leased property.
In an agricultural lease, the lessor's privilege also encompasses the fruits produced by the land.
La. C.C. Art. 2708. Lessor's privilege over sublessee's movables

The lessor's privilege extends to the movables of the sublessee but only to the extent that the sublessee is indebted to his
sublessor at the time the lessor exercises his right.
.
LA. C. C. 2709. Lessor's right to seize movables of third persons
The lessor may lawfully seize a movable that belongs to a third person if it is located in or upon the leased property, unless the
lessor knows that the movable is not the property of the lessee.
The third person may recover the movable by establishing his ownership prior to the judicial sale in the manner provided by
Article 1092 of the Code of Civil Procedure. If he fails to do so, the movable may be sold as though it belonged to the lessee.
Hypo for this article: law student has an apartment in BR, but gets a clerkship in Dallas, so he sublets. While he is at this
fabulous job, he forgets to pay the rent. So landlord has sheriff (remember, no self-help in LA) go and seize property. Inside
there is a laptop, ipad, iphone, but they belong to the subtenant. Unless landlord knows or has reason to know those things
belong to a third person, he can have them seized. The owner can get the items back, but he has to intervene according to 1092
and has to do so timely
But, suppose that I rent a building to run a computer repair shop. I forget to pay the rent. Inside, I have laptops w/name tags
now the landlord knows or has reason to know they dont belong to meso no seizure.
LSA-C.C. Art. 2710. Enforcement of the lessor's privilege

The lessor may seize the movables on which he has a privilege while they are in or upon the leased property, and for fifteen
days after they have been removed if they remain the property of the lessee and can be identified.
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The lessor may enforce his privilege against movables that have been seized by the sheriff or other officer of the court, without
the necessity of a further seizure thereof, as long as the movables or the proceeds therefrom remain in the custody of the
officer.
This article tells us that the landlord has a right of pursuit to enforce his privilege. But, only has this right of pursuit over the
LESSEEs property. So in the computer repair shop privilege, if the owner of the laptop takes the computer home, the landlord
does not have a right to pursue that property. But if the tenant takes his personal laptop out of the building and stores it at his
buddys house, landlord can pursue it within 15 days.
LSA-C.C. Art. 2711. Transfer of thing does not terminate lease

The transfer of the leased thing does not terminate the lease, unless the contrary had been agreed between the lessor and the
lessee.
LSA-C.C. Art. 2712. Transfer of immovable subject to unrecorded lease

A third person who acquires an immovable that is subject to an unrecorded lease is not bound by the lease.
In the absence of a contrary provision in the lease contract, the lessee has an action against the lessor for any loss the lessee
sustained as a result of the transfer.
La. C.C. Art. 2713. Lessee's right to sublease, assign, or encumber

The lessee has the right to sublease the leased thing or to assign or encumber his rights in the lease, unless expressly prohibited
by the contract of lease. A provision that prohibits one of these rights is deemed to prohibit the others, unless a contrary intent
is expressed. In all other respects, a provision that prohibits subleasing, assigning, or encumbering is to be strictly construed
against the lessor.
LSA-C.C. Art. 3216. Special privileges on movables

The privileges enumerated in the preceding section, extend to all the movables of the debtor, without distinction.
There are some which act only on particular movables and no other; and it is of these last that we shall treat in this and the
following sections.
LSA-C.C. Art. 3217. List of special privileges on particular movables

1. The appointments or salaries of the overseer for the current year, on the crops of the year and the proceeds thereof; debts due
for necessary supplies furnished to any farm or plantation, and debts due for money actually advanced and used for the
purchase of necessary supplies and the payment of necessary expenses for any farm or plantation, on the crops of the year and
the proceeds thereof.
continues still in his possession.
furniture, which is found in the house let, or on the farm, and on every thing which serves to the working of the farm.
4. The debt, on the pledge which is in the creditor's possession.
5. That of a depositor, on the price of the sale of the thing by him deposited.
7. The price due on movable effects, if they are yet in the possession of the purchaser.
carriers; such as taxes, storage and privileged claims required to be paid before moving the thing; and in case the thing carried
be lost or destroyed without the fault of the carrier, this privilege for money paid by the carrier shall attach to insurance
effected on the thing for the benefit of the owner, provided written notice of the amount so paid by the carrier and for whose
account, with a description of the property lost or destroyed, be given to the insurer or his agent within thirty days after the
loss, or if it be impracticable to give the notice in that time, it shall be sufficient to give the notice at any time before the money
is paid over.
Notes of Decisions (263)
179
LSA-C.C. Art. 3219. Method of enforcement of lessor's privilege

The privilege of the lessor and the manner in which it is enforced against the property subject to it are described in the Title
Lease.
LA. C.C. Art. 3256. Lessor's privilege primed by costs of sale

Whatever may be the privilege of the lessor, charges for selling the movables subjected to it are paid before that which is due
for the rent, because it is these charges which procure the payment of the rent.
LA. C.C. Art. 3257. Lessor's privilege primed by funeral charges

The case is the same with respect to the funeral expenses of the debtor and his family; when there is no other source from
which they can be paid, they have a preference over the debt for rent or hire, on the price of the movables contained in the
house or on the farm.
LA. C.C. Art. 3258. Lessor's privilege primes other general privileges
But the lessor has a preference on the price of these movables, over all the other privileged debts of the deceased, such as
expenses of the last illness, and others which have a general privilege on the movables.
LA. C.C. Art. 3259. Lessor's privilege on crops primed by supplies and labor
With regard to the crops which are subject to the lessor's privilege, the expenses for seed and labor, the wages of overseers and
managers are to be paid out of the product of the year, in preference to the lessor's debt.
So, also, he who supplied the farming utensils, and who has not been paid, is paid in preference to the lessor out of the price of
their sale..
LA. C.C. Art. 3260. Ranking between privileges of lessor and depositor
If, among the movables with which the house or farm, or any other thing subject to the lessor's privilege, is provided, there
should be some which were deposited by a third person in the hands of the lessor or farmer, the lessor shall have a
preference over the depositary on the things deposited for the payment of his rent, if there are no other movables subject
to his privilege, or if they are not sufficient; unless it be proved that the lessor knew that the things deposited did not
belong to his tenant or farmer.
LA. C.C.P. Art. 3501. Petition; affidavit; security
A writ of attachment or of sequestration shall issue only when the nature of the claim and the amount thereof, if any, and the
grounds relied upon for the issuance of the writ clearly appear from specific facts shown by the petition verified by, or by the
separate affidavit of, the petitioner, his counsel or agent.
The applicant shall furnish security as required by law for the payment of the damages the defendant may sustain when the writ
is obtained wrongfully.
LA. C.C.P. Art. 3502. Issuance of writ before petition filed

A writ of attachment or of sequestration may issue before the petition is filed, if the plaintiff obtains leave of court and
furnishes the affidavit and security provided in Article 3501. In such a case the petition shall be filed on the first judicial day
after the issuance of the writ of attachment or of sequestration, unless for good cause shown the court grants a longer delay.
LA. C.C.P. Art. 3503. Garnishment under writs of attachment or of sequestration

Except as otherwise provided by law and in the second paragraph of this article, garnishment under a writ of attachment or of
sequestration is governed by the rules applicable to garnishment under a writ of fieri facias.
In garnishment under a writ of sequestration the only property that can be seized is property the ownership or possession of
which is claimed by the plaintiff or on which he claims a privilege.
LA. C.C.P. Art. 3504. Return of sheriff; inventory

The sheriff, after executing a writ of attachment or of sequestration, shall deliver to the clerk of the court from which the writ
issued a written return stating the manner in which he executed the writ. He shall annex to the return an inventory of the
property seized
LA. C.C.P. Art. 3505. Reduction of excessive seizure

If the value of the property seized under a writ of attachment or of sequestration exceeds what is reasonably necessary to
satisfy the plaintiff's claim, the defendant by contradictory motion may obtain the release of the excess.
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LA. C.C.P. Art. 3506. Dissolution of writ; damages

The defendant by contradictory motion may obtain the dissolution of a writ of attachment or of sequestration, unless the
plaintiff proves the grounds upon which the writ was issued. If the writ of attachment or of sequestration is dissolved, the
action shall then proceed as if no writ had been issued.
The court may allow damages for the wrongful issuance of a writ of attachment or of sequestration on a motion to dissolve, or
on a reconventional demand. Attorney's fees for the services rendered in connection with the dissolution of the writ may be
included as an element of damages whether the writ is dissolved on motion or after trial on the merits.
LA. C.C.P. Art. 3507. Release of property by defendant; security

A defendant may obtain the release of the property seized under a writ of attachment or of sequestration by furnishing security
for the satisfaction of any judgment which may be rendered against him.
LA. C.C.P. Art. 3507.1. Release of property by plaintiff; security

Property seized under a writ of attachment or of sequestration may be released to the plaintiff upon proof of his ownership and
upon furnishing security as required by Article 3508. All costs incurred as a result of the seizure shall be paid by the plaintiff
prior to the release of the property. A written agreement to hold the seizing authority harmless for wrongful seizure of property
which is not seized to enforce a security interest, mortgage, lien or privilege may be substituted in lieu of security at the
discretion of the sheriff.
LA. C.C.P. Art. 3508. Amount of security for release of attached or sequestered property
The security for the release of property seized under a writ of attachment or of sequestration shall exceed by one-fourth the
value of the property as determined by the court, or shall exceed by one-fourth the amount of the claim, whichever is the lesser.
LA. C.C.P. Art. 3509. Release of property by third person

When property seized under a writ of attachment or of sequestration is in the possession of one not a party to the action, he
may intervene in the action and, upon prima facie showing that he is the owner, pledgee, or consignee of the property, have the
property released by furnishing security in the manner and amount, within the same delay, and with the same effect as a
defendant.
LA. C.C.P. Art. 3510. Necessity for judgment and execution

Except as provided in Article 3513, a final judgment must be obtained in an action where a writ of attachment or of
sequestration has issued before the property seized can be sold to satisfy the claim.
LA. C.C.P. Art. 3511. Attachment and sequestration; privilege

To the extent not otherwise provided under Chapter 9 of the Louisiana Commercial Laws (R.S. 10:9-101, et seq.), a creditor
who seizes property under a writ of attachment or of sequestration acquires a privilege from the time of seizure if judgment is
rendered maintaining the attachment or sequestration.
LA. C.C.P. Art. 3512. Release of plaintiff's security

The security required of the plaintiff for the issuance of a writ of attachment or of sequestration shall be released when
judgment is rendered in his favor and is affirmed on appeal or when no appeal has been taken and the delay for appeal has
elapsed.
LA. C.C.P. Art. 3513. Sale of perishable property

Perishable property seized under a writ of attachment or of sequestration may be sold as provided in Article 2333. The proceeds
of such a sale shall be held by the sheriff subject to the orders of the court.
Nothing contained herein shall be construed to prohibit the release of such property upon furnishing of security.
LA. C.C.P. Art. 3514. Release not to affect right to damages

The release of property upon furnishing security under Articles 3507, 3509, or 3576 shall not preclude a party from asserting
the invalidity of the seizure, or impair his right to damages because of a wrongful seizure.
LA. C.C.P. Art. 3571. Grounds for sequestration

When one claims the ownership or right to possession of property, or a mortgage, security interest, lien, or privilege thereon, he
may have the property seized under a writ of sequestration, if it is within the power of the defendant to conceal, dispose of, or
waste the property or the revenues therefrom, or remove the property from the parish, during the pendency of the action.
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LA. C.C.P. Art. 3572. Sequestration before rent due

A sequestration based upon a lessor's privilege may be obtained before the rent is due, if the lessor has good reason to believe
that the lessee will remove the property subject to the lessor's privilege. If the rent is paid when it becomes due, the costs shall
be paid by the plaintiff.
LA. C.C.P. Art. 3573. Sequestration by court on its own motion

The court on its own motion may order the sequestration of property the ownership of which is in dispute without requiring
security when one of the parties does not appear to have a better right to possession than the other.

An applicant for a writ of sequestration shall furnish security for an amount determined by the court to be sufficient to protect
the defendant against any damage resulting from a wrongful issuance, unless security is dispensed with by law.
LA. C.C.P. Art. 3575. Lessor's privilege

A writ of sequestration to enforce a lessor's privilege shall issue without the furnishing of security.
LA. C.C.P. Art. 3576. Release of property under sequestration

If the defendant does not effect the release of property seized under a writ of sequestration, as permitted by Article 3507, within
ten days of the seizure, the plaintiff may effect the release thereof by furnishing the security required by Article 3508.
LSA-R.S. 9:3241. Limitation on lessor's privilege upon failure or death of lessee

The lessor's privilege and right of pledge under any lease, on any building used wholly or in part for mercantile purposes,
entered into after August 31st, 1926, shall not extend, in the case of the failure or death of the lessee, to secure rent for a term
of more than six months after death or failure. Nothing herein shall be construed to deprive the landlord of his privilege upon
the effects on the leased premises, belonging to the purchaser of the lease for the unexpired term, at succession, sheriff's, or
syndic's sale, except in the case of the insolvency or death of the purchaser. In such case, the provisions of this Section shall
apply in full force.
The lessor's privilege and right of pledge under any lease, on any building used wholly or in part for mercantile purposes,
entered into after August 31st, 1926, shall not extend, in the case of the failure or death of the lessee, to secure rent for a
term of more than six months after death or failure. Nothing herein shall be construed to deprive the landlord of his
privilege upon the effects on the leased premises, belonging to the purchaser of the lease for the unexpired term, at
succession, sheriff's, or syndic's sale, except in the case of the insolvency or death of the purchaser. In such case, the
provisions of this Section shall apply in full force.6-month go back in case of the death.
LSA-R.S. 9:3251. Lessee's deposit to secure lease; retention by lessor; conveyance of leased premises; itemized
statement by lessor
A. Any advance or deposit of money furnished by a tenant or lessee to a landlord or lessor to secure the performance of any
part of a written or oral lease or rental agreement shall be returned to the tenant or lessee of residential or dwelling premises
within one month after the lease shall terminate, except that the landlord or lessor may retain all or any portion of the advance
or deposit which is reasonably necessary to remedy a default of the tenant or to remedy unreasonable wear to the premises. If
any portion of an advance or deposit is retained by a landlord or lessor, he shall forward to the tenant or lessee, within one
month after the date the tenancy terminates, an itemized statement accounting for the proceeds which are retained and giving
the reasons therefor. The tenant shall furnish the lessor a forwarding address at the termination of the lease, to which such
statements may be sent.
B. In the event of a transfer of the lessor's interest in the leased premises during the term of a lease, the transferor shall also
transfer to his successor in interest the sum deposited as security for performance of the lease and the transferor shall then be
relieved of further liability with respect to the security deposit. The transferee shall be responsible for the return of the lessee's
deposit at the termination of the lease, as set forth in Subsection A of this Section.
C. Paragraph A of this Section shall not apply when the tenant abandons the premises, either without giving notice as required
or prior to the termination of the lease.
Deals with just the deposit. Advise client to take pictures so that he may get his deposit back.
Failure to return the deposit gives the tenant the right to collect attorneys fees.
LSA-R.S. 3252. Damages; venue

A. The willful failure to comply with R.S. 9:3251 shall give the tenant or lessee the right to recover actual damages or two
hundred dollars, whichever is greater, from the landlord or lessor, or from the lessor's successor in interest. Failure to remit
within thirty days after written demand for a refund shall constitute willful failure.
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B. An action for the recovery of such damages may be brought in the parish of the lessor's domicile or in the parish where the
property is situated.
LSA-R.S. 9:3253. Costs and attorney's fees

In an action brought under R.S. 9:3252, the court may in its discretion award costs and attorney's fees to the prevailing party.
LSA-R.S. 9:3254. Waiver of tenant's rights prohibited

Any waiver of the right of a tenant under this part shall be null and void.
LSA-R.S. 9:3258. Lessor's right to own, control, use, enjoy, protect and dispose of property and things
Every lessor, in accordance with the provisions of Article I, Section 4 of the Louisiana Constitution of 1974, shall have the
right to the ownership, control, use, enjoyment, protection and right to dispose of private property including any alienation
thereof by lease or otherwise, where a person by law or contract has a legal right to give to another the enjoyment of a thing or
property for a valid consideration; which said rights shall include all rights granted to lessors by Title IX of the Louisiana Civil
Code1 dealing with lease, and which said rights shall not be altered, abridged or diminished except by state law, and which said
rights are subject to the reasonable exercise of the police power.
LSA-R.S. 9:3259. Unpaid rent; attorney fees

A. Whenever any lessee of any apartment building, house, motel, hotel, or other such dwelling fails to pay rent that has become
due and delinquent, within twenty days after delivery of written demand therefor made in accordance with the provisions of
this Section, correctly setting forth the amount of rent due and owing, the lessee shall be liable for reasonable attorney fees for
the prosecution and collection of such claim when judgment on the claim is rendered in favor of the claimant.
B. Delivery of written demand for purposes of this Section may be accomplished by mailing the written demand by certified
mail to the last known address of the lessee, by personal delivery to the lessee or by tacking the written demand on the door of
the leased premises.
C. The provisions of this Section shall apply to oral leases only.
LSA-R.S. 9:3259.1. Unpaid rent; mobile homes or manufactured housing; notification by lessor
B. When the rental payments for immovable property on which a mobile home or manufactured housing is located are sixty
days past the due date for the payment, the lessor shall notify the secured parties and the mortgagor, if the mortgagor is not the
lessee or occupant of the mobile home or manufactured housing, in writing by mail that the rental payments are sixty days past
the due date. The notice shall include the following information if known or readily available to the lessor or if available from
the office of motor vehicles of the Department of Public Safety and Corrections:
(1) The lessor's name.
(2) The lessee's name.
(3) The mortgagor's name.
(4) The location of the mobile home or manufactured housing.
(5) The number of days that the rental payments are overdue, the monthly rental payment, and the total amount past due.
(6) The vehicle identification number of the mobile home or manufactured housing.
(7) A description of the mobile home or manufactured housing including the make, model, year, dimensions, and any
identification numbers or marks.
C. Notwithstanding any provision of the law to the contrary, failure of the lessor to provide such notification within thirty days
after the rental payments are sixty days past due shall limit the lessor's privilege or right of pledge for rent to the amount of
rental payments past due for ninety days.
D. The lessor shall be entitled to collect a fee of twenty-five dollars from the lessee or mortgagor in addition to the rental
payments due and any additional fees or charges due the lessor when such notification is made and the lessee or mortgagor
subsequently pays the rental payments due.
E. The lessor shall be entitled to collect a fee of twenty-five dollars from the secured parties in addition to all rental or storage
payments due at the time the mobile home or manufactured housing is repossessed when such notification is made and the
secured party subsequently obtains possession of the mobile home or manufactured housing.
F. The office of motor vehicles in the Department of Public Safety and Corrections shall maintain a record of all mobile homes
and manufactured housing for which a vehicle certificate of title has been issued pursuant to Chapter 4 of Title 322 of the
Louisiana Revised Statutes of 1950 and which is subject to a security device for a period of ten years or for the period stated
for the termination of the security device. The record shall include, if available:
(1) The name and address of the mortgagor or vendee of the mobile home or manufactured housing.
(2) The names and addresses of the primary secured party and any secondary secured party on any security device.
(3) The vehicle identification number of the mobile home or manufactured housing.
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(4) A description of the mobile home or manufactured housing including the make, model, year, dimensions, and any
identification numbers.
LSA-R.S. 9:4770. Conflicts in favor of Chapter 9 of the Louisiana Commercial Laws

9:4770 is the link between the ranking provisions on privileges and the rules on UCC9 which has its own
ranking provisions. Insofar as UCCP ranks statutory liens, the UCC9 (security interests beats a non-
possessory statutory lien (Louisiana privilege) by nature wins even if recorded later in time. It specifically
refers to the rights of the vendor and a lessor under 2705 and 3218.
On what movables may the landlord have a privilege: 1) the property of the tenant 2) the property of the subtenant 3) the
property of third persons that is on the premises (as long as it is not transient and landlord doesnt know it belongs to someone
else)
What Can The Lessor Do? Pickens v. Webster (1879): FACTS: plaintiff leased a plantation. During the lease, judgment
creditors seized the crop and other movables. Lessor seeks injunction arguing that the seizure interfered w/the lessors right of
detention. ISSUES: Does the lessors privilege to take effects and keep them until he is paid prevent other creditors from
provoking a sale of the things subject to detention? HELD: The landlord has a right of detention (to ultimately sell the thing)
does not prevent other creditors of the lessee from seizing the thing in the hands of the landlord and having it sold, subject to
the landlord's claim.
Prof says: bottom linedeals w/3218. You may retain possession as against the debtor until paid. And it another creditor takes
it, you get paid first
How Long Does the Privilege Last? Boylston v. Jones (1934): FACTS: 2 tracts of farmland next to each other. One tract
w/house. 2 owners. Farmer didnt pay the rent on the land w/no house. Took his cotton from that land and moved it to the land
w/the house, with the consent of the lessor of the land w/no house. HELD: Once 15 days has lapsed, the lessor has no more
privilege. Lessor will also lose the privilege if it is within 15 days, but the lessee sells the thing. He will also lose privilege if
lessor consents to removal. Here, lessor has no privilegeit was longer than 15 days as to some cotton and to other cotton, the
landlord consented to removal to the land with the house.
Prof says: The privilege STARTS when there is a lease PLUS movables in or on the premises. Privilege ends (and can no
longer chase property) after 15 days after removal of the property if the lease is still in effect (if they are still the lessees
property) OR as long as the property is still there if the lease ended. This is all under 2709.
Hypo: I ended the lease and moved out. I didnt pay the last month. I left my iphone. Landlord still has privilege on the iphone.
But, if I have paid, but I still left the iphone, there is no privilege.
Hypo: I have a lease that starts on 1/1/10, ending 12/31/10. I like the place so I sign a new lease on 1/1/11 through 12/31/11.
This is a novation. On 6/6/11, I break the lease and dont pay. When did privilege start? Bc it is a novation, it starts at signing
of new lease.
Hypo: What if I dont sign a new lease, but I just keep paying. Then it is reconducted, and it is considered to be the same lease,
so it starts at signing of first lease
Note: When landlord sells the property, there is no longer a lease bw tenant and landlord, so the seller no longer has landlords
privilege. This is also true if the landlord assigns the property to B; B has lessors privilege starting on date of assignment. Also
note, once it the property is sold or the lease is assigned by A to B, once A is no longer the landlord and thus, has no privilege
EVEN IF HE IS UNPAID. A can still sue the tenant to pay his bill, A just no longer has a privilege (preference to be paid) on
the property.
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Property of Third Persons on the Leased Premises. Merrick, Race & Foster v. LaHache (1875): FACTS: ISSUES: HELD:
When 3rd party property is on the leased premises w/out the consent of the 3rd party owner, there is no privilege on that
property. If the 3rd party owner consents to the property being on the leased premises, then there is a lessors privilege on the
property of the 3rd party. Additionally, if the 3rd party owner consented to the things being on the leased premises, then the 15
day right of pursuit also applies. Art. 2707.
Property of Third Persons. Turner v. Ratcliff (1934): FACTS: ISSUES: HELD: Under the new law, you can seize 3rd party
property in or on the property. BUT if it is a car bc there is a TITLE, the landlord knows (or at lease should have known) that
the car belonged to someone else(in other words, that it is transient)?? IF it had been a laptop on the driveway, unless it had a
nametag on it, can be seizedtrue owner can get it back, pursuant to intervening under 1092.
Prof says it really is key whether the landlord KNOWS or shouldve known that the property did not belong to the lessee.
What Happens When the Landlord Sells the Property? Bistes v. Checker Cab Company (1930): FACTS: The landlord sold
the leased premises and, 17 days later, obtained a writ of provisional seizure for unpaid rent and the tenant's movables were
seized under the writ. However, the movables had already been seized under a writ of fieri facias in favor of a third party who
had a judgment against the tenant. The landlord claimed that his lien of privilege was superior to the third party's claim.
HELD: third party's interest was superior to that of the landlord. The court reasoned that the landlord had allowed possession
of the movables to pass from himself when he sold the property, which extinguished the privilege under La. Civ. Code Ann. art.
3218. The court further reasoned that the landlord was not entitled to exercise his privilege with regard to the tenant's movables
after selling the property because it would have deprived the third party of rights that accrued to her after the sale.
Prof says: Owner of 3rd party property intervened AFTER the landlord sold the property. TOO BAD. Article 2707 tells us this
true owner must intervene BEFORE the judicial sale. Court was just giving it a literal reading.
Also noteonce the landlord sells the premises, he has relinquished possession, so the privilege is extinguished.
Lessor v. Depositor. The Bettcher Bros. v. Original Swells Club (1931): FACTS: The Iroquois club used to rent a building and
left some chairs there. Iroquois says they paid the rent. The building is now rented by Swells Club. Swells club doesnt pay
rent. If we look at Art.3260, it tells us that the lessor beats depositary. If the chairs were left in the building truly for deposit,
then STILL, under 3260, the lessor should win.
But this is NOT what happened. How it SHOULD have been analyzed is that it wasnt the lessees property, and the landlord
KNEW that, so he shouldnt have been able to seize it. (The court makes a deal out of the being convinced that the lessor knew
the property he seized was someone elses). Point2709 should have controlled the analysis. Where court screwed up is by
trying to figure out if leaving the chairs was or was not deposit. Prof says leaving chairs in a nightclub for the club to use is not
a depositit is more like loan for use. Prof says the court was TRYING to get to the correct result (landlord cant seize the
table and chairs) but used the wrong Code articles and twisted them all up to get there. NOW, all that matters is 2709, etc
controls!!
Leasehold Mortgages. Carriere v.Bank of Louisiana (1996): FACTS: Carriere owned commercially zoned land. Entered into
5 year lease w/Mr. O. Mr. O and Carriere made the lease w/the idea that Mr.O was going to build a restaurant on the land. To
obtain the financing, he executed a CMN secured by a mortgage on the leasehold estate and the improvements. He goes into
bankruptcy and stops paying the bank and the lessor. The lessor filed suit to terminate the lease and the bank filed suit for
executory process foreclosing on the note and CM. At sheriffs sale, Bank of La purchased the mortgage propertywhich was
the leasehold estate and the improvements. Bank of LA appealed the eviction decisionand won!! So now the Carrieres are
trying to get the bank to pay rent.
DISCUSSION:
it has also been long established in Louisiana that the right of occupancy, use and enjoyment possessed by a lessee by virtue of
a lease may be severed from the lessee's obligation to pay rents under the lease
the Civil Code explicitly provides that buildings and other constructions permanently attached to the ground may belong to a
person other than the owner of the ground and further provides that when such an owner no longer has the right to keep them
on the land of another he must, upon written demand of the owner of the ground, remove them within 90 days after such
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written demand. If the owner of such buildings or other constructions fails to timely remove them, the owner of the ground
acquires ownership of such buildings or other constructions with no obligation to compensate the former owner.
Thus, a lessee who has availed himself of his statutory right to mortgage his interests in his lease may mortgage either: (1) his
entire lease, which includes all of the lessee's rights, duties and obligations under the lease, including the obligation to pay
rents; or (2) only his right of occupancy, use and enjoyment under the lease. If the lessee mortgages his entire lease, defaults on
the mortgage, and the mortgagee forecloses, the purchaser at the Sheriff's sale becomes the owner of the lease, i.e., the lessee,
and acquires all of the lessee's rights, duties and obligations under the lease, including the obligation to pay rent.
If, on the other hand, the lessee mortgages only his right of occupancy, use and enjoyment, defaults on the mortgage, and the
mortgagee forecloses, the purchaser at the Sheriff's sale becomes the owner of only the original lessee's right of occupancy, use
and enjoyment under the lease, while the original lessee/mortgagor retains the obligation to pay rents.
If, in this situation, the original lessee/mortgagor also defaults on his obligation to pay rents, the owner of the right of
occupancy, use and enjoyment, absent a specific and unambiguous subordination in favor of such an acquirer by the lessor,
may, should the lessor thereafter cause the lease to be terminated for the original lessee's non-payment of rents, lose his right to
remain on the leased premises. In this situation, if there are also improvements on the land which were owned by the original
lessee/mortgagor that are now, by virtue of the original lessee/mortgagor's default and the subsequent foreclosure and sale,
owned by the purchaser at the Sheriff's sale, the lessor will be free, in accordance with La. C.C. art. 493, to demand, in addition
to the purchaser's vacation of the land, removal of such improvements within ninety days.
[Finding that the bank was not liable for the rental payments before the sheriffs sale (bc there was a provision in the K saying
so),]we now turn to the issue of whether or not BOL, as the third party purchaser at a Sheriff's sale of the mortgaged leasehold
estate and improvements located thereon, is liable to the Carrieres for rental payments which Occhipinti failed to pay
subsequent to [their purchase at the sheriffs sale]. BOL could not acquire anything more at the Sheriff's sale than that which
was mortgaged by Occhipinti.
Although the parties failed to describe that which was mortgaged as THAT RIGHT OF OCCUPANCY, USE AND
ENJOYMENT created and existing by virtue of a Ground Lease by and between the Carrieres and Occhipinti, they
nevertheless explicitly chose to describe that which was mortgaged as something other than Occhipinti's entire lease, instead
describing it as THAT LEASEHOLD ESTATE created and existing by virtue of a Ground Lease.
First, we are unwilling to impose a requirement that, as a matter of law, only by the use of the phrase THAT RIGHT OF
OCCUPANCY, USE AND ENJOYMENT may the parties to a mortgage create a mortgage of less than the entire interest of
the lessee. Second, in our view, the mortgage at issue herein, in using the phrase THAT LEASEHOLD ESTATE created and
existing by virtue of a Ground Lease, neither explicitly states nor reasonably implies that a mortgage of Occhipinti's entire
lease is intended or even contemplated by the parties. Instead, we conclude the use of the phrase leasehold estate as opposed
to THAT GROUND LEASE or THE LEASE or THE ENTIRE LEASE connotes a mortgage of something less than
Occhipinti's entire interest in the lease is being mortgaged.
HELD: Prof says---What happened in this case is that Mr. O mortgages his lease. Bank forecloses on this mortgage. The
problem is basically that the tenant SPLIT the lease; divided right to occupy (given to bank) and the obligation to pay rent (still
in Mr. O) What this really boils down to is that plaintiff sued the wrong party. They should have sued Mr. O. Another way the
plaintiff could have fixed this by evicting Mr. O, bc if he is evicted, then he loses the right to occupy and thus, the bank does
too.
LEASE FINANCING AND THE LESSORS PRIVILEGE

Four Basic Forms of Financing for Leased Property
1) Lessor may mortgage the property. secure the personal obligation of another.
2) The tenant may mortgage its interest in the lease (Carriere case).
3) The landlord may assign the income stream under 9:4401.
4) The tenant may place a UCC9 interest on movables on the premises.
A Mortgage on the Lessors Propertythe lessor may mortgage the land itself. LA law is that a mortgage is indivisible and
burdens the entirety of the mortgaged property, which includes component parts of the land (buildings, other constructions,
things permanently attached to a building/construction). Louisiana law allows an owner to make certain items of movable
property that are not fixtures into immovable property merely by filing in the conveyance records of the parish a declaration
making machinery and appliances in commercial establishments component parts; this declaration is effective to legally
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immobilize these items even if they can be easily removed physically. Fact that lessor has granted a mortgage does not
necessarily imply the personal liability of the lessor; a mortgage may secure a non-recourse or in rem obligation or may
secure the obligation of another. When a landlord leases unimproved property, there is usually a clause in the K that says any
constructions owned by the lessee as separate constructions revert to the landlord at the termination of the lease. To finance the
constructions by the lessee, the lender typically requires that the tenant fully secure the loan AND that the lessor mortgage his
own interest in the real estate. Since the mortgage will encumber all component parts, there is much litigation over WHAT is a
component part.
A Security Interest in the Rental Streamthe only way to do this is to use La. R.S. 9:4401LA UCC 9 cannot be used!!
There are two ways to do so under the statute:
1. Lender files an act (called and act of assignment or act of pledge) in the conveyance records where the immovable is
located.
2. Act of mortgage: If the lender is also taking a mortgage on the lessors property interest, then the security interest in the
rental stream may be contained in the act of mortgage and it ONLY needs to be filed in the mortgage records.
The immovable must be carefully described to be effective against 3rd parties. The description must be as good as one used in a
mortgage (to make the mortgage effective against 3rd parties).
It must state the amount of the obligation secured by the rents.
Ranking A Lessors Privilege Against a UCC 9 Security Interest;
By statute, The UCC 9 Security Interest On Movables Always Wins (if it is properly perfected) against the lessors
privilege, regardless of whether the the UCC 9 interest is perfected BEFORE OR AFTER the lessors privilege comes into
effect. Repairmans privilege beats lessors privilege.
The Property of a Subtenant: lessor has privilege, but only to the extent that the subtenant owed the tenant. Ex: tenant owes
lessor $1000, but sub only owes $400. Only $400 of the subs property is subject to the privilege. No right of pursuit!!
Third Party Property: more limited than tenants property. Privilege only attaches if the property is IN or UPON the leased
premises. No right of pursuit. Cant know (or have reason to know) the property does not belong to the tenant.
What about notice? Well, if the landlord knows it is third party propertythen he cant seize, so no notice. But if he doesnt
know, he can and there is no requirement that the tenant notify the third person. If the third person has no notice, it is
impossible for them to intervene. Uh oh!! While there are no cases right now, the tenant may be liable to the third person for
failure to notify in the future.
LESSON #25. THE VENDORS PRIVILEGE ON MOVABLES
Dont need recodation for it to be effective between third parties. If you want it effective against third parties, file original in
mortgage and a copy in conyence. Every credit sale gives rise to resolutory condition. Once you file it in the mortgage
and conyenace records, it is a vendors privilege.
How do you write vendors privilege for immovables? Must be recorded. 3274.
LA. C.C. Art. 465. Things incorporated into an immovable

Things incorporated into a tract of land, a building, or other construction, so as to become an integral part of it, such as building
materials, are its component parts.
LA. C.C. Art. 466. Component parts of buildings or other constructions

Things that are attached to a building and that, according to prevailing usages, serve to complete a building of the same general
type, without regard to its specific use, are its component parts. Component parts of this kind may include doors, shutters,
gutters, and cabinetry, as well as plumbing, heating, cooling, electrical, and similar systems.
Things that are attached to a construction other than a building and that serve its principal use are its component parts.
Other things are component parts of a building or other construction if they are attached to such a degree that they cannot be
removed without substantial damage to themselves or to the building or other construction.
LSA-C.C. Art. 467. Immovables by declaration
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The owner of an immovable may declare that machinery, appliances, and equipment owned by him and placed on the
immovable, other than his private residence, for its service and improvement are deemed to be its component parts. The
declaration shall be filed for registry in the conveyance records of the parish in which the immovable is located.
LA. C.C. Art. 468. Deimmobilization

Component parts of an immovable so damaged or deteriorated that they can no longer serve the use of lands or buildings are
deimmobilized.
The owner may deimmobilize the component parts of an immovable by an act translative of ownership and delivery to
acquirers in good faith.
In the absence of rights of third persons, the owner may deimmobilize things by detachment or removal.
LA. C.C. Art. 469. Transfer or encumbrance of immovable

The transfer or encumbrance of an immovable includes its component parts.
LA. C.C. Art. 470. Incorporeal immovables

Rights and actions that apply to immovable things are incorporeal immovables. Immovables of this kind are such as personal
servitudes established on immovables, predial servitudes, mineral rights, and petitory or possessory actions.
LA. C.C. Art. 2487. Delivery excused until payment of price and for insolvency
The seller may refuse to deliver the thing sold until the buyer tenders payment of the price, unless the seller has granted the
buyer a term for such payment.
This is the vendors LIEN. The privilege is art. 3227.
LA. C.C. Art. 2561. Dissolution of sale for nonpayment of price

LSA-C.C. Art. 2562 Dissolution of sale of immovables for non-payment of price; extension of time for payment
When an action is brought for the dissolution of the sale of an immovable and there is no danger that the seller may lose the
price and the thing, the court, according to the circumstances, may grant the buyer an extension of time, not in excess of sixty
days, to make payment, and shall pronounce the sale dissolved if the buyer fails to pay within that time. When there is such a
danger, the court may not grant the buyer an extension of time for payment.
LSA-C.C. Art. 2563. Payment of price after expiration of term but prior to default
When the contract of sale of an immovable expressly provides for dissolution in case of failure to pay the price, the buyer still
has the right to pay, in spite of the express dissolution clause, for as long as the seller has not given the buyer notice that he
avails himself of that clause or has not filed suit for dissolution.
LSA-C.C. Art. 2564. Dissolution of sale of movables

If the thing is movable and the seller chooses to seek judicial dissolution of the sale because of the failure of the buyer to
perform, the court may not grant to the buyer any extension of time to perform.
OF THE PRIVILEGE OF THE VENDOR OF MOVABLE EFFECTS

LA. C.C. Art. 3227. Vendor's privilege on movables; agricultural products of the United States
He who has sold to another any movable property, which is not paid for, has a preference on the price of his property, over the
other creditors of the purchaser, whether the sale was made on a credit or without, if the property still remains in the possession
of the purchaser.
So that although the vendor may have taken a note, bond or other acknowledgment from the buyer, he still enjoys the privilege.
Any person who may sell the agricultural products of the United States in the city of New Orlenas [Orleans], shall be entitled
to a special lien and privilege thereon to secure the payment of the purchase money, for and during the space of five days only,
after the day of delivery; within which time the vendor shall be entitled to seize the same in whatsoever hands or place they
may be found, and his claim for the purchase money shall have preference over all others. If the vendor gives a written order
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for the delivery of any such products and shall say therein that they are to be delivered without vendor's privilege, then no lien
shall attach thereto.
LA. C.C. Art. 3228. Loss of privilege by sale with other property of purchaser
But if he allows the things to be sold, confusedly with a mass of other things belonging to the purchaser, without making his
claim, he shall lose the privilege, because it will not be possible in such a case to ascertain what price they brought.
LA. C.C. Art. 3229. Vendor's claim for restitution

If the sale was not made on credit, the seller may even claim back the things in kind, which were thus sold, as long as they are
in possession of the purchaser, and prevent the resale of them; provided the claim for restitution be made within eight days of
the delivery at farthest, and that the identity of the objects be established.
LA. C.C. Art. 3230. Restitution dependent on identification

When the things reclaimed consist in merchandise, which is sold in bales, packages or cases, the claim shall not be admitted if
they have been untied, unpacked or taken out of the cases and mixed with other things of the same nature belonging to the
purchaser, so that their identity can no longer be established.
LA. C.C. Art. 3231. Restitution of things easily recognized

But if the things sold are of such a nature as to be easily recognized, as household furniture, even although the papers or cloths,
which covered them at the time of delivery, be removed, the claim for restitution shall be allowed.
What Kind of Sales Create A Vendors Privilege? Singer Company v. Willis (1977): (1) Louisiana vendor's privilege, if it
arises, is valid as a statutory lien as against the trustee; (2) the privilege applies only to sales completed within Louisiana; (3)
privilege did not attach where final sales contract acceptance took place outside Louisiana and identification of goods sold or
their separation from a mass thereof did not take place in Louisiana, and (4) such determination did not have effect of
impairing the obligation of contracts in contravention of the Federal Constitution.
Sale of Fungible Items. Forrey v. Strange (1925): FACTS: purchase on open account of oil field machinery, tools, and
merchandise. On this open account, partial payments were made. Purchaser didnt pay his mortgages and did not pay his open
account in full. Seller is claiming vendors lien and privilege on the machinery, etc HELD: Seller had no vendor's lien upon all
the movable property on the leased premises.
Its claim was for a balance due on a running account. The law allows no vendor's lien for a general balance upon all the
property sold and delivered and charged for in said account.
The law is, that the vendor's lien extends only to the very thing for which the price has not been paid, and only to the extent of
the unpaid price thereof; also, only if the thing still remains in the possession of the purchaser. R.
Manifestly, payments on open account must be imputed to the price of the things first sold, unless specially agreed otherwise.
Hence Seller had been paid the price of the articles first sold, and had no vendor's lien on such [this first sold property] property
for the unpaid price of the things sold to the buyer later; nor had it any vendor's lien for the unpaid price of such things as had
been disposed of.
Practically speaking--In case of fungible items to determine where the vendors lien, we are going to elect FIFO, first in, first
out. Say the creditor is unpaid for three of the items. He can seize the last items if not sold. Under LIFO, he could not seize
anything.
Christina Equibank, EPA, and Pritania deal with component parts.
When Does a Movable Become an Immovable? What Happens to the Vendors Privilege? Christina Inv. Corp. v. Gulf Ice
Co. (1951): Under Louisiana law, vendor of movables has privilege for unpaid price of property sold as long as property
remains in possession of vendee and can be identified.
Under Louisiana law, which does not recognize conditional sales, such contracts are considered outright sales vesting absolute
title in buyer, but a vendor's lien is thereby created when entered into and executed in Louisiana.
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Real estate mortgage does not destroy vendor's privilege on thing placed on property mortgaged as long as object is complete
in itself and can be removed without much damage, but if the movable has become so incorporated thereto, or merged into the
immovable property as to have become part and parcel of it, the vendor's privilege on movable is lost.
Where ice plant furnished ice in crushed form to boats which moored at the plant's dock for such service, and ice crusher was
not located in building and only connection with dock were blocks put in front of wheels to keep machine from rolling and
angle irons pressed into conveyor coming out of ice plant, and electric wires running to plant, the machine was removable
without material injury to the real estate and hence regardless of whether machine had become an immovable by destination,
vendor's privilege was preserved as against real estate mortgage.
Equibank v. US IRS (1985): FACTS: Equibank is key case of when something becomes a component part under 466.
Chandelier case. Societal expectations test. Would you expect to house to operate without it? Chandelier was a component
part of the mansion because it would be appropriate for the type of house. Would not be same result in a mobile home. TEST:
Does the average, ordinary, prudent person buying [this place] expect [the thing] to be there when he or she arrives to take
possession?
US EPA V. New Orleans Public Service (1987): three electrical transformers, bolted to the floor, in brewery building were
component parts of the building. Court adds to societal expectations testnow, what degree if skill necessary to remove the
thing. Court says the test is whether society views the item as in one of the categories of immovable. Reviews jurisprudence
and gives us a list:
WINDOW AC: movable
WATER HEATER: attached by pipes, so immovable
WALL COVERINGS (mirrors, marble wainscoting, wallpaper?): immovable bc such a degree of permanence
ITEMS: Drapes not immovable. Hotel furniture some say yes and some say no. Loose limestone is movable but the base is
not.
About the vendors privilege
Questions:
What is movable property subject to the privilege? See cases above.

What does which is not paid for mean? If a check is issued, is that paid? What about part payment?
What does if property still remains in possession of the purchaser? It is thought mere detention (object physically in
possession) is sufficient possession to preserve vendors privilege. So if buyer sells the thing, but has not yet physically
delivered, the privilege is preserved. But what if the thing has been loaned, bailed/deposited or pledged? We arent sure about
either!!
Lesson 26:Ranking Privileges on Movables
Also relevant: La. C.C.P. Arts. 1092, 3501 et seq., 3571-3575

LSA-C.C. Art. 3217. List of special privileges on particular movables
1. The appointments or salaries of the overseer for the current year, on the crops of the year and the proceeds thereof; debts due
for necessary supplies furnished to any farm or plantation, and debts due for money actually advanced and used for the
purchase of necessary supplies and the payment of necessary expenses for any farm or plantation, on the crops of the year and
the proceeds thereof.
continues still in his possession. (read this one with R.S. 9:4501-4502)
furniture, which is found in the house let, or on the farm, and on every thing which serves to the working of the farm. (Lessors
privilege)
4. The debt, on the pledge which is in the creditor's possession. (pledgors privilege)
5. That of a depositor, on the price of the sale of the thing by him deposited. (depositors privilege)
7. The price due on movable effects, if they are yet in the possession of the purchaser. (vendors privilege on movables)
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carriers; such as taxes, storage and privileged claims required to be paid before moving the thing; and in case the thing carried
be lost or destroyed without the fault of the carrier, this privilege for money paid by the carrier shall attach to insurance
effected on the thing for the benefit of the owner, provided written notice of the amount so paid by the carrier and for whose
account, with a description of the property lost or destroyed, be given to the insurer or his agent within thirty days after the
loss, or if it be impracticable to give the notice in that time, it shall be sufficient to give the notice at any time before the money
is paid over.
LSA-C.C. Art. 3252. General privileges on both movables and immovables

The privileges which extend alike to movables and immovables are the following:
1. Funeral charges.
2. Judicial charges.
3. Expenses of last illness.
4. The wages of servants.
5. The salaries of secretaries, clerks and other agents of that kind.
Whenever a surviving spouse or minor children of a deceased person shall be left in necessitous circumstances, and not possess
in their own rights property to the amount of one thousand dollars, the surviving spouse or the legal representatives of the
children, shall be entitled to demand and receive from the succession of the deceased spouse or parent, a sum which added to
the amount of property owned by them, or either of them, in their own right, will make up the sum of one thousand dollars, and
which amount shall be paid in preference to all other debts, except those secured by the vendor's privilege on both movables
and immovables, conventional mortgages, and expenses incurred in selling the property. The surviving spouse shall have and
enjoy the usufruct of the amount so received from the deceased spouse's succession, until remarriage, which amount shall
afterwards vest in and belong to the children or other descendants of the deceased spouse.
LSA-C.C. Art. 3253. Order of payment of privileges; debtor's movables taken before immovables
When, for want of movables, the creditors, who have a privilege according to the preceding article, demand to be paid out of
the proceeds of the immovables of the debtor, the payment must be made in the order laid down in the following chapter.
LSA-C.C. Art. 3254. Special privileges prime general privileges on movables; ranking among general privileges when
movables sufficient
If the movable property, not subject to any special privilege, is sufficient to pay the debts which have a general privilege on the
movables, those debts are paid in the following order:
Funeral charges are the first paid.
Law charges, the second.
Expenses of the last illness, the third.
The wages of servants, the fourth.
Suppliers of provisions, the fifth.
The salaries of clerks, secretaries, and others of that nature, the sixth.
The thousand dollars secured by law to the surviving spouse or minor children, as set forth in Article 3252, shall be paid in
preference to all other debts, except those for the vendor's privileges and expenses incurred in selling the property.
LSA-R.S. 9:4501. Repairman's privilege on automobiles and other machinery

A. Any person operating a garage or other place where automobiles or other machinery are repaired, or parts therefor are
made or furnished, has a privilege upon the automobile or other machinery for the amount of the cost of repairs made,
parts made or furnished, and labor performed. If an estimate was given by the repairman for the repairs, then in order for
the amount of the privilege to exceed the amount of the estimate, the repairman must secure authorization to exceed the
amount of the estimate. This privilege is effective for a period of one hundred twenty days from the last day on which
materials were furnished or labor was performed if the thing affected by such privilege is removed from the place of
business where such labor was performed or materials were furnished; provided that if the thing affected by such privilege
remains in the place of business of the person who furnished such materials or performed such labor, such privilege
continues as long as such thing remains in such place of business. For the purposes of this Section, it is immaterial where
the automobile or other machinery may have been located at the time or by whom the parts may have been attached.
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B. This privilege may be enforced by the writ of sequestration, without the repairman having to furnish security therefor; and
the exemptions from seizure granted by R.S. 13:3881 shall not be applicable to objects or property subject to this privilege
for purposes of enforcing the privilege. This privilege is superior to all other privileges except for a vendor's privilege,
a chattel mortgage previously recorded, a previously perfected security interest under Chapter 9 of Louisiana
Commercial Laws [time ranking], or against a bona fide purchaser to whom possession has been delivered and who
has paid the purchase price without previous notice of the existence of the privilege.
C. If the automobile or other machinery is seized and sold by the holder of a vendor's privilege or previously recorded chattel
mortgage, then any proceeds over and above the balance due on the vendor's privilege and previously recorded chattel
mortgage, plus costs of court including costs of the sheriff, constable, or marshal, shall be paid to the garage or repairman,
not to exceed the amount of the repairman's privilege.
LSA-R.S. 9:4502. Privilege for making or repairing movable goods, commodities, equipment, merchandise, machinery,
and other movable objects
A. (1) Any person engaged in the making or repairing of movable goods, furniture, upholstery, commodities, equipment,
merchandise, machinery, or movable objects or movable property of any type or description, has a privilege on the thing
for the debt due him for materials furnished or labor performed. This privilege is effective for a period of one hundred
twenty days from the last day on which materials were furnished or labor was performed, if the thing affected by such
privilege is removed from the place of business where such labor was performed or materials furnished; provided that if
the thing affected by such privilege remains in the place of business of the person who furnished such materials or
performed such labor, such privilege continues as long as such thing remains in such place of business.
B. This privilege is effective for a period of twelve months from the last day on which materials were furnished or labor was
performed on any farm equipment or machinery, if said thing affected by such privilege is removed from the place of
business where such labor was performed or materials furnished; provided, further, that this special farm privilege shall not
be effective for more than one hundred twenty days as against third parties who purchase the equipment or machinery, or
who lend money secured by the equipment or machinery, in good faith without knowledge of the existence of any
privilege.
C. This privilege may be enforced by the writ of sequestration, without the necessity of the creditor furnishing security
Therefore, if the debtor is first given ten days written notice by registered mail, and the exemptions from seizure granted
by R.S. 13:3881 shall not be applicable to objects or property subject to this privilege for purposes of enforcing this
privilege.
D. This privilege is inferior to a vendors privilege, a chattel mortgage previously recorded, a previously perfected
security interest under Chapter 9 of the Louisiana Commercial Laws, [FN1] or against a bona fide purchaser to
whom possession has been delivered and who has paid the purchase price without previous notice of the existence of
the privilege.
E. In addition to the remedy above granted, when the thing affected by the privilege remains in the place of business of the
person having such privilege and the debt due thereon remains unpaid for more than ninety days from the date on which
the last labor was performed or last material was furnished, the holder of such privilege may sell such property at private
sale and without appraisement, after advertising such property for ten days as provided by law in case of judicial sales of
movables. If the thing affected by such privilege and subject to such sale is of a value of ten dollars or less, to be shown by
written estimate made and signed by two disinterested appraisers, then it shall not be necessary to advertise such property
for sale, but in lieu thereof the privilege holder shall, at least ten days prior to such sale, mail by registered mail to the
owner or apparent owner at his last known address a notice stating the intention to sell such property and giving the date,
time and place of the sale. From the proceeds of any such sale, the amount of the debt secured by such privilege shall be
satisfied, including all reasonable charges for registered notices, advertisement or charges for appraisers and costs of the
sale; and the balance, if any, shall be held for the benefit of the owner for a period of six months, after which time, if it
remains unclaimed, it shall be paid to the state treasury.
F. This Section shall not be construed as repealing any of the provisions of R.S. 9:4501 or of any other law which grants a
privilege, or grants another remedy for the enforcement thereof. However, the remedy granted by Subsection C of this
Section is not available to any person who is granted a remedy for the enforcement of his privilege under any other Section
of this Title. When property to which the privilege granted by R.S. 9:4501 does not apply, but for which a certificate of
title from the office of motor vehicles of the Department of Public Safety is required, is sold at private sale pursuant to
Subsection C, the office of motor vehicles shall issue a new certificate of title to the purchaser, if the application therefore
is accompanied by an authentic act of sale and proof of compliance with the advertisement or notice requirement, as the
case may be.
LSA-C.C. Art. 3255. Order of payment when available movables insufficient
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But when part of the movables are subject to special privileges, and the remainder of the movables are not sufficient to
discharge the debts having a privilege on the whole mass of movables, or if there be equality between the special privileges, the
following rules shall direct the determination.
LSA-C.C. Art. 3256. Lessor's privilege primed by costs of sale

Whatever may be the privilege of the lessor, charges for selling the movables subjected to it are paid before that which is due
for the rent, because it is these charges which procure the payment of the rent.
LSA-C.C. Art. 3257. Lessor's privilege primed by funeral charges

The case is the same with respect to the funeral expenses of the debtor and his family; when there is no other source from
which they can be paid, they have a preference over the debt for rent or hire, on the price of the movables contained in the
house or on the farm.
LSA-C.C. Art. 3258. Lessor's privilege primes other general privileges

But the lessor has a preference on the price of these movables, over all the other privileged debts of the deceased, such as
expenses of the last illness, and others which have a general privilege on the movables.
LSA-C.C. Art. 3259. Lessor's privilege on crops primed by supplies and labor
With regard to the crops which are subject to the lessor's privilege, the expenses for seed and labor, the wages of overseers and
managers are to be paid out of the product of the year, in preference to the lessor's debt.
So, also, he who supplied the farming utensils, and who has not been paid, is paid in preference to the lessor out of the price of
their sale.
LSA-C.C. Art. 3260. Ranking between privileges of lessor and depositor

If, among the movables with which the house or farm, or any other thing subject to the lessor's privilege, is provided, there
should be some which were deposited by a third person in the hands of the lessor or farmer, the lessor shall have a preference
over the depositary on the things deposited for the payment of his rent, if there are no other movables subject to his privilege,
or if they are not sufficient; unless it be proved that the lessor knew that the things deposited did not belong to his tenant or
farmer.
LSA-C.C. Art. 3261 Depositor's privilege and other privileges
With the exception stated in the foregoing article, the privilege of the depositor on the thing deposited is not preceded by any
other privileged debt, even funeral expenses, unless it be that the depositor must contribute to the expense of sealing and
making inventory, because this expense is necessary to the preservation of the deposit.
LSA-C.C. Art. 3262. Privilege for expenses of preservation and other privileges
The privilege of him who has taken care of the property of another, has a preference over that property, for the necessary
expenses which he incurred, above all the other claims for expenses, even funeral charges; his privilege yields only to that for
the charges on the sale of the thing preserved.
LSA-C.C. Art. 3263. Vendor's privilege and other privileges

The privilege of the vendor on movables sold by him, which are still in the possession of the vendee, yields to that of the owner
of the house or farm which they serve to furnish or supply, for his rents. It yields also to the charges for affixing seals and
making inventories, but not to the funeral or other expenses of the debtor.
LSA-C.C. Art. 3264. Privilege of innkeepers

The privilege of innkeepers on the effects of travelers deceased in their house, is postponed to funeral and law charges, but is
preferred to all the other privileged debts of the deceased.
LSA-C.C. Art. 3265. Privilege of carriers

The privilege of carriers, for the cost of transportation and incidental expenses, yields only to the charges which would arise on
the sale of the goods.
The case is the same respecting the freight of goods carried on board a ship or other vessels [vessel].
LSA-C.C. Art. 3266. Immovables liable when movables insufficient

If the movables of the debtor, by reason of the special privileges affecting them or for any other cause, are not sufficient to
discharge the debts having a privilege on the whole movable property, the balance must be raised on the immovables of the
debtor, as hereafter provided.
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LSA-C.C. Art. 3267. Special privileges on immovables and other privileges

If the movables of the debtor are subject to the vendor's privilege, or if there be a house or other work subjected to the privilege
of the workmen who have constructed or repaired it, or of the individuals who furnished the materials, the vendor, workmen
and furnishers of materials, shall be paid from the price of the object affected in their favor, in preference to other privileged
debts of the debtor, even funeral charges, except the charges for affixing seals, making inventories, and others which may have
been necessary to procure the sale of the thing.
LSA-C.C.P. Art. 2643. Third person claiming mortgage, security interest, or privilege on property seized
A third person claiming a mortgage, security interest, or privilege on the property seized in an executory proceeding may assert
his right to share in the distribution of the proceeds of the sale of the property by intervention, as provided in Article 1092. The
intervention shall be served as provided in Article 1093 and shall be tried summarily.
LSA-R.S. 9:4770. Conflicts in favor of Chapter 9 of the Louisiana Commercial Laws

Must make sure there is a Louisiana sale in order for a vendors privilege to occur. It applies to a disguised sale unless the sale
falls under lease provisions.
What is special about a privilege is that the preferred/privileged creditor is not subjected to the general rule of pro-ration. He
gets paid in full before an ordinary creditor gets anything.
General privileges are on all of the current and future assets of the debtor (some only affect movable property, others
immovable, others both). Special privileges affect only a specific item or a specific TYPE of item.
Specials on only one item: repairmans privilege (3217(2) and 9:4501-4502), vendors privilege (art 3227), vendors privilege
on immovable (3249(1)
Specials on a class of items: depositary, lessors privilege
Generals: funeral, law charges/judicial expenses, last sickness, servants wages, suppliers of provisions (affects only movables),
salaries of clerks and secretaries, necessitous surviving spouse
Privileges are ranked against each other as prescribed by the Code. But sometimes there are concurrent privilegesthey rank
the same, usually these are of the same nature or the law expressly provides for concurrent ranking.
General privileges ON MOVABLES DO NOT need to be recorded. They automatically affect third parties even though there is
no way to ascertain that they exist.
General privileges on immovables: some must be recorded, others not. If they must be recorded, they have no effect until they
are. Once recorded they affect all immovable property owned (or later owned) by the debtor in ANY PARISH where recorded.
Prof says memorize the ranking provision of 9:4821.
4 general rules on ranking:

1) rank separately: ranking of privileges on movables must be done separately from ranking privileges on immovable. They
cannot be ranked simultaneously.
2)deal w/movable first: Art. 3253 declares that when a privilege encompasses both movables and immovable, all rights in the
movables must be dealt with first. Only if there is insufficient funds to pay off the creditors may a creditor exercise any rights
in the immovable.
But, under 3270, if there are insufficient funds from the total of the movables and immovables (bc there isnt
enough movables value, bc the movables have all kinds of special privileges, or the total value of
immovable/movables together dont equal enough to pay off everyone) to pay off the creditors then we have to
rank them according to statute SEPARATELY. So creditors whose privileges reach both immovable and
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movable will be reranked as if the privilege was broken into two groups: immovable and movables. So
movables are paid according to the statute for ranking movables and immovable are paid according to the
statute on immovable.
3)Special v. general: special privileges prime general privileges on movables
4)general rules v. special rules: 3255-3270 are specific rules on ranking special privileges against one another and rules on
ranking special against general privileges. If these rules conflict with the general ranking rules, these control.
The general privileges: funeral, law, last illness, servants wages, suppliers, clerk/secretary salary, necessitous spouse
The special privileges that matter today: lessor, vendor, repairman, pledger, depositor
Some ranking rules from the Code:
Special>general
Ranking of the general: necessitous spouse>funeral>judicial>last illness>servants wages>suppliers of

provisions>secretary/clerk salary
Vendor, costs of sale>necessitous spouse>everything else
Vendor, chattel mortgage previously recorded, UCC9 (previously perfected), GF buyer (paid price and has possession)>auto
repair>everything else
Vendor, chattel mortgage previously recorded, UCC9(previously perfect), GF buyer (paid price and has possession)>repair of
movables>everything else
Funeral, costs of sale>lessor>other general privileges
Lessor>depositor (unless lessor knew it didnt belong to his tenant)
Depositor>everything else, even funeral, except lessor
Charges on the sale of the thing preserved>privilege on necessary costs for preservation>everything else
UCC 9>lessor, vendor
Funeral, law >innkeeper>other privileges
Vendor>funeral, other privileged debts
Costs of sale, lessor>vendor>funeral, other debts
Costs of sale>vendor, workman who built/repaired building, supplier of materials used in building/repairing>funeral and
everything else
Hypo: Landlord leases to tenant, Dave, who runs a computer repair shop. Inside the shop Dave has: a cash register which he
borrowed from his grandpa, a table and chairs that he meets w/customers at, rented from Chairs-R-Us, 10 laptops, all
w/nametags, which he is fixing, 2 laptops that he uses to format programs to make computer repairs that he bought from Best
Buy and are purportedly secured by a UCC document. UCC covers Rent Proceeds Equipment and Inventory, and a shelf full of
computer parts. He leases a corner to a CPAthe subtenant, who is current on rent.
UCC beats lessor privilege. UCC that is signed PRIOR to repairs, it beats repairmans privilege. Dave has repairmans
privilege over the repaired computers. There is no lessor privilege over the repaired laptopsthey are labeled w/name of
owner. Landlord seizes cash register and chairs and table, the owners have to intervene, bc there is no reason the landlord
should know. Chairs and tables are not covered by UCC bc UCC does not cover furniture. Cash register, his own laptops, may
or may not be covered by UCCdepends on whether they are considered tools of trade, equipment, etc. Shelf of parts are
certainly covered by UCC. What about subtenant? Well, landlord has lessors privilege over him UP TO THE AMOUNT HE
OWES. Since he doesnt owe anything, there is no privilege.
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Prof says: There have been a lot of questions and concern about viscous circles and liens on moveables. Below are two
examples.
Here are the statutory authority for some of the most common liens.
R.S. 49:4770: UCC beats everyone except a possessory lien or when another statute specifically says otherwise
R.S. 9:4501: A repairmans lien beats a lessors.
R.S. 9:4501: A vendors beats a repairmans.
R.S. 9:4501 provides that a repairman beats a later filed UCC.
Civ. code art. 3263: A lessors beats a vendors .
The facts:
There is a sewing machine (a Louisiana credit sale) on leased property that has been repaired on site within the past 7 days.
There is a lessors lien, a repairmans lien, and a vendors lien.
These three can create a viscous circle
1. The repairman beats lessor (9:4501);
2. Lessor beats vendor (CC art 3263); and
3. Vendor beats repairman (R.S. 9:4501).
In this case, you can argue that the latest legislative enactment controls. The latest legislative act is was the revision of the Civil
Code lease articles including article 3263. As a result the lessor, because the code article saying he beats the vendor who beats
the repairman is most recent would rank first.
Another circle would be if there was a first a Louisiana credit sale that crests a vendors privilege, then a repairmans lien, and
last in time a UCC filing.
Vendor beats repairman (R.S. 9:4501).
Repairman beats UCC
UCC beats vendor
The solution is that the UCC is the most recent enactment Repairman, UCC, Lessor, Vendor
Ranking of Privileges v. UCC9 Security Interest. First National Bank of Boston v. Beckwith Machinery Company (1995): All
privileges, both possessory and nonpossessory, are subordinate to perfected Chapter 9 security interests in same property,
unless privileges fall within one of the limited exceptions giving them priority.
Conventional Mortgage v. Privileges. Succession of Hardy (1929): FACTS: ISSUES: HELD:
Lessor v. Vendor. LaPorte v. Libbey (1905): FACTS: ISSUES: HELD:
i. General Privileges
iii. Concept
1. Here we look at privileges that fall on both movables and immovables (Chapter 5 Art.
3252)
2. Art. 3252 structure
a. Its poor!
b. Each of the 6 privileges is not described, however back in Chapter 1 these
privileges are actually described in detail (Arts. 3191 et seq.)
iv. Enumeration
1. To those owed funeral charges (3192 et seq.)
a. Secured creditor: Provider of the service of burying
b. Debtor: The property that the de cujus had when he died
c. Obligations secured: Expenses of interment
d. Limitation: $500
i. Not adjusted for inflation
2. To those owed law charges (judicial charges)
a. Secured creditor
i. Not the attorney
ii. Its the winning litigant
b. Debtor: The losing litigants immovable and movable property
c. Obligations secured
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i. Law charges are such as are occasioned by the prosecution of suit before
the courts. But this applies only to court costswhich the party cast
has to pay to the party winning.
ii. Not attorneys fees.
iii. Court costs
1. Filing fees
2. Copying costs
3. Costs of the appeal (transcript of trial proceedings, etc.)
4. Pleadings
d. Limitation
i. Rule: Only costs which are taxed
ii. The judge taxes costs, meaning he in his discretion assigns
responsibility for paying costs to the pertinent parties (most to the losing
party)
3. To medical providers for expenses of last illness
a. Secured creditor: Providers of the medical services
i. Medical services covered (3202): Physicians and surgeons for their fees,
nurses for their wages, and the apothecary (pharmacist) for medicines
supplied by him
b. Debtor: The property of the decedent
i. Art. 3204 If the child died, the privilege falls not only on his own
property, but also on his parents property
i. Expenses of the last sickness
ii. Last sickness: that of which the debtor died
d. Limitation
i. Only one year prior to the death (Art. 3201)
ii. If the illness was chronic, the privilege does not arise until the illness
prevents the person from attending to his business and confines him to
his bed or chamber (Art. 3200)
4. To certain privileged workers for unpaid wages/salaries
a. Secured creditor: Servants, or secretaries
b. Debtor: The employer/payor
i. Wages of servants
1. Servants are people who receive wages and stay in the house of
the employer, including butlers, valets, footmen, and cooks
2. Limitation: the past full year of service and whatever has
transpired in current year
a. How do we reckon the years? By calendar? WDK.
ii. Salaries of clerks, secretaries, etc.
1. Who are clerks and secretaries? WDK exactly. OBrien says it
is like Uncle Scrooges employee Cratchitthe secretary in
house.
2. Limitation: current year and all of the prior year.
d. Note: now federal labor law preempts these privileges to a large extent
5. To survivors in necessitous circumstances for minimal living allowance
a. Condition: necessitous circumstances
i. Defined: Possessing less than $1,000
b. Secured creditor: the surviving spouse and children
c. Debtor: movables and immovables of the de cujus
d. Obligations secured
i. Up to an amount of the $1,000; on the estate
e. The privilege is never used
ii. Special Privileges
v. Concept
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1. Some fall on movables; some on immovables

2. Many of the following enumerated fall on movables only
vi. Enumeration
1. To depositaries for storage/preservation expenses
a. Secured creditor: depositary or other provider of preservation services
i. The contract of deposit is an underlying trigger
ii. Privilege also to a consignee: consignees expenses are covered
b. Debtor
i. 3217(6): the debt laid out in preserving the thing
ii. Privilege falls on the thing being stored/deposited
c. Obligation secured
i. Costs of preservation (as is the case with most privileges).
Extraordinarily, in the following noted cases, also the costs of storage.
ii. For an onerous deposit, privilege falls onto the thing deposited until the
depositary is paid (privilege to retain)this covers storage costs
iii. Aircraft (R.S. 9:3514)
1. The depositary of the aircraft has a privilege on the cost of
storage (the rent owed)
2. To innkeepers for food and lodging expenses
a. Secured creditor: the hotel
b. Debtor
i. The property of the traveler brought to the inn (3217(8))
ii. Only the property that the hotel guest brought to the inn
c. Obligation secured: The things furnished by the innkeeper (3217(8)), whether
lodging or food costs
d. Limitation: amount of the charges
3. To carriers for transport costs
a. Generally
i. When the Civil Code provides inadequate protection, the Legislature just
adds a new R.S. in Title 9 (Civil Code Ancillaries), and does not explain
how the Code and the R.S. fit together
ii. Possibilities:
1. Last-in-time rule. The R.S. repealed the old Code law.
2. Cumulative privileges.
iii. This is a recurring problem with these privileges
iv. Kilborn: presume cumulation
1. There is some overlap
2. Each of which must be independently analyzed
v. This privilege: Art. 3217(9), and R.S. 9:4601
b. Secured creditor: carriers & haulers/truckers
c. Debtor: person having contract with hauler/carrier
d. Obligation secured
i. Code (carriers privilege): Cost of transport and necessary expenses like
preservation and paying taxes
ii. R.S. (haulers privilege): charges of hauling (which may be as broad as
the Code but WDK)
e. Limitation
i. Code (carriers privilege): privilege is lost as soon as the carrier delivers
the thing
ii. R.S. (haulers privilege): 180 days from the last day of hauling
f. Ranking issue: The haulers privilege is inferior to the vendors privilege, a
perfected Art. 9 interest, and to a bona fide purchaser to whom possession has
been delivered and who has paid the price without notice of the haulers privilege.
4. To attorneys for fees
a. Secured creditor: attorney who provided the services
b. Debtor: the client
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i. R.S. 9:5001 any money recovered pursuant to a judgment

1. Defendants dont recover judgments; therefore this is really a
plaintiff attorneys privilege
2. Note it does not apply to settlements. Only to judgments.
ii. R.S. 37:218 attorney may take an interest in a contingency fee
1. If an attorney takes an interest in the contingency fee, that
interest is protected by a privilege: in the recovery up to the
amount of the contingency fee
2. This does include settlements
3. This statute also does not help defense attorneys
5. To cleaner for cleaning charges
a. Secured creditor: dry cleaners, cleaners of carpets and rugs (R.S. 9:4681 et seq.)
b. Debtor: receiver of the services. The things themselves are encumbered.
c. Obligation secured
i. Retaining privilege to hold onto the stuff if the debtor doesnt pay
ii. If the debtor doesnt pay the dry cleaner within 90 days, the launderer
may dispose of the property
iii. Costs of cleaning are covered
6. To medical providers for charges incurred in treating injuries caused by tortious conduct
a. Generally: R.S. 9:4571 et seq. A potentially very important privilege.
i. The privilege requires the existence of a tort
b. Secured creditor: ambulance services, health care providers, and hospitals who
provide medical services to the victim of a tort
c. Debtor: the tort recovery from the tortfeasor and/or his liability insurer or other
indemnitor
d. Obligation secured: reasonable charges or fees for medical care of the injured tort
victim
e. Limitation: notice required
i. For the privilege to be effective against other potential payors of the tort
damages (liability insurer, tortfeasor, indemnitor, or even the victim), the
holder of the privilege must provide notice to that person
ii. Notice must include name and address of tort victim and medical care
provider; certified mail return receipt requested, or fax
iii. If the hospital wants the tortfeasor to pay the hospital, the hospital must
send notice to the tortfeasor. The same for any party from whom the
hospital wants to recover its privilege.
1. This may even be the tort victim and his insurer: so that the
hospital can recover the tort judgment proceeds
iv. It is possible for the privilege to only be effective against certain parties,
based on to whom notice is sent
7. To artisans for their services

a. Concept
i. Defined: a privilege available to people who make or repair things.
1. Artisan: person skilled in some kind of trade, craft, or art
requiring manual dexterity (e.g., carpenter, plumber, tailor, or
mechanic). Blacks.
ii. Code
1. Art. 3217(2): To a workman or artisan, a privilege for the price
of his labor on the movable which he has repaired, but only as
long as it continues in his possession.
2. Note that the Code does not include the costs of parts, but only
labor
a. However, the courts have said that also parts are
covered, contrary to the statutes plain meaning.
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b. WDK.
iii. R.S. 9:4501 et seq.
1. 4502 Repairmen generally of movables
a. Privilege on the thing repaired to cover labor and parts
b. The privilege lasts as a general rule the longer of (1)
120 days from the last day repair work was performed,
and (2) when possession is lost
i. Exception: 12 months from when labor was
last performed, where the thing repaired is
farm equipment
2. 4501 Automobile repairmen
a. An exception to the 4502 rule
b. Covers parts and labor
c. Time period: same
d. Limitation: estimate limit
i. If the auto repairman gave an estimate of the
cost of repairs, then the privilege is limited to
that amount; unless the repairman goes back
to the debtor to inform of the increase in price
b. Scope: persons who are privileged and debts that are secured
i. In general
ii. Special variants
1. Airplane artisans
a. La. R.S. 9:4512
b. The repairman must file with the FAA documentation
on an FAA-form that he has done work on the aircraft
and not been paid. If he does this, hes not limited to
the 120-day pursuit period. The privilege is
indefinitely held.
c. Otherwise, the 120-day period applies.
2. Farm artisans
c. Priority of artisans privilege
i. (1) Vendors privilege
ii. (2) Previously perfected Art. 9 interests
iii. (3) Good faith purchaser who has paid the price without notice of the
privilege
iv. (4) The artisans privilege
d. See Kilborn Problems re crops and artisans privileges
8. To the lessor for rent
a. Concept, privileged persons, debts secured
i. Concept: the lessors privilege for rent of leased immovables only
1. Art. 3217(3) The rents of immovables
2. Art. 3219 refers us to the Title on Lease for the content of the
lessors privilege
3. Art. 2707 The lessors privilege secures payment of rent and
other obligations arising from lease of an immovable. Lessor
has a privilege on [ALL] the lessees movables that are found in
or upon the property
a. In an agricultural lease, the lessors privilege also
encompasses the fruits (crops) produced by the land
ii. Property covered: Falls on movable property of the lessee on the leased
premises
iii. Debt secured: Secures lessees obligation to pay rent to the lessor
b. Property encumbered
i. In general
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1. Movable property of the lessee

a. ALL movable property of the lessee found in or upon
the leased premises
b. Additional period of pursuit: lessees movables for 15
days after they have been removed from the leased
premises, if they remain the property of the lessee and
can be identified
2. Movable property of the sublessee
a. Lessors privilege extends to these movables, only to
the extent that the sublessee is indebted to the
sublessor1
b. Therefore, if the sublessee does not owe the sublessor
money, the lessor does not have a privilege on the
sublessees movables
3. Movable property of others
a. Code: maybe. 2709 Lessor may lawfully seize a
movable belonging to a third person if it is located in or
upon the leased property, unless the lessor knows that
the movable is not the property of the lessee.
i. If the lessor does not know that the property
belongs to a third person, the lessor may seize
it.
b. 2709 continued: The third person may recover the
movable by establishing his ownership prior to the
judicial sale. If he fails to do so, the movable may be
sold as if it belonged to the lessee.
i. Thus if the third person doesnt intervene
before the sale, the lessor is protected.
c. The Rule: if the lessor (1) doesnt know that its
property of the third person and (2) can get the judicial
sale done before the third person finds out, there is
only then a limited privilege on the property of third
persons.
ii. Special variants
1. Agricultural leases
a. 2707 In an ag lease, the lessors privilege also includes
fruits produced by the land (=crops)
b. For third party effectivity: the ag lessor must file an
EFS
2. Leases of self-storage units
a. La. R.S. 9:4756 Self service storage facilities
b. The self-storage lessor is allowed self-help
i. If the self-storage lessee is behind on his rent,
after giving notice, the lessor may pop the
lock, and sell the contents at public auction
c. Avoidance in bankruptcy
i. Bankruptcy Code: if debtor is a lessee in bankruptcy, the lessors
privilege is extinguished as a matter of preemptive federal law
d. See Kilborn Problems re Lessors privilege
9. To the seller of a things for its price: vendors privileges
a. Concept, privileged persons, debts secured
i. Concept
1
Of course, the sublessor is the lessee.
201
1. Movables: Art. 3217(7) The price due on movable effects, if

they are yet in the possession of the purchaser.
a. Similar to a PMSI: its a purchase-money privilege!
b. So if the law gives a vendors privilege, why obtain a
PMSI? Because the vendors privilege sucks! See
infra.
2. Immovables: Art. 3249(1) The vendor on the estate by him
sold, for the payment of the price or so much of it as is unpaid,
whether it was sold on or without a credit.
a. 3250 Attaches not only to the immovable sold, but also
the beasts and ag equipment on the land.
ii. *Sellers right to revindicate property through dissolution of sale
distinguished
b. Variations
i. Seller of an immovable
1. **Extra perfection requirement: recordation
a. Art. 3271 The vendor of an immovable only preserves
his privilege on the object, when he has caused to be
duly recorded at the office for recording mortgages,
this act of sale
b. Ordinarily, the buyer, to protect his interest, will record
the act of sale in the conveyance records.
i. However, 3271 directs the seller to record in
the mortgage records, if he wants to preserve
his vendors privilege on the immovable, as to
third parties.
ii. Seller of a movable
1. Special cause of loss of privilege: buyers possession ends
a. Art. 3217(7) limits the privilege on sold movables to
when the thing sold is in the possession of the buyer. If
the buyer has relinquished possession, the privilege is
gone.
b. Problem: what is meant by possession
i. **Alternatives: (1) corpus + animus, or (2)
corpus only, or (3) ownership!
ii. Historical: the language for this Article is
from the projet du gouvernmont (sp?). All the
French say the phrase means ownershipso
the privilege would only exist as long as the
buyer has not alienated the thing.
iii. Jurisprudence: (1) corpus. (2) other old
decisions finding it means corpus. (3) 1985
3d Cir.: corpus + animus.
iv. The law: WDK. Trahan would go with
source analysis: ownership. A matter of
original intent.
c. If the buyer re-obtains possession then we know that
the privilege does return.
2. Scope: extraordinary extension of privilege to fire insurance
proceeds2
10. To constructors (see infra)
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LESSON #27. THE VENDORS PRIVILEGE ON IMMOVABLES
LA. C.C. Art. 3249. Special privileges on immovables

Creditors who have a privilege on immovables, are:
1. The vendor on the estate by him sold, for the payment of the price or so much of it as is unpaid, whether it was sold on or
without a credit.
2. Architects, undertakers, bricklayers, painters, master builders, contractors, subcontractors, journeymen, laborers, cartmen
and other workmen employed in constructing, rebuilding or repairing houses, buildings, or making other works.
3. Those who have supplied the owner or other person employed by the owner, his agent or subcontractor, with materials of any
kind for the construction or repair of an edifice or other work, when such materials have been used in the erection or repair of
such houses or other works.
The above named parties shall have a lien and privilege upon the building, improvement or other work erected, and upon the
lot of ground not exceeding one acre, upon which the building, improvement or other work shall be erected; provided, that such
lot of ground belongs to the person having such building, improvement or other work erected; and if such building,
improvement or other work is caused to be erected by a lessee of the lot of ground, in that case the privilege shall exist only
against the lease and shall not affect the owner.
4. Those who have worked by the job in the manner directed by the law, or by the regulations of the police, in making or
repairing the levees, bridges, ditches and roads of a proprietor, on the land over which levees, bridges and roads have been
made or repaired.
LSA-C.C. Art. 3268. Vendor's privilege on land and workmen's privilege on buildings
When the vendor of lands finds himself opposed by workmen seeking payment for a house or other work erected on the land, a
separate appraisement is made of the ground and of the house, the vendor is paid to the amount of the appraisement on the
land, and the other to the amount of the appraisement of the building.
LSA-C.C. Art. 3269. Order of payment out of immovables; distribution of loss among mortgage creditors
With the exception of special privileges, which exist on immovables in favor of the vendor, of workmen and furnishers of
materials, as declared above, the debts privileged on the movables and immovables generally, ought to be paid, if the movables
are insufficient, out of the product of the immovables belonging to the debtor, in preference to all other privileged and
mortgage creditors.
The loss which may then result from their payment must be borne by the creditor whose mortgage is the least ancient, and so in
succession, ascending according to the order of the mortgages, or by pro rata contributions where two or more mortgages have
the same date.
LSA-C.C. Art. 3270. Effect of priorities among privileges

When the debts privileged on the movables and immovables can not be paid entirely, either because the movable effects are of
small value, or subject to special privileges which claim a preference, or because the movables and immovables together do not
suffice, the deficiency must not be borne proportionally among the debtors, but the debts must be paid according to the order
established above, and the loss must fall on those which are of inferior dignity.
LSA-C.C. Art. 3271. Vendor's privilege on immovables, recordation

The vendor of an immovable only preserves his privilege on the object, when he has caused to be duly recorded at the office
for recording mortgages, his act of sale, in the manner directed hereafter, whatever may be the amount due to him on the sale.
LSA-C.C. Art. 3272. Privileges of contractors, mechanics and materialmen; recordation and ranking
Architects, undertakers, bricklayers, painters, master builders, contractors, subcontractors, journeymen, laborers, cartmen,
masons and other workmen employed in constructing, rebuilding and repairing houses, buildings, or making other works; those
who have supplied the owner or other person employed by the owner or his agent or subcontractor with materials of any kind
for the construction or repair of his buildings or other works; those who have contracted, in the manner provided by the police
regulations, to make or put in repair the levees, bridges, canals and roads of a proprietor, preserve their privileges, only in so far
as they have recorded, with the recorder of mortgages in the parish where the property is situated, the act containing the
bargains they have made, or a detailed statement of the amount due, attested under the oath of the party doing or having the
work done, or acknowledgment of what is due to them by the debtor.
The privileges mentioned in this article are concurrent.
LSA-C.C. Art. 3273. Recordation, effect against third persons

203
Privileges are valid against third persons, from the date of the recording of the act or evidence of indebtedness as provided by
law.
LSA-C.C. Art. 3274. Time and place of recordation; effectiveness

No privilege shall have effect against third persons, unless recorded in the manner required by law in the parish where the
property to be affected is situated. It shall confer no preference on the creditor who holds it, over creditors who have acquired a
mortgage, unless the act or other evidence of the debt is recorded within seven days from the date of the act or obligation of
indebtedness when the registry is required to be made in the parish where the act was passed or the indebtedness originated and
within fifteen days, if the registry is required to be made in any other parish of this State. It shall, however, have effect against
all parties from date of registry. If you record vendors privilege timely, it beats mortgage.
Hypo: X sells to Y. Day 1, we sign; Day 2, we file original; Day 3, Y puts mortgage on property to a Bank; Day 4, record
mortgage in mortgage; Day 5, record mortgage in conveyance. Is X outranked? No. If X records his vendors privilege timely,
it has retroactive rank. 3274.
Hypo: What if there is a pre-existing judicial mortgage against Y? Bottom line: under Home Finance, LASC held a timely
recorded vendors privilege on immovable property outranks a prior recorded judicial mortgage against the Buyer (not the
property).
Hypo: A sells to B sale with mortgage for 30 year. B sells to C sale with mortgage for 30 years. C sells to D sale with mortgage
for 30 years. D (current owner) puts mortgage on property for 10 years. Now theres a judgment against B (prior owner),
judgment against C, judgment against E. D sells to E by cash sale, E has 10-year mortgage by Credit Union.
o What do we know? Bs note is described as 30 years. So 2010 is when its due. Note prescribes in 5 years, but we
dont know if its been interrupted or acknowledged. But it is more than 9 years, so 6 years after maturity. So its good
until 2016. Resolutory condition is 10 years from due date so good until 2010.
o All of these mortgages are still good and out there. Assume judgments are still good, too.
o When D sells to E, and records timely within 7 days, the vendors privilege and the mortgage that D will have is going
to be inferior to most people. Clearly, vendors privilege beats pre-existing judgment against E. But it is subject to
everything else. So vendors privilege doesnt give you jump-up against pre-existing liens and prior owners of the
property.
o What happens if the sale between D and E is cash sale and Credit Union finances it with mortgage? If no special
statute for credit union, the mortgage against E is inferior to the judgment. The only way to jump ahead a buyer is the
vendors privilege or a special statute (savings and loans has one).
o So when I get ready to run the title or finance the property, if Im the Credit Union, run the Buyers name in the
mortgage records to find out if there are pre-existing judicial mortgages or other general mortgages against the Buyer
(like a legal mortgage).
o Remember the vendors privilege is a specific privilege.
LSA-C.C. Art. 3275. Inclusion of date of birth of parties

In addition to any other requirement that may be provided by general or special law, every act or other document evidencing a
privilege that is filed for recordation in accordance with this Chapter shall contain the date of birth of all parties named in the
act or document. The failure to include the date of birth of all parties shall not affect the validity of the act or instrument. No
clerk of court or recorder of mortgages shall refuse to accept for recordation any act or instrument which does not contain the
date of birth of all parties.
LSA-R.S. 9:2721. Filing in office of parish recorder

A. Repealed by Acts 2005, No. 169, 8, eff. July 1, 2006.
B. An act of sale of immovable property or attachment thereto filed for registry in the office of the parish recorder pursuant to
Subsection A of this Section shall designate the name of the person responsible for all property taxes and assessments and
include the address where property tax and assessment notices are to be mailed. The person responsible for the taxes and
assessments of the immovable being transferred shall provide the above information to the tax assessor for the parish in which
the immovable property is located for the purpose of issuing tax and assessment notices.
C. Anyone who acquires immovable property in this state, whether by sale, sheriff's sale, giving in payment, or in any other
manner, which property is subject to a recorded lease agreement that is not divested by the acquisition, shall take the property
subject to all of the provisions of the lease, including any provision for the payment of a commission to a leasing agent or other
third party, provided that the lease was recorded prior to the recordation of the document which establishes the rights of the
person who acquires the property. Such document shall include but is not limited to a mortgage, option to purchase, or other
writing.
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LSA-R.S. 9:2724. Liens or privileges not dependent upon recordation for existence or priority
This Chapter shall not derogate from or otherwise affect the existence or priority of any lien or privilege which, under existing
law, is not dependent upon recordation for its existence or priority.
Rules on immovable privileges is different than the rules on movable privileges. No privilege on an immovable shall affect 3d
parties unless recorded in the public records EXCEPT funeral.
Critical differences:
Movables: no filing or recording, critical elements are: whether seller has received payment in full, whether the transaction is a
LA sale, whether the property remains in the buyers hands
Immovables: must be recorded to have effect on third parties, must not say that the price was paid in cash, even if seller can
prove that payment was by check that didnt go through.
Recording the privilege on immovable:

no magic language such as vendors privilege need by in document
there must be a description of property sufficient to identify it
the act of sale must reveal on its face that something remains to be paid, must not say cash sale
Generally:
3249 says the vendor only has a privilege for the extent of the price so much as is unpaid.
3271 says the vendor of an immovable only preserves privilege when it is recorded (not just filing). Rules about filing plus
timing recordation applies here.
3273 says privileges are valid from the date of recording.
3274 no privileges shall have affect unless recorded within 7 days in the parish or 15 days outside the parish.
Ranking:
1)if the act of sale is passed in the parish where the immovable is located, the act must be recorded in that parish within 7 days
of the passage of the act of sale. If this is done, the vendors privilege takes effect from the day the act of sale was signed (so it
is retroactive)
2)if the act of sale is passed in another parish (not the one in which the immovable is located), the vendors privilege will be
retroactive to the date the act of sale was signed, if the act is recorded within 15 days of the act
A timely filed (within 7 or 15 days, as appropriate) will outrank a judicial mortgage previously filed against the buyer.
Ex: March 1, 2011 seller and buyer enter an act of credit sale. This act notes that it is subject to a 2005 mortgage. On
March 2, 2011 the act is filed in the correct parish. Clerk didnt record until July 10, 2011. March 6, 2011 buyer grants
mortgage on the tract of land, which is filed and recorded same day in the correct parish. The Precis says that the act of credit
sale will be considered to be March 2, 2011but note that we have had the Wede case since written. SO MAYBE NOT!!! But
assume that the act of sale is filed and recorded on March 4. Since it was within 7 days, the vendors privilege will be retro to
the date the act was signed. So the rank will be 1)2005 mortgage 2)vendors privilege 3) creditors mortgage from March 6.
How To Prove the Existence of A Vendors Lien. City Bank & Trust v. Caneco Constr. (1977): an exception to PRD being a
negative doctrine. Here, the act of sale showed it was a cash sale. The later morgagee relied on thisthis is OK here. Act of
sale needs to say there is something owed.
Timely Recordation of the Vendors Privilege. Succession of Clay (1882): FACTS: ISSUES: HELD:
205
Heirs of Gallaugher v. Hebrew Congregation (1883): FACTS: ISSUES: HELD:
Givanovitch v. Hebrew Congregation (1884): FACTS: ISSUES: HELD:
Rank of a Vendors Privilege. Home Savings v. Tri-Parish Ventures (1987): Among otherwise equal claimants priority in
ranking of liens is accorded to that privilege with earliest recordation date. Vendor's privilege as to lien which is preserved and
perfected against third parties through recordation primes subsequent mortgages affecting property.
Lawyers Title Insurance Corp. v. Valteau (1990): vendor's privilege (now assigned to a third party) arising from a sale to the
buyer outranks a prior recorded judicial mortgage against the seller. So if the seller has a prior judicial mortgage, the vendors
privilege on an immovable later sold to him will outrank the judicial sale.
Verret v. Rougeau (1991): Vendor's lien arising from sale to vendee was entitled to preferential ranking over previously
recorded judicial mortgage against one of earlier vendees in chain of title of property. Vendor's lien was perfected when vendor
sold vendee lots and was not defeated when vendee subsequently conveyed property by warranty deed to third party.
LESSON #28. THE PRIVATE WORKS ACT
LSA-R.S. 9:4801. Improvement of immovable by owner; privileges securing the improvement

The following persons have a privilege on an immovable to secure the following obligations of the owner arising out of a work
on the immovable:
(1) Contractors, for the price of their work. (contractor)
(2) Laborers or employees of the owner, for the price of work performed at the site of the immovable.
(3) Sellers, for the price of movables sold to the owner that become component parts of the immovable (466), or are
consumed at the site of the immovable (gasoline for generator), or are consumed in machinery or equipment used at the
site of the immovable(lumber and you build patio). (supplier)
(4) Lessors, for the rent of movables used at the site of the immovable and leased to the owner by written contract. (
(5) Registered or certified surveyors or engineers, or licensed architects, or their professional subconsultants, employed by the
owner, for the price of professional services rendered in connection with a work that is undertaken by the owner. A
"professional subconsultant" means a registered or certified surveyor or engineer or licensed architect employed by the
prime professional, as described in this Paragraph. In order for the privilege of the professional subconsultant to arise, the
subconsultant must give notice to the owner within thirty days after the date that the subconsultant enters into a written
contract of employment. The notice shall include the name and address of the subconsultant, the name and address of his
employer, and the general nature of the work to be performed by the subconsultant.
LSA-R.S.9:4802. Improvement of immovable by contractor; claims against the owner and contractor; privileges
securing the improvement
A. The following persons have a [PERSONAL] claim against the owner AND a claim against the contractor to secure
payment of the following obligations arising out of the performance of work under the contract:
(1) Subcontractors, for the price of their work.

(2) Laborers or employees of the contractor or a subcontractor, for the price of work performed at the site of the
immovable.
(3) Sellers, for the price of movables sold to the contractor, or a subcontractor that become component parts of the
immovable, or are consumed at the site of the immovable, or are consumed in machinery or equipment used at the site
of the immovable.
(4) Lessors, for the rent of movables used at the site of the immovable and leased to the contractor or a subcontractor by
written contract.
(5) Prime consultant registered or certified surveyors or engineers, or licensed architects, or their professional
subconsultants, employed by the contractor or a subcontractor, for the price of professional services rendered in
connection with a work that is undertaken by the contractor or subcontractor. (a) A "professional subconsultant" means
a registered or certified surveyor or engineer, or licensed architect employed by the prime consultant. (b) For the
privilege under this Subsection to arise, a prime consultant or professional subconsultant shall give written notice to
the owner within thirty working days after the date that the prime consultant or professional subconsultant is
employed. The notice shall include the name and address of the prime consultant or professional subconsultant, the
name and address of his employer, and the general nature of the work to be performed by the prime consultant or
professional subconsultant.
206
B. The claims against the owner shall be secured by a privilege on the immovable on which the work is performed.
C. The owner is relieved of the claims against him and the privileges securing them when the claims arise from the
performance of a contract by a general contractor for whom a bond is given and maintained as required by R.S. 9:4812 and
when notice of the contract with the bond attached is properly and timely filed as required by R.S. 9:4811.
D. Claims against the owner and the contractor granted by this Part are in addition to other contractual or legal rights the
claimants may have for the payment of amounts owed them.
E. A claimant may assert his claim against either the contractor, his surety, or the owner without the joinder of the others. The
claim shall not be subject to a plea of discussion or division.
F. A contractor shall indemnify the owner for claims against the owner arising from the work to be performed under the
contract. A subcontractor shall indemnify the owner, the contractor, and any subcontractor from or through whom his
rights are derived, for amounts paid by them for claims under this part arising from work performed by the subcontractor.
G. (1) For the privilege under this Section to arise, the lessor of the movables shall deliver a copy of the lease to the owner
and to the contractor not more than ten days after the movables are first placed at the site of the immovable for use in a
work. (2) For the privilege under this Section or R.S. 9:4801(3) to arise, the seller of movables shall deliver a notice of
nonpayment to the owner at least ten days before filing a statement of his claim and privilege. The notice shall be served
by registered or certified mail, return receipt requested, and shall contain the name and address of the seller of movables, a
general description of the materials provided, a description sufficient to identify the immovable property against which a
lien may be claimed, and a written statement of the seller's lien rights for the total amount owed, plus interest and
recordation fees. The requirements of this Paragraph (G)(2) shall apply to a seller of movables sold for use or consumption
in work on an immovable for residential purposes. (3) In addition to the other provisions of this Section, if the seller of
movables has not been paid by the subcontractor and has not sent notice of nonpayment to the general contractor and the
owner, then the seller shall lose his right to file a privilege or lien on the immovable property. The return receipt indicating
that certified mail was properly addressed to the last known address of the general contractor and the owner and deposited
in the U.S. mail on or before seventy-five days from the last day of the month in which the material was delivered,
regardless of whether the certified mail was actually delivered, refused, or unclaimed satisfies the notice provision hereof
or no later than the statutory lien period, whichever comes first. The provisions of this Paragraph shall apply only to
disputes arising out of recorded contracts.
LSA-R.S. 9:4803. Amounts secured by claims and privileges

A. The privileges granted by R.S. 9:4801 and the claims granted by R.S. 9:4802 secure payment of:
(1) The principal amounts of the obligations described in R.S. 9:4801 and R.S. 9:4802(A), interest due thereon, and fees
paid for filing the statement required by R.S. 9:4822.
(2) Expenses incurred by the claimant or other person having a privilege, for the cost of delivering movables that become
component parts of the immovable, or are consumed at the site of the immovable, or are consumed in machinery or
equipment used at the site of the immovable, if the amounts are owed by the owner, contractor, or subcontractor to the
claimant or person having the privilege.
(3) Amounts owed under collective bargaining agreements with respect to a laborer's or employee's wages or other
compensation for which a claim or privilege is granted and which are payable to other persons for vacation, health and
welfare, pension, apprenticeship and training, supplemental unemployment benefits, and other fringe benefits
considered as wages by the secretary of labor of the United States in determining prevailing wage rates, unless the
immovable upon which the work is performed is designed or intended to be occupied primarily as a residence by four
families or less. Trustees, trust funds, or other persons to whom the employer is to make such payments may assert
and enforce claims for the amounts in the same manner and subject to the same procedures provided for other amounts
due laborers or employees granted a claim or privilege under this Part.
B. The claim or privilege granted the lessor of a movable by R.S. 9:4801(4) or R.S. 9:4802(A)(4) is limited to and secures
only that part of the rentals accruing during the time the movable is located at the site of the immovable for use in a work.
A movable shall be deemed not located at the site of the immovable for use in a work after:
(1) The work is substantially completed or abandoned; or

(2) A notice of termination of the work is filed; or
(3) The lessee has abandoned the movable, or use of the movable in a work is completed or no longer necessary,
and the owner or contractor gives written notice to the lessor of abandonment or completion of use.
LSA-R.S. 9:4806. Owner defined; interest affected

A. An owner, co-owner, naked owner, owner of a predial or personal servitude, possessor, lessee, or other person owning or
having the right to the use or enjoyment of an immovable or having an interest therein shall be deemed to be an owner.
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B. The claims against an owner granted by R.S. 9:4802 (non-privity) are limited to the owner or owners who have contracted
with the contractor or to the owner or owners who have agreed in writing to the price and work of the contract of a lessee,
wherein such owner or owners have specifically agreed to be liable for any claims granted by the provisions of R.S.
9:4802. If more than one owner has contracted each shall be solidarily liable for the claims. (IF 2 people co-own property
and 1 has work down and the other 1 doesnt know about the work, the lien-claimants can seize and sell the interest of the
person who made the contract.)
C. The privilege granted by R.S. 9:4801 and 4802 affects only the interest in or on the immovable enjoyed by the owner
whose obligation is secured by the privilege.
D. The privilege granted by this Part upon a lessee's rights in the lease or buildings and structures shall be inferior and subject
to all of the rights of, or obligations owed to, the lessor, including the right to resolve the lease for nonperformance of its
obligations, to execute upon the lessee's rights and to sell them in satisfaction of the obligations free of the privilege. If a
sale of the lease is made in execution of the claims of the lessor, the privilege attaches to that portion of the sale proceeds
remaining after satisfaction of the claims of the lessor.
Cavanaugh case: what language do you need for a mortgage. Arose from a ground lease (lease for vacant property) where they
built a building. Lease-hold mortgage.
LSA-R.S. 9:4807. Contractor, general contractor, subcontractor defined. (Trick: you can be a general contractor
A. A contractor is one who contracts with an owner to perform all or a part of a work.
B. A general contractor is a contractor: (1) Who contracts to perform all or substantially all of a work; or (2) Who is deemed
to be a general contractor by R.S. 9:4808(B).
C. A subcontractor is one who, by contract made directly with a contractor, or by a contract that is one of a series of
contracts emanating from a contractor, is bound to perform all or a part of a work contracted for by the contractor.
LSA-R.S. 9:4808. Work defined (other definition: 4820) Here, it tells us does work qualify for a privilege? 4820 tells us,
who can make the claim even if they didnt start the work?
A. A work is a single continuous project for the improvement, construction, erection, reconstruction, modification, repair,
demolition, or other physical change of an immovable or its component parts. (Repairman comes to repair an AC; thats a
repair of a component part.)
B. If written notice of a contract with a proper bond attached is properly filed within the time required by R.S. 9:4811, the
work to be performed under the contract shall be deemed to be a work separate and distinct from other portions of the
project undertaken by the owner. The contractor, whose notice of contract is so filed, shall be deemed a general contractor.
C. The clearing, leveling, grading, test piling, cutting or removal of trees and debris, placing of fill dirt, leveling of the land
surface, or performance of other work on land for or by an owner, in preparation for the construction or erection of a
building or other construction thereon to be substantially or entirely built or erected by a contractor, shall be deemed a
separate work to the extent the preparatory work is not a part of the contractor's work. The privileges granted by this Part
for the work described in this Subsection shall have no effect as to third persons acquiring rights in, to, or on the
immovable before the statement of claim or privilege is filed.
D. This Part does not apply to: (1) The drilling of any well or wells in search of oil, gas, or water, or other activities in
connection with such a well or wells for which a privilege is granted by R.S. 9:4861. (2) The construction or other work on
the permanent bed and structures of a railroad for which a privilege is granted by R.S. 9:4901. (3) Public works performed
by the state or any state board or agency or political subdivision of the state.
LSA-R.S. 9:4811. Notice of a contract with a general contractor to be filed (how can owner protect himself? Timely
notice of contract and the bond) Also look to 4831 (need legal property description)
A. Written notice of a contract between a general contractor and an owner shall be filed as provided in R.S. 9:4831 before the
contractor begins work, as defined by R.S. 9:4820, on the immovable. The notice: (1) Shall be signed by the owner and
contractor. (2) Shall contain the legal property description of the immovable upon which the work is to be performed and
the name of the project. (3) Shall identify the parties and give their mailing addresses. (4) Shall state the price of the work
or, if no price is fixed, describe the method by which the price is to be calculated and give an estimate of it. (5) Shall state
when payment of the price is to be made. (6) Shall describe in general terms the work to be done.
B. A notice of contract is not improperly filed because of an error in or omission from the notice in the absence of a showing
of actual prejudice by a claimant or other person acquiring rights in the immovable. An error or omission of the identity of
the parties or their mailing addresses or the improper identification of the immovable shall be prima facie proof of actual
prejudice.
C. A notice of contract is not improperly filed because a proper bond is not attached. (its not improper, but it will NOT
protect the owner if the bond is not attached.)
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D. A general contractor shall not enjoy the privilege granted by R.S. 9:4801 if the price of the work stipulated or reasonably
estimated in his contract exceeds twenty-five thousand dollars unless notice of the contract is timely filed.
LSA-R.S. 9:4812. Bond required; terms and conditions (only need to know that bond amount is percentage of contract
price) Its a payment bond that assures lien claimants will be paid. Bond must be filed before work begins to protect
owner. What is the procedural way to get people to claim on the bond? Concursus (interpleader; you say someone is owed
this money, not sure who, here is the money, come claim it). What are we releasing with this bond? Nonprivity claims.
A. To be entitled to the benefits of the provisions of R.S. 9:4802(C), every owner shall require a general contractor to furnish
and maintain a bond of a solvent, legal surety for the work to be performed under the contract. The bond shall be attached
to the notice of the contract when it is filed.
B. The amount of the bond shall not be less than the following amounts or percentages of the price of the work stipulated or
estimated in the contract: (1) If the price is not more than ten thousand dollars the amount of the bond shall be one hundred
percent of the price. (2) If the price is more than ten thousand dollars but not more than one hundred thousand dollars the
amount of the bond shall be fifty percent of the price, but not less than ten thousand dollars. (3) If the price is more than
one hundred thousand dollars but not more than one million dollars the amount of the bond shall be thirty-three and one-
third percent of the price, but not less than fifty thousand dollars. (4) If the price is more than one million dollars the
amount of the bond shall be twenty-five percent of the price, but not less than three hundred thirty- three thousand three
hundred thirty-three dollars.
C. The condition of the bond shall be that the surety guarantees: (1) To the owner and to all persons having a claim against the
contractor, or to whom the contractor is conventionally liable for work done under the contract, the payment of their claims
or of all amounts owed them arising out of the work performed under the contract to which it is attached or for which it is
given. (2) To the owner, the complete and timely performance of the contract unless such guarantee is expressly excluded
by the terms of the bond.
D. The bond of a legal surety attached to and filed with the notice of contract of a general contractor shall be deemed to
conform to the requirements of this part notwithstanding any provision of the bond to the contrary, but the surety shall not
be bound for a sum in excess of the total amount expressed in the bond.
E. The bond given in compliance with this Part shall be deemed to include the following conditions: (1) Extensions of time
for the performance of the work shall not extinguish the obligation of the surety but the surety who has not consented to
the extensions has the right of indemnification under the original terms of the contract as provided by Article 3057 of the
Civil Code. (2) No other amendment to the contract, or change or modification to the work, or impairment of the surety's
rights of subrogation made without the surety's consent shall extinguish the obligations of the surety, but if the change or
action is materially prejudicial to the surety, the surety shall be relieved of liability to the owner, and shall be indemnified
by the owner, for any loss or damage suffered by the surety. (3) A payment by the owner to the contractor before the time
required by the contract shall not extinguish the obligation of the surety, but the surety shall be relieved of liability to the
owner, and shall be indemnified by the owner for any loss or damage suffered by the surety.
Think about what these bonds do. Payment bond runs to owner (Owner, I will pay all these folks) and to the lien claimaints
(you guys can make a claim against me!). Thats what a payment bond does.
What is a performance bond? General contractor says to owner, I will build it in a certain way. Surety says, if he doesnt
build it, Ill pay. Performance bonds only run to owner.
Why would a contractor want a bond at all? Protect himself. Bonds attach to notice of contract. If a general contractor does not
have a notice of contract timely, the general contractor cannot get a privilege/lien to secure his claim against the owner. GO
back to 4811(c)not improperly filedprotects two people: still starts the ranking even if no bond is there.
LSA-R.S.9:4813. Liability of the surety

A. The surety is liable without benefit of discussion or division.
B. If the total amount owed to persons to whom the surety is liable exceeds the total amount of the bond, the surety's liability
shall be discharged in the following order: (1) First, and pro rata, to persons who preserve their claims in the manner
required by R.S. 9:4822. (those who can sue the owner) (2) Second, and in the order in which they present their obligations
to the surety, to persons who do not preserve their claims as required by R.S. 9:4822 but to whom the contractor is
otherwise liable. (3) Third, to the owner. (also a hidden provision4822(J).
C. The liability of the surety is not extinguished by a deficiency in the amount of the bond, the failure to attach the bond to
the notice of contract, or the failure to file the notice as required to R.S. 9:4811.
D. An action shall not be brought against a surety, other than by the owner, before the expiration of the time specified by R.S.
9:4822 for claimants to file statements of their claims, unless a statement of the claim in the form required by R.S.
9:4822(G) is delivered to the surety at least thirty days prior to the institution of the action.
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E. The surety's liability, except as to the owner, is extinguished as to all persons who fail to institute an action asserting their
claims or rights against the owner, the contractor, or the surety within one year after the expiration of the time specified in
R.S. 9:4822 for claimants to file their statement of claim or privilege.
LSA-R.S. 9:4814. Contractors; misapplication of payments prohibited; civil penalties; payment of claims, attorney fees
and costs.
A. No contractor, subcontractor, or agent of a contractor or subcontractor, who has received money on account of a contract
for the construction, erection, or repair of a building, structure, or other improvement, including contracts and mortgages
for interim financing, shall knowingly fail to apply the money received as necessary to settle claims to sellers of movables
or laborers due for the construction or under the contract. Any seller of movables or laborer whose claims have not been
settled may file an action for the amount due, including reasonable attorney fees and court costs, and for civil penalties as
provided in this Section.
B. When the amount misapplied is one thousand dollars or less, the civil penalties shall be not less than two hundred fifty
dollars nor more than seven hundred fifty dollars.
C. When the amount misapplied is greater than one thousand dollars, the civil penalties shall be not less than five hundred
dollars nor more than one thousand dollars, for each one thousand dollars in misapplied funds.
D. A contractor, subcontractor, or agent of a contractor or subcontractor who is found by the court to have knowingly failed to
apply construction contract payments as required in Subsection A shall be ordered by the court to pay to plaintiff the
penalties provided in Subsection B or C, as may be applicable, and the amount due to settle the claim, including reasonable
attorney fees and court costs.
Most contracts say, I will pay you when you finish each job, but I am holding a certain percentage back, called a retainage,
until the end of the job. This is why contractors never really have any moneythey have to pay those subcontractors. This is
why liens are so imporatnt.
LSA-R.S. 9:4820. Privileges; effective date

A. The privileges granted by this Part arise and are effective as to third persons when:
(1) Notice of the contract is filed as required by R.S. 9:4811; or
(2) The work is begun by placing materials at the site of the immovable to be used in the work or conducting other work at
the site of the immovable the effect of which is visible from a simple inspection and reasonably indicates that the work has
begun. For these purposes, services rendered by a surveyor, architect, or engineer, or the driving of test piling, cutting or
removal of trees and debris, placing of fill dirt, or leveling of the land surface shall not be considered, nor shall the placing
of materials having an aggregate price of less than one hundred dollars on the immovable be considered. For these
purposes, the site of the immovable is defined as the area within the boundaries of the property.
B. If the work is for the addition, modification, or repair of an existing building or other construction, that part of the work
performed before a third person's rights become effective shall, for the purposes of R.S. 9:4821, be considered a distinct
work from the work performed after such rights become effective if the cost of the work done, in labor and materials, is
less than one hundred dollars during the thirty-day period immediately preceding the time such third person's rights
become effective as to third persons.
C. A person acquiring or intending to acquire a mortgage, privilege, or other right, in or on an immovable may conclusively
rely upon an affidavit made by a registered or certified engineer or surveyor, licensed architect, or building inspector
employed by the city or parish or by a lending institution chartered under federal or state law, that states he inspected the
immovable at a specified time and work had not then been commenced nor materials placed at its site, provided the
affidavit is filed within four business days after the execution of the affidavit, and the mortgage, privilege, or other
document creating the right is filed before or within four business days of the filing of the affidavit. The correctness of the
facts recited in the affidavit may not be controverted to affect the priority of the rights of the person to whom or for whom
it is given, unless actual fraud by such person is proven. A person who gives a false or fraudulent affidavit shall be
responsible for any loss or damage suffered by any person whose rights are adversely affected.
D. Apersonacquiringorintendingtoacquireamortgage,privilege,orotherrightunderSubsectionCofthisSectionshall
havepriorityinaccordancewithR.S.9:4821,regardlessofwhetherworkhasbegunormaterialsweredeliveredtothejob
siteaftertheeffectivedateandtimeoftheaffidavit,butpriortotherecordationofthemortgage,privilege,orotherright,
providedthatthedocumentcreatingtherightwasfiledbeforeorwithinfourbusinessdaysofthefilingoftheaffidavit.
LSA-R.S.9:4821. Ranking of privileges (Its a big deal to know when work began)
The privileges granted by R.S. 9:4801 and 4802 rank among themselves and as to other mortgages and privileges in the
following order of priority:
(1) Privileges for ad valorem taxes or local assessments for public improvements against the property, liens and privileges
granted in favor of parishes for reasonable charges imposed on the property under R.S. 33:1236, liens and privileges
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granted in favor of municipalities for reasonable charges imposed on property under R.S. 33:4752, 4753, 4754, 4766,
5062, and 5062.1, and liens and privileges granted in favor of a parish or municipality for reasonable charges imposed on
the property under R.S. 13:2575 are first in rank.
(2) Privileges granted by R.S. 9:4801(2) and R.S. 9:4802(A)(2) rank next and equally with each other.
(3) Bona fide mortgages or vendor's privileges that are effective as to third persons before the privileges granted by this Part
are effective rank next and in accordance with their respective rank as to each other.
(4) Privileges granted by R.S. 9:4801(3), R.S. 9:4801(4) and by R.S. 9:4802(A)(1), R.S. 9:4802(A)(3), and R.S. 9:4802(A)(4)
rank next and equally with each other.
(5) Privileges granted by R.S. 9:4801(1) and R.S. 9:4801(5) rank next and equally with each other.
(6) Other mortgages or privileges rank next and in accordance with their respective rank as to each other.
LSA-R.S.9:4822. Preservation of claims and privileges

A. If a notice of contract is properly and timely filed in the manner provided by R.S. 9:4811, the persons to whom a claim or
privilege is granted by R.S. 9:4802 shall within thirty days after the filing of a notice of termination of the work: (1) File a
statement of their claims or privilege. (2) Deliver to the owner a copy of the statement of claim or privilege. If the address
of the owner is not given in the notice of contract, the claimant is not required to deliver a copy of his statement to the
owner.
B. A general contractor to whom a privilege is granted by R.S. 9:4801 of this Part, and whose privilege has been preserved in
the manner provided by R.S. 9:4811, shall file a statement of his privilege within sixty days after the filing of the notice of
termination or substantial completion of the work.
C. Those persons granted a claim and privilege by R.S. 9:4802 for work arising out of a general contract, notice of which is
not filed, and other persons granted a privilege under R.S. 9:4801 or a claim and privilege under R.S. 9:4802 shall file a
statement of their respective claims and privileges within sixty days after: (1) The filing of a notice of termination of the
work; or (2) The substantial completion or abandonment of the work, if a notice of termination is not filed.
D. (1) Notwithstanding the other provisions of this Part, the time for filing a statement of claim or privilege to preserve the
privilege granted by R.S. 9:4801(5) expires sixty days after the latter of: (a) The filing of a notice for termination of the
work that the services giving rise to the privilege were rendered; or, (b) The substantial completion or abandonment of the
work if a notice of termination is not filed. This privilege shall have no effect as to third persons acquiring rights in, to, or
on the immovable before the statement of claim or privilege is filed. (2) Notwithstanding the provisions of this Part, the
seller of movables sold for use or consumption in work on an immovable for residential purposes, if a notice of contract is
not filed, shall file a statement of claim or privilege within seventy days after: (a) The filing of a notice of termination of
the work; or (b) The substantial completion or abandonment of the work, if a notice of termination is not filed.
E. A notice of termination of the work: (1) Shall reasonably identify the immovable upon which the work was performed and
the work to which it relates. If the work is evidenced by notice of a contract, reference to the notice of contract as filed or
recorded, together with the names of the parties to the contract, shall be deemed adequate identification of the immovable
and work. (2) Shall be signed by the owner or his representative. (3) Shall certify that: (a) The work has been substantially
completed; or (b) The work has been abandoned by the owner; or (c) A contractor is in default under the terms of the
contract. (4) Shall be conclusive of the matters certified if it is made in good faith by the owner or his representative.
F. A notice of termination or substantial completion may be filed from time to time with respect to a specified portion or area
of a work. In that case, the time for preserving privileges or claims as specified in Subsections A or C of this Section shall
commence with the filing of the notice of termination or substantial completion as to amounts owed and arising from the
work done on that portion or area of the work described in the notice of termination. This notice shall identify the portion
or area of the land and certify that the work performed on that portion of the land is substantially completed or has been
abandoned.
G. A statement of a claim or privilege: (1) Shall be in writing. (2) Shall be signed by the person asserting the same or his
representative. (3) Shall reasonably identify the immovable with respect to which the work was performed or movables or
services were supplied or rendered and the owner thereof. (4) Shall set forth the amount and nature of the obligation giving
rise to the claim or privilege and reasonably itemize the elements comprising it including the person for whom or to whom
the contract was performed, material supplied, or services rendered.
H. A work is substantially completed when: (1) The last work is performed on, or materials are delivered to the site of the
immovable or to that portion or area with respect to which a notice of partial termination is filed; or (2) The owner accepts
the improvement, possesses or occupies the immovable, or that portion or area of the immovable with respect to which a
notice of partial termination is filed, although minor or inconsequential matters remain to be finished or minor defects or
errors in the work are to be remedied.
I. A work is abandoned by the owner if he terminates the work and notifies persons engaged in its performance that he no
longer desires to continue it or he otherwise objectively and in good faith manifests the abandonment or discontinuance of
the project.
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J. Before any person having a direct contractual relationship with a subcontractor, but no contractual relationship
with the contractor, shall have a right of action against the contractor or surety on the bond furnished by the
contractor, he must record his claim as provided in this Section and give written notice to the contractor within
thirty days from the recordation of notice of termination of the work, stating with substantial accuracy the amount
claimed and the name of the party to whom the material was furnished or supplied or for whom the labor or service
was done or performed. Such notice shall be served by mailing the same by registered or certified mail, postage
prepaid, in an envelope addressed to the contractor at any place he maintains an office in the state of Louisiana.
(HIDDEN PROVISION: If you cant sue owner because untimely and you cant sue contractor, you cant sue surety. If
you want to collect, follow your lien timely. J cuts it down for those who are untimely.)
K. (1) Any person to whom a privilege is granted by R.S. 9:4802 may give notice to the owner of an obligation to that person
arising out of the performance of work under the contract. The notice shall be given prior to: (a) The filing of a notice of
termination of the work; or (b) The substantial completion or abandonment of the work, if a notice of termination is not
filed. (2) The method of notice shall be under R.S. 9:4842(A). The notice shall set forth the nature of the work or services
performed by the person to whom the obligation is owed and shall include his mailing address.
L. (1) When notice under Subsection K has been given by a person to the owner, the owner shall notify that person as
required by R.S. 9:4842(A) within three days of: (a) Filing a notice of termination of the work; or (b) The substantial
completion or abandonment of the work, if a notice of termination is not filed. (2) The owner who fails to give notice to
the person under the provisions of this Subsection within ten days of commencement of the period for preservation of
claims and privileges shall be liable for all costs and attorney's fees for the establishment and enforcement of the claim or
privilege.
LSA-R.S. 9:4823. Extinguishment of claims and privileges

A. A privilege given by R.S. 9:4801, a claim against the owner and the privilege securing it granted by R.S. 9:4802, or a
claim against the contractor granted by R.S. 9:4802 is extinguished if: (1) The claimant or holder of the privilege does not
preserve it as required by R.S. 9:4822; or (2) The claimant or holder of the privilege does not institute an action against the
owner for the enforcement of the claim or privilege within one year after the expiration of the time given by R.S. 9:4822
for filing the statement of claim or privilege to preserve it; or (3) The obligation which it secures is extinguished.
B. A claim against a contractor granted by R.S. 9:4802 is not extinguished by the failure to file a statement of claim or
privilege as required by R.S. 9:4822 if a statement of the claim or privilege is delivered to the contractor within the period
allowed for its filing by R.S. 9:4822. The failure to file an action against the owner as required by R.S. 9:4823(A)(2) shall
not extinguish a claim against a contractor if an action for the enforcement of the claim is instituted against the contractor
or his surety within one year after the expiration of the time given by R.S. 9:4822 for filing the statement of claim or
privilege to preserve it.
C. The extinguishment of a claim or privilege shall not affect other rights the claimant or privilege holder may have against
the owner, the contractor, or the surety.
D. A privilege granted by this Part is extinguished if a bond is filed by the owner as provided by R.S. 9:4835.
E. A claim against the owner and the privilege securing it granted by this Part are extinguished if a bond is filed by the
contractor as provided by R.S. 9:4835.
F. In a concursus proceeding brought under R.S. 9:4841, the joinder of the owner and a person who has a privilege or a claim
against the owner, or the joinder of the contractor or surety and a person who has a claim against the contractor constitutes
the institution of an action for the enforcement of the claim or privilege against the owner, contractor, or surety as the case
may be.
LSA-R.S. 9:4851. Scope; definition

A. The provisions of this Subpart and the notice required to be given herein shall be nonwaivable and shall be applicable to
all residential home improvements and shall be read and construed in pari materia with the other provisions of this Part.
B. For the purposes of this Subpart, residential home improvements shall include all improvements or construction which
enhance the value or enjoyment of any real property occupied by the owner thereof principally as a single- family dwelling
or residence if such works would entitle any person to lien rights against the property under the provisions of R.S. 9:4801
through 9:4842.
LSA-R.S. 9:4852. Notice

A. Prior to or at the time of entering into a contract for residential home improvements under the provision of this Subpart,
the contractor shall deliver to the owner or his authorized agent, for such owner's or agent's signature, written notice in
substantially the following form:
NOTICE OF LIEN RIGHTS
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Delivered this ______ day of ____________, 19___, by ____________________, Contractor.

I, the undersigned owner of residential property located at ______(street address)______ in the city of ____________, parish
of ____________, Louisiana, acknowledge that the abovenamed contractor has delivered this notice to me, the receipt of which
is accepted, signifying my understanding that said contractor is about to begin improving my residential property according to
the terms and conditions of a contract, and that in accordance with the provisions of law in Part I of Chapter 2 of Code Title
XXI of Title 9 of the Louisiana Revised Statutes of 1950, R.S. 9:4801, et seq.: (1) A right to file a lien against my property and
improvements is granted to every contractor, subcontractor, architect, engineer, surveyor, mechanic, cartman, truckman,
workman, laborer, or furnisher of material, machinery or fixtures, who performs work or furnishes material for the
improvement or repair of my property, for the payment in principal and interest of such work or labor performed, or the
materials, machinery or fixtures furnished, and for the cost of recording such privilege. (2) That when a contract is unwritten
and/or unrecorded, or a bond is not required or is insufficient or unrecorded, or the surety therefor is not proper or solvent, I, as
owner, shall be liable to such subcontractors, materialmen, suppliers or laborers for any unpaid amounts due them pursuant to
their timely filed claims to the same extent as is the hereinabove designated contractor. (3) That the lien rights granted herein
can be enforced against my property even though the contractor has been paid in full if said contractor has not paid the persons
who furnished the labor or materials for the improvement. (4) That I may require a written contract, to be recorded, and a bond
with sufficient surety to be furnished and recorded by the contractor in an amount sufficient to cover the cost of such
improvements, thereby relieving me, as owner, and my property, of liability for any unpaid sums remaining due and owing
after completion to subcontractors, journeymen, cartmen, workmen, laborers, mechanics, furnishers of material or any other
persons furnishing labor, skill, or material on the said work who record and serve their claims in accordance with the
requirements of law.
B. The notice herein required shall not be considered a condition of the construction contract.
LSA-R.S. 9:4853. Copies of notice

A. A copy of the signed notice shall be given to the owner or agent who has affixed his signature thereto.
B. Every person who may be entitled to lien rights against the residential property for work to be done or material to be
furnished pursuant to this Subpart shall be furnished a copy of the signed notice by the contractor upon request.
LSA-R.S. 9:4854. Lien rights unaffected

Nothing contained in this Subpart shall abrogate or interfere with the lien rights of any person otherwise entitled thereto
pursuant to the provisions of this Part.
LSA-R.S. 9:4855. Penalty for violation

In the event any liens are perfected under the provisions of this Part against any immovable property for work or improvements
covered under the provisions of this Subpart and the contractor has failed to comply with the provisions of this Subpart, or, if
having technically complied with this Subpart, has willfully, knowingly, and unlawfully falsified any statements or fraudulently
obtained the signature of the owner or his agent, such owner shall have a civil cause of action therefor, and shall be entitled to
reasonable damages and attorney fees. The penalty provided for herein shall not apply if the contractor or subcontractor obtains
a bond from a good and solvent surety in favor of the owner of the property on which the lien is placed pursuant to R.S.
9:4841, or reimburses the property owner in an amount sufficient to satisfy the lien, either in the form of a deduction from the
original contract price or other refund and the owner so acknowledges receipt in writing.
BIG ISSUES UNDER THE ACT

1) 9:4801 talks about work on an immovable and deals with the rights of those who have privity of K with the owner. 9:4802
talks about work in an immovable deals with the rights of those who dont have privity of K with the owner
(subcontractors, and subs of subs). Lien claimants without privity have a 9:4802 right secured by a privilegean
accessory liability.
2) The owner who protects himself from personal liability from those with whom he has no privity and those who dont. File
in the mortgage records a notice of K and file with that a bond. This must be done before work begins.
If these three things are done the owner avoids personal liability and is able to remove the liens from the property. If not
done before the work begins the owner has personal liability and his property can be seized and sold.
The notice of K has six requirements. It doesnt have to be witnessed or notarized. Short form recordation statement.
Private work act is a mixture of time ranking and nature ranking.

213
Scope of lien claimants:

Laborers: whether they work for owner of property or general K or sub
General Contractors: also ones who have privity of K with owner
Sellers of movables: sellers of things that become component parts or are consumed at the site (as long as they are sold to the
owner or the general/sub)
Lessors of movables used at the job site: as long as there is written K w/the owner or w/general K or sub
Architects, engineers, and land surveyors: as long as they have a K w/ the owner or general/sub K
The PWA is a personal claim. An inferior lien claimant cannot payoff a higher ranked one and claim the superior rank
Who does it not cover: sellers or suppliers not in privity w/ owner, general or sub (like those who sell to the person who sells to
the general, they are more properly called vendors), laborers who work for vendors, suppliers, or lessees of movables used in
improving the property
Definition of owner: appears very broad from 9:4806. But it is limited in two ways: 1) only owners impacted by privilege 2)
privilege is limited to that owners interest in the property. When there is more than one owner, the 9:4802 non privity personal
claims against owners do not apply to the non-contracting owners.
Definition of work:
9:4808(a)single continuous project or action for improvement, construction, erection, reconstruction, modification, repair,
demolition, or other physical change of an immovable or its component parts, where there is one general K and everything
that anyone does on the job is part of one huge general K. Any lien claimant who does this kind of work may assert PWA
privilege.
But note that you can break this up. Suppose that there is an owner of a huge piece of land. He wants to develop it, put 5
residential apartment buildings, 3 restaurants and a few mixed use buildings. The owner could do this all under one general K,
but he could also break it up into 3 different Ks and this is important bc if its separate, all the dates for when the lien period
starts will be different
9:4808(c)prep work is a separate work. So if above owner has to have land cleared before he starts building, the guys on the
bulldozers and bushhogs on on separate jobs than the ones who will be actually constructing the buildings
9:4820: much more narrow scope of activity. Once work under this provision is performed, privileges are effective after this
point for anyone who works on the project after this pointwhat this means that if someone begins 9:4820 work, it will entitle
any other worker to a lien EVEN IF HE HAS NOT YET BEGUN WORK
Ex: a carpenter puts up a new wall on Feb. 1. This is 9:4820 work. This entitles the painting contractor to assert a claim ALL
THE WAY BACK TO FEB, even if he wont come on the job until August.
This type of work starts when 1) by placing (more than $100 of) materials at the site of the immovable to be used in the work
or 2) conducting other work at the site of the immovable the effect of which is visible from a simple inspection and reasonably
indicates that the work has begun (but cannot be prep work)
Definition of general K: one who performs all or substantially all of the work or is deemed to be one by 4808(B)
Definition of Sub-K: one who is bound to perform all of part of the work contracted for the general either by direct contract w/
the contractor or by a series of contracts, does not include someone who merely delivers something to a job site (that person is
a seller) but will include someone who INSTALLS something at the job site
Notice of K: must be filed in mortgage records where building is located, must be filed BEFORE 9:4820 work begins.
(although bc it has never gone to LASC, we do not know definitively what the result will be for failing to timely file, NOT
filing one if your job is over $25K will get the claimants lien thrown OFF the owners propertyhe WILL NOT have a
privilege). But it is not tied to 9:4808 work.
Ex: only thing that happened on a tract of land is that a tractor operator clears trees. This is 9:4808 work and the tractor
operator can obtain PWA privilege. But this is not 9:4820 workso a notice of K that is filed after the tractor operator has
finished is STILL timely filed.
214
EX: while tractor was clearing land, a lumber supplier delivered $500 worth of materials to job site. Now 4820 work has begun
and a notice of K filed after this is too late.
If timely filed (with proper bond) the owner escapes ALL personal liability to lien claimants not in privity of K. If owner does
this properly that means that anyone who does not have privity with owner will only have the option to sue the person they are
in privity with and pursue the surety under the bond.
This, and all PWA filings, must be filed in parish where the immovable is located.
6 requirements for notice of K:

1)signed by owner and contractor. Not required to be witnesses or notorized
2)legal property description
3)identify the parties and give mailing address
4)state the price of the work. If not fixed, must give a method of calculation and give an estimate.
5)must state when price is to be paid
6)shall generally describe the work to be done
Notice of termination of project: this starts the time from which the lien claimants must file their statement of claim
May be filed when 1) the work has been substantially performed (notice of substantial completion) 2) the work was not
completed but work on the job has stopped (like where contractor is in default and has left job site or was kicked off job site or
work was abandoned) (aka notice of termination)
Should state whether the reason for notice, ie: completion, abandonment, default
Should identify the immovable, must reference notice of K (if it was filed), must be signed by owner or his rep,
What is substantial completion: last work performed or last materials delivered. Thus when no more materials are to be
delivered and no more work to be done, it is clearly substantially complete. Job can be substantially complete even if there are
minor or inconsequential matters remaining. It can also be filed when the owner has accepted the work of one contractor
(like the plumber) and start the lien period clock running for all plumbing lien claimants while he continues to have other work
done.
The hard part is deciding what substantial completion is: cases are all over. Some cases say that it is when house may be
occupiedyou may have lots left to do, but if city says you can occupy it, it is substantially complete
Bond: it is a legal suretyship, it is reqd
An owner may have unlimited personal liability to lien claimants even if the owner did not know the identity of these parties
while they were working on the property even though the owner has no privity w them (sub-Ks). To limit owner liability (and
contractor liability) to those w/out privity is to timely file notice of K WITH A PROPER BOND
NOTE: on exam, it is very very likely that we will have mortgage, UCC securities, privileges, PWA all unpaidrank them!!!
Also note that the deal w/mortgagesthey are ranked by TIME. Privileges on the other hand, are ranked by TYPE. PWA is a
hybridsome are ranked by type, some are ranked by time!!
LIEN PERIOD: preservation of the liena statement of claim or privilege must be filed within the proper lien period
Why important: lien claimants who have privity have the option to sue the owner directly on the contract, regardless of whether
they preserved their claim. But lien claimants without privity will not be able to sue the owner unless they have preserved their
lien
30 days: If notice of K was timely filed (even if bond was not proper), all claimants have 30 days from the date the notice of
termination was filed to file their stmt of claim
60 days: if notice of K was not timely filed , all lien claimants have 60 days from notice of termination or substantial
completion or abandonment of the work
215
70 days: only applies when notice of K was not filed AND ONLY to the sellers of movables sold for use or consumption in
work on immovable for residential purposes
How does the general contractor preserve lien:

Under $25K: see R.S. 9:4811
60 days: If the K was OVER $25K he is entitled to PWA lien only if he timely filed a notice of K. If he did this, then he has 60
days from notice of termination or substantial completion to file statement of claim. Then he must timely file a lawsuit (failure
to do so will extinguish the lien)
Note that ALL lien claimants must timely file a lawsuit. All the statement of claim does is preserve the lien on the owners
property. Claimants have to file suit within one year. But when is that one year? We have no definitive case law on it. Some
caselaw says that claimant has 1 year to file suit from their filing time. Prof says he always advises his clients to file one year
from substantial completion. The reason for this is if they think they are in the 60 day lien period, but they are actually in the 30
day, they may file on last 1 year from last day of the 60 day lien period and they are 30 days too latebc they were actually in
the 30 day lien period.
Lien claimants without privity are secured under PWA for work performed. These are 4802 claimants. But it is personal
liability of the ownerthis personal liability is just secured by the lien.
RANK ORDER
1.ad valorem taxes (doesnt matter when taxes were assessed)
2. laborers (doesnt matter when they performed work or when they filed statement of claim, as long as they properly
preserved privilege, they will outrank 3-5, amongst laborers, they rank equally, it doesnt matter who performed or filed first)
3. pre-existing, valid, mortgages/vendors privilege (this is where the no work affidavit will help the lender, who can say look,
when I lent this money, I had a no work affidavit, so I should beat everyone but the city/parish taxes and the actual laborers,
amongst each other in this class, they rank each other according to date)
4. material men/suppliers/lessors
5. general K and subs and professionals: look at serious this is!! Even if the general and subs do everything right, they still get
paid last, they have the privilege, they just rank last
6. Others: like lenders who didnt get a no work affidavit, someone in privity w/owner who didnt timely file their lien
No work affidavit: will allow the lender to outrank bc allows them to be considered a pre-existing mortgage (category #3).
Bc PWA privileges start to affect 3rd parties from the earlier of notice of K or 4820 work starting, 3rd parties cant tell whether
PWA liens affect the property just be examining public records.
4820(c) is a protection from this. If a lender wants and mortgage privilege, in the immovable, they can get a no work affidavit.
If timely and properly obtained, it puts them in class 3 instead of class 6.
How: an engineer, surveyor, architect, or city/parish building inspector or lender (bank)rep goes out to the property, inspects it,
executes an affidavit (stating time of inspection) and states in the affidavit that no work has started and no materials have been
placed.
WHEN: if filed within 4 business days after execution of the affidavit AND the mortgage/privilege/other document creating the
right is filed before OR within 4 days of the filing of the affidavit, the person relying on it is protected. Failure to follow this
filing time will result in the holder of the mortgage not being able to rely on itand it will not protect them!!
The whole idea of PWA is to protect the guys who are actually doing the work. We dont want the generals and subs stiffing the
guys who are actually in the sun working. On that note, Prof complainswhy should lessor, supplier, etc outrank general and
sub? They are biz owners just like general and subs, they arent the ones who are out there doing the work?
Subs of subs of subs are covered under the act but suppliers of suppliers or subs of suppliers are not covered by the act.
Prof says: the start of work is ALMOST always when the foundation is laid. It could also be when the notice of K is filed. Start
of work is HUGEit will determine when the last guy who hangs wallpaper ranksit will be all the way back to start of
work.
216
No work affidavit hypo:
Workers in 3217 has a privilege on the land and the property.
Under the private works act people without privity gets two rights: right to seize and sell land and property and get
privileges on the proceeds of the sale and the owner has personal liability to these people. EX. Say the contract amount is
$100k but the contractor has not paid his workers at all. Owner is not entitled to limit his liability to the amount of the
contract he entered into with the general contractor.
Suretys liability is independent of the owner or the contract. Suretys liability is contractual. General liability of sureties
is contained in 9:4813. He is liable to those who preserve their claims timely under 9:4822 and then those who dont
timely file; then owners. Suretys liability is extinguished within a year period from the lien should have been filedone
must file against surty in this time frame. The full liability of the surety is not just in 9:4813 but also in For anybody
below the first tier you will not be able to sue the surety.
The owner protects himself by filing a timely notice of contract and bond before the 9:4820 work begins. If notice is filed
timely the lien claimants go down on route: 9:4822A these people have 30 days from the date of notice of termination or
completion (a statement of what I have done is complete)notice of substantial completion (everything but the punch
list). The general contractor has 60 days if notice of contract done timely.
What if owner untimely filed or not filed? General contractor has a problem because he is not going to be able to collect
unless the notice of contract is filed. Lien claimant has 60 days from which to file their lien from notice of substantial
completion or abandonment. (J) is the statute that the sureties had fixedbefore any person had direct relation with the
sub and not with the general, he must record his claim. (F) notice of substantial completion requirements. (G) how to file
the lien. (K) is the non-privity rightthey may give notice to the owner and is designed to tell the owner I am put here
and you need to tell me when there has been substantial completion so that I can get paid. The owner shall notify that
person by mail within 3 days of substantial completion.
9:4823 says that once you file a lien it is extringuished unless you do the following: must institute an action within one
from date of filing the lien against the owner, the contractor and the surety. EXCEPTION is if the owner files a concursus
proceeding then in that case will you find that the lien claimant does not lose the lien rights. 9:4803 lien rights are for the
principal amount of obligation, expenses for costs of delivery, amounts over collective bargaining as well. 9:4822 4831
liens are filed for registry with the recorder of mortgages-so filing is all you need under this act and not recordation. (C) is
a reminder that although each filing made shall contain a description of property to permanent identify the property-street
name is insufficient. What happens if one goes past 30 daysthe owner can get this notice erased because the notice is
good for five years.
Construction financing; Mezzanine financing can take for of credit enhancement and be subrogated tot eh rights of the
construction financercould be part equity. permanent financingtake out loans; Construction lender is going to make
sure the mortgage is filed before the notice of contract and an affidavit of no work. All the work that continues five years
is covered.
HYPO: Als Restaurant and has a general contractor. Larry laborer starts to do work for the general contractor.
Cash register that is bolted and
a long counter built by Bars by Boudreaux.
In the kitchen he has a stove with a hood bought on credit from Stoves Inc.
and he has outdoor/indoor carpeting bought on credit.
TO finance he goes to the bank. Who takes a mortgage on the building and a UCC9 on furniture, fixtures, equipment and
goods.
Construction begins by a laborer who works for general contractor.
Carpet comes on next.
Boudreauxs cabinets
Stove comes in next
Paul the painter paints everything.
Finance company gets a judgment against Al and Al doesnt perfect a timely suspensive appeal.
When is the mortgage filed? There is no notice of contract. The mortgage is filed before Larry laborer begins. When is the
UCC 9? After the carpet is installed.
217
Go to the ranking provisions. 9:4821.
Privileges rank the building and its component parts:

1. Property-Ad valorem taxes. NOTHING IN CATEGORY 1
2. Laborers 4801(2) & 4802(A)(2) Inside this rank they rank equally and share proportionally. Property & Laborers.
NOTICE THEY RANK BEFORE MORTGAGE HOLDERS.
3. Bona-fide mortgages. Pre-existing Mortgages. Mortgage X and Y. Mortgage Y is a collateral mortgage. Mortgage X is
next is labeled a multiple indebtedness 3298 mortgage. Inside the rank they will rank by time. Both filed and recorded.
Delivery of collateral mortgage note is Dec. 2, 1999-value was given on Nov. 29, 1999. A collateral mortgage ranks from
the earliest concurrence fromt eh perfection of the security interest of the collateral mortgage note (concurrence of value
being given and delivery of note) so the earliest it can rank is Dec. 2 and since after work began so Mortgage Y drops to
category 5. Future advance mortgage ranks however from the date of filing.
4. Everybody (sub and supplier and vendors lessors if timely preserved); professionals without privity to the owner just the
general contractor except contractors and engineers. Inside this rank they rank equally. Liens have been filed against the
supplier of the carpet the lumber of Boudreaux and the metal work of the stove guy. Must determine whether these guys
are subs or suppliers. A contract is one who contracts with an owner. Work takes place on the premises. A subcontractor
is someone who does some work on the premises. A carpenter is one who built offsite and came on premises to install. If
one is a sub then his supplier gets a lien. In this rank are the subs and their suppliers and they rank equally in this rank.
Carpet was bought on credit and was a movable before it was installed. There was this UCC9 filed after the carpet was
installed so it does not pick up the carpet but it does pick up the stove. SO the fixture filing allows his to come and yank
the stove out and sell separately from the building. It is movable as to the UCC 9 guy. If the stove is a component part it
is a fixture-not covered by UCC9 and is sold with the building subject to all those claims, if it a movable it is not a fixture
and none of the lien claimaints can seize and sell it. Lien against the immovable, the property. Purpose of UCC9 filing is
to be able to pull it out and sell it.
5. General contractor and professional who have privity with owners. General contractor timely filed within the 60 day
period but 4811(D) says a general contractor shall not enjoy privilege unless the K is under $25k and there is no notice of
K general is unsecured in the sale of this property because the K is over $25k.
6. Post mortgages and privileges rank equally. Rank by time. Only Mortgage X beats the lien claimants. Y and the finance
company judgment on Dec. 3, 1999. As between the two, Judicial mortgage does not rank until filing on Dec. 3rd so that Y
ranks above the finance company.
Movables Ranking
Cash Register. Is it an immovable or movable (Equibank or Prytannia Park tests). Can put a UCC9 equipment and goods on
today and it applies to future equipment and goods. Rank as to fixtures, only if filed before the fixtures is installed and only on
commercial property. If UCC9 installed to fixture then he ahs an option to pull them out or take a supplier or K lien on the
whole building. Depends on how much he thinks he can gets ranking #4. UCC9 outranks vendors privilege.
Bar Built by Boudreaux. Hard to say that it is an immovable but he has lost a vendors privilege. But he does have a subs
privilege which is on the entire building.
Stove is an immovable then the stove company has a vendors privilege. Stove wants sub privilege in order to be secured
creditor. Repairmen wants it to be a component part so that he is entitled to a lien on the entire building. Vendors privilege on
immovables has to be dealt with separately then a vendors privilege on movables.
General Contractor has to build into his price the delay. Nobody gets paid until the end of the lien period.
218

Louisiana Security Devices Overview

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LOUISIANA SECURITY DEVICES

Ally Champagne: Law List Outline + My notes Rubin 2013

LESSON #1: AN INTRODUCTION TO SECURITY DEVICES

Introduction to Security Devices

TYPES OF CONTRACT NON- Personal Immovable Movable Immovables

II. Classification of security devices

1.Acceptance is presumed, no expressed requirement for acceptance.

C.C. Art. 3035. Definition of Suretyship

C.C. Art. 3036. Obligations for Which Suretyship May Be Established

C.C. Art. 3041. Kinds of Suretyship

C.C. Art. 3043. Legal Suretyship

C.C. Art. 3044. Ordinary Suretyship; Interpretation

C.C. Art. 3046. Defenses Available to Surety

C.C. Art. 3066. Legal Suretyship to conform to law.

a. Ordinary:Non-Commercial Surety This is the Default.

C.C. Art. 3038. Formal Requisites of Suretyship

a. Planiol-Traite Elementaire De Droit Civil: Suretyship is

c. What Has to Be in Writing For A Valid Suretyship Contract?

C.C. Art. 3039. Suretyship Requires No Formal Acceptance

Notethis is a commercial suretyship because there is a gas station involved

Issue: can parol be used to prove intent?

Pointgenerally, you are stuck with what is in the writing. No parol.

Notes on The Creditor-Surety Relationship

No Parol Evidence Should Be Admissible.

ii. The Creditor-Debtor RelationshipUse of Parol Evidence

1. Parol May Be Used to Prove A Change In The Principal Obligation

d. What Language is Sufficient for a Contract of Suretyship?

f. When Does Suretyship Terminate? What language is sufficient to terminate a suretyship

C.C. Art. 3058. Extinction of the Suretyship

C.C. Art. 3059. Extinction of Principal Obligation

C.C. Art. 3061. Termination of Suretyship

C. C.Art. 3062. Effect of modifications of principal obligation

i. The end (extinction & termination)

1. Modification extinguishes to the extent of prejudice unless the

subrogation the creditor has preference over the

pledge for the principal obligor's duty to reimburse the surety

ii. Effects Articles

C.C. Art. 1825. Subrogation Definition

C.C. Art. 1826. Effects

C.C. Art. 1827. Conventional subrogation by the obligee

Art. 1828. Conventional subrogation by the obligor

Art. 1829. Subrogation by operation of law.

Art. 1830. Effects of legal subrogation

C.C. Art. 3047. Rights of the Surety

C.C. Art. 3048. Suretys right of Subrogation.

C.C. Art. 3049. Surety's right of reimbursement for payment of obligation

Art. 3051. Payment by debtor without notice of payment by surety

Art. 3052. Limitation on right of surety to recover what he paid creditor

Art. 3053. Surety's right to require security

Art. 3054. Failure to provide security

Art. 3055. Liability among co-sureties

Art. 3056. Right of contribution among co-sureties

Art. 3057. Limitation upon right of contribution

C.C. Art. 3503. Solidary obligors

C.C. Art. 3504. Surety

C.C.P. Art. 921. Exception defined

C.C.P. Art. 922. Kinds of exceptions

C.C.P Art. 923. Functions of exceptions

Construing the Suretyship Agreement

Distinction Between Solidary Obligors and Sureties

Creditor-debtor relationship need not be in writing.

Gates v. Renfroe (1852)