Bank of Coushatta v. King
| Decision Date | 30 March 1988 |
| Docket Number | No. 19437-CA,19437-CA |
| Parties | BANK OF COUSHATTA, Plaintiff-Appellant, v. Ralph E. KING, Jr., et al, Defendants-Appellees. |
| Court | Court of Appeal of Louisiana — District of US |
Robert E. Bethard, Coushatta, for plaintiff-appellant.
James Farrier, Baton Rouge, for defendants-appellees.
Before JASPER E. JONES, NORRIS and LINDSAY, JJ.
The Bank of Coushatta brought this deficiency judgment action against the defendant, Christine Sullivan King, following a foreclosure by executory process. The trial court found that the executory proceedings were defective and denied the Bank's demands. The Bank appealed.
On July 9, 1984, the Bank filed a suit for executory process against Ralph King, Jr. and his wife, Christine Sullivan King. In its petition, the Bank alleged that it was the holder and owner of two promissory notes executed by the Kings. These were collateral mortgage notes. The first promissory note for $250,000 was executed on August 3, 1981, and made due on demand. The note was made payable by the Kings to "themselves" and was endorsed in blank. The note provided for twelve percent per annum interest from date until paid, with twenty percent attorney fees on the principal and interest due. The second note for $250,000 was executed on August 20, 1981. Its provisions were identical to those of the first note.
Each note was paraphed "Ne Varietur" for identification with an authentic act of mortgage on real estate located in Franklin Parish. Each mortgage contained a confession of judgment.
The amount owed on the collateral mortgage notes was not alleged in the body of the petition. However, in the prayer of the petition, the plaintiff made demand upon the defendants for payment in the amount of $293,540.08, together with 13.50 percent per annum interest from December 1, 1983, until paid, plus 25 percent attorney fees on both principal and interest, and all costs, and in default of payment, plaintiff prayed that a writ of seizure and sale be issued for the sale of the described real estate, with benefit of appraisal, to satisfy the debt. Both notes and certified copies of the mortgages were attached to the petition for executory process. Also, attached to the petition was a notarized verification by the Bank's president that the facts contained in the petition were true and correct. No other documents were attached to the petition.
Payment was not made and a writ of seizure and sale was subsequently issued. The mortgaged property was appraised, and adjudicated to the Bank at the Sheriff's sale on February 6, 1985, at a price of $70,000. The total cost of the Sheriff's sale was $2,095.79, thus entitling the Kings to a credit of $67,904.21 on the writ.
The sales proceeds were insufficient to satisfy the principal indebtedness of $293,540.08 prayed for in the petition for executory process. Therefore, on December 16, 1985, the Bank filed a suit for deficiency judgment. The suit was filed against Mrs. King alone, who was then divorced from Mr. King.
In its suit for deficiency judgment, the bank attached to the petition the two collateral mortgage notes and certified copies of the two acts of mortgage, which had been filed in the original suit for executory process. The Bank also attached a single payment handnote. This handnote was executed by Mr. King alone. The handnote was in the original principal amount of $293,540.08. It was executed on December 1, 1983, and made due on March 1, 1984. The note provided for 13.5 percent per annum interest from date until paid and 25 percent attorney fees on the principal and interest due. The handnote bore a notation which designated as collateral a "[c]ollateral pledge agreement dated 09/04/81 in the amount of $500M covering land in Franklin Parish (192 acres) and collateral pledge agreement dated 5/24/83 in the amount of $6,000.00 covering land in Winnsboro, LA." (The dates and property descriptions do not coincide with those on the collateral mortgages which were attached to the petition.)
Also attached to the petition for deficiency judgment was a continuing guaranty executed by Mrs. King on September 4, 1981, guaranteeing Mr. King's debts up to $393,884.40. The Bank sought judgment against Mrs. King in the amount of $293,540.08, together with 13.50 percent per annum interest for a period of one year from December 1, 1983, and 25 percent attorney fees on the aggregate amount of both principal and interest due, and all costs, subject to a credit of $67,904.21 derived from the previous Sheriff's sale which was held on February 6, 1985.
Mrs. King answered the suit, alleging several defects in the executory proceedings which would prevent the bank from obtaining a deficiency judgment against her. The trial court ruled in favor of Mrs. King and rejected the demands of the Bank.
In its written reasons for judgment, the trial court found the executory proceedings defective because the Bank failed to attach the handnote to the petition for executory process in compliance with LSA-C.C.P. Art. 2637(C), and an authentic copy of the collateral pledge agreement which formed a necessary link between the handnote and the collateral mortgage note.
Finding that the plaintiff had lost its right to obtain a deficiency judgment on the handnote signed by Mr. King, the trial court ruled that the plaintiff was not entitled to a deficiency judgment against Mrs. King. The trial court issued its written reasons for judgment on April 24, 1987, and a judgment dismissing the plaintiff's petition was signed on June 29, 1987.
The Bank appealed. It relies upon the following assignments of error: (1) the trial court erred in finding that LSA-C.C.P. Art. 2637 required that the handnote be attached to the petition for executory process when a collateral mortgage note is sued upon; (2) the trial court erred in finding that a certified copy of the collateral pledge agreement should have been attached to the petition for executory process; and (3) the trial court erred in determining that the plaintiff was not entitled to a deficiency judgment against Mrs. King.
The Bank asserts in its first assignment of error that the trial court erred in its interpretation of LSA-C.C.P. Art. 2637. The trial court found that, following its 1983 amendment, Article 2637 mandates that in the case of a collateral mortgage, the handnote must be attached to the petition for executory process.
The articles governing evidence required for executory process are LSA-C.C.P. Art. 2635, 2636, and 2637. These articles provide, in pertinent part, as follows:
Art. 2635. Authentic evidence submitted with petition
The plaintiff shall submit with his petition the authentic evidence necessary to prove his right to use executory process to enforce the mortgage or privilege. These exhibits shall include authentic evidence of:
(1) The note, bond, or other instrument evidencing the obligation secured by the mortgage or privilege.
(2) The authentic act of mortgage or privilege on immovable property importing a confession of judgment.
....
(4) Any judgment, judicial letters, order of court, or authentic act necessary to complete the proof of plaintiff's right to use executory process.
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 regarding the obligation to pay attorney's fees shall not preclude the use of executory process.
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 or privilege, paraphed for identification with the act of mortgage or privilege by the notary or other officer before whom it is executed (2) A certified copy or a duplicate original of an authentic act;
....
(6) All other documentary evidence recognized by law as authentic.
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 privilege maturing the obligation, or of advances made by the holder of a collateral mortgage note or note for future advances, need not be submitted in authentic form. These facts 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, 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....
Paragraph C of Article 2637 was added by amendment in 1983.
In routine financial transactions, such as that which occurred in this case, the collateral mortgage note does not represent the indebtedness; it is the security that is pledged to secure the payment of another note, usually a handnote, which represents the indebtedness. The true indebtedness is the debt that the collateral mortgage note is pledged to secure. Nevertheless, the jurisprudence has established that, in foreclosures of collateral mortgages, for the purposes of executory process, the collateral mortgage note is the "instrument evidencing the obligation secured by the mortgage." LSA-C.C.P. Art. 2636(1). Slidell Building Supply, Inc. v. I.D.S. Mortgage Corp., 273 So.2d 343 (La.App. 1st Cir.1972), writ denied 274 So.2d 708 (La.1973); Cameron Brown South, Inc. v. East Glen Oaks, 341 So.2d 450 (La.App. 1st Cir.1976); Fuller v. Underwood, 355 So.2d 62 (La.App. 2d Cir.1978), writ denied 357 So.2d 1153 ...
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...in defense of a deficiency judgment when rights of the principal debtor and/or property owner are affected, see Bank of Coushatta v. King, 522 So.2d 1328 (La.App. 2d Cir.1988); Bankers Trust of La. v. Smith, 629 So.2d 525 (La.App. 5th Cir.1993), Danny and Janet Moore received the required n......
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Bank of Coushatta v. King
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