Bankers Trust of Louisiana v. Smith

• Decision Date: 15 December 1993
• Docket Number: No. 93-CA-464,93-CA-464
• Citation: 629 So.2d 525
• Parties: BANKERS TRUST OF LOUISIANA v. Earl H. SMITH, Jr. and Marianne Ross Smith.
• Court: Court of Appeal of Louisiana — District of US

Page 525

629 So.2d 525

BANKERS TRUST OF LOUISIANA v. Earl H. SMITH, Jr. and Marianne Ross Smith.

No. 93-CA-464.

Court of Appeal of Louisiana,

Fifth Circuit.

Dec. 15, 1993.

Gerard O. Salassi, IV, Newman, Mathis, Brady, Wakefield & Spedale, Metairie, for plaintiff/appellee/appellant.

Anthony L. Glorioso, Metairie, for defendants/appellants/appellees.

Before KLIEBERT, C.J., and CANNELLA, J., and THOMAS F. DALEY, J. Pro Tem.

THOMAS F. DALEY, Judge Pro Tem.

This appeal arises from a suit seeking executory process of a collateral mortgage note pledged to secure a debt following execution on a collateral chattel mortgage note that was also pledged to secure the same debt. Bankers Trust of Louisiana, plaintiff/cross-appellant (Bank), held a $200,000.00 demand note executed by Earl Smith on behalf of Winfield Jewelers, Inc. (Winfield). This note was secured by personal endorsements of Earl H. and Marianne Ross Smith, defendants/appellants (Smiths). In addition to the personal endorsements, the demand note was also secured by two collateral mortgage notes. One was a collateral chattel mortgage note executed by Winfield secured by a chattel mortgage on Winfield's inventory. The other was a collateral mortgage note executed by the Smiths secured by a mortgage on the Smiths' personal residence.

The Bank, alleging default on the $200,000.00 demand note, filed suit to execute on Winfield's collateral chattel mortgage with no mention of the other collateral mortgage note. Pursuant to the first suit, Winfield's inventory was seized and sold at Sheriff's sale. After costs were deducted, $85,331.70 was credited to Winfield's debt. Subsequently, the Bank filed the present suit seeking enforcement by executory process of the second collateral mortgage note. The suit was then converted to ordinary process. The FDIC was substituted as plaintiff. In its petition converting the suit to ordinary process, the Bank also sought recognition of the mortgage on the Smiths' residence as well as personal judgment against the Smiths.

After a trial on the merits, the trial judge made the following findings and rulings: (1) a single pledge of two mortgage notes was proven; (2) the plaintiff proved the existence and amount of the principal debt; (3) the appraisal in the earlier executory proceeding was defective; (4) the defective appraisal did not bar an in rem judgment against the Smiths' residence; (5) the defective appraisal barred a personal judgment against the Smiths under the Deficiency Judgment Act, La.Rev.Stat. 13:4106. Accordingly, the trial judge ordered judgment in rem in favor of the Bank, recognizing the collateral mortgage on the Smiths' residence and denying personal judgment against the Smiths.

The Smiths' filed a suspensive appeal and the Bank cross-appealed. The Smiths specified two errors: (1) the trial court erred in finding that the Bank proved the debt sued upon; (2) the trial court erred in finding that the deficiency judgment act did not bar an in rem judgment against the Smiths' residence. The Bank specified three errors: (1) the trial court erred in failing to award a money judgment in favor of the Bank; (2) the trial court erred in finding the appraisal in the previous suit defective; (3) the trial court erred in not awarding a personal judgment against the Smiths.

For the following reasons, we find the specifications of error without merit and affirm the trial court.

THE SMITHS' SPECIFICATION ERROR # 1: THE TRIAL COURT ERRED IN FINDING THAT THE BANK PROVED THE DEBT SUED UPON.

This specification of error is based upon inconsistencies in the amount sought in the original petition and the amount proved at trial. The original petition sought to recover a sum of $98,577.07. The actual balance proved at trial was $90,868.47. The Bank also entered the original note of $200,000.00 into evidence. The Smiths point to no other reasons why the trial court erred in this finding. The record supports the trial court's finding, therefore we will not disturb it on appeal.

In a suit for deficiency judgment, the creditor must plead and prove the existence of the obligation giving rise to the debt. First Acadiana Bank v. Beiber, 582 So.2d 1293, 1296 (La.1991). At trial, Earl Smith admitted that a $200,000.00 principal balance was due the Bank by Winfield. In the face of an admission to the existence of the debt, the Smiths cannot now assert that the Bank failed to prove the existence of the debt.

Additionally, the Smiths cannot claim that the bank failed to prove the existence of the debt because the Bank failed to prove the amount of debt. Earl Smith admitted to the existence of the $200,000.00 balance on the demand note. The Bank submitted evidence of the seizure and sale of Winfield's inventory, and of application of the proceeds to the balance due on the demand note. Even though the original demand note of $200,000.00 was entered into evidence, there was ample evidence to support the conclusion that the amount due was less than $200,000.00.

Furthermore, in the original demand note and guaranty, the parties agreed that the records of the Bank would serve as rebuttable prima facie evidence of the unpaid and funded principal balance of the debt. At trial the Bank produced a computer printout, labeled Exhibit P-11, showing a balance due of $90,868.47 on the debt in question. Testimony explained that the $90,868.47 was the figure carried on the Bank's books at its closure in March 1989. The Smiths made no objection to admission of the Bank record into evidence. Additionally, the Smiths offered no evidence or testimony rebutting the $90,868.47.

In light of Earl Smith's admission, the parties' agreement to accept the Bank's records as rebuttable prima facie proof of the debt, and of the Smiths' failure to rebut or object to the Bank's records, the Smiths cannot now challenge the existence of the debt.

THE SMITHS' SPECIFICATION OF ERROR # 2: THE TRIAL COURT ERRED IN FINDING THAT THE DEFICIENCY JUDGMENT ACT DID NOT BAR AN IN REM JUDGMENT AGAINST THE SMITHS' RESIDENCE.

The Smiths contend that this suit is a suit for deficiency judgment and that the Deficiency Judgment Act, La.Rev.Stat. 13:4106, bars an in rem judgment in this case. The trial court disagreed, and based on its findings, held that La.Rev.Stat. 13:4106 does not bar an in rem judgment in this case. The record supports the trial court's findings, and in light of those findings, we agree with the trial court's application of La.Rev.Stat. 13:4106.

Although not styled as such, the Smiths contend that this suit is an action for deficiency judgment. However, even assuming this action is one for deficiency judgment, the Deficiency Judgment Act does not bar an in rem judgment in this case. The language of La.Rev.Stat. 13:4106(B) places this suit outside the purview of the act.

The Deficiency Judgement Act provides that a deficiency judgment cannot be obtained against a debtor when, to satisfy a debt, the debtor's property is seized and sold without appraisal. ¹ However, the Deficiency Judgment Act, by its own language, does not bar execution on two or more things pledged and mortgaged to secure the same debt. La.Rev.Stat. 13:4106(B). In this case, there were two things pledged or mortgaged, the collateral chattel mortgage note along with the underlying mortgage on Winfield's inventory and the collateral mortgage note along with the underlying mortgage on the Smiths' residence. There was also one principal debt, the $200,000.00 demand note. Thus, the exception in Subsection (B) was triggered here.

The Smiths further contend that 13:4106(B) is applicable only when there is a single pledge or mortgage on more than one piece of property and that in this case there were two separate pledges of two separate collateral mortgage notes secured by two separate pieces of property. However, this court need not address whether the exception to Subsection (B) is limited only to instances in which there is a single pledge or mortgage.

The trial court factually determined there was one pledge of two collateral notes. The record supports this finding. Because there was no formal written pledge agreement, the trial court relied on testimony and circumstantial evidence. The testimony and record establish both collateral mortgage notes were pledged on the same day. The only evidence to refute the trial court's finding is the Smiths' own self-serving assertion. The trial judge did not agree with the Smiths' assertion. We find no manifest error in his conclusion there was one pledge of two collateral notes. Rosell v. ESCO, 549 So.2d 840 (La.1989).

In short, because the exception in Subsection (B) applies to these facts, La.Rev.Stat. 13:4106 does not bar an in rem judgment against the Smiths' residence.

THE BANK'S SPECIFICATION OF ERROR # 1: THE TRIAL COURT ERRED IN FAILING TO AWARD A MONEY JUDGEMENT.

Although the Bank asserts that it is entitled to a money judgment in this case, in its brief the Bank provides no legal support for this assertion. Upon review of the record, we agree with the trial judge's conclusion that the Bank was not entitled to a money judgment.

As a general rule, where a judgment is silent with respect to any demand which was an issue in the case under the pleadings such silence constitutes an absolute rejection of that demand. Sun Finance Co., Inc. v. Jackson, 525 So.2d 532, 533 (La.1988). The trial court limited its judgment to an in rem judgment recognizing and maintaining the Bank's collateral mortgage. In doing so the trial court declared the existence and enforceability of the collateral mortgage, nothing more. Because the judgment is silent with respect to a money judgment, ...