Bowl-Opp, Inc. v. Larson
Decision Date | 15 November 1971 |
Docket Number | Civ. A. No. 70-1385. |
Citation | 334 F. Supp. 222 |
Court | U.S. District Court — Eastern District of Louisiana |
Parties | BOWL-OPP, INC., Plaintiff, v. Clive M. LARSON and Homer H. Horton, Jr., Defendants. |
Jerry A. Brown, Monroe & Lemann, New Orleans, La., for plaintiff.
Charles E. McHale, Jr., New Orleans, La., for defendants.
This is an action brought by the plaintiff, Bowl-Opp, Inc., a Delaware corporation qualified to do business in Louisiana, based on diversity of citizenship with the amount in dispute being in excess of $10,000.00, exclusive of interests and costs. The plaintiff, assignee and holder of a bearer note, seeks to recover a sum of money allegedly owed by the defendants, Larson and Horton, citizens of Louisiana and endorsers on the note, as a deficiency that resulted when the property mortgaged to secure the note was sold at a public sale pursuant to a federal court order for less than the amount outstanding on the note at that time. The matter was tried to the Court on April 23, 1971, and taken under advisement. Upon consideration of the testimony adduced at the trial, the stipulations made by counsel for the respective parties, and the depositions and exhibits received into evidence at the trial, the court now makes the following findings of fact and conclusions of law.
The defendants, Clive M. Larson and Homer H. Horton, Jr.,1 endorsed a negotiable promissory bearer note, dated December 8, 1961, in the principal amount of $80,000.00, executed by Tangi Bowling Investment Corporation as maker, payable to the order of bearer in monthly installments of $720.00 each, commencing January 1, 1962, and payable in a like amount on the first day of each month thereafter until December 1, 1976, with the balance becoming due and payable then.
The terms of the note provided for the following:
A default on the terms of the note occurred on June 1, 1966, when the regular monthly installment was not paid. No monthly installments have been paid since that date; and the plaintiff, as holder of the note, exercised its option to declare the entire unpaid balance of the note, including principal, interest and attorney's fees, due and payable.
On the date of the default, the unpaid balance on the principal was $63,974.58. Plaintiff proceeded in state court via executiva and filed suit on October 28, 1966, to foreclose on the note for the above amount of money plus seven (7%) percent interest thereon from June 1, 1966, until paid, together with ten (10%) percent attorney's fees on the total amount of principal and interest.
The plaintiff was not able to foreclose against the mortgaged property due to the fact that Southern Land Title Corporation, successor to Tangi Bowling Investment Corporation, and owner of the mortgaged property, was a debtor corporation in a proceeding in this court entitled "In the Matter of: Southern Land Title Corporation", No. 66-1095, and The Honorable Lansing L. Mitchell enjoined the foreclosure sale in the state court previously filed by Bowl-Opp by a stay order issued on December 8, 1966. The foreclosure in the state court was subsequently enjoined by a stay order issued by The Honorable Frederick J. R. Heebe of this court on April 27, 1967, in the case entitled "In the Matter of: Southern Land Title Corporation, Debtor", No. 67-135.
The plaintiff filed a petition in November of 1968, "In the Matter of: Southern Land Title Corporation, Debtor", No. 67-135, requesting that the trustee disclaim and abandon the property securing the mortgaged note. In his answer the trustee refused to disclaim the property but agreed to its being sold at public auction provided the plaintiff would release Southern Land Title Corporation and all its subsidiary corporations from liability for any deficiency on the mortgaged note bearing against the property sought to be disclaimed.
By judgment dated January 21, 1969, "In the Matter of: Southern Land Title Corporation, Debtor", No. 67-135, after the plaintiff withdrew its petition for disclaimer, it was ordered that the property be sold at public auction. The judgment also noted:
"The stipulation of Bowl-Opp, Inc., * * * to waive liability for any deficiency on the mortgage indebtedness due them by Southern Land Title Corporation or any of its corporate subsidiaries * * *"
Although the judgment of the court is devoid of any reservations by Bowl-Opp, Inc., against any of the individual makers or endorsers, the true intentions of Bowl-Opp, Inc., is reflected in the following discussion at a hearing before The Honorable Frederick J. R. Heebe on January 16, 1969, among Mr. Little, the attorney for the Trustee, Mr. Matheny, the attorney for Bowl-Opp, Inc., and Judge Heebe.
The sale of the property was duly advertised on May 6, May 20, and June 2, 1969, and the property was sold, without appraisal, as scheduled and as advertised on June 5, 1969.
At the sale, Bowl-Opp, Inc., and American Machine & Foundry Company, bidding in the name of Bowl-Opp, Inc., were the last and highest bidders for the property known as Tangi Bowling Lanes, Inc., designated as Tracts I-A and II-A, and all movables included therein, for a price of $101,000.00. After proper deductions were made, this sale price left a deficiency in excess of $27,000.00.
This court has jurisdiction by virtue of diversity of citizenship of the parties and the amount in controversy.2
The judgment ordering the property to be sold at public auction rendered in this court in the proceeding entitled "In the Matter of: Southern Land Title Corporation, Debtor", No. 67-135, did not operate as a discharge of the defendants from liability as endorsers. The plaintiff did reserve its rights against the individual endorsers and it had no intention to discharge them when it discharged Southern Land Title Corporation and any of its corporate subsidiaries from liability.
Article 2203 of the Louisiana Civil Code provides:
"The remission or conventional discharge in favor of one of the codebtors in solido, discharges all others, unless the creditor has expressly reserved his right against the latter." (Emphasis added)3
This principle of law is also firmly established in Louisiana jurisprudence:
"The right of a holder of a negotiable instrument to release one of the persons thereon solidarily bound, without thereby impairing his rights against others likewise bound is definitely recognized and provided for in various articles of the Louisiana Civil Code; but to preserve his right against the obligors not released, express reservation of rights as against them must be made at the time release is given."4
Although there was no express reservation in the judgment of January 21, 1969 allowing the sale,5 the intention to reserve the rights against the individual endorser was sufficiently expressed by Bowl-Opp, Inc., in the proceedings to satisfy Article 2203.
The defendants deny liability under the Louisiana Deficiency Judgment Act'6 inasmuch as the mortgaged property was sold without appraisal.
The plaintiff argues that the Deficiency Judgment Act does not apply in this case for three reasons. First, the plaintiff alleges that the Deficiency Judgment Act does not apply to sales under Bankruptcy laws because the requirement of appraisal in public sales under Louisiana law does not obtain in federal law. Second, the plaintiff alleges that the Act does not apply because the plaintiff did not take advantage of a waiver of appraisement. Third, the plaintiff claims that the Act does not apply to the endorsers in this case.
The Louisiana Deficiency Judgment Act provides in part:
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Exchange Nat. Bank of Chicago v. Spalitta
...federal case resolving the issue of the applicability of the Deficiency Judgment Act to sales under Chapter X, I.e., Bowl-Opp, Inc. v. Larson, 334 F.Supp. 222 (E.D.La.1971). That was a diversity suit in which the federal district court judge was bound to apply Louisiana law to the situation......
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Newtek Small Bus. Fin., LLC v. Baker
...the Civil code articles of the time, even though the judicial sale was made with appraisal. Rubin, at 845-46. In Bowl-Opp, Inc. v. Larson , 334 F. Supp. 222 (E.D. La. 1971), the federal court, relying on Simmons and C.I.T. , held that the LDJA could be used as a bar by endorsers following a......
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Exchange Nat. Bank of Chicago v. Spalitta
...that Louisiana law be applied and followed in such instances. We are more persuaded by the Court's decision in Bowl-Opp, Inc. v. Larson, D.C., 334 F.Supp. 222 (1971), where the court held that an order for the sale of mortgaged realty by the federal court in a bankruptcy proceeding did not ......