LeBlanc v. Bernard

• Decision Date: 19 December 1989
• Docket Number: No. 88,88
• Citation: 554 So.2d 1378
• Parties: Paul J. LeBLANC, Jr. v. Sherman A. BERNARD, etc. CA 1179.
• Court: Court of Appeal of Louisiana — District of US

Page 1378

554 So.2d 1378

Paul J. LeBLANC, Jr. v. Sherman A. BERNARD, etc.

No. 88 CA 1179.

Court of Appeal of Louisiana First Circuit.

Dec. 19, 1989.

Lawrence A. Durant, Baton Rouge, for plaintiff-appellee Paul J. LeBlanc, Jr.

Don Moss, Baton Rouge, for defendant-appellant Sherman A. Bernard, et al.

Before COVINGTON, WATKINS and SHORTESS, JJ.

SHORTESS, Judge.

Paul J. LeBlanc, Jr. (plaintiff) filed this suit against Sherman A. Bernard (defendant) in his capacity as the rehabilitator of First Republic Life Insurance Company (First Republic) and liquidator of Commonwealth Securities Corporation (Commonwealth). ¹

Plaintiff seeks dissolution for nonpayment of the purchase price of a cash sale (reciting payment of $437,400.00, the purchase price in full) of certain immovable property pursuant to an option agreement acquired by Roger J. LeBlanc ² owner of 100 percent of the shares of Commonwealth (to whom the disputed property was immediately transferred upon the conclusion of the sale) and 99.95 percent owner of First Republic (to whom the property was transferred by defendant pursuant to an order of liquidation transferring all assets of Commonwealth, in liquidation, to First Republic, in rehabilitation). By an act of sale between defendant, on behalf and as rehabilitator of First Republic, and National American Life Insurance Company, dated June 2, 1982, the property was transferred again; however, a notice of lis pendens regarding plaintiff's claim for dissolution was filed in the public records prior thereto, on April 12, 1979. Additionally, the act of sale recites that National American Life Insurance Company "is aware and takes cognizance of litigation involving above described property bearing suit No. 223,278, 19th Judicial District Court, East Baton Rouge Parish, Louisiana."

The trial court determined that none of the purchase price was ever paid (a fact not controverted at trial) and ordered dissolution of the sale from plaintiff to LeBlanc, citing Sliman v. McBee, 311 So.2d 248 (La.1975). Defendant appeals, asserting error in the trial court's refusal to apply the public records doctrine, more specifically LSA-R.S. 9:2721, so as to preclude plaintiff's claim, ³ and error in ordering "revindication." Defendant argues, in essence, that he, as rehabilitator and liquidator, is a "third party" within the meaning of LSA-R.S. 9:2722. ⁴ LSA-R.S. 9:2722 defines the scope of the terms "third persons or third parties" used in LSA-R.S. 9:2721, thereby limiting the protection of the latter to only those within the definition of the former.

Plaintiff asserts (1) that dissolution is available in these circumstances irrespective of the existence of a third party, citing McBee, 311 So.2d 248, and (2) that defendant is not a third party. The trial court's oral reasons for judgment cite McBee, 311 So.2d 248, and include the statement: "the mere fact that the property passed through the hands of the [Insurance Commissioner] ... does not purify these transactions."

McBee involved an act of sale reflecting a credit sale by language in the document that the promissory notes executed in conjunction therewith were to be "the personal obligation" of the vendees. McBee, 311 So.2d at 250. There was no recorded mortgage. The court held that the vendor's lien (which was specifically waived in the act of sale) was distinct from the right of dissolution for nonpayment and, therefore, the latter was not included in the waiver, granting dissolution notwithstanding the existence of a third party. McBee, 311 So.2d at 256.

Robertson v. Buoni, 504 So.2d 860 (La.1987), citing McBee, granted dissolution where the public records reflected the vendor's pre-existing mortgage (which was assumed by the vendees in the act of sale) but also reflected vendees as owners of the property. ⁵ Buoni, 504 So.2d at 861. The vendor in Buoni did not record a mortgage in her favor. There was no evidence of a third party although the court of appeal assumed that one existed and denied dissolution. Robertson v. Buoni, 494 So.2d 563, 564 (La.App. 5th Cir.1986). The supreme court reversed, stating:

The court of appeal's speculation of the presence of a third party purchaser of the property is reasonable, but is not a valid cause for denial of the remedy of dissolution of a sale of immovables. The right to dissolution of a sale of an immovable for nonpayment is not contingent on the absence of a third party purchaser. A vendor seeking dissolution of the sale may do so even after the property has left the hands of the original purchaser.

(Citations omitted.) Buoni, 504 So.2d at 863. Justice Lemmon concurred, reasoning that a vendor's right to dissolution when there exists a third party depends upon whether the public record reflects that dissolution could occur (i.e., that the purchase price had not been fully paid), citing A. Yiannopoulos, Property Sec. 165 (2 Louisiana Civil Law Treatise (1980)). Buoni, 504 So.2d at 863 (Lemmon, J., concurring).

The right to dissolution is the result of a resolutory condition implicit in all commutative contracts, which effects revocation of the obligation and a return to the pre-existing status quo. LSA-C.C. art. 2045 and 2046. ⁶ There is no specific requirement in the Civil Code that an act of sale be recorded to preserve the right of dissolution. A. Yiannopoulos, supra, at Sec. 165; see also Yiannopoulos, Real Rights in Louisiana, 23 La.L.Rev. 161, 232 (1963). Professor Yiannopoulos suggests the right of dissolution where the act of sale is not recorded is wholly consistent with the public records doctrine, LSA-R.S. 9:2721-24, because the vendor is record owner and a third person purchasing from the vendee acquires a title that is "utterly null and void, except between the parties thereto." A. Yiannopoulos, supra, at Sec. 165 (citing LSA-C.C. art. 2266); see also Yiannopoulos, Real Rights in Louisiana, supra, at 233. The operation of the right of dissolution against a third party becomes inconsistent with the public records doctrine when, as here, the public records reflect that the price has been paid. Id.; Buoni, 504 So.2d at 863 (Lemmon, J., concurring). The majority opinion in Buoni can be distinguished from our facts because there the public records reflected a mortgage in vendor's name and the property in vendees' names, and, most importantly, there was no evidence of an affirmative statement that the entirety of the purchase price had been paid. ⁷ For these reasons we hold that the right of dissolution cannot lie in this case if defendant can rely on the public records. See LSA-R.S. 9:2722.

The Commissioner of Insurance of Louisiana as rehabilitator or liquidator is vested with title to "all property, contracts and rights of action of the insurer as of the date of the order directing rehabilitation or liquidation." LSA-R.S. 22:735. He acts in the capacity of an officer of the State of Louisiana, State v. Preferred Accident Insurance Co., 238 La. 372, 115 So.2d 384 (1959), and is responsible on his official bond for all assets that come into his possession. LSA-R.S. 22:735. Whether the Commissioner can rely on the public records in marshalling these assets is a question of first impression in this state, and our research discloses no caselaw on point elsewhere.

The trial court placed defendant in the exact shoes of First Republic. ⁸ He erred here as a matter of law. The Commissioner of Insurance as rehabilitator or liquidator owes an overriding duty to the people of the State of Louisiana. The raison d'etre of his office is because the insurance industry is "affected with the public interest." LSA-R.S. 22:2. Any duties imposed upon that office, therefore, must be performed with the public interest foremost in mind. The Commissioner's responsibilities as rehabilitator or liquidator include, additionally, protection of the policyholders, creditors, and the insurer itself. Republic of Texas Savings Association v. First Republic Life Insurance Co., 417 So.2d 1251, 1254 (La.App. 1st Cir.), writ denied, 422 So.2d 161 (La.1982). This court has previously held that defendant, as rehabilitator, "does not stand precisely in the shoes of First Republic." Id.

Republic of Texas involved defendant in his capacity as rehabilitator of First Republic and an executory proceeding brought by Republic of Texas Savings Association (Republic of Texas) to foreclose on a collateral mortgage. A series of financing arrangements resulted in Republic of Texas becoming the holder of a hand note that did not correspond to the collateral package in which it had purchased a participation. Republic of Texas exchanged its note for a note First Republic represented to have been the original note but what appears to have been a back-dated instrument. In attempting to enforce the note against First Republic (by that time in rehabilitation), Republic of Texas asserted that the rehabilitator should be estopped from asserting certain defenses because those defenses would allow First Republic to "benefit from its own misrepresentations." Republic of Texas, 417 So.2d at 1253. In that context we held: "While a party to the instrument may be estopped from asserting defenses based on previous misrepresentations, this restriction does not extend to the rehabilitator." Id. at 1254.

The Commissioner's function as rehabilitator or liquidator requires, initially, a determination of the assets and liabilities of the insurer. See LSA-R.S. 22:750 (requiring a report to the court reflecting assets and liabilities within a specified time period). The Commissioner's title to property in this capacity is in the nature of a fiduciary holding those assets for the benefit of parties in varied legal relationship to the insurer. See Couch, 2A Couch Cyclopedia of Insurance Sec. 22:45 (Anderson 2d ed. 1984). The Commissioner is authorized, subject to court approval, to borrow funds against the assets. LSA-R.S. 22:740 (allowing the securing of repayment by...