Meadow Brook National Bank v. Massengill
Decision Date | 09 June 1970 |
Docket Number | No. 26604.,26604. |
Parties | The MEADOW BROOK NATIONAL BANK, Plaintiff-Appellee, v. John B. MASSENGILL et al., Defendants-Appellants. |
Court | U.S. Court of Appeals — Fifth Circuit |
James J. Morrison, New Orleans, La., Nathan Greenberg, Gretna, La., for defendants-appellants.
Jerry A. Brown, D. Douglas Howard, Bartholomew P. Sullivan, Jr., New Orleans, La., for plaintiff-appellee.
Before WISDOM, GOLDBERG and MORGAN, Circuit Judges.
This diversity case turns on the Louisiana law governing the liability of endorsers liable in solido1 with the maker of a mortgage note. Here the endorsers contend they are released from liability because: the creditor released the principal debtor; they received no demand for payment or notice to appoint appraisers in the executory foreclosure sale; and the note was usurious. We agree with the district judge that the creditor properly and effectively reserved his rights against the endorsers; that the endorsers received all the notice and demand to which they were entitled; and that the endorsers failed to prove that the note was usurious. Meadow Brook National Bank v. Massengill, E. D.La.1968, 285 F.Supp. 55.
August 25, 1964, West Jefferson Professional Medical Plaza, Inc., later merged with Southern Land Title Corporation, executed a note and mortgage in the amount of $600,000 at an interest rate of eight percent per annum. The note, payable to "Ourselves", was endorsed on the back first by West Jefferson, the maker, then by defendants John B. Massengill, Mario M. Bonfanti, Julian E. Hotard, Frank Spalitta, James H. Pfister, Charles L. Mammelli, Jr., and Sam J. Recile. The maker and endorsers on the note bound themselves jointly, severally, and in solido by the related act of mortgage on an apartment complex now known as Butterfly Terrace No. 1. Meadow Brook National Bank2 obtained the note at a five percent discount.
Payments lapsed in 1966. The bank filed suit for foreclosure against the property by executory process. The Bank served a copy of the petition and a notice of demand for payment upon all the endorsers. In reorganization proceedings involving Southern Land Title, the federal district court for the Eastern District of Louisiana issued a stay order against this foreclosure. Consequently, in February 1967, the Bank brought the present suit against the endorsers for the full amount owed on the note.
(Emphasis added.)
The Bank thereupon instituted a new foreclosure suit in the state court, naming only the mortgagor as defendant, but specifically reserving its rights against the endorsers. The sale was advertised in accordance with state law. The property was appraised at $200,000, and the Bank bought the property with the high bid of $200,000. The Bank credited against the note this amount along with fire insurance payments it had received. It has now secured judgment in the present suit against the endorsers of $441,490.77 with interest at eight percent per annum from December 20, 1967, and ten percent of the interest as attorneys fees. From this judgment, the endorsers appeal.
Landry v. New Orleans Public Service, 177 La. 105, 147 So. 698, 700 (1933).
The endorsers contend that the Bank failed to reserve its rights when it first attempted to foreclose against the property and when it first petitioned the bankruptcy court for a release of the property. But at that time, no release of West Jefferson was contemplated. Thus, no reservation was then necessary. When the district court and the trustee required a release, the Bank was careful to obtain a sufficient reservation of its rights in the resulting order. It reaffirmed those rights in the executory foreclosure proceeding. Therefore, we agree with the district court that the endorsers are not released on that count.4
We take up next the question whether the endorsers should be released because the Bank did not serve them with notice either of demand for payment or the demand to appoint appraisers in the executory foreclosure proceedings.
In the first place, we observe that by the terms of the note the endorsers specifically waived "demand, protest and notice of protest" and "presentment, protest and notice of non-payment".5 If there were any doubt on that score, the evidence amply indicates that a demand for payment was continually outstanding against the endorsers. The Bank had commenced this very suit to compel the endorsers to pay the note some six months before its final and successful foreclosure proceeding in the state court. But the endorsers maintain that Louisiana law requires the creditor to have named them party defendants in the executory foreclosure proceeding if he is to hold them liable now. To support this contention, they cite Consolidation Loans, Inc. v. Guercio, 200 So.2d 717 (La.App.1966), a Louisiana Court of Appeals case. In Guercio, the Louisiana First Circuit ruled that a co-maker of a note who was part owner of the mortgaged property and was named a defendant in the executory foreclosure proceedings must receive a demand for payment. In the case before us, however, the endorsers did not possess an interest in the property. As we have already pointed out, moreover, not only did the endorsers here waive demand for payment; such a demand was outstanding against them. Thus, the policy that guided the Guercio court — that a debtor should have the opportunity to pay the indebtedness — is fulfilled here. Finally, Guercio did not pass on the question who should be named a party in the foreclosure proceedings; the Louisiana First Circuit had already ruled in Polk Chevrolet, Inc. v. Vicaro, 162 So.2d 761 (La.App.1964), that a co-maker obligated in solido was not entitled to be named a defendant in the foreclosure proceedings. In short, we find no authority to sustain the contention that an endorser without interest in the property must be named a defendant in an executory foreclosure.6
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