Mid-South Plumbing, L.L.C. v. Dev. Consortium-Shelly Arms, L.L.C.

• Decision Date: 23 October 2013
• Docket Number: No. 2012–CA–1731.,2012–CA–1731.
• Citation: 126 So.3d 732
• Parties: MID–SOUTH PLUMBING, L.L.C. v. The DEVELOPMENT CONSORTIUM–SHELLY ARMS, L.L.C.
• Court: Court of Appeal of Louisiana — District of US

126 So.3d 732

MID–SOUTH PLUMBING, L.L.C.

v.The DEVELOPMENT CONSORTIUM–SHELLY ARMS, L.L.C.

No. 2012–CA–1731.

Court of Appeal of Louisiana, Fourth Circuit.

Oct. 23, 2013.

David C. Clement, Clement Gates & May, New Orleans, LA, for Plaintiff/Appellant.

Charles L. Stern, Jr., Danielle C. Babashoff, Margaret V. Glass, The Steeg Law Firm, L.L.C., New Orleans, LA, for Defendant/Appellee.

(Court composed of Judge PAUL A. BONIN, Judge DANIEL L. DYSART, Judge SANDRA CABRINA JENKINS).

SANDRA CABRINA JENKINS, Judge.

Mid–South Plumbing, LLC (“Mid–South”) appeals the trial court's judgment overruling Mid–South's exceptions of no right of action and no cause of action, and granting the petition for preliminary injunction filed by the mortgagee, First Bank and Trust (“First Bank”). For the reasons assigned, the judgment of the trial court is affirmed and this matter is remanded to the trial court for further proceedingsconsistent with this Court's opinion.

FACTUAL AND PROCEDURAL BACKGROUND

In January and February of 2002, Mid–South was hired to do plumbing repair work at the Magnolia Garden Apartments located at 6001 Dowman Road in New Orleans. After the work was completed, Mid–South sent invoices to the apartment's management company totaling $35,177.50. Because it was only paid $10,000.00 of the amount owed, on June 12, 2002, Mid–South filed a Statement of Claim and/or Privilege (“Lien”) for the balance in the Office of the Recorder of Mortgages and Notarial Archives for the Parish of Orleans. The Lien identified the property as the Magnolia Garden Apartments, but did not name the owner of the property.

On January 29, 2003, Mid–South filed a lawsuit in Orleans Parish to recover the outstanding balance of $25,907.50, along with interest and attorney fees. Mid–South also sought recognition and maintenance of a privilege against the property based upon the Lien. The sole defendant named in the petition was The Development Consortium–Shelly Arms, LLC (“Shelly”), a prior owner of the property with no interest in it at the time that the work was performed by Mid–South. In connection with the petition, Mid–South also filed a Notice of Lis Pendens in the Orleans Parish mortgage records which also misidentified the owner of the property as Shelly. On March 13, 2003, Mid–South filed an amended petition substituting the correct owner, Cobalt, LLC (“Colby”), as the proper defendant in the place of Shelly. Mid–South failed, however, to amend the Lien and the Notice of Lis Pendens to name Cobalt as the owner of the property in the mortgage records and notarial archives.

Thereafter, in September of 2004, the owner, Cobalt, obtained a mortgage of the property through First Bank to secure a loan of $2,500,000.00. Due to Mid–South's filing error, at the time that the mortgage was executed and recorded, the public records did not reflect the existence of a claim by Mid–South against any property owned by Cobalt. As a result, the title attorney handling the loan was unable to locate the Lien or the Notice of Lis Pendens and consequently entered into a contract that did not take into consideration either document.

In 2009, nearly five years after First Bank granted a mortgage on the property, Mid–South filed a Motion for Summary Judgment against Cobalt. In doing so, Mid–South erroneously represented to the trial court that its Lien included “the identity of the person for whom the contract was performed.” The trial court granted Mid–South's motion on September 11, 2009. ¹ The judgment awarded Mid–South the monetary damages it requested; “recognized and maintained” the Lien filed by Mid–South as valid; and directed the Sheriff to “execute such Lien against the immovable property identified in and made subject of the Lien and sell such immovable property at a judicial sale in full satisfaction” of the judgment.

Thereafter, a writ of fieri facias issued. The property was seized by the Sheriff and scheduled for public auction on August 16, 2012. First Bank received a Mennonite notice ² and in response, filed a Petition for Temporary Restraining Order, Preliminary Injunction, and Permanent Injunction against Mid–South arguing that the Lien was unenforceable as facially invalid due to Mid–South's failure to identify Cobalt as the owner of the Property in the public records as mandated by law. Mid–South, in turn, filed exceptions of no right of action, no cause of action, and a reconventional demand seeking damages for costs incurred in attempting to execute the writ of fieri facias.³ The trial court ultimately overruled the exceptions and granted the preliminary injunction on September 20, 2012. It is from this judgment that Mid–South now appeals.

DISCUSSIONExceptions of No Right of Action and No Cause of Action

By its first assignment of error, Mid–South argues that First Bank could not establish a right or cause of action because Louisiana Code of Civil Procedure Articles 1092, 2298, and 2643 expressly require a party to have an alleged ownership interest in property in order to have standing to enjoin a foreclosure sale. It argues that the Bank should have instead intervened to assert its alleged right to share in the proceeds from the sale.

Peremptory exceptions of no right of action are reviewed de novo because they involve questions of law. Turner v. Law Firm of Wolff & Wolff, 07–1589, p. 2 (La.App. 4 Cir. 6/4/08), 986 So.2d 889, 891. When reviewing the lower court's ruling on an exception of no right of action, we must focus on whether the particular plaintiff has a right to bring the suit and is a member of the class of persons that has a legal interest in the subject matter of the litigation, and in doing so, we assume that the petition states a cause of action for that plaintiff. Lions Gate Films, Inc. v. Jonesfilm, 12–1452, p. 4 (La.App. 4 Cir. 3/27/13) 113 So.3d 366, 369;Hood v. Cotter, 08–0215, p. 17 (La.12/2/08), 5 So.3d 819, 829.

Peremptory exceptions of no cause of action are also subject to de novo review; not only do they involve questions of law, but the trial court's decision is based solely on the sufficiency of the petition. Fink v. Bryant, 01–0987, p. 4 (La.11/28/01), 801 So.2d 346, 349. The function of the exception of no cause of action is to question whether the law extends a remedy to anyone under the factual allegations of the petition. Fink, 01–0987, p. 3, 801 So.2d at 348. Therefore no evidence may be introduced in support of the exception and the well-pleaded facts in the petition must be accepted as true. Fink, 01–0987, p. 4, 801 So.2d at 349. “Simply stated, a petition should not be dismissed for failure to state a cause of action unless it appears beyond doubt that the plaintiff can prove no set of facts in support of any claim which would entitle him to relief.” Id.

Mid–South claims that a plain language reading of Articles 1092, 2298, and 2643 supports the conclusion that third persons claiming a mortgage interest in seized property may only intervene to share in the distribution of sale proceeds and to contest ranking. According to Mid–South, the seizure and sale were valid because the trial court's September 11, 2009 judgment recognized and maintained the Lien as valid and this judgment was neither appealed nor declared to be null. Mid–South claims that as a result, First Bank had no standing to challenge the sale. We disagree. There is nothing in the Code of Civil Procedure that expressly prevents a mortgage-holder from seeking injunctive relief to stop the sale of unlawfully seized property, regardless of whether there is a previously undisputed judgment recognizing the alleged validity of the underlying lien.

Article 1092 begins by providing that “[a] third party claiming ownership of, or a mortgage or privilege on, property seized may assert his claim by intervention.” (Emphasis added). The use of the word, “may” indicates that the assertion of third-party rights to seized property via intervention is permissive, rather than mandatory. La. R.S. 1:3 (“The word shall' is mandatory and the word may' is permissive”). The Article goes on to address the time frame within which third parties claiming specific rights to the property may intervene. According to Article 1092, if the third party is asserting an ownership interest in the property, the party may intervene at any time prior to the sale, “and the court may grant him injunctive relief to prevent such sale before an adjudication of his claim of ownership.” La. C.C.P. art. 1092. If, on the other hand, the third party is claiming a mortgage or privilege on the property, the party may intervene at any time prior to the distribution of proceeds from the sale “and the court shall order the sheriff to hold such proceeds subject to its further orders.” La. C.C.P. art. 1092.

Of significance, Article 1092 does not directly address the rights of third parties contesting the validity of the sale itself. Rather, the article provides that “[a]n intervener claiming the proceeds of a judicial sale does not thereby admit judicially the validity, nor is he estopped from asserting the invalidity, of the claim of the seizing creditor.” La. C.C.P. art. 1092. In addition, the Article does not prescribe a particular means by which one contesting the validity of a judicial sale must do so. As a result, we find that there is nothing in Article 1092 that prevents a third party claiming a mortgage or privilege on the property from contesting the validity of a sale prior to the sale, and such rights do not have to be asserted via intervention.

The second codal article that Mid–South relies on to contest First Bank's intervention is Article 2298, which relates to the injunction of Sheriff's sales. It provides that judgment debtors and third persons claiming ownership of property seized under a writ of fieri facias are entitled to injunctive relief prohibiting the sheriff from proceeding with the sale of property in four situations, including “[w]hen the sheriff is...