Quality Finance Co. of Donaldsonville, Inc. v. Bourque

• Decision Date: 23 June 1975
• Docket Number: No. 55758,55758
• Parties: QUALITY FINANCE CO. OF DONALDSONVILLE, INC. v. Kermit 'Hart' BOURQUE, Clerk and Recorder, et al.
• Court: Louisiana Supreme Court

Page 656

315 So.2d 656

QUALITY FINANCE CO. OF DONALDSONVILLE, INC. v. Kermit 'Hart' BOURQUE, Clerk and Recorder, et al.

No. 55758.

Supreme Court of Louisiana.

June 23, 1975.

Rehearing Denied July 25, 1975.

Robert R. Rainer, W. Frank Gladney, Baton Rouge, for defendant-applicant.

Raymond B. Gautreau, Donaldsonville, for plaintiffs-respondents.

SUMMERS, Justice.

The narrow issue before the Court is whether Quality Finance Company (transferee of mortgaged property under an act of giving in payment (dation enpaiement) from its mortgage debtors Marvin and Patricia Gros) is entitled to an order mandating the Clerk of Court to cancel a judicial mortgage and lien inferior in rank to the mortgage formerly held by Quality Finance which it cancelled.

The trial judge ordered cancellation, and the First Circuit affirmed. Certiorari was granted on the application of Lane Wood & Company, the holder of an inferior judicial mortgage; the State of Louisiana, through the Department of Employment Security, a lien holder of inferior rank; and Kermit 'Hart' Bourque, the Clerk and Recorder of Ascension Parish. 307 So.2d 625.

By stipulation and the pleadings these facts are established: Marvin and Patricia Gros were insolvent on April 3, 1973. Installment payments due on mortgages affecting their property were delinquent. Five encumbrances were registered in the mortgage records of Ascension Parish bearing upon real estate owned by them in the Crescent Place Subdivision of Ascension Parish. The conventional mortgages also affected certain compressors used by Marvin Gros in his business. In the order of their registry, on April 3, 1973 these obligations consisted of 1) a mortgage in favor of Ascension Savings and Loan Association with a principal balance of $20,378.72, with interest amounting to $450; 2) a mortgage in favor of Quality Finance Company of Donaldsonville, Inc., with a balance of $8,945.55; 3) a judgment in favor of Mrs. Exal D. Gros in the sum of $48,000 with a balance due of $6,000; 4) a lien filed by the Louisiana Department of Employment Security in the amount of $250.02; and 5) a judgment in favor of Lane Wood and Company in the sum of $6,766.65.

At this time, Quality Finance had instituted proceeding to obtain executory process and the sale of the property for the satisfaction of the obligation under its mortgage in the sum of $8,945.55. In order to avoid bankruptcy, to alleviate the costs incident to the foreclosure, and to salvage the compressors described in the mortgage, Marvin and Patricia Gros executed an act of giving in payment transferring the mortgaged real estate to Quality Finance. In consideration of this transfer Quality Finance agreed to cancel its mortgage and assume the payment of the balance due under the mortgage held by Assension Savings and Loan. The total amount of the indebtedness owed to these two mortgagees was then $29,773.83. This transaction was undertaken by Quality Finance in contemplation of selling the property thus acquired to Jack Hood for $29,000 in accordance with an agreement entered into by them. It was the proceeds of this contemplated sale which Quality Finance planned to apply to the satisfaction of the debts of Marvin and Patricia Gros to Ascension Savings and Loan Association and to its own second mortgage.

After execution of the act of giving in payment, title passed from Marvin and Patricia Gros to Quality Finance and, in compliance with its agreement, Quality Finance caused the inscription of its mortgage to be cancelled from the mortgage records, planning to apply the proceeds of the sale to Hood to the satisfaction and cancellation of the Ascension Savings and Loan mortgage. In preparation for the transfer to him, Jack Hood had his attorney to search the public records and learned of the encumbrances in favor of Mrs. Gros, the Department of Employment Security and Lane Woods & Company. On this finding, Hood's attorney refused to approve title unless the inscription of these three encumbrances were cancelled insofar as the real estate which Hood proposed to purchase. When Quality Finance demanded cancellation, the Clerk of Court refused and a petition for mandamus to compel the cancellation was filed by Quality Finance.

At the trial, by stipulation, Mrs. Exal D. Gros agreed to release the real estate from the effects of the judgment in her favor in consideration of the transfer of the compressors to her. Her judgment, therefore, is no longer involved in this litigation.

An act of giving in payment, except for differences noted in Articles 2655 through 2659 of the Civil Code, has the effect of transferring title the same as the ordinary contract of sale. Jones v. First National Bank, Ruston, La., 215 La. 862, 41 So.2d 811 (1949). The transfer by the debtors Gros to Quality Finance, therefore, effectively divested them of title to the real estate. The conventional transfer, however, did not relieve the property of the mortgage recorded in favor of the Ascension Building and Loan,...