Chapter 31
Mortgages and
Foreclosures after the
Recession
Case 31.1
La.App. 5 Cir.,2010.
Bank of New York v. Parnell
32 So.3d 877, 09-439 (La.App. 5 Cir. 1/26/10)
Court of Appeal of Louisiana,
Fifth Circuit.
The BANK OF NEW YORK, acting solely in its capacity as trustee for EQCC Trust 2001-2
FN1. Appellant repeatedly refers to “the bank” as “the trust” arguing that it was the trust that filed the suit for executory
process rather than the bank. We refer to the appellee herein as “the bank” although we recognize its status as a trustee.
Presently before the Court is the judgment granting the bank’s motion for summary judgment and dismissing the claims. For the
following reasons, we reverse in part, affirm in part and we remand for further proceedings.
Procedural History
FN2. In its memorandum in support of the motion for summary judgment, the bank alleged that the loan has been paid in
full from insurance proceeds following Hurricane Katrina and that the mortgage has been canceled.
After conducting the hearing, the trial court granted the bank’s motion for summary judgment.
Summary Judgment Law
Summary judgments are reviewed
de novo
on appeal, with the reviewing court using the same criteria that govern the trial court’s
CHAPTER 30: MORTGAGES AND FORECLOSURES AFTER THE RECESSION 505
Loan Corp.,
08-246, p. 6 (La.App. 5 Cir. 11/25/08), 4 So.3d 93, 97,
untimely writ not considered,
09-0005 (La.3/6/09), 3 So.3d 473.
The parties attached correspondence to their respective motions and opposition. The pertinent letters indicate the following:
About two years after Ms. Parnell entered into the loan, on June 19, 2003, Mr. Breeden wrote a letter to Bank of New York on
behalf of Ms. Parnell providing a notice of rescission. He alleged that rescission was proper because the loan was governed by
HOEPA and EquiCredit failed to deliver all required material disclosures, including but not limited to two notices of HOEPA
on the loan was below 8%; namely, 6.7%. She also stated that Ms. Parnell was provided with accurate and compliant disclosures.
On October 8, 2003, Mr. Breeden wrote to Ms. Donnelly stating that he had not been provided with a copy of the HUD-1 statement
and asked that it be provided. On November 7, 2003, Ms. Donnelly provided Mr. Breeden with the HUD-1 statement.
On December 30, 2003, James B. Dodd, Bank of America’s Senior Vice President wrote to Mr. Breeden stating that the loan did
not meet the threshold requirement to trigger the disclosure requirements under HOEPA. He also said that Ms. Parnell had been
and no permission to rescind existed. She also said that Ms. Parnell was due for the September 1, 2003 payment.
In the petition, Ms. Parnell alleged several Truth in Lending Act violations. On appeal, she argues that the trial judge erred in
finding that she had no HOEPA claim for damages pursuant to 15 U.S.C. § 1640(a)(2) and that she had no basis under HOEPA to
rescind her loan transaction with the bank pursuant to 15 U.S.C. § 1635. She argues that the bank’s mortgage against her property
had become void by operation of 15 U.S.C. § 1635(b) as a result of the HOEPA violations of nondisclosure. Thus, the foreclosure
and not subject to executory process.
Ms. Parnell asserts on appeal that her loan is a Home Ownership and Equity Protection Act Amendments (HOEPA) loan under 15
U.S.C. § 1602(aa) and Regulation Z, 12 C.F.R § 226.32, giving her the right to rescind under § 1635 and enhanced actual
damages under § 1640(a)(4).
In
Lopez v. Delta Funding Corp.,
1998 WL 1537755, *5 (E.D.N.Y.1998) (footnotes omitted), the court held that to qualify as a
FN3. 15 U.S.C. § 1602(aa) pertinently provides:
(aa)(1) A mortgage referred to in this subsection means a consumer credit transaction that is secured by the
consumer’s principal dwelling, other than a residential mortgage transaction, a reverse mortgage transaction, or a
transaction under an open end credit plan, if-
….
threshold requirement”).
Lopez v. Delta Funding Corp.,
1998 WL 1537755, *7 (E.D.N.Y.1998) (footnotes omitted).
At issue here is the nature of the funds paid to the broker. Ms. Parnell contends, and the bank disputes, that her mortgage loan
falls within 15 U.S.C. § 1602(aa) because the total points and fees she paid exceeded 8% of the total loan amount.
Regulation Z, 12 C.F.R § 226.32(b)(1)(ii) pertinently defines “points and fees” as “[a]ll compensation paid to mortgage brokers.”
“A yield spread premium, or ‘YSP,’ is a lump sum paid by a lender to a broker at closing when the loan originated by the broker
times a day. When a lender agrees to purchase a loan from a broker, the broker receives the then applicable pricing for the loan
based on the difference between the rate reflected in the rate quote and the rate of the loan entered into by the borrower….
Lender payments to mortgage brokers may reduce the up-front costs to consumers. This allows consumers to obtain loans
without paying direct fees themselves. Where a broker is not compensated by the consumer through a direct fee, or is partially
compensated through a direct fee, the interest rate of the loan is increased to compensate the broker or the fee is added to
CHAPTER 30: MORTGAGES AND FORECLOSURES AFTER THE RECESSION 507
fees or through the interest rate.
1999 Statement of Policy, 64 Fed.Reg. at 10081 (footnotes omitted).
Ms. Parnell relies on Regulation Z, 12 C.F.R § 226.32(b)(1)(ii), which defines “points and fees” as “[a]ll compensation paid to
mortgage brokers.” Ms. Parnell argues that this means all compensation paid to the mortgage broker are “points and fees.” Thus,
despite the fact that the HUD-1 form recites that the lender paid the “yield to spread premium,” that amount constituted “points and
fees” and thus should have been included in the total calculation of “points and fees.” Accordingly, Ms. Parnell contends that the
inclusion of all “points and fees” would make the loan a HOEPA loan.
We agree that under Regulation Z, the “yield to spread premium” is included in the definition of “points and fees.” We disagree that
this ends the inquiry. We must next determine whether the “yield to spread premium,” which falls within the ambit of “all
compensation paid to the broker” and are therefore defined as “points and fees” in Regulation Z, are “points and fees payable by
the consumer at or before closing” in order to trigger HOEPA. 15 U.S.C. § 1602(aa)(1)(B)(i). Whether the loan is a HOEPA loan is
determined by “the total points and fees payable by the consumer at or before closing.” It is not determined by the total
compensation paid to the broker.
other grounds,
868 N.E.2d 1179 (Ind.App.2007);
Macheda v. Household Finance Realty Corp. of New York,
631 F.Supp.2d 181
(N.D.N.Y.2008).
The bank argues that the “yield to spread premium” was not “financed” as were the other settlement charges and therefore this line
of cases is distinguishable. The bank states that “[a]t best the [“yield to spread premium”] was an indirect payment paid over the
course of the loan through interest payments that were not payable by Appellant at or before closing.” The bank further argues that
Board’s Official Staff Interpretation of 12 C.F.R. § 226.32(b)(1)(ii) that fees paid to a mortgage broker directly or indirectly are
included in the calculation of fees and points … Finally, while TILA is highly technical, it is a remedial statute. It was designed to
protect consumers like the plaintiff here, not more sophisticated lending and financial institutions, who are able to control the
structure of the loan transaction. Congress did not use the term “paid” in § 1602(aa), instead, it used the term “payable” which
looks to the fact that the consumer bears the cost of those fees at the time of closing, not whether those fees were financed, paid
defendant was liable under HOEPA. Although interpreting different provisions, we concluded that HOEPA and Regulation Z must
be interpreted in favor of the borrower.
An interpretation in favor of the borrower is consistent with HOEPA’s goals as explained in
Williams v. Gelt Financial Corp.,
237
B.R. 590, 594 (E.D.Pa. Aug 10, 1999) (internal quotations partially omitted; citations partially omitted):
TILA was enacted in 1968 to aid the unsophisticated consumer so that he would not be easily misled as to the total costs of
Id.
Accordingly, we find that the trial judge erred in granting summary judgment insofar as the HOEPA claim.
Louisiana Unfair Trade Practices and Consumer Protection Law (LUTPA)
The Louisiana Unfair Trade Practices and Consumer Protection Law (LUTPA) is codified in La. R.S. 51:1401,
et seq.
The law,
however, exempts certain entities. La. R.S. 51:1406(1). The bank filed a motion for summary judgment asserting that as a matter
of law Ms. Parnell has no claim under LUTPA because financial institutions like the bank are exempt from LUTPA.
FN4. We note, however, that 2000 La.Acts, 1st Ex.Sess. No. 34, § 4 pertinently provided that the provisions were
intended to clarify existing law and therefore were corrective and remedial and applied to all existing transactions.
Accordingly, the clarifying statute may be regarded as interpretive and given retrospective effect because it does not
change, but merely clarifies, pre-existing law.
State Farm Mut. Auto. Ins. Co. v. Noyes,
02-1876 (La.App. 1 Cir. 2/23/04),
872 So.2d 1133.
FN5. In 2006, after the executory process proceeding was filed, the Legislature again amended R.S. 51:1406(1) by 2006
La.Acts, No. 171 § 1, effective August 15, 2006 to read in pertinent part as follows:
The provisions of this Chapter shall not apply to:
Any federally insured financial institution, its subsidiaries, and affiliates or any licensee of the Office of Financial
FN6. La. R.S. 6:101 provides for the establishment of the Office of Financial Institutions as a state agency.
2000 La.Acts, 1st Ex.Sess. No. 34, § 3, effective April 14, 2000 (footnote added).
Business activities of national banks are controlled by the National Bank Act, 12 U.S.C. § 1
et seq.,
and regulations promulgated
thereunder by the Office of the Comptroller of the Currency.
Watters v. Wachovia Bank, N.A.,
550 U.S. 1, 6-7, 127 S.Ct. 1559,
FN7. The provision states in pertinent part:
(f) Unfair or deceptive acts or practices by banks, savings and loan institutions, or Federal credit unions; promulgation
of regulations by Board of Governors of Federal Reserve System, Federal Home Loan Bank Board, and National Credit
Union Administration Board; agency enforcement and compliance proceedings; violations; power of other Federal
agencies unaffected; reporting requirements
(1) In order to prevent unfair or deceptive acts or practices in or affecting commerce (including acts or practices with
are unfair or deceptive to consumers) by banks … each agency … shall establish a separate division of consumer
affairs which shall receive and take appropriate action upon complaints with respect to such acts or practices by banks
… subject to its jurisdiction. The Board of Governors of the Federal Reserve System … shall prescribe regulations to
carry out the purposes of this section, including regulations defining with specificity such unfair or deceptive acts or
In her petition, Ms. Parnell alleged that she was damaged as a result of the bank’s failure to provide her with an accounting as
required by RESPA, 12 U.S.C. § 2605.
The bank moved for summary judgment on the basis that although Ms. Parnell was notified of the proper address to send her
request for an accounting, she failed to do so. According to the bank, there is no evidence that Ms. Parnell sent any request for an
accounting to the proper party and to the proper address pursuant to RESPA.
public holidays, Saturdays, and Sundays) unless action is taken within that period; (2) that the servicer take specific investigatory
and/or corrective actions and provide the borrower with written notification of such actions within 60 days (excluding legal public
holidays, Saturdays, and Sundays); and, (3) that the servicer refrain from providing information regarding overdue payments to any
consumer reporting agency during the 60-day period. 12 U.S.C. § 2605.
A “qualified written request” shall be a written correspondence, other than notice on a payment coupon or other payment medium
3500.21(d)(3)(ii). Furthermore, 24 C.F.R. § 3500.21(e)(1) states: “By notice either included in the Notice of Transfer or separately
delivered by first-class mail, postage prepaid, a servicer may establish a separate and exclusive office and address for the receipt
and handling of qualified written requests.”
The bank argues that Fairbanks Capital Credit established a separate and exclusive office and address for the receipt and
2002.
Ms. Weinberger attested that the usual mailing procedure for notifying mortgagor of a change in servicers included generating a
notification letter, addressing a letter to the customer, applying proper postage to the letter, and delivering the addressed and
postage-paid letter to the U.S. Postal Service. She said that Fairbanks followed these procedures on March 15, 2002. According to
their records, on March 15, 2002, Fairbanks sent a letter to Ms. Parnell by Fairbanks’ usual mailing procedures stating that
3500.11 states: “The provisions of this part requiring or permitting mailing of documents shall be deemed to be satisfied by placing
the document in the mail (whether or not received by the addressee) addressed to the addresses stated in the loan application or
in other information submitted to or obtained by the lender at the time of loan application or submitted or obtained by the lender or
settlement agent, except that a revised address shall be used where the lender or settlement agent has been expressly informed in
writing of a change in address.” Thus, this notice provision does not require actual receipt on the part of the borrower.
The RESPA notice requirement of the change in servicing was met in this case. However, Ms. Parnell is seeking damages under
another RESPA provision: the servicer’s failure to respond to her “qualified written request.”
Mr. Breeden began corresponding with various entities on June 19, 2003 when he requested a rescission of the loan based on
various alleged Truth in Lending violations. His first letter was directed to the Bank of New York at Penn Plaza. In July 2003, he
received a reply from Fairbanks at the Deerwood Park Blvd. address in Jacksonville, Florida. Fairbanks assured him that it would
contact the appropriate persons and reply to his inquiry. Fairbanks stated that if he had any additional questions to contact Jeff
Myers, the consumer advocate. A few months later, on September 15, 2003, Fairbanks through Mr. Jeff Myers at the Deerwood
Park Blvd. address in Jacksonville, Florida wrote to Mr. Breeden informing him that Fairbanks had acquired the servicing of the
loan on April 1, 2002. But, EquiCredit requested to handle the issues concerning the notice of rescission. He advised Mr. Breeden
to contact Ms. Donnelly in the EquiCredit legal department at Southside Boulevard in Jacksonville, Florida regarding rescission and
“for further questions or concerns.”
On September 24, 2003, Bank of America through Margaret Donnelly, its paralegal, responded to Mr. Breeden’s request for
rescission. She stated that the Bank of New York had only recently forwarded his rescission request to her and that the file had
been recalled from Salt Lake City. She stated that she found no basis for permitting rescission.
Apparently, relying on Mr. Myers’s statement that he should direct further questions or concerns to Ms. Donnelly, Mr. Breeden, on
October 8, 2003 sent a letter to Ms. Donnelly and asked that the letter serve as a “qualified written request.”
On November 7, 2003 Ms. Donnelly responded that they were only the “Master Servicer” under an agreement with Bank of New
York and that his request for an accounting should be directed to the loan servicer, Fairbanks, at an address in Salt Lake City
Utah. She advised him that a notice of change in servicing was made by Fairbanks on or before April 1, 2002. Therefore,
apparently from this letter, Bank of America was the Master Servicer.
In his affidavit, Mr. Blackmer attested that EquiCredit is a wholly-owned subsidiary of Bank of America.
On December 16, 2003 Mr. Breeden wrote to Mr. Myers at Fairbanks Deerwood Park Blvd. address in Jacksonville, Florida
expressing his confusion. He wrote that Ms. Donnelly had advised Mr. Breeden to contact Bank of New York for the accounting
512 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
The bank argued below as it does here that it is entitled to summary judgment as a matter of law because Ms. Parnell has no claim
for damages or attorney’s fees as a result of the alleged wrongful seizure. And, Ms. Parnell has not suffered any damages because
the property was only seized and never sold.
The trial judge found that as a matter of law, Ms. Parnell was not entitled to damages for the alleged wrongful seizure and her sole
remedy was to seek an injunction. The trial judge based his ruling on the basis that La.C.C.P. art. 2751, the injunction article,
makes no provision for damages or attorney’s fees.
Two issues are presented here. First, as a matter of law, notwithstanding Article 2751, is Ms. Parnell otherwise entitled to damages
for alleged wrongful seizure? Second, is she entitled to damages if the property was seized but not sold? For the reasons that
follow, we find that Ms. Parnell is not barred as a matter of law from seeking damages under Article 2315 for the alleged wrongful
seizure although attorney’s fees are not allowed under Article 2315. We also find that damages are permissible in a situation where
the property is seized but not sold. Finally, we conclude that there are issues of material fact as to whether the bank acted
reasonably in accelerating the note.
Before 1989, La.C.C.P. art. 2751 contained a second paragraph that had been enacted in 1981:
In the event injunctive relief is granted to the defendant, if the court finds the seizure in the executory proceeding to be wrongful,
it may allow damages to the defendant. Attorney’s fees for the services rendered in connection with the injunction may be
included as an element of the damages.
The 1960 official revision comments state:
(f) The second paragraph to this Article, which was enacted in 1981, is intended to give the trial judge the discretion to award
damages and attorney’s fees where the seizure through executory process was wrongful. It is not intended to require that
damages and attorney’s fees be awarded in every case where an injunction is issued, for example, where an injunction is issued
because of a technical deficiency or a technical error.
In support of its motion for summary judgment, the bank relied on La.C.C.P. art. 2751, which in 1989 deleted the damages and
attorney’s fee portion of that article. Currently, Article 2751 provides:
The defendant in the executory proceeding may arrest the seizure and sale of the property by injunction when the debt secured
by the security interest, mortgage, or privilege is extinguished, or is legally unenforceable, or if the procedure required by law for
an executory proceeding has not been followed.
2315.
Before 1981, Article 2751 had no provision for damages or attorney’s fees. Despite the fact that Article 2751 had no such
provision, Louisiana jurisprudence recognized that an action for damages for wrongful seizure could be maintained. In 1976, the
Louisiana Supreme Court recognized that “[a] party aggrieved by [a] wrongful seizure is entitled to recover not only special
damages caused him thereby, but also general damages (if proven) by way of mortification, humiliation, mental worry, etc. caused
FN8.
See, Levine v. First National Bank of Commerce,
05-106, p. 3 (La.App. 5 Cir. 12/27/05), 917 So.2d 1235, 1238
(“This suit originated as an executory proceeding by the Bank to foreclose on property located in Gretna, Louisiana.”).
In
Escat v. National Bank of Commerce in New Orleans,
256 So.2d 786, 787-88 (La.App. 4 Cir.1972),
overruled on other grounds
by General Motors Acceptance Corp. v. Meyers,
385 So.2d 245 (La.1980) (
Escat I
), a case that predated the damage provision,
the Fourth Circuit held: “Our jurisprudence has long recognized and awarded damages for the illegal seizure of realty.” Thus, the
751 So.2d 855.
[5] As a general rule, Louisiana law does not provide for the recovery of attorney fees in the absence of a specific statutory
provision allowing such recovery or a contractual agreement by the parties to pay attorney fees.
Kinsinger v. Taco Tico, Inc.,
03–
622, p. 4 (La.App. 5 Cir. 11/12/03), 861 So.2d 669, 671–72. Prior to 1981, Article 2751 did not provide attorney fees for the
improper use of executory proceedings. Thereafter, until 1989, the attorney fees were allowed. In
General Motors Acceptance
the issue of quantum in the event the defendant was cast in judgment.
Accord: Escat v. National Bank of Commerce in New
Orleans,
284 So.2d 832 (La.App. 4 Cir.1973),
overruled on other grounds by General Motors Acceptance Corp. v. Meyers,
385
So.2d 245 (La.1980) (
Escat II
).
In
Phillips v. Great Southern Mortg. & Loan Corp.,
350 So.2d 1279 (La.App. 3 Cir.1977), the court upheld a damage award where
as a result of the seizure the plaintiffs were not deprived of the physical possession of their property. The seizure was only
2004. She attested that she examined the records of Fairbanks and Select regarding Ms. Parnell mortgage. She said that the
records were made at or near the time of the events described therein and from information transmitted by persons with knowledge
of the events described herein who were routinely acting for Fairbanks and Select in recording the information described herein.
She said that the records were kept in the course of regularly conducted business activities and it was Fairbanks’ and Select’s
regular practice to make and keep these records. She also attested that the records reflected that Ms. Parnell failed to submit any
which predated the date of the alleged September default, are not determinative. Rather, pertinent to our inquiry is whether Ms.
Parnell has raised a genuine issue of material fact regarding whether she was in default since September 2003, which was the
triggering date of default.
Ms. Parnell relies on two money orders attached to her affidavit with an accompanying letter from Fairbanks. The money orders
are dated December 5, 2003. Each is for the amount of $725. The money orders reference the date of September 7, 2003 and
this Security Instrument shall be given by delivering it or by mailing such notice by certified mail addressed to Borrower at the
Property Address or at any such other address as Borrower may designate by notice to Lender as provided herein, and (b) any
notice to Lender shall be given by certified mail to Lender’s address stated herein or to such other address as Lender may
designate by notice to Borrower as provided herein. Any notice provided for in this Security Instrument shall be deemed to be
given to Borrower or Lender when given in the manner designated herein.
FN9. Section 14 refers to legislation affecting the lender’s rights and Section 17 refers to the transfer of the property or a
beneficial interest in the borrower.
….
The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure
proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure. If the default is not
notice, plaintiff could declare all of the sums by the mortgage to be immediately due and payable without further demand that the
property could be seized and sold to satisfy the indebtedness due.
In her petition, Ms. Parnell alleged that the bank was not due an order of seizure and sale since it had no right to accelerate the
loan. She alleged that in the petition for executory process, the bank alleged that it sent Ms. Parnell the 30-day notice letter as
required by the mortgage for acceleration by it gave no specific details. She states that she never received any letter. Therefore,
The attached October 21, 2003 letter does not contain any indication that it was sent by certified mail and there is no return receipt
attached to the letter indicating that Ms. Parnell received it. In addition, Ms. Weinberger did not state that she personally sent this
particular letter by certified mail to Ms. Parnell. Therefore, the fact that Ms. Parnell has attested that she did not receive the notice,
which was required under the mortgage to be sent by certified mail, creates an issue of material fact as to whether the bank
complied with the mortgage requirements for acceleration.
Thus, unlike
Daigle,
the required affirmative act is relevant because without that affirmative act, the bank had no right to accelerate
the note.
[7][8] The general rule regarding promissory notes is that a clause allowing the holder to accelerate maturity at the holder’s option
is not operative until the holder takes some affirmative action clearly and unequivocally evidencing the intention to the maker.
Rivers v. Rivers,
404 So.2d 1300, 1302 (La.App. 2 Cir.1981) (citations omitted). Under the contractual terms of the mortgage, the
trial court erred in granting summary judgment in favor of the Bank of New York acting solely in its capacity as Trustee for EQCC
Trust 2001-2, who was not entitled to summary judgment as a matter of law on the issue of Ms. Parnell’s claim for damages for
alleged wrongful seizure. Under La.C.C. art. 2315, damages for wrongful seizure are recoverable. Furthermore, damages are
recoverable although the property was seized but not sold, provided that Ms. Parnell sustains her burden of proving damages.
Additionally, damages for wrongful acceleration of the note are recoverable and issues of material fact remain as to whether the
Case 31.2
CHAPTER 30: MORTGAGES AND FORECLOSURES AFTER THE RECESSION 517
La.App. 4 Cir.,2010.
Mitchell v. Valteau
30 So.3d 1108, 2009-1095 (La.App. 4 Cir. 1/27/10)
FN1. The plaintiff is a veterinarian and a life-long resident of New Orleans.
FACTUAL AND PROCEDURAL BACKGROUND
On April 30, 2001, Dr. Mitchell borrowed $143,724 to purchase a house and the lot on which it was located, bearing the address
4528 Laurel Street, New Orleans, Louisiana (the “Property”). On that same date, Dr. Mitchell executed a note for the borrowed
amount, which was secured by a mortgage on the Property. The note was made payable to the original mortgagee, North
requested that the case be placed on hold and that service be withheld as the Property had hurricane damages.
Subsequently, WMB transferred the servicing of the mortgage note to Wells Fargo. On March 27, 2007, Dr. Mitchell and Wells
Fargo entered into a “Stipulated Partial Reinstatement/Repayment Agreement.” According to the repayment agreement, Dr.
Mitchell agreed to pay accelerated loan payments. The agreement provided that Wells Fargo would “hold legal action only upon
receipt of agreed funds and the signed agreement.” Addressing the pending executory proceeding, the agreement provided:
12/26/06 and recorded same. On 7/12/07, rec’d word to return writ to court
‘Unsatisfied.’
Petition to be amended and amended writ
to follow. 7/12/07 Writ
returned
Unsatisfied.”
On July 19, 2007, the trial court ordered that the original petition be amended and that an amended writ of seizure be issued. On
September 7, 2007, the sheriff issued an amended notice of seizure. During the following week (September 10 to 17, 2007), the
sheriff attempted to serve Dr. Mitchell at her residence on seven occasions. Because the sheriff was unable to serve Dr. Mitchell,
naming as defendants only WMB and Wells Fargo, effectively dismissing the other two defendants.
On June 17, 2008, Wells Fargo filed peremptory exceptions of no cause of action and res judicata. On October 17, 2008, the trial
court denied the exception of no cause of action, but granted in part the exception of res judicata as to any allegation seeking to
declare the sale pursuant to the executory proceeding null and void.
On November 12, 2008, WMB filed a Motion to Substitute its receiver, the Federal Deposit Insurance Company, in its place as the
FN2. Since Dr. Mitchell has not assigned as error the trial court’s denial of her motion for new trial, the issue of whether
WMB was properly dismissed is not before us on appeal. For this reason, the exception of no cause of action WMB filed
in this court is denied as moot. (In her brief, Dr. Mitchell expressly noted that she takes no position on WMB’s exception.)
DISCUSSION
Appellate courts review the grant of a summary judgment motion
de novo
using the same standard applied by the trial court in
FN3. An authentic act is one executed before a notary public in the presence of two witnesses. La. C.C.P. art. 2234. An
act evidencing a mortgage or privilege imports a confession of judgment when the obligor acknowledges the obligation
secured by the act and confesses judgment thereon, whether before or after maturity. La. C.C.P. art. 2632.
A creditor seeking to enforce a mortgage or privilege on property by executory process must file a petition praying for the seizure
and sale of the property affected by the mortgage or privilege. La. C.C.P. art. 2634. To prove his right to use executory process, a
plaintiff-creditor must submit with its petition authentic evidence of three things: (1) the mortgage or privilege on the property
sought to be seized and sold; (2) the amount of the indebtedness sought to be enforced; and (3) the plaintiff-creditor’s right to
enforce the mortgage or privilege under the executory process. La. C.C.P. Art. 2637, Cmt. (a). Once the order has issued and the
property has been seized, the defendant-debtor may contest the seizure only by taking a suspensive appeal or by instituting an
injunction proceeding to arrest the seizure and sale. La. C.C.P. art. 2642.FN4
FN4. As noted elsewhere, Dr. Mitchell filed an injunction seeking to arrest the seizure and sale of the Property, which was
dismissed. Based on that prior request for injunctive relief, the trial court in this case granted in part Wells Fargo’s
exception of res judicata. Although Dr. Mitchell assigns as error the trial court’s ruling on that exception, we find it
unnecessary to reach that issue since we find no substantive defects in the executory proceeding.
In this case, WMB filed a petition for executory process and attached thereto authentic evidence satisfying all three requirements
FN5. The court in
Mennonite Board of Missions v. Adams,
462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983),
recognized that “prior to an action which will affect an interest in life, liberty, or property protected by the Due Process
Clause of the Fourteenth Amendment, a State must provide ‘notice reasonably calculated, under all circumstances, to
apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.’ ” 462
U.S. at 795, 103 S.Ct. 2706.
Rejecting the debtor’s contention, the court in
Lassiter, supra,
reasoned that the debtor had defaulted under the terms of the
mortgage and that the creditor had validly exercised its right to have the property seized and sold in accord with the executory
520 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
process provisions, La. C.C.P. arts. 2631–2638. The court further reasoned that read together La. C.C.P. art. 2293(B)-which
requires service of “a written notice of seizure of the property”–and La. R.S. 13:3852–which requires the notice include “the date of
the first scheduled sale of the property”–mandate that “upon seizure of their property, a defendant receive a written notice that
informs them of the first scheduled sale date.”
Lassiter,
04-484 at p. 4, 889 So.2d 1157. The court still further reasoned that there
was no Louisiana authority for requiring a creditor to provide a debtor with notice of a rescheduled judicial sale. Summarizing, the
court in
Lassiter
held that when a sheriff’s sale is delayed, the creditor is not required to serve the debtor with another notice of
seizure. The court concluded that the Louisiana provisions for notice to a debtor in the event of seizure, which comport with the
Mennonite
due process requirements, mandate only notice of the original sale date. Under these provisions, the onus is placed on
the debtor to monitor the executory proceeding for the rescheduled sales date.
[3] Dr. Mitchell contends that
Lassiter
is distinguishable because it involved the same creditor seeking to reschedule the sale of the
property under the same executory proceeding. In contrast, she contends that the Supplemental and Amending Petition filed in the
executory proceeding involved a new creditor-Wells Fargo-and resulted in the issuance of a new writ of seizure. She contends that
“[s]ervice of notice of the new writ was mandatory under Article 2721, and could not be waived by service of notice of a prior writ by
a former creditor [WMB] who no longer had the right to bring executory proceedings against Dr. Mitchell.” We disagree.
The situation in this case is analogous to the situation presented in the
Lassiter
case. Dr. Mitchell defaulted on her loan agreement
and WMB established its right to proceed by executory process to seize and sell the Property. Dr. Mitchell was served with a notice
of seizure. Thereafter, she entered into the repayment agreement. The repayment agreement is analogous to the bankruptcy filing
in
Lassiter.
Both postponed a scheduled sale date. The repayment agreement expressly provided that the executory proceeding
would be placed on hold for the time the repayment agreement was in place. The agreement also provided for the resumption of
the foreclosure in the event of a default in its terms, which Dr. Mitchell acknowledged occurred. When the executory proceeding
was resumed, there was no obligation to serve Dr. Mitchell with another notice of seizure.
CHAPTER 30: MORTGAGES AND FORECLOSURES AFTER THE RECESSION 521
no discovery had taken place at the time summary judgment was granted. In support, she cites La. C.C.P. art. 966 C(1), which
provides that summary judgment should only be considered “[a]fter adequate discovery.” Wells Fargo counters that discovery is
not a prerequisite to granting summary judgment. Wells Fargo emphasizes Dr. Mitchell’s failure to conduct any discovery despite
the passage of more than nine months between the filing of the suit and the summary judgment hearing. Wells Fargo contends
that discovery is irrelevant to establish compliance with the law regarding executory process and that a delay for conducting
discovery in this case therefore is unwarranted.
The jurisprudence holds that “while parties must be given fair opportunity to carry out discovery and present their claim, there is no
absolute right to delay action on motion for summary judgment until discovery is complete.”
Thomas v.
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