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23

VIEWS: 9 PAGES: 3

									                                LOUISIANA SECURITY DEVICE SURVEY                           Fr 6 Mar
                                         Professor Trahan


                                          Course Outline 23


      ...
II    Corpus
      A Real security
          1 Volitional real security
             a Concept
             b Classifications
                 1) Volitional real movable security (“Article 9 security interests”)
...
                   2)   Volitional real immovable security (“mortgages”)
                        a) In general
                        b) Definition, content & scope
                        c) Classifications
                             1] Conventional mortgages
                                 a] Creation
                                      1} As between the parties
...
                                     2}  As against third parties
                                         1/ Establishing effectivity: recordation
                                              a/ The concept
                                              b/ What to record
                                              c/ In what records to record
                                              d/ The effective moment of “recordation”: “filing”
                                              e/ The consequences of mis-filing (what happens if
                                                   the mortgage, though filed, is erroneously
                                                   indexed)
                                         2/ Maintaining effectivity: re-inscription
                                              a/ Duration of effectivity following original
                                                   inscription (recordation)
                                                   1o General rule: ten years from date of
                                                        mortgage
                                                   2o Exception: six years from the date on which
                                                        the secured obligation matures
                                              b/ Extension of effectivity
                                                   1o Method of obtaining extension: re-
                                                        inscription
                                                   2o Duration of extension
                                              c/ Cancellation (recognition of lapse of effectivity)
                                                   1o Concept
                                                   2o Causes
                                                        ao At the request of mortgagee
                                                        bo At the request of the mortgagor
                                b]   Transfer of conventional mortgages
...




                                             Page 1 of 3
Assignments:

I. For Mo 9 Mar:

    (1) Precis, § 10 [pp. 75-83]

    (2) On the "re-inscription" of mortgages, read:
         (a) CC arts. 3357-3365
         (b) Precis, § 11 [pp. 83-88]

    (3) On the "cancellation" of mortgages, read CC arts. 3366-3368

    (4) Work the following “mortgage recordation & re-inscription” problem:
              1. On the same day she received a $100,000 loan from Big Bank, Darla Dittmer signed an
         effective act of mortgage before a notary and two witnesses granting a mortgage in her
         residence to Bank. Wanda Wallace, a wealthy friend of Dittmer’s, was one of the two witnesses
         who signed Dittmer’s mortgage.
              About a year later, Dittmer approached Wallace for help. Dittmer needed more money,
         and Bank was unwilling to lend any more. Dittmer offered to give Wallace a mortgage in the
         same property she had mortgaged to Bank. Wallace was hesitant about this, but she ultimately
         relented and gave Dittmer a $100,000 loan. That same day, Dittmer signed an effective act of
         mortgage granting Wallace a mortgage in the same property she had mortgaged to Bank.
         When Wallace’s attorney searched the grantor-grantee index of the mortgage records, she
         found no listing of any mortgage by Dittmer having been recorded in favor of Bank. Wallace’s
         lawyer proceeded to file Wallace’s act of mortgage for recordation.
              Six months later, Dittmer has defaulted on both the loan from Bank and the loan from
         Wallace. The value of Dittmer’s property securing both mortgages is sufficient to cover only one
         of them—either Bank or Wallace will take all of the proceeds of a foreclosure sale.
              A. If Bank’s mortgage was actually absent from the records (i.e., it was never filed), is
         Bank’s mortgage effective against Wallace, given that she knew full well that Bank’s mortgage
         existed (indeed, she signed it as a witness)?
              B. Would it make a difference if Bank had filed its mortgage the day after Wallace’s
         attorney filed her mortgage?
              C. Would it make a difference if Bank’s mortgage had been filed before Wallace’s, but
         Wallace’s attorney did not find Bank’s mortgage only because the clerk of court indexed it
         improperly (or failed to index it at all) in the grantor-grantee index?
              D. Would it make a difference if Bank had filed its mortgage before Wallace, but the clerk
         of court failed to record Bank’s mortgage altogether?
              E. What result if Bank failed to file its mortgage, but Wallace filed her mortgage in the
         CONVEYANCE records (accepted at the same clerk’s window as mortgage records, and kept
         by the same parish clerk of court)?

II. For Tu 10 Mar:

    (1) Work the following “mortgage recordation & re-inscription” problem:
              2. Drain Rite Plumbing, Inc. (“Drain Rite”), borrowed $250,000 from First Bank of Iberia
         (“FBI”) to build its new plumbing supply manufacturing facility in Alexandria, LA. Drain Rite’s
         indebtedness to FBI is evidenced by a promissory note dated February 28, 1991, in the
         principal amount of $250,000 payable to the order of FBI in 240 consecutive monthly
         installments payable on the first of each month, commencing April 1, 1991, and ending March 1,
         2011. When she signed the promissory note, Drain Rite’s duly authorized president also signed
         an act of mortgage, which properly described the immovable property owned by Drain Rite on
         which the facility was to be built. The mortgage stated that the secured indebtedness was “any
         and all indebtedness of Drain Rite, or its successors or assigns, under that certain $250,000


                                               Page 2 of 3
    promissory note by Drain Rite, as maker, payable to the order of First Bank of Iberia, dated
    February 28, 1991, including any and all interest due on said note.” FBI had Drain Rite’s
    mortgage recorded in the Rapides Parish mortgage records.
           Five years later, Drain Rite needed operating capital for its plumbing supply manufacturing
    facility, so it borrowed another $120,000 from Bank One and signed a promissory note and act
    of mortgage, both dated June 5, 1996. The note was payable in 120 monthly
    installments,beginning July 1, 1996, and ending June 1, 2006. The note was secured by a
    mortgage on Drain Rite’s manufacturing facility. The mortgage was proper and effective in all
    respects, and it described the secured indebtedness as “any and all indebtedness of Drain Rite,
    or its successors or assigns, including any and all interest charges, fees, and penalties, under
    that certain $120,000 promissory note by Drain Rite, as maker, payable to the order of Bank
    One, in 120 monthly installments, commencing July 1, 1996, and ending June 1, 2006.” Bank
    One had Drain Rite’s mortgage recorded in the East Baton Rouge Parish mortgage records.
           Seven years later, Drain Rite encountered financial difficulties and missed several
    payments on its notes to FBI and Bank One. On July 15, 2003, both FBI and Bank One
    properly accelerated the entire remaining amount due on their notes, and they declared Drain
    Rite in default. Shortly thereafter, FBI initiated executory proceedings against Drain Rite’s
    immovable property subject to its mortgage, and Bank One soon intervened as an interested
    party entitled to share in the proceeds of any foreclosure. After Drain Rite’s president received
    the Notice of Seizure and Sale of the manufacturing facility, she raced to your office with some
    questions:
           A. Is FBI’s mortgage valid against third parties?
           B. Would your answer be different if FBI’s mortgage had been created on February 28,
    1993?
           C. Assume FBI’s mortgage were created on February 28, 1993, and it is no longer
    effective against third parties. Can Drain Rite request that the parish clerk of court cancel the
    mortgage? If so, what must Drain Rite do, and will “cancellation” of the mortgage on the
    mortgage records affect the effectiveness of the mortgage against Drain Rite?
           D. Is Bank One’s mortgage valid against third parties?
           E. Is Bank One’s mortgage enforceable against Drain Rite?
           F. Assume that Bank One’s mortgage is valid against third parties. When will its
    effectiveness against third parties cease?
           G. Would your answer to Part “F” change if Bank One had properly filed its mortgage not
    on June 5, 1996, but two years later, on June 5, 1998?
           H. Exactly what, if anything, can Bank One do to avoid having the effectiveness of its
    mortgage against third parties cease after the date you identified in Part “F”?
           I. If Bank One takes the action you described in Part “H,” will the effectiveness of its
    mortgage against third parties lapse at some point in the future? If so, exactly when, and what,
    if anything, can Bank One do to avoid this second potential lapse?

(2) Read (re the “transfer” of mortgages):
    (a) CC art 2645, 3311-3318, 3356
    (b) Precis, § 12 [pp. 88-90]




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