Jerry Hiers VS Julian Dufreche

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NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NO 2012 CA 1132 JERRY HIERS VERSUS NLIAN DUFRECHE 7udgment Rendered MAY 3 1 2 13 On Appeal from the 21st Judicial District Court In and for the Parish of Tangipahoa State of Louisiana Trial Court No 2011 3145 Honorable Zorraine M Waguespack Judge Presiding Albert 7 Campani II Thomas Richards Attomeys for Plaintiff Appellee Jerry Hiers Mark Higdon Christina Huguet Bryan S McManus Covington LA Charles L Stern Jr Danielle C Babashoff Attorneys for Intervenor Appellant Regions Bank Margaret V Glass New Orleans LA Mey J e SfL l C o C 1S r a P Steven W Copley Donna Phillips Currault Phillip J Antis Jr New Orleans LA Mark C Landry Metairie LA BEFORE WHIPPLE C McCLENDON AND HIGGINBOTHAM JJ J 2 HIGGINBOTHAM J Appellant Intervenor Regions Bank Regions appeals tl trial court e judgment that overruled its exception raising the objection of no cause of action and granted plaintiff swrit of mandamus k the following reasons we affirm or FACTS AND PROCEDi HISTORY RAL On September 21 2011 plaintiff Jerry Hiers filed afor Writ of Petition Mandamus as a summary proceeding against Julian Dufreche in his capacity as clerk of court and ex recorder of mortgages for Tangipahoa Parish officio Hiers requested Dufreche show cause why a writ of mandamus should not issue ordering him to erase the Cancellation recorded at Instrument No 763369 and further to restare the Poole Note Mortgage Instrument No 624119 to its position and status as of August 9 2007 before said cancellation was recorded The matter initially came before th court on January 17 2012 and his request e was orally granted Subsequently on 7anuary 23 2012 Regions filed a motion for leave to intervene and for new trial In its motion for intervention Regions stated that i holds a promissory note secur by a mortgage on the property t d involved in this matter granted to it by 47204 LLC According to the record in 2004 by an act of assignment Hiers obtained ownership of a promissory note executed by Aipha Storage and Development LLC in favor of Genita Poole and Wallace Poole in the amount 400 00 000 the Poole Note The Poole Note was secured by a mortgage affecting two tracts of land in Tangipahoa Parish Tract 1 and Tract 2 Later Hiers formed 47204 LLC of which he was the sole member and the company acquired ownership of Tract 1 and Tract 2 In March 2005 Florida Parishes Bank FPB loaned money to 47204 LLC To secure the debt FPB was granted a mortgage on Tract 1 and Tract 2 3 As part of that transaction Hiers his wife Elizabeth and 47204 LLC signed an Act of Assignment and Notarial Endorsement of Promissory Notes and Collateral Mortgage Poole Notz Assignment which states Jerry Hiers Elizabeth Hiers and 47204 LLC do hereby sell assign transfer negotiate and unto endorse PB F y ar rigkats titl amd interest ir the Poole Note Subsequently Hiers transfexred all his interesC in 47204 LLC to Chad Bordelon In June 2007 after 47204 LLC had been transfened to Bordelon Regions extended a 00 OOO SOO loan to 47204 LLC secured by a mortgage on Tract 1 1 and Tract 2 As part of that transaction the FPB loan was paid off and FPB at the request of Regions requested that the clerk of court cancel all existing encumbrances on the property According to the public records this included cancellation of the Poole Note secured by a znortgage on Tract 1 and Tract 2 on September 24 200 7 In his petition for writ of mandamus Hiers asserts that he pledged the I Poole Note to FPB as additional collateral for the loan FPB extended to 47204 LLC Hiers states that the Poole Note has not been satisfied and FPB did not have the right or authority to cancel the mortgage securing the Poole Note Therefore the Poole Note and martgage should be reinstated and restored to the position it held before it was erroneously car celled Regions argues that the public records doctrine should apply and the mortgage should not be reinstated Regions contends that the Poole Note Assignment filed in the pu records and signed by Hiers and FPB was by its lic plain language clearly a sale of the Poole Note and not a pledge Therefore FPB on the face of the public records was the owner of the Poole Note and was the proper party to request the cancellation of the mortgage secured by the Poole Note Regions motion for new trial states that it relied on the public records s 4 and on cancellation of the Poole mortgage executed by FPB to determine it had a first mortgage on Tract 1 and Tract 2 therefore the Poole mortgage should not be reinstated to the prejudice of Regions Regions also filed a peremptory exception raising the objection of no cause of action arguing that Hiers had no cause of action for mandamus The matter came before the trial court on April 19 2012 At the hearing both parties to the Poole Note Assignment testified that the assignment was actually a pledge Hiers testified that his intent in signing the assignment of the Poole Note to FPB was that it was being used as collateraL He claimed that he had no intention of selling the Poole Note and received no compensation for it from FPB Wayne Allen Executive Vice President of FPB testified that his intention in signing the assignment ofthe Poole Note was to assure that FPB had a first mortgage on the property He stated his understanding of an assignment was taking something that eventually you would return If you taking re a sale would be something that we were buying and we were paying for He said FPB did not pay anything for the assignment and took it merely as additional collateral Allen further testified that he intended only to cancel the assignment of the mortgage and not to cancel the mortgage According to the testimony of both Allen and Hiers there was no secret understanding or agreement between them that the document purporting to be a sale of the Poole Note was actually a pledge Both parties to the Poole Note Assignment thought that what they were signing was only a pledge of the Poole Note to FPB as collateral and not a sale of the Poole note to FPB Ted Dittmer an attorney who was involved in the refinancing process between Regions and 47204 LLC testified that he relied on the documents in The Poole Note Assignment identifies Jerry A Hiers and Elizabeth P Hiers as ASSIGNORS and Wayne Allen on behalf of FPB as the ASSIGNEE 5 the public records to determine that the Poole Note had been assigned to FPB and therefore FPB was proper in cancelling the mortgage At the conclusion of the hearing and in a written judgment signed on I April 30 2012 the trial court granted Regions motion for s new trial overruled s Regions peremptory exception of no cause of action and granted Hiers writ s of mandamus The trial court determined that the mortgage was erroneously cancelled and ordered the clerk of court for the Parish of Tangipahoa o T restore the mortgage recorded on December 9 2002 at Mortgage Book 1085 Page 789 originally granted by Alpha Storage and Development L to Genita Schorling Poole wife C and of Wallace Poole Jr now in favar of Jerry Hiers to its original place and rank in the land records of the Parish of Tangipahoa and to erase the cancellation of said mortgage which cancellation was erroneous Regions appealed citing the following assignments of error 1 the trial court erred when in contravention of the public records doctrine and La Civ Code art 3342 it considered testimonial evidence of intent and allowed unrecarded claims of ownership at odds with the public records to affect the rights of third parties who relied on those public records and 2 the trial court erred when it granted mandamus and reinstated the mortgage based on mistaken cancellation because under La Civ Code art 3356 the record B owner cancelled the mortgage In response Hiers contends that the trial court determination that the s mortgage was erroneously cancelled was correct because the exception to the public records doctrine applies in this case LAW AND DISCUSSION Mandamus Initially Regions argued that the trial court erred in ordering the re inscription of the mortgage at issue in a judgment arising out of a mandamus 6 proceeding because it was not a ministerial duty as required by La Code Civ P art 3863 We need not reach the issue of whether or not mandamus is appropriate in this case Mandamus is a summary proceeding La Code Civ P art 2592 The proper method of opposing the use of a mandamus proceeding is to raise a dilatory exception urging the objection of unauthorized use of a summary proceeding La Code Civ P art 926 The dilatory exception 3 A must be raised prior to answer or judgment by default and failure to do so means the exception is waived La Code Civ P art 928 Martin v Bonanno 421 So 359 362 La App lst Cir 1982 Regions filed an exception of no 2d cause of action three months after filing its intervention and answer contending that Hiers failed to state a cause of action for mandamus The substance of the exception of no cause of action was clearly an objection to the use of summary proceeding by Hiers We are obligated to construe the exception by its substance not the title supplied by the litigant La Code Civ P art 865 Because Regions exception which in substance was an objection to Hiers use s of summary proceeding was not filed prior to its answer any objection Regions had to Hiers use of summary proceeding was waived s The Public Records Doctrine The public records doctrine and its basic principles of recordation are set forth in La Civ Code arts 3338 and 3342 which protect third persons from the effect of unrecorded instruments affecting real estate and attempts to vary 2 Louisiana Code of Civil Procedure article 3863 provides A writ of mandamus may be directed to a public officer to compel the performance of a ministerial duty required by law or to a former officer or his heirs to compel the delivery of the papers and effects of the office to his successor 3 The recent supreme court case of Aberta Inc v Atkins 2012 La 5 89 0061 2012 25 So3d 1161 per curiam addressed the use of mandamus when the cancellation would involve more than a ministerial duty however in that case a dilatory exception of unauthorized use of suminary proceeding was filed 7 the terms or statements of fact in recorded ixistruments Louisiana Real Estate Transactions 1 Peter S Title 26 8 2d ed 2008 The Louisiana Public Records doctrine generally expresses a public policy that interest in real estate must be recorded in order xo affect third persens The public records doctrine is founded upon our public olicyr and social pucpose of assuring stability of land titles Cimarex Energy Co v Mauboules 2009 La 4 40 So3d 1170 10 9 931 943 j The public records doctrine has been described as a negative doctrine because it does not create rights but rather denies the effect of certain rights unless they are recorded Cimarex 40 So3d at 944 In explaining the negative nature of the doctrine the Louisiana Supreme Court has stated that third persons are not allowed to rely on what is contained in the public records but can rely on the absence from the public records of those interests that are required to be recorded Simply put the rule that what is rrecorded is not effective does not ot mean that what is recorded is effective bn all events despite any defect contained therein Id Although the public records doctrine is a negative doctrine it also has a positive aspect in the sense that a thzrd person who acquires an interest in an immovable after the recordation of an instrument that relates to the immovable may rely upon the recitals of that recorded instrument under the rule that secret claims and equities between the parties to the instrument cannot be invoked to the prejudice of third parties relying upon the public records LeBoeuf v Malbrough 188 Sa 196 202 La App lst Cir 1966 See La R 9 2d S 2721 Louisiana Civil Code article 3341 enacted by Acts 2005 No 169 1 effective July 1 2006 codified this concept i that the mere fact that a document is recorded does not mean e that it is valid oi that the person with record ritle is in fact the owner See Evans v City of Baton Rouge 10 La App lst Cir 2 68 So 576 580 n 3 1364 11 14 3d 8 repealed by Acts 2005 No 169 i effectiye July 1 2006 and replaced with La Civ Code art 3342 An exception to the public records doctrine exists w a mortgage is cancelled from the public records through firaud error or mistake The cancellation of a mortgage through fraud error or mistake without the consent or knowledge of the holder does not deprive the holdex oi his security even as against third parties dealing with the property in good faith in reliance on the public records MeL Development Company Inc v Pybarn 268 So 296 2d 298 La App 2d Cir 1972 Davis Lumber Company v DeBrueys Wood 200 So 916 916 La App lst Cir 1967 National Acceptance Company 2d of America v Wallace 194 So 194 201 La App 2d Cir 1967 writs 2d denied 250 La 467 and 470 196 So 533 and 534 La 1967 2d Cases involving fraudulent r erraneous eancellation in which the exception to the public records doctrine has been applied involve mortgage holders who did not know or consent to the cancellation and who had no way of knowing of the wrongful cancellation of the mortgage and no means of protecting their security inYerests in ihe p Therefore the exception to the roperty public records docirine is necessary in the interest of justice Central Bank v Frost 552 So 508 512 La p 2nd Cir 1989 writ denied 556 So 59 2d 2d La 1990 cert denied 498 U 827 1 S 83 112 L55 1990 S 11 Ct 2d Fd Regions contends that the triafl court erred u in contravention of the hen public records doctrine it considered testimonial evidence of interrt and allowed unrecorded claims of ownership at odds with the public records to affect the rights of third parties who relied on those public records Regions asserts that the Poole Note Assignment filed into the public records unambiguously did sell assign transfer negotiate and endorse with warranty of title any and all of 9 i s Hiers right title and interest in and to the Poole Note and mortgage to FPB Emphasis added Therefore Regions argues that any evidence introduced to contradict those terms should not be considered In support of its position Regions relies on La Civ Code art 3342 which provides A party to a recorded instrument may not contradict the terms of the instrument or statements of fact it contains to the prejudice of a third person who after its recordation acquires an interest in or over the immovable to which the instrument relates Regions also relies on La Civ Code art 3356 which provides B A recorded transfer modification amendment or release of a mortgage or privilege made by the obligee of record is effective as to a third person notwithstanding that the obligation secured by the mortgage or privilege has been transferred to another In response Hiers argues that the factual scenario presented in this case fits within the long exception to the public records doctrine as established discussed in Davis Lumber Company v DeBrueys 200 So 916 La Wood 2d App lst Cir 1967 Hiers contends that the cancellation of a mortgage was by mistake and was without his consent or knowledge and therefore does not deprive him of his security even as against Regions dealing with the property in good faith and in reliance on the public records Further Hiers contends that the document Regions relied on to determine it had a first mortgage on the property is the cancellation of the mortgage not the assignment and he was not a pariy to that document Regions assertion that on the face of the public records it appeared FPB was the owner of the Poole Note is correct Therefore Regions had no way of 5 This article codified the positive aspect of the Public Records doctrine and the well settled jurisprudence that third parties who acquire an interest in an immovable are entitled to rely on the recitals of a recorded instrument relating to that immovable regardless of any secret understandings agreements claims or equities that may exist between the parties to the instrument 1 Peter S Title Louisiana Real Estate Transacrions 5 8 2d ed 2008 In this case both parties testified that they not only intended the Poole Note Assignment to be a pledge but actually thought that the document they signed pledged the note as additional collateral and did not sell the note There was no evidence presented that there was any secret understanding or agreement between Hiers and FPB 10 knowing that the Poole Note Assignment language clearly contemplating a s sale was intended by the parties only as a pledge However for the following reasons we agree with the trial court determination that the Poole mortgage s was erroneously cancelled Therefore the long exception to the public held records doctrine applies in this case As the public recards doctrine is a negative doctrine the fact that the Poole Note Assignment was recorded does not mean that FPB is in fact the owner See 1 Peter S Title Louisiana Real Estate Transactions 16 8 2d ed 2008 FPB and Hiers agree that the Poole Note Assignment was intended only as additional collateral and not as a sale Therefore filing the Poole Note Assignment which on its face contemplated a sale into the public records did not create any ownership rights of the Poole Note in FPB Thus FPB was not the holder of the note when it requested that the mortgage be cancelled The pertinent docutnent Regions relied on to conclude it had a first mortgage on the property was the cancellation of the mortgage securing the Poole Note According to the record FPB requested the cancellation of the Poole mortgage at the request of Regions and with its assistance The cancellation was done for the benefit of Regions Regions attorney secretary s actually completed part of the request form far cancellation and filed it FPB through its vice president Wayne Allen signed the document requesting that the Poole mortgage be cancelled Allen testified that by signing the request form for cancellation he intended only to cancel the assignment of the mortgage and not to cancel the mortgage Wayne Allen unequivocally testified that the cancellation of the mortgage was done in error and without Hiers consent or s knowledge Further Hiers testified that he did not know about the cancellation of the mortgage 11 The exception to the public records doctrine applies when the cancellation of a mortgage is through mistake and without the consent or knowledge of the holder In that case the cancellation does not deprive the holder of his security even as against third parties dealing with the property in good faith in reliance on the public recards See Davis Lumber Company 200 So at 919 Wood 2d In the case sub judice there is uncontroverted testimony of Allen who was the party responsible for the cancellation of the Poole Note establishing that the mortgage was cancelled by mistake and without the consent or knowledge of Additionally Hiers testified that he had no knowledge of the Hiers cancellation The trial court listened to the testimony and found it credible Therefore the circumstances in this case fit within the long exception to held the public records doctrine and we find no error in the trial court determination s that the mortgage was erroneously cancelled Further because Hiers did not know or consent to the cancellation had no way of knowing of the wrongful cancellation of the mortgage and had no means of protecting his security interests in the property the application of the exception to the public records doctrine in this case is necessary in the interest of justice See Central Bank v Frost 552 So 508 512 La App lst Cir 2d 1989 writ denied 556 So 59 La 1990 cert denied 498 U 827 111 2d S Ct S 83 112 L55 1990 2d Ed CONCLUSION For the faregoing reasons the judgment of the trial court is affirmed All costs of this appeal are assessed to Intervenar Regions Bank Appellant AFFIRMED 12 STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2012 CA 1132 ERRY HIERS VERSUS JULIAN DUFRECHE McCLENDON 7 dissents and assigns reasons The majority applies the exception to the public records doctrine based on a fallacious determination that FPB was not the holder of the note at the time that it requested cancellation In order to reach this conclusion the majority citing t Peter S Title Louisiana Real Estate Transactions 16 8 2d ed 2008 states as the public records doctrine is a negative doctrine the fact that the Poole Note Assignment was recorded does not mean that FPB was in fact the owner However 16 8 further provides The public records doctrine also has a positive aspect in the sense that a third person who acquires an interest in an immovable after the recordation of an instrument that relates to the immovable may rely upon the recitals of the recorded instrument under the rule that secret claims and equities between the parties to the instrument cannot be invoked to the prejudice of third parties relying upon the public records The original note was assigned by Hiers to FPB with the following language in the Act of Assignment Assignors Hiers his wife and 47204 LLC do hereby sell assign transfer negotiate and endorse with warranty of title unto FPB any and all of Assignors right title and interest in the following 1 One certain promissory note in the original amount of 00 000 400 2 The Mortgage Note and 3 The Mortgage and all allonges collateral mortgage note act of mortgage s or and collateral mortgage acts of pledge and all other collateral modifying and securing the Hand Note all of which are hereby or accepted and received by Assignee Assignors do hereby notarially endorse the Promissory Note in favor of Assignee Clearly Regions could rely upon the foregoing recitals of the recorded instrument that established FPB to be the holder of the note Therefore the exception to the public records doctrine which requires a lack of consent or knowledge by the holder does not apply because the note was cancelled with FPB consent and s knowledge Accordingly I respectfully dissent and would reverse the judgment of the trial court ordering the restoration of Hiers mortgage Hiers action for improper cancellation of the mortgage is against FPB the party that allegedly cancelled the mortgaee in error 2

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