Wells Fargo Bank, N.A., as Trustee for SABR Trust 2004-OP1, Mortgage Pass-Through Certificates, Series 2004-OP1 VS Fredrick Malcolm Settoon

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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NO 2012 CA 1980 WELLS FARGO BANK N A VERSUS FREDRICK MALCOLM SETTOON Judgment Rendered UN 7 2 3 On Appeal from the Judicial 21s District Court In and far the Parish of Tangipahoa State of Louisiana Trial Court No 2010 0002752 The Honorable M Douglas Hughes Judge Presiding Benjamin Monroe Louisiana Attorney for Plaintiff Appellant Wells Fargo Bank N A Charles V Genco Attorneys for Defendant Appellee D Mark Valentine Fredrick Malcolm Settoon B Dean Cory B Blunk Amite Louisiana BEFORE GUIDRY CRAIN AND THERIOT JJ GJ C cu s CRAIN J This appeal is from a judgment granting a preliminary injunction and prohibiting the plaintiff from pursuing the judicial sale of certain immovable property subject to a mortgage We reverse and remand FACTS AND PROCEDURAL HISTORY Wells Fargo Bank N as Trustee for SABR Trust 2004 Mortgage A OP1 Through Pass Certificates Series 2004 filed a petition for executory process OP1 against Fredrick Malcolm Settoon seeking to enforce a promissory note executed by Settoon in favor of Option One Mortgage Corporation The promissory note was secured by a mortgage encumbering certain immovable property and Wells Fargo requested and obtained a writ of seizure and sale of the immovable property by order signed on July 13 2010 Wells Fargo petition was verified and s included two e 1 the original note consisting of three pages and a one ibits page document captioned ALLONGE TO NOTE and 2 a certified copy of the recorded mortgage agreement containing a confession ofjudgment The immovable property was seized on July 14 2010 but did not proceed to a judicial sale at that time Approximately two years later Settoon filed a petition seeking injunctive relief to prevent the judicial sale ofthe property and asserted the following grounds 1 the corporate status of Option One the original creditor had been suspended by the California Secretary of State since 1990 2 the allonge was not dated 3 the signature on the allonge was not notarized and 4 otber than a name there was no fiirther identification of the person who signed the allonge or by whom she was employed The trial court granted a temporary restraining order and after a hearing on the request for a preliminary injunction entered a judgment on October 9 2012 enjoining Wells Fargo from causing a judicial sale of the immovable property The trial court issued written reasons basing its judgment on the grounds advanced z by Settoon Wells Fargo appealed and argues that the trial court erred because the law does not require that the endorsement of a note be dated or notarized that Option One legal status did not affect the negotiation of the note and s alternatively that no evidence was presented ofOption One corporate status s LAW AND ANALYSIS A person seeking to enforce a mortgage in an executory proceeding must file a petition praying for the seizure and sale of the property affected by the mortgage and must submit with the petition authentic evidence of 1 the note bond or other instrument evidencing the obligation secured by the mortgage and 2 the authentic act of mortgage importing a confession ofjudgment La Code Civ Pro arts 2634 and 2635A The note bond or other instrument evidencing the obligation secured by the mortgage and paraphed far identification with the act of mortgage is deemed to be authentic for purposes of executory process La Code Civ Pro art 1 2636 Signatures affixed to the instrument secured by the mortgage are presumed genuine and no further evidence of those signatures is required far the purposes of executory process La R 9 S 4422 1 The defendant in an executory proceeding may arrest the seizure and sale of the property by injunction when the debt secured by the mortgage is extinguished or is legally unenforceable or if the procedure required by law for an executory The judgment gxants the Plaintiffs Petition for Injunctive Relief and enjoins Wells Fazgo from causing a judicial sale of the subject property until fixrther order of this Court We construe this language as granting the requested preliminary injunction and not a permanent injunction Granting more than a preliminary injunction would be improper as the recard does not contain a stipulation whereby the parties converted the preliminary injunction hearing into a trial for the permanent injunction See High Plains Fuel Corp v Carto Int Trading Inc 93 I 1275 La App 1 Cix 5 640 So 2d 609 613 writ denied 94 La 11 646 94 20 2362 94 29 So 2d 402 2 Section 4422 was amended by 2012 Act No 400 to render the statute applicable to any whether promissory note negotiable not Priar to this amendment the statute applied to any negotiable instrument or instnunent that would be negotiable but for a limitarion of personal liability of the maker The amendment is not material to the current proceeding as the promissory note at issue is a negotiable instrument and thus subject to either version of the or statute 3 proceeding has not been followed La Code Civ Pro art 2751 The applicant for a preliminary injunction need make only a prima facie showing that he will prevail on the merits Paddison Builders Inc v Turncliff 95 La App 1 Cir 1753 96 4 672 So 2d 1133 1136 writ der 96 La 1014 679 So 2d d i 1675 96 1386 Wheiher to grant ar deny a preliminary ir lies within the sound junction discretion of the trial court Absent a clear abuse of tk discretion the trial court is s ruling will not be disturbed on appeal City ofBaton Rouge of East Baton Parish Rouge v 200 Government Street LLC 8La App 1 Cir 9995 So 0510 08 23 2d 32 36 writ denied 08 La 1 998 So 2d 726 2554 09 9 We first address the arguments relating to the allonge namely that the trial court erred in finding that the allonge had to be notarized dated and contain further information about the employment of the person who signed it Wells Fargo contends the allonge is part of the note and therefare deemed authentic Wells Fargo further contends that the note was rendered bearer paper by a blank indorsement on behalf of Option One so no authentic evidence of the assignment of the note to Wells Fargo is required Finally Wells Fargo contends that s Summerville signature on behalf of Option One is presumed genuine for purposes of executory process under Louisiana Revised Statute 9 no 1so 4422 further evidence of the indorsement is required Settoon counters by arguing that the note is not bearer paper because the indorsement appears on the allonge which is not in authentic form and is not a part of the note and therefare is not deemed authentic These arguments raise two legal issues 1 is the allonge deemed authentic and 2 did the indorsement on the allonge convert the note to bearer paper The crucial question in resolving these issues is whether the allonge was affixed to the original promissory note as that term is used in Louisiana Revised Statute 103 a 204 a As a general matter an atlonge is a of paper annexed to a piece promissory note on which to write endorsements for which there is no room on the instrument itself Such must be so firmly affixed thereto as to become a part rI sp dnc v Elmwood Partners L 01 La Pione alley I o C 453 thereof App 5 Cir 10 800 Sc 2d 932 933 xn 2 Black Q1 17 quoring sLaw Dictionary 70 S ed 1979 In the presexit case the a is a single doc that ge o page ument identifies the note by Settoon name loarz number property address loan amount s and date It then provides Therefore in reference to the captioned note the following applies Pay to the order o blank space Without Recourse This language is followed by a signature on behalf of Option One by Ulda Summerville who is identified as an Assistant Secretary This signature if effective as an indorsement of the note constitutes a blank indorsemenY which would render the note bearer paper and subject to negotiation by transfer of possession alone La R 103 For purposes of S 205 b executory process the requirement of authentic evidence does not apply to the transfer of a bearer note La R S 4102A 13 Terrebonne Bank Trust Co v Smith 415 So 2d 414 417 La App 1 Cir 1982 j Louisiana Nat Bank of Baton Rouge v Heroman 280 So 2d 362 371 La App 1 Cir 1973 writ denied 281 Sa 2d 755 La 1973 This principle is true whether the note was originally payable to bearer or became bearer paper by virtue of a blank indorsement Louisiana Nat Bank ofBaton Rouge 280 So 2d at 371 However Settoon argues that the note was not converted to bearer paper because the signature appears on the allonge and not the note 3 Settoon cites Bankers Trust Co of California N u Cooley 03 La App 1 Cir A 1942 04 25 6 884 Sa 2d 594 for the proposition that authentic evidence is required to prove the assignxnent ofa note to use executory process however nothing in Cooley suggests that the note in that case was beazer paper To the contrary the Cooley court cited tha law governing the assignment of order paper Cooley 884 So 2d at 595 5 The validity of a signature on a document attached to a note is addressed in the Uniform Commercial Code at Louisiana Revised Statute 10 awhich 204 3 defines the term indorsemenY and provides in pertinent part For the purpose of determining whether a signature is made on an instrument a paper affixed to the instrument is a part of the instrument Comment 1 to Section 103 areferences the above statement and explains 204 that an indorsement on an allonge is valid even though there is sufficient space on the instrument for an indorsement Consequently Summerville ssignature on the allonge will be considered an indorsement of the note if the allonge is affixed to the note In that event the signature on the allonge will be presumed genuine for purposes of executory process See La R 9 The note would then be S 4422 1 considered bearer paper and subject to assignment by transfer of possession alone La R S 4102A 13 Terrebonne Bank Trust Co Louisiana Nat Bank of Baton Rouge The UCC does not define affixed and our courts have not previously interpreted this word in this context Section 103 adetermines when a paper 204 will be considered part of an instrument for purposes of an indorsement which is an act that can produce significant legal consequences with respect to the instrument including the negotiation of the instrument a restriction on the payment of the instrument or the imposition of indorser liability under certain s circumstances See La S R a 204 103 Given the importance of an indarsement a signature appearing on a document that was not part of the original instrument increases the need to ensure that the signature was intended to be and was in fact an indorsement of that instrument We find that the requirement in Section 10 that a paper be a 204 3 affixed to the instrument demands that the paper be actually attached to the instrument meaning some form of physical connection securing the paper to the 6 instrument See In re McFadden 471 B 136 173 D 5 Sw R C 12 S 9 Resolution Corp v Watson 964 S 262 264 Tex 10 Lamson v 2d W 97 30 Commercial Credit Corp 187 Colo 382 385 531 P 966 968 1975 Fed 2d Home Loan Mortgage Corp v Madison 2011 WL 2690617 D Ariz 7 11 12 s Black Law Dictionary 9 ed 2009 defming affix as t attach add to or o fasten on The attachment requirement serves two purposes permanently preventing fraud and preserving the chain of title to an instrument Sw Resolution Corp 964 S 2d at 264 W The trial court written reasons state that the allonge was ato the s ttached original promissory note This fmding of fact was apparently based upon allegations in Settoods petition which at paragraph V asserts that the allonge was ttached ato the original promissory note In his verification filed with the petition Settoon confirmed under oath that all the information contained therein is true and correct to the best of his knowledge information and belie At the preliminary injunction hearing Settoon counsel described the allonge as s attached to this mortgage sic We find that Settoon allegation in his verified petition is a judicial s confession that the allonge was attached to the note A judicial confession is a declaration made by a party in a judicial proceeding and constitutes full proof against the party who made it La Civ Code art 1853 C Traina Inc v T Sunshine Plaza Inc 03 a 12 861 So 2d 156 159 An admission 1003 03 3 by a party in a pleading constitutes a judicial confession C Traina Inc 861 T So 2d at 159 Taboni ex rel Taboni v Estate ofLongo 01 La 2 2107 02 22 810 So 2d 1142 A judicial confession has the effect of waiving evidence as to the subject of the admission C Traina Inc 861 So 2d at 159 A declaration T made by a party attorney or mandatary has the same effect as one made by the s party himself La Civ Code art T 1853 Comment b C Traina Inc 861 So 2d at 159 A judicial confession is indivisible and it may be revoked only on the ground of error of fact La Civ Code art 1853 In C Traina a plumbing contractor Traina sued the properiy owner T Sunshine who filed an exception of no cause of action alleging that any agreement between the parties was an oral contract Sunshine later repeated the same allegation in a subsequznt exception and amended answer In reversing the court of appeal the supreme court held that the allegations constituted judicial confessions explaining The court of appeal recognized that Sunshine judicially confessed that it had an aral contract with Traina but reasoned that Sunshine revoked its admission when it filed a subsequent pleading denying any contractual relationship existed We disagree La Civ Code art 1853 explicitly provides that a judicial confession may be revoked only on the ground of error of fact At no time did 5unshine assert its judicial confession of an oral contract was made in error To the contrary Sunshine amended answer confirmed Sunshine earlier s s allegation of an oral contract by continuing to allege in the altemative that an oral contract existed Therefore we must conclude based on the record before us that Sunshine judicial confession of an s oral contract was never revoked on the ground of error of fact Because a judicial confession has the effect of waiving evidence relating to the subject of the admission and withdrawing the subject matter of the confession from issue Traina was not required to offer at trial affirmative proof of its oral contract with Sunshine T C Traina Inc 861 So 2d at 160 s Settoon verified petition judicially confessed that the allonge was attached to the note Prior to the preliminary injunction hearing Settoon did not attempt to amend or otherwise modify this allegation for errar We distinguish these facts from those presented to the courts in Eddy v State Farm and Cas Co 09 0874 La App 1 Cir 12 and Guidry v Barras 368 So 2d 1129 1132 La App 09 23 3 Cir 1979 wherein the party making the allegation attempted to amend the pleading to correct or modify the allegation Under those circumstances the courts held that an amendment should be permitted pursuant to Louisiana Code of Civil s Procedure articles 934 11 ana 1155 unAess the adversary was misled or deceived Eddy at pp 3 Guiday 3 So 2ci at 1132 4 i8 Based upon the foregoing we find that tiie trial court factual finding that s the allonge was attacb to the note wa correct The allonge therefore forms a ed part of the not the signature on the allonge s presumed genuin and no further evidence of the indursement and assignment of the note is required for this executory process proceeding La R 103 La R 9 La R S 204 aj S 4422 1 S 41 13 Q2A Similarly Wells Fargo was not required to produce any further evidence of s Summerville identification or her employer The allonge confirms that the note was indorsed on behalf of Option One By Summerville who is identified by name and position of employment This provides sufficient evidence of her identity and her employer s Settoon final argument is that executory process is improper because the California Secretary of State suspended Option One corparate status in 1990 s This claim is based on an e attached to Settoon petition that the trial court ibit s relied upon in rendering its ruling W find that the corporate status ofOption One e does not affect the negotiation of the note Louisiana Revised Statute 103 a 202 provides Negotiation is effective even if c i from an infant a btained corporation exceeding its powers or a person without capacity ii by fraud duress or mistake or iii in breach of duty or as part of an illegal transaction The reason for this law is the protectioxi of the lholder of the note as expiained in Comment 2 of Section 3 202 Subsection a applies even though the lack of capacity or the illegality is of a character which goes to the essence of the transaction and makes it entirely void It is inherent in the character 4 We express no opinion on Settoon ability Yo amend his petition on remand to remove the s allegation of attachment for error so as to revoke the judicial confession for purposes of the trial on the permanent injanction 9 of negotiable instruments that arzy ei in possession of an son instrument which by its terms is pa to tk person ar to bearer is able at a holder and may be dealt with by any as a holder The principle vne finds its most extrexne application in tlxe well settled rule that a holder in due course may take the in e from a thief and be trument en ted prote against the laian of the l rigmtfz owner he ipolicy of subsection a is Yhat any person to wharra arc instrument is negotiated is a holder untii the i been xecc it tt erson nent nstru has ered rn az s axi possessi Having established its statu5 s a hoider of the ar note We11s Fargo has the ginai right to enforce payment of the obli regardless of the corporate status of the ation original payee See La R 10 3 3 and 3 S 1 205 202 2 b 201 301 Settoon failed to identify or establish a valid reason for granting a preliminary injunction to prevent the subject immovable property from proceeding to a judicial sale We find the trial court erred as a matter of law in granting the preliminary injunction and reverse the judgment rendered on October 9 2012 and remand for further proceedings in accordance herewith Costs of this appeal are assessed to Settoon REVERSED AND REMANDED 5 Ils s W Faxgo aiternative aegument that the trial court dmproperly considered fne e hibil purporting to set forth Option One coraarate statas is n s aot 10

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