Bankers Life Co. v. Shost

Citations: 518 So. 2d 563; 1987 WL 3324Docket: 87-CA-284

Court: Louisiana Court of Appeal; December 7, 1987; Louisiana; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

An appeal was filed by Freedlander, Inc., the second mortgagee, to rescind a sheriff's sale of property that was seized following an executory process initiated by Bankers Life Company, the first mortgagee. The property was sold to Deborah Triche. Freedlander sought to prevent the Clerk of Court from recording the sheriff's deed and to stop Triche from selling or encumbering the property, also requesting annulment of the sale. The trial court upheld the sale's validity and denied Freedlander's requests, instructing the sheriff to file the deed and distribute the sale proceeds. Freedlander appealed the decision, but the Court of Appeal affirmed the trial court’s ruling. 

Bankers Life had filed for executory process against Pauline Regotti and John A. Shost, as well as Martha Johnson and Dewey Johnson, based on a promissory note originally executed in 1963. The property subject to the mortgage is located in St. John the Baptist Parish and was described in detail. Although Martha and Dewey Johnson did not sign the note, Bankers considered them the current owners. A writ of seizure and sale was issued and served in early February 1986. In a separate action, Freedlander had also instituted executory process against the Johnsons based on a note executed in 1984 and secured by a mortgage on the same property. The sheriff's sale occurred on March 26, 1986, with the property sold for $10,411.00.

Freedlander was aware of Bankers' executory process suit and the scheduled sheriff's sale on April 2, 1986. However, Freedlander, relying on information from Bankers' attorney, did not attend the sale, which actually occurred on March 26. Freedlander subsequently filed an action to rescind the sale, citing several errors by the trial court: 1) failure to set aside the sale due to Bankers' attorney's actions, which Freedlander claimed rendered the sale null under L.S.A.-C.C. Art. 2619; 2) the sale not being conducted at the legally required time of 11 a.m.; 3) Triche's failure to pay the purchase price timely; and 4) lack of due process due to Freedlander not receiving notice of the sale. 

Freedlander also alleged fraud, claiming Bankers did not provide the correct sale date. Testimony revealed that Donna Turner from Freedlander called Bankers' attorney and was mistakenly given the wrong date by Craig Jackson, resulting in a "mixup." The trial court sustained objections to Turner's notes as hearsay, and Freedlander did not appeal this ruling. Turner noted that she typically received accurate information from Bankers. Despite asserting that the incorrect date constituted fraud, the court found no evidence of intentional wrongdoing by Bankers, as the attorney apologized for the mixup. The trial judge's conclusion that no fraud occurred was supported by the evidence, leading to a finding of no manifest error.

Freedlander seeks to annul the sheriff's sale under L.S.A.-C.C. art. 2619, which allows for annulment in cases of fraud or nullity, despite general protections for innocent third-party purchasers. He claims that Bankers' actions "chilled" competition during the sale. The court in Boyd v. Farmer-Merchants Bank & Trust Co. established that a judicial sale is typically secure unless fraud or ill practices are proven. Furthermore, misrepresentation intended to suppress competition can also justify annulment, as noted in Swain v. Kirkpatrick Lumber Co.

In this case, the property was acquired by an innocent buyer who did not engage in practices to chill competition, and no evidence of fraud or improper practices by Bankers was found. The trial court concluded that Bankers' error regarding the sale date did not constitute fraud or ill practices that could invalidate the sale.

Freedlander further argues for annulment based on procedural violations: the sale commenced at 11 a.m. instead of the required 10 a.m., as per L.S.A.-R.S. 13:4341, and the purchaser did not pay a 10% deposit at the time of sale, contrary to L.S.A.-R.S. 13:4359. While the sale started late, L.S.A.-R.S. 13:4360 indicates that failure to pay a required deposit allows the seizing creditor to re-offer the property, but does not automatically invalidate the sale. As such, the court found no grounds for annulment based on these procedural arguments.

The seizing creditor, Bankers, possesses the discretion to immediately re-offer the property for sale or have it re-advertised, options not available to Freedlander, who is not the seizing creditor. Discrepancies in timing and violations of L.S.A.-R.S. 13:4359 are deemed procedural errors that do not undermine the creditor's right to utilize executory process, as established in Brown v. Everding. L.S.A.-R.S. 13:4112 stipulates that judicial sales of immovable property through executory process cannot be annulled due to form or procedural objections unless a timely action is taken within six months from September 12, 1975. Freedlander, acknowledging that the sheriff's recordation of the proces verbal could rectify procedural defects, sought a temporary restraining order to prevent this recordation. Although Freedlander petitioned for a preliminary injunction, it did not pursue a permanent injunction or appeal the trial court's decision to dissolve the temporary restraining order, effectively abandoning its claim against the sale on procedural grounds.

Freedlander argues that the sheriff's failure to notify it directly of the sale date, relying instead on constructive notice via newspaper advertisement, constituted a due process violation. It is noted that Freedlander's address was readily available from its recorded mortgage, and the mortgage's inscription was included in the foreclosure process documentation. Citing Mid-State Homes, Inc. v. Portis, Freedlander references key Supreme Court cases (Mullane v. Central Hanover Bank & Trust Co. and Mennonite Board of Missions v. Adams) that emphasize the necessity of appropriate notice and hearing before the deprivation of property.

Due Process requires that notice to interested parties must be "reasonably calculated" to inform them of pending actions, allowing them to present objections. The Mullane case determined that a New York statute providing only constructive notice violated this requirement for known beneficiaries. In Mennonite, the Supreme Court addressed the adequacy of notice in Indiana tax sales, ruling that mortgagees must receive actual notice (via mail or personal service) if their identities are publicly recorded, rather than relying solely on constructive notice. The sophistication of the creditor does not diminish the need for proper notice, although states are not obligated to expend extraordinary efforts to locate unknown mortgagees. Freedlander, a second mortgagee, had a significant interest in the property sold, which was inadequately addressed by the sheriff's sale process, thereby necessitating notice and an opportunity to be heard. Constructive notice was insufficient for Freedlander due to easily obtainable contact information through public records. Louisiana law provides a mechanism for individuals to request notices of seizure for immovable property, ensuring they receive proper notifications should their property be seized.

The mortgage certificate must include requests for notice of seizure. Upon receiving the certificate, the sheriff is required to notify individuals who requested notice at least ten days before the sheriff's sale, using certified mail or actual delivery. This notification must include the seizing creditor's name and address, the seizure method, the amount owed, and the sale date. Neither the clerk of court nor the sheriff or their associates are liable for failing to notify if a reasonable effort to deliver the notice was made. The sheriff's failure to notify does not affect the seizing creditor's rights or invalidate the sale. The case references Mid-State, affirming that L.S.A.-R.S. 13:3886, which allows notice to creditors once they’ve identified themselves and paid a fee, is constitutional. Freedlander did not comply with this statute and cannot claim a lack of notice regarding the sale date. The trial judge determined that Freedlander had the opportunity to protect its interest by following the statute. Consequently, the judgment from June 20, 1986, is affirmed at the appellant's expense. Additionally, a memo dated February 19, 1986, confirming the sale date was later introduced into evidence without objection.