338 So.3d 50
La. Ct. App.2022Background
- NORA and Pontchartrain Park CDC (PPCDC) entered a Development Agreement to revitalize scattered residential sites; NORA funded the project under a Loan Agreement and expected to recoup its value from future sales.
- The Development Agreement and Loan Agreement were not recorded; a Memorandum of Development Agreement (MODA) referencing the Development Agreement and declaring NORA’s subordination to lenders was the only instrument recorded.
- PPCDC’s subsidiary (REH) borrowed from First NBC Bank (FNBC) and granted recorded multiple-indebtedness mortgages securing promissory notes; Edwards is FNBC’s successor in interest.
- Edwards foreclosed on the recorded mortgages; sale proceeds were placed in escrow. NORA asserted superior rights to those funds under the unrecorded agreements.
- The trial court held the recorded mortgages (Edwards) had priority because the MODA constituted a valid subordination of NORA’s rights, ordered escrow disbursed to Edwards, and dismissed NORA’s claims; NORA appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the recorded MODA gave notice and effectively subordinated NORA’s rights to later-recorded lender mortgages | MODA provided constructive notice of the Development Agreement and amendments; NORA’s interest should have priority or at least not be defeated by later mortgages | MODA expressly subordinated NORA to lenders and was the only recorded instrument; recorded mortgages have priority under the public records doctrine | MODA contained valid subordination language; NORA subordinated its rights to lenders despite other agreements being unrecorded |
| Whether Edwards (successor to FNBC) was entitled to priority and disbursement of escrowed sale proceeds | NORA argued it was entitled to recoupment from sale proceeds under unrecorded agreements and thus should be first in distribution | Edwards argued recorded multiple-indebtedness mortgages (its interest) were senior and entitled to escrow as a matter of law | Court affirmed: Edwards’s recorded mortgages ranked ahead and escrowed funds were properly disbursed to Edwards |
Key Cases Cited
- Cimarex Energy Co. v. Mauboules, 40 So.3d 931 (La. 2010) (explains Louisiana public records doctrine and effect of unrecorded instruments on third parties)
- Camel v. Waller, 526 So.2d 1086 (La. 1988) (discusses public records doctrine as a negative doctrine denying effect to unrecorded rights)
- Bankers Trust Co. of California v. Breaux, 900 So.2d 980 (La. App. 5 Cir. 2005) (valid subordination and party intent can alter priority of encumbrances)
- T.D. Bickham Corp. v. Hebert, 432 So.2d 228 (La. 1983) (recognizes enforceability of contractual subordination shifting priority)
- Planchard v. New Hotel Monteleone, LLC, 332 So.3d 623 (La. 2021) (summary judgment appellate standard; de novo review)
- Wright v. Louisiana Power & Light, 951 So.2d 1058 (La. 2007) (discusses summary judgment standards and appellate review)