First National Bank, USA v. DDS Construction, LLC
91 So. 3d 944
La.2012Background
- DDS Construction developed the Homewood Place subdivision and granted First National a Multiple Indebtedness Mortgage on Lots in Square A, including Lot 8; Bering later bought Lot 8 and obtained a Bering Mortgage with MERS as nominee; First National’s Construction Mortgage was intended to cover Lots 1, 2, 5, 6, 7, 8, 9, 11, 13; DDS misappropriated sale proceeds, so Lot 8 was not released from the Construction Mortgage; First National initiated executory process seeking foreclosure on Lots 1 and 8; First National sought cancellation of the Construction Mortgage as to Lot 8 via a Request for Cancellation filed June 10, 2009; Sutherland, the closing notary, prepared an Act of Correction indicating Lot 8A instead of Lot 8, filed June 3, 2009; First National later filed an Act of Correction through Wilks on June 15, 2009 (not compliant with 35:2.1); Dufrene filed a second Act of Correction on October 28, 2009 (compliant with 35:2.1); US Bank (via assignment) held the Bering Mortgage and intervened asserting priority; the district court ruled for First National; the court of appeal reversed, holding the correction could not reinstate the cancelled mortgage; this Court held 35:2.1 applies, allows correction, and reinstates the district court judgment ordering First National’s mortgage to prime the Bering Mortgage; case remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether La. Rev. Stat. § 35:2.1 applies to corrections canceling a mortgage from public records | First National: § 35:2.1 may correct the cancellation and retroactively delete Lot 8 | US Bank: § 35:2.1 only clerical; cannot reinstate cancelled mortgage | Yes; § 35:2.1 applies and retroactive correction can reinstate priority |
| Whether the First National Act of Correction was valid under § 35:2.1 | First National: correction executed by bank is valid | US Bank: correction must be by notary before whom error occurred | No; only the Dufrene Act satisfied § 35:2.1 requirements |
| Whether the Dufrene Act of Correction retroactively reinstates Lot 8 mortgage priority | Dufrene Act corrected clerical error and retroactively restored Lot 8 | US Bank: no prejudice to third parties and reinstatement not allowed | Yes; Dufrene Act retroactively reinstates the Construction Mortgage as to Lot 8, priming US Bank |
| What is the effect on mortgage priority and public records doctrine | Correction maintains true agreement and intent; reinstates priority | Public Records Doctrine prohibits reinstating cancelled instruments | Construction Mortgage primes Bering Mortgage; public records doctrine respected with retroactive correction |
Key Cases Cited
- City of Harahan v. State ex rel. Division of Administration, 986 So.2d 755 (La.App. 5 Cir. 2008) (analogous limitations on corrections to transfers/real property)
- Carrere v. Reddix, 30 So.2d 432 (La. 1947) (court authority to reinstate cancelled mortgages; corrections limited)
- In re Succession of Faget, 53 So.3d 414 (La. 2010) (statutory interpretation; legislative history supports plain language)