120 So. 3d 757
La. Ct. App.2013Background
- Wells Fargo filed executory process against Settoon to enforce a note secured by a mortgage on immovable property.
- A writ of seizure and sale was issued on July 13, 2010 and property seized July 14, 2010, but no sale occurred at that time.
- Petition included the original note, an allonge to the note, and a certified copy of the mortgage with a confession of judgment.
- Settoon sought injunctive relief citing (i) Option One’s suspended corporate status, (ii) an undated allonge, (iii) unsigned/notarized signature on the allonge, and (iv) lack of identifying information about the signer.
- The trial court granted a temporary restraining order and then a preliminary injunction prohibiting the judicial sale; the order was based on Settoon’s grounds; Wells Fargo appealed.
- The court held the allonge was attached to the note, made the indorsement effective, and that Option One’s corporate status did not affect the negotiation; consequently the injunction was improper and the case was remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the allonge is affixed to the note and part of the instrument | Wells Fargo: allonge is part of the note and bears as authentic indorsement | Settoon: allonge is not affixed to the note and not authentic | Affixed; the allonge forms part of the note |
| Whether the indorsement on the allonge converts the note to bearer paper | Wells Fargo: blank indorsement renders bearer paper and permits easy transfer | Settoon: indorsement on allonge is insufficient because it is not on the note itself | Indorsement on an affixed allonge is effective; note becomes bearer paper for purposes of executory process |
| Whether the corporate status suspension of Option One affects enforceability of the note | Wells Fargo: corporate status does not affect negotiation of the note | Settoon: suspension undermines the authority of the indorsement | Corporate status does not affect negotiation; holder can enforce |
| Whether the petition's assertion that the allonge was attached is a judicial confession affecting the proceeding | Wells Fargo: no issue; attached allegation stands | Settoon: seeks to challenge that assertion on remand | Settoon’s verified petition constitutes a judicial confession that the allonge was attached; supports affixation finding |
| Whether the trial court properly granted a preliminary injunction | Wells Fargo: injunction appropriate only if prerequisites shown; no abuse of discretion | Settoon: merits favor injunction due to defects in allonge and corporate status claims | trial court erred in granting the injunction; reversed and remanded |
Key Cases Cited
- Pioneer Valley Hosp., Inc. v. Elmwood Partners, L.L.C., 800 So.2d 932 (La.App.5 Cir. 2001) (definition of allonge and attachment concepts)
- Louisiana Nat. Bank of Baton Rouge v. Heroman, 280 So.2d 362 (La.App.1 Cir. 1973) (bearer paper and indorsement effects explained)
- Terrebonne Bank & Trust Co. v. Smith, 415 So.2d 414 (La.App.1 Cir. 1982) (bearer paper and transfer by possession principle)
- C.T. Traina, Inc. v. Sunshine Plaza, Inc., 861 So.2d 156 (La. 2003) (judicial confession effects and amendment considerations)
- Bankers Trust Co. of California, N.A. v. Cooley, 884 So.2d 594 (La.App.1 Cir. 2004) (authentic evidence requirements for assignment of order paper)
- Sw. Resolution Corp. v. Watson, 964 S.W.2d 262 (Tex. 1997) (indorsement on an allonge valid when affixed to instrument)