SE Property Holdings, LLC v. Gibson et al

Filing 32

ORDER AND REASONS granting 13 Motion for Summary Judgment. IT IS FURTHER ORDERED that SEPH shall file a proposed judgment not later than June 20, 2018. Signed by Judge Carl Barbier on 6/13/2018. (cg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

SE PROPERTY HOLDINGS, LLC

CIVIL ACTION

VERSUS

No. 17-7644

CHARLES GIBSON, ET AL.

SECTION: “J”(5)

ORDER AND REASONS
Before the Court is a Motion for Summary Judgment (Rec. Doc.
13)

filed

by

Plaintiff,

SE

Property

Holdings,

LLC,

and

two

oppositions thereto (Rec. Docs. 23, 25) filed by Defendants,
Jeffrey Green, Cecile Green, and Charles Gibson.

SE Property

Holdings, LLC, has also filed a reply (Rec. Doc. 29).

Having

considered the motion and legal memoranda, the record, and the
applicable law, the Court finds that the motion should be GRANTED.
FACTS AND PROCEDURAL BACKGROUND
The facts in this case are not in dispute.

On November 19,

2007, Jeffrey Green and Cecile Green (the “Greens”) purchased a
tract

of

immovable

property

located

in

Washington

Parish,

Louisiana (“Tract A”). In connection with the purchase, the Greens
granted First National Bank of Baldwin a properly recorded security
interest in Tract A to secure the amounts owed under a promissory
note (the “FNBB Mortgage”).

Over the next few years, the Greens

purchased three additional tracts of immovable property (“Tract
B,” “Tract C,” and “Tract D”) also located in Washington Parish. 1
On July 13, 2012, the Greens executed a mortgage in favor of
Charles Gibson (“Gibson”) as to Tracts A, C, and D, which mortgage
secured a $200,000 debt owed by the Greens to Gibson (the “Gibson
Mortgage”). Upon being filed in the Washington Parish records, the
Gibson Mortgage established the second encumbrance on Tract A
(inferior to the FNBB mortgage), and the sole encumbrance on Tracts
C and D.

Tract B, however, remained unencumbered.

On September 27, 2013, Plaintiff, SE Property Holdings, LLC
(“SEPH”), obtained a judgment against the Greens in the principal
amount

of

$23,626,922.31

fees, and costs.

plus

interest,

reasonable

attorneys’

SEPH’s judgment was recorded in the property

records of Washington Parish on July 15, 2014, thereby perfecting
a judicial mortgage against Tracts A, B, C, and D.

Consequently,

SEPH’s judicial mortgage established the third encumbrance on
Tract A, the second encumbrance on Tracts C and D, and the sole
encumbrance on Tract B.

SEPH foreclosed on Tract B in execution

of its judgment, and subsequently acquired the property on June 3,
2015.
On April 10, 2015, Gibson acquired the FNBB Mortgage and
underlying promissory note by assignment from Tarpon Pool I, LLC.

1

Tracts A-D are contiguous and were collectively utilized by the Greens as a
single estate (the “Green Estate”).

2

On August 13, 2015, the Greens executed a dation en payment, or
giving in payment, in favor of Gibson, which transferred Tracts A,
C, and D to Gibson in satisfaction of the FNBB Mortgage and the
Gibson Mortgage (the “Mortgages”). The parties recorded the dation
in the conveyance and mortgage records of Washington Parish the
following day.

One week later, on August 20, 2015, Defendants

attempted to rescind the dation by executing and filing an “Act of
Rescission of Dation en Paiement” (the “Act of Rescission”) into
the conveyance and mortgage records of Washington Parish.
On August 8, 2017, SEPH filed this lawsuit against Defendants
seeking a declaratory judgment that the Mortgages are null and
void and without any legal effect.
relief

as

may

be

necessary

to

SEPH also seeks injunctive
enforce

and

effectuate

its

declaratory judgment.
PARTIES’ ARGUMENTS
SEPH contends that it is entitled to judgment as a matter of
law because the Mortgages were extinguished by confusion as a
result of the dation.
obligations

were

In addition, SEPH argues that because the

extinguished,

Defendants’

subsequent

Act

of

Rescission was without any legal effect and failed to revive the
Mortgages.
Defendants argue that summary judgment is improper for a host
of reasons. First, Defendants argue that the Mortgages were not
extinguished by confusion because Gibson had an interest in keeping
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the titles distinct and separate to ensure that the property
actually satisfied the obligations being forgiven by the dation.
To this end, Defendants contend that even if the Court determines
that the Mortgages are extinguished, Gibson should retain his
ranking and priority prior to confusion for the amount owed on the
Mortgages.

Next,

Defendants

argue

that

summary

judgment

is

improper because the prescriptive period for bringing a claim to
have the dation declared a relative nullity has not expired.
Lastly, Defendants contend that the Act of Rescission successfully
dissolved the dation and restored the parties to the situation
they were in before the dation was executed.
LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R.
Civ. P. 56); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th
Cir. 1994). When assessing whether a dispute as to any material
fact exists, a court considers “all of the evidence in the record
but refrains from making credibility determinations or weighing
the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness
Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All reasonable
inferences are drawn in favor of the nonmoving party, but a party
4

cannot defeat summary judgment with conclusory allegations or
unsubstantiated assertions. Little, 37 F.3d at 1075. A court
ultimately must be satisfied that “a reasonable jury could not
return a verdict for the nonmoving party.” Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir.
1991). The nonmoving party can then defeat the motion by either
countering with sufficient evidence of its own, or “showing that
the moving party’s evidence is so sheer that it may not persuade
the reasonable fact-finder to return a verdict in favor of the
moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in the
record is insufficient with respect to an essential element of the
nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden
then shifts to the nonmoving party, who must, by submitting or
referring to evidence, set out specific facts showing that a
genuine issue exists. See id. at 324. The nonmovant may not rest
upon the pleadings, but must identify specific facts that establish

5

a genuine issue for trial. See, e.g., id. at 325; Little, 37 F.3d
at 1075.
DISCUSSION
I. Extinguishment by Confusion
SEPH

has

extinguished.

the

burden

of

proving

that

the

Mortgages

are

See La. Civ. Code. art. 1831 (“A party who asserts

that an obligation is null, or that it has been modified or
extinguished, must prove the facts or acts giving rise to the
nullity, modification, or extinction.”). A dation en paiement, or
giving in payment, “is a contract whereby an obligor gives a thing
to the obligee, who accepts it in payment of a debt.”
Code art. 2655.

La. Civ.

An act of giving in payment has the effect of

transferring title the same as an ordinary contract of sale.
Quality Fin. Co. of Donaldsonville v. Bourque, 315 So. 2d 656, 658
(La. 1975).

It is well-established that when a creditor receives

ownership of property following a dation en paiement, the mortgage
held by the creditor on the subject property is extinguished by
confusion.

See

La.

Civ.

Code

art.

3319(2)

(“A

mortgage

is

extinguished . . . [b]y confusion as a result of the obligee’s
acquiring ownership of the thing mortgaged.”); see also La. Civ.
Code art. 1903 (“When the qualities of obligee and obligor are
united in the same person, the obligation is extinguished by
confusion.”); Matter of Dibert, Bancroft & Ross Co., Ltd., 117
F.3d 160, 171 (5th Cir. 1997).
6

The dation at issue provides:
“This transfer and conveyance of the property is made
and accepted for an in consideration of the indebtedness
represented by the notes referred to above . . . CHARLES
SIDNEY GIBSON . . . as the owner of the above-described
promissory note does hereby grant a full and complete
release of the mortgage securing payment of the note and
does authorize and direct the Clerk of Court and Recorder
of Mortgages of the Parish of Washington, State of
Louisiana, to cancel and erase in its entirety from his
record the inscription of the mortgage recorded in MOB
953, Page 7, and the mortgage recorded in MOB 805, page
246.”

(Rec. Doc. 13-2 at 46).

By the express terms of the dation,

Gibson received Tracts A, C, and D in satisfaction of his Mortgages
(i.e., the FNBB Mortgage and the Gibson Mortgage), which encumbered
the

aforementioned

tracts.

Accordingly,

the

Mortgages

were

extinguished by confusion at the moment Defendants executed the
dation. 2

See Matter of Dibert, Bancroft & Ross Co., Ltd., 117 F.3d

at 172 (“[F]or the purposes of confusion, the dation was legally
sufficient to consolidate—“confuse”—in the person of the creditor
the qualities of both obligee and obligor and thereby extinguish
the mortgage.”); see also Hibernia Nat’l Bank v. Continental Marble
& Granite Co., 615 So. 2d 1109, 1111-12 (La. App. 5 Cir. 1993)
(concluding that the execution of a dation en paiement from a
mortgagor to a mortgagee extinguished two collateral mortgages

2 Guste v. Hibernia Nat’l Bank in New Orleans, 94-0264 (La. App. 4 Cir. 5/16/95);
655 So. 2d 724. (noting that delivery of a thing is necessary to perfect the
giving in payment, and that in the case of immovable, delivery is deemed to
take place upon the execution of the writing that transfers ownership).

7

under the doctrine of confusion, so as to allow a judicial mortgage
filed in the interval between the execution of the dation and its
recordation to create a lien on the immovable property that was
the subject of the dation).
Nevertheless,

Defendants

argue

that

in

light

of

Martin

Lebreton Ins. Agency v. Lamastus, 357 So. 2d 883 (La. App. 1 Cir.
1978), the dation only extinguishes the Mortgages to the extent
that the value of Tracts A, C and D satisfy the debts subject to
the dation.

Defendants further rely on Lamastus to contend that

Gibson’s rights as a primary creditor may be prejudiced in the
absence of an independent determination of the value of the tracts.
At

issue

in

Lamastus

was

whether

the

trial

court

erred

in

dismissing an inferior creditor’s lawsuit seeking to set aside a
dation en paiement to a superior lienholder.

Id.

The defendants

in the case, Mr. and Mrs. Lamastus, executed a promissory note for
$30,000 secured by a collateral mortgage on their property due to
the plaintiff.

Id.

However, before the mortgage was recorded,

the defendants made a dation en paiement of the same property to
a senior creditor for a stated consideration of $260,000.

Id.

The plaintiff filed suit to set aside the dation en paiement
arguing that he was prejudiced by the transaction because the
property given in payment was worth more than the value recited in
the dation.

Id.

In upholding the validity of the dation, the

court reasoned that the plaintiff suffered no prejudice “because
8

the claims of

. . . [the creditors senior to the plaintiff] primed

that of plaintiff to such an extent that their satisfaction would
leave nothing available to apply against its debt.” Id. at 885.
The Court finds Defendants’ reliance on Lamastus misplaced.
Unlike the case sub judice, at issue in Lamastus was whether an
inferior third party creditor—not the creditor involved in the
dation—had been prejudiced as a result of the dation.

Here, the

third

has

party

creditor—SEPH—neither

alleges

that

it

prejudiced by the dation nor seeks to set aside the dation.

been
In

light of this, the Court finds the Defendants’ argument regarding
prejudice untenable.

By its express terms, the dation transferred

title to Tracts A, C, and D in satisfaction of the Mortgages which
encumbered the tracts. At the time of the transfer, the conveyance
and

mortgage

records

of

Washington

Parish

reflected

SEPH’s

judicial mortgage; therefore, Gibson took Tracts A, C, and D
subject to SEPH’s judicial mortgage.

See Bourque, 315 So. 2d at

658–59 (La. 1975) (“[The] satisfaction and cancellation of any
encumbrance by a giving in payment [does] not have the effect of
voiding the obligations owed to other creditors holding recorded
conventional mortgages, liens or judicial mortgage which ha[ve]
also attached to the property of the debtor.”); see also Calloway
v. Taylor, 286 So. 2d 156, 158 (La. App. 1 Cir. 1973) (concluding
that the appellant who received property by way of a dation en
paiement took the property subject to a prior recorded judicial
9

mortgage); Hibernia Nat’l Bank, 615 So. 2d at 1111-12 (concluding
that

a

creditor

who

takes

property

by dation en paiement in

satisfaction of debt will acquire the property subject to any
encumbrances of other creditors recorded prior to the recordation
of the dation en paiement). To the extent Defendants argue that
Gibson may be prejudiced by SEPH’s encumbrance, it is not for the
Court to determine whether Gibson made a wise decision in receiving
encumbered property in exchange for the release.
Moreover, Defendants cannot avoid extinguishment on the basis
that a claim to have the dation declared relatively null has not
yet prescribed.

As an initial matter, the mere fact that that

Gibson could possibly assert such a claim has no impact on the
Court’s ability to resolve the instant motion. “An absolutely null
contract, or a relatively null contract that has been declared
null by the court, is deemed never to have existed.” La. Civ. Code
art.

2033

(emphasis

added).

Whereas

an

obligation

is

not

extinguished by confusion as the result of an absolutely null
contract,

“[i]f

th[e]

transaction

is

only

relatively

null

confusion takes place, however, until the nullity is declared by
the court.”

5 Saul Litvinoff & Ronald J. Scalise, Jr., Louisiana

Civil Law Treatise § 20.1 (2d ed. 2017) (emphasis added).

Here,

it is undisputed that the dation has not been declared relatively
null. Further, the Court lacks the authority to declare the dation
a relative nullity sua sponte.
10

See La. Civ. Code art. 2031

(“Relative nullity may be invoked only by those persons for whose
interest the ground for nullity was established, and may not be
declared by the court on its own initiative.”).

In sum, the Court

concludes that the Mortgages were extinguished by operation of law
once Gibson acquired ownership of the tracts.
II.

Whether the Mortgages Were Revived
Finally, the Court must determine whether the Act of

Rescission was sufficient to revive the Mortgages.

The Louisiana

Civil Code provides that “a mortgage is extinguished,” inter alia,
“[b]y

prescription

of

all

the

obligations

that

the

mortgage

secures,” “[w]hen all the obligations . . . for which the mortgage
is established have been incurred and extinguished,” and, as is
the case here, “[b]y confusion as a result of the obligee’s
acquiring ownership of the thing mortgaged.”

La. Civ. Code art.

3319. 3 Whether a mortgage which has been extinguished by confusion

3

A mortgage is extinguished:
(1) By the extinction or destruction of the thing mortgaged.
(2) By confusion as a result of the obligee's acquiring ownership
of the thing mortgaged.
(3) By prescription of all the obligations that the mortgage
secures.
(4) By discharge through execution or other judicial proceeding in
accordance with the law.
(5) By consent of the mortgagee.
(6) By termination of the mortgage in the manner provided by
Paragraph D of Article 3298.
(7) When all the obligations, present and future, for which the
mortgage is established have been incurred and extinguished.

La. Civ. Code art. 3319.

11

can be revived by the subsequent acts of the parties appears to be
an open question under Louisiana law.
However, it is well-established that Louisiana law prohibits
a mortgage from being revived if the obligation that the mortgage
secures has prescribed, or when all the obligations for which the
mortgage was established have been incurred and extinguished,
notwithstanding certain subsequent acts of the parties.

See

Whitney Nat’l Bank v. Demarest, 947 F.2d 182, 188 (5th Cir. 1991)
(concluding

that

a

mortgage

that

had

been

extinguished

via

prescription could not be revived despite a later acknowledgement
or renunciation of prescription); see also Aldridge v. Reed, 190
So. 845, 847 (La. App. 2 Cir. 1939) (“[W]hen the obligation is
extinguished by prescription, the mortgage falls with it; becomes
dead, and ... a subsequent acknowledgment of the obligation or
waiver

of

prescription

thereon

does

not

revive

or

reinstate

the mortgage.”); State Bank & Tr. Co. of Golden Meadow v. Boat
D.J. Griffin, 755 F. Supp. 1389, 1398 (E.D. La. 1991) (“[W]hen
the mortgage is for a specific debt, payment extinguishes debt
and mortgage,

and

the

subsequent

issue

of

the

note

will

not revive the mortgage.”); Baton Rouge Wood Products, Inc., v.
Ezell, 194 So. 2d 372, 377 (La. App. 1 Cir. 1966).

The Court finds

no reason to treat a mortgage which has been extinguished by
confusion any differently. As articulated by the Louisiana First
Circuit Court of Appeal:
12

A mortgage extinguished by operation of express law,
however, cannot be revived by its subsequent pledge for
a debt of any nature whatsoever. Once the mortgage has
ceased to exist by operation of law, it is dead for all
purposes and all time. The parties are without power to
revive its lifeless remains. Upon extinguishment . . .
the mortgage ceases to exist—there is nothing left to .
. . deal with in any legal manner.

Ezell, 194 So. 2d at 377.

Therefore, the Court finds that the Act

of Rescission did not have the effect of reviving the Mortgages.
Accordingly, the Court concludes that SEPH is entitled to judgment
as a matter of law that the Mortgages were extinguished by the
dation pursuant to La. Civ. Code art. 3319.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that SEPH’s Motion for Summary Judgment
(Rec. Doc. 13) is GRANTED.
IT IS FURTHER ORDERED that SEPH shall file a proposed judgment
not later than June 20, 2018.
New Orleans, Louisiana, this 13th day of June, 2018.

_________________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

13