Code III - Security Rights Flashcards
Personal Security (Suretyship)
security right allowing a debt to be enforced against a person other than the obligor
Real Security Right
security right enforceable against property
- Mortgages - agreement on immovables
- Privileges - by law on immovables
- Security Interests - agreement on movables (NOT TESTED)
Suretyship
conventional obligation which a 3p (surety or guarantor) binds herself to a creditor to fulfill obligation of another on failing to do so
Suretyship Requirements
only by contract and must meet two formal requirements
- In Writing (act under private signature, signed by surety)
- Express: unambiguous
- surety’s personal liability
- obligations undertaking
(Parole evidence is NOT permitted)
Ostensible Suretyship
surety appears to be immediately liable as principal co-obligor
will be treated as a surety (with extra rights a defenses) IF:
1. principal cause of the contract with creditor is to guarantee performance rather than enjoying benefits of obligation
2. Creditor clearly knows this
Creditor’s Rights
Immediate, unconditional, and solidary
may collect the principal obligor’s debt from any surety as soon as it is enforceable
Guarantee of Payment
sureties cannot demand exhaust principal obligor first
Guarantee of Collection
may pursuit principal obligor first unsuccessfully
Surety’s Defenses
- Defense of Principal Obligor (duress, and other vices NO capacity or bankruptcy defense)
- Remission (release) of principal or accessory obligation
- Modification of Obligation
- Impairment of collateral security
Release of Co-Surety
releases that surety’s virile share of the guaranteed obligation
Effect of Modification or Impairment
Ordinary suretyship is totally extinguished by material modification or impairment
commercial is only extinguished to the extent the modification or impairment actually injury the surety
creditor has burden of proving extent has NOT injured
Commercial vs. Ordinary
ordinary = friend, family
commercial = all other
Rules of Construction
ordinary is strictly construed in favor of the surety
commercial is construed like any other
Surety’s rights against Principal Obligor
if surety is force to pay they are entitled to:
- Reimbursement (as long as debt was exigible - due and owing)
- Subrogation (step’s into creditor’s shoes)
Surety’s rights against Co-Sureties (Contribution)
collect from co-sureties to extent any one has paid more than virile share of the obligation
Insolvent Co-Surety
their share is reallocated to the others in equal shares unless modified by contract
Termination of Suretyship
specific obligations = extinction or unenforceability of principal obligation renders suretyship terminated
continuing guarantee = providing notice to the creditor of desire to terminate for FUTURE obligations
Notice of Death of Surety
operates as notice that surety’s estate will NO LONGER BE LIABLE for FUTURE obligations
Mortgages
gives creditor contingent right in immovable property
Parties to a Mortgage
Mortgagor = property rights affected
Mortgagee = creditor with security rights
Conventional Mortgage
created by contract (act of mortgage) which mortgagor grants security right in specifically identified property
Judicial Mortgage
party obtains judgment for the payment of money, files a certified copy of the judgment in parish where debtor’s immovable property is located
Automatically encumbers ALL present and future rights in immovable property in said parish
must be reestablished every 10 years
Legal Mortgages
arise as matter of law in certain limited circumstances
Special and General Mortgages
special = specifically identified immovable property (conventional)
General = anywhere in a defined region (legal and judicial)
Property Susceptible to Mortgage
absolute ownership and lesser rights (ususfruct, servitudes of right of use, lessee’s right of quiet use and enjoyment)
if movables become component parts, mortgage automatically extends
Creating Conventional Mortgage
- In Writing
- Signed by MORTGAGOR
- Value and describe secured obligation
- Describe Immovable Property
Mortgage Writing Requirement
Authentic act recommended BUT NOT required
if authentic act can be enforced quicker through “executory” process if not authentic must go through “ordinary” process
Paraphs - NO LONGER REQUIRED
Recording of Mortgages (Perfection)
to be effective as to third parties must be filed for record in parish in which immovable property is located
Priority Ranking
whoever properly filed first takes first precedence to the value of the property
Buyers of the property = have absolute and exclusive ownership if mortgagee fails to file before buyer files an act of sale
Filing in Mortgage Records
acts of mortgage must be filed in the MORTGAGE RECORDS (ENTIRE MORTGAGE MUST BE FILED)
Acts of sale are filed in conveyance records
Lapse - Effective Dates
any mortgage is effective for at least 10 years after the date on ACT OF MORTGAGE (NOT FILING)
Longer if:
1. mortgage describes the maturity date
2. The maturity date is nine years or longer
6 years after the maturity date
Effect of Filed Amendments
if amended and refiled effective period of mortgage is recalculated according to new terms
Reinscription
must sign and file a notice of reinscription BEFORE LAPSE
- states the name of the mortgagor
- states the recordation number or other information about the original filed mortgage
- declares the mortgage resinscribed
EXTENDS for another 10 years
Judicial Mortgage Reinscription
must be revived in a separate proceeding
Transfer of Secured Principal Obligation
original creditor-mortgagee transfers to 3p the right to enforce an obligation new creditor automatically acquires all original creditor’s rights under the mortgage
Transfer of Mortgaged Property
buyer who files act of sale in conveyance records AFTER mortgagee properly filed takes the property SUBJECT to the mortgage
Called a third possessor
Extinction of Mortgages
- Extinction or Destruction of Mortgaged Prop
- Extinction of Principal Obligation
- Confusion
- Termination (written notice from mortgagor when all outstanding debt is paid)
Multiple Indebtedness Mortgages
secures fluctuating future advances
must state the max amount of secured debt that can be outstanding at any given time
Priority is given the date which is filed
remains effective against borrower even if paid all outstanding loans
Scope of Pledge of Lease of an Immovable and its rents
owner of immovable gives creditor rights in one or more leases of that immovable and its rents to secure an obligation
Creation and Effectiveness against 3ps (pledge of lease and its rents)
- in writing signed by pledgor
- states amount secured or the maximum secured amount that can be outstanding at any time
- precisely describes nature and situation of the immovable property NEED NOT describe specific leases
must be filed in mortgage records in parish of immovable property to be effective against third parties
Privileges
Arises by operation of law
gives a creditor a right in identified property to serve as a source of value if the obligor fails to fulfill an obligation
ALL DEFINED BY LAW NOT BY AGREEMENT
Privileges Limited Remedies
do not offer a quicker an more convenient method of seizing and selling property, its a RESERVATION of priority
General and Special Privileges
General = all identified property
Special = specified property
General Privileges
attach to ALL movable and immovable property of the person to whom the described goods or services have been supplied on credit
general privileges rank below SPECIAL privileges or security interest but ABOVE a mortgage
Examples: funeral charges up to $500 and winning litigants right to collect court-ordered costs from losing party
Selected Special Privileges
only affect movable property
1.Artisan’s/Repairpersons Privilege
2. Lessor’s privilege
3. Vendor’s privilege
Artisan’s/Repairpersons Privilege
Civil Code: only the price of labor and only so long as the thing remains in the artisan’s possession
Revised Statutes: secures both labor and materials and remains for 120 days from last day on which materials and/or labor was supplied OR until person relinquishes possession of the item whichever is later
120 days increased to 1 year if repaired item is farm equipment
Civil code privilege is TOP priority
Statute priority over all security right other than prior perfected chapter 9 interests
Lessor’s Privilege
landowners who lease their farmland and buildings to secure payment of rent and other obligations
effects all lessee’s movables on property persists for 15 days for property removed
privilege extends to prop of sublessee but no 15 day right to pursuit
Priority over vendor’s privilege (except vendor’s on farm equipment) and all general privileges except funeral charges
Vendor’s Privilege
Immovable credit sale = must be recorded in mortgage records to preserve privilege
Movables credit sale = persists only as long as stays in possession of buyer
Priority in movable over all general privileges but is subordinate to lessor’s privilege (except in farm implements)
Properly recorded vendor’s privilege in immovable property has priority over a filed mortgage only if the act of credit sale is properly recorded before the mortgage OR WITHIN 7 days of the date of the act of credit sale 15 days if recorded in different parish than where executed
Private Works Act
protects contractors and suppliers for claims for unpaid wages and material costs
PWA Rights
- claim against the owner of the immovable property over which work was done
- a privilege over the immovable over which work was done
Owner’s Avoidance of PWA Claims
can avoid by filing a notice of contract and obtaining surety bond
Notice of Contract
BEFORE WORK BEGINS
filed in mortgage records where immovable is located
Must be singed by owner and contractor and describe the immovable, work to be done, contract price, and when payment is due
Work
Work begins when either
1. materials worth at least $100 are delivered to the site
2. other visible work is conducted on the site (except dirt work)
Surety Bond
owner must obtain surety bond in an amount sufficient to cover potential claims
attach evidence of bond to notice of contract
Establishing PWA Claims and Privileges
- Must arise
- Must be preserved
Arising requirement
PWA claims and privilege arises as soon as a claimant is owed money
PWA Exceptions for Privileges
- Claimant is general contractor and cost of construction is greater than $100,000, claimant MUST properly file notice of contract
- Claimant is lessor of movables, lacks privity of contract with owner, the claimant MUST deliver notice to the contractor (and owner if notice of contract is filed) that they have leased or intend to lease to a contractor or subcontractor for use in work
NOTE: if notice is given more than 30 days from when leased movable is delivered then claim/privilege ONLY inlcudes rents that come due after notice is given - Claimant is seller of movables (materialman) to a subcontractor and notice of contract has been filed, claimant must deliver notice of nonpayment of the price to the owner and contractor no later than 75 days from last day of the month on which the movables were delivered to the job site
Preserving Requirement
claimant must file a statement of claim and/or privilege in proper time period
- be signed by claimant
- reasonably identify improved immovable
- describe the amount being claimed
- identify who failed to pay
5 Describe the work that was done
Preserving Timing
Statement of claim and/or privilege must be filed no later than 60 days from the earlier of:
- filing of a notice of termination of the work
- date of subtantial completion or abandonment of the work
Preservation timing EXCEPTIONS
- 30 days after the notice of termination IF:
- a notice of contract has been timely filed, AND
- the claimant is not in privity of contract with the owner NO LATER THAN 6 MNTHS after the date of substantial completion or abandonment (delivered to owner in 30 days or 6 months if address is given in notice of contract
- 60 days after notice of termination if claimant is general contractor. If a notice of termination has not been filed, no later than 7 months after the date of substantial completion or abandonment
- 70 days after the earlier of the filing of a notice of termination or the date of substantial completion or abandonment if: 1. claimant is a seller or lessor of movables with privity of contract with the owner or any claimant does not have privity of contract with the owner 2. the work is residential 3. a notice of contract was not filed, and 4. the claimant gives notice of nonpayment to the owner before expiration of the general 60-day filing period and then waits at least 10 days before filing stmt of claim/privilege
Substantial Completion and Abandonment
substantially complete when 1: last work is performed on or materials are delivered to the contstruction site OR 2: owner accepts the improvement or possesses or occupies the immovable
abandoned when: 1. owner terminates the work and notifies the person engaged no longer desire to continue OR 2: owner otherwise objectively and in good faith manifests the abandonment or discontinuance of the prroject
Priority of PWA Privileges against 3ps
earlier of:
1. notice of contract is properly filed OR
2. when work begins
No Work Affidavit
creates an irrebuttable presumption that work has not begun
Requirements:
1. singed by an engineer, surveyor, or architect
2. declare work has not begun
3. contain complete property description
4. filed in mortgage records no later than 4 business days before or after the filing of a mortgage or privilege
5. based on an inspection that occured no later than four business days before or after the filing of a mortgage or privilege
Priority of PWA Privileges against other PWA Privileges
- Local Gov
- Laborers
- Mortgages and vendors’ privileges that became effective BEFORE PWA privileges
- Subcontractors, materialmen, and lessors
- General contractor, architects, surveyors, or engineers hired by owner or professional consultant
- Mortgages and vendors’ privileges effective AFTER PWA privileges effective
Enforcing PWA Privilege
file suit under ordinary process
Prescription: 1 year from filing of statement of claim and/or privilege for PWA claims
Maintenance: notice of lis pendens msut be filed into the mortgage records within one year of filing the satement of claim and/or privilege
