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In re LeBlanc

United States District Court, E.D. Louisiana

June 3, 2019

IN RE MAUREEN PHILIPS LEBLANC

         SECTION “F”

          ORDER AND REASONS

          MARTIN L. C. FELDMAN UNITED STATES DISTRICT JUDGE

         Before the Court is an appeal from the United States Bankruptcy Court's order granting in part and denying in part Ocwen Loan Servicing, LLC's motion to annul cancellation of mortgage and to rank mortgages. For the reasons that follow, the Court AFFIRMS the Bankruptcy Court's ruling that the property description in the Original Ocwen Mortgage was insufficient to encumber Lot 47 but REMANDS the matter for a determination on the merits as to the validity and rank of the SBA Mortgage.

         Background

         The issue in this bankruptcy appeal is whether a property description in a conventional mortgage is sufficient to encumber a residential lot located in a subdivision in Slidell, Louisiana. The facts underlying the appeal date back to 2001:

         In August of 2001, Maureen Philips LeBlanc purchased adjacent Lots 46 and 47, situated in Section 1 of Bayou Bonfouca Estates in Slidell, Louisiana.[1] Three years later, on May 5, 2004, LeBlanc sold Lot 46. The following year, on July 25, 2005, she executed a promissory note in favor of Quicken Loans, Inc., secured by a mortgage in favor of Mortgage Electronic Registration Systems, Inc., as nominee for Quicken Loans.[2] Recorded in the St. Tammany Parish mortgage records on August 15, 2005 as Instrument No.1512016, the “Original Ocwen Mortgage” describes the mortgaged property as follows:

         Tax ID Number: 1240534749

         Land situated in the Parish of St. Tammany, State of Louisiana is described as follows:

All that certain Lot or Parcel of Land, together with all the buildings and improvements thereon, and all the rights, privileges, servitudes, appurtenances and advantages thereunto belonging or in anywise appertaining, situated in BAYOU BONFOUCA ESTATES, SECTION 1, Slidell, Street. [sic] Tammany Parish, to-wit: Lot 46 of said subdivision and more fully described as follows: Said Lot 46 has a frontage of 50.00 feet on Middlebrook Drive, with a depth on the East of 123.9 feet, a depth on the West of 121.6 feet, with a width in the rear of 100.00 feet, more or less, which is varied by the traverse of Bayou Bonfouca. All as will be seen by reference to plat of Survey No. 2028 by John Sollberger, dated August 12, 1958. Further in accordance with survey by Ivan M. Borgen, C.E., dated February 14th, 1978, Survey No. 14, 174, copy of which is attached to Act No. 382991.
Commonly known as: 161 Middlebrook Dr., Slidell, LA 90458

         Emphasis added. LeBlanc intended to place the mortgage on Lot 47 of Bayou Bonfouca Estates, Section 1, which bears the stated municipal address of 161 Middlebrook Drive and the tax ID number listed in the mortgage property description. However, the Original Ocwen Mortgage erroneously refers to “Lot 46” and contains the metes and bounds description for the lower-numbered lot.[3]

         Soon after, Ms. LeBlanc executed three additional mortgages. First, she issued a multiple indebtedness mortgage in favor of Hibernia National Bank, which is currently assigned to Real Time Resolutions, Inc. Recorded in the St. Tammany Parish mortgage records on November 22, 2005, the Real Time Mortgage references 161 Middlebrook Drive and contains the same tax ID number as that included in the Original Ocwen Mortgage, but it refers to “Lot 47” and contains the metes and bounds description for the higher-number lot:

ALL THAT CERTAIN LOT OR PARCEL OF GROUND, TOGETHER WITH ALL THE BUILDINGS AND IMPROVEMENTS THEREON, AND ALL THE RIGHTS, PRIVILEGES, SERVITUDES, APPURTENANCES AND ADVANTAGES THEREUNTO BELONGING OR IN ANYWISE APPERTAINING, SITUATED IN BAYOU BONFOUCA ESTATE, SECTION 1, SLIDELL, ST. TAMMANY PARISH, LOUISIANA, TO-WIT: LOT 47 OF SAID SUBDIVISION AND MORE FULLY DESCRIBED AS FOLLOWS: SAID LOT 47 HAS A FRONTAGE OF 50 FEET ON MIDDLEBROOK DRIVE, WITH A DEPTH ON THE EAST OF 150.2 FEET, A DEPTH ON THE WEST OF 123.9 FEET, AND A WIDTH IN THE REAR OF 100 FEET MORE OR LESS WHICH IS VARIED BY THE TRAVERSE OF BAYOU BONFOUCA.

         Next, on December 13, 2005, LeBlanc executed a mortgage in favor of the U.S. Small Business Administration, which was recorded in the St. Tammany Parish mortgage records on January 11, 2006.[4] Finally, LeBlanc executed another mortgage in favor of MERS nearly identical to the Original Ocwen Mortgage, except that it identifies the mortgaged property as Lot 47, rather than Lot 46, and contains the metes and bounds for Lot 47. Although the “Corrected Ocwen Mortgage” is ostensibly dated July 25, 2005, it was not recorded in the St. Tammany Parish mortgage records until March 8, 2006.[5]

         Thereafter, on June 7, 2006, the Clerk of Court for St. Tammany Parish cancelled the Original Ocwen Mortgage from the mortgage records, at the request of MERS. Contrary to its representations, MERS did not hold the promissory note secured by the Original Ocwen Mortgage at that time, and the note had not been satisfied.

         A decade later, on August 31, 2017, Maureen Philips LeBlanc filed for bankruptcy under Chapter 13. Contending that the Original Ocwen Mortgage ranks as the first of three mortgages recorded against Lot 47 in Section 1 of Bayou Bonfouca Estates, Ocwen moved the Bankruptcy Court for an order: (1) annulling the erroneous cancellation of the Original Ocwen Mortgage; and (2) declaring that the property description in that mortgage is sufficient to encumber Lot 47 and rank ahead of all mortgages recorded after August 15, 2005.

         After conducting a trial and entertaining witness testimony, the Bankruptcy Court issued an Order on October 30, 2018, granting in part and denying in part Ocwen's motion. In its ruling, the Bankruptcy Court annulled the cancellation of the Original Ocwen Mortgage but held that the property description in the Original Ocwen Mortgage was insufficient to encumber or alert a third party that it affects Lot 47. Accordingly, the Bankruptcy Judge determined that Ocwen's interest in Lot 47 dates from the recordation of the Corrected Ocwen Mortgage on March 8, 2006, and therefore, ranks behind the Real Time Mortgage and the SBA Mortgage.

         It is from this Order that Ocwen now appeals. Ocwen submits that the Bankruptcy Court erred in holding that the Original Ocwen Mortgage lacked a sufficient property description to encumber Lot 47 in Section 1 of Bayou Bonfouca Estates. In the alternative, insofar as the Bankruptcy Court was correct regarding the insufficiency of the Original Ocwen Mortgage's property description, Ocwen submits that it erred in finding that the SBA Mortgage ranks ahead of the Corrected Ocwen Mortgage when there is no evidence regarding the validity or rank of the SBA Mortgage in the record.

         I.

         A district court functions as an appellate court when reviewing the decision of a bankruptcy court. In re Webb, 954 F.2d 1102 (5th Cir. 1992). The standard of review depends upon whether a finding of fact or conclusion of law is subject to review. When findings of fact are reviewed, the clearly erroneous standard applies. United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). However, where a finding of fact is premised on an improper legal standard, it is not protected by the clearly erroneous rule and is reviewed de novo. In re Missionary Baptist Foundation of America, 818 F.2d 1135, 1142 (5th Cir. 1987).

         II.

         The first issue on appeal is whether the Bankruptcy Court erred in determining that the Original Ocwen Mortgage lacked a sufficient property description to encumber Lot 47 of Bayou Bonfouca Estates, Section 1, in Slidell, Louisiana. The Bankruptcy Judge ruled that the description was misleading to those searching the public records for documents affecting Lot 47 because Lots 46 and 47 both exist, were both owned by LeBlanc at one point in time, and had at one time carried the same municipal address. After conducting a de novo review, the Court finds that the property description in the Original Ocwen Mortgage was misleading and therefore insufficient to create a valid conventional mortgage.

         A.

         Under Louisiana law, a mortgage is a right over property that secures an underlying obligation. See La. Civ. Code arts. 3278-3287. Louisiana Civil Code article 3288 sets forth the requirements for a valid conventional mortgage, one that is created by contract; it provides:

A contract of mortgage must state precisely the nature and situation of each of the immovables or other property over which it is granted; state the amount of the obligation, or the maximum amount of the obligations that may be outstanding at any time and from time to time that the mortgage secures; and be signed by the mortgagor.

La. Civ. Code art. 3288 (emphasis added). The purpose of this property description requirement is “to give notice to third persons of exactly what property is mortgaged.” See In re Vezinot, 20 B.R. 950, 953 (Bankr. W.D. La. 1982) (citing Gretna Finance Co. v. Camp, 212 So.2d 857 (La.App. 4 Cir. 1968)).[6]

         While there is no bright-line rule for determining the sufficiency of a property description in a mortgage or deed, Louisiana jurisprudence has distinguished between descriptions that are misleading and those that are ambiguous. This case literature instructs that a misleading description is insufficient but that an ambiguous description may be valid, provided it can be clarified by extrinsic evidence:

A deed is deemed to constitute notice to third parties where it enables the court to locate and identify with certainty, the property intended to be conveyed, with the aid of such extrinsic evidence as is admissible under the rules of evidence. The recorded description need not be given with such particularity as to make resort to extrinsic evidence absolutely unnecessary. However, the description may not be so inaccurate or faulty as to be misleading.

Wood v. Morvant, 321 So.2d 914, 918 (La.App. 1 Cir. 1975).

         Whether an inaccurate description is misleading turns on whether the descriptive error is apparent from the public records. See id. at 919 (“We find that in each instance the descriptive errors in question were apparent on the face of the public record, namely the official township maps on file and of record in the office of the Clerk and Recorder.”); see also In re Vezinot, 20 B.R. at 954 (“Third persons searching the records for mortgages should not be bound to look beyond the mortgage records unless the mortgage itself refers to another recorded instrument.”). Applying this standard, courts have recognized that “where the description in the recorded [instrument] is so [m]isleading that it actually describes accurately some other property than that mortgaged or sold, a purchaser is not only not put on his guard thereby, but is actually put off his guard.” See Mid-State Homes, Inc. v. Knapp, 156 So.2d 122, 126 (La.App. 3 Cir. 1963) (citations omitted). On the other hand, a property description that “contains inaccuracies is nonetheless sufficient if it identifies the property with certainty and if it is not so inaccurate or faulty as to be misleading.” C&G Constr., Inc. v. Valteau, 615 So.2d 433, 436 (La.App. 4 Cir. 1993) (citations omitted).

         Although these rules provide helpful guidance, Louisiana jurisprudence emphasizes that “no precise criteria can be established for distinguishing between descriptions which are sufficient to put third persons on notice and those which are not.” Wood, 321 So.2d at 918. As a result, “each case of this nature must be decided in the light of its own peculiar facts and circumstances.” Id. Moreover, while the case literature often treats property descriptions in mortgages and deeds alike, at least one Louisiana property law scholar has recognized an important distinction:

The description requirements for acts of sale of immovable property, and the willingness of courts to allow the eking of title to complete an insufficient description, are not automatically applicable to the contract of mortgage, which must “state precisely the nature and situation of each of the immovables or other property over which it is granted.” Dian Tooley-Knoblett, 24 La. Civ. L. Treatise, Sales § 6:10 (2018 ed.).

         Finally, a conventional mortgage is effective against third parties only after it is recorded in the mortgage records of the parish in which the immovable property is located. La. Civ. Code arts. 3307, 3338; see Cimarex Energy Co. v. Mauboules, 40 So.3d 931, 944 (La. 2010) (“The primary focus of the public records doctrine is the protection of third persons against unrecorded interests.”).

         B.

         In this case, it is undisputed that the Original Ocwen Mortgage contains the correct municipal address and tax ID number for Lot 47 but the incorrect lot number and metes and bounds description. Ocwen contends that this conflicting information gives rise to an ambiguity that can be clarified by extrinsic evidence and that the Bankruptcy Court erred in finding the description misleading and thus insufficient to create a valid mortgage. Ocwen advances three main arguments in support of its position: (1) the Bankruptcy Court's decision fails to acknowledge that the Original Ocwen Mortgage was discoverable through a search of the St. Tammany Parish public records; (2) the Bankruptcy Court failed to follow applicable Louisiana jurisprudence, as well as its own precedent, as affirmed by this Court, in In re Heitmeier; and (3) the Bankruptcy Court erroneously relied on jurisprudence applying property description standards pertaining to the Louisiana Private Works Act, which explicitly provides that a municipal address is not a sufficient property description.

         Real Time counters that the property description within the four corners of the Original Ocwen Mortgage is misleading because it specifically identifies Lot 46 and contains the metes and bounds description for Lot 46, rather than Lot 47. Real Time further submits that, although the municipal address and tax ID number are related to Lot 47, the municipal address of 161 Middlebrook Drive is insufficient to determine which lot was intended to be encumbered because the lots once shared this ...


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