Corona v. MRC Realty, Inc.

Full title: JOSEPH CORONA, III v. MRC REALTY, INC.

Court: STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT

Date published: Mar 6, 2015

2014 CA 0543 (La. Ct. App. Mar. 6, 2015)

Opinion

2014 CA 0543

03-06-2015

JOSEPH CORONA, III v. MRC REALTY, INC.

D. Rex English Slidell, Louisiana Counsel for Plaintiffs/Appellees Joseph Corona, III and Chris Ducote, Sr. Richard A. Richardson Madisonville, Louisiana Counsel for Intervenor/Appellant AJ Title Company, Inc.

McCLENDON, J.

NOT DESIGNATED FOR PUBLICATION On Appeal from the Twenty-Second Judicial District Court
In and for the Parish of St. Tammany
State of Louisiana
No. 2012-16351
Honorable Reginald T. Badeaux, Judge Presiding D. Rex English
Slidell, Louisiana
Counsel for Plaintiffs/Appellees
Joseph Corona, III and Chris Ducote, Sr.
Richard A. Richardson
Madisonville, Louisiana
Counsel for Intervenor/Appellant
AJ Title Company, Inc.
BEFORE: WHIPPLE, C.J., McCLENDON, AND HIGGINBOTHAM, JJ. McCLENDON, J.

In this matter, the intervenes appeals a judgment of the trial court that found that its mortgage ranked behind that of the plaintiff. We affirm.

On November 10, 2005, Nyla Hurst and #1 MRC Enterprises, L.L.C. entered into a lease purchase agreement with Rain Tree Marketing Inc. (Rain Tree) and Chris Jerome Ducote, Sr. to purchase certain immovable property in St. Tammany Parish for $870,000.00.¹ After several extensions of the agreement, on January 18, 2008, Rain Tree sold the property to MRC Realty, Inc. (MRC Realty) for the stated price. Rain Tree was represented by its agent and owner, Mr. Ducote, and MRC Realty was represented by its agent and owner, Nyla Hurst. AJ Title Company, Inc. (AJ Title) handled the closing.²

1 The lease purchase agreement referred to Raintree Marketing, Inc. However, for consistency, we refer to the company as Rain Tree.

2 The record indicates that Ms. Hurst's sister owns AJ Title.

The U.S. Department of Housing & Urban Development Settlement Statement (the HUD statement), prepared in connection with the closing, shows that Mr. Ducote provided owner financing for the sale of the property in the amount of $562,804.83 with MRC Realty signing a note (the Ducote note) and mortgage (the Ducote mortgage) in favor of Mr. Ducote in connection therewith.³ The HUD statement also shows that MRC Realty provided an Equity Paid credit in the amount of $135,644.49, leaving a balance of $176,312.58.⁴ AJ Title loaned MRC Realty the remaining balance.⁵ The HUD statement referred to the amount of $176,312.58 as the "2nd mtg."

3 The actual mortgage note was in the amount of $562,805.00.

4 The Equity Paid credit was the sum total of credits towards the purchase price referenced in the lease purchase agreement.

5 The actual mortgage note was in the amount of $176,313.00.

On January 22, 2008, the cash sale and two mortgages were recorded by AJ Title consistent with the HUD statement.⁶ MRC Realty made payments on the mortgages for almost three years and then defaulted. On October 29, 2012, Mr. Ducote sold his note to the plaintiff, Joseph Corona, III, for approximately $355,000.00. On November 30, 2012, Corona filed a Petition for Foreclosure by Executory Process without Appraisal, acknowledging that MRC Realty quit making payments on the Ducote note and mortgage as of the November 2010 monthly installment.

6 Mr. Ducote's mortgage was recorded in St. Tammany Parish as Instrument # 1664736, and AJ Title's mortgage was recorded as Instrument # 1664739.

Thereafter, on March 1, 2013, AJ Title filed a Petition of Intervention, asserting that its mortgage was superior to the mortgage of Mr. Corona. With the petition, AJ Title filed a Rule to Rank Mortgages and to Prohibit Payment of Proceeds from Sheriff Sale, contending that Mr. Ducote did not loan MRC Realty anything and that the Ducote note and mortgage were unenforceable because they were entered into without consideration.

Following a hearing on September 24, 2013, the trial court ruled in favor of Mr. Corona and Mr. Ducote and against AJ Title, maintaining the ranking of the mortgage by MRC Realty in favor of Mr. Ducote as being superior to the mortgage by MRC Realty in favor of AJ Title. Judgment was signed on October 15, 2013, and AJ Title appealed.⁷

7 This court issued a rule to show cause order, stating that the October 15, 2013 judgment appeared to be a partial judgment without a designation of finality. In response, on July 11, 2014, the trial court issued an Amended and Supplemental Judgment stating: "This is a final and appealable Judgment pursuant to La. C.C.P. art. 1915." Also on July 11, 2014, the trial court issued a per curiam opinion concluding that there was no just reason for delay based on the criteria expressed in R.J. Messinger, Inc. v. Rosenblum, 04-1664 (La. 3/2/05), 894 So.2d 1113, 1122. Based on our own review, we find the designation was proper.

In its sole assignment of error, AJ Title asserts that the trial court erred in finding that the Ducote mortgage ranked ahead of the AJ Title mortgage. AJ Title argues that the Ducote note is unenforceable because there was no legal cause for the note. It argues that "MRC [Realty] had no reason to obligate itself to [Mr.] Ducote because [Mr.] Ducote did not loan anything to MRC [Realty]. MRC [Realty] received no advantage from [Mr.] Ducote in exchange for its obligation to pay [Mr.] Ducote." AJ Title asserts that the reason for MRC Realty to obligate itself was to receive $562,805.00 and because MRC Realty did not receive a check in that amount, there was no reason for MRC Realty to have obligated itself to Mr. Ducote. Therefore, according to AJ Title, because the note is null, as an accessory right, the Ducote mortgage is invalid.⁸

8 On the other hand, Mr. Corona contends that the Ducote note is not null for absence of cause. He further asserts that AJ Title breached its fiduciary duties to Mr. Ducote and that the clean hands doctrine bars AJ Title from recovery. Mr. Corona claims that AJ Title did not disclose to all the parties that it had a financial interest in the transaction. Mr. Corona also argues that AJ Title protected its interest and MRC Realty's interest by issuing title insurance policies, but that AJ Title did not offer Mr. Ducote title insurance to protect his interests. However, based on our finding herein, it is unnecessary to address these arguments.

AJ Title fails to recognize that MRC Realty purchased a valuable piece of property and as part of the consideration executed a note in the amount of $562,805.00. Its argument that because a check was not written out to MRC Realty in that amount and that MRC Realty therefore received no advantage is without merit. Consequently, its assertion that the Ducote note and mortgage are invalid is also without merit.⁹

9 AJ Title also asserts that Corona, as the assignee, could not enforce the Ducote note because Corona was not a holder in due course. However, AJ Title's argument regarding Corona's holder in due course status was never raised or submitted to the trial court. Our jurisprudence has a longstanding general rule that issues not submitted to the trial court for decision will not be considered for the first time on appeal. ASP Enterprises, Inc. v. Guillory, 08-2235 (La.App. 1 Cir. 9/11/09), 22 So.3d 964, 971, writ denied, 09-2464 (La. 1/29/10), 25 So.3d 834. See also Rule 1-3, Uniform Rules of Louisiana Courts of Appeal.

Louisiana Civil Code article 3307 provides, in pertinent part:

A mortgage has the following effects:



. . . .



(3) The mortgagee is preferred to the unsecured creditors of the mortgagor and to others whose rights become effective after the mortgage becomes effective as to them.[¹⁰]

In this matter, it is undisputed that the Ducote mortgage is the first ranking mortgage on the subject property as reflected in the public records. Accordingly, following a thorough review of the record, we find no error in the trial court's conclusion that the mortgage granted by MRC Realty in favor of Mr. Ducote is superior to the mortgage granted by MRC Realty in favor of AJ Title.¹¹

10 See also LSA-C.C. art. 3279, which provides:

Mortgage gives the mortgagee, upon failure of the obligor to perform the obligation that the mortgage secures, the right to cause the property to be seized and sold in the manner provided by law and to have the proceeds applied toward the satisfaction of the obligation in preference to claims of others.

11 A court of appeal may not overturn a judgment of the trial court absent an error of law or a factual finding that it is manifestly erroneous or clearly wrong. See Stobart v. State through Dept. of Transp. and Development, 617 So.2d 880, 882, n.2 (La. 1993).
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We issue this memorandum opinion affirming the judgment of the trial court in compliance with Rule 2-16.1.B, Uniform Rules of Louisiana Courts of Appeal. All costs associated with this appeal are assessed to the intervenor, AJ Title Company, Inc.

AFFIRMED.