What are the formal requirements for creation of a suretyship?
Formal requirements for creation of a suretyship:
- Writing
- Express promise to pay
- Ostensible suretyship
- the principle cause of the contract with the creditor is to guarantee performance of the obligation
- the creditor clearly knows this
What are the surety’s defenses against payment to a creditor?
Defenses for which classification is relevant:
- Material modification of the obligation without surety’s consent. E.g., forbearance plus increase in the interest rate.
- Impairment of the collateral. E.g., failure to protect security interest. (Not very common)
- If either of these events occur AND the surety doesn’t consent to the change:
- Ordinary suretyship is extinguished
- Commercial suretyship is extinguished to the extent that the modification actually injures the surety.
Defenses for which classification is not relevant:
- Defenses of principal obligor: vices of consent, illegality. Except cannot assert lack of capacity or discharge in bankruptcy.
- Remission of principal obligor: surety’s assessorial obligation is released if the creditor remits (releases) the principal obligation/debt.
- Remission of co-sureties: releasing one co-surety remits that surety’s virile share
All of the defenses may be waived.
What are the types of suretyship contracts?
- Legal Suretyship. Bail bondsmen.
- Commercial Suretyshp. Present if any of these elements is present:
- the surety or the debtor is a business entity
- the principal obligation (debt) or the suretyship contract
arises out of a commercial transaction (business deal).
- Ordinary suretyship: defeault if neither legal nor commercial
What’s the significance of the distinction between different types of suretyships?
Effect: relevant to two defenses (material modification of obligation without consent and impairment of the collateral)
What rights does a surety have against a debtor?
- Reimbursement
- If surety pays debtor’s “exigible” (due and owing) obligation, surety has a right to seek reimbursement from the debtor.
- If surety pays an obligation that was not “exigible” e.g., if the principle obligation has prescribed, surety cannot get reimbursement.
- Subrogation: surety steps into creditor’s shoes, exercising all rights that the creditor had against the debtor (including real security rights.
How can the surety terminate the agreement?
Notice to the debtor. If creditor learns that surety has died, that counts as notice of termination.
Termination is prospective only. It only applies to obligations arising after notice of termination.
What rights does a surety have against the other sureties?
Contribution (solidary liability among co-sureties): if one of multiple sureties pays the creditor, the paying surety can collect contribution of the non-paying sureties’ virile shares.
What is a mortgage?
A real accessory right that allows a mortgagee (creditor) to have immovable property seized and sold to pay the secured debt in preference to other claims.
Right in property rather than against a person.
What kind of property can be the subject of a mortgage?
Immovable property and related rights (usufruct, servitude of right of use, lessee’s rights in leased property)
What are the different types of mortgages?
- Legal mortgage. E.g., tutor/tutee
- Judicial mortgage: creditor on a money judgment files a certified copy of judgment in mortgage records of a parish where debtor has/will have immovables.
- Conventional mortgage (contract mortgage): special mortgage extending only to specific identified property and is created by contract with the debtor.
What are the unique aspects of a judicial mortgage?
Judicial mortgages are general mortgages. They encumber all of the mortgagor’s immovable property–present and future–in the parish where the mortgage is filed.
What are the formal requirements for a valid conventional mortgage?
Creation of conventional mortgage:
- written
- Signed by the mortgagor (authentic act not required)
- State the amount or maximum amount secured. Can secure a fluctuating line of credit, but needs maximum dollar figure.
- Legal description of the immovable property. Not a street address. Legal description can include references to public maps. Reference to attached map or to a subdivision (or plat) map incorporates the legal description.
Who is the mortgagor?
The person who owns the immovable property. This might be a different person than the obligor. E.g., mother who owns the property might secure my debt.
How do you make a mortgage effective against 3rd parties?
A mortgage is effective against third parties when the entire mortgage (“act of mortgage”) is filed for registry in the mortgage records of the parish where the immovable property is located.
- No extracts of mortgage
- Mortgage, not conveyance records.
- First to file between mortgagees has priority.
For how long is a mortgage effective against 3rd parties?
Filed mortgage effective against 3rd parties for 10 years after the date of the mortgage (not the filing date) by default.
Exception: Unless mortgage describes 9+ year maturity date.
- Describes maturity date (due date) of any secured debt and
- That date is 9 years or more after date of the mortgage (not filing date), effective for 6 years after maturity date of debt.
Example: mortgage describes maturity date of secured date of 30 years. It’s effective for 6 years after that. In total, it’s effective against 3rd parties for 36 years.
How do you maintain an effective recording of a mortgage?
Creditor has to sign and file a notice of inscription. Extends the mortgage for 10 more years form the date of filing of the notice.
How do you transfer the mortgage?
Transfer the mortgage by:
- Transfer of the secured note automatically transfers the mortgage.
- Transfer of mortgage property (if recorded)
What are privileges in the security rights context?
Real security devices that arise by operation of law.
What are the different types of privileges that arise by law?
Privileges in LA include:
- Privilege of repair people
- Lessor’s privilege
- Vendor’s privilege
What is the privilege of repair people?
Privilege in thing made/repaired to secure fee for repair service, parts, and labor. Exists only when in possession of the goods or 120 days from last day on which materials and/or labor were supplied.
What is the lessor’s privilege?
Privilege on all of the lessee’s movable property located on leased immovable property to secure rental price and any other lease obligations.
What is the vendor’s privilege?
Privilege on any movable or immovable property sold, to secure purchase price. Requirements:
- Movables: must still be in possession of the buyer
- Immovables: act of credit sale must be recorded in mortgage records.
How do privileges rank?
Ranking privileges:
- Security interest, perfected or not, beats all privileges except for a possessory repairperson’s privilege.
- Repair person beats lessor
- Lessor beats vendor, but
- Vendor beats repairperson
