Sales and Leases Outline
Sales and Leases Outline
Tooley’s Phonenumbers
O – 861 – 5682
H – 831 – 1838
Cell 723 – 4762
Beeper 453 - 3758
Sales Title: Book III Title 7
Art. 2438
Art. 2438-2444
Art. 2447: Capacity
Art. 2456-2463: ownership (not really going to study)
Art. 1908
Art. 1907
PART ONE: SALE
CHAPTER ONE: PERFECTION OF THE CONTRACT OF SALE
I. THE ELEMENT OF PRICE
A. THE ELEMENT OF PRICE
A. Price, essential elements
The price must be fixed by the parties in a sum either certain or determinable through method agreed by them. There is no sale unless the parties intended that a price be paid.
The price must not be out of all proportion to the value of the thing sold.
B. Price left to determination by third person.
The price may be left to the determination of a third person. If the parties fail to agree on or to appoint such a person, or if the one appointed is unable or unwilling to make a determination, the price may be determined by the court.
C. No Price fixed by the parties
When the thing sold is a movable of the kind that the seller habitually sells and the parties said nothing about the price, or left it to be agreed later and they fail, to agree, the price is a reasonable price at the time and place of delivery. If there is an exchange or market for such things, the quotations or price lists of the place of delivery or, in the absence, those of the nearest market, are a basis for the determination of a reasonable price.
II. Nevertheless, if the parties intend not to be bound unless a price be agreed on, there is no contract without such an agreement.
Art. 2464: Price, essential elements
The price must be fixed by the parties in a sum either certain or determinable through a method agreed by them. There is no sale unless the parties intended that a price be paid.
The price must not be out of all proportion with the value of the thing sold. Thus, the sale of a plantation for a dollar is not a sale, though it may be a donation in disguise.
Art. 2465: Price left to determination by third person
The price may be left to the determination of a third person. If the parties fail to agree on or to appoint such a person, or if the one appointed is unable or unwilling to make a determination, the price may be determined by the court.
Art. 2466: No price fixed by the parties
When the thing sold is a moveable of the kind that the seller habitually sells and the parties said nothing about the price, or left it to be agreed later and they fail to agree, the price is a reasonable price at the time and place of delivery. If there is an exchange or market for such things, the quotations or price lists of the place of delivery or, in their absence, those of the nearest market, are a basis for the determination of a reasonable price.
Nevertheless, if the parties intend not to be bound unless a price is agreed on, there is no contract without such an agreement.
2467 – Transfer of Risk
The risk of loss of the thing sold owing to a fortuitous event is transferred from the seller to the buyer at the time of delivery.
That risk is so transferred even when the seller has delivered a nonconforming thing, unless the buyer acts in the manner required to dissolve the contract.
Benglis Sash & Door Co. v. A.P. Leonards
Leonards architect ordered custom windows but did not discuss price. They had done business before. Leonards cancelled windows just before delivery. D claims windows were not delivered in the specified time.
Trial Ct. held delivery was within a reasonable time.
Appeals – reversed saying no Contract because no price was set.
Supreme Ct. – under 2439 the price does not have to be fixed as long as there is a meeting of the minds as to price. In this case there were factors that the parties consented to buy and sell the windows at a reasonable price. A reasonable price was implied by the circumstances.
Hearsey v. Craig (La. 1910) - grandmother gave property to nurse
Grandmother transferred a piece of property to a nurse who took care of her for past, present and future services. Other grandkids contest because if the transaction is a Giving in Payment (GIP), use the sales articles and because no agreement as to the price, no sale, so should be no GIP.
HELD: The K has elements of an onerous and remunerative donation and the court will give effect to what the parties intended. If it were a GIP, the other grandkids would have prevailed.
Therefore, if you intend it to be a GIP, be sure to include the amount of the indebtedness to show its classification.
Dixon v Turner - D/purchaser (bank) purchased property valued at $5400 and granted seller a lifetime usufruct and assumed a $200M mortgage on the property. Full ownership v naked ownership.
Louis Werner Sawmill v. O’Shee (La. 1904) - timber - OVERRULED BY ART. 2465
D was selling land on which timber was growing. Price was to be determined by an estimator, but the estimators could not agree (b/c D wanted deal to fall through). P claims that Ds were not acting in good faith and sought performance or a court appointed estimator.
HELD: No COA, but the result would not be the same now: Article 2465 says that if the parties fail to agree, the price can be determined by the court.
See also article 1974 - if quantity to be determined by a third party and parties fail to name third party or third party refuses to do so then court may determine quantity.
Louis Werner Sawmill co. v. Oshee
FACTS: D agrees to sell lands for timber and both D and P agree to estimatior set price. Plaintiff brings suit claiming that the defendants estimator exceeded the plaintiffs estimator by an amount so great as to indicate there was no intention on defendants part to make a true estimate.
P.H. T.C. grants defendants no cause of action. Defendant claims the contract is sought to be enforced as a promise of sale and that as such it is defective in not stating a price.
4 things needed 1) parties legally capable of contracting, 2) consent given, 3) thing, 4) price. There was no stipulation how timber to be measured—D wins.
FACTS: plaintiffs are grandchildren of deceased Gamper and they seek to annul an act of conveyance made by her to defendant. A leaves land to niece for taking care of her, no value set on real estate conveyed or services rendered. Onerous donation don’t need price.
RULE: a sale is perfected by the consent of the parties, whereas giving in payment is completed only by the delivery of the thing given and that an insolvent may lawfully sell for the price paid him, whereas the law forbids the giving to one creditor to the prejudice to the others of anything save money.
In the giving of payment as in the contract of sale, it is essential that the price or value of the thing given be fixed and agreed on.
HOLDING: the validity of conveyance purported to a remunerative donation is not affected by the failure of the parties to fix the value.
Landeche v. N.O. Coffee (La. 1931) - syrup
Purchaser agreed to acquire cane syrup whose price was dependent upon the market price of sugar (between 15 and 30 cents). The Sugar Market crashed and the price dropped to 5 cents which was below the range the parties had set forth. The buyer said that the parties intended to be bound regardless of whether the sugar price was w/in the range specified. The seller said the range was exclusive, ( if the sugar price was higher or lower than the range, the parties did not intend to be bound.
HELD: No K because no price. Parties intended to be bound ONLY if the price was between 15 and 30 cents.
2050 - Provisions interpreted in light of each other
Each provision in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract to sell.
If the parties agree on a method for determining the price, and the method doesn’t take into consideration an event (i.e. sugar falling below a certain price, if the method of calculation is based on the price of sugar), then price is indeterminable if the method is exclusive, but may be determinable if the method is illustrative.
U.C.C. 2:305 - There is a provision for situations in which a pricing mechanism is set, but for whatever reason the mechanism breaks down, a reasonable price would be supplemented. However, art. 2466 accounts for no such situation. Therefore, if 2466 is modeled on 2:305 then this ct’s decision (not bound) would be correct based on leaving out this type of situation. But, Bilbe says that an equity argument could be forwarded based on 2466.
Landeche Bros. Co. v. New Orleans Coffee Co.
D was to buy sugar from P. An equation was set up to determine the price of the sugar with the market price being a variable. A range from 15 to 30 cents was set. When it was time to buy the market price was 5.91 cents.
D refuses to buy the sugar.
The P and D did not bargain to sell or buy the syrup except within the range. It should have been in the contract. One must look at the contract as a whole.
II TRANSFER OF TITLE AND RISK
A. Transfer of Ownership.
Ownership is transferred between parties as soon as there is agreement on the thing and the price is fixed, even though the thing sold is not yet delivered or the price paid.
B. Transfer of ownership; things not individualized
When the object of a sale is a thing that must be individualized from the mass of things of the same kind, ownership is transferred when the thing is thus individualized according to the intention of the parties.
C. Sale by weight tale or measure; lump sales
When things are sold by weight , tale or measure, ownership is transferred between the parties when the seller with the buyers consent weighs counts or measures the things
When things such as goods or produce are sold in a lump ownership is transferred between the parties upon their consent, even though the things are not yet weighed counted or measured.
D. Transfer of Risk
The risk of loss of the thing sold owing to a fortitious event is transferred from the seller to the buyer at the time of delivery. That risk is so transferred even when the seller a nonconforming thing, unless the buyer acts in a way required to dissolve the contract.
Art. 2456: Transfer of ownership
Ownership is transferred between parties as soon as there is agreement on the thing and the price fixed, even though the thing sold is not yet delivered nor the price paid.
Art. 2457: Transfer of ownership; things not individualized
When the object of a sale is a thing that must be individualized from a mass of things of the same kind, ownership is transferred when the thing is thus individualized according to the intention of the parties.
Art. 2458: Sale by weight, tale or measure; lump sales
When things are sold by weigh, tale, or measure, ownership is transferred between the parties when the seller, with the buyer’s consent, weighs, counts or measures the things.
When things, such as goods or produce, are sold in a lump, ownership is transferred between the parties upon their consent, even though the things are not yet weighed, counted, or measured.
Art. 2459: Reserved
Art. 2460; Sale on view or trial
When the buyer has reserved the view or trial of the thing, ownership is not transferred from the seller to the buyer until the latter gives his approval of the thing.
Art. 2467; Transfer of risk
The risk of loss of the thing sole owning to a fortuitous event is transferred from the seller to the buyer at the time of delivery.
That risk is so transferred even when the seller has delivered a nonconforming thing, unless the buyer acts in the manner required to dissolve the contract.
* the risk of loss is transferred to the buyer at the moment of delivery rather than upon consent.
“Appropriation” or “Individualization”
Collins v. Louisiana State Lottery Co.
P sent in money with numbers for the lottery. The numbers made it to the final stage but did not get mailed in time to meet guidelines that say 20$ and more must be certified mail. P says there was a completed sale because there was consent to buy and sell.
Ct. held – No sale.
Collins v. La Lottery (La. 1891)
Dispute over whether lottery tickets had been appropriated. P asserts that he sent in his number and $ in time, so he owned the ticket. However, ( partially processed ticket purchase and only set tickets aside. ( couldn’t get in mail b/c of complicated internal procedures (had to mail tickets day before drawing) and was required to cancel and reissue tickets for next drawing.
HELD: Although the #’s had been set aside, they did not get into the mail in time and the process was
incomplete. Collins loses under 2457, bc. the lottery’s intention was that the item would not become the buyer’s until the process was complete.
VIATOR:
( relies on Art. 2456 that sale was complete when there was agreement for the thing.
Ct. says dispositive issue is whether the lottery’s actions consented to the sale -- Did they accept Collins’ offer to purchase?
Ct. said Collins knew of the necessity for being timely with his order.
Ct. relies on Benjamin on Sales.
2 ideas at work:
1) Offer and acceptance - consent
2) Appropriation.
Conclusive act on part of lottery Co. - would have been conclusive if they had mailed the tickets - that makes the tickets exclusively for Collins.
Separate offer and acceptance and individualization problems.
In ’99, the results would be the same b/c of Art. 2457.
EXAMPLE:
VIATOR offers to buy 500 Twinkies at usual price. Hostess telegrams “Accepted, will be delivered next week.” Art. 2623 - Have a contract to sell/bilateral K of sale. A conventional obligation exists between parties that is fully enforceable. It must set forth thing and price and meet the formal requirements of the sale it contemplates.
Art. 1973 - Object is determined as to kind. Here, you know the kind of thing (Twinkies), just not the exact 500 Twinkies are not known or individualized. ( No Sales Contract, but there is an innominate K to sell that is governed by the general obligation articles.
Viator could argue under art. 1983 that Hostess had an obligation to specify and under art. 1759 Hostess had a duty to act in good faith.
Today would get the same results as actual case.
Edgewood Co. v. Falkenhagen
Agreement for 30 barrels of whiskey. 10 delivered at once
10 on Jan 10
10 on Jan. 25
Jan. 7th D asks that shipments be made Feb1 and 15 because he is overstocked. P puts barrels aside for D at this time and marks them.
Jan. 20 D sent asking P to cancel order entirely.
If K remained executory then P may only get damages
I K had ripened into an executed K and whiskey had become the property of D then P can sue for the full price.
P claims there was a sale as soon as he put the barrels on the side for D
The CT. held – no delivery, no sale
Edgewood v Falkenhagen (1922) - whiskey
F: ( sold ( whiskey who tried to cancel order but ( refused to accept the cancellation. ( sued for price of whiskey. ( had set aside and stored in warehouse 20 barrels for ( and sent ( certificate. ( tried to cancel b/c overstocked. At time of suit liquor was in (’s warehouse.
I: Whether K remained executory, leaving ( only an action for damages, or did it ripen into an executed K, so that the whiskey became the property of the (, entitling ( to sue for the price. Ct concerned w/whether there can be an appropriation w/out delivery.
H: ( can seek specific performance to get the price paid.
( Today this is governed by 2456 whereby the buyer becomes the owner even before the price paid or the thing delivered, and specific performance by the seller is available.
( Sale became executed when 20 barrels were segregated from (’s stock and put aside as property of (. This was an appropriation and completed the sale. ( became owner of appropriated whiskey and ( became entitled to the price.
( No longer at vendor’s whim to dis-identify these bottles with the vendee - a 3rd party must be involved in this case, however, any personalization/customization would reach the same result. (ex) Brigette’s t-shirts “Brigette’s #1!”
Benj. Sales “It is a question of law whether the selection made for the vendor in any case is a mere manifestation of his intention, which may be changed at his pleasure, or a determination of his right, conclusive on him, and no longer revocable.”
Shuff v. Morgan
Goodwyn v. Pritchard
P agreed to purchase D’s crop of molasses, which was to be delivered to the plantation in barrels. Delivery could have been as late as Jan. 15 with payments as the shipments arrived. P paid on Dec. 28
Jan 4 the sugarhouse catches fire.
Issue – At whose risk was the molasses at the time of the fire.
The molasses had not been weighed yet but P had agreed to buy all of D’s crops.
P bought insurance but the risk was not his.
D had to eat it.
California Fruit Exchange v. John Meyer, Inc.
California Fruit Exchange v John Meyer (1928) - damaged peaches
F: ( is fruit wholesaler in N.O. Entered into oral agreement w/ ( for sale and purchase of peaches. Peaches were shipped from California and arrived damaged. ( inspected peaches finding them damaged and refused to accept delivery. ( sold peaches at public auction at a loss. ( suing for difference.
P: District Court said peaches were property of ( until accepted by ( in New Orleans.
Court of Appeal held K was for “California Acceptance” at shipping point ( in favor (. However, the Court of Appeals affirmed the Dist. Cts. opinion on grounds that delivery by ( to carrier, co-signed to itself in New Orleans on a bill of lading in its name is not an appropriation of peaches as to transfer ownership. Court of Appeal held risk could not transfer because ownership had not transferred yet.
Supreme Court decision contrary to Court of Appeal but in agreement with District Court that ( has not brought his claim within the Uniform Bill of Lading Act.
Custom of trade in New Orleans important to show true intent of the parties - to accept ownership only after inspection. Supreme Court looked to custom of trade because bill of lading said upon approval of buyer but California Fruit Exchange argued it was the common carrier rule (ownership transferred once delivered to common carrier).
NOTE - The reservation by a consignee of the privilege of inspection does not place the goods while in transit at the risk of the consignor… Whether expressed or implied, it does not change the incidence of the risk. Title passes upon shipment, though subject to the right of rescission upon discovery of defects.
Greeson Company v. Harnischfeger Corp.
C.W. Greeson v Harnischfeger (1957) - dragline
( sold ( a dragline for $55M. It was shipped by ( to Wisconsin and then to Arkansas. ( agreed to furnish expert operator to supervise and unload the dragline. ( sent another employee (Bartlett) who was responsible for tracking machine to its job site. Bartlett while transporting to job site ran dragline into canal and damaged it while trying to remove it.
HELD: Risk of loss passed from ( to ( when machine arrived in Arkansas when it was unloaded and assembled by (’s employee. At this point dragline belonged to (’s. The court said, at the latest, risk transferred to (’s upon delivery in Arkansas, the agreed destination.
CHAPTER TWO: SALES SUBJECT TO CONDITIONS
I. SALE SUBJECT TO SUSPENSIVE CONDITION
Canal Motors, Inc. v. Campbell
Paid 25 down payment for a used car 3, 162.50
Took Car Got in accident Loan Company would not make loan.
Suspensive condition – loan
Trial Ct. found for P
Appellate Court – Reversed Remanded
Thing not yet in existence is a type of suspensive condition
Canal Motors, Inc. v. Campbell (1970)
P/Car Dealership brought suit against D/Purchaser, Campbell, for not paying agreed upon price. D/Purchaser made a down payment or deposit of $25 pending a loan approval. The vehicle was delivered on May 28th to D/Purchaser and held in his possession until it was wrecked on June 22nd. No further payment was made. Defendant contends that ownership did not transfer b/c there was a suspensive condition - the loan approval.
HELD: There was a genuine issue of fact - if the $25 was a deposit to hold the automobile until loan approval. If so, there was no completed sale, but at most a suspensive conditional obligation dependent upon an uncertain event. But the court didn’t decide if the loan was approved. Summary judgement was improperly granted therefore case remanded to Appellate Court.
When a sale is made subject to a suspensive condition that the purchaser obtain a loam, the purchaser must make a good faith effort to satisfy the condition or the seller will be released from his obligation and the purchaser will be barred from enforcing any provisions in the original agreement.
You can have a contractual obligation where the purchaser has possession of the object BUT the object is still owned by the seller (i.e. subject to a suspensive condition). This would be a K to Sell.
NOTES
When a sale has been conditioned on the happening of an event, if the event does not occur within a reasonable time as contemplated by agreement, then no rights will flow to either party and the sale does not come into existence.
A draft given as the price in a sale does not constitute a suspensive condition and ( the validity of the sale is unaffected by a subsequent dishonor of the draft.
A Sale was conditioned on the purchaser obtaining financing. The purchaser decided to pay cash instead. Seller attempted to rescind. Purchaser sued for S.P. The ct. held for the purchaser, because a purchaser may waive a condition which is inserted for his own benefit.
1767 - Suspensive and resolutory conditions
A conditional obligation is one dependent on an uncertain event.
If the obligation may not be enforced until the uncertain event occurs, the condition is suspensive.
If the obligation may be immediately enforced but will come to an end when the uncertain event occurs, then the condition is resolutory.
1770 - Condition that depends on the whim or will of the obligor
A suspensive condition that depends solely on the whim of the obligor makes the obligation null.
A resolutory condition that depends solely on the will of the obligor must be fulfilled in good faith.
Comments:
(b) A condition that depends on upon an event that is left to the obligor’s whim makes an obligation null only when that obligation is suspensive. The obligation is not null if the condition is resolutory.
(c) A condition involving an event left to the obligee’s whim does not make the obligation null.
(d) An event which is left to the obligor’s whim is one whose occurrence depends entirely on his will such as his wishing or not wishing something.
(e) This article eliminates the expression “potestative condition” because Louisiana jurisprudence has been plagued by misinterpretations of it.
II. INSPECTION BY BUYER
American Creosote Works v. Boland Machine & Mfg. Co.
24 Creosote fir pilings agreement changed per telephone conversation
fir ordered by P + treated and sold to D. P loaded it on D’s barge. Wharf caught fire. Contract said D needed to inspect and accept it. D wins contract can state terms of delivery
American Creosote Works v. Boland Machine & Mfg. Co. (1948) - pilings
P sued to recover cost of pilings which were specially ordered by D according to detailed specifications to be delivered to barge subject to inspection and acceptance. Pilings were delivered and not inspected by D. Then they burned.
HELD: For D b/c the terms of the contract are clear that the pilings are to be transferred to the D only after they have been tendered for inspection and have actually been accepted. The court looked to the intention of the parties as to when the pilings would be transferred (which is shown on the face of the contract and in both oral and documentary evidence in the record) as well as to custom of the plant.
View and trial vs. right to inspect. Under view and trial, ownership does not pass until buyer has approved the goods. If buyer doesn’t approve a sale has never occurred. Kind of like a suspensive condition.
Per Viator, the court botched the difference between view and trial and right of inspection to avoid harsh results. They didn’t want the buyer to get screwed and have to pay for pilings he had not even looked at.
Per Kristine, the court used 2460 to avoid the D getting screwed. They used P’s letter from his insurance company which stated no payment for goods after delivery. Court took letter and said “no delivery.” Must have ownership to have risk of loss. If goods delivered then would have ownership and D responsible.
III. THE BOND FOR DEED CONTRACT
St. Landry Loan Company v. Etienne
Foreclosure d won
IV. SALE OF FUTURE THINGS
Plaquemine’s Equipment & Machine Co. v. Ford Motor Co.
District Ct. found – P had no title to the truck dissolved writ of sequestration
Appellate Court – affirmed in part remanded damages for wrongful sequestration
Supreme Court – Affirmed –P did not have title
Facts – P ordered special truck from Pearce Ford made deposit
Then liquidated Pearce went into judicial Solvency
Rationale – Depending on who owned it whether or not the writ should be dissolved
Plaquemines – contends sale has been perfected 2439/2456
Ford ownership did not transfer until truck came into deliverable form
Truck required assembly sale was not perfected until complete assembly therefore perfection never took place
2450 – Suspensive condition never fulfilled
3rd sentence – if from your fault you prevent the thing from coming about you are liable for damages
need to be in complete form for transfer of ownership.
CHAPTER THREE: AGREEMENTS PREPARATORY TO THE SALE
May be a contract but not a perfected sale because a condition is not fulfilled.
Individualization perfects the sale
One that anticipates a perfected sale
When parties anticipate sale and enter into a contract there a re 2 different models or possibilities
As between parties one is unequivocally bound to proceed and the other is not.
Art. 2620: Option to buy or sell
An option to buy, or an option to sell, is a contract whereby a party gives to another the right to accept an offer to sell, or to buy, a thing within a stipulated time.
An option must set forth the thing and the price, and meet the formal requirements of the sale it contemplates.
Art. 2621: Acceptance, when effective; option turns into contract to sell; rejection
The acceptance or rejection of an offer contained in an option is effective when received by the grantor. Upon such an acceptance the parties are bound by a contract to sell.
Rejection of the offer contained in an option terminates the option but a counteroffer does not.
Art. 2622: Warranty of assignor
The assignor of an option to buy a thing warrants the existence of that option, but does not warrant that the person who granted it can be required to make a final sale.
If, upon exercise of the option, the person who granted it fails to make a final sale, the assignee has against the assignor the same rights as a buyer without warranty has against the seller.
Art. 2623: Bilateral promise of sale; contract to sell
An agreement whereby one party promises to sell and the other promises to buy a thing at a later time, or upon the happening of a condition, or upon performance of some obligation by either party, is a bilateral promise of sale or contract to sell. Such an agreement gives either party the right to demand specific performance.
A contract to sell must set forth the thing and the price, and meet the formal requirements of the sale it contemplates.
Art. 2624: Deposit, earnest money.
A sum given by the buyer to the seller in connection with a contract to sell is regarded to be a deposit on account of the price, unless the parties have expressly provided otherwise.
If the parties stipulate that a sum given by the buyer to the seller is earnest money, either party may recede from the contract, but the buyer who chooses to recede must forfeit the earnest money, and the seller who so chooses must return the earnest money plus an equal amount.
When the earnest money has been given and a party fails to perform for reasons other than a fortuitous even, that party will be regarded as receding from the contract.
Art. 2625: Right of first refusal
A party may agree that he will not sell a certain thing without first offering it to a certain person. The right given to the latter in such a case is a right of first refusal that may be enforced by specific performance.
Art. 2626: Terms of offered sale
The grantor of a right of first refusal may not sell to another person unless he has offered to sell the thing to the holder of the right on the same terms, or on those specified when the right was granted if the parties have so agreed.
Art. 2627: Right of first refusal, time for acceptance
Unless otherwise agreed, an offer to sell the thing to the holder of a right of first refusal must be accepted within ten days from the time it is received if the thing is movable, and within thirty days from that time if the thing is immovable.
Unless the grantor concludes a final sale, or a contract to sell, with a third person within six months, the right of first refusal subsists in the grantee who failed to exercise it when an offer was made to him.
Art. 2628: Time limitation for option and right of first refusal
An option or a right of first refusal that concerns an immovable thing may not be granted for a term longer than ten years. Nevertheless, if the option or right of first refusal is granted in connection with a contract that gives rise to obligations of continuous or periodic performance, an option or a right of first refusal may be granted for as long a period as required for the performance of those obligations.
Art. 2629: Effect against third persons
An option, right of first refusal, or contract to sell that involves immovable property is effective against third persons only for the time the instrument that contains it is filed for registry in the parish where the immovable is located.
An option, right of first refusal, or contract to sell that involves movable property is effective against third persons who, at the time of acquisition of a conflicting right, had actual knowledge of that transaction.
Art. 2630; Indivisibility of right
The right to exercise an option and the right of first refusal are indivisible. When either of such rights belongs to more than one person all of them must exercise the right.
2/14
Who sets price when given first right of refusal?
Hypo
2627 Presupposes before concluding sale you have made some offer to one who holds first right of refusal. You have a 6-month period within which to sell it or else the right subsists.
Underlying policy – assume the third party died or dropped out.
Should you be bound to come back to the holder?
Option for a stipulated time. If the holder of the option rejects within the stipulated time then it becomes extinguished.
Does not terminate right or right of first refusal.
Obligations are heritable. This distinguishes options from ROFR from an irrevocable offer. An irrevocable offer is not a contract, so the death of an offeror extinguishes an irrevocable offer. Death does not extinguish an option or a ROFR.
I. UNILATERAL PROMISE TO SELL
a. The Option
Becker and Associates, Inc. v. Lou-Ark Equipment Rentals Co.
Becker & Associates, Inc. v. Lou-Ark Equipment Rentals Co. - crane rental
Lou-Ark leased crane to Becker for a minimum of 30 days (month to month). Lease amended to include an option to purchase based on a price to be determined by mutual agreement or by an independent appraiser. Becker wanted to purchase because he had paid $41,200. Crane was appraised by 2 different appraisers who both said was worth $40M. Lou-Ark didn’t agree to either appraisers and refused to sell. Becker filed suit for specific performance. Lou-Ark sued Becker, who was still in possession, to be declared the owner of the crane, for its return and for $12,000 accrued rent. Cases were consolidated into one. HELD: Supreme Court reversed Court of Appeals (held the option stated a time for it to be executed because it was part of the lease agreement and Becker could exercise option to purchase at any time during the 30 day rental period if rent was paid) and held K did not provide for a definite time to accept. For a unilateral K there must be a specified time period which does not exist here. Can’t have perpetual or indefinite term.
Would get the same result b/c of Art. 1950 - Error as to the nature of the K.
Case cited in comment (c) of article 2620 - an option for a perpetual or indefinite term is null.
b. Right of First Refusal
Jones v. Hospital Corporation of America
P purachased land from D. D orally agreed to give him rt of 1st refusal on lot 1. P wanted to buy lot 1 and took steps towards buying it. No contract written on sale of lot 1. D wins.
Pelican Publishing Company v. Wilson
D wrote book with option to not buy next and no competition. Option must have way of getting price. D won.
II. BILATERAL PROMISE TO SELL
Peck v. Bemiss
Peck v. Bemiss (1855) - PECK DOCTRINE
Parties executed only a K to Sell because they intended to transfer o/s at a later date. Ct. knows this and Slidell focuses on Peck’s language (a notorial act to occur later). Possession can occur literally or symbolically.
*** Anytime parties in a 1st writing (merely K to sell) contemplate a later writing, o/s transfers at later writing. The 1st writing is a K to Sell (Bilateral Promise of Sale); the 2nd writing is the Contract of Sale.
Remedy is writ of specific performance.
2467- there has to be transfer of o/s as a precondition to transfer risk.
1855
Agreement about real estate – agreed to sell for terms. Certificate indicates the property has already been sold. Was the instrument really a sale or an intention to bind themselves for a sale?
Held – Language was intended to bind for a sale at a later time.
Ownership did not pass at confection of document.
Act of sale is when ownership shifts to buyer.
Bifurcation 1. Agreement
2. Act of sale
Deed common law concept
Bilateral – both parties are bound
2623 – Both parties can seek specific performance
2624 – A. Deposit
Earnest Money – Must return money plus an equal amount.
Considered to be a deposit unless expressly stated as otherwise or as earnest money.
Hypo
Buyer 1,000 tendered to the seller
Seller pulls out of deal. Seller must return 2,000 to the buyer.
If not designated as earnest it does not become earnest money. They must stipulate to that. If deposit then specific performance is a remedy. If earnest money then can’t use specific performance. Double what was tendered.
Moratory damages – damages received by delay in performance.
Compensatory damages
Common Law – liquidated or
Civil Law - stipulated damages
2005
2006
A party who does not perform and is excused cannot be made liable. Ex. Bipolar woman – promises to buy then claims bipolar disorder. Excused.
Earnest money is forfeited if you breach for a non-excusable reason.
Hypo
Bilateral promise to sell label as earnest premised sale on availability of a loan. Suspensive condition so an excusable breach.
CHAPTER FOUR: FORM OF THE CONTRACT OF SALE
Art. 1839 Transfer of immovable property
A transfer of immovable property must be made by authentic act or by act under private signature. Nevertheless, an oral transfer is valid between the parties when the property has actually been delivered and the transferor recognizes the transfer when interrogated under oath.
An instrument involving immovable property shall have effect against third persons only from the time it is filed for registry in the parish where the property is located.
Art. 1846 Contract not in excess of five hundred dollars
When a writing is not required by law a contract not reduced to writing for a price or in the absence of a price for a value not in excess of five hundred dollars may be proved by competent evidence.
If the price or value is in excess of five hundred dollars, the contract must be proved by at least one witness and other corroborating circumstances.
Art. 2440 Sales of immovable Method of making
A sale or promise of sale of an immovable must be made by authentic act or by act under private signature, except as provided in Article 1839.
2/19/01
Hypo
A buyer and a seller agree on a price
The buyer puts up check for 10,000. There is a writing that gives a stipulated time. The buyer applies for a loan and can’t get it. Buyer needs to back out. Ask? Was it a deposit or earnest money. When not stipulated as earnest money it is c considered to be a deposit. Seller keeps the deposit because of the breach.
If the sale was based on the loan as a suspensive condition then failure of the condition voids the loan.
If it was earnest money then negates specific performance and money serves as stipulated damages. If seller breaches he must return the 10,000 plus another 10,000.
Until 1995 the rule was the opposite. Before 1995 $ given in conjunction with a bilateral contract to sell defaulted to earnest money not deposit money.
2624 comment – there was a lot of confusion over this.
Form of a contract for sale of immovables. 1839 authentic act private signature and a writing. Oral transfer is recognized when the property has been delivered and the transferor recognizes the transfer under oath.
2440 – A sale or promise of a sale of an immovable must be made by authentic act or by act under private signature
1837 – except as provided by 1839.
Chauvin v. Bohn – contract for sale of a home. Check was not good enough writing. Seller wanted to enforce specific performance. “Must be in form required”. Property case. Langevin v. Howard – same issue with a predial servitude. Sold portion that cut off buyer from a driveway. When paying for a use of another’s driveway the check did not designate which driveway.
Eking out a title is allowed when there is enough of a writing to start out with. (by parole evidence). If the writing is too general you can embellish with parole evidence. Parole evidence is allowed if there insufficient body in the title.
Pierce v. Griffen
Petitory action – P asserts ownership of property.
1832 – Written form required by law.
When the law requires a contract to be in written form, the contract may not be proved by testimony or by presumption, unless the written instrument has been lost, destroyed or stolen.
Four wooden stakes were written on and subsequently burned by D.
P says intentional burning of stakes does not fall under the ambit of 1832. Ct. says burning was not intentional in the sense of meaning the law had.
Issue the writing of the sale did not have to be on paper. The stakes were enough.
Agreement to sell land for 100.00
D had 18 years of possession.
Pierce v. Griffin (1st Cir. 1957)
Petitory action brought by widow of owner of property - she has title and there is nothing evidencing divestiture of o/s. D is party in possession for 15 years with house on the land, but has no document. D asserts that there was an instrument in writing, but must have been destroyed accidentally. HELD: For D. P actually admitted that a sale occurred. Oral transfer only valid between these parties because of article 1839. Also, look at 1832 - When the law requires a contract to be in written form, the contract may not be proved by testimony or by presumption, unless the written instrument has been destroyed, lost, or stolen.
Court looks for written document first.
Lemoine v. Lacour
1948 Rapides parish
Unilateral Contract to sell – One party has a choice the other party does not have the choice.
Alternatively – contract that anticipates a sale each has bound themselves to proceed.
P says agreement to buy property for 10 payments of 35$ to equal 350.00. D will not accept the 10th payment. P seeks specific performance.
a. deed or
b. money given for property
District Ct. No COA – No written document
Appellate Ct. No COA – No written document
Supreme Ct. – Should have given P opportunity to interrogate on stand. In interrogatories D admitted to agreement.
So let him amend his pleadings in the interest of justice.
Written act was without specified formalities – It did not describe the place at all. It just said payment on place.
Lemoine v. Lacour (La. 1948)
P paid D 9 installments and has the receipts, but when P tendered the last installment, D refused to sell. There was nothing in writing except the receipts which had no description of the property.
HELD: Since there is no writing and the purported sale was by oral transfer and P is in possession, the only way P can prove sale is to interrogate D under oath. Ct. remanded to allow P amend his complaint and to allow P to prove possession and make D testify under oath.
Triangle Farms, Inc. v. Harvey
P claims bound by contract executed by Sherburne. Did P have permission to sell? No. Agency agreement was not in writing. Equal dignitaries rule. Requires a writing for anything done for me or on my own behalf. If I authorize a representative to do it for me. That must be in writing also.
2993 Form of contract of sale/immovables
Triangle was a contract entered into between D (Harvey) and agent(Sherburne). Argument D that P who asserts ownership (Triangle) was a participant in the original contract. Sherburne represented Triangle Farm.
Even though you cant get ownership if you have paid money and proved it you can get your money back. P. 62 3paragraph well settled.
2993 Form for mandate. Must be in writing.
Agency and Common Law Estoppel idea.
Parole evidence is testimonial evidence.
Clean Hands Rule – Scheme to defraud Ct. isn’t supposed to get involved in disputes between bad guys.
Triangle Farms v. Harvey (La. 1934)
P seeks to collect property and D alleges that he is in possession of the property and he paid $ to another entity that was an alleged agent of P. P had a written chain of title. Agency agreement was not in writing.
HELD: 1832 - Parol testimony was inadmissible to establish an agency to sell land, and purchaser could not establish title by such testimony.
Mitchell v. Clark
Isabel Mitchell v. her nephew Clark
To change conveyance record to show Mitchell as the owner of the property.
P says purchased from HH in 1958
Trial Ct. ordered clerk to transfer into Mitchell’s name because Mitchell had paid the purchase price taxes and costs for the property
Appellate Ct. – reversed
1) No COA
2) parol evidence inadmissible
When Mitchell purchased she stipulated Clark as the vendee but never told him. She wanted him to receive the property when she died without trouble.
Holmes lived in Kansas City,
Clark lived in Atlanta Georgia single
Neither P nor D signed the deed at time of conveyance
In 1981 D learned it was in his name
D didn’t show up for proceedings. His testimony is presumed detrimental
Supreme Ct. – Trial ct. Correctly denied Clark’s no COA
And permitted Mitchell to show whatever documents support P’s position
Trial CT. should not have permitted oral testimony. P paid purchase price and had a right to demand in deed translative of title executed in her favor.
Action brought not on error but on change of mind.
Bilateral Contract to sell.
2623 Specific Performance
Cash 1,200. Tells Holmes to transfer ownership in Clark’s name. Holmes transfers.
Inter vivos – while alive
Mortis Causa – upon death takes effect
Causa Mortis – Common Law thing.
Mortis Causa has two elements
1. Inheritable revocable – you are free until you do to change your mind.
2. Because it takes effect at death you aren’t able to tell of your intention any more so forms and rules are rigid.
3. This did not comport with the mortis causa donation requirements.
Failure of Cause on her part.
Her problem is she never owned the property. She stipulated to Clark. Indirect liberality from Clark.
Creditors alleging fraud parole testimony to expose may use simulation
Revocatory action
Appeal – Affirmed
On Rehearing
Ct. erred in holding parole evidence inadmissible.
When purpose is to bring into the estate of the debtor real estate that has never formed any part of it parole evidence is not allowed.
P case dismisses
Problem when it is to defraud the creditor
Ackerman never owned the property.
When they want to make a gift the third party they stipulate sometimes. Donation of contractual rights.
Oblique action – held by the debtor action to assert rights of the debtor
Agency
2993 Mandate must be in writing
2036 – no writing agency no ways to prove it.
3017 – undisclosed mandate is not illegal.
Mitchell v. Clark
1958 Mitchell bought home from Holmes for 1,200, Mitchell wanted it to be a donation mortis causa but it fails as that.
1. At trial admitted evidence pertaining to ownership allowed Mitchell to retain the property
a. Mitchell paid for it plus taxes
b. Both Mitchell and Clark did not sign the authentic act
c. At the time of the purchase Mitchell stipulated that Clark be named as vendee
d. Recorded July 9, 1958 ASK IS this the point of no return????
e. Clark filed exception of no COA
2. Trial Ct. was in error to give rebuttable presumption as a judicial confession status of when D did not testify on his behalf.
3. Clark devolutive appeal
5 judge panel reversed Ct. of Appeal said parole evidence not admissible because of no writing
Trial Ct. correctly denied no COA correctly allowed doc as evidence should not have allowed parole testimony
Mitchell was not based on error but on change of mind.
Did not prescribe after a 28-year lapse.
***Titles would be rendered insecure if allowed to change title the way it was done in Mitchell.
Cosey – case used where only written evidence was used. Rule excluding parole evidence was inapplicable because P was able to show community property during his parent’s marriage.
Mitchell v. Clark (La. 1984)
P seeks to have herself declared the owner of immovable property over her D nephew. P paid the purchase price and put the title in D’s name (even though D did not know). P paid the taxes, expenses, etc. D kicked P out. HELD: P had no written evidence to assert o/s and the donation was invalid as a donation mortis causa. Trial court erred when assumed by Clark not showing up his testimony wouldn’t support his case. Can’t do this: just assume his testimony would be a confession and allow 1839. Trial Court’s application of 1839 and giving property back to P was reversed by the Supreme Court who said property belongs to Clark.
For 1839 only person who owns the property can testify under oath to change the public records. For example, in Hackenburg, if Hackenburg had died and Gartskamp was still alive with property in his name he could testify “Yes, property was purchased to be put in Hackenburg’s name.”
Parol evidence is insufficient to create a title in one who never owned the property or to show that the vendee was in reality some other person than the person named in the act of sale.
If a written doc. Is needed to buy and sell immovables, then written doc. Is needed to grant an agent the power to buy or sell (“equal dignity” in common law).
D wins
Hoffman v. Ackermann
P creditor of D seeks to have property of Peters decreed to D so he can seize it to realize the debt owed him by D. P believes this property really belongs to D because it was bought with money given to Peters from D. To shield P from getting it.
2 Squares of ground Nos. 613 and 649
2/21
Hoffman v. Ackerman
P judgment creditor of D said to collect his judgment he should be able to seize property of Peters.
P alleges Ackerman gave money to Peters to buy the property. To shield it from a judgment debt owed him.
Jury trial found for P.
D appeals
P says fraudulent simulation if it were sought to annul the sale, which Meyers made to Peters, Meyers would necessarily have to be made a party Defendant.
Hoffman v. Ackermann (La. 1903)
P is a judgement creditor of D and D took $ that could have satisfied the debt and gave it to a friend who bought land in the friend’s name. P asserts that the title should be in D’s name.
HELD: For D b/c nothing in writing, even if P could prove that D paid for the property. Parol evidence at first hearing inadmissible because land was never originally in the debtor’s patrimony.
( Per Viator, exceptions to the evidence rule (2025, 1848, and 2036) do not apply.
P could seek other remedies which allows creditors to set aside transactions taken in anticipation of collection: Revocatory action - action to revoke or undue when the creditor asserts his rights to rescind the transaction (see art. 2036 - 2043). Action in declaration of simulated sale.
P wins
HYPO
X sells b.A. for 1,000.00 (Beneficiary)
Y owes X 1,000 (Stipulator)
Y then sells property to Z for 1,000.00 says do not pay me pay X
Z (Promisor)
Y as seller is obligee of duty to pay price
Obligor Third Party
(Stipulate to pay third party)
3/5
Frank v. Motwani
1987
Agreement to buy/sell
Property located on S. Peters for 690,000. Upon acceptance of offer purchaser was to deposit 69,000 as follows
1. c.d. in amount of 50,000
2. 19,000 non0negotiable demand note due at act of sale executed by purchaser to the order of C.W.Frank
3. Failure to do 1 and 2 will be considered a breach and buyer must either at sellers option forfeit the deposit 69,000 or demand specific performance
After demand note was executed purchaser says that agreement was verbally cancelled the next day.
D stopped payment on the 50,000.
Seller sued for deposit.
Trial ct. awarded by summary judgment. No genuine issue as to material fact
Ct. of appeal affirmed saying written contract couldn’t be verbally cancelled.
Supreme Ct. – Reversed saying the contract could be verbally cancelled because you need a completed sale followed with possession to fall under the oral exception.
.Issue – Is as a matter of law a writing required to cancel a written contract
1839 – Transfer of property must have a writing authentic act or private signature
Does not apply because this addresses modifications not cancellations
1848 – Testimonial or other evidence may not be admitted to negate or vary the contents of an authentic act or an act under private signature. Nevertheless, in the interest of justice, that evidence may be admitted to prove such circumstances as a vice of consent, or a simulation, or to prove that the written act was modified by a subsequent and valid oral agreement.
May parol evidence be used to prove a verbal modification of a contract?
1848 does not apply
1901 – written contracts may be revoked or cancelled by mutual consent of the parties.
Does not say how this has to be manifested.
Ct. had found in Kaplan v. University Lake Corp. that the contract was revoked by mutual verbal consent.
Supreme Ct. – reversed said summary judgment was incorrect. Remanded. Party claiming cancellation should be allowed to present evidence to prove that the contract was verbally cancelled.
Frank v. Motwani (La. 1987)
P is seller under an agreement for sale of immovable property. D put down deposit, but then stopped payment of check. D says that we agreed verbally to call the deal off. P seeks liquidated damages and atty fees on summary judgement, arguing that cancellation of an agreement to sell must be in writing which precludes the introduction of parole evidence. HELD: Modifications of agreements to sell do not need to be in writing unless the modification itself needs to be in writing.
To cancel there must me mutual consent to the cancellation. (ex) power of attorney - just tear up to cancel and don’t need a separate writing. Parol evidence is admissible to see if they tore it up.
D wins
Williams v. Bowie Lumber Co.
“Payment on place” not good enough description of property. Not specific enough. Unusual description not complete. Prescription is a fall back position. Omnibus description – “all of the property sold by “Him” or “All I own” is enough specificity for a valid sale. This is specific enough without there being any ambiguity. Threshold of eking out the title. When recorded however it must be more specific. For third parties to be bound it must be more specific also.
D wins
Williams v. Bowie Lumber Co. (La. 1948) - not covered in class
Heirs of transferor assert that the lands were not transferred b/c the documents did not specifically describe the land. The document contained an omnibus description which said “All land except 2 areas” and the property in question was not an excepted one, therefore, the land was transferred. BUT, omnibus descriptions do not bind or affect 3rd parties and are treated as no description at all (regardless if recorded or not). In this case, the description was omnibus and recorded.
HELD: Because there is no 3rd party here (heirs step into the shoes of the transferor), court said omnibus description was enough to show intention to sell
Ex. I sell al land in St. Tammany Parish and I record it. 2nd transferor transfers specifically described land and records it. 1st omnibus description is not binding upon the 3rd party.
Non-mineral lease of an immovable?????????????
2683 - Leases of land may be by written or oral K
Timber and predial servitudes must be in writing.
Options to buy immovables have to be in writing.
Jeanfreu v. Jeanfreu
Writing for movables. Factually similar to Hoffman. P alleged to be true owner. Title placed in the name of another.
Brother Louis sued brother Edward for ownership of a motorboat.
Title was placed in brother Edwards name for convenience only. D had agreed to return the boat on demand. P had borne the expenses of the boat in the amount of 2,500.
D pleaded estoppel on action of not speaking up in ct. when boat was seized
Prescription of 3 and 5 years
Trial Ct – for P
Brothers buy boat- if put in some one else’s name for convenience then no prescription after 3yrs. P wins
*******************WHO IS Fred?
Issue – prescription of 3 years at Appellate level.
496 – The owner exposes himself to the loss of his right of ownership in a thing if he permits it to remain in the possession of a third person for a time sufficient to enable the latter to acquire it by prescription.
3506 – If a person has possessed in good faith and by just title, as owner a movable thing, during three successive years without interruption he shall acquire the ownership of it by prescription unless the thing was lost or stolen.
Ownership of Movables can be corroborated by parole evidence in this case there was the seller of the boat testified that Louis had bought the boat.
Lower Ct. was affirmed
2993 – Form – Contract of Mandate
Estoppel Basis – Should have been a writing but there was not. Everything went forward. Principle can no longer question authority because of the amount of things that have been done up to that point.
2996 – Agency partnership – authority to alienate acquire encumber or lease
Jeanfreau v. Jeanfreau (La. 1935) - Motor boat
Louis purchased a boat and placed title of the boat in his brother Ed’s name for convenience only. Ed claims acquisitive prescription b/c he has been named as owner for more than 3 years. Corporeal movable property does not need to be recorded, but if value over $500, then you need corroborating evidence and one witness to prove its o/s. P tries to assert that the property is his even though vendor named P’s brother as the vendee.
HELD: Ct. held parol evidence is admissable for movables to establish o/s. For parol evidence, you need one witness and corroborating evidence. Louis can prove he’s paying for maintenance and docking of boat. P has the right at trial to ask the vendor if he sold the property to P.
( If the price or value is less than $500 and no writing is needed, then all that is required to prove o/s is competent evidence.
3/7
CHAPTER FIVE - THINGS THAT MAY BE SOLD
Legal requirements of a contract.
1. consent
2. capacity
3. cause
4. object
Common Law
1. Legality
2. Agreement
3. Capacity
4. Consideration
2448 - Things that May be Sold
All things corporeal or incorporeal, susceptible of o/s, may be the object of a K, unless the sale of a particular thing is prohibited by law.
2450 - Sale of future things
A future thing may be the object of a contract of sale. In such a case, the coming into existence of the thing is a condition that suspends the effects of the sale. A party who, through his fault, prevents the coming into existence of the thing is liable for damages.
2451 - Sale of a hope
A hope may be the object of a contract of sale. Thus, a fisherman may sell a haul of his net before he throws it. In that case, the buyer is entitled to whatever is caught in the net, according to the parties’ expectations (i.e. if an individual believes the net may catch some pirate treasure, then the treasure would belong to the individual, but if the individual’s cast turns up Mr. Ed then he does not own Mr. Ed), and even if nothing is caught the sale is valid.
2452 - Sale of the thing of another
The sale of a thing belonging to another does not convey ownership.
2453 - Sale of a thing pending litigation of ownership
When the ownership of a thing is the subject of litigation, the sale of that thing during the pendency of the suit does not affect the claimant’s rights. Where the thing is immovable, the rights of third persons are governed by the laws of registry.
2447 – Sale of litigious right
2448 - Things that may be sold
2449 - Reserved
2450 – Sale of future things
2451 – Sale of a hope
2452 – Sale of the thing of another
2453 – Sale of a thing pending litigation of ownership
3506 (18) repealed
St. Martin Land Co. v. Pinckney
Issue – Whether or not a mineral royalty is a servitude.
Prescription of nonuse can be to servitudes of 10 years
Distinction – Mineral lease - gives a right to seek oil and gas.
Mineral servitude – a right in the land constituting a part of the ownership itself.
Mineral Royalty – a legal right attached to the ownership of the land passive, no right to ingress or egress. A real obligation or right in favor of the person acquiring it. Authorized by 2015.
Revenues – from production of oil and gas and subsequent sale
D argued 10 years didn’t begin to run until drilling began. Sale of a mineral royalty is a sale of a hope there is no suspensive condition. Buyer takes on the risk
2652 – Sale of a litigious right
When a litigious right is assigned the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment, with interest from the time of the assignment.
A right is litigious for that purpose, when it is contested is a suit already filed.
Nevertheless, the debtor may not thus extinguish his obligation when the assignment has been made to a co-owner of the assigned right, or to a possessor of the thing subject to the litigious right.
When a litigious right is assigned or transferred the debtor may extinguish by price with interest to the assignee. Also, it is a sale of an incorporeal right. It does not prohibit it spells out the consequences.
Applies to rights contested in suits already filed and pending.
Limited application to those issues already at suit. Definition of litigious right at P2
Must be in the process of being litigated.
St. Martin Land Co. v. Pinckney (La. 1947)
At issue was a mineral royalty under art. 2451. A mineral royalty is a right to receive oil and gas from a property IF oil and gas is ever produced - there is no obligation on the landowner to seek driller of oil.
HELD: Production of oil occurs by the hands of man and not by natural processes, therefore, this is the Sale of a hope.
Hicks v. Clark (La. 1954)
Mineral servitude that expired for non-use of 10 years. Owner once more had rights. One who had servitude tried to argue that the servitude was the sale of a hope and after 10 years, it went to him as owner of the hope.
HELD: Court said NO - For public policy reasons, mineral rights revert to owner of land after 10 years b/c it would be a continuous burden on the land otherwise.
Litigious Redemption – Right of debtor to purchase right that third party paid for.
Hicks v. Clark
Rains sells to Brown and reserves ¼ interest in minerals. Not the royalties. Mineral servitudes have a 10 year prescription of non use. Active right was reserved – undivided right of ¼ of each molecule. Brown sells to Hicks. Hicks sells to Red Chute. In this sale Hicks retains his own ¼ interest. He also says that when Rains interest prescribes then it will revert to himself(Hicks). Ct. says for public policy reasons Hicks cannot get the ¼ interest it must revert back to the land and whomever owns the land gets it.
2447 - Sale of litigious rights, prohibitions
Officers of a court, such as judges, attorney’s, clerks, and law enforcement agents, cannot purchase litigious rights under contestation in the jurisdiction of that court. The purchase is null and makes the purchaser liable for all costs, interest and damages.
Could argue that a sheriff in one parish could purchase litigious rights of a suit going on in another parish according to plain language.
The Rules of Professional Conduct has impacted this area of law.
2652 - Sale of litigious rights
When a litigious right is assigned, the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment, with interest from the time of the assignment.
A right is litigious, for that purpose, when it is contested in a suit already filed.
Nevertheless, the debtor may not thus extinguish his obligation when the assignment has been made to a co-owner of the assigned right, OR to a possessor of the thing subject to the litigious right.
This article is triggered ONLY if there is a contested suit!!!
3506 - General definitions of terms
18. Litigious Rights - Litigious rights are those which can not be exercised without undergoing a lawsuit.
McClung v. Atlas Oil (La. 1921)
Interest in minerals were transferred to atty for services to be rendered in a lawsuit expected, but not yet filed. Suit is filed and P and D reach a settlement, but the atty. (who now has an interest in the minerals) wants to keep litigating, so Atlas argues that these rights are litigious and unenforceable.
HELD: Because no suit was filed at the time of the transfer of rights, the atty’s rights were not litigious. Therefore, he could retain his interest in the minerals.
Bilbe says that the court used the definition in Art. 2652 relating to litigious redemption to determine if the rights were litigious, but did not consider the definition in 3506 which is a much broader definition. Could have reached a different conclusion if relied on this.
The definition in Art. 3506 was added the same year as 2447, so the legislature likely meant it to define Art. 2447.
In Succ. of Cloud, the court discusses Gautreaux v. Harang which is consistent with McClung, and court notes that previous cases overlooked the definitions section - Doesn’t look like the court will apply McClung anymore.
***These rules hold true whether $ is at issue OR competing claims to o/s of property***
McClung v. Atlas Oil Co.
P settles with D – the lawyer wants to keep litigating (Huey Long).
Contingency Fee Statute not applicable.
Rules on litigious rights are.
2652 Paragraph 2
An attorney is an officer of the court and cannot purchase litigious rights.
Long did not acquire a litigious right because no lawsuit was pending.
Chose narrow definition. Huey Longs conduct was legitimate
3/12
Hope v. Madison
2653 – Sale of litigious rights
2447 – sale of litigious rights prohibited
Exegesis – way we read and reconcile articles
P executed a deed to her attorney Madison an undivided 1/3 interest in minerals and property of land P was seeking to recover from Gordon
For the consideration of $1
1st suit
Sought contract annulled on grounds of fraud, misrepresentation, failure of cause
2nd suit
Sought judicially declared null and violative of law
D says same COA
Suit 2 should be barred by judgment of suit 1
Consideration was the legal services
Contingency Fee Statute 37.218
1. the consideration was legal services and was available
2. pendent lite – while the suit is going on
3. transfer cannot invoke the provisions of 2447
This case violates 2447
It was already decided and on appeal. It had to be a pretrial memo D has a problem with 2 because she does not have a right to argue this relative nullity because she is a private party being protected.
2030 Absolute nullity
2031 Relative nullity
Court says this is a contingency fee arrangement
Hope v. Madison
Hope transferred to Madison, her attorney, a 1/3 interest in the mineral rights of the property. Although the deed said only consideration was “$1 and other consideration;” in petition, Mrs. Hope admitted a manifestation of true intent.
D won
Succession of Cloud
5 siblings
I child married, Urzula. Father sells land to son in law married to Urzula for 250.00
1. property transfer to Ursula
2. as well as 2 transfers of mineral interests from U Hatch to Martin Sanders her attorney
3. and transfer from U Hatch to Urzula to Urzula Inc.
Sale of land was set aside.
2. upheld Attorney invokes exception pre-revision code of professional responsibility and says it is permitted
Urzula was person in charge of succession of father.
The 20 acre tract was equally divided among the children
Urzula wouldn’t sign because she thought she deserved more for taking care of her mother.
Supreme CT says attorney violated canons and contracts for a % interest in the land
Attorney’s fees were 20,000. He ended up receiving 108,000.
HYPO
2652 – don’t go there Joe.
Derogates from the general rule
Joe Jim
Obligee Obligor
Bank Debtor
Jim borrows 10,000
Bank sells accounts to someone else for 9,000 potential of uncollectability but a chance for profit of collecting 10,000.
Strictly personal obligations cannot be assigned.
Heritable is other than personal
Subrogation – transfer of obligee
1825 Legally by operation of law
Conventionally by agreement
1827. Even without the obligee’s consent subrogation is subject to the rules governing the assignment of rights.
10,000 recovery
Legal subrogation 9,000 recovery
A suit filed while pending must be assignment of suit to be a sale of litigious rights.
So obligor cannot only pay 9,000
McClung did not involve litigious redemption. Propriety of sale of intention to file a lawsuit.
The Courts are discouraging Joe because he might be trying to harm someone by buying litigious rights.
Romans – to prevent purchase of claims so as to injure the debtor.
The odious purchaser of the litigation.
CHAPTER 6 : EFFECTIVENESS OF SALE AGAINST THIRD PARTIES
521 - Lost or stolen thing
One who has possession of a lost or stolen thing may not transfer its ownership to another. For purposes of this chapter, a thing is stolen when one has taken possession of it without the consent of the owner. A thing is not stolen when the owner delivers it or transfers its ownership to another as a result of fraud.
Comments:
(b) Theft = misappropriation or taking of a corporeal movable, w/o the consent to its owner. Common Law Larceny. Thus, not stolen if a thing is delivered to another as a result of fraud.
(c) U.C.C. ( 2-403(d) is in accord with this article. It protects the bona fide purchaser even though “the delivery was procured through fraud punishable as larcenous under the criminal law.” However, one who purchases from a thief with no title at all is not protected.
(d) Payment by a check that was subsequently dishonored was originally regarded as theft. Thus, in the past, the transferee did not acquire w/s and could not convey it to another person. Today, however, a sale based on a dishonored check is considered a credit sale, and as a result, the transferee acquires o/s that he can further convey to third persons.
522 - Transfer of ownership by owner under annullable title = voidable k due to vice of consent
A transferee of a corporeal movable in good faith and for fair value retains the ownership of the thing even though the title of the transferor is annulled on account of a vice of consent.
Comments:
(a) A person having a corporeal movable under an annullable title may validly transfer o/s to an acquirer in good faith. Even if the title of the transferor is annulled, the owner may not revendicate the thing in the hands of the good faith acquirer.
EX: Owner of an item intends to divest himself of o/s, but fraud or error is present in the transfer. Transferor can rescind if the transferee still has it. If transferee sold to a GFP for mkt. value, than original owner cannot rescind.
523 - Good faith, definition
An acquirer of a corporeal movable is in good faith unless he knows or should have known that the transferor was not the owner.
Comments:
(b) If the acquirer has notice of facts that would put a reasonably prudent man on inquiry, he is under duty to investigate with the view to ascertaining the true situation. If he does not do so, he cannot claim that he is a purchaser in good faith.
524 - Recovery of lost or stolen things
The owner of a lost or stolen movable may recover it from a possessor who bought it in good faith at a public auction or from a merchant customarily selling similar things on reimbursing the purchase price.
The former owner of a lost, stolen, or abandoned movable that has been sold by authority of law may not recover it from the purchaser.
Comments:
(b) “if a person possesses a movable, as owner, in good faith and by a just title, for 3 consecutive years w/o interruption, he acquires the o/s of it by prescription, unless the thing was stolen or lost, in which event he does not acquire the o/s by possessing as owner, under a just title, and in good faith, for 3 yrs. Even, where the owner of a lost or stolen movable acquired it from a public auction or from a merchant, he does not acquire it by 3 yrs. acquisitive prescription, but he must be reimbursed for his cost prior to returning it. The transferee of a lost or stolen thing, whether in good faith or in bad faith acquires o/s by 10 yr. prescription.
Generally, if a thief steals your TC and sells it at a garage sale to a good faith purchaser, you can demand return from the purchaser without paying that person any $. Under this article, certain groups are protected: Auctions and Merchants who customarily sell similar things,
( 1 is consistent with (or an exception to) 521, but it gives the purchaser the right to receive $ from the owner equaling what he paid for the item at the auction or from the merchant.
KEY: You do not have to reimburse the merchant, but you do need to reimburse the customer.
So, if an item is stolen from you and pawned at a pawn shop - it does not appear that you owe the pawn shop owner anything - ONLY people who purchase from the pawn shop owner. (issue: could a pawn broker be a merchant selling similar things - Bilbe says that no cases exist, but in other states pawn brokers are not merchants.)
525 - Registered movables
The provision of this chapter do not apply to movables that are required by law to be registered in public records.
This provision made more sense when Art. 520 was around which said that where there had been a voluntary entrustment of possession of a movable to another, the person who transferred it took the risk that the movable would be sold to a good-faith purchaser.
This provision protected the Hertz Rent-A-Car places.
This provision never regulated a transaction b/c it was repealed quickly!
2439
1. Agreement to thing and price
2. writing
3. ownership transfers upon agreement
4. risk of loss doesn’t transfer till delivery
This is limited to contracting parties 1,2,3,4
Movables are subject to the rule of delivery
Immovables are subject to the public records registration
518 – voluntary transfer of title
Ownership of a movable to 3rd parties
Upon delivery
Provided in good faith creditors of the transferor may seize the movable while he is still in his possession.
3/14
Risk Shifting
Sale on delivery is binding on the world
3rd party gets ownership creditors can come in and seize it.
Problems that arise even if there is delivery.
Risk shifting is the scheme law uses to decide which party gets the thing.
Ownership may or may not be flawed.
original owner -------------------Intermediary-------------------Third Party
(rascal) in possession
On whom should risk fall?
Ring sold to intermediary then sold to Third Party. On whom should the risk fall to go after the rascal?
Who bears the risk
S polar positions on this issue.
Common Law View – protects ownership
Ownership is so important it can only be transacted through certain ways. If it is flawed and doesn’t transfer to I it doesn’t transfer to the Third Party either.
French Civil Code takes viewpoint that integrity of commerce and ease of flow needs to be protected so possession needs to be protected.
Possession vaut titre – is ownership
Power to convey even though he may not have good ownership.
Original LA articles were more in line with common law
In the 70’s there was a greater movement to the French view.
520 – If you voluntarily relinquish possession then too bad to you.
We don’t follow this
79 legislation enacted
80 suspended
81 repealed
Nothing put in its place
520 existed in a scheme. It was the general rule. Those following were the exceptions. They were not repealed. Look at exceptions. Specific exceptions tell us how to handle those types of fact patterns.
How do we resolve cases that do not fall in the exceptions?
521 – protects owner – one who has possession of a lost or stolen item
524 – auctioneer or merchant in good faith you have to purchase it back
522 – vices of consent – you have somewhat a voluntary transfer so this one protects the third party – Yianoppolus wrote this one
2035 – Remedies for contractual problems. Nullity of a contract does not impair the rights acquired through an onerous contract by a third person in good faith. Litvinoff wrote this one.
We assume these are the same concept but this has not been litigated yet
525 – registered movables
The provisions of this chapter do not apply to movables that are required by law to be registered in public records.
Problem with this article
Brown and Root v. Southeast – stolen loader case
Original owner – Brown------------Intermediary---------------Third Party – Southeast
Was the purchaser in good faith?
523 good faith is presumed unless you knew or should have known that the possessor was not the owner. Serial number was gouged out but case went for Third party.
P has the burden of proof and has failed to carry it.
Brown & Root v. Southeast Equipment (1st Cir. 1985)
Movable at issue was a Caterpillar and whether the acquirer bought it in good faith from a merchant who customarily sells similar things? The owner is challenging his good faith b/c there was no serial number, the price was very low and the plates were covered. Good faith is presumed unless the party opposing can show the person knew or should have known it was stolen.
HELD: Acquirer was in good faith under Art. 523, so Brown and Root can have the item back, but they must reimburse the purchaser for the item. D wasn’t in possession for 3 yrs - What happened to Holloway 3 yr period? Code was amended in ’80 - 524 rev. comment (a)
EXAMPLE:
Lend your sister your TV and it ends up in a merchants place of business and is purchased by a GFP. If you read Art. 524 literally, it refers only to lost or stolen items, but there is an inclination to say this fits too. This is an issue b/c we no longer have Art. 520 and when 524 was written, Art. 520 covered items that were voluntarily entrusted to a possessor (it gave o/s to the GFP for value even though possessor did not have o/s).
Now that 520 is gone, does 524 protection extend to voluntary entrustment? NO COURT HAS DECIDED! Bilbe seems to think it does.
Frantz v. Fink, Moss – diamond earring case
Tooley likes this case
P did not sell earrings to MOSS
P did voluntarily relinquish them
Fink gave diamonds to Moss to make into broach
Moss pawned broach
Fink had possession of one pair of earrings
Moss goes to original owner and says I have been robbed
Moss was arrested
Fink says I don’t know where they came from
Court says – On first pair Fink was in good faith on second pair he should have known wasn’t in good faith.
If these facts arose today, 521 would not apply.
522 volu8ntarily relinquished. Was there a contract of sale?No
So fraud doesn’t apply to sale.
There is no article that applies to this because it should follow a general rule and we don’t have one.
William Frantz v. Fink (La. 1910) - Hocked Two Pair of Earrings
Complaining jeweler let “faithless” have possession of two pair of earrings of which he could sell to a 3rd party ONLY if above the price he set. Faithless (Moss) sold first pair to Fink for less than the value and 2nd pair to another pawn dealer. Fink gave Moss a broach valued at $1500 dollars to set diamonds. Moss hocked the broach to a 3rd pawn dealer. Fink tried to get broach back and Moss confessed that he hocked. Moss told Fink about getting 2nd pair of earrings and their value which would pay to get broach out of pawn.
HELD: The original transaction b/w jeweler and faithless was not a sale, however Fink purchased as a GFP. Therefore, court used the principles of estoppal b/c complaining jeweler gave up possession to someone they knew would resell the item. As to the 2nd pair of earrings, Fink knew Moss was a thief and should not have gotten involved, therefore Fink is responsible to restore price or earrings to jeweler as to this 2nd pair.
Under 520 – gave greater power to the possessor but they had to be a good faith possessor.
3/19
Port Finance v. Ber (Orl. Cir. 1950)
Faithless purports to be a respected person in Lake Charles and buys a car for $750. The car dealership calls to see if his check is good. Executes bill of sale and then faithless sells car in N.O. to car dealer for $400. N.O. dealer argues that the 1st dealer intended to sell it and although you had an annullable title, faithless sold it to me, a GFP for value, so I own the car. Lake Charles dealer argues that faithless did not have title, b/c dealer only meant to sell it to the person faithless represented (he could also argue lack of good faith of the N.O. dealer b/c of the price and the pre-dated bill of sale).
HELD: For Lake Charles dealer - says car was stolen b/c he misrepresented himself. The sale of a thing belonging to another does not convey o/s. P acted as a RPP under the circumstances and the record is void of any facts that show P acted negligent. On the other hand, D was alerted to facts that should have aroused the suspicion of a RPP.
Ct. attempted to use the common law inter praesentes inter absentes rule which says that if you have a face-to-face encounter, then faithless holds title, but if you have a transaction by correspondence (phone or letter), then the correct party holds title. Ct. attempted to apply this, but screwed up.
Bilbe thinks they have the correct winner, but for the wrong reason (he thinks lack of good faith)
Port Finance v. Ber P wins
Car financier Used car lot owner
P sought Chevrolet or 700$
D in possession with title
District Ct – for D
P Appeals – Dupuis (Alias Daugat) approached P for car sale. Wrote a check. Assistant manager called bank to confirm identity and that check was good. I went to jail in Alexandria.
Dupuis sold car to Ber
Title = ownership.
Reversed
521 – Lost or stolen
522 Vices of Consent
525 – Registered movables
Transfer of ownership that is immediate is not binding on Third pArties
518 – delivery
Sale subject to bonafide purchaser doctrine
2439 – Overarching
Civil Law – cause – onerous, gratuitous. Why did you do what you Did?
Common Law – consideration. What did you get for it?
P entered into the contract of sale impersonation mistake as to the person. Is the person the principle cause?
Impersonator sells to D
Cost sould have allerted
Attempt to verify check.
If the case were decided today The methodology would be
521 – Rule if a thing is in possession of I is lost or stolen I has no legal power to transfer ownership. Definition – A thing is not stolen when the owner delivers it or transfers its ownership to another as a result of fraud.
Fraud it doesn’t come under this rule
522 – OO I TP
Two criterion Third Party
1. good faith
2. fair value
3. Transferee – even though the title of the transferor is annulled on account of a vice of consent
522 goes beyond this case makes it more crystal
Court says – fraud equal to theft
Articles do not say that. Differences bewteen 522 and this case. 522 was not encacted.
Court used jurisprudential rule that 520 would have replaced Weighing fasctors in this case.
522 does not weigh factors.
Port Finance allowed impersonation to count as theft.
Ct. in this says if it is knowingly transferred it is not really theft.
Today we would apply
521 – does not apply because it was a sale
522 – Higgins was in good faith and it was fair value.
Does vice of consent apply?
There was no error as to the formation of the contract. So not truly vice of consent
Jeffrey Motor Co. v. Higgins
District Ct. – Recognizes P as owner of 53 Oldsmobile
D Appeals – D had to return car to P or 2,650 with legal interest
Dabbs N.O. Dealer bought cars from Alabama dealer. Jeffrey Motors
Ross – retailer salesman for Jeffrey P drove car to N.O. accepted a draft instead of cash from Dabbs Check was insufficient funds
Dabbs sold car to Higgins. Dabbs was convicted. Sale of a thing belonging to another is null.
Broad definition of word theft in criminal proceedings.
D says estoppel – Court did not discuss because of ratification. Converted to credit sale acceptance of draft. Sale was incomplete – Dabbs should have stopped sale earlier. Dabbs had title so he could convey it.
Contract required cash – Agent accepted non-conforming method of payment
Owner has right to repudiate but he ratified it by accepting the draft.
Jeffery Motor Co. v. Higgins (La. 1956)
Cars from dealer in Atlanta delivered to a N.O. dealer to be paid for in cash, but driver accepted a post-dated check, which was NSF. Atlanta dealer deposited the check into the bank and in the meantime the N. O. dealer sold one of the cars to a GFP who believed the deal was OK.
HELD: Dealer ratified the K by depositing the check when he could have demanded the car back, so the object was sold to the N.O. dealer who can sell it to someone else. Jeffrey’s acceptance of the draft and depositing the draft constituted ratification and converted the transaction to a credit sale. The sale was complete when they accepted the draft b/c there was agreement as to the object and price.
In this case, court disapproves of the Ber reasoning that the car was stolen.
Yorkwood Savings and Loan v. Charlie Hardison and Sons
Trial Ct. – Sale from Allen to D was null and void for a motor home.
Appellate – affirmed
Facts – Dowtys abandoned mobile home.
Dellacono employ for Gulf Union Corp.
Allen made bid for home
In prior dealing Allen always paid with a certified check.
P had taken possession of the home on June 8 obtained voluntary surrender form signed by Dowtys
Allen picked up the home but was never given the bill of sale. D was contacted by Allen to purchase home. He paid 3 checks – D never asked if Allen owned the home.
D has home. Allen took off with the money.
Registration Records – To have marketable title one must also have certificate of title
Exception is Doctrine of Estoppel.
P never entered into act of sale with Allen. Pick up order is all he had to give.
Estoppel doesn’t apply here because the P should not have relied on Allens assertions without some proof.
OO-----------------------------I----------------------------------TP
P Allen Hardison
Yorkwood D
P wins
525 – does not go that far that unless it is registered it does not apply.
Yorkwood Savings v. Hardison (1st Cir. 1980)
P asserting o/s of a mobile home. Nothing was ever executed, but a “pick-up” order was given to Allen by P, who always retained title; Allen, a mobile home dealer, was supposed to buy it and P gave him permission to put the mobile home on his lot, but he did not. Allen sold the mobile home to D.
HELD: Ownership did not transfer to D b/c no certificate of title. The 1st Circuit thinks that cert. of titles are more important than the Flatte court thought. P gets mobile home back. No transfer of title and no bill of sale. No sale, because nothing was executed or transferred thus, P never stopped being the owner.
What if Allen had moved the trailer to his lot and D had gone there to look at it?
Clear change of possession pursuant to an understanding that the item was to be sold.
Court would likely find that owner consented and is estopped from challenging OR
The sale is final b/c agreement that once paid, the trailer is his (see William Franz)
You do not even reach the issue in Flatte until you have possession.
Bible thinks that you should use 522 by analogy to motor vehicles b/c of the dynamics of 520.
RULE (comes from the jurisprudence):
If you transfer possession with the intent to sell at a later date, but retain title, court looked to this as a sale (could say annullable sale under 522 b/c agreement as to thing and price) and o/s transfers if faithless sells to a third party.
In circumstances where the 3rd party does not ask for a title, the owner could argue that the 3rd party is not in good faith, but there is nothing yet in the jurisprudence.
EXAMPLE of how Key Possession is:
“A” = owner; “B” = Faithless; “C” = buyer
1) A executes credit sale with B, but A retains possession. B strikes deal with C. C pays B who skips town w/o paying A. C cannot take possession from A because C only bought B’s rights, thus C is an assignee.
2) Same as 1) except B gained possession, & subsequently transferred o/s to C. Here, A is out of luck in accordance with Art. 522. C is entitled to B’s rights and B essentially had title.
Trumbell Chevrolet Sales v. Maxwell
District Ct. – No COA Estoppel
Appellate – False forged statement was basis of transfer
Reasoning – Original sale was complete when the seller accepted a draft which constituted an agreement.
There was an attempt to sell
Price was paid
Seller withheld the documents in order to protect himself.
Because there were forged documents the tp was in good faith
Certificate was forged
TP claimed to be a bonafide purchaser
This case does not go that far. The TP is bona fide because he didn’t know or have reason to know it was forged. 525 – Case by case you ought to have certificate of title but not a bright line rule. Ct. will consider other factors.
Trimbull Chevrolet v. Maxwell (2nd Cir. 1962)
P delivered and took a check for 18 cars which were going on a lot to be sold, but retained the title to each car. D subsequently sold cars, but did not pay P. P argues that because he retained title, he should prevail over consumer.
HELD: NO - consumer protected b/c seller knew that these cars would be resold immediately.
Note case: Fisher v. Bullington (La. 1953):
In this case, the court apparently recognized a conditional sale (where title does not transfer to the purchaser until the happening of a condition), when the courts normally treat these transactions as a credit sale and o/s transfers immediately - other later courts rejected the basis in Fisher and said that sales in which the check is bad is not a conditional sale, but constitutes a fraudulent transaction that is void.
Three specialized rules
521
522
525
Not all cases cover these
Where do we start with General Rule?
Pre 79 would be covered by all three rules.
Ct.s were balancing case by case looked at relative negligence and gave to the one less negligent.
Not appropriate to use the balancing process if it is covered by one of these rules.
If not then it is appropriate to balance or weigh factors.
3/21
Public Records Doctrine
Law – When immovable property is sold it is not binding on 3rd Party (TP) until recorded.
2442 – Recordation of sale of immovable to affect third parties
A- B A – C
1839 – Transfer of immovable property transfer by authentic act or by act under under private signature.
Paragraph 1 – still binding when delivered and recognized by transferor under oath
Paragraph 2 – An instrument involving immovable property shall have effect against Third Persons only from the time it is filed for registry in the parish where the property is located.
2035
2021
McDuffie v walker –
Facts bought land from McLelland in 1899 but did not have it recorded until 1908.
District – For P
Appellate – For P
Supreme Ct. – For D
D – Walker bought land from succession sale of Zemmer McLelland.
So even though D had title P was able to acquire it because it was not recorded.
1982 – Just title need to have it recorded also.
Potential knowledge does not substitute for recordation.
LA in taking this approach is in the minority.
LA and NC use this viewpoint that knowledge is irrelevant.
48 other states take position that TP with knowledge is the functional equivalent of recordation.
We have the PURE RACE DOCTRINE
The one first to the court house wins ownership.
McDuffie v. Walker (La. 1910)
Exact application of 9:2756 (old Code Art. 2266). Even if the 2nd buyer knew about the 1st transaction, in which seller executed a sale with 1st buyer, 2nd buyer is protected by the public records doctrine b/c any transaction not recorded is null and void.
What if 1st Buyer was in possession at the time 2nd buyer recorded? What is his rights under eviction? Does his rights under eviction differ if he was not in possession?
Succession of James
Wife died in 1915
Husband wants what is left of estate
William Johnson in 1917
P Chretian dismissed
D Johnson wins
Succession of James (La. 1920) If you are not empowered to make the transaction, it is set aside.
At the time of this case, the head and master regime controlled; hus. could lease immovables, but his wife could not enter these transactions alone. BUT wife leased immovable property and property deed said she was single; she mortgaged the property. Hus. asserts that the mortgage is invalid b/c he was not a party to the transaction.
HELD: Mortgage was invalid b/c husband’s consent is necessary the court found nothing in public records doctrine to change this assertion.
3/28
Camel v. Waller
Footnote ABCD
Automatically under community property
He is head and master. So He has the power to sell property. Wife has the right to sue him (husband) as a breach of duty by selling to the girlfriend.
Girlfriend’s title is good however.
Under Community Property laws James operates to make community property applicable.
Impact of Title 35 Section 11 - Did not apply
Now concurrence is needed.
Camel v. Waller (La. 1988)
When parties were married, husband asserted that he was “judicially separated” and acquired property. After the acquisition, the separation was obtained, but was not recorded. Subsequently, property was sold to TP.
HELD: First, the purchaser cannot rely on the declaration of the marital status of spouse, so as to validate his acquisition in preference to interest of the wife (court cites Succ. of James). However, at this time, hus. was head and master and could alienate the CP. Therefore, court protects the TP b/c the husband had the power to sell and the judgement of separation was not recorded.
Bilbe thinks this case follows Humphrey’s even though the court implies that Humphrey’s doesn’t decide this.
If this scenario happened today, no sale b/c need the consent of the wife under Art. 2347.
La. R.S. 35:11 was inapplicable in this case, but provides:
B. A declaration of one’s marital status in an acquisition of immovable property by the person acquiring the property creates the presumption that the marital status as declared in the act of acquisition is correct and, except as provided in Subsection C, any subsequent alienation, encumbrance, or lease of the immovable by onerous title shall not be attacked on the ground of the marital status.
B. Any person may file an action to attack the subsequent alienation, encumbrance, or lease on the ground that the marital status of the party as stated in the marital act is incorrect; however, such action shall not affect any rights acquired by a third party acting in good faith.
C. The presumption is retroactive to 9-1-87.
This statute says that for a 3rd party to be protected, the transfer must be:
1) an onerous transaction and
2) in good faith and
3) spouse lied about marital status in 1st acquisition.
* If these elements are not present then James can be looked to, lack of consent can vitiate the k
* This is contrary to James, because a spouse w/o power to alienate cannot transfer title & thus the 3rd party would not be protected.
EXAMPLE:
Hus. describes himself as single; thereafter wife finds out and says that she did not concur.
TODAY, wife would win!
You could make the argument under Succ. of James b/c in James the non-concurring husband’s consent was not given and the court repudiated the sale - now this applies to both parties.
BUT - look at 35:11 - first there must be a false statement of marital status and the declaration must be made in the instrument of acquisition; then the third party must be an onerous transaction where the TP was in good faith.
35:11 deviates from the traditional public records model b/c under McDuffie, even if the 2nd buyer knew that the sale was improper, he was protected. The TP in this instance must be in good. * If you do not have 35:11, then apply Succ. of James.
Consider Art. 2342 - discussing the declaration of separate property made in an acquisition. (i.e. person admits being married, but says that he is using his separate property which is false)
The 2nd paragraph of Art. 2342 functions the same way as 35:11 in that, if the property is sold by onerous title, it will not be set aside based upon the falsity of that declaration.
HOWEVER, no good faith requirement in this article - you could argue either way by comparing or contrasting 35:11 that good faith is implicitly required.
McDuffie – knowledge is irrelevant
False declaration of judicial separation
2342 – if a spouse has falsely declared property to be separate and sells it the spouse cannot attack the sale.
35 is designed to protect third party relting on the record. “Enshrines a lie” at the expense of the McDuffie rule.
PUBLIC RECORDS DOCTRINE – The law requires to be recorded – enables a third paerty to ignore it if it is not recorded.
Succ. Of James – limited willingness to recognize rights not recorded.
Title 35 1987
Ex. T’s father is wealthy
T knows she will inherit
T forges name and sells property to herself.
T then sells property
T records both instruments.
2452 – still belongs to Dad because sale of a thing belonging to another is null.
2340 – Presumption that property is community.
Forged recorded instruments are not effective.
Heirs rights – children belong to a preferred status.
LA has made children a mandatory class. Forced heirship. Changges have been made over the years. This came out of giving more protection to surviving spouses.
There have been moves to make changes in forced heirship.
Policy consideration is that parents do not owe children
Paretn ought to be able to choose where assets go.
23 years or younger are still protected. Legal right to certain share of parents property
1493 – definition of forced heir 23 years or younger those with mental incapaccitation.
1495 –
1505
Forced heirship is a parents limitation on the right to donate.
If a childs forced share does not go to him this is an impingement.
The child has a legal action against the donee. Action of reduction
Seeking to reduce the donation to other party and bring it back into the legetime.
Heir only has a right to reduce up to ¼ of property.
Time limit – 3 years before death.
Long. V. Chailan
Lou Toler Cole Long married to Henry Long Sr.
6 children He owns ½ interest at her death
she dies
Debt was incurred by father
Sheriff seized property and sold it.
Heirs rights are important in Long.
Spouses rights are important in James
Long v. Chailan (La. 1934)
Property was acquired in dad’s name during existence of the community b/w mom and dad. Mom dies and dad purports to sell the property. Her heirs assert that they should have to concur.
HELD: For heirs, even though there was no way in the public records for the purchasers to know that she was dead.
Termination of community by wife’s death was treated differently than in Humphrey’s which was a divorce, because death is not recorded.
Today’s regime requires concurrence, but you also have reasoning in Succ. of James that nevertheless, consent of both parties is necessary.
A spouse can renounce the rt. to concur.
EXAMPLE:
Same facts as example above, but instead of divorce, the wife dies and the husband tries to alienate the property.
Wife’s heirs can assert: (1) Long v. Chailan, (2) When she was alive, it was necessary to have her concurrence, and this passes to her heirs.
What about 35:11?
Remember, must have a statement about marital status; then it is applicable and a presumption exists that the marital status is what it is declared to be - cannot be attacked if by onerous title and the acquiring party is in good faith!
Because there is no mention of death in 35:11, you could argue that 35:11 overrules Long and we will no longer protect the heirs! BIG STUFF.
Also note that the declaration in 35:11 must be in the original acquisition of the property, NOT the sale to the 3rd party.
4/2
Chacere v. Superior Oil
The right children have under forcced heirship laws. Under statute this could be asserted against thrid party buyers. Donation triggers right to recapture by child. If parent has sold the child does not have the right to recapture. We are a pure race system but third party is protected in the case of a donation.
Public reocrds doctrine does not protect however in the case of a forgery.
Public Records Doctrine is a negative doctrine.
Basic fact pattern of Camel v. Waller.
Custodian of records in office of conveyances
Separate registrar for Mortgages.
PRD is talking about the conveeyances. You hand original document to registrar They are filed in a book. In the order they are received. Then placed in an indices. Alphabetical one set for grantors one set for grantees. Historically this is done manually.
Chachere v. Superior Oil (La. 1939)
Although sales were recorded, they were really gratuitous transactions. Good faith TP acquires.
HELD: For TP; if original seller was trying to get the property back, he may be able to, but once 2nd transferor filed in the public records that it was a sale, he was estopped from challenging the sale as a donation, so the property went to the TP who relied on the false assertion in the public records.
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Grantee Grantor
Start here
Nelly
Mike
Joe
Nelly
Run each name in grantor look for instrument by which each was transferred
Ex. Mike sold to Ben but never recorded
Mike sold to Joe Ben records
Joe sold to Nelly and then records
Ben recordeed late. When you do the search you will find Nelly from Joe
Joe from Mike
Ben will not be in the grantee book.
Mike will be under grantor
First doc. Will be sale to Joe
Not Mke to Ben
Camel vv. Waller
Husband had head and master power
H divorce not recorded
Sells to
X
Wife records
Then x sells to y
Event that terminated his power happened before sale however divorce was not recorded
Dissent by Dixon When she does record it ought to prevent but he is wrong says T. because the system protects ownership.
Run names in grantor list because Ben is not in the grantee list Because he is not in the chain of grantee list.
Grantee Grantor
Receives property sells property
Hypo
X
Y - unrecorded
Z - recorded
A – recorded
Record title owner - Recordation records your status as transferee from owner
Recordation problem – A break in the chain. AS long as X doesn’t sell to someone else you can fix the chain of title.
X – D records 2000
Y – 2001 recorded
Z - 1985
A – 1995
No legal duty to record. However buyer has recourse for eviction
Acquisitive prescription. Good faith just title 10 years
Bad faith, No title, 30 years
In a sale 2474 Chapter 7 Obligations of the seller. Owners duty are imposed on seller not the buyer. Duty on the seller are straightforward – duty to express tyourself clearly.
Sellers duty 2475
Two Categories
1. To deliver the thing to the buyer
2. Warranty – Contractual and legal responsibility. 3 Distinctive warranties
a. Eviction, peacable possession, ownership
b. Redhibition. Absence of hidden defects
c. Fit for customary use, statutorily bound
1. When there is a sale ownership transfers to buyer even though the price has not been paid and the the thing not delivered.
Seller must perform by delivery/ Buyer must pay price
2477 – At act of sale
What delivery consists of creates presumption that delivery of immovables when texecution of documents. Deemed to take place of execution of instrument. Unhelpful because sometimes seller does not deliver property at act of sale. Sometimes they agree to have seller pay for extended use.
Breaach of delivery of obligation – Damages – Value for use deprived of. Alternatively dissolution of the sale.
Commutative – performed at one time, the same time.
Ex – Sale of horse. For 1,000
If it is a commutative contract if the first party doesn’t perform the second party is discharged.
2487 – seller may refuse until buyer tenders price unless a term has been set. Then it is not commutative. Term may be when my tax refund comes in.
2487 – specific adaptation of general rule
Either party to commutative simultaneous performance
2022 – Simultaneous – Problem of buyer havving been given a term and seller not having the exception because he has extended the term. Nevertheless the buyer learns of the risk in the transaction.
Then General obligation articles apply.
2023 – If the financial situation deteriorates and you have extended a term you can demand security.
Non conforming goods – delivery duty.
2485 – Describes buyers remedy if seller doesnot deliver or deliverslate. Election of remedies.Dissolution of specific performance
Delivery Rule – Immovable property and assertion in sale and quantity and differenceed in specialized 2491 – not covered
Read Young v. Stevens
4/4
seller’s obligation to deliver the thing sold
cook v west.
Cook v. West (La. 1842)
P believed he purchased hay from a flatboat; D was the original owner who asserts that he is still the owner. P’s original dealings were with Wood (scoundrel). Wood purportedly made a deal with D and then attempted to sell to P. Although the sale as perfect between D and Woods, Woods could not transfer it until he had delivery of the thing by paying the price (D had the right to withhold the goods until Woods paid, since it was a cash sale).
HELD: Normally, transferee only succeeds to the rights of the transferor, ( D maintained o/s until delivery was made, and so Wood nor P ever had o/s.
Under Art. 522, (bona fide purchaser) and negotiable instruments, the transferee can have greater rights than the transferor.
Maxwell Motors v. Davis (2nd Cir. 1976)
P/seller brought suit for the balance of the agreed upon price (P still has possession). D claims that since it was never delivered to me, he didn’t owe the balance.
HELD: The seller is not bound to make delivery of the thing if the buyer does not pay the price. (old Art. 2487) Seller was not in default of any of his commitments, so the proper remedy is suit for price.
TODAY:
2485 - Buyer’s rights upon default, damages
When the seller fails to deliver or to make timely delivery of the thing sold, the buyer may demand specific performance of the obligation of the seller to deliver, or may seek dissolution of the sale.
In either case, and also when the seller has made a late delivery, the buyer may seek damages.
Pwon
Matthews v. Gaubler (Orl. Cir. 1951)
Sale of residential property. D agrees to hand over possession at the act of sale. At closing (the last day remaining on the purch. agmt.), D says the baby is sick and we can’t get out until tomorrow. P says no and brings suit for double the deposit and atty fees, per purch. agmt.
HELD: For P. P is entitled to delivery at final execution of documents. Bilbe believes the ct. would have reached the same conclusion even if the purch. agmt did not state that the keys were to be handed over at closing.
-------------------------------------
Period of time which buyer has right to assert lack of merchantible title is before he has gotten to the sale.
K to sell -----------------------------------------------------------------Sale
Bound to purchase, but not purchased yet
Remedy is warranty against eviction after sale
Buyer who learnes of problem in title under this doctrine is permitted to walk away from the sale.
Once bought you must undo the sale (rescission)
Merchantable Title Doctrine has similar common law basis
Civil no legislative basis for this doctrine. Remains jurisprudential creature.
Not merchantable – lower threshold than ownership. Question mark on sellers entitlement that would require litigation on issue.
Schaub v. D’Quin (La. 1948)
Purchaser contends that he should not have to go forward with an order decreeing specific performance because seller’s title was imperfect (seller’s chain of title included a sale of interest to a minor that did not comply with statutory requirements).
HELD: The possibility of “claims of a substantial nature” did exist and buyer did not have to perform.
Note: The buyers were not saying that the minor’s claim for title would be successful, but that they do not want to pay the price for property that they may have trouble selling. ( Need only show “claim of a substantial nature” exists.
The buyer has an “implied warranty of merchantability” which dies not have to be written into the K.
Substantial Nature - Includes future litigation or even suggestions of future litigation.
Schaub v. Oquin
Minors as sellers in the chain of title
Could the minors ratify? YES
Problem discovered about title was curable.
Ct. said on second rehearing litigation was necessary to resolve issue of title.
Young v. Stevens (La. 1967
Purchaser refuses to go forward with sale b/c title is unmerchantable ( neighbor’s fence encroached on driveway and fences on the property of issue encroached on the other property.
HELD: Buyer was justified in refusing to go forward with the transaction under either circumstance.
The argument was made that in residential property, your expectation was not to get the extra foot on the driveway, but this would still not solve the encroachment on the other person’s property.
Today, people can get out of the contract by getting a survey order.
CHAPTER 9 WARRANTY AGAINST EVICTION
Merchantable title jurisprudential question of requiring litigation for resolution.
Litvinoff says Doctrine is jurisprudentially created suspensive condition. Requires that title be merchantable before sale goes through.
Ct.s have viewed as breach by seller. Seller may win litigation but threshold is low enough that buyer can just waslk away.
Suspensive condition not a breach
Neither party is bound until conditions are fulfilled. – unless a party caused the condition to fail. If earnest is given he ought to get his deposit back.
2500 Eviction scope of warranty
Loss resulting from TP rights
A – B Not recorded
A – C recorded
Exception in 2503
2500
B brings zaction against A for warranty of eviction
C ghets ownership in petitory action
Breach of warranty of ownership
Warranty also covers encumbrances of servitudes
2500 – defenition
2503 – incorporated notion of a quit claim common law notion
2503 – waiving warranty implied in every sale you can opt out
If you say nothing you are covered by general rules. You can increase or decrease or exclude However, even if you exclude seller must return the price unless
By seller own act, cannot be limited
Subrogated rights – Creditor takes place of another creditor.
Transfer of rights is subrogation
Seeking to assert right against seller up the chain
Z going to X to assert right or relief x-------y---------------z
2506 – rights against evicted buyer in case of eviction
Can recover price and fruits with exception in increase in value of thing.
2507
2509 apportionment don’t worry about
2511 – evicted from part of property buyer can rescind entire sale if he would not have bought the thing without that part
2517 – procedural mechanism seller has duty to defend suit. If buyer fails to call seller in warranty
Richmond v. Zapata
No express exemptions for mineral leases. If sales document would have explained mineral rights the buyer then could have taken subject to that. Instrument did not alert buyer of mineral rights being exempted from sale
1977 recorded servitude.
2001 Seller sells to you all rights of ownership. When one stick is taken out of the bundle and the prescription of non uses takes place the stick goes back to the bundle. D WON.
Richmond v. Zapata (La. 1977)
P/Purchaser complained because drilling was occurring on the property pursuant to an existing, recorded mineral lease.
HELD: For D. P/Buyer is without recourse to the seller because there were ample external signs of mineral production when the buyer bought the property.
The court compares this to the rule that a vendor does not warrant the property conveyed as free from apparent servitudes, to which a mineral lease is likened.
The buyer would have a claim if there was a recorded mineral lease, but no drilling at the time of the sale?
This decision was not based on the public records, but the ability to see the servitude (old Art. 2515; today’s 2500)
Servitude binding because of recordation. If not in the instrument there is a breach. Rule for apparent servitudes is an exception. Legal non apparent servitude
Land closest distance to public road for enclosed estate.
689
690
Cling
Liberative Prescription
Right of eviction might take place years after the sale.
One of future covenants
Branching out into the future. Breach of warranty 50 years after the sale.
COA doesn’t arise until you have been evicted
3499 – 10 years is the default rule
Warranty against redhibition built into.
4/9
Bologna Brothers v. Stevens (La. 1944) * Imp case
1) Stephens acquires immovable in B.R.
2) Stephens transfers to Stephens Realty Co. (recorded, but square # left out)
3) Stephens (not Stephens Realty) conveys property to Bologna Brothers
4) Bologna builds a building on the property
5) Stephens dies
6) Bankston approaches the Stephens family to purchase the land - he buys it from Stephens Realty
7) Bankston goes to Bologna and tells them the deal and asks for $ to quite title
8) Bologna pays
9) Bologna pissed off and sues Stephens’ estate
D’s argue that: A) P’s have never been evicted and cannot sue for the purchase price (they outright own the property now b/c they paid Bankston for the right)
Court says that you can state a claim for eviction even if you have not been physically removed or been sued ONLY IF Contrary title claim made by an individual with Perfect Title, even though this party has not brought suit.
Bilbe says that it is much better to make your claim before the act of sale as unmerchantable title, if you close the sale and have trouble when you sell it, the argument for eviction would be much weaker b/c the defendant’s could argue that you were never evicted.
D’s also argue: B) the transfer from Stephens to Stephen’s Realty was invalid because no square # was given, so the transfer from Stephens to Bologna was valid.
Court says that Bankston did not have perfect title, which seems to mean that Stephens will owe. However, court allows Stephens to implead Bankston to argue that the transfer must be rescinded b/c Bankston knew that the sale was improper or fraudulent.
See Art. 2517 - if buyer is P or D, must give notice to the seller or forfeits his warranty claim if the seller can show that the third person had no right to the property (this is what the court remanded the case for)
EVICTION = 1) Physical attempt to remove buyer.
2) Contrary title claim made by an individual with Perfect Title.
Stephens sold to Bologna
Stephens died
Stephens Realty Co.
Breach of contract sale – claim for return of purchase price. buyer suing seller.
Warranty against eviction – implied in every sale.
Issue – Has buyer been evicted? NO
In Bolgna the buyer had been evicted.
Third party with superior rights made him pay 1,000.00.
Buyer suing seller for warranty of eviction.
However the buyer had not been hasselled. Buyer had not yet lost the thing he only feared losing the thing.
Warranty of merchantable title is onlyt available for thing not yet sold.
Difference between warranty of merchantability and Warranty of eviction. In eviction it has already been sold.
Once entered into a sale there are three warranties
1. eviction
2. redhibition
3. intended use or fitness
At time of Bolgna 2500 defined eviction as actual loss of the thing.
Bolgna asked the ct. to extend to the fear of the loss of the thing.
Sale – a transfer of ownership.
2500 – Danger of losing the thing – added because of jurisprudential expansion.
Merchantable title – must be litigated for resolution.
Perfect title – If litigated we know who will win.
Seller breached his warranty if they lose litigation.
A – B unrecorded wrong section – flawed
A – C recorded – correct section – no flaws
Standard – perfect title
Bologna what to do if no actual eviction
Kling v. McLin (4th Cir. 1981)
P is a vendee of an automobile and argues that there is a lien on the car. Vendor tried to argue the complaint was one in redhibition which prescribed in one year. P/vendee claims that because he was not notified of the Chattel Mtg. the sale should be rescinded because had he known he would not have purchased the car.
HELD: NO - redhibitory defects in cars describe cars that do no run - in this case, we are talking about an encumbrance that denies complete ownership (this is a claim under Eviction..
.
Guthrie v. Rudy Brown Builders Inc.
Cause for aAttorneys fees and mental anguish
Issue – P’s and Ragusas house encroached on P’s land fence and gutter encroached.
Surveyor – Garland
Aattorney fees are only aloowed for ont type. Knowledge or latent defect.
Ct. says this is an a ction for warranty of evictiction of part of the land.
Induced error makes it fraud.
Non induced is simply an error.
Ct. tries to limit what it says is fraud.
With redhibition. There is a bigger prize of damages and attorneys fees.
Bad faith seller – one who has knowledge of the defect.
Partial eviction – 10 year prescription.
Redhibition – has shorter prescription
Katz v. Katz Realty Co.
2500 Encumbrances/servitudes
2511 Partial eviction
Theory of cause Why did buyer purchase the land? If he purchased to get all of it there is a failure of cause and rescission is permitted price should be diminished if rescission is not sought.
Loss of enjoyment same as partial eviction of ownership
2511 To get rescission he must prove that his cause has failed.
Make him whole
Analogized to partial eviction
Qualitative v. Quantitative
Limitations on right to use completely
Duty to mitigate damages
1. requirement of expenditures diminimus
2. must ensure damage will be reduced
670 encroaching buildings
Katz v. Katz Realty (La. 1955)
Encroachment of building on other residential property. P was the seller and found out about his encroachment during a sale. P negotiated with owners of the strip to buy that property from them. He then sues his vendor for during as sale. P negotiated with owners of the strip to buy that property from them. He then sues his vendor for return of the extra price paid.
HELD: For P; if you compare the cost of moving the building or purchasing the strip of property, it is much cheaper to buy the strip of property.
D unsuccessfully invoked old article 2514 (now 2511), which says that for partial eviction, the court should use a proportional price based on the total amount acquired. Court says that this is not the type of situation addressed here
Warranty and chain of title
C. WARRANTY AND CHAIN OF TITLE
Carpenter v. Herndon (La. 1931) – pg. 409 read.
Herndon (w/mortgage to Bank) ( Brown (w/o warranty) ( Bank (( Herndon (( Carpenter ( None of the transfers contained any mention of the mortgage. Herndon doesn’t pay and is evicted. Herndon is broke, so the P is looking for someone else.
GO TO 2503 3rd para:
The buyer is subrogated to the rights in warranty of the seller against other persons, even when the warranty is excluded.
So, when Herndon transferred to Carpenter, he transferred all of his warranty rights up the chain of title. Therefore, Carpenter can go after the Bank and Brown.
HELD: Because Herndon owed the money to the Bank, the Bank cannot be said to violate warranty against eviction *they can evict him!). Because Carpenter acquires the rights of Herndon, he cannot collect against Bank [If the Bank would have sold directly to Carpenter, there would have been a warranty]
Section 7: Seller’s Liability For His Own Acts
Clark v. O’Neal (La. 1858)
(Bilbe doesn’t like the result in this case)
Facts example: Bilbe sells to me (had perfect title); I do not record the transfer; times get tough for Bilbe and his creditors go after this land b/c Bilbe is still record owner. I can sue Bilbe for breach of warranty against eviction, even though I failed to record the instrument. (i.e. vendor has just as much reason to get the sale recorded and when he fails to do so eviction can be considered to be the seller’s fault?).
. QUIT CLAIM DEED AFTER ACQUIRED TITLE DOCTRINE
Waterman v. Tidewater Associated Oil (1948)
2 chains of title: At some point
Rectangle ( Rose (quit-claim in one chain of title)
5 years later
Kranebell ( Rectangle (in second chain of title)
If the after acquired title applies, because Rectangle acquired the title 5 years later, Rose and the subsequent transferees of Rose would NOT have a warranty claim against Rectangle.
HELD: Doctrine of after acquired title is inapplicable to quit claims, Since the first chain did no purport to transfer anything, the benefit cannot be had by the transferees.
Example:
Cleaning up the title and I ask Bilbe to give me a quit-claim form for $5M.
Bilbe later decides to buy the property that he earlier had quit-claimed
If the after acquired title is applicable, then the transferees gets the benefit of the after acquired title Court rejects this in 2502 - 3rd para – After acquired title does inure to Quitclaim vended.
CHAPTER 10 REDHIBITION – only hidden defects
2520 - Warranty against redhibitory defects
The seller warrants the buyer against redhibitory defects, or vices, in the thing sold.
A defect is redhibitory when it renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect. The existence of such a defect gives a buyer the right to obtain rescission of the sale.
A defect is redhibitory also when, without rendering the thing totally useless, it diminishes its usefulness or its value so that it must be presumed that a buyer would still have bought it but for a lesser price. The existence of such a defect limits the right of a buyer to a reduction of the price.
The presence of an express warranty in the sale does not convrt the action for redhibition into an action for breach of k.
The warranty against redhibitory vices can be avoided only by an express and explicit waiver.
Redhibition does not apply to “contracts to sell” or to new homes.
2521 - Defects that are made known to the buyer or that are apparent
The seller owes no warranty for defects in the thing that were known to the buyer at the time of the sale, or for defects that should have been discovered by a reasonably prudent buyer of such things.
A defect is not redhibitory if it is not hidden. Thus, if the buyer knows or should have known of the defect or if the seller discloses the defect, the buyer does not have a redhibitory action.
The buyer must make more than a casual observation of the object; he must examine the thing to ascertain its soundness.
2522 - Notice of existence of debt
The buyer must give the seller notice of the existence of a redhibitory defect in the thing sold. That notice must be sufficiently timely as to allow the seller the opportunity to make the required repairs. A buyer who fails to give that notice suffers diminution of the warranty to the extent the seller can show that the defect could have been repaired or that the repairs would have been less burdensome, had he received timely notice.
Such notice is not required when the seller has actual knowledge of the existence of a redhibitory defect in the thing sold.
On the other hand, a seller who is merely presumed to have knowledge of a defect in the thing - as, for instance, a manufacturer - by operation of law is entitled to receive notice.
However, when the manufacture sells through a dealer, the manufacturer is deemed to receive notice when the dealer is properly notified of the existence of a defect in the thing.
2524 - Thing fit for ordinary use
The thing sold must be reasonably fit for its ordinary use.
When the seller has reason to know the particular use the buyer intends for the thing, or the buyer’s particular purpose for buying the thing, and that the buyer is relying on the seller’s skill or judgement in selecting it, the thing sold must be fit for the buyer’s intended use or for his particular purpose.
If the thing is not so fit, the buyer’s rights are governed by the general rules of obligations.
If you can prove that the item was not reasonable fit for ordinary use, then you can receive damages under the 3rd paragraph. (comment (a) says that this article does not change the law, but that is BS)
( You could use this article if you can’t prove 2545 (that the seller knew), and you do not just want to recover the purchase price in 2531. This article definitely has overlap from 2531 - the legislature has provided a basis of full K liability where traditionally there has only been a basis for redhibition.
When the thing sold is not fit for its ordinary use, even though it is free from redhibitory defects, the buyer may seek dissoluiton of the sale and damages, or just damages, under the general rules of obligations. The buyers action is one for breach of contract.
2529 - Thing not of the kind specified in the contract
When the thing the seller has delivered, though in itself free from redhibitory defects, is not of the kind or quality specified in the contract or represented by the seller, the rights of the buyer are governed by other rules of sale and conventional obligations.
Could use this article the same way as you use 2524 in order to get dissolution and damages.
See also 2603 - Seller obligation to deliver conforming thing
The seller’s failure to complete the renovation of a condo, which adversely impacted upon P’s unit by rendering it uninhabitable for the reason that P’s unit effectively lacked a roof was not a redhibitory defect.
Breach of K claims carry 10 yr. prescriptive periods opposed to a shorter periods for redhibition.
2530 - Defect must exist before delivery
The warranty against redhibitory defects covering only defects that exist at the time of delivery. The defect shall be presumed to have existed at the time of delivery if it appears within three days.
2531 - Liability of seller who knew not of the defect (Retailer Friendly)
A seller who did not know that the thing he had sold had a defect is only bound to repair, remedy, or correct the defect. If he is unable or fails to do so, he is then bound to return the price to the buyer with interest form the time it was paid, and to reimburse him for the reasonable expenses occasioned by the sale, as well as those incurred for the preservation of the thing, less the credit to which the seller is entitled if the use made of the thing, or the fruits it has yielded, were of some value to the buyer.
A seller who is held liable for a redhibitory defect has an action against the manufacturer of the defective thing, if the defect existed at the time the thing was delivered by the manufacturer to the seller for any loss the seller sustained because of the redhibition. Any contractual provision that attempts to limit, diminish or prevent such recover by a seller against the manufacturer shall have no effect.
Note that this article does not contain mention of damages (b/c seller DID NOT KNOW of the defect), while article 2545 contains everything in 2531 PLUS damages and atty fees (b/c the seller KNEW of the defect).
No responsibility for damages whereas in 2545 Damages are available where the seller who knew of the defect.
A manufacturer need not be presented an opp. To fix.
Each seller in the chain must be determined to have known or not known.
2532 - Return of the thing: destruction of the thing
A buyer who obtains rescission because of a redhibitory defect is bound to return the thing to the seller, for which purpose he must take care of the thing as a prudent administrator, but is not bound to deliver it back until all his claims or judgements, arising form the defect are satisfied.
If the redhibitory defect has caused the destruction of the thing the loss is borne by the seller, and the buyer may bring his action even after the destruction has occurred.
If the thing is destroyed by a fortuitous event before the buyer gives the seller notice of the existence of a redhibitory defect that would have given rise to a rescission of the sale, the loss is borne by the buyer.
After such notice is given, the loss is borne by the seller, except to the extent the buyer has insured that loss. A seller who returns the price, or a part thereof, is subrogated to the buyer’s right against third persons who may be liable for the destruction of the thing.
2534 - Prescription
A. (1) The action for redhibition against a seller who did not know of the existence of a defect in the thing sold prescribes in four years from the day delivery of such thing was made to the buyer or one year from the day the defect was discovered by the buyer, whichever occurs first.
2) However, when the defect is of residential or commercial immovable property, an action for
redhibition against a seller who did not know of the existence of the defect prescribes in one year from the day delivery of the property was made to the buyer.
B. The action for redhibition against a seller who knew, or is presumed to have known, of the existence of a defect in the thing sold prescribes in one year from the day the defect was discovered by the buyer.
B. In any case prescription is interrupted when the seller accepts the thing for repairs and commences anew from the day he tenders it back to the buyer or notifies the buyer of his refusal or inability to make the required repairs.
2537 - Judicial sales
Judicial sales resulting from a seizure are not subject to the rules on redhibition.
2538 - Multiple sellers, multiple buyers, successors
The warranty against redhibitory vices is owed by each of multiple sellers in proportion to his interest - Joint, divisible interest.
Multiple buyers must concur in an action for rescission because of a redhibitory defect. An action for reduction of the price may be brought by one of multiple buyers in proportion to his interest.
The same rules apply if a thing with a redhibitory defect is transferred, inter vivos or mortis causa, to multiple successors.
2540 - Redhibitory vice of one of several matched things sold together
When more than one thing are sold together as a whole so that the buyer would not have bought one thing without the other or others, a redhibitory defect in one of such things gives rise to redhibition for the whole.
2541 - Reduction of the price
A buyer may choose to seek only reduction of the price even when the redhibitory defect is such as to give him the right to obtain rescission of the sale.
In an action for rescission because of a redhibitory defect the court may limit the remedy of the buyer to a reduction of the price.
The price is reduced by the difference in the sale price and the price and individual would have paid had he known of the defect.
2545 - Liability of the seller who knows of the defect; presumption of knowledge
A seller who knows that the thing he sells has a defect but omits to declare it, or a seller who declares that the thing has a quality that he knows it does not have, is liable to the buyer for the return of the price with interest from the time it was paid, for the reimbursement of the reasonable expenses occasioned by the sale and those incurred for the preservation of the thing, and also for damages and reasonable attorney fees. If the use made of the thing, or the fruits it might have yielded, were of some value to the buyer, such a seller may be allowed credit for the use of such fruits.
A seller is deemed to know that the thing he sells has a redhibitory defect when he is a manufacturer of that thing.
2548 - Exclusion or limitation of warranty; subrogation
The parties may agree to an exclusion or limitation of the warranty against redhibitory defects. The terms of the exclusion or limitation must be clear and unambiguous and must be brought to the attention of the buyer.
A buyer is not bound by an otherwise effective exclusion or limitation of the warranty when the seller has declared that the thing has a quality that he knew it did not have.
The buyer is subrogated to the rights in warranty of the seller against other persons, even when the warranty is excluded.
This art. does not apply to 2524 and 2529.
Rey. v. Cuccia (La. 1974) - Trailer Hitch
Wife supposedly drove the camper trailer like a woman and it breaks! Seller blames it on wife and wife claims defect. Seller argues that the defect was not in existence at the time of the sale. Poor manual suggested hitch to be installed at a minimum of 18 inches and no more than 19.5 inches. Manual failed to warn of dangers if installed higher than recommended amount. Seller found to have installed hitch too high. Manufacturer liable for not warning against such hidden dangers.
HELD: Seller and manufacturer solidarily liable for return of purchase price and attorney fees. After 3 days the buyer must prove a defect exist but does not need to show the cause of the defect. After 3 days, the burden shifts to the seller to show intervening cause for damage and not defect. Art. 2545 - manufacturers are presumed to be in bad faith. At time of case, because manual failed to disclose potential warnings manufacturer (Yellowstone) solidarily liable.
NOTES:
( In its ordinary/intended use this would not have happened unless there was a defect
After the 3 day period the defect must have existed at the time of delivery.
2530 comment (c) - The nature of a defect may allow the court to draw an inference that it existed at the time of delivery even if it appeared 3 days after that time.
2534 - (Against seller who doesn’t know of defect) Either 1 year from day defect was discovered or 4 years from day of delivery, whichever occurs first.
2534 - (Against seller who knew of defect) Either 1 year from day defect was discovered by the buyer. (ex) manufacturer (presumed to know defects in his designs - automatically bad faith). But other articles “kick in” and 10 liberative prescription applies.
2534 paragraph 3 - When buyer notifies seller and returns item to be fixed prescription is interrupted during that period and starts again when the buyer gets it back or its notified that seller refuses or is unable to make the required repairs
p wins
Media Production Consultants v. Mercedes-Benz - Even though vendor pays less to buy the object he still gets indemnification for the full amount he sold it because vendor loses more because he sells for more. Although vendor sold car for $50,000 and only paid $25,000 he is still indemnified to Mercedes Benez for $50,000. Why? Because manufacturer at default. Seller lost $50,000 ($25,000 cost, $25,000 profit). It is indemnification for K price rather then price paid.
-----------------------
[pic]
Third Party
Holder of First Right of Refusal
Owner wants to sell for 300,000
[pic]
Holder of FROR
Feb. 2000
300,000
Third Party – June 2000 300,000
Nov. 2000 – 300,000
At this time must go back to the holder.
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