Tss Properties, LLC v. Ray-Bayou, LLC and M & G Property Holdings, LLC

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

20-333

TSS PROPERTIES, LLC
VERSUS
RAY-BAYOU, LLC AND

M&G PROPERTY HOLDINGS, LLC

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. C-20176729
HONORABLE KRISTIAN EARLES, DISTRICT JUDGE

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VAN H. KYZAR
JUDGE

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Court composed of John E. Conery, Van H. Kyzar, and Sharon Darville Wilson,
Judges.

Conery, J., concurs in the result.

AFFIRMED.

Theodore G. Edwards, IV
James H. Domengeaux, Jr.
Davidson, Meaux, Sonnier, McElligott, Fontenot, Gideon & Edwards
810 South Buchanan Street
Lafayette, LA 70501
(337) 237-1660
COUNSEL FOR DEFENDANT/APPELLANT:
M&G Property Holdings, LLC

James M. Garner
Elwood F. Cahill, Jr.
John T. Balhoff, II
Tyler M. DeAgano
Sher, Garner, Cahill, Richter, Klein & Hilbert, LLC
909 Poydras Street, 28th Floor
New Orleans, LA 70112
(504) 299-2100
COUNSEL FOR PLAINTIFF/APPELLEE:
TSS Properties, LLC

Sean M. Stockstill

R.J. Fonseca, Jr.

Standard Law, LLC

921 Kaliste Saloom Road

Lafayette, LA 70508

(337) 349-3867

COUNSEL FOR PLAINTIFF/APPELLEE:
TSS Properties, LLC

Alan K. Breaud

Breaud & Meyers

P. O. Box 51365

Lafayette, LA 70505

(337) 266-2200

COUNSEL FOR DEFENDANT/APPELLEE:
Ray-Bayou, LLC

KYZAR, Judge.

M&G Property Holdings, LLC appeals the granting of summary judgment in
favor of TSS Properties, LLC declaring a servitude to be null, void, and of no effect.
For the reasons set forth below, we affirm the judgment of the trial court.

FACTS AND PROCEDURAL HISTORY

TSS Properties, LLC (TSS) filed this suit against Defendants, Ray-Bayou,
LLC (Ray-Bayou) and M&G Property Holdings, LLC (M&G), to declare a servitude
granted by Ray-Bayou in favor of the adjacent property owner M&G, null, void, and
of no effect as to TSS as the subsequent purchaser of Ray-Bayou’s property. The
material facts are relatively simple and, in large part, undisputed.

Ray-Bayou purportedly granted a servitude of passage and use to M&G, the
owner of adjacent property on Johnston Street in Lafayette, Louisiana, to allow
M&G access through Ray-Bayou’s property while building a shopping center and
for cross parking once finished. The servitude was purported to have been granted
by written document between Ray-Bayou and M&G on January 6, 2017, but not
recorded in the conveyance records with the Lafayette Parish Clerk of Court until
September 8, 2017. Also on September 8, 2017, Ray-Bayou sold its property to
TSS, though that deed was not recorded until September 12, 2017.

TSS moved for summary judgment on its declaratory judgment action. It
claimed that any servitude that may have been granted is invalid as it contains a
faulty property description and, alternatively, that it was not recorded until after the
bill of sale from Ray-Bayou to TSS was signed. Ray-Bayou and M&G opposed the
motion but did not file reciprocal adverse motions for summary judgment. The trial
court granted the motion, declaring the servitude void and of no effect as to TSS. At
issue on appeal is the propriety of the issuance of the summary judgment declaring

the servitude to be invalid and of no effect as to TSS.

DISCUSSION

“A motion for summary judgment is a procedural device used when there is
no genuine issue of material fact for all or part of the relief prayed for by a litigant[]”
and “is reviewed on appeal de novo, with the appellate court using the same criteria
that govern the trial court’s determination of whether summary judgment is
appropriate; i.e., whether there is any genuine issue of material fact, and whether the
movant is entitled to judgment as a matter of law[.]” Maggio v. Parker, 17-1112, p.
4 (La. 6/27/18), 250 So.3d 874, 878. Summary judgment procedure is favored and
“is designed to secure the just, speedy, and inexpensive determination of every
action, except those disallowed by Article 969.” La.Code Civ.P. art. 966(A)(2). The
law further provides that summary judgment “shall be granted if the motion,
memorandum, and supporting documents show that there is no genuine issue as to
material fact and that the mover is entitled to judgment as a matter of law.” La.Code
Civ.P. art. 966(A)(3).

The Recordation Issue

The trial court granted summary judgment in this case determining in part that
the act of sale from Ray-Bayou to TSS was perfected prior to the recordation of the
purported servitude agreement and, thus, the servitude agreement was of no effect
as to TSS. Specifically, the servitude did not burden TSS’s property. We disagree
with this rationale.

This issue turns on the application and interpretation of the Louisiana public
records doctrine as set forth in our law. Louisiana Civil Code Article 3338 provides
that the rights and obligations established or created by an instrument that transfers
an immovable or establishes a real right in or over an immovable are without effect
as to a third person unless the instrument is registered by recording it in the

appropriate mortgage or conveyance records. Further, “[t]he effect of recordation

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arises when an instrument is filed with the recorder and is unaffected by subsequent
errors or omissions of the recorder. An instrument is filed with a recorder when he
accepts it for recordation in his office.” La.Civ.Code art. 3347. This Article speaks
to “when” a document gains the effect of recordation not once, but twice, thus
stressing its importance.

The public records doctrine has been described as a negative
doctrine because it does not create rights, but, rather, denies the effect
of certain rights unless they are recorded. Title, supra at § 8.16; Camel
[v. Waller], 526 So.2d [1086, 1089-90 (La.1988)]; Phillips v. Parker,
483 So.2d 972, 975 (La.1986). In explaining the negative nature of the
doctrine, this Court has stated that third persons are not allowed to rely
on what is contained in the public records, but can rely on the absence
from the public records of those interests that are required to be
recorded. Camel, 526 So.2d at 1090 [citing Redmann, The Louisiana
Law of Recordation: Some Principles and Some Problems, 39 Tul.
L.Rev. 491 (1965)]. The primary focus of the public records doctrine
is the protection of third persons against unrecorded interests. Camel,
526 So.2d at 1090; Phillips, 483 So.2d at 976.

Cimarex Energy Co. v. Mauboules, 09-1170, pp. 19-20 (La. 4/9/10), 40 So.3d 931,
944,

Louisiana’s public records doctrine includes the use of a “race to
the courthouse” system of recordation: “Instruments take effect as to
third persons in the order in which the instruments are filed.” 1 PETER
S. TITLE, LOUISIANA REAL ESTATE TRANSACTIONS §& 8:16
(2d ed.2008). The public records doctrine “does not create rights in the
positive sense, but rather has the negative effect of denying the
effectiveness of certain rights unless they are recorded.” /d. A well-
established consequence of these two principles is illustrated in
McDuffie v. Walker, 125 La. 152, 51 So. 100, 105-106 (1909), in which
this court ruled that an unrecorded contract affecting immovable
property has no effect as to third persons, even when a third person has
actual knowledge of that unrecorded contract.

Wede v. Niche Mktg. USA, LLC, 10-243, p. 6 (La. 11/30/10), 52 So.3d 60, 63 n.6.
At the time of the filing and recordation of the purported right of servitude in
favor of M&G, there was nothing recorded concerning the sale of the property from
Ray-Bayou to TSS. Thus, M&G was able to rely on the absence of any record
negating the effects of that instrument, if indeed it created any such rights. McDuffie

v. Walker, 125 La. 152, 51 So. 100 (1909), stands for the proposition that an act of

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sale is effective as to third parties from the date recorded, not the date of the sale. In
this case, the sale from Ray-Bayou to TSS occurred several days prior to the
recordation date. While the sale date was the same as the date the purported
servitude was recorded, September 8, 2017, it is the recording dates that determine
whether the property was affected by any such servitude. This is the only
interpretation that can properly give effect to the public records doctrine as we have
come to understand and to apply the same. Third parties are entitled to rely on the
dates of recordation of particular acts. If indeed TSS had sold its property to another
party, that party necessarily would have been affected by the purported servitude as
per the public records doctrine, as it was recorded prior to the recordation of TSS’s
purchase of the property. The third party is not entitled to rely on the date of the sale
of the property to TSS to claim the servitude has no effect. The date the act of sale
was signed, September 8, 2017, is no more relevant than the fact that the purported
servitude agreement was signed on January 6, 2017. The undisputed facts here are
that the sale to TSS was recorded on September 12, 2017, and the purported
servitude in favor of M&G was recorded on September 8, 2017. Thus, the servitude
affects the property of TSS, if the recorded document actually created such rights.
TSS further asserts that the trial court made a factual finding in support of the
judgment which was not based on any valid evidence before it on the motion for
summary judgment. We find this issue moot given our reliance on the public records
doctrine. If the deed had been recorded on the day it was executed, September 8,
2017, the same day the purported act of servitude in favor of M&G was recorded,
we would look to the timing of the recordation, as “the effectiveness thereof dated
or reverted to the day, hour and minute of the filing[.]” Kinnebrew v. Tri-Con Prod.
Corp., 244 La. 879, 894, 154 So.2d 433, 438 (1963). As the act of sale from Ray-

Bayou to TSS was not recorded until September 12, 2017, the trial court erred in

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granting summary judgment in favor of TSS, at least in part, on that basis. However,
that does not end our inquiry.
Description of the Property and the ‘Servitude Agreement”

M&G next argues that the trial court erred in its conclusion that the January
6, 2017 Agreement between it and Ray-Bayou did not contain an adequate property
description so as to put third parties, such as TSS, on notice of the purported
servitude. It asserts that the Agreement listed the mailing address of Ray-Bayou, the
grantor of the purported servitude, as 6413 Johnston Street, Lafayette, Louisiana,
which was the same address as the property bought by TSS. Further, it asserts that
affidavits filed on behalf of M&G and Ray-Bayou reflect that the principal of TSS,
Jai Hwan An, knew of the alleged servitude agreement. M&G asserts that these facts
are evidenced by Jai Hwan An in his deposition, the affidavits filed in opposition to
the motion for summary judgment, and in the pleadings filed in the case.

Louisiana jurisprudence emphasizes that “no precise criteria can be
established for distinguishing between descriptions which are sufficient to put third
persons on notice and these which are not.” Wood v. Morvant, 321 So.2d 914, 918
(La.App. 1 Cir. 1975). As a result, “each case of this nature must be decided in the
light of its own peculiar facts and circumstances.” /d.

The Agreement contains the following “Recitals” and references a separate
“Servitude Agreement,” dated the same date as the Agreement:

A. M&G and Ray-Bayou have entered into a formal agreement

dated January 6, 2017, for grant of servitude of access, passage and

parking (“Servitude Agreement”) on and across certain property owned

by Ray-Bayou as shown on the shaded areas entitled “Right of Passage”

on the attached Exhibit A.

B. In said Servitude Agreement Ray-Bayou agreed to grant,
under the terms and conditions of the Servitude Agreement, a perpetual,

non-exclusive predial servitude for pedestrian and vehicular ingress and
egress and parking on, across and over the Ray-Bayou Parcel as shown

on the shaded areas entitled “Right of Passage” on the attached Exhibit
A, such servitude to run in favor of the M&G Parcel.

The Agreement was recorded by Ray-Bayou at 3:55:05 p.m. on September 8,
2017. The September 8, 2017 cash sale between Ray-Bayou and TSS was recorded
by Ray-Bayou on September 12, 2017. Although the Agreement refers to a separate
servitude agreement and states that the description of the property affected is shown
in the “Right of Passage” attached as exhibit “A.,” no such documents were attached
to the Agreement or recorded in the Lafayette Parish Clerk of Court’s conveyance
records. Moreover, the Agreement contains no description of the property over
which Ray-Bayou grants a servitude, nor is there a separate document containing a
property description. Even reading the Agreement alongside or in conjunction with
the cash sale from Ray-Bayou to TSS, one cannot glean from the public record that
a servitude existed over the property sold to TSS.

Further, although the cash sale from Ray-Bayou to TSS includes a clause
stating that the sale is subject to servitudes, the language specifically refers to
“recorded” servitudes, as per the following language from the deed (emphasis
added):

This sale is made and accepted subject to the restrictive
covenants, easements, servitudes, mineral royalties, oil, gas and
mineral leases, obligations of ownership, etc. affecting the above
described property of record in the Lafayette Parish Clerk of Court’s
Office.

Clearly, if any “Servitude Agreement” had been recorded in the records of the
Lafayette Parish Clerk of Court before its purchase, TSS would have been burdened
thereby. There were none so recorded as between Ray-Bayou and M&G, nor does

the Agreement establish any servitude in and of itself over any particularly described

property of Ray-Bayou. Thus, we cannot find that the Agreement adequately

establishes a servitude or provides a description of any property over which any
servitude was established so as to put TSS on notice thereof.

Under somewhat similar factual circumstance, in Dallas v. Farrington, 490
So.2d 265 (La.1986), the supreme court affirmed a decision by the court of appeal
finding that a conventional servitude was never established where, in an agreement
to purchase, the seller of a tract of land obligated himself as a condition of the sale
to grant plaintiffs a servitude to use a particular drive for passage to their property.
However, the actual grant of the servitude was omitted from the act of sale, which
transferred the property, and was not otherwise recorded separately. The supreme
court noted that knowledge of the existence of an obligation to grant a servitude
without an actual recorded servitude is of no consequence under our law.

Contracts affecting immovable property must be recorded in
order to affect third parties. La.R.S. 9:2721 and 2756. The public
records doctrine is essentially a negative doctrine declaring that what is
not recorded is not effective except between the parties, and a third
party in purchasing immovable property is entitled to rely on the
absence from the public records of any unrecorded interest in the
property such as a sale or a grant of a servitude. Phillips v. Parker, 483
So.2d 972 (La.1986). Because recordation is essential for effectiveness
against third parties, actual knowledge by third parties of unrecorded
interests is immaterial. McDuffie v. Walker, 125 La. 152, 51 So. 100
(La.1909}; Redmann, The Louisiana Law of Recordation: Some
Principles and Some Problems, 39 Tul.L.Rev. 491 (1965). This
principle of the law of registry applies here so that Farrington’s son
acquired the property free of any conventional servitude, irrespective
of any actual knowledge that the father had obligated himself to grant
a servitude, since actual knowledge outside the public records is
immaterial. A. Yiannopoulos, 4 Louisiana Civil Law Treatise - Predial
Servitudes § 127 (1983).

Id. at 269-70 (footnote omitted) (emphasis added).

In this case, the Agreement specifically references a separate servitude
agreement, yet there was no such separate agreement attached, nor its location in the
property records referenced. Further, there was no property description whatsoever,

even a defective one, referenced in the Agreement. While the document does include

a mailing address of Ray-Bayou as 6413 Johnston Street, Lafayette, Louisiana,
which does correspond to the property purchased by TSS, it is not referenced in the
agreement as the location of the servitude. If it had been, the outcome here may be
different. However, given that it is apparent that Ray-Bayou is a commercial
property owner, it was not readily apparent that the servitude, if one existed, affected
the property at that particular address. Further, even the nature of any servitude was
not precise, as there was no attached servitude agreement showing the location or
extent of the servitude; it was simply a nebulous reference to some servitude on some
property owned by Ray-Bayou. Accordingly, we conclude that the nature and extent
of the servitude as well as the description of the property affected by any such
servitude was not apparent from the Agreement so as to put third parties on notice
that it affected this particular property. As such, the motion for summary judgment
was properly granted in this case on this basis, unless the outcome is altered by the
subsequent act of correction filed on behalf of Ray-Bayou and M&G.

The Act of Correction

On October 1, 2017 at 11:16:10 a.m., there was recorded a “Notarial Act of
Correction” purporting to correct the Agreement by attaching a plat thereto showing
the description of the property affected by the servitude and area of the servitude.
This was by and between Ray-Bayou and M&G Holdings, LLC. It is to be noted
that the deed from Ray-Bayou to M&G was originally to M&G Property Holdings,
LLC, not M&G Holdings, LLC.

Louisiana Revised Statutes 35:2.1 provides that a clerical error in a notarial
act affecting movable or immovable property or any other rights, corporeal or
incorporeal, may be corrected by an act of correction executed by the person who
was the notary or one of the notaries before whom the act was passed, or the notary

who actually prepared the act containing the error, but with the proviso that it must

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be passed before a notary and two witness, 1.e., 1t must be an authentic act. Further,
the statute provides that the act of correction executed in compliance with the section
shall be given retroactive effect to the date of recordation of the original act.
“However, the act of correction shall not prejudice the rights acquired by any third
person before the act of correction is recorded where the third person reasonably
relied on the original act.” La.R.S. 35:2.1(B). Our jurisprudence is clear that an
affidavit of correction is permissible only to correct “clerical errors” which do “not
alter the true agreement and intent of the parties” and that it cannot effect any
substantive change to the original document. Cockerham v. Cockerham, 12-1769,
p. 13 (La.App. 1 Cir. 10/3/13), 201 So.3d 253, 262.

The act of correction was filed in October 2017, nearly a month after TSS
acquired its property. Thus, given our conclusion above that the Agreement did not
contain an adequate description of any servitude or of the properties involved so as
to put third parties, such as TSS, on notice of the servitude, we find that summary
judgment is proper. The act of correction could not have retroactive effect to the
prejudice of rights acquired by TSS before the act of correction was recorded, as
TSS was entitled to reasonably rely on the absence of any recorded servitude
affecting the property it acquired. La.R.S. 35:2.1.

DECREE

For the reasons set forth, we affirm the judgment of the trial court granting the
motion for summary judgment in favor of TSS Properties, LLC. Costs of this appeal
are assessed to M&G Property Holdings, LLC.

AFFIRMED.