Keybank National Ass'n v. Perkins Rowe Associates, LLC

Majority - james j. brady

1. No, KeyBank's assignment and consolidation of the mortgages did not defeat its ability to claim priority from the date of the original Wachovia mortgage. Louisiana law broadly supports assignment rights (La. C.C. arts. 2642, 2645), allowing an assignee to stand in the shoes of the assignor. The court found that Wachovia assented to the mortgage, despite not signing it, as consent is presumed and acceptance can be tacit under La. C.C. art. 3289, and Wachovia received a secured promissory note. The mortgage to secure future obligations (La. C.C. art. 3298) remained valid because an expectation of an eventual obligation existed, as evidenced by ongoing negotiations and KeyBank's eventual lending. The note and mortgage were not simulations, as the parties intended them to have legal effect and KeyBank relied on the recorded documents. The Wachovia note was not a sham, as a mortgage requires an underlying obligation, which the promissory note satisfied by obligating Wachovia to advance funds. The consolidation did not constitute a novation, which requires clear and unequivocal evidence of intent to extinguish an existing obligation (La. C.C. arts. 1879, 1880). The consolidated note explicitly stated it did not extinguish or constitute a novation. The facts were more akin to Union Bldg. Corp. v. Burmeister, where consolidation merely combined existing security interests without adding collateral, as opposed to White Co. v. Hammond Stage Lines, which involved increasing security at the expense of other obligees. Finally, the amendments to the consolidated note did not create new obligations that would reset its priority, as the principal indebtedness secured by KeyBank ($170 million note + $10,000 JTS note) did not exceed the $200 million maximum aggregate principal amount stated in the original Wachovia mortgage (La. R.S. 9:5390(B)). Therefore, KeyBank's mortgage, which ranks from September 14, 2005, has priority. 2. No, ThornCo's liens cannot relate back to either Lemoine’s preliminary site work or the medical office building construction. Under the Private Works Act, to outrank KeyBank's mortgage, ThornCo's liens must be effective on or before September 14, 2005. The court determined that Lemoine’s preliminary site work on Tract A-5 (roadways, drainage, utilities) was merely preparatory and constituted a 'separate work' under La. R.S. 9:4808(C) because it differed in kind from the actual erection of buildings and simply prepared the site. Consequently, ThornCo, not being a participant in this preliminary work, cannot use it to establish an earlier effective date for its liens. Furthermore, the 'no work' affidavit filed the day after the Wachovia mortgage recording conclusively established that no 'work' had begun that would trigger lien priority for subsequent contractors at that time, as permitted by La. R.S. 9:4820(C). Lemoine’s medical office building contract also qualified as a 'separate work' under La. R.S. 9:4808(B) because it was a properly recorded contract with a bond, executed before work began on that specific project. ThornCo performed no work on this separate MOB project, thus it cannot avail itself of that work for ranking purposes. All other general contractor work post-dates the Wachovia mortgage.