IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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No. 97-31275

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In the Matter of:

LLOYD C. CHARRIER; BARBARA T. CHARRIER,

Debtors

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LLOYD C. CHARRIER; BARBARA T. CHARRIER

Appellants,

versus

SECURITY NATIONAL OF OREGON,

Appellee.

Appeal from the United States District Court

for the Middle District of Louisiana

February 18, 1999

Before SMITH, DUHÉ and WIENER, Circuit Judges.

WIENER, Circuit Judge:

In this bankruptcy case, Plaintiffs-Appellants Lloyd and

Barbara Charrier appeal the judgment of the district court

affirming the bankruptcy court’s holding that a 1979 collateral

mortgage encumbering a parcel of their community property is valid,

and that Security National of Oregon (“SNO”) is entitled to the

balance due on two promissory notes secured by that mortgage.

Concluding that the bankruptcy court’s holding is correct, we
1At trial, the Charriers claimed that they made their last

payment in August 1979. SNO was unable to obtain the payment

records on the original loan to dispute this point.

2

affirm.

I

FACTS AND PROCEEDINGS

On January 3, 1979, Lloyd and Barbara Charrier executed a

promissory note (the “collateral mortgage note”) in the amount of

$200,000, paraphed ne varietur for identification with a 1979 act

of mortgage (the “collateral mortgage”) on community immovables ——

a 13 acre tract of land and the improvements on it, including the

couple’s personal residence —— in Walker, Louisiana. The Charriers

pledged the collateral mortgage note and collateral mortgage to

Livingston State Bank (“LSB”) to secure another promissory note

(the “hand note”) which represented the actual loan to the

Charriers from LSB. There is no evidence in the record as to the

precise amount actually owed on the hand note, but it appears that

the Charriers satisfied this obligation in August of 1979.1 It

also appears from the record that —— as indicated by the bankruptcy

court —— the Charriers had executed a written Act of Pledge,

although what became of that document is unknown. 

On August 11, 1982, Mr. Charrier took out another loan with

LSB, evidenced by a new hand note. At the time of this
3

transaction, Mr. Charrier, but not his wife, signed a new Act of

Pledge that pledged the original $200,000 collateral mortgage note

and collateral mortgage. As additional security for the 1982 loan,

Mr. Charrier pledged another collateral mortgage note and

collateral mortgage, encumbering three different parcels of

community immovable property. One week later, on August 18, 1982,

Mrs. Charrier executed a power of attorney, making Mr. Charrier her

agent and attorney-in-fact. Pursuant to this authority, Mr.

Charrier could “make . . . and endorse promissory notes”; “pledge

. . . all or any part or parts” of her property; “encumber,

hypothecate or mortgage all or any part or parts of the property

belonging to [Mrs. Charrier]” and “consent and agree to all

privileges, mortgages and pledges in favor of, or against, [Mrs.

Charrier] that may be required and necessary.”

On September 18, 1985, and December 4, 1985, Mr. Charrier

executed two more hand notes payable to LSB, one in the amount of

$360,305.44 and the other in the amount of $15,000. Each note

indicated that it was secured by three separate collateral pledge

agreements, two of which were dated in 1984, and the other of which

was dated September 18, 1985. The 1985 pledge agreement is the one

that expressly repledged the 1979 collateral mortgage note and

collateral mortgage.

LSB continuously possessed the 1979 collateral mortgage note

until the bank went into receivership in 1992. At that time, the
4

Federal Deposit Insurance Corporation (“FDIC”), as receiver for

LSB, sold all three hand notes from 1982 and 1985, together with

their collateral —— including the 1979 collateral mortgage note and

collateral mortgage —— to Security National #4, from which SNO

subsequently purchased these instruments in 1994. 

In November 1996, the Charriers sought protection under

Chapter 7 of the Bankruptcy Code. On February 3, 1997, SNO filed

an adversary complaint in the bankruptcy court seeking a judgment

against the Charriers for the balances due on the two 1985 hand

notes and recognition of the 1979 collateral mortgage as security

for these notes. 

Following a trial on the merits, the bankruptcy court denied

the Charriers’ discharge, entered judgment in favor of SNO on the

two notes, and recognized the 1979 collateral mortgage as valid and

subsisting. In its oral reasons for judgment, the bankruptcy court

noted that, even though SNO could not locate the original or a copy

of the 1979 collateral pledge agreement, there was sufficient

evidence in the record to reflect that one had existed. And,

because LSB had continuous possession of the collateral mortgage

note from 1979 to 1992, reasoned the court, it could be presumed

that the parties intended for the pledged collateral mortgage note

and collateral mortgage to secure future advances. Consequently,

the court concluded, when LSB granted a new loan to the Charriers

in 1982 —— within five years of the original Act of Pledge —— this
2The district court did not address the bankruptcy court’s

theory that LSB’s retention of the pledged note provided automatic

security for future advances. Furthermore, the district court

found it unnecessary to reach the bankruptcy court’s alternative

conclusion that the Charriers made a valid pledge of a natural

obligation.

5

loan was automatically secured by the 1979 collateral. Likewise,

the two loans made by LSB in 1985 constituted future advances

secured by the subject collateral pledges. As such, payments made

on these three loans interrupted prescription on the collateral

mortgage note and preserved the collateral mortgage. 

Assuming, in the alternative, that the parties did not

contemplate future advances in their original pledge, the

bankruptcy court concluded that the collateral mortgage was

nevertheless valid because Mr. Charrier had repledged the 1979

collateral mortgage note in 1982. The court reasoned that when

Mrs. Charrier granted the power of attorney to her husband just

days after the pledge, her act was sufficient to ratify his

encumbrance of the community property. Finally, concluded the

court, even if the 1979 collateral mortgage note had prescribed,

the Charriers made a valid pledge in 1985 of a natural obligation

under Louisiana Civil Code article 3139, and thereby revived the

collateral mortgage.

The Charriers appealed to the district court, which affirmed

solely on the basis that the debtors had repledged the 1979

collateral mortgage note.2 The court reasoned that Mrs. Charrier’s
3Texas Lottery Comm’n v. Tran (In re Tran), 151 F.3d 339, 342

(5th Cir. 1998).

4Id.

6

1982 power of attorney not only vested her husband with express

authorization to grant future mortgages on their community

property, but also ratified the encumbrance Mr. Charrier made

without her concurrence on August 11, 1982. By repledging the 1979

collateral mortgage note and remitting payment on the 1982 hand

note, concluded the court, the Charriers interrupted prescription

and preserved the collateral mortgage. The Charriers timely filed

a notice of appeal.

II

ANALYSIS

A. Standard of Review

Although this case has already been reviewed on appeal by the

district court, we review the bankruptcy court’s ruling as though

this were a direct appeal to us.3 We thus review the bankruptcy

court’s findings of fact under the clearly erroneous standard, and

its conclusions of law de novo.

4

B. Applicable Law

In a typical Louisiana collateral mortgage transaction, the

borrower contemporaneously executes a promissory note (known as a

collateral mortgage note) and an act of mortgage (known as a

collateral mortgage). In this latter instrument, the mortgagor
5First Guar. Bank v. Alford, 366 So. 2d 1299, 1302 (La. 1978).

6Texas Bank of Beaumont v. Bozorg, 457 So. 2d 667, 671 (La.

1984).

7La. R.S. 9:5807; Kaplan v. University Lake Corp., 381 So. 2d

385, 390-91 (La. 1979). On prescription of the collateral mortgage

note, the underlying collateral mortgage is lost, and the hand note

remains as a purely personal obligation of the borrower. Id.

8La. Civ. Code art. 3133.

9Alford, 366 So. 2d at 1304; Durham v. First Guar. Bank of

Hammond, 331 So. 2d 563, 565 (La. Ct. App. 1st Cir. 1976).

7

acknowledges his indebtedness and states his intent to pledge the

collateral mortgage note, which is secured by the collateral

mortgage, as security for the advancement of funds. The collateral

mortgage note is customly made payable on demand, to “Bearer” or

“Myself” or “Any Future Holder,” and is “paraphed” for

identification with the mortgage.5 This collateral mortgage

package is then delivered by the borrower in pledge to the lender

to secure an indebtedness which is usually represented by a

separate “hand note.”6 A collateral mortgage note prescribes five

years from the date of its execution unless prescription is

interrupted by acknowledgment or by partial payment on the

indebtedness it secures.7 

The pledge of a collateral mortgage note and collateral

mortgage to secure a debt is a contract.8 The pledge secures only

the debt or debts contemplated in the act of pledge between the

pledgor and the pledgee.9 A collateral mortgage package may be

pledged to secure particular debts, either previously existing or
10Bozorg, 457 So. 2d at 672; La. Civ. Code art. 3158 (amended

1989).

11La. Civ. Code art. 3158 (amended 1989). This article

provided in pertinent part:

When a debtor wishes to pledge promissory notes

. . . he shall deliver to the creditor the

notes . . . and such pledge so made . . . shall

without further formalities be valid as well

against third persons as against the pledgor

thereof, if made in good faith . . . . All

pledges may be made by private writing of any

kind if only the intention to pledge be shown

in writing, but all pledges . . . must be

accompanied by actual delivery.

See Pontchartrain State Bank v. Gross, 508 So. 2d 901, 903 (La. Ct.

App. 5th Cir. 1987); Plumbing Supply House, Inc. v. Century Nat’l

Bank, 440 So. 2d 173, 175 (La. Ct. App. 4th Cir. 1983). The 1989

amendment did not alter the above quoted language.

12La. Civ. Code art. 3158 (amended 1989); New Orleans

Silversmiths, Inc. v. Toups, 261 So. 2d 252, 255 (La. Ct. App. 4th

Cir. 1972); State Bank & Trust Co. of Golden Meadow v. Boat D.J.

Griffin, 755 F. Supp. 1389, 1398 (E.D. La. 1991).

8

contracted contemporaneously with the pledge, or future loans by

the pledgee to the pledgor —— or both —— up to the limits of the

pledge.10 

As a general rule, Louisiana law does not require a written

pledge agreement because the pledge of a promissory note is

confected by mere delivery.11 To secure future advances, however,

a creditor must prove that the parties intended for the original

collateral mortgage note to be used for this purpose.12 At one

time, it was generally agreed that, as long as a creditor retained

possession of the pledged note, he could rely on standard future

advance language contained in a collateral mortgage to establish
13See Alford, 366 So. 2d at 1302-03; Acadiana Bank v. Foreman,

352 So. 2d 674, 676-77 (La. 1977). Max Nathan, Jr. & Anthony P.

Dunbar, The Collateral Mortgage: Logic and Experience, 49 La. L.

Rev. 39, 57 (1988). 

14Alford, 366 So. 2d at 1302.

15457 So. 2d 667 (La. 1984).

16Id. at 674 n.10.

17Id. We note the presence on the 1979 act of mortgage of the

signature of a person designated as representing “Any Future Holder

or Holders” of the collateral mortgage note. It is not clear,

however, from either the mortgage itself or the record, whether

this signatory was a representative of LSB. 

9

the parties’ requisite intent.13 Under this theory, full payment

of a debtor’s principal obligation would not extinguish the

collateral mortgage note and accompanying mortgage.14 As long as

the pledged collateral mortgage note had not prescribed, subsequent

advances would be secured automatically. 

Following the Louisiana Supreme Court’s 1984 decision in Texas

Bank of Beaumont v. Bozorg, however, this area of law has become a

bit murky.15 In Bozorg, the court “emphasized” in a footnote that

evidence of the parties’ intent to secure future advances “must be

in the contract of pledge and not in the collateral mortgage

instrument.”16 This is so, explained the court, because “the

pledgee is generally not a party to the collateral mortgage

instrument, and the instrument is frequently executed prior to a

contract of pledge.”17 In light of Bozorg, it is now unclear how,

if at all, a creditor can prove intent in the absence of a written
18See Nathan & Dunbar, Logic and Experience, 49 La. L. Rev. at

58.

19Alford, 366 So. 2d at 1303.

20Id.

21The Charriers also argue that, contrary to the conclusion

reached by the bankruptcy court, Mr. Charrier was prohibited under

Louisiana community property law from repledging the 1979 note

without Mrs. Charrier’s concurrence, and that Mrs. Charrier did not

ratify the 1982 repledge. Because we affirm the bankruptcy court’s

holding on other grounds, however, we find it unnecessary to

address any of the alternative theories on which the court based

its ruling.

10

pledge agreement.18 

If a creditor cannot prove intent to secure future advances,

the collateral mortgage becomes dormant when a debtor’s principal

obligation is extinguished, even if the creditor retains physical

possession of the collateral mortgage note.19 To activate the

collateral mortgage, the debtor must repledge the collateral

mortgage note, before it prescribes, as security for a new loan.

In sum, absent proof that the parties intended to secure

future obligations or that the obligor on a collateral mortgage

note subsequently repledged it, mere retention of the collateral

mortgage note after extinguishment of the original hand note does

not give a creditor a continuing security interest.20 

The Charriers base their challenge of the bankruptcy court’s

holding that the 1979 collateral mortgage was valid and subsisting

on the ground that their intent to secure future advances has not

been proven.21 Indeed, argue the Charriers, in the absence of a
22Under La. Civ. Code. art. 1832, the existence of a written

contract may be proved by testimony or presumption when the written

instrument has been destroyed, lost, or stolen. 

23The pledge agreements obtained by the bank in 1982 and 1985

provide in pertinent part:

As an inducement to LIVINGSTON STATE BANK & TRUST

CO. (hereinafter referred to as “Bank”) to extend

credit to the undersigned (whether one or more) from

time to time, the undersigned herein and hereby

agree that:

11

written pledge agreement specifically authorizing the use of the

1979 collateral mortgage note to secure future indebtednesses, the

mere physical retention of the note by LSB was insufficient to

preserve the mortgage on their property. We disagree. 

We acknowledge that, in the wake of Bozorg, it may be quite

difficult to prove intent absent a written pledge agreement, but

the bankruptcy court found ample evidence in the record of the

existence of such a document, and so do we.22 The Charriers are

correct in stating that the actual 1979 pledge document was never

located. Nevertheless, a plethora of commercial loan memoranda

referring to a 1979 “CPA” —— or collateral pledge agreement —— was

introduced at trial. In addition, a former bank president and a

loan officer testified regarding LSB’s longstanding practice of

always obtaining pledge agreements using the same standard form as

those obtained by the bank from Mr. Charrier in 1982 and 1985.

Both of these later agreements contain express language granting

the bank a security interest in the 1979 collateral mortgage note

for all existing and future indebtednesses.23 In light of this
a. All promissory notes executed by the

undersigned or any one or more of them to

the order of Bank, in principal, interest

and attorney’s fees, as therein stipulated, and

all extensions and/or renewals thereof; and

b. Any and every other debt, liability and

obligation, direct or indirect, absolute or

contingent, liquidated or unliquidated, due or

to become due, whether now existing or 

hereafter arising, of the undersigned, or any

one or more of them, to Bank;

up to the sum, in aggregate, of . . . , at any one

time outstanding, are and shall be secured by the

pledge of all securities and/or property listed and

described . . . .

24Specifically, the collateral mortgage provides:

The above described note is given and this

mortgage is granted for the purpose of being used

as collateral security by MORTGAGOR for any

indebtedness due the holder of the note, direct or

contingent. The note may be issued and pledged by

MORTGAGOR as his interest and convenience may

require to secure loans and advances made or to be

made or to secure the debt of the maker or of

another. (Emphasis added).

12

evidence, the bankruptcy court was satisfied that such a pledge

agreement had also been executed in connection with the 1979

transaction. The Charriers have made no attempt to rebut this

finding, and we see nothing in the record to persuade us that it

was clearly erroneous. 

We further note in passing that the act of collateral mortgage

signed by Mr. and Mrs. Charrier in 1979 contains language that

specifically authorized future advances.24 This, together with the

Charriers’ failure to retrieve the collateral mortgage note or seek
13

its cancellation after paying off the original debt represented by

the original hand note, and their repeated willingness to accept

new loans based on the purported pledge of the 1979 collateral

mortgage package, are clear indicators of the Charriers’ intent to

secure future indebtednesses with that collateral. As this intent

was also evidenced in the original contract of pledge, we are

convinced that the monies received by the Charriers after 1979 were

secured future advances. For the foregoing reasons, the ruling of

the bankruptcy court, as previously affirmed by the district court,

is in all respects,

AFFIRMED.