Good Faith in Louisiana Property Law

• Author: John A. Lovett
• Position: De Van D. Daggett, Jr. Distinguished Professor, Loyola University New Orleans College of Law.
• Pages: 1163-1221

Good Faith in Louisiana Property Law Dedicated to A.N. Yiannopoulos  John A. Lovett ** TABLE OF CONTENTS Introduction ................................................................................ 1163 I. Encroaching Buildings: Article 670 ........................................... 1172 II. Good Faith Purchaser Doctrine .................................................. 1179 A. Lost or Stolen Things ........................................................... 1182 B. Annullable Title ................................................................... 1187 C. The Double Sale .................................................................. 1189 D. The Faithless Pledgee, Lessee, or Depositary ...................... 1193 III. Accession ................................................................................... 1200 IV. Acquisitive Prescription with Respect to Immovables ............... 1210 Conclusion: Property Law Without Good Faith ......................... 1218 INTRODUCTION The concept of good faith is a cornerstone of Louisiana private law. It plays a central role in the law of general and conventional obligations. 1 It Copyright 2018, by JOHN A. LOVETT.  The author dedicates this Article to Professor A.N. Yiannopoulos. His teaching, leadership, and scholarship inspired the author and so many others to learn about Louisiana’s Civil Law tradition, be advocates for that tradition, and work to improve the law. Professor Yiannopoulos made an indelible mark on Louisianna’s legal system and on the lives of countless Louisiana law students, Louisiana lawyers, and jurists across the world. His legacy will endure for generations to come. ** De Van D. Daggett, Jr. Distinguished Professor, Loyola University New Orleans College of Law. The author gratefully acknowledges the helpful comments he received on earlier drafts of this Article from Melissa Lonegrass, Ronald J. Scalise, Jr., the participants in the Property Works in Progress Workshop at Northeastern University Law School, and the Louisiana Legal Scholarship Workshop at Loyola University New Orleans College of Law. 1164 LOUISIANA LAW REVIEW [Vol. 78 makes crucial appearances in the law of sales. 2 It even affects subjects in the law of persons, such as the civil effects of absolutely null and putative marriages. 3 But good faith is also a pivotal concept in Louisiana property law. Although it has always been a feature of that law, during an intense burst of law reform activity stretching from 1977 to 1982, the Louisiana Legislature (“Legislature”) updated and extended the concept of good faith in several core areas of property law. 4 1. In the context of general and conventional obligations, all obligors and obligees must conduct themselves in accordance with the general duty of good faith. LA. CIV. CODE ANN. arts. 1759, 1770, 1983 (2018). An obligor in good faith who breaches a conventional obligation is liable only for foreseeable damages, but an obligor in bad faith can be liable for unforeseeable damages as long as those damages directly resulted from his failure to perform. Id. arts. 1996–97. Other provisions that employ good faith in the law of obligations include Louisiana Civil Code article 1975 (“[O]utput or requirements must be measured in good faith.”); article 2021 (“Dissolution of a contract does not impair the rights acquired through an onerous contract by a third party in good faith.”); article 2028 (“Counterletters can have no effects against third persons in good faith.”); and article 2035 (“Nullity of a contract does not impair the rights acquired through an onerous contract by a third party in good faith.”). For a detailed meditation on the role of good faith in the law of obligations, see Saul Litvinoff, Good Faith, 71 TUL. L. REV. 1645 (1997). 2. Although the Louisiana Civil Code provisions in the chapter on sales do not specifically use the term “good faith” in the text of the articles, revision comments repeatedly distinguish between good faith and bad faith sellers. See, e.g., LA. CIV. CODE ANN. art. 2534 cmt. a (noting that the article “changes the law . . . by extending the prescriptive period for actions in redhibition against a seller in good faith from one to four years . . . .”) (emphasis added); id. art. 2545 cmt. b (describing a manufacturer as being “deemed to be in bad faith” regardless of his actual knowledge of the thing sold); art. 2545 cmt. f (noting that a buyer is not required to give “a bad faith seller or a manufacturer” an opportunity to repair before instituting an action in redhibition); art. 2545 cmt. g (referring to a potential credit a “bad faith seller” can claim for use of thing in an action of redhibition). 3. Id. art. 96. 4. Through his leadership role with the Louisiana State Law Institute in the revision of the Louisiana Civil Code and as the most widely cited and influential commentator on Louisiana law, Professor A.N. Yiannopoulos significantly influenced the development of good faith in Louisiana property law. See generally Justice Harry T. Lemmon, A Tribute to Athanasios N. Yiannopoulos, 73 TUL. L. REV. 1025 (1997); Tyler G. Storms, Interview with Professor A.N. Yiannopoulos: Louisiana’s Mos t Influential Jurist in Our Time, 64 LA. BAR. J., June–July 2016, at 24, 27 n.6 (listing the numerous Law Institute Committees for which Professor Yiannopoulos served as reporter). It is fitting, then, that this Article contributes to the current issue of the Louisiana Law Review published in his honor. 2018] GOOD FAITH IN LOUISIANA PROPERTY LAW 1165 This Article addresses the role of good faith in four of those distinct areas: (1) as a prerequisite to the establishment of a predial servitude benefiting the owner of a building that encroaches on the property of a neighbor; 5 (2) as a mediating device allocating the rights of an original owner of a corporeal movable and a subsequent acquirer under the bona fide purchaser doctrine; 6 (3) as a defining characteristic establishing rights and obligations under the law of accession when a person possesses immovable property without a valid title; 7 and (4) as a prerequisite for the acquisition of ownership of, or other real rights in, immovable property by ten-year acquisitive prescription. 8 Although this Article notes the sources of good faith in Louisiana jurisprudence, prior Louisiana civil codes, and European civil codes considered in the revision process, it focuses primarily on how good faith has functioned in the post-revision property law landscape. It does so by examining the text and structure of the good faith provisions in the continuous revised Civil Code and reported judicial decisions that have employed the new or reformulated definitions of good faith. Within the parameters of property law that are the focus of this Article, 9 an owner of a corporeal thing experiences a loss of property rights in some form or another. In the case of encroaching buildings, the servient estate owner may be forced to relinquish a predial servitude over his immovable property if the encroaching building owner is in good faith. 10 In the case of a lost or stolen corporeal movable, the owner must compensate a subsequent acquirer before the owner can recover possession if the acquirer purchased 5. LA. CIV. CODE ANN. art. 670. 6. Id. arts. 518–25. 7. Id. art. 487. 8. Id. arts. 3475, 3480–82. The Louisiana Civil Code also provides that a possessor can acquire ownership of or other real rights in a movable through acquisitive prescription after three years of possession with good faith and an act sufficient to transfer ownership, but she must possess for ten years in the absence of good faith or title to acquire ownership by prescription. Id. arts. 3489–91. Cases applying these articles are discussed briefly infra note 276 and accompanying text. 9. Good faith also plays a quiet but significant role in the shadows of Louisiana’s public records doctrine. See, e.g., Longleaf Invs., L.L.C. v. Tolintino, 108 So. 3d 157, 159–61 (La. App. Cir. 2012) (holding that a party who would otherwise be a third party purchaser under Article 3338 of the Civil Code cannot rely on the public records doctrine when there are indications of bad faith and fraud). Consideration of good faith in the public records doctrine, however, is beyond the scope of this Article. For more on this topic, see generally Michael Palestina, Comment, Of Registry: Louisiana’s Revised Public Records Doctrine , 53 LOY. L. REV. 899 (2007). 10. Art. 670. 1166 LOUISIANA LAW REVIEW [Vol. 78 the corporeal movable in good faith. 11 In other situations covered by the bona fide purchaser doctrine, the original owner of a corporeal movable thing will lose all of his property rights in a corporeal movable he once owned and cannot revendicate the thing if the acquirer takes possession in good faith from a particular kind of intermediary. 12 In accession, the owner of immovable property must sometimes compensate another person who enters his immovable without permission and improves it, derives natural or civil fruits from it, or even depletes it of some of its actual substance, if that other person is a good faith possessor. 13 Finally, under the law of acquisitive prescription, the original owner of an immovable will lose all or a portion of her property rights to another person who has intruded on the owner’s sphere of exclusive control if the intruder took possession pursuant to a just title and was in good faith at the time of the intrusion. 14 In all four of these situations, the Louisiana Civil Code shifts a property law entitlement from the original owner to someone who ordinarily would not be entitled to any legal protection. 15 In each of these instances, the concept of good faith serves as a crucial mediating device, reallocating the rights and obligations of the original owner and the new player who has arrived on the scene either uninvited or through some intermediate transaction. This Article suggests that the...