Levine v. First National Bank of Commerce

The First National Bank of Commerce (co-plaintiff) held the mortgage on a house owned by Dr. Jeffrey S. Levine (defendant). The mortgage note contained a common due-on-sale clause that complied with federal law and was approved by the federal Office of the Comptroller of the Currency. The clause allowed the bank to demand immediate repayment of the loan if Levine conveyed title or any other interest in the property to a third party. Richard and Sandra Carrara (co-plaintiffs) later took sole occupancy of the house pursuant to a bond-for-deed contract (Louisiana's version of a contract for deed.) The contract obligated the Carraras to assume Levine's mortgage payments, which they did, in return for which Levine promised to convey title to the property once the bank's loan was fully repaid. When the bank learned about the bond for deed, it invoked the due-on-sale clause and sued Levine to foreclose on the property. The Carraras sued Levine for disturbing their quiet enjoyment of the house. Levine responded that Louisiana law did not allow a lender to enforce due-on-sale clauses so long as loan repayments were being repaid and no title to the mortgaged property had passed. The trial ended in judgments for Levine (as to the bank's claim) and the Carraras. The trial court also ordered the bank to indemnify Levine for the Carraras' damages award. An appellate court dismissed the Carrara's claim but otherwise affirmed the trial court's judgment. The bank appealed to the Louisiana Supreme Court.