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Privileges under Louisiana law

On Behalf of | Apr 5, 2017 | Mergers & Acquisitions

Under Louisiana law, creditors are afforded numerous privileges against property owned by their debtor, and, in some instances, against third parties, to provide additional security to collect the money that is owed. By definition, a privilege is “a right, which the nature of a debt gives to a creditor, and which entitles him to be preferred before other creditors.” A privilege may exist on movable or immovable property, or on both at once.

There are scores of privileges that are afforded to different types of creditors under Louisiana law. A complete list of privileges that are afforded to creditors is beyond the scope of this article, but they include:

a. A privilege for a contractor or laborer for the price of their work for improvements to immovable property

b. A privilege for a seller of movable sold to the owner of immovable property to become component parts or that are consumed in machinery or equipment used at the site of improvements to immovable property

c. A privilege for lessors who rent movables used at the site for improvements to immovable property

d. A privilege for registered or certified surveyors or engineers, licensed architects or their professional sub consultants for professional services rendered for work on an immovable

e. A privilege for contractors and laborers who provide services on a well to produce hydrocarbons, or those who transport materials or persons to the wellsite

f. A privilege for suppliers or laborers who furnish supplies, materials or labor for the construction, maintenance or repair of the road bed and structures of a railroad

g. A privilege for repairmen who repair, make or furnish parts for automobiles

h. A privilege for repairmen who make, repair movable goods, furniture, upholstery, commodities, equipment, merchandise, machinery, marine vessels, trailers, equipment or motors used on marine vessels

i. A privilege for a person who repairs, restores, performs maintenance work or other services on aircraft or provides fuel materials in connection therewith

j. A privilege for person who furnishes water to another to assist in growing or maturing a crop

k. A privilege for threshermen, combinemen and grain driers for the services rendered on the crop

l. A privilege for sellers of agricultural products in chartered cities and towns

m. A privilege for persons engaged in the business of hauling on the property called for the charges or labor performed in connection therewith

n. A privilege for landowners and stumpage owners for the price of logs sold and on the poles and cross ties manufactured therefrom

o. A privilege for a health care provider, hospital or ambulance service that furnishes service or supplies to any injured person on the net amount payable to the injured person, his heirs or legal representatives out of any judgment or settlement recovered from another person or insurance company on account of such injuries

p. A privilege for owners of self-service storage facilities upon all movable property stored at the facility for the debt due for rent and all reasonable charges and expenses necessary for the preservation of the movable property stored there

q. A privilege for workmen or artisans for the price of labor on movable which they have repaired or made if it continues in their possession

r. A privilege for vendors for the price of the property sold if the property remains in his possession

s. A privilege for architects, undertakers, bricklayers, painters, master builders, contractors, subcontractors, journeyman, laborers, cartmen and other workmen employed in constructing, rebuilding or repairing houses, buildings or making other works upon the building, improvement or other work erected

If one has a valid privilege upon certain property, they also have the right to seize that property during the pendency of the action to prevent the owner from concealing, disposing of or wasting the property of the revenues therefrom, or removing the property from where it is located.

Furthermore, in order for a defendant whose property is seized under a writ of sequestration to obtain the property, he must first furnish security for the satisfaction of any judgment that may be rendered against him in the proceeding. This right also provides further security to preserve the property should it need to be sold in order to satisfy the underlying indebtedness.

Privileges are strictly construed because they give preference over other general creditors. There are many procedural guidelines that a holder of a privilege must follow in order to preserve the validity of the privilege, and in some instances continuous possession of the property that is the subject of the privilege is a pre-requisite for the privilege to exist.

Additionally, sometimes property is the subject of multiple privileges or other security devices in favor of multiple creditors such that determinations must be made on the priority afforded each creditor over that property Furthermore, if property is seized under a writ of sequestration improperly, a person can be held liable for damages for wrongful seizure. Consequently, it is oftentimes critical that legal advice be obtained to sort through these complex issues.