When the matter set up in a cross-bill is directly responsive to
the averments in the bill and is directly connected with the
transactions which are set up in the bill as the gravamen of the
plaintiff's case, the amount claimed in the cross-bill may be taken
into consideration in determining the jurisdiction of this Court on
appeal from a decree on the bill.
In Louisiana, the holder of one or more of a series of notes
secured by a concurrent mortgage of real estate is entitled to a
pro rata share in the net proceeds arising from a sale of
the mortgaged property at the suit of a holder of any of the other
notes, and an hypothecary action lies to enforce such claim, based
upon the obligation which the law casts upon the purchaser to pay
the
pro rata share of the debt represented by the notes
that were not the subject of the foreclosure suit.
Page 136 U. S. 131
Such obligation, cast by law upon the purchaser, partakes of the
nature of a judicial mortgage, and, in order to be effective as to
third persons --
i.e., persons who are not parties to the
act or the judgment on which the mortgage is founded -- it must be
inscribed with the recorder of mortgages, and no lien arises until
it is so registered.
Under the laws of Louisiana, a claim for damages arising from
alleged wrongful acts of a party with respect to removing personal
property from a plantation while he had possession of it, and for
waste committed by him about the same time, are
quasi-offenses, and are prescribed in one year.
It appearing that the subject of the controversy in this case is
identical with that which was before the court in an action at law
at October term, 1883, in
Cragin v. Lovell, 109 U.
S. 19I, and that the parties are the same, and that the
Court then held that "the petition shows no privity between the
plaintiff and Cragin," and "alleges no promise or contract by
Cragin to or with the plaintiff,"
held that while the plea
of
res judicata is not strictly applicable, the court
should make the same disposition of the controversy which was made
then.
In equity. The case is stated in the opinion.
MR. JUSTICE LAMAR delivered the opinion of the Court.
This is a suit in equity, in the nature of an hypothecary
action, under the Civil Code of Louisiana, brought in the court
below by George D. Cragin, a citizen of New York, against William
S. Lovell, a citizen of Mississippi, and Orlando P. Fisk, a citizen
of Michigan. Its object was to have a lien declared in favor of the
complainant upon certain real property belonging to the defendant
Lovell, and, in default of the payment thereof by Lovell, to have
the property sold to satisfy it.
The bill was filed on the 18th of January, 1883, and its
material allegations were substantially as follows: on the 31st of
January, 1870, Louisa S. Quitman and Eliza A. Quitman
Page 136 U. S. 132
sold to Orlando P. Fisk a sugar plantation known as the "Live
Oak Plantation," and certain other particularly described real
estate, all situated in the Parish of Terrebonne, Louisiana, and
received in part payment therefor nine promissory notes made by
Fisk, payable to his own order and endorsed in blank by him, of
$2,000 each, due in one, two, three, four, five, six, seven, eight,
and nine years, respectively, from that date, all of which bore
interest at seven percent until maturity and eight percent
thereafter until paid, and were secured by a mortgage on the said
plantation "in favor of said vendors, their heirs and assigns, and
all future holder or holders of said promissory notes, or any of
them." Fisk paid the first of those notes when it came due, but did
not pay any of the others. The second one not having been paid at
maturity, the Misses Quitman, on the 14th of February, 1872,
brought suit on it against Fisk in the Circuit Court of the United
States for the District of Louisiana to foreclose the mortgage.
Afterwards the Quitmans, in consideration of $2,386, the amount of
that note, including accrued interest, attorneys' fees, and costs,
paid to them by complainant, sold and transferred to him all their
right, title, and interest in the note and in that suit, and
subrogated him to all their rights in the premises against Fisk and
under the mortgage. Fisk having also failed to pay the third note,
the Quitmans brought suit thereon against him on the 21st of May,
1873, in one of the state courts, and a few months afterwards, in
consideration of $2,608.65, the amount of the note, including
accrued interest, attorney's fees, and costs, paid to them by
complainant, sold and transferred to him all their right, title,
and interest in the note and in that suit, with a like subrogation
as in the preceding case. The fourth note not having been paid at
maturity, the Quitmans brought suit on it against Fisk on the 26th
of February, 1874, in one of the state courts of Louisiana, and
foreclosed the mortgage, and under executory process issued by that
court, the mortgaged property was seized by the sheriff of the
parish and regularly sold by him on the second of May, 1884, to the
Misses Quitman for $10,900, which sum, after paying costs and
expenses, was reduced to $10,447.05, the whole of which
Page 136 U. S. 133
portion of the price of said property was retained by the said
Louisa S. and Eliza A. Quitman.
The bill further alleged that by the sale to the complainant of
the two before-mentioned notes, with subrogation as aforesaid, he
acquired a right of priority of payment out of the proceeds of the
sale of the property mortgaged to secure the same; that by such
sale and transfer to him, they made the remaining notes held by
them subordinate in rank to those so sold to him; that at the time
of the sale, the Quitmans were the holders and owners of all of the
other notes, and that they, having retained the proceeds of the
sale of the property, became and were liable to him for the full
amount due upon his two notes, including interest, costs, and
attorney's fees, which amount was unpaid, and remained secured by
lien upon the property.
It was then averred that Louisa S. Quitman afterwards died,
leaving her sister, Eliza A. Quitman, as sole heir and legatee, who
entered into the property and took possession of it; that Eliza A.
Quitman died soon afterwards, having appointed the defendant Lovell
sole executor of her estate, which was still in the course of
administration, and that, before the filing of the bill,
complainant notified Lovell, as executor, that he was the holder
and owner of the two notes purchased by him, and demanded payment
of the amount due thereon, including interest and costs, which was
refused.
It was then averred that the defendant Lovell is in possession
of the property under a claim of ownership by title derived from
the Quitmans, or the last survivor of them, which claim is subject
to the demand of complainant, and that after the aforesaid demand
and refusal of payment of his two notes, complainant demanded
payment thereof from Lovell, as possessor of the mortgaged property
at least ten days before the filing of the bill, which was also
refused, and the defendant Lovell still refused payment of the
notes, and also refused to surrender the lands or to permit them to
be sold to satisfy complainant's demand.
By reason of the aforesaid premises, complainant averred that he
had a first lien and privilege on the mortgaged property
Page 136 U. S. 134
in the possession of Lovell, for the amount due on his notes,
and had the right to have it seized and sold to pay the same.
The bill prayed that an account be taken of the amount due
complainant on his notes; that he be decreed to have a first lien
and privilege upon on the mortgaged property for the amount found
due him, which the defendants should be decreed to pay, together
with costs, attorney's fees, etc.; that in default thereof, the
property be seized and sold to pay his demand; that if the amount
realized from such sale be insufficient to pay his demand, he might
have execution for the deficiency against the estate of Eliza A.
Quitman, and for other and further relief.
April 2, 1883, the defendant Lovell filed a general demurrer,
which was overruled December 10, 1883, reinstated December 14,
1883, and withdrawn January 9, 1884, with leave to file his plea,
which he did on the same day. This plea set up (1) that the notes
sued on by the complainant having been executed by Fisk, January
31, 1870, and made payable in two and three years from date,
respectively, were barred by prescription of five years; (2) that
the act of mortgage by which payment of those notes was secured,
having been executed January 21, 1870, and recorded February 12,
1870, lapsed and expired and became extinguished January 21, 1880,
it having never been reinscribed; (3) that the foreclosure of the
mortgage by the Quitmans on one of the notes secured concurrently
with those of the complainant, and the sale of the mortgaged
property, had the effect to extinguish the mortgage; (4) that the
defendant was not in any manner interested in the notes sued on or
in any of the others of the series, nor in the mortgage by which
they were secured, but acquired the property by purchase for a
valuable consideration long after the seizure and sale of it to
satisfy the mortgage, and therefore subsequently to the extinction
of the mortgage.
This plea was overruled June 9, 1884, and March 6, 1885, the
complainant amended his bill. In this amendment complainant alleged
that, in a suit brought by him in the court below against Fisk, a
decree was entered on the 6th of June,
Page 136 U. S. 135
1873, that he recover from Fisk the sum of $96,526.71, and that,
as Fisk had used $4,918 of complainant's money in examining titles,
paying taxes and purchase money of the property in dispute, the
latter sum was decreed to be an equitable lien upon the plantation,
to take effect from February 13, 1872, the date when the bill in
that suit was filed, until discharged by the payment of the whole
debt of Fisk, as established by the decree. By reason of that lien,
complainant alleged that he had an interest in paying the amount
due upon his two notes, and that by the payment of the amount due
upon them to the Quitmans, he was subrogated of right, by operation
of law, to all the rights of the Quitmans to those two notes, and
the mortgage securing them, as well as by the express subrogation
alleged in the original bill.
March 7, 1885, Lovell answered, averring as follows: when Fisk
purchased the plantation, as aforesaid, he was not acting for
himself, but for complainant, who was the real purchaser and
furnished the funds to make the cash payment at that time; that
shortly after that purchase, complainant called upon the attorneys
for the Quitmans several times, and acknowledged and claimed that
he was the real purchaser of the plantation, and as such promised
and bound himself to take up and pay the notes given in part
payment therefor, and did pay at maturity the first of those notes
with his own funds. About the time of the maturity of the second
note, the complainant instituted a suit against Fisk on the equity
side of the court below in which he claimed to be the real owner of
the plantation and to have been the purchaser of it instead of
Fisk, who illegally took the title in his own name and was all the
time acting as complainant's agent, having paid the cash part of
the purchase and the first note with complainant's money, and that
complainant had promised the Quitmans to pay them the balance, and
was ready to do so. A final decree was rendered in that suit upon
the pleadings and proofs adjudging complainant to the real owner of
the plantation and finding the matters and things set forth in his
bill in that suit to be correct. Prior to the institution of that
suit, complainant took possession of the plantation as sole owner
thereof, and,
Page 136 U. S. 136
pending that suit, caused himself to be appointed receiver
thereof, and continued in the possession thereof, cultivating the
plantation and disposing of the crops raised thereon for his own
sole and exclusive benefit, accounting to no one therefor. Fisk
abandoned the plantation about that time, has never returned, never
contested that suit, and never afterwards set up any claim to the
plantation. Fisk, at the time of the purchase of the plantation and
up to the date of the acts complained of in that bill, was a man in
the full confidence of complainant, entrusted with ample funds an
credit, but without means of his own, either at that time or since.
Complainant was a
bona fide owner of the plantation from
the date of that sale, and the Quitmans did not sell the two notes
to him, as he alleges, but accepted payment thereof from him, as
the real obligor thereof. Complainant instigated the suits on the
mortgage notes, and then bought them in, and by agreement with the
Quitmans was subrogated to all of the Quitmans' rights as against
Fisk, solely in order to aid him in his suit against Fisk, he
having advised the Quitmans that Fisk had been acting only as his
agent in the transactions, and such subrogation was taken by
complainant to be used only in case he should fail in his equity
suit with Fisk. Complainant was, and had been for a long time, in
possession of the plantation when it was sold in the foreclosure
suit of the Quitmans, and, having full knowledge of all those
proceedings, consented thereto, and in fact requested the
institution of the proceedings and was present at the sale, stating
that he was desirous of having some third person purchase the
plantation, as he was unwilling to own it longer.
The answer further denied that complainant bought the two notes
of the Quitmans; averred that he acquired no right to the proceeds
of the sale of the mortgaged property, but, on the contrary,
continued to owe the Quitmans, as before, on the remaining notes of
the series, the difference between the amount of them and the
proceeds of the sale; alleged that those two notes were
extinguished by his payment thereof, so far as the Quitmans and the
plantation was concerned, and that the mortgage, as to them, was
also extinguished by those proceedings,
Page 136 U. S. 137
and further set up that the Quitmans never became liable to
complainant in any manner for any amount by reason of those
proceedings, nor did he thereby acquire any lien or privilege upon
the plantation. It was then alleged that on the 17th of February,
1876, the defendant purchased the plantation from its then owner,
Eliza A. Quitman, free and unencumbered with any demand or claim of
the complainant or of anyone else; that at that time there was no
inscription of any mortgage or privilege against the property in
the name of anyone, and none could exist against the defendant,
because he was a third person within the meaning of art. 176 of the
constitution of the state; that the notes which the complainant
seeks to collect, having been dated January 31, 1870, and made
payable in one and two years from date, respectively, were barred
by prescription of five years; that the mortgage securing those
notes, having been executed January 21, 1870, lapsed and expired
and became prescribed under the laws of the state, January 21,
1880, and was therefore extinguished and of no effect, as if had
never been reinscribed, and that by virtue of the foreclosure
proceedings instituted by the Quitmans upon one of the notes, the
mortgage became extinguished.
The defendant Lovell, by way of cross-bill, then set up:
(1) that by reason of the facts set forth in the foregoing
answer, and of the promises made by the complainant to the Quitmans
as therein set forth, complainant became liable for the payment of
the whole of the purchase price of the plantation represented by
the notes given by Fisk; that complainant, while in possession of
the plantation as owner of it, committed great waste thereon by
destroying and injuring the fences, buildings, outbuildings,
fixtures, and improvements thereof, and removed therefrom all the
movable property which was there when the sale was made by the
Quitmans to Fisk, for the benefit of an adjoining plantation owned
by him, and greatly depreciated the value of the plantation by
reason of improper cultivation and business methods, so that it did
not sell for a sufficient sum to pay the mortgage under which the
foreclosure was made, as it otherwise would have done. Wherefore
complainant is liable to and justly owes the defendant Lovell,
Page 136 U. S. 138
as executor of Eliza A. Quitman, the difference between the
amount of the unpaid notes, with interest up to the date of the
sheriff's sale, to-wit, May 1, 1874, and the sum of $10,447.05, the
net proceeds of that sale, with interest at eight percent
thereafter until paid.
(2) that Eliza A. Quitman instituted a suit at common law in the
court below against the complainant on March 3, 1880, to recover
the amount of that difference, and obtained a judgment against him
for that amount, which on the 12th of November, 1883, upon appeal,
was reversed and ordered to be arrested by this Court, and that
prescription was thus interrupted, and did not run against this
claim urged by the defendant during the pendency of those
proceedings. The record in that suit was then referred to and was
made a part of the answer and cross-bill, and the amount for which
that suit was brought was claimed as due defendant by
complainant.
The prayer of the cross-bill was for an account, a judgment
according to the allegations therein contained, and for other and
further relief.
On the 4th of April, 1885, the complainant filed a demurrer,
plea, and answer to the cross-bill specifically denying all the
material allegations of it and pleading the prescription of one,
five, and ten years. He pleaded the decision of this Court in the
suit brought by Eliza A. Quitman against him as an estoppel against
her and all those claiming under her in this proceeding, and
averred that, having a lien upon the plantation, he had an interest
to pay the notes of Fisk if he chose, though he was not at any time
personally liable to the Quitmans, and, having paid the two notes
set forth in his bill, he was entitled to them as owner, and was
subrogated to the mortgage securing them. He further denied that he
took the subrogation made by the Quitmans under an agreement or
understanding that it should take effect only against Fisk, and not
against the Quitmans and the plantation, but averred that he took
it without any restrictions or limitations, for all it was worth
under the law. He averred further that the complainant in the
cross-bill had been sued individually, as third possessor of the
premises in dispute, and not as executor of the Quitmans or of
Page 136 U. S. 139
either of them, and that he owned the property personally, and
not as executor, and therefore could not maintain his cross-bill in
his capacity as executor.
Fisk was never found, and never appeared. On the 28th of May,
1886, upon motion of the attorneys for complainant suggesting that
he had for a valuable consideration transferred to George D.
Cragin, Jr., all his interest in this suit, and to the subject
matter thereof, with full subrogation to the rights in the
premises, it was ordered that the latter be subrogated as
complainant, with authority to prosecute and carry on the suit in
his own name. A great deal of testimony was adduced on both sides,
and on the 12th of June, 1886, the following decree was
entered:
"This cause came on to be further heard at this term upon the
complainant's bill and the cross-bill of W. S. Lovell, executor of
the last will and testament of Eliza A. Quitman, deceased, and the
evidence adduced by the parties, and was argued by counsel,
whereupon, and in consideration thereof, it was ordered, adjudged,
and decreed as follows:"
"1st. That the complainant purchased the two notes sued upon,
and was subrogated expressly as to one, and by operation of law as
to the other, to all the rights of action thereon, including the
mortgage executed by Orlando P. Fisk to secure the same, as alleged
in the complainant's bill, and is entitled to the relief
prayed."
"2d. That this cause be referred to J. W. Gurley, master, to
take an account of the amount due the complainant on said notes and
mortgage, and report the same to this Court as soon as
practicable."
"3d. It is further ordered and decreed that said cross-bill be
dismissed, and further proceedings are suspended until the coming
in of the master's report."
On the 14th of June, 1886, the master filed his report, in which
he found that, as the sum realized by the Quitmans from the
mortgage sale was retained by them, and as they were the holders of
six of the unpaid notes and complainant of two, therefore
complainant was entitled to one-fourth of the net proceeds of the
sale, with interest to June 10, 1886, at
Page 136 U. S. 140
seven percent, and also one-fourth of the attorneys' fees, in
all $4,830.64.
June 15, 1889, a final decree was rendered in accordance with
the report of the master, and it was further decreed that, in case
the amount thus found due should not be paid within sixty days, the
property should be sold to pay that sum, and a personal judgment
was also entered against Lovell for any amount left over, in case
the property should not sell for the amount found due and the
costs. An application for a rehearing having been denied, Lovell
brought this appeal.
The assignments of error are that the court erred (1) in
refusing to maintain the defendant's plea of prescription of five
years to the notes sued on; (2) in refusing to maintain his plea of
prescription of ten years to the mortgage sued on; (3) in refusing
to maintain his plea that the mortgage was extinguished by the sale
of the plantation under the foreclosure proceedings taken by the
Quitmans; (4) in refusing to maintain his plea on the ground that
he was a third person purchasing without notice; (5) in decreeing
that the complainant purchased the two notes sued upon, and was
subrogated expressly as to one, and by operation of law as to the
other, to all the rights of action thereof, including the mortgage
executed by Fisk to secure them, as alleged in his bill, and is
entitled to the relief prayed; (6) in dismissing the defendant's
cross-bill.
A motion to dismiss the appeal his been filed, and associated
with it is a motion to affirm. The first of these motions is based
upon the ground that the amount in dispute, as determined by the
judgment rendered, is but $4,830.64, which is less than the amount
required to give us jurisdiction. It is then argued that the amount
claimed in the cross-bill cannot be added to this amount so as to
give jurisdiction, nor can that amount be considered by itself for
that purpose (1) because the cross-bill asserts no claim on the
part of Lovell in his own behalf, but only as executor of Eliza A.
Quitman, deceased, while the original bill was brought against him
personally, as third possessor of the property, and (2) because the
subject
Page 136 U. S. 141
matter of the cross-bill, to-wit, the equitable claims of the
Quitman estate, of which Lovell was executor, against the
complainant are distinct and separate from the subject matters in
the original bill. These two grounds upon which the motion rests
are negatived by the express averments of the bill itself, which
are that the Misses Quitman,
"having retained the price of said sale under said foreclosure,
became and were liable to your orator for the full amount then due
upon the notes held by him, and all interest, costs, and attorney's
fees accrued thereon, which amount remained secured by lien and
privilege upon all said property, and still so remains, the same
still remaining wholly unpaid. . . . And your orator avers that . .
. more than thirty days before filing this bill, he notified the
said Lovell, executor as aforesaid, that he was the holder and
owner of said notes purchased by him as aforesaid, and demanded
payment of the amount due thereon,"
etc. And the prayer of the bill was
"that an account may be taken under the direction of this
honorable court, before one of the masters thereof, or otherwise,
as the court may direct, of the amount due your orator, in
principal, interest, and costs, upon the two notes herein before
described, and acquired by him by purchase as aforesaid; that he be
decreed to have a first lien and privilege upon the lands and
premises herein described, for the amount so found to be due, to
date from said 2d day of May, 1874; that said defendants be decreed
to pay the same, together with all your orator's costs and charges
in this behalf sustained (including attorney's fees at two percent
upon the sum due him), within some short day to be fixed by the
court, and, in default thereof, that said mortgaged property be
seized and sold under the order and decree of this honorable court,
and that your orator be paid out of the proceeds of such sale, and
that, if the same be insufficient to pay him, he have execution for
the balance, and that his right to recover any deficiency from the
estate of said Eliza A. Quitman be reserved to him,"
etc.
To these averments the cross-bill was directly responsive, and
the matter therein set up as equitable claims of the
Page 136 U. S. 142
Quitmans against Cragin were directly connected with the
transaction which he alleges, in large part, as the gravamen of his
complaint. It is true that the bill also presents a claim against
Lovell as the possessor of the property to which the complainant
alleged he had a lien, but that only shows the alternative nature
of the relief sought. The original bill was an hypothecary action,
which, by article 61 of the Louisiana Code of Practice, is thus
defined:
"An hypothecary action is a real action which the creditor
brings against the property which has been hypothecated to him by
his debtor, in order to have it seized and sold for the payment of
his debt."
In the original bill, complainant prayed that the mortgaged
property be sold to pay his demand, and, if the proceeds of that
sale be insufficient for that purpose, that he then "have execution
for the balance, and that his right to recover any deficiency from
the estate of Eliza A. Quitman be reserved to him."
It is thus observed that the action was against the property
itself, very much of the same nature as a suit
in rem at
common law, and it was necessarily brought against Lovell because,
by coincidence, he had possession of it. The judgment against him,
while in one aspect of it a personal judgment, was also a judgment
against the property, and it would seem that the claim in the
cross-bill, which is one growing out of, or appurtenant to, the
property, was really incident to the suit, as it was a part of the
original transaction of the sale and mortgage of the Live Oak
plantation, out of which the claim in the original bill is derived.
The duty of Lovell, as executor of the estate of Miss Quitman, to
protect the property required him to set up the defense in the
cross-bill as a set-off against the claim and the prayer of the
complainant's original bill. We think, therefore, the amount
claimed by the cross-bill can properly be taken into consideration
in determining the jurisdiction of this Court, and, as that amount
is more than the jurisdictional amount, the motion to dismiss is
denied.
For reasons that will be made manifest as we proceed in our
discussion of the case upon its merits, the motion to affirm is
also denied.
Page 136 U. S. 143
Assuming for present purposes that the facts relative to the
purchase by complainant of the two notes which form the basis of
his claim, and also to the subrogation, are as found by the court
below, we pass to the assignment of error. It is clear that if this
were an original suit directly on the note, to foreclose the
mortgage, it could not be maintained, because under the provisions
of the Louisiana law, the note would be prescribed and the mortgage
would be perempted. These notes were both dated January 31, 1870,
and matured February 3, 1872, and February 3, 1873, respectively.
They were therefore prescribed February 3, 1877, and February 3,
1878, respectively, by virtue of article 3540 of the Revised Civil
Code, which is as follows:
"Actions on bills of exchange, notes payable to order or bearer,
except bank notes, those on all effects negotiable or transferable
by endorsement or delivery, and those on all promissory notes,
whether negotiable or otherwise, are prescribed by five years
reckoning from the day when the engagements were payable."
The mortgage given to secure these notes was recorded February
12, 1870, and, never having been reinscribed, became perempted in
ten years from that date by virtue of article 3369 of the Revised
Civil Code, which is as follows:
"The registry preserves the evidence of mortgages and privileges
during ten years, reckoning from the day of its date; its effect
ceases, even against the contracting parties, if the inscriptions
have not been renewed before the expiration of this time in the
manner in which they were first made."
It is also true that a mortgage, under the laws of Louisiana, is
indivisible (art. 3282, Civil Code), and that the foreclosure of it
has the effect to extinguish it even if all the parties to the
mortgage have not been made parties to the foreclosure proceedings.
Parkins v. Campbell, 5 Martin (N.S.) 149;
Pepper v.
Dunlap, 16 La. 163.
It is insisted, however, by the complainant that this action is
brought not on the aforesaid notes and mortgage directly, but to
enforce an obligation growing out of the foreclosure and sale of
the mortgaged property -- an obligation on the part of the
purchaser at the sale to pay to the complainant,
Page 136 U. S. 144
out of the net proceeds of the sale, his
pro rata share
thereof. In other words, the contention is that the net proceeds of
the sale should have been divided ratably among the holders of all
the unpaid notes secured by the mortgage, and that, as that was not
done by the Quitmans, who purchased the property, an obligation
arose on their part to pay the different installments of the debt,
which obligation followed the land, and was not prescribable until
at least ten years from the date of the sale. Certain provisions of
the Civil Code and the Code of Practice, as well as a number of
decisions of the supreme court of the state, are relied upon to
support this view, all which we shall now consider.
The following articles of the Code of Practice relate to the
general question involved:
"Art. 679. When there exists a mortgage or privilege on the
property put up for sale, the sheriff shall give notice, before he
commences the crying, that the property is sold subject to all
privileges and hypothecations, of whatsoever kind they may be, with
which the same is burthened, and with the condition that the
purchaser shall pay in his hands whatever portion of the price for
which the property shall be adjudicated may exceed the amount of
privileges and special mortgages to which such property is
subject."
"Art. 686. When a seizing creditor has a privilege or a special
mortgage on the property seized, for the debt of which all the
installments are not yet due, he may demand that the property be
sold for the whole of the debt, provided it be on such terms of
credit as are granted to the debtor by the original contract for
the payment of such installments as are not due."
"Art. 706. But when the property sold is subject to privileges
or special mortgages in favor of other persons besides the suing
creditor, the sheriff shall require from the purchaser, and he
shall be compelled to deliver to the creditor whether the sale be
made for ready money or on credit, only the surplus of price beyond
the amount of the privileges or special mortgages, if there be any
surplus."
"Art. 709. The hypothecary action lies against the purchaser
Page 136 U. S. 145
of a property seized, which is subject to privileges or
mortgages in favor of such creditors as have said privileges and
mortgages, in the same manner, and under the same rules and
restrictions, as are applicable to a third possessor of a mortgaged
property."
One of the leading cases relied on is
Pepper v. Dunlap,
16 La. 163. In that case, the holders of the second and third notes
of a series of seven (the first having been paid at maturity)
concurrently secured by a mortgage on certain real and personal
property, obtained an order of seizure and sale on their mortgage,
against the mortgaged property, praying in their petition that it
be sold to satisfy all the notes, but on a credit to meet those not
due. The order was issued by the lower court, and the defendant
appealed directly to the supreme court. After discussing some
incidental questions, the court said:
"The mortgage is in its nature indivisible, and prevails over
each and every portion of all the immovables subjected to it.
Louisiana Code, art. 3249 (now 3282). If so, how can property
subject to a special mortgage be sold to satisfy a part of the
debt, the whole of which the mortgage secures? Would the purchaser
acquire such title as he is legally entitled to, and would he not,
on the contrary, have to run the danger of being disturbed for the
payment of the balance of the debt, although the price of his
purchase would be the full value of the property? Such proceedings
would, in our opinion, be met with such difficulties and
inconveniences that an injury must necessarily result to either of
the parties, and we cannot sanction the doctrine that the creditor
of a part of a debt secured by a special mortgage, for which notes
have been given, may be allowed or must be restrained to seeking
and obtaining the satisfaction of his claim out of the sale of the
property mortgaged for the whole, without any regard to the right
of those who may be the holders of the other notes, and with an
entire disregard of the consequences as to the purchaser of the
property. Our laws being silent on this subject, we must reason by
analogy."
And, after discussing the various articles of the Code of
Practice relating to this subject, the court went on to say:
"It is
Page 136 U. S. 146
clear, then, from these articles that the purchaser of the
property is personally bound for the surplus of the adjudication,
still secured by special mortgage on the property sold, and that he
holds said surplus in his hands, subject to the claim or call of
the creditors who had the inferior mortgages, and who had nothing
to do with the sale from which said surplus proceeded, and that
when it is demanded of him, if he does not pay it, he is subject to
being proceeded against in the same manner as if he were a third
possessor. This, it seems to us, would be a safe and proper rule to
adopt in a case like the present, where the different installments
are secured by the same mortgage and where the rights of the
creditors are of equal dignity, and we cannot see any good reason
why, in the absence of any law, it should not be adopted. . . . We
think, therefore, that we may safely establish as a rule of
practice that when a seizing creditor only sues for such
installments of a debt secured by privilege or special mortgage as
are due, the property so mortgaged is to be sold for the whole of
the debt, on such terms of credit as are granted by the original
contract, although such creditor does not show that the subsequent
installments belong to him or that he is the holder of all the
notes mentioned in the contract of mortgage, and that it suffices
that the several installments as are not due be mentioned in the
petition."
Johnson v. Duncan, 24 La.Ann. 381, resembles the case
at bar in some respects. In that case, the plaintiff was the owner
and holder of one of a concurrent series of notes secured by
mortgage on a plantation. The holder of the other notes of the
series foreclosed the mortgage, and the property was sold to the
defendant for an amount not quite sufficient to satisfy the whole
indebtedness. The court said:
"The defendant was bound to retain in his hands for the benefit
of the plaintiff's note the
pro rata of the price coming
thereto by law, and to pay the same, with interest, when demanded.
We do not think he was bound for any more than this, but judgment
to this extent may be properly given under the pleadings and
evidence, and this view renders it unnecessary to pass upon many
technical points presented in the argument. The
Page 136 U. S. 147
principal defense urged is that of peremption. The defendant
contends that the mortgage was first recorded in 1859, and was not
reinscribed, and that the plaintiff, whose suit was not instituted
till 1871, lost his rights against defendant by peremption. This we
think an error. The obligation of defendant springs from his
purchase, and the duty of retaining in his hands the proportion of
price coming to a concurrent mortgage note not embraced in the
judgment under which the sale was made, and to deliver such
proportion to the holder of such note. An hypothecary action is
provided against him. As to him, the mortgage of the concurrent
creditor requires no reinscription, for he has assumed the debt to
the extent of its proportion of the purchase money, which he must
retain."
In
Soniat v. Miles, 32 La.Ann. 164, 166, the court,
quoting from the syllabus in
Parkins v. Campbell, 5 Martin
(N.S.) 149, said:
"When a debt, secured by mortgage is due in several
installments, and the assignee of the second causes the property to
be seized and sold, the sale gives a complete title to the
purchaser, and the creditor of the first installment cannot seize
the property in his hands unless
he alleges and proves
that the sale is an absolute nullity, or unless he proceeds against
that purchaser, by the hypothecary action, for any proportion of
the price to which he may be entitled, under a prior or concurrent
mortgage."
These authorities establish the principle that the holder of one
or more of a series of notes secured by a concurrent mortgage is
entitled to a
pro rata share in the net proceeds arising
from the sale of the mortgaged property at the suit of a holder of
any of the other notes, and that an hypothecary action lies to
enforce such claim. And one of them,
Johnson v. Duncan,
lays down the principle that, as regards the purchaser at the
foreclosure sale, no reinscription of the mortgage is necessary,
because he has assumed, by his purchase, the payment of the
proportionate share of the debt. And the reasoning of the court in
that case inevitably leads to the conclusion that the basis of the
hypothecary action provided by the Code in such cases is the
obligation which the law casts upon the purchaser
Page 136 U. S. 148
to pay the
pro rata share of the debt represented by
the notes that were not the subject of the foreclosure suit.
But the other proposition advanced by the complainant, that
right of action is not prescribable until at least ten years from
the date of sale, is not supported by any of these authorities or
by any that have been brought to our attention or that we have been
able to find.
In
Smith v. Johnson, 35 La.Ann. 943, the court held, as
stated in the syllabus of the case, that
"the hypothecary action against the third possessor is not
barred by the prescription of ten years when the principal
obligation has been kept alive, and the mortgage securing it has
been properly inscribed and reinscribed."
In
Gentes v. Blasco, 20 La.Ann. 403, 405, the court
said:
"We consider the hypothecary action as accorded and defined by
articles 61, 62, and 63 of the Code of Practice, to be an original
action. It is declared to be a real action, and that it follows the
property in whatever hand it may be found. What is said in
Kemp
v. Heirs of Cornelius, 14 La.Ann. 301, in regard to the
ten-years prescription being applicable, whenever it becomes
necessary to institute a separate and distinct action from the one
in which the judgment was rendered, seems not to apply to the
hypothecary action. In that case, we have already seen the action
was personal. We do not find in our Code any period expressly fixed
for the prescription of the hypothecary action. And the reason
seems to be that its duration is contingent upon the existence of
the right from which it springs."
Applying this principle to the case at bar, it is to be observed
that the right from which the hypothecary action springs was the
right of the complainant to his
pro rata share of the net
proceeds of the sale of the mortgaged property, or, in other words,
the hypothecary action is based upon the obligation on the part of
the purchasers to pay to him that amount -- an obligation which, as
before stated, follows the land into the hands of third persons. We
have also seen that according to the rule announced in
Johnson
v. Duncan as to the purchaser at the sale, no inscription of
the obligation was necessary.
Page 136 U. S. 149
But as to third persons such is not the case. Upon this point
the Louisiana Constitution of 1868 and the Constitution of 1879 are
positive and peremptory. Article 123 of the Constitution of 1868 is
as follows:
"The General Assembly shall provide for the protection of the
rights of married women to their dotal and paraphernal property,
and for the registration of the same, but no mortgage or privilege
shall hereafter affect third parties unless recorded in the parish
where the property to be affected is situated. The tacit mortgages
and privileges now existing in this state shall cease to have
effect against third persons after the first day of January,
eighteen hundred and seventy unless duly recorded. The General
Assembly shall provide by law for the registration of all mortgages
and privileges."
Article 176 of the Constitution of 1879 provides:
"No mortgage or privilege on immovable property shall affect
third persons unless recorded or registered in the parish where the
property is situated, in the manner and within the time as is now
or may be prescribed by law, except privileges for expenses of last
illness and privileges for taxes, state, parish, or municipal,
provided such privilege shall lapse in three years."
The obligation in such case partakes of the nature of a judicial
mortgage, and, to be effective as to third persons, it was
necessary that it be inscribed with the recorder of mortgages. The
judgment of the court from which the aforesaid obligation arose did
not give a lien until so registered.
Hanna v. Creditors,
12 Martin (La.) 32;
Adle v. Anty, 5 La.Ann. 631;
Ford
v. Tilden, 7 La.Ann. 533; Arts. 3322, 3342, Civil Code; Art.
123, Constitution of 1868; Art. 176, Constitution of 1879.
Third persons are understood to be "all persons who are
not parties to the act or the judgment on which the mortgage is
founded." Art. 3343, Civil Code. And in that class must be placed
the defendant Lovell, considered in his individual capacity, as
possessor of the property, for his character as executor and his
obligation as such did not exist until after he became such
purchaser. As to him, the obligation aforesaid was of no effect
without being registered, as required by the laws of Louisiana, and
no action would lie to enforce it.
Page 136 U. S. 150
This principle was applied by the Supreme Court of Louisiana in
Delony v. George, 20 La.Ann. 216. That case is well stated
in the syllabus, as follows:
"A, having sold a tract of land to B, retained a mortgage
thereon for the unpaid portion of the price, with the
pact de
non alienando in the act of the sale. B subsequently sold the
same tract of land to C, without an assumption in the act of sale
of the existing mortgage. A lost his mortgage by allowing ten years
to elapse without reinscription.
Held that C., the third
purchaser, held the property free from the mortgage of A after the
lapse of ten years from its inscription, notwithstanding the
pact de non alienando contained in the act of sale from A
to B, and that the third purchaser could successfully enjoin the
order of seizure and sale taken out by A."
It is to be observed that our discussion of the case hitherto
has been upon the theory that the court below was correct in
finding that the complainant purchased the two notes in suit, and
was subrogated to all the rights in and to them enjoyed by the
Quitmans. Indeed, the argument of both parties is largely based
upon that theory, and the contrary view is presented only
incidentally in connection with the issue raised by the cross-bill.
In fact, however, it makes no substantial difference in our
conclusion on the issues presented by the original bill whether
that theory, or, more properly speaking, that finding of fact, be
correct or not, as that is the most favorable view of the matter to
the complainant that can be taken, and, in any view of the case,
his bill cannot not be sustained. The decree of the court below in
that respect is erroneous, and should be reversed.
With respect to the cross-bill, we are of the opinion the decree
below was correct, although the grounds upon which the court based
its decree are not stated. One of the causes of action alleged in
the cross-bill is for damages arising from the alleged wrongful
acts of the complainant with respect to removing personal property
from the plantation while he had possession of it, and for waste
committed by him about the same time. Under the law of Louisiana,
such acts on the part of the complainant would be considered
quasi-offenses, and
Page 136 U. S. 151
would therefore be prescribed by one year. Art. 3536, Civil
Code.
But furthermore, as stated by the attorney for appellant, the
cross-bill "is for the same cause of action" as was originally
brought in
Cragin v. Lovell, in which judgment was
rendered against Cragin in the court below, but on appeal to this
Court was reversed and ordered to be arrested because the petition
set up no cause of action against Cragin, the complainant herein.
109 U. S. 109 U.S.
194. The cause of action in that case was the same as in this, and
the parties are the same, and, while the plea of
res
adjudicata may not be strictly applicable because the judgment
in that cause was simply arrested, and did not therefore adjudicate
upon the merits of the case, yet a comparison of the cross-bill
here and the petition in that case discloses that they are almost,
if not entirely, identical so far as the substance of both is
concerned. And, as we held there that "the petition shows no
privity between the plaintiff and Cragin," and "alleges no promise
or contract by Cragin to or with the plaintiff," it would seem that
the same rule should be applied with reference to this cross-bill,
even though it is ostensibly an equity proceeding.
Ballance
v. Forsyth, 24 How. 183;
Life Insurance Co. v.
Bangs, 103 U. S. 780;
Gould v. Evansville & Crawfordsville Railroad,
91 U. S. 526,
91 U. S. 534;
Alley v. Nott, 111 U. S. 472, and
cases cited.
The decree of the court below sustaining the complainant's
bill was erroneous, and to that extent is reversed, and with
respect to its dismissal of the cross-bill it was correct, and to
that extent is affirmed, and the case is remanded to that court
with a direction to dismiss the bill, with costs.