Groves v. Sentell

153 U.S. 465 (1894)

GROVES
v.
SENTELL.

No. 278.

Supreme Court of United States.

Argued and submitted March 13, 1894. Decided May 14, 1894. APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF LOUISIANA.

Mr. George A. King, (with whom were Mr. Charles W. Hornor and Mr. William S. Benedict on the brief,) for appellants.

Mr. E.T. Merrick, Senr., for Mrs. Randolph, appellee, submitted on his brief.

Mr. E.M. Hudson, for Sentell, complainant in the bill of interpleader and appellee, submitted on his brief.

Mr. Edgar H. Farrar, Mr. Benjamin F. Jonas, and Mr. Ernest B. Kruttschnitt, for McLean, liquidator and appellee, submitted on their brief in which they contended.

MR. JUSTICE WHITE, after stating the case, delivered the opinion of the court.

As Martha Groves and W.J. Groves and Pogue, administrator, are the only appellants, the correctness of the decree in their favor and against Mrs. Randolph and Sentell is not before us. In this regard that decree is final. The Stephen Morgan, 94 U.S. 599.

The first apparent question is the correctness of the decree, holding that certain payments which were made on the note should have been imputed to Mrs. Randolph's portion, instead of to the note as a whole. The payments which were thus imputed by the lower court were those made subsequent to the notarial act of 1873, in which the parties fixed the principal of the note at $7577.34. As to the payments made prior to this date there is no dispute in the record, as they are all admitted to have been made in equal proportions from the funds belonging to Mrs. Stark and to Mrs. Randolph.

The first question necessary to be determined is, was the note, under the Louisiana law, a joint or a solidary obligation. A joint obligation under the law of Louisiana binds the parties thereto only for their proportion of the debt, (Civil Code, Arts. 2080, 2086,) whilst a solidary obligation, on the contrary, binds each of the obligors for the whole debt. The note was clearly a joint note, and not a solidary one. Solidarity, under the law of Louisiana, must be expressly stipulated, and is never presumed. La. Civil Code, Art. 2093. We consider it unnecessary, however, to pass upon the question of imputation of payments, because of our conclusions upon another branch of the case. The issue between the parties is not as to the amount of the payments, but as to the manner in which the payments should be applied. It follows, therefore, that the controversy involves, not the sum due, but the person by whom it is due. As we conclude that the whole debt, irrespective of the question of whether it is due by Mrs. Randolph or by Mrs. Stark, is payable out of the fund, it is useless to determine how much is due by one or by the other.

Whether the whole debt was payable out of the whole property, or any part thereof, depends on whether the mortgage was divisible or indivisible under the law of Louisiana. Says the Louisiana Civil Code: "The mortgage is a real charge on the property bound for the discharge of the obligation. It is in its nature indivisible, and prevails over all the immovables subjected to it, and over each and every portion. It follows them into whatever hands they pass." Art. 3282.

This provision of the Louisiana Code was derived from the Code Napoleon, where its identical language is found, Code Napoleon, Art. 2114. The mortgage in this case contains nothing on its face which takes it out of the general rule. The parties "severally declare" that they are indebted, etc., and that they do "hereby mortgage to and in favor of the said Rosetta Rhea, represented herein by her attorney in fact, the property described in the deed." There is no stipulation in the act showing in the remotest degree an intention to mortgage separately an undivided half of the property for an undivided half of the debt. Thus, on the face of the act, it is a mortgage of the whole property for the whole debt. It was in the power of the contracting parties to have stipulated against indivisibility, and that they failed to do so is self-evident. The provision of the Code is that indivisibility is "in the nature of a mortgage," therefore not of its essence. The commentators on the Code Napoleon agree that indivisibility can be avoided, even where the parties join in a common act of mortgage by stipulating that the mortgage is to be divisible. Laurent, in his Principes de Droit Civil Français, thus states the rule: "All the authorities teach the doctrine that the law, in saying that a mortgage is indivisible by its nature, intends simply thereby to declare that it is not so indivisible in its essence. From this it is concluded that parties may by their conventions stipulate to the contrary. The right of the parties to make such agreements in relation to the divisibility of the mortgage as they deem proper cannot be denied, because indivisibility rests upon intention." (Vol. 30, page 159; see also Rodière On Indivisibility, paragraph 466.) Paul Pont, in his treatise On Privileges and Mortgages, thus states it: "The words `in the nature of' have a significance which is applied to them sometimes in other provisions of the law. Thus, the law says that indivisibility is in the nature of a mortgage, in the same way that it is provided that warranty is in the nature, not in the essence, of contract of sale. And because indivisibility is purely a matter of intention, it can be controlled by the will of the parties." (Vol. 1, page 321, paragraphs 331 and 332.)

These expositions of the civil law writers are persuasive as to the proper construction of the Louisiana Code. Virterbo v. Friedlander, 120 U.S. 707, 728. Indeed, by the strongest possible analogy, they have been adopted by the Louisiana courts. Thus, a vendor's privilege, under the law of Louisiana, is "in the nature" of the contract of sale. The rule there as to this privilege is that, where a sale is made and the privilege is not excluded by express agreement or by implications clearly deducible from the language of the parties, it is implied to exist, as it is of the "nature of the contract." Boner v. Mahle, 3 La. Ann. 600.

The parties, then, having had the power, in contracting the mortgage, to exclude indivisibility, and not having done so, indivisibility applies, not alone as a result of their silence, but also because, being the general rule and of the nature of the contract, it exists unless excluded by the express terms or by plain "implication deducible from the contract." It is urged, however, that, as the obligation secured by the mortgage was joint, therefore the mortgage itself must necessarily have been joint. The proposition confounds the nature of the principal obligation with that of the accessory contract of mortgage. That the divisibility of a debt does not necessarily import the divisibility of the mortgage securing it, is unanimously held by the civil law writers. "Under the theory of the law the indivisibility of the mortgage has no reference to the nature of the principal obligation. Thus, there may be a division of the obligation either between joint creditors or joint debtors, or between the heirs of joint creditors and joint debtors." (Paul Pont, vol. 1, page 33.) Laurent, in speaking on the same subject, says: "Thus, if the debt is discharged in part, or is divisible, it has no influence whatever upon the mortgage. This will subsist in its entirety, although the debt may be extinguished in part, and although a third possessor of the immovable mortgage may be liable only personally for a portion of the debt. We thus see that the indivisibility of the mortgage does not render the obligation itself indivisible. Where the obligations are joint they may be divided, actively or passively, between the heirs of the creditor and the heirs of the debtor." (Laurent, vol. 30, page 151; same page, paragraph 177.) (See also Rodière, page 167 et seq.)

The whole subject was at an early date considered by the French Court of Cassation. Certain persons gave a power of attorney to an agent, authorizing him to contract a debt and consent a mortgage. The agent borrowed the money and gave the mortgage. When the mortgage came to be enforced the debtors defended on the ground that the agent had consented a solidary debt when he had only the power to consent a joint one; that, therefore, not only was the debt joint, but the mortgage securing it divisible. The court found that the power only authorized the contracting of a joint debt; but it held that as the power authorized the agent to consent a mortgage, and the mortgage was in its nature indivisible, the debt was joint; but the indivisible mortgage securing it remained and was in force. (Cassation, May 6, 1818, referred to and quoted in Paul Pont, vol. 1, p. 328.)

It has been contended that a different rule has been established in Louisiana. We are referred, in support of this proposition, to Walton & Kemp v. Lizardi, 15 La. 292, and Erwin v. Greene, 5 Rob. (La.) 70. These cases, instead of supporting the contention, we think refute it. In the Walton case several persons had bought separate undivided portions of a square of ground. To evidence their obligations to pay the purchase price, they issued their separate notes for their respective shares, and secured them by one act of mortgage upon the property. Some of the purchasers paid their notes, and others did not. Foreclosure proceedings were commenced upon the unpaid notes, against the whole property, and the issue presented was whether the mortgage was divisible or indivisible. The court held, after a critical examination of the contract, that upon its face it stipulated that the mortgage should be divisible, and not indivisible. It said that each of the parties had given his separate notes for his separate obligation, and that the agreement between them and the vendor was that the notes should be secured by a special mortgage on "each of the lots for which the same should be given in payment." The language of the mortgage in that case was as follows: "We, in order to secure the following described notes, jointly effect, mortgage, and hypothecate;" again, "and the said purchasers, each in proportion of their respective shares and interest in said property, do hereby confess judgment in favor of said parties;" again, "now the said parties do hereby agree that a sale of said ground shall be made in favor of ... and in the following proportions." The facts clearly justified the court in saying "from the particular care which the parties appear to have taken to distinguish their proportionate interest in the property, as well as in the payments for which they respectively gave their separate obligations," their intention was clear to create a divisible and not an indivisible mortgage.

The facts in Erwin v. Greene were very similar to those just referred to. There the court said: "Each of the obligors promised to pay his portion of the price for which he gave his separate notes, and each took care to distinguish and designate the proportion of their respective interests in the property."

These cases, by converse reasoning, confirm the rule of indivisibility as applied to the contract with which we are dealing. Indeed, we think this contract is controlled not by the foregoing cases but by Potts v. Blanchard, 19 La. Ann. 167, 168, and Stewart, Hyde & Co. v. Buard, 23 La. Ann. 411, 415.

In the first case, certain heirs sold their undivided interests in land and the vendees gave their notes as evidence of their obligation to pay the purchase price, and secured the same by mortgage upon the property. The question was whether the mortgage thus given covered the whole of the property or a part. The court said: "The question presented is one of the construction of the act of mortgage given by the purchasing heirs to the vendors. It is, whether or not the whole property described in the act of sale and mortgage is covered by the mortgage or only the proportion of interest sold. We think there can be no doubt that the mortgage was intended to actually cover the whole property subject to the mortgage." Referring to the act of mortgage, it further said: "The property was fully described in the act; ... it does not say proportion sold, but the property is described and the description is of the whole property."

In the latter case, (23 La. Ann.,) separate notes were given to evidence the price of undivided interests. These notes were secured by mortgage upon the whole property, and the court held the mortgage to be indivisible. It is contended that even although indivisibility of mortgage is the rule, as the parties have the power to stipulate for divisibility, therefore we must not confine our view to the act of mortgage, but must look beyond its terms to ascertain the intention of the parties. If in so doing we find their intention was to make a divisible mortgage, such intention should be enforced. Whether intention can be arrived at beyond the act of mortgage itself, where the party seeking to enforce the mortgage is the innocent third holder of negotiable paper, is a question upon which we express no opinion. The paper here is in the hands of the original holder. If we resort to the intention of the parties as derived from their situation in order to interpret the mortgage, we could reach no different conclusion. We have seen that the joint nature of the obligation does not negative the indivisibility of the mortgage by which the obligation is secured. The very purpose for which the mortgage was given in this case furnishes a cogent reason why the mortgage should have been indivisible. The consideration of the debt which it secured was the purchase price of movable property — mules, cane, and agricultural implements — situated, at the time of sale, on the Leinster plantation. By the very fact of the purchase of these things by the owners of the plantation they became incorporated with the plantation and constituted an integral part thereof. The Louisiana Code declares that "things which the owner of a tract of land has placed upon it for its service and improvement are immovable by destination," ... and among the things enumerated are "cattle intended for cultivation, implements of husbandry, seeds, plants, etc." La. Civil Code, Art. 468. It follows, then, from the nature of the things purchased, they became incorporated with the whole plantation upon which they were situated. Being thus indivisibly united with the whole thing, it is reasonable to draw the conclusion that the intention of the parties was that the security given for the purchase price would rest upon the entire entity, of which the things sold became a part by operation of law. If the parties to the contract did not intend such contingency, it could have been readily provided against by a stipulation in the act of mortgage. All the conduct of the parties subsequent to the granting of the mortgage during the long term of years over which its payment was extended indicate that they considered the mortgage covered the whole property indivisibly.

Concluding that the mortgage was indivisible, the only remaining question is, did the fact of the voluntary partition of the property covered by the mortgage operate to prevent the mortgage creditor from enforcing his mortgage against either part thereof. The negative of this proposition necessarily results from the doctrine of indivisibility. The writers on the French Code, which is in this regard identical with the Louisiana Code, are unanimous on the subject. Says Laurent (vol. 30, p. 157): "Our code and our law of mortgages have borrowed from Dumoulin the formula which characterizes the effects of indivisibility. `The mortgage subsists in its entirety upon all the properties affected, upon each of them and upon each portion of them.'" Pont says: "It is, then, admitted that a creditor, having a mortgage upon several pieces of immovable property, can, in consequence of indivisibility, exercise the whole sum of his rights against any particular piece thereof without giving rise to a right on the part of a special mortgage creditor subsequently inscribed to compel him to do otherwise." (Vol. 1, p. 330.) These principles taught by the civil law commentators are settled in the jurisprudence of France. See Cassation, March 4, 1833; Dalloz, 1833, vol. 1, p. 35; Cassation, December 24, 1844; Journal du Palais, 1844, vol. 1, p. 98; idem, 1846, vol. 2, p. 427. See also authorities quoted by Paul Pont in his treatise on mortgages, vol. 1, p. 330, in footnote. A like rule is the settled law of Louisiana. Pepper v. Dunlap, 16 La. 163; Adams v. Lear, 3 La. Ann. 144; Freret v. Freret, 31 La. Ann. 506; Bagley v. Tate, 10 Rob. (La.) 45; Powell v. Hayes, 31 La. Ann. 789, 793, 794. In Powell v. Hayes, the issue involved not only the right on the part of the second mortgage creditor or third possessor to compel the holder of the first mortgage to proceed against the whole property, but also the question of subrogation. The first mortgage creditor had released a portion of the property, and sought to hold the remainder for the entire amount of his claim. To this the third possessor objected, not alone upon the ground that the proceeding must be against the whole property, but also on the ground that he was entitled to subrogation to all the rights of the first mortgage creditor, which he could not have by reason of the partial release of the first mortgage. Both these positions were held to be unsound. As to the first, the court said: "In Bagley v. Tate, (10 Rob. 45,) it was held that the plea of discussion cannot be opposed to a creditor holding a special mortgage (C.P. 73, C.C. 3367); nor can a third possessor of property specially mortgaged for a debt for which other property is also bound require that it shall be liable only for a pro rata portion of the debt. Each and every part of the property mortgaged is liable for each and every portion of the debt." Considering the claim of subrogation, the court said: "It may be that the third possessor, having an interest in discharging the debt will, upon payment thereof, be entitled to subrogation to the then existing rights of the mortgage creditor... . He" (the third possessor) "is under no obligation to pay the creditor, and when he does pay, he must be satisfied with a subrogation to these rights as they exist. We cannot see how the rights of a mortgagee may be affected, or put in duriori casu by the circumstance of there being a second mortgage or a sale of the mortgaged premises," etc.

Applying these principles, it is evident that the entire proceeds of the sale of the mortgaged property or a part thereof were stricken with the entire mortgage, and that the creditor could not be compelled to divide his security in consequence of the voluntary partition of the property made after the mortgage was inscribed. Nor does it affect this question that Sentell & Co. in liquidation were junior mortgage creditors on that part of the mortgaged property which belonged to Mrs. Randolph. As the second mortgage creditor, or third possessor, of the property, Sentell could not lawfully complain of the exercise by the first mortgage creditor of his rights against a part of the property mortgaged, and was only entitled by subrogation to the rights of the first mortgage creditor as they existed at the time of the foreclosure proceedings.

The Louisiana Code provides that subrogation takes place of right —

"1st. For the benefit of him, who, being himself a creditor, pays another creditor whose claim is preferable to his by reason of his privileges and mortgage.

"2d. For the benefit of the purchaser of any immovable property who employs the price of his purchase in paying the creditor to whom this property was mortgaged.

"3d. For the benefit of him, who, being bound with others or for others for the payment of the debt, had an interest in discharging it." (Article 2161.)

Of course, nothing in this opinion affects any rights of subrogation to which either Sentell & Co. or Mrs. Randolph may be entitled under the laws of Louisiana, as a consequence of the payment of the amount due on the mortgage note out of the fund.

It is true, as the junior mortgage creditor interested in the fund, Sentell & Co. had the right to plead prescription as to the principal obligation, in order thereby to defeat the rights of the first mortgage creditor. "Creditors and also other persons who may have an interest in the acquiring of an estate or the extinguishment of an obligation by prescription, shall have the right to plead it, even in case the person claiming such estate or bound by such obligation renounces such right of prescription." (La. Civil Code, article 3466.) The same code, however, (article 3463,) provides that courts shall not supply the plea of prescription. There is no plea of prescription in the record, unless we hold that such a plea results from the general answer of Sentell & Co. in liquidation that they were entitled to a subrogation, which they could not obtain because the portion of the debt due by Mrs. Stark was prescribed. If this be treated as a technical plea, the record contains abundant evidence showing such interruptions of prescription as prevent the operation of the statute of limitations. It is immaterial whether the payments made by Stark, as the agent of Mrs. Stark and of Mrs. Randolph, were made with the money of Mrs. Randolph or with the money of Mrs. Stark. At the time these payments took place such acknowledgments were made as conclusively interrupted prescription. "Prescription," says the Louisiana Code, article 5320, "ceases likewise to run whenever a possessor makes an acknowledgment of the right of a person whose title they prescribe."

We conclude by considering the decree of the court below allowing the solicitor of Sentell & Co. in liquidation a fee from the fund. The general rule is that a party who has an interest in the subject-matter of the suit cannot file a bill of interpleader, strictly so called. In fact, the assertion of perfect disinterestedness is an essential ingredient of such a bill. Killian v. Ebbinghaus, 110 U.S. 568, 572; Mitchell v. Hayn, 2 Sim. & Stn. 63; Bedell v. Hoffman, 2 Paige, 199; Atkinson v. Manks, 1 Cowen, 691.

Sentell was a member of the firm of Sentell & Co. in liquidation. That firm was practically the real claimant of the fund, and would necessarily be a beneficiary from the successful issue of the controversy in favor of Mrs. Randolph. True, in Louisiana, the civil law regards a partnership as a different juridical entity from the members who compose it. There is, however, no averment in the bill or proof in the record that the firm in liquidation was insolvent or that Sentell had no residuary interest in its assets. The presumption of interest resulting from the partnership remains until rebutted by averment or proof. Sentell was therefore in the position where he must be presumed to have a substantial, although not direct interest in the result of the litigation. Though it was allowable when so situated to file a bill in the nature of a bill of interpleader, (Bedell v. Hoffman, supra,) we think it clear that his ultimate interest prevents him from being allowed his solicitor's fee from the fund dedicated to the payment of the mortgage, thereby diminishing the security of the mortgage creditor.

The decree is reversed, and a decree is rendered in favor of Martha Groves and William J. Groves, directing the payment out of the fund of $4873, with interest at eight per cent from March 5, 1884, until paid, and costs of this and the court below.

Reversed.

MR. JUSTICE JACKSON, not having been present at the argument, took no part in the decision of this case.