Shepherd v. Orleans Cotton Press Co.

2 La. Ann. 100

Opinion

The judgment of the court was pronounced by

Rost, J.*

The object of this controversy is to ascertain the order in which the mortgage creditors of the Orleans Cotton Press Company are to be paid, out of the proceeds of the sale of the establishment where the Company carried oil its operations. The following are the mortgages to be classed; 1st. A mort gage to secure the payment of four hundred bonds of §500 each, and one hundred an<^ tweuty b°n|Is of §400 each, all bearing date the 15th of March, 1834. This mortgage was inscribed on the 26th of March, 1834, and no re-inscription 0f jj took place till the 21st of April, 1845. 2d. A mortgage given to secure the payment of one hundred and twenty bonds of §500 each, bearing date the 15th of January, 1836, and recorded on the 30th of the same month. An attempt was made by one of the bond-holders, on the 13th of January, 1846, to ro-inscribe that mortgage, so far as his interest went. 3d. A mortgage in favor of Leeds &; Co., inscribed on the 29th of July, 1845. 4th. A mortgage given to secure the payment of eighty bonds of the Company, for §500 each, inscribed on the 14th of December, 1841. This mortgage has been reduced by payments to $13 500, besides interest. 5th. A judgment obtained by Rezin L.. Shepherd against the Orleans Cotton Press Company, inscribed on the 3d of February, 1846.

The judge of the court below, following the jurisprudence established by the late Supreme Court, and considering, that the mortgage given in 1834 lost its rank and ceased to have effect even against third persons having notice, on the 29th of March, 1844, for want of re-inscription — that the re-inscription made bn the 21st of April, 1845, had, from that day, and from that day only, the effect of a new mortgage — that, although against all persons not coming under the denomination|of third persons,[the mortgage may exist whether recorded or not, the inscribed mortgage ceases to have effect against all persons, if more than ten years have been suffered to elapse without re-inscription — that the attempt at re-inscribing the mortgage of 1836 was not in a legal form, and could produce no effect, ordered the proceeds of the sales to be distributed as follows : 1st. To pay and satisfy the costs of the suit in which the property was seized and sold, including the costs of this suit. 2d. To discharge the mortgage of Leeds Sf Co. 3d. To discharge the mortgage recorded on 14th of December, 1841, by satisfying the bonds yet unpaid, which itwas intended to secure, and the interest due thereon. 4th. To discharge the mortgage re-inscribed on the 21st of April, 1845, by satisfying the bonds yet unpaid, which it was intended to secure, with interest due thereon. 5th. To pay and satisfy the principal, interest, and cests of the suit of R. D. Shepherd against the Orleans Cotton Press Company. The court further ordered the 'erasure upon the books of the recorder, of all the other mortgages mentioned in his certificate. Three of the creditors have appealed from this judgment, and upon the appeal several others have asked that it be amended.

For a proper understanding of the points made by the numerous counsel, it is necessary to premise that, in countries where the civil and common law prevail, the registry laws are at this day administered upon two distint and essentially different principles. In the first, so far as all but the parties are concerned, the inscription is in fact the mortgage. It must be renewed at certain fixed periods, and the non-re-inscription may be opposed by all third persons having an adverse interest, although they may be charged with notice. The right of preference which subsequent mortgage creditors, with or without notice, are compelled by law to to give the inscribed mortgage, provided it is re-inscribed according to law, appears to bo viewed there in the light of an obligation contracted on condition that an event shall happen within a limited time. C. C. art. 2033. The case of Turner v. Parker. 10 Rob. 154.

The delay is in all cases fatal, and if it is suffered to expire without re-inscription, the mortgage loses its rank, and a subsequent re-inscription gives it effect only from the time it is made. A litigation between the mortgage creditors does not dispense from re-inscription ; even the sale of the property effected under the mortgages, not does dispense from it, when the purchaser fails to pay the price. The inscription must continue until the proceeds of the property mortgaged are reduced to possession. 2 Troplong, Priv. et Hyp. nos. 558, 569, 570. 3 Troplong, nos. 716, 716 bis, 770, 724, 725. Merlin, Rep. do Jurisp., verbis Inscription and Hypothéque. Such is the principle of the registry law of Franee, and of the other nations of Europe who have imitated her Codes.

In England and in the other states of’ the Union, the rule, on the contrary, is that inscription need not be renewed, that the want of the registry required by the statute is not in all cases fatal; and that extra-judicial notice, when brought home to the party who alleges the want of registry, is equipollent to it. Story’s Equity, pp. 397, 385, 399.

We are called upon to determine upon which of these two principles the registry laws of Louisiana have been framed, and should be administered. The appellees contend that, by the introduction in the Louisiana Code of art. 3333, which is the same as art. 2154 of the Napoléon Code, enlarged so as to extend the effect of non-re-inscription to the parties themselves, we have adopted the rule of the French law in a manner too clear to be misunderstood; that whatever may be the intendment of arts. 3314 and 3315 of the Civil Code, the question involved in this controversy is not one of unregistered mortgages, and that, whenever the inscription has been made, the provisions of art. 3333 cannot be evaded. They further allege that art. 3328 makes it the duty of every notary, who passes an act of sale, mortgage or donation of an immovable, to obtain from the office of mortgages a certificate declaring the privileges or mortgages inscribed on the object of the contract and to mention them in the act, and that, as it is also made the duty of notaries to see to the first inscription of those acts, the presumption is that that incumbrances upon immovable property are always inscribed and known to the persons dealing with the owner: that consequently, if all persons having such a notice are deprived of the rights intended to be conferred by art. 3333, that article is in all cases in operation.

The appellants, on the other hand, insist that, under arts. 3314 and 3315 of our Code, which are not found in the French Code, the contending parties here cannot be called third persons, because they did not become creditors before the existence of the previous mortgages, and did not deal with the debtor in ignorance of those mortgages, since they had them reiterated to them in the acts under which they claim; that, if inscription was required as to them, those two articles would become inoperative, and the diligent creditor, who inscribes his mortgage, would find himself placed in a worse condition than if he had not inscribed it.

The most universal and effectual way of discovering the true meaning of laws, when their provisions appear conflicting, is by considering their reason and spirit, and the motives which induced the legislature to enact them. Civil Code, art. 18. Under the laws of Louisiana, at the time of the change of government, both immovables and moveables were subject to a great number of mortgages, and no publicity was required to be given to them. It was soon perceived that such a state of things was ill adapted to the necessities of a growing and commercial country, and the inconvenience and occasional hardship resulting from it, soon raised against the whole system of mortgages an opposition which has controlled all our subsequent legislation in relation to them. As early as the adoption of the Code of 1808, it succeded in abolishing mortgages on moveables, anc^ *n 6staW‘sIling a recording office in the city of New Orleans, where all conventional and judicial mortgages were to be inscribed, before they could have 6g-0C(. againS(; third persons: but it was unable, at that time to subject legal mortgages to that formality.- They continued to have effect without inscription, and the framers of thejCode adopted, on the subject of good faith and of notice, dispositions similar to those of arts. 3314 and 3315 of the present Civil Code. See Code of 1808, p. 458, art. 37; p. 470, art. 78; p. 472, art. 80; p. 464, arts. 52, 53, 54. In 1810 recording offices were established in every parish in the territory. 3 Martin’s Digest, verbo Mortgage. The opposition continued to gain strength, and, in 1813, an act was passed making it necessary to record all mortgages and liens, under a penalty which is in these words: “And all sureties, sales, contracts, judgments, sentences or decrees, and all liens of any nature whatever, having the effect of legal mortgage, which shall not be recorded agreeably to the provisions of these acts, shall be utterly null and void to all intents and purposes, except between the parties thereto.” The 3rd section of that act provided that,"the want of the formality of recording should in no wise be prejudicial to the interests of minors, absent heirs and persons insane. These were the only exceptions.

The spirit that dictated that act presided overthe formation of the Code of 1825. Many of the legal mortgages were abolished by lit, and art. 3333 was evidently a blow aimed at those that^were suffered to remain. It has been considered by the legislature ever since as suffering no exception. In 1842, the property banks were exempted by law from its operation, under the belief that it was about to extinguish the right of preference of the mortgages held by those institutions. In 1843, any persons having an interest were authorized, by another law, to cause to be cancelled on the books of the recorder all mortgages the inscription of which had continued more than ten years. Acts of 1842, p. 232, Acts of 1843, p. 61.

After these repeated manifestations of the mens legislatoris, and the numerous adjudications of our courts giving it effect, the question must be considered as settled. Nothing has been shown in argument that would justify this court in disturbing at this late day a known rule of property. A similar state of things in France, at the beginning of the revolution, produced there, also, a violent opposition to occult mortgages. That opposition resulted in the adoption of the principle of publicity, and of the specific legislation which we have borrowed from them.

Questions about uninscribed mortgages under arts. 3314 and 3315 will be determined as they come before us; but it may here be observed that those articles were taken from dispositions of the Code of 1808, and that the new dispositions introduced along with them, have the effect of rendering them, to a very great extent, inoperative.

Registry laws, provided they are known and certain, can work no injury. The view which has been heretofore taken of ours, and which we feel constrained to adopt, has, in a high degree, the merit of certainty in its application, and is consonant with the general rule of the civil law, that legal delays are fatal in all cases, unless expressly declared to be otherwise. It is based upon the consideration that, whatever may be the effect of the notice generally, when the act has been inscribed they do not extend to a waiver of the laws which regulate the mode and limit the life of the inscription. The inscription is exclusively in the power of the party having an interest to make it. If he does not reinscribe, he cannot complain of losses sustained through his own neglect. The construction contended for by the appellants would make, in all cases, of the effect of instription, a matter era pais, and therefore uncertain, and would give rise to endless litigation.

We do not understand art. 3333 as providing for the prescription of mortgages, but, on the contrary, as recognizing the right of re-inscription, after the expiration of ton years, as exercised by the first mortgagees in this case.

The French side of that article clearly expresses the intention of the legislature. It is the effect of the inscription that ceases, not the effect of the mortgage. If the prescription of the mortgage had been intended, it would have been so expressed. Prescription never attaches by implication.

The cases in the 13th and 14th vols. of the Louisiana Reports should be understood as having reference to the inscription, although, it must be admitted, that the language used by the court would authorize a different interpretation. Roche's Heirs vs. Groysillicre, 13th La. 245. Gravier’s Executors vs. Hodge, 14 La. 103.

The inscription produces some effects between the contracting par-ties. Art. 3329 provides that, if a person who has given a mortgage on his property, takes advantage of the neglect to register the mortgage, and engages the same property afterwards to another person, without informing him of the first mortgage, he shall be considered guilty of fraud, and shall be subject to the damages which the law authorizes in such cases. After the inscription, he is not liable in damages for giving a second mortgage. At the expiration of ten years, if no re-inscription takes place, his liability revives, and m that manner, the effect of the first inscription ceases, even against the contracting parties-

The court below did not err in considering the re-inscription attempted to be made on the 13th of January, 1846', for part of the mortgage securing the second series of bonds, as void. Whatever be the form of the re-inscription, the description of the property mortgaged is one of its essential requisites, and was entirely omitted on that occasion. The reference to previous mortgages does not cure that defect. The object of the re-inscription is to dispense from searching, for the evidence of mortgages, more than ten years back.

That part of the judgment appealed from which orders the amount of a judgment obtained by R. D. Shepherd against the defendants, in suit No. 24478 of the District Court, to be paid by preference, is erroneous. That judgment was obtained upon bonds of the second series, and, as tho effect of the mortgage securing the payment of those bonds did not cease between the parties to it, by the omission to re-inscribe after ten years, all the bonds of that series should be paid concurrently.

It is therefore ordered that the judgment of the District Court be amended, so that, after satisfying the four previous mortgages, the balance remaining be distributed pro rata between R. D. Shepherd and all the other holders of the bonds of the defendants, bearing date the 15th of January, 1836. It is further ordered, that tho judgment thus amended be affirmed, the appellee’ R. D. Shepherd paying one half of tho costs of the appeal, the other half to be paid by tho appellants.

Footnotes

*

íSwdisll, J., did not sit in this case, being related to one of tho parties.