Nalle v. Young/Opinion of the Court

The proceedings in the state court were ordinary and not executory, and in the circuit court the petition stood as a bill in equity to foreclose a mortgage. The decree of November 6, 1886, was a final decree, and the execution may be regarded as the equivalent of a direction to a master or commissioner to make sale in the enforcement thereof. Under the Civil Code and Code of Practice of Louisiana, judicial sales are conducted by the sheriff or other public officer in the manner minutely described, and adjudicated to the purchaser, who thereupon becomes the owner of the article adjudged. Rev. Civ. Code, Arts. 2601-2621; Code Prac. art. 663 et seq. But in an equity foreclosure in a circuit court, while the requirements of the state law should be complied with, and the forms of proceeding pursued as nearly as practicable, it is proper for the officer who makes the sale to make a report or return to the court for confirmation. Resistance to such confirmation may be made, under circumstances, and this sometimes results in the setting aside of the sale, and an order for a resale. But the scope of these pleadings was much wider. To the confirmation of the sale the defendant, indeed, interposed objections, waiving any formal report for confirmation, but they were not passed upon by the circuit court independently of defendant's alleged cross bill and the petition of Mrs. Young in intervention; and these papers may all be considered together, as they were by the circuit court, and, so treated, they constituted, in effect, an independent suit, brought by Young and his wife, to set aside the sale, and have the alleged mortgage of the wife declared the prior incumbrance and enforced, or for redemption.

The objections in respect of alleged irregularities in the conduct of the sale, or the invalidity of certain taxes, and the requirement of their payment, need not be considered, as they are not sustained by the record, and mere informalities or irregularities in a judicial sale in Louisiana do not constitute a sufficient ground for setting it aside. Stockmeyer v. Tobin, 139 U.S. 176, 11 Sup. Ct. 504.

The principal objection to the sale was the insufficiency of the bid at which the property was disposed of, and that objection will be first examined.

Under articles 679, 683, and 684 of the Code of Practice of Louisiana, when there exists a special conventional mortgage or privilege on the property put up for sale, the property is sold subject thereto, and the purchaser pays to the officer so much of the price as exceeds 'the amount of the privileges and special mortgages to which such property is subject'; and, in case of sale on 12 months' credit, if there exist on the property any privileges or special mortgage, in favor of other persons than the judgment creditor, and who are preferred to him, the purchaser is entitled to retain in his hands, out of the price, the amount required to satisfy the privileged debts and special hypothecations to which the property sold was subject, but is bound to give his obligation for the surplus of the purchase money, if there by any, and subscribe his obligation at 12 months' credit, with security. But, if the price offered is not sufficient to discharge the privileges and mortgages existing on the property, having a preference over the judgment creditor, there shall be no adjudication, and other property, if there be any, shall be seized.

If, therefore, the mortgage claimed by Mrs. Young was conventional or special, and had been properly recorded, and not legally renounced, and it was prior to that of Nalle & Co., no sale of the mortgaged property could be made under the junior incumbrance of the latter, unless the price bid was sufficient to discharge the prior lien. But, if the prior mortgage was legal or judicial, this requirement did not apply, and the property passed to the purchaser subject to the payment of the prior lien. Alford v. Montejo, 28 La. Ann. 593; Godchaux v. Dicharry's Succession, 34 La. Ann. 579.

The circuit court held that the mortgage asserted by Mrs. Young was a special mortgage, which took precedence over that of Nalle & Co., that her renunciation was void, and, the price bid not being sufficient to discharge this prior special mortgage, that the sale could not be confirmed and must be set aside.

By the Civil Code, the partnership or community of acquets and gains exists between husband and wife by operation of law, unless otherwise stipulated in the contract. The separate property of the wife is that which she 'brings into the marriage, or acquires during the marriage by inhertance, or by donation, made to her particularly,' and 'is divided into dotal and extradotal. Dotal property the marriage establishment. Extradotal property, to assist him in bearing the expenses of the marriage establishment. Extradotal properyt otherwise called 'paraphernal property,' is that which forms no part of the dowry.' Fleitas v. Richardson, 147 U.S. 550, 553, 13 Sup. Ct. 495; Rev. Civ. Code, arts. 2332, 2399, 2334, 2335.

By article 2337, 'By dowry is meant the effects which the wife brings to the husband to support the expenses of the marriage.'

Article 2383 declares: 'All property, which is not declared to be brought in marriage by the wife, or to be given to her in consideration of the marriage or to belong to her at the time of the marriage, is paraphernal.'

Mrs. Young claimed an indebtedness on the part of her husband to her, arising from his having received the proceeds of a life insurance policy on the life of her father in her favor for $5,000, and the additional sum of $2,500, being an amount which came to her from her father's estate, and was received by him. This was paraphernal property. The wife has a legal mortgage on the property of her husband 'for the restitution or reimbursement of her paraphernal property.' Article 3319. 'Conventional mortgage is that which depends on covenants. Legal mortgage is that which is created by operation of law. Judicial morgage is that which results from judgments.' Article 3287. A legal mortgage results by operation of law, and 'no legal mortgage shall exist, except in the cases determined by the present Code.' Articles 3311, 3312.

Article 2376 declares that the wife has a legal mortgage on the property of her husband for the restitution of her dowry as well as for the replacement of her dotal effects; and by article 2379 it is provided that, during the marriage, the husband may, with the consent of his wife, 'be authorized by the judge, with the advice of five of the nearest relations of the wife, or friends, for want of relations, to mortgage, specially for the preservation of his wife's rights, the immovables which he shall designate; and then, the surplus of his property shall be free from any legal mortgage in favor of his wife'; while article 2390 is as follows: 'The wife may alienate her paraphernal property with the authorization of her husband, or in case of refusal or absence of the husband, with the authorization of the judge; but should it be proved that the husband has received the amount of the parphernal property thus alienated by his wife, or otherwise disposed of the same for his individual interest, the wife shall have a legal mortgage on all the property of her husband for the reimbursing of the same. The husband may release the mass of his property from this legal mortgage, by executing a special mortgage in the manner required in the preceding section, for dotal effects.' Thus, it appears that a legal mortgage on all the husband's property exists until a special mortgage is executed according to the foregoing provisions, and the law does not contemplate a legal and a special mortgage existing at the same time And the legal mortgage of the wife, to affect third persons, must be recorded in the office of mortgages for the parish where the property lies. Articles 3342-3349.

Mrs. Young must either stand upon her legal mortgage, resulting from the receipt of her paraphernal property, and recognized by the judgment of July 9, 1881, decreeing a separation of property, or a judicial mortgage arising from that judgment, or on the contract between herself and Mrs. Metcalfe, by which Mrs. Metcalfe purported to transfer to her an indebtedness due by Wade R. Young, secured on the property in controversy. If her mortgage be legal or judicial, its existence would not be a bar to the confirmation of a sale for an amount insufficient to satisfy and, moreover, it could not rank the special conventional mortgage of Nalle & Co., because it was not recorded until subsequently.

It is, indeed, insisted that it was altogether invalid under article 2428. 'The separation of property, although decreed by a court of justice, is null, if it has not been executed by the payment of the rights and claims of the wife, made to appear by an authentic act, as far as the estate of the husband can meet them, or at least by a bona fide noninterrupted suit to obtain payment.' Chaffee v. Sheen, 34 La. Ann. 690; Nachman v. Le Blanc, 28 La. Ann. 345, 346; Bertie v. Walker, 1 Rob. (La.) 431, 432. But this becomes immaterial, as whatever rights, if any, might be claimed under it, it could have no effect as against Nalle & Co. for want of record.

According to Rev. Civ. Code, arts. 3345, 3349, all mortgages, whether conventional, legal, or judicial, are required to be recorded as provided, and the preservation of the legal mortgage or privilege in favor of a married woman depends on the record of the evidence of her mortgage or privilege in the mortgage book of the parish where the property is situated; and that evidence, if not by written instrument, must consist of 'a written statement, under oath, made by the married woman, or her husband, or any other person having knowledge of the facts, setting forth the amount due to the wife, and detailing all the facts and circumstances on which her claim is based.' There was no such evidence as last named here, and no such inscription until after the mortgage to Nalle & Co. had been given and registered. Lovell v. Cragin, 136 U.S. 130, 149, 10 Sup. Ct. 1024.

The transaction between Mrs. Metcalfe, Young, and Mrs. Young appears to have been that, Mrs. Metcalfe being indebted to Young, and Young idnebted to Mrs. Metcalfe, the respective debts were discharged by agreement, and compensated each other, but that it was agreed that Young's indebtedness to Mrs. Metcalfe should be kept alive for the benefit of Mrs. Young, upon the consideration, on Mrs. Young's part, of the release of her paraphernal claims against her husbond. Compensation had, however, taken place, and the two debts were reciprocally extinguished. Rev. Civ. Code, arts. 2130, 2207, 2208.

This was the necessary effect by operation of law; and, when the principal obligation was discharged, the mortgage fell with it, and would not be revived, though the indebtedness were reacknowledged in favor of another. Smith v. McWaters, 22 La. Ann. 432; Davidson v. Carroll, 20 La. Ann. 199; Schinkel v. Hanewinkel, 19 La. Ann. 260.

Again, contracts between husband and wife are forbidden in Louisiana except as specified. Contracts of sale between them 'can take place only in the three following cases: (1) When one of the spouses makes a transfer of property to the other, who is judicially separated from him or her, in payment of his or her rights. (2) When the transfer made by the husband to his wife, even though not separated, as a legitimate cause, as the replacing of her dotal or other effects alienated. (3) When the wife makes a transfer of property to her husband, in payment of a sum promised to him as a dowry.' Articles 1790, 2446; Carroll v. Cockerham, 38 La. Ann. 813, 824.

This transaction was an attempt to extinguish the wife's general mortgage by the transfer of the special mortgage of a third party, satisfied by the act as between the immediate parties thereto, and, if it could be done at all, it could only be when taking place in accordance with articles 2379 and 2390, and recorded, as required by article 3345; and, as already seen, these articles were not complied with.

But, were this otherwise, the judgment of 1881 did not recognize her alleged special mortgage, which recognition was evidently not prayed for, and recognized only her legal mortgage in complete disregard of her special mortgage if she had had any.

The rendition of judgment for all her paraphernal claims, without any recognition of a special conventional mortgage to secure them, would seem to have concluded the fact that none such then existed, or, at least, furnishes such persuasive proof thereof as must be controlling on this record. Nicolson v. Bank, 27 La. Ann. 369.

Conceding, then, that the renunciation by Mrs. Young is favor of Nalle & Co. was ineffectual, her legal or judicial mortgage, if outstanding, was, nevertheless, subordinate to their mortgage, and not entitled to precedence. In the jurisprudence of Louisiana, and under the statutes of that state, the right of redemption from a decree in foreclosure does not obtain. If a prior mortgage exists, the prior mortgagee is not a necessary party, and purchasers take subject to the prior lien. If there be a subsequent mortgage, the prior mortgage containing the pact de non alienando, as Nalle & Co,'s mortgage did, the mortgagee therein need not be made a party, but must takenotice of the proceedings to enforce the prior mortgage at his peril. He may, however, apply to set aside the sale on proper grounds. Dupasseur v. Rochereau, 21 Wall. 130; Watson v. Bondurant, Id. 123; Carite v. Trotrot, 105 U.S. 751.

As heretofore noticed, Mrs. Young and her husband prayed for redemption, which is not, in any foreclosure case, allowable as such; while, so far as their pleadings are regarded as seeking the setting aside of the sale and for a resale, we find no adequate grounds for according that relief.

The decree of June 9, 1890, is reversed, with costs, and the cause remanded to the circuit court, with instructions to enter a decree overruling the objections to the sale of July 30, 1887, dissolving the injunction, adjudicating the property to Mrs. Mary Nalle, wife of Eustis F. Golson, and ordering the delivery of possession to her.