Robinson & Co. v. Cosner

PROVOSTY, J. This is an hypothecaryaction by Robinson & Co. against Geo. W. Cosner to enforce a judgment obtained by Robinson & Co. against one Neely, and duly recorded while the property now sought to be proceeded against stood of record in Neely’s name. Neely failing to pay the credit part of the price of the sale by which he had acquired this property, his vendor, John H. Lewis, obtained a judgment against him, and caused a fi. fa. to issue on it, and the property to be seized and sold, and purchased it at the sheriff’s sale. He subsequently sold it to Cosner, who has called him in warranty to defend the suit. Included in this judgment for the vendor’s claim was a debt which, for want of registry, was not secured by any mortgage or privilege as to third persons, and the fi. fa. was issued for both debts, and the sale was made for both. Lewis’ bid was the only one made at the sale, and was for the full amount called for by the writ; that is to say, for the full amount of the two debts, plus the costs. The sheriff’s deed to Lewis recited that the price of the adjudication was paid by Lewis; but the sheriff’s return on the writ shows the contrary, since it contains the statement that the money was received from Lewis and paid to his attorney. As a matter of fact, no part of the price of the adjudication was paid, except to an amount sufficient for the costs. The sheriff’s deed to Lewis which was duly recorded, directed the clerk of court and ex officio recorder of mortgages to cancel 'all mortgages subsequent in date of registry to Lewis’ said vendor’s claim; and, under this instrument, the registry of Robinson & Co.’s said judgment was canceled. And it was after this cancellation that the defendant, Cosner, bought the property from Lewis. He did so in good faith, relying upon the records of the recorder’s office,' which showed said property to be free of mortgages. The property was Neely’s homestead, and he was present at the sale for the purpose of asserting his homestead right of $2,000 against any excess of the price of the adjudication over and above the amount of Lewis’ judgment. He could not claim the homestead as against Lewis' judgment, because one of the debts for which it had been rendered was for the purchase price of the property, and the other was for labor and materials that had gone towards improveing the homestead. Const, art. 245. This other debt, not having ever been recorded, did not bear mortgage or privilege upon the property as against third persons, and, while priming the homestead, was itself primed by Robinson & Co.’s judicial mortgage. Robinson & Co., though present 'at the sale through an agent for the purpose of asserting any rights they might have, made no attempt to interfere. Doubtless, they considered that, inasmuch as their claim was inferior in rank to the vendor and homestead claims, which together exceeded the amount of the adjudication, they could get nothing by interfering. That this was the reason for their nonaction is not shown affirmatively, but results by a very strong implication. It was only some nine months later that they awoke to their present idea of their having rights in the premises, and brought'this suit. The date of the sale was August 5, 1911. This suit was filed June 10, 1912. The question is, of course, whether at said sheriff’s sale the property passed to Lewis free of their said judicial mortgage, or burdened with it. If it passed free, the sheriff was authorized to direct the inscription of said mortgage to be canceled. If it passed burdened with said mortgage, the cancellation of the inscription of said mortgage was [599] unauthorized, and cannot affect Robinson & 00.’s mortgage rights. The rule is that the property sold at a sheriff’s sale passes burdened with the mortgages resting upon it, which are superior in rank to the claim of the seizing creditor, but free- of those which are inferior (O. P. arts. 679, 683-685, 708, 710), unless the inferior mortgages are special, and a balance remains after the seizing creditor’s claim is satisfied ; in which event the purchaser retains in his hands this balance to an amount equal to that of these inferior 'special mortgages (Tessier v. Bourgeois, 38 La. Ann. 256). But he cannot retain this balance when the inferior mortgages are not special, but are general— 1. e., legal or judicial. Pasley v. McConnell, 38 La. Ann. 474. In Fortier v. Slidell, 7 Rob. 398, this court said that the Code had made no provision for the mode of raising subsequent general mortgages when at a sheriff’s sale there remains a surplus, and propounded the question, “What is to be done in such a case?” and answered the question by saying that this surplus must be paid to the sheriff, to be attributed by him to satisfying these subsequent general mortgages. This view was expressly reaffirmed in La Gourgue v. Summers, 8 Rob. 175, and has never been departed from. All this we do not understand the learned counsel for Robinson & Co. as contesting in any way; in fact, they have cited the said articles of the Code and decisions as authority on their side. Their contention is that, unless the sheriff does apply the surplus to the subsequent mortgages, they are not extinguished, but continue to remain upon the property, and that in the instánt case he did not do so, but applied it in part to the satisfaction of the second item of Lewis’ judgment, which was inferior in rank to Robinson & Co.’s mortgage. We do not think that the manner in which the sheriff has distributed the price of á sale made by him can exercise any influence upon the question of whether the property passed to the purchaser burdened with, or free of,, the mortgages subsequent in rank to the claim of the seizing creditor, unless, indeed, the subsequent mortgages are special, and the surplus of the price of adjudication has been paid to the holder of them; in which case, of course, these special mortgages would be extinguished by payment, and could no longer affect the property. The purchaser at a sheriff’s sale is not required to supervise the distribution of the proceeds of the sale. All he is required to do is to comply with his bid. The law then regulates the situation; and, according to this law, the property passes to him free of the general mortgages inferior in rank to the claim of the seizing creditor. Indeed, if the sale in this case .had been made to satisfy only that part of Lewis' judgment which was for the vendor’s claim, and Lewis had paid the price of the adjudication, the case would appear to us to be wholly free from difficulty. But the sale was made to satisfy both the vendor’s claim and the unsecured claim included' in the judgment. The judgment was for both claims, and the fi. fa. was for both, and the sale was, in form and in fact, made to satisfy both, and Lewis paid no part of the price; he and the sheriff merely went through the paper ceremony of exchanging receipts. Under these circumstances, doubt has arisen in our minds whether, to the extent that the sale was thus made to satisfy the unsecured claim, it must not be considered as having been for a debt inferior in rank to Robinson & Co.’s said mortgage, with the result that the property passed subject to said mortgage. We have concluded, however, that while the sale was, in fact, made to satisfy both claims, it was, in legal contemplation, made to satisfy only the vendor’s claim. Our rea [601] •son for so concluding is that, in law, a sheriffs sale must have the effect of either removing subsequent general mortgages from the property sold, or letting them remain thereon; that its having the effect of both removing such mortgages and letting them remain is a legal impossibility; that therefore this sale must be considered as having been made, in legal intendment, to satisfy •one or the other of said two claims, and not both; and that, in this condition of things, it must be considered as having, in legal intendment, been made to satisfy the paramount claim included in the writ. We have concluded that the legal situation in the case of such a dual writ is not different from the situation where, instead of the two claims being included in one writ, they are embraced in separate writs, and the two writs are placed in the hands of the sheriff at the same time, and the sale is made to satisfy both. In such a case the paramount writ alone is considered; an adjudication must be made regardless altogether of whether the amount bid is sufficient or not to leave a balance for the subordinate writ. C. P. art. 685. We do not think that the fact that the two claims were included in one judgment and in one writ, instead of being kept separate, has altered the legal situation. They have continued to be entirely separate in legal intendment. If, in the case of such a dual writ, the sale had to be considered as being made to satisfy the unsecured claim, there couid be no adjudication whenever the amount of the subsequent mortgages and the secured claim together exceeded the value of the property. This is so because the bidders at the sale would understand that the property was to pass to them burdened with these subsequent mortgages, and would regulate the amount of their bids accordingly, and would make no bid if the secured claim and the subsequent mortgages together exceeded the value of the property. In the instant case, if the announcement had been made at the sale that the property was to pass burdened with this Robinson & Oo. mortgage, there could not have been any sale, as the amount of this mortgage and of the vendor’s claim together largely exceeded the value of the property, judging of this value from the bidding at said sale. Again, in the case of such a dual writ, the property would unquestionably pass free of the homestead claim; for the sale would have been made to satisfy the vendor’s claim. Now, if, while it thus passed free of the homestead right, it passed subject to subsequent general mortgages, the legal situation would be that these subsequent general mortgages would, as an effect of the sale, be endowed with a preference over the homestead in every case where the price of the adjudication did not exceed the amount of the vendor’s claim by an amount sufficient to satisfy both it and the homestead. The property would then pass free of the homestead, but subject to subsequent general mortgages. Robinson & Co.’s mortgage is for a much larger amount than is being claimed in this suit. In other words, Robinson & Co. are not seeking to enforce their mortgage for its full amount, but only to the extent of the surplus of the price of the adjudication over the vendor’s claim. Now, if said sale had been made to satisfy this unsecured claim, the legal situation would have been that the property would have passed burdened with Robinson & Co.’s mortgage to its full amount. By claiming only the surplus, therefore, Robinson & Co. have practically recognized that the legal situation stands just as if the sale had been made to satisfy the vendor’s claim alone. The only ground upon which they base their contention that their mortgage continued to adhere to the property is that the surplus was legally at [603] intratable to it, and was erroneously attributed to Lewis’ unsecured claim. As the price of the sale was divisible, although the sale itself was indivisible, one might, at first blush, think that the sale might be considered as having been made in satisfaction of the vendor’s claim up to its amount, and in satisfaction of the unsecured claim for the balance; but, on principle, as we have endeavored to show, this cannot be done; and a departure from principle is always fraught with pernicious consequences. Erroneous doctrine comes with smiling face and in pleasant garb .when presenting itself for adoption, but thereafter makes no end of trouble. As already stated, we are clear that the property at a sheriff’s sale passes free of subsequent general mortgages, and that the purchaser has no concern with the disposition which the sheriff may make of the proceeds of the sale. But what if the price of the adjudication is not paid, but, as happened in this case, .is retained by the purchaser? In such a case, we have little doubt that, to the extent that the price of adjudication thus retained would, if paid, have been attributable to the subsequent general mortgages, the property passes subject to these mortgages. The ceremony of an exchange of' receipts between the purchaser and the sheriff could not in such a case alter the legal situation, which would stand just as if the purchaser had retained the surplus of the price for the express purpose of satisfying these subsequent general mortgages. Whenever the price had been thus expressly retained, no one, we imagine, would say that the property had passed free of these mortgages. Therefore, if Lewis were still the owner of this property, and the suit were against him, we should have little doubt of Robinson & Co.’s right to the hypothecary recourse they are now seeking to. exercise. But Lewis is no longer owner; Cosner is; the suit is not against Lewis; it is against Cosner, who, as already stated, acquired the property in good faith, believing it to be free of mortgages — a brief founded upon the public records. In saying founded on the public records, we do not lose sight of the fact that the sheriff’s return, which the law required should be on file in the office of the clerk of court and ex officio recorder, showed that the price had not been paid, but had been retained by Lewis; but we do not consider that this sheriff’s return forms any part of the public records in connection with the question of whether at the sheriff’s sale the property passed free of, or burdened with, the general mortgages inferior in rank to the seizing creditor’s claim. Articles 693 and 698, C. P., provide in that connection as follows; Article 693: “This act must make mention: “1. Of the writ by virtue of which the object has been seized and sold. “2. Of the title of the cause in which the writ has been issued. “3. Of the names and surnames of the defendant, plaintiff and purchaser. “4. Of the nature of the object sold, with a description of it, as well as of the price and conditions on which it has been adjudged. “5. Of the manner in which the purchaser has paid the price, or bound himself to discharge it. “6. Of the amount of the privileges or mortgages with which the property adjudicated is incumbered, and which were made known at the time of the adjudication. “7. And finally, of the special mortgage which he has given to secure the payment of this price, where the sale has been made on a credit.” Article 698: “This act, thus recorded and delivered to the purchaser, shall be held as full proof of what it contains, in all the courts of this state, in the same manner as an act before a notary would be.” We think that when Cosner came to examine the records with a view to determining whether this property had passed at said sale free of, or burdened with, this judicial [605] mortgage, he had a right to rely upon this sheriff’s deed, and was not required to consult the sheriff’s return. This deed informed him that said property had been sold to satisfy a debt superior in rank to said judicial mortgage, and that the price of the adjudication had been paid. With the verity of the sheriff’s statement contained in the deed, that the price had been paid, Cosner had no concern. His sole concern had to be as to whether, assuming the price to have been paid, the sheriff was authorized by law to cause the inscription of subsequent mortgages to be canceled; and the sheriff had such authority if the sale was made to satisfy a claim superior in rank to this judicial mortgage. Cosner and Lewis make the point that this surplus now sued for would not have been attributable to Robinson & Co.’s mortgage if paid, but to the satisfaction of Neely’s homestead claim, which had a preference over it; and that therefore Robinson & Co. are without any right of action. Into this and other questions raised in the case and argued in the briefs we have deemed, it unnecessary to go. The judgment appealed from is therefore set aside, and the suit of plaintiffs is dismissed at their cost in both courts.