Mercier v. Canonge

Slidell,* J. The plaintiffs are creditors of J. F. Oanonge, their former tutor, who was appointedin 1S32, and gave the usual bond, with a surety. The object of the present suit is to enforce their alleged right of tacit mortgage upon certain real estate, which was mortgaged in the years 1837, 1838, and 1889, by Miss Aimee Ganonge, to the Citizens’ Bank and the Union Bank. Their pretensions are resisted by the Banks, who are the appellants in this cause, from a judgment according a preference to the tacit mortgagees. The real estate in question never at any time stood upon the public records in the name of J. F. Oanonge. It was conveyed by other parties to Miss Ganonge, by deeds in the usual form; and in these deeds, and in the mortgages executed by her in favor of the Banks, she appeared as the unqualified owner. But under the parole evidence, (the exceptions to which we deem it unnecessary to consider,) it appears that Miss Ganonge had only the apparent title. The whole of the property was, in reality, purchased by Jean Frangois Ganonge, her brother, for his own account, and with his own funds. The titles of the property were made to her for his convenience, and with a view to its easy use for the purpose of future sale or mortgage; which could not have been effected with the same facility, if they had been purchased in -his own name, in consequence of his holding the office of tutor, which would have involved the incumbrance of a tacit mortgage in favor of his wards. Ganonge, in his answer, asserts that he [38] believed at the time, that his other property was amply sufficient for the protection of his wards, and the evidence tends to justify the sincerity of that opinion, Ilowever-important this may be, so far as the mere moral aspect of the transaction may be involved, we'have not considered it as materially affecting the legal questions presented for our solution. The District Judge was of opinion that the tacit mortgage of the minors operated upon the property to the detriment of the Banks, even considered as third persons. It is true that by our Code, “ the property of the tutor is tacitly mortgaged in favor of the minor from the day of the appointment of the tutor, as security for his administration, and for the responsibility which results from it.” Civil Code, art. 3782. If these terms are tobe interpreted in their largest and most liberal sense, and without reference to the provisions and principles of our laws and jurisprudence, the conclusion might be drawn from them that all the tutor’s-property, legal or equitable, open or concealed, was affected by the tacit incumbrance in preference to all the world. But an interpretation thus isolated seems to us inadmissible. Ordinary mortgages are required to be created by the formal, written consent of the parties, for specific sums, and to be inscribed upon the public records. But the tacit mortgage operates secretly, and by a legal fiction. It is in derogation of common right. It should, therefore, be strictly construed. The propriety of such strict construction is aided by the consideration that the system of tacit mortgages is one which tends to impair public confidence, and check the free circulation of property, which is so conducive to the general prosperiy. Keeping these principles in view, we are of opinion that as against innocent third persons, purchasers, or mortgagees for a valuable consideration, the language of the Code may be properly interpreted as applying to the ostensible property of the tutor, and as not extending to that in which he has only a covert, equitable interest. It is said by counsel that minors are the favorites of the law. The law does treat them as a privileged class in certain respects; but its protection is not to be strained to the detriment of the great mass of society. If the doctrine for which the plaintiffs contend he sanctioned, what becomes of that settled rule of jurisprudence which regards with favor the rights of an innocent purchaser, and .refuses to affect him by a secret equity ? See the case of Pike v. Monget, 4 Annual. Sayton v. McGill, 2 Ann. 196. Mills v. Fahey, 1849—not reported. Stockton v. Craddick, 4 Ann. 286. The next inquiry is, whether these mortgagees, as is charged, knew when they took their mortgages that, although apparently held by Miss Oanonge, the property was, in truth, her brother’s? It is obvious that, on this point, the burden is upon the plaintiffs. As to the Citizens’ Bank, it appears that when Miss Oanonge applied to become a stockholder, which involved a mortgage to secure the stock and stock loans. her titles were submitted, in the usual course, to the attorneys and counsel of the Bank, and were approved. In addition to them report, the Bank was fortified in its confidence by the affidavit of Miss Ocmonge, according to the usual formula prescribed to applicants, that she “ was truly and ~bona fide owner of the property by her offered to be mortgaged to the Citizens’ Bank of Louisiana to secure the stock she had subscribed for in said institution.” The parole evidence is entirely insufficient to affect the first mortgage given to the Citizens’ Bank, by establishing a knowledge of the simulated title of [39] Miss Ganonge. In relation to the subsequent incumbrance in favor of that “Bank, it is proper to enter into a more detailed notice of the evidence. J. M Ganonge deposed as follows: “When I found it impossible to meet my engagements with the several institutions mentioned in the petition of Armancl and Alfred, Herder, I wrote to them in order to obtain some indulgence, and by turning to my letters, which must be in existence, it will be seen, if my memory serves me well—I believe it does—that I offered to give them mortgages upon the property placed in the name of my sister, and I actually informed them that the property was mine.” To rebut this testimony, as may be reasonably inferred, the defendants offered in evidence, at the trial before the Judge of the Third District Court of New Orleans, the letters of Ganonge to the Banks. It is not asserted by the counsel for the plaintiffs that these letters revealed the true condition of the property ; and the recollection of Ganonge, who does not profess to speak positively, is probably inaccurate. That they did not, is asserted by the counsel for the Bank, and at present, for the purposes of argument, we will assume that they did not. Erom the other testimony in the cause, it appears that two Directors of the Citizens’ Bank were aware, at the period, at least, of some of the mortgage transactions with that Bank, that Miss Ganonge held property for her brother. But, on the other hand, it is proved affirmatively that others of the Directors were ignorant of it, and that the subject was never brought before the Board. The Board consisted of — Directors, and there is no evidence that the two Directors above referred to were specially charged with the business of these mortgages, or had authority in the affairs of the Bank, other than that which pertained to them nirtute officii under the charter. It would be a doctrine fraught with the most dangerous consequences to stockholders, and inconsistent with the theory of corporations, to say that the private knowledge of those two Directors, (not clothed with any special authority in the premises, and constituting a small minority of the whole number,) which knowledge was undisclosed to the Board, should destroy the rights of the corporation. This would be attributing to such minority a power to do indirectly, what directly they would be incompetent to do. See the Louisiana State Bank v. Senecal, 13 La. Rep. 525. Commercial Bank v. Cunningham, 21 Pick., 216. National Bank v. Norton, 1 Hill, 578. Ex-parte Walkins, 2 Montegut, 348, Cited in Angel & Ames on Corp., chap. ix. p. 301. With regard to the Union Bank, it is in eviueuce, mar two oi its ¿/¡rectors were aware that the property standing in Hiss Ganonge’s name belonged to her brother. One of them states that he is unable to say whether he derived this information from a conversation with Ganonge, or from a letter written by him to the Bank; but that it was from one or other of those sources. This letter, addressed by Ganonge to the Bank, was offered in evidence by the defendants. It contains no suggestion that the property, which he states that his sister will mortgage to secure his liability to the Bank, belongs to himself; and we must, therefore, conclude that the Director derived his information from a personal conversation with Ganonge, which, it is not shown, was communicated to the Board, or to his associates. The other Director was the person who made the conveyance to Miss Ganonge, some years before, at the request of her brother, for whom he had previously held the title. The corporation is not, in our opinion, affected by the knowledge of these two Directors, who do not appear to have had any special authority in the matter. The same opinion, a fortiori, applies to the knowledge of the Notary before whom the act, or mortgage, was [40] executed, and who was a mere ministerial officer, employed to clothe in notarial form the'contract between the corporation and the other parties. After a tareful consideration of the testimony and documentary evidence in this cause, we are of opinion that the mortgagee dealt with Miss Ganonge upon the faith of the apparent titles, and without direct or constructive notice of the simulation of those titles; and that, as innocent third persons, who have given a valuable consideration, they are to be preferred to the minors. The latter must look for their indemnity to their tutor, and to his official surety. It is proper, here, to observe that some of the letters of Ganonge to the Citizens’ Bank, which were oiferred in evidence by the Bank, have been mislaid since the trial. It is asserted by the counsel of the Bank that these letters did not disclose the fact that Ganonge was the real owner of the property mortgaged, and we do not understand the counsel of the plaintiffs as asserting the contrary. Under all the circumstances of the case, and there having been no application to have the cause remanded, in order to supply the loss of these letters by evidence of their contents, we have assumed that they did not disclose the real ownership. If the plaintiffs’ counsel had differed with the counsel of the defendants in his recollection of the contents of the letters, we should have considered it a sufficient cause for remanding; and, if there be any difference of recollection now, we should be disposed still to consider it, on an application for rehearing, accompanied by a representation of counsel to that effect. It is, therefore, decreed that so much of the judgment of the Court below, as in any wise affects the said Citizens’ Bank of Louisiana and the said Union Bank of Louisiana, be reversed, and that there be judgment in favor of the said Citizens’ Bank of Louisiana and the said Union Bank of Louisiana, and against the said plaintiffs, the costs, in both Courts, of the proceeding against said Banks to be paid by the said plaintiffs. Dunbak, J., concurred in the opinion delivered by Slidell, J. Footnotes [*] Mistis, 0.1., did not sit in this case,having an interest in the event, he being a stockholder of the Union Bank.