U.S. Supreme Court
Union Bank of Louisiana v. Stafford, 53 U.S. 12 How. 327 327 (1851)
Union Bank of Louisiana v. Stafford
53 U.S. (12 How.) 327
APPEAL FROM THE DISTRICT COURT OF THE
UNITED STATES FOR THE DISTRICT OF TEXAS
The 25th section of the law of Louisiana incorporating the Union Bank of- Louisiana declares that in all hypothecary contracts and obligations entered into by any married individual with the bank, it shall be lawful for the wife to unite with him, and chanroblesvirtualawlibrary
in such case the property of the wife, whether dotal or of any other description, shall be affected by the contract.
Where a wife united with her husband in mortgaging property to the bank, the mortgage was good under this clause.
A sale of the mortgaged property for a twelve months' bond under an order of seizure and sale was not a novation or extinguishment of the original mortgage.
Where the mortgage is payable by installments, some of which were not due at the filing of the bill, the statute of limitations will not apply. The possession of the mortgagor was not adverse to the mortgagee.
Where other parties had a nominal interest as defendants and resided beyond the jurisdiction of the court, it was error in the circuit court to dismiss the bill because they were not made parties. Under the Act of Congress of 1839, the court should have gone on to decree against the actual defendants, and in this case all who have a beneficial interest are in court.
The facts are set forth in the opinion of the Court, to which the reader is referred. chanroblesvirtualawlibrary
MR. JUSTICE GRIER delivered the opinion of the Court.
The Union Bank of Louisiana filed a bill in the District Court of the United States for Texas, claiming the seizure and sale of certain negro slaves which had been mortgaged to them by the defendants in Louisiana and afterwards removed to Texas. The bill was dismissed by the court below for want of proper parties, and the complainants have appealed to this Court. It will be necessary to select from the voluminous record of the case only so much of the allegations in the pleadings and of the evidence connected therewith as will exhibit the several points of law which have been argued and relied upon in this Court.
The bill sets forth a mortgage made by the respondents through their attorney to the complainants dated 6 June, 1837, to secure the payment of a loan of $45,000, payable in one year from its date. Among other things, this mortgage included 102 slaves, with their increase. When this mortgage became due, the defendants refused to pay, and opposed the sale of the slaves on the ground that at the time of its execution, Mrs. Stafford was a minor. After some time, a compromise was effected between the parties by the intervention of friends. The bank accepted the notes of J. S. Stafford for about twenty thousand dollars of their debt, and Mrs. Stafford joined her husband in a mortgage on the same property for the sum of $30,000 payable, the interest annually, and the principal in annual installments, chanroblesvirtualawlibrary
commencing on the first of March, 1844, and ending in 1851. This mortgage is dated 22 May, 1841. It recites the original mortgage of 1837, acknowledges the loan of $45,000 by the bank to respondents "for the purpose of assisting them in their pecuniary matters and for the particular purpose of paying debts due by the wife." It recites that the wife being now of full age, "is anxious to do away with any vice, defect, or informality which might vitiate or impair the previous mortgage," and thereby "approves, ratifies, and confirms it to the amount and extent of $30,000, so that the two instruments shall be considered as one mortgage." Isaac Thomas also intervened and became a party to this mortgage in his own right and as administrator of Michah P. Flint, stating that Stafford had given a mortgage to Flint in his lifetime on a part of these negroes dated 9 June, 1836, to secure him for endorsements, and likewise a mortgage to said Thomas and Flint, dated 22 April, 1837, for $100,000 for the same purpose, and agreeing to release and discharge both these mortgages so far as to give priority to the mortgage to the Union Bank.
"This waiver and postponement by said Thomas, however, being made without prejudice to the rights acquired by him in a portion about 48 in number of the above-named slaves, at a sheriff's sale of the property at the suit of the New Orleans Canal & Banking Company on 8 August, 1840."
The bill further alleges, and this allegation is fully proved by the evidence in the cause, that these slaves remained in the possession of the respondents from the date of the mortgage till February, 1845, when they were fraudulently removed by them to the State of Texas for the purpose of evading the payment of this and other debts secured upon them, and that Stafford has threatened to remove them out of that state to Mexico if such a step should be necessary to prevent them from being seized to satisfy his debts.
To prevent this, a receiver was appointed by the court, and by means of a writ of assistance, a part of the slaves have been taken into his possession with much difficulty and at great expense.
The answer of Mrs. Stafford admits the mortgages, and that the slaves have been brought to Texas, and that she holds them in her possession subject to the order of the court. Without attempting to give an abridgment of the various matters alleged in this answer, we shall proceed to notice the several points of defense made by counsel in the argument, stating the allegations and facts which tend to elucidate them, without regarding the order or peculiar statement of them in the answer.
I. Was this mortgage valid and effectual to pass or bind the chanroblesvirtualawlibrary
interest, "property, and right of the wife, whether dotal or of any other description?"
In the decision of this question it is not necessary to take into consideration the doctrines of the civil law or of the Louisiana Code, art. 2412, concerning the power of the wife to bind herself as surety for the debts of her husband, as we are of opinion that the 25th section of the Act of April 2, 1832, incorporating the Union Bank of Louisiana, is conclusive upon this point. It is as follows:
"SEC. 25. Be it further enacted &c. that in all hypothecary contracts and obligations entered into by any married individual with or in favor of said Union Bank of Louisiana or with any of its offices of discount and deposit according to the true intent and meaning of this act, it shall be lawful for the wife of the said individual to bind and oblige herself jointly and in solido with him, and in such case the property and right of the wife, whether dotal or of any other description, shall be affected by the said contracts or obligations, provided that the said wife be of the age of majority at the time of entering into such obligations or contracts."
Now it is admitted that when the latter instrument of mortgage was executed, the wife was of full age.
That it is a hypothecary contract for the loan of money by the bank is evident from the face of the deed. And if the recital in the mortgage that it was given for a loan of money be not conclusive evidence of that fact, the testimony in the case fully shows that the consideration of it was the loan of $45,000, which was set to the credit of Stafford on the books of the bank and drawn out by his checks. The purpose to which this money was applied was a matter with which the bank had no concern, and which cannot affect the validity of its security.
This instrument was a public act, duly acknowledged, and was therefore a binding contract or obligation to affect the "property and right of the wife, whether dotal or of any other description," and by the laws of Louisiana operated as a judgment, with lien on the property specially described in it. See Bank of Louisiana v. Farrar, 1 La.Ann. 49.
II. It is alleged in the answer that this contract of mortgage has been novated and extinguished.
The facts on which this objection rests are as follows:
The instrument of mortgage contains a covenant that
"In case of failure on the part of the mortgagors to pay any or either of said installments, or any or either of the amounts of interest, it shall be sufficient cause to foreclose the same and enforce the payment by such legal process as the nature of the case shall
or may require."
The mortgagors having failed to make any payment of the annual installments of interest in April, 1843, the bank obtained an order of seizure and sale of the mortgaged property. According to the usual course of proceeding in such cases, when the sheriff cannot obtain a bid for cash to the amount of two-thirds of the appraised value of the property, it is again offered for sale on a credit of one year, the purchaser giving what is called a twelve months' bond, and if the purchase money be not paid in that time, the mortgagee may have an order of seizure and sale on this bond. On this last sale, the property is sold for cash subject to all previous liens to the higher bidder. In this case the mortgaged property was bid off by William M. Stafford, a brother of respondents; he gave his twelve months' bond; the property remained, as usual, in the possession of the respondents; and no part of the purchase money was paid at the end of the year. The bank then issued process for a final sale of the property to the highest bidder for cash. The lands included in the mortgage were sold, but the negroes were fraudulently carried off by the defendants to Texas. The amount for which the lands sold did not satisfy the first installment of the principal of the mortgage, due in March, 1844.
The question which arises on these facts is whether this sale to William M. Stafford, and his twelve months' bond is a novation or extinguishment of the original mortgage. If it was, the complainants should have filed their bill on the twelve months' bond, which operated as a judgment and mortgage on the property, and not on the original mortgage, as has been done in this case.
"A novation takes place in three ways." Louis.Code, art. 2185
"1st. When a debtor contracts a new debt to his creditor, which new debt is substituted to the old one, which is extinguished. 2d. When a new debtor is substituted to the old one, who is discharged by the creditor. 3d. When, by the effect of a new engagement, a new creditor is substituted to the old, with regard to whom the debtor is discharged."
Whether this twelve months' bond operates as a novation and discharges the mortgage or judgment without actual payment or satisfaction is a question depending so entirely on the peculiar laws of Louisiana that we must look alone to the decisions of the tribunals of that state for its solution. The cases of Offut v. Hundsley, 9 La. 1; Reboul v. Behren, id., 90; and Dunlap v. Sims, 2 La.Ann. 239, are directly in point on this question. In the latter case, the court said
"No principle is better settled in our law than that a sale of property under execution on a credit of twelve months neither satisfies the judgment nor novates the debt. "
On this point of defense, therefore, we must decide that the sale to William M. Stafford and his twelve-months' bond, which it is admitted has never been paid, did not novate or extinguish the lien or debt secured by the original mortgage to the bank. This result is consonant with the true equity and justice of the case, as it is transparently clear from the whole transaction that William M. Stafford's interposition in this matter was merely to gain further time for the respondents, he being wholly unable to satisfy the debt of the bank according to the tenor of his bond. His transfer of the negroes to Mrs. Stafford or to M'Waters as her trustee left the case, as between these parties, in precisely the same position as it stood at first. The negroes always remained in possession of respondents, subject to the lien of the mortgage, notwithstanding this complication of sales and nominal transferees.
III. The respondent, both by her pleas and in her answer, sets up the statute of limitations of Texas as a bar to the proceedings in this case; she relies first on the section which limits all actions of debt, upon any contract in writing to four years, and secondly
"that all actions for detaining personal property, or for converting such property to one's own use shall be commenced and sued within two years next after the cause of such action or suit, and not after,"
and alleges that
"she has converted the slaves to her own use and held them adversely to the complainant from 9 April, 1845, until after the commencement of this suit -- that is to say for more than two years before the filing of this bill."
However much it may be the policy of Texas as it is alleged in the cases of Love v. Dock and Snodely v. Cage, lately decided in the supreme court of that state, to give a liberal construction to their statutes of limitation in favor of debtors for the purpose of encouraging immigration, it is abundantly apparent that these sections can have no application to a bill in equity to enforce the sale of mortgaged property, whether the slaves in question be considered either as personalty or realty.
The first of the eight installments of the principal debt became due on 1 March, 1844, and the last in 1851, and the bill was filed in February, 1848, less than four years after the first installment became due, so that if this were an action of debt, the plea could apply only to the installments of interest payable before 1844. And in such an action it would be no answer to this objection to the plea of the statute that the creditor had a right to sell the mortgaged property on the failure or neglect of the mortgagor to pay the first installment. In cases of concurrent jurisdiction, courts of equity are said to act in obedience to the statutes of limitation, and in other cases they act chanroblesvirtualawlibrary
upon the analogy of the limitations of law. A bill to foreclose a mortgage and enforce the sale of the mortgaged property has no analogy to an action of trover, detinue, or trespass. The claim of the mortgagee is a "jus ad rem," not a "jus in re." He does not claim as owner of the property. The possession of the mortgagor is not adverse, but under the mortgagee. And although this species of realty is movable and may be carried away or fraudulently concealed from the pursuit of the mortgagee, such acts cannot be alleged in a court of equity as an adverse possession which will defeat the lien of the creditor after two years, in analogy to the limitation of actions at law for taking and carrying away or converting to one's own use the property of another. A chancellor will not permit a party to plead his own fraud to defeat the equity of the complainant. This plea must therefore be overruled.
IV. The court below decided the three points of defense which we have just considered against the respondents, but dismissed the bill of complainants for want of proper parties.
This constitutes the fourth and last ground of defense which has been urged in the argument of the case in this Court.
It is contended that William M. Stafford, James A. M'Waters, and Isaac Thomas should have been made parties to this bill, and that without such parties the court cannot proceed to a decree in favor of complainants.
It is admitted that William M. Stafford, James A. M'Waters, and Isaac Thomas reside in the State of Louisiana and out of the jurisdiction of the court. And it is contended that as the complainant cannot therefore compel them to become parties, he is utterly remediless notwithstanding the original mortgagors are in court and have in their possession the property subject to the lien of his mortgage.
It is true that if these persons had been within the jurisdiction of the court, they might properly have been made parties, but there is no decree sought against either of them, nor will a decree in favor of the complainants affect any rights which they may have.
It is unnecessary in the consideration of this point to bring under review the doctrines advanced on this subject in treatises on equity practice and pleadings or cases decided in England or elsewhere. The act of Congress of 28 February, 1839, is conclusive of this point. It enacts
"That where, in any suit at law or in equity commenced in any court in the United States, there shall be several defendants, any one or more of whom shall not be inhabitants of or found within the district where the suit is brought or shall not voluntarily appear thereto, it shall be lawful for the court to entertain jurisdiction and proceed
to trial and adjudication of such suit between the parties who may be properly before it. But the judgment or decree rendered therein shall not conclude or prejudice other parties not regularly served with process or not voluntarily appearing to answer, and the nonjoinder of the parties who are not so inhabitants or found within the district shall constitute no matter of abatement or other objection to said suit."
Notwithstanding the complication of mortgages, sales, and transfers of the slaves now in question, it must be observed that they have never been out of the possession of the respondents till seized with a strong hand by the marshal on a writ of assistance and delivered to the receiver appointed in this case. And as we have seen, the transfer to William M. Stafford by the sheriff, on his giving a twelve months' bond, left them still subject to the lien of the mortgagees, as the bond was never paid. The transfer from Stafford to M'Waters for the separate use of Mrs. Stafford, one of the original mortgagors, did not affect the rights of the mortgagees; neither Stafford nor M'Waters have or claim any beneficial interest in the property. M'Waters was examined as a witness, and might have been made a party if he chose. It would be a strange perversion of justice if the remedy on a mortgage could be defeated by transfers of this description to persons living out of the jurisdiction of the court. If this act of Congress had never been passed, a court of equity would not suffer the remedy of a mortgagee to be defeated by such a scheme.
If it were true that Isaac Thomas still retained his claim to forty-eight of the slaves included in the mortgage, it would be no reason why the complainant should not be entitled to his decree as against the respondents, leaving Thomas to prosecute his claims, if he had any, at such time and in such manner as he might elect. But the plea set up in the answer on this point must be taken with the facts connected with it, as alleged by the respondent, in connection with the testimony of Thomas himself, who was examined as a witness in the case. By these it appears that the New Orleans Canal & Banking Company had a previous mortgage for $10,000 on these forty-eight slaves, executed by Stafford and wife; that a writ of seizure and sale issued thereon, and these slaves were sold to Isaac Thomas, who left them in possession of the respondents, but never paid for them; that the slaves were then sold as the property of Thomas and purchased by one Flint, who afterwards released his right to the Canal Bank, who sold to William M. Stafford, who transferred his right to M'Waters in trust for Mrs. Stafford. It appears also by the record that the Canal Bank has filed its bill claiming its lien on these slaves, who are in the hands of the receiver appointed in this case and who, by arrangement between chanroblesvirtualawlibrary
the parties, holds them subject to their respective rights. The Canal Bank, though not formally made a party to this bill, is in court claiming its rights through Thomas. The court has therefore before them all the parties claiming any beneficial interest in these slaves, and before it distributes the proceeds of the mortgaged property, can compel the parties interested either to settle their respective claims amicably or by action or interpleader, and thus make a final decision binding on all the parties who have any claim to the property.
The decision of the district court dismissing the bill for want of proper parties must therefore be
Reversed and the record remitted to the court below with directions to enter a decree in favor of the complainants and have such further proceeding as to justice and equity may appertain.
This cause came on to be heard on the transcript of the record from the District Court of the United States for the District of Texas, and was argued by counsel. On consideration whereof it is now here ordered, adjudged, and decreed by this Court that the decree of the said district court in this cause be and the same is hereby reversed with costs, and that this cause be and the same is hereby remanded to the said district court with directions to that court to enter a decree in favor of the complainant and for such further proceedings to be had therein as to law and justice may appertain.