
    No. 7013.
    Mrs. A. R. Richardson vs. Moses Mann.
    Where the pledgeo of a mortgage note, in whoso hands it has been placed to secure-a debt duo him by the pledgor, sells the property mortgaged to secure the note for a sum less thau the amount of the note, and immediately resells it for a larger sum than that of the note, he becomes liable to the pledgor, not for the price at which the property was resold, but merely for the amount of the note.
    APPEAL from the Seventh Judicial District Court, parish of WestFeliciana. Yoist, J.
    
      Kennard, Howe & Prentiss and W. W. Lealce for plaintiff and appellee.
    
      Wiclcliffe & Fisher for defendant and appellant.
   The opinion of the court was delivered on the original hearing by Maer, J., and on the rehearing by Spencer, J.

Marr, J.

Mrs. Richardson pledged to Mann, Fischer & Co., as collateral, two notes secured by mortgage on the “Island Plantation.” On the 4th February, 1875, it was agreed between her and Moses Mann, of Mann, Fischer & Co., then in liquidation, that Mann should “ proceed in a summary manner, by the 25th January, 1876, to collect the notes held as collateral, or, if he should not do so, he obligates himself to pay to Mrs. Richardson the difference between the sum total of her indebtedness to Mann, Fischer & Co. and to Mann individually and the notes held as collateral, it being optional with Mann to proceed to the summary collection before the 25th January,' 1876, should he so desire.”’

On the 24th January, 1876, Mann, Fischer & Co. obtained an order of seizure and sale on the mortgage notes ; but their attorney apprehended that the evidence on which that order was granted was not sufficient, because he had offered a copy of a copy of the mortgage; and, as soon as he procured from New Orleans a properly authenticated copy of the original, he submitted that, with the other authentic evidence, and the judge ran his pen through the figure “24,” in the order, and wrote in the line above •“ thirty-first.”

The sale-day in the parish of West Feliciana was the first Saturday of each month. The first Saturday in February was the fifth day of the month; and, of course, there was not time to advertise for that day: •the first Saturday in March was the fourth day of that month, which was a legal holiday, a dies non, by express statute : so that the sale could mot have been made on that day. Act of 1871, p. 61. The sale was made on the first Saturday, which was the first day of April.

This suit was brought on the 21th of February, 1876, to recover of Mann the amount of the two mortgage notes, $5000, with eight per cent interest from January 25,1871, less sundry credits set forth in the petition, on the ground that Mann had “failed to proceed to the summary -collection of said mortgage notes on or before the 25th January, 1876, ■according to said contract, and refuses to pay petitioner the balance.of her notes as he agreed and obligated himself to do, though amicably requested, and having been put in default.”

The answer sets out the facts, the obtaining of the order of seizure and sale on the 21th January, that no legal sale could have been made prior to the first Saturday in April, when it was made: that plaintiff suffered no damage or injury from the fact that the suit was instituted on -the 31st instead of the 25th January; that defendant’s counsel had doubt as to the sufficiency of the evidence on which the order of 21th January was granted, and for that reason sent to New Orleans for additional evidence, on which the date of the order was changed to 31st ■January; that the sale could not have taken place earlier than the 1st April on an order obtained at any time in January ; and that he has carried out strictly the spirit and intent of the contract.

In November an amended petition was filed in which it was charged that on the 1st April the property was adjudicated to Moses Mann and others for $8200 ; that at the sale Mann, Fischer and others, and Vincent D. Walsh were bidding for the property, when Mann persuaded and inRuenced Walsh not to bid, and as soon as the property was adjudicated to Mann and others they sold it, before leaving the place, under their agreement, to Walsh for $10,000.

That the illegal acts of Mann and others prevented fair competition -and sale as contemplated by law, through which Mann expected to defraud petitioner of one half the difference between his purchase, $8200, and the sale to Walsh for $10,000, amounting to $900 05.

The prayer is for judgment for the entire amount, as set forth in -the original petition.

Defendant answered by denial of each and’ every allegation in the amended petition contained. The judgment was in favor of plaintiff’s •transferees, McGehee, Snowden & Violet, for $5000, with interest, subject to sundry credits, as prayed for in the original petition ; and defendant appealed. Plaintiff, in answer, prays for damages for a frivolous appeal.

We agree with the district judge that Mann complied with his contract to proceed in a summary manner by the 25th January, 1876. He had the option to proceed or not before that time; he obligated himself to proceed by that time. He actually commenced the proceeding, by obtaining the judge’s order on the 21th January. If he had prosecuted the sale under that order, with all possible dispatch, it could not have been made before the first Saturday in April.

It appears from the testimony of Walsh that August Fischer, representing Mann, Fischer & Co., and Willis W. Forrester, who held one of the mortgage notes, concurrent with those pledged by Mrs. Richardson to Mann, Fischer & Co., were bidding on the property against Walsh. Walsh had made one or more bids, and had bid more than he intended when he left home. He asked the sheriff to suspend until he could have a talk with Fischer. Does not remember whether or not Mann was present at this conversation. He did not bid again on the property. Did not bid on the machinery, which was sold separately. After the sale, and before leaving the place, “I was induced, by the advice of Gov. Wickliffe, to buy the property. The inducements that persuaded me to purchase was the deferred payments, enabling me to meet them with the crops raised on the place. I purchased the property at $10,000, one half cash, and balance in one and two years.”

On cross-examination he says he considers $10,000 for the place, including the machinery, on the terms, half cash, balance in one and two years, a more reasonable price than his highest cash bid, which was between $6500 and $7000, for the place alone, without the machinery.

“Neither Moses Mann, nor August Fischer, nor Willis Forrester, nor Max Fifecher, nor any other person persuaded or induced witness to cease bidding on the place. Witness ceased bidding because he thought that Mr. August Fischer would give more for the property than witness would. Witness came to that conclusion from the conversation he had with Mr. Fischer. * * * * * * '* * * *

“Had no understanding with Mann, Max and August Fischer and Forrester in regard to bidding on the Island plantation, except that he told August Fischer that he would not bid any more than he had already bid ; that he had already bid more than ho expected, when he found out that the machinery would be sold separately.”

The testimony fails to show any illegal act, any thing that was in any respect improper on the part of Walsh, or the other parties bidding on the property. It is evident that he was influenced mainly by the advice of Gov. Wickliffe and Louis Sterling, old friends of his, as he states, to make the purchase; and he considered the terms at which he purchased better than his highest bid.

The district judge makes no reference in his reasons for judgment to the alleged illegal acts of Mann, with intent to defraud Mrs. Richards m ; nor do we think it necessary to sny more than that it is without support in the testimony adduced. The decision in favor of plaintiff is upon the sole ground that, in the transaction with Walsh, “ Mann was acting as the agent of Mrs. Richardson, and she is entitled to the benefit of said sale at §10,000.”

The legal title to the two notes pledged to Mann, Eischer & Co. was in them. They had the option to allow Mrs. Richardson their face value and interest, or to proceed on them by the 25th January, 1876. They elected to proceed, and they commenced the proceeding on the 24th of January. They were no more the agents of Mrs. Richardson, in provoking the sale of the mortgaged property, than they were of Willis Forrester, who held one of the series of notes secured by the same mortgage. Their object was to collect the debt due them by. Mrs. Richardson ; and their only obligation to her was to collect and give her tho benefit of her share and portion of the proceeds of the sale. If the amount thus realized on the two notes should exceed the amount of her indebtedness, for which they were pledged, she would be entitled to the excess. They did not buy the property as agents for Mrs. Richardson, nor did they soli it to Walsh as her agents. They purchased in their own right., as the highest bid iers ; and their obligation was to account for the proceeds. Their bid was §8200. Tho costs and taxes to be deducted were §935 70, leaving for distribution §7264 SO. Out of this the sheriff retained, by order of court, §500, to answer the demands of Rudman and Wagner, who claimed privileges on the machinery and implements, leaving for actual distribution to tho two mortgage creditors §6764 30.

The amount of Mrs. Richardson’s two notes was - - §5866 67

And the amouut due Forrester was.....- - 2933 33

Total mortgage debt --------- §8800 00

If the $500 retained by the sheriff should come into this distribution, Mrs. Richardson’s portion would be just double that of Forrester, §4S42 87. Or, if the §500 be deducted, her share would be §4509 54.

The amount due by Mrs. Richardson to Mann, Fischer & Go. up to the date of the sale was §4844 29. If her share of the proceeds be fixed at §4S42 87, the balance against her would be §1 42. If it be fixed at §4509 54, she would owe Mann, Fischer & O >. §134 75. In either case, Mrs. Richardson has.no just claim or cause of action against defendant; and she had none at the timo the suit was brought.

The judgment of the district court is therefore annulled, avoided, and reversed; and it is now ordered, adjudged, and decreed that the demand of plaintiff be rejected, and her suit be dismissed with costs in this court and in the district court.

On Rehearing,

Spencer, J.

The questions presented and to be determined by us on this rehearing we will consider seriatim.

First — Is the pledgee oí a note the agent and mandatary of the owner, and in case he buys property mortgaged to secure the note for a less sum than the amount of the note, and immediately resells it for a greater sum than the note, what is the measure of his responsibility to the owner ? Is he bound to account only for the price at which he purchases; or at the price at which he sells; or is he liable only for the amount of the note ?

Although for the purposes of collection the pledgee is considered to have the legal title of the note pledged, still he is not really the owner of it. Art. 3166 C. C. declares that the debtor “ remains proprietor of the pledge, which is in the hands of the creditor only as a deposit to secure his privilege on it.” This is made manitest also by the undoubted rule that when there is no fault or negligence in the pledgee the loss of the pledge, or deterioration of its value, by insolvency, etc., must be borne by the pledgor. 1 An. 344.

The obligations of a pledgee are in substance very similar to those of mandataries and agents. In 17 Barbour, 492, the Supreme Court of New York say that “ a creditor holds collateral securities as the agent and trustee of his debtor.” In Moses vs. Murgatroyd, 1 John. Ch. 119, Chancellor Kent said: “These collateral securities are in the nature of trusts, created for the better protection of the debt.” In 1 An. 344, our own court assimilate the responsibilities of pledgees of notes to those of agents, and a similar doctrine is held in “ King vs. Harman,” 6 La. 607.

We think, therefore, that Mann, in the enforcement and collection of the mortgage notes placed in his hands as collaterals, was the agent or trustee of Mrs. Richardson, and is not permitted to speculate, to her prejudice, upon the thing pledged.

Mr. Story on “ Agency,” sec. 207, says: “Indeed, this doctrine is so firmly established upon principles of public policy that no agent will be permitted to take * * any profits incidentally obtained in the execution of his duty, even if it be sanctioned by usage. Such a usage has been severely stigmatized as a usage of fraud and plunder.”

Perry on Trusts, $ 427, says: “ Trustees hold a position of trust and confilence. The legal title of the trust property is in them, and generally its whole management and control is in their hands. At the same time the beneficiaries of the trust may be women or children, or persons incompetent to protect their own interests. For these reasons, to protect the weak and helpless on 'the one hand, and to prevent trustees ■from using their position and influence for their own gain, and to prevent them from hazarding the trust property upon what they may think ■to be profitable speculations on the other, they are not allowed to make any profit from their office. They can not use the trust property, nor "their relations to it, for their own personal advantage. All the power -and influence which the possession of the trust fund gives must be used for the advantage and profit of the beneficial owners, and hot for the personal gain and emolument of the trustee. No other rule would be ¡safe; nor would it be possible for courts to apply any other rule as between trustee and cestui que trust. * * * * *

A trustee, executor, or assignee can not buy up a debt or incumbrance to which the trust estate is liable for less than is actually due "thereon and make a profit to himself: but such purchase inures for the benefit of the trust estate, and the creditors, legatees, and cestui que trust shall have all the advantages of such purchase. * * *

“ So, if a trustee buys the trust property at private sale or public ¡auction, he takes it subject to the right of the cestui que trust to have ■the sale set aside or to claim all the benefits and profits of the sale for himself. * ****** *

“By this rule, trustees may be liable to great losses, while they can receive no profit; and the rule is made thus stringent that trustees may ■not be tempted from selfish motives to embark the trust fund upon the •chances of trade and speculation. If a trustee charge a bonus in his ¡account for his skill and services in conducting the business of the trust, it will be set aside. * * * * * *

“All persons who stand in a fiduciary relation to others must ¡account for all the profits made upon moneys in their hands by reason of such relation. * * * * * * * *

“Agents, guardians, directors of corporations, officers of municipal •corporations, and all oilier pei'sons clothed with a fiduciary character, are ¡subject to this rule.”

In his work on Bailments Mr. Story says, § 343 :

“Another duty of the pawnee at the common law is to render a clue account of all the income, profits, and advantages derived by him from "the pledge in all cases where such an account is within the scope of the bailment. If, for instance, the pawn is a slave, the profits of his labor ¡are to be accounted for. If the pawn consists of cows, horses, or other •cattle, the profits of their labor are also to be accounted for, if within the contemplation of the parties. The Boman and foreign law seem, in ¡all cases of this sort, to imply an obligation to account, from the very mature of such a pledge. In rendering an account of the profits, the pawnee is at liberty to charge all the necessary costs and expenses ■to which he has been put, and to deduct them from the income or profits. If he has sold the pledge he is bound to account for the proceeds, and to pay over to the pawner the surplus beyond his debt or other demand, and the necessary expenses and charges. Pothier thinks that the duty of the pawnee goes further; and that ho is bound to account for all the profits and income which he might have received from the pledge but for his own negligence.”

See, also, Gibson vs. Hunter, 14 La. 124.

But in the case before us the total mortgage debt bearing on the-property amounted to only $8800, of which $5866 67 was held by Mrs. Richardson, and $2933 33 by Willis Forrester. The property was bought in by four persons jointly, and, so far as appears, equally, to wit: Moses Mann, Max Fischer, August Fischer, and Willis Forrester; and these four made a joint deed without assignation of parts to Walsh for ten-thousand dollars, one half cash, and the balance at one and two years with eight per cent interest from date, and attorney’s fees, and secured by mortgage and vendor’s lien. We think this equivalent to a cash sale-at $10,000. But we see no reason why we should allow Mrs. Richardson more than the amount of her notes. We do not think the agent’s responsibility should go beyond that. If he realizes the full amount of the notes, there is no speculation at her expense or to her loss. We think that under the circumstances of this case, when the property was bought in for $8200 and on same day and at same place resold for ten thousand dollars cash, or its equivalent, the agent should not be permitted to profit by the resale, except to the extent that there is excess over the amount due the pledger. But we can not require the agent to pay more than he realized. As we have seen, Mann was only one of four purchasers, and realized therefore by the resale only one fourth of $1800’ as profit — say $450. This suit is against Mann only, and we can not hold him responsible for the profits made by his copurchasers, who are no parties to this suit, and, for aught that appears, in nowise the agents or trustees of Mrs. Richardson, or in any wise accountable to her for any profits realized by them. She declares upon her contract with Mann only, of date February 4,1875. It is that which she seeks to enforce in her orioinal petition ; while in the amended petition she simply alleges a-conspiracy to prevent bidding at the sale, and consequent injury. She does not ask any where specifically the relief sought on this rehearing;but as the evidence showing the relations between herself and Mann is before us without objection, and there is a prayer fora judgment of $1500 and “for general relief,” we think we can allow her a judgment for the amount realized by Mann as profits on resale. As we have seen, Mann realized a profit of $450. Giving Mrs. Richardson the benefit of the $500 retained by the sheriff, she would still owe defendant $1 42 after crediting her with her pro rata of the $8200, less costs.

Her pro rata was, after deducting costs, - - - - $4842 87

Her debt to defendant was - -- -- -- -- 4844 29

Leaving balance due by her.......$ 142

Which being deducted from - -- -- -- -- 450 00

Leaves due by Mann - -- -- -- -- -$ 448 58

But should the $500 retained by. the sheriff on oppositions or any part thereof be decreed to go to the claimants (opponents), then her pro^ rata, to wit, two thirds of these $500, or of such part thereof as may be decreed to said opponents, must be deducted from the above sum of $448 58.

It is therefore ordered and decreed that our former decree be set aside, and it is now ordered that plaintiff, Mrs. Richardson, (for use of' McGehee, Snowden & Yiolet, subrogees,) do recover of Moses Mann-the sum of $448 58, with legal interest from April 3,1876, till paid, subject to a credit of same date for two thirds of such sum as shall be-awarded out of the $500 retained as aforesaid to said opponents.

It is further ordered that this cause be remanded, for the purpose solely of ascertaining the amount of said credit, and that this judgment be not executed so far as it would be affected by said credit until the saméis ascertained.

It is further ordered that plaintiff and appellee pay costs of this-appeal, and defendant those of the court below.  