
    NEW IBERIA NATIONAL BANK, Plaintiff-Appellant, v. TEETER MOBILE HOME SALES, INC., et al., Defendants-Appellees.
    No. 4668.
    Court of Appeal of Louisiana, Third Circuit.
    Sept. 11, 1974.
    Rehearing Denied Oct. 10, 1974.
    Writ Refused Dec. 13, 1974.
    
      Provost, Ernest & Schwing, by James W. Schwing, New Iberia, for plaintiff-appellant.
    Earl H. Willis, George W. McHugh, Jr., St. Martinville, Theodore M. Haik, Jr., New Iberia, Winston Teeter, Teeter Mobile Home Sales, c/o La. State Penitentiary Angola, for defendants-appellees.
    Before FRUGÉ, CULPEPPER and WATSON, JJ.
    
   FRUGÉ, Judge.

Plaintiff, New Iberia National Bank, filed this suit against Teeter Mobile Home Sales, Inc., its two principal stockholders, Winston Teeter and Anthony Ackal, individually, and against Earl H. Willis, individually. The suit is against the corporation as the maker of and the individuals as the endorsers of a promissory note dated May 18, 1971, in the amount of $31,176.-00. • The plaintiff bank filed a motion for summary judgment as to the defendant, Anthony Ackal, which was granted. After trial on the merits, the trial court rendered judgment in favor of the plaintiff and against Teeter Mobile Home Sales, Inc. and Winston Teeter. The trial court exonerated Earl H. Willis from liability on the grounds that his endorsement was conditioned on the bank having a valid pledge of eight mobile homes and the bank did not have such a pledge and that, regardless of the validity of the pledge, the bank was grossly negligent in its care of the pledged mobile homes and that this negligence released Willis from liability on the note. We agree with the decision of the trial court that Willis’ endorsement was conditioned on the bank having a valid pledge and that the bank did not have such a pledge; therefore, we affirm.

Some time prior to May 19, ■ 1971, Winston Teeter, the president of Teeter Mobile Home Sales, Inc., and Anthony Ackal, the vice president of Teeter Mobile Home Sales, Inc., approached Mr. J. Ferdie Hebert, the executive vice president of the New Iberia National Bank, to inquire as to the possibility of borrowing funds. These funds were to be secured with the pledge of eight mobile homes and the endorsements of Mr. Teeter and Mr. Ackal. The two men were informed that the bank had already loaned the corporation in excess of $120,000 and that additional security would be required. It was agreed that the endorsement of Mr. Willis would be sufficient additional security. The two men approached Mr. Willis and requested that he endorse the note for them. In the past, Mr. Willis, an attorney at law, had been requested from time to time to perform legal services for the corporation.

When Mr. Willis went to the bank to discuss the proposed transactions with Mr. Hebert he was assured by Mr. Hebert that there would be a valid pledge of the mobile homes. Teeter and Ackal assured Mr. Willis that the mobile homes were new, that they were unencumbered, and that they would be pledged to the bank as security for the loan. It was further agreed between the parties that none of the eight mobile homes would be sold without securing the permission of Mr. Willis. All monies received from the sale of the homes would be applied to the payment of the promissory note. The back of the note contained the following notation:

"Secured by pledge of mobile homes as follows:
1970 Diplomat #FK2 — 1250—1717C
1969 Ramada #2 — 1248—E—2699
1970 Artcraft #6412 — 7324A
1969 Ramada #2 — 1248—E—2696
60' Monterey #60 — 12—L1323Z
60' Monterey #60 — 12—L1342Z •
60' Custom #10 — 12—L1638
65' Monterey #65 — 14—L1402Z" . (Tr. 59)

Subsequently one of the homes was sold. Willis was contacted as to the amount to be received for the home, agreed with the sale, and the proceeds of the sale were applied toward the liquidation of the note. Following the signing of the note the bank appointed Ackal as custodian of all of the mobile homes.

In September, or earlier, a judgment was obtained by one I. A. McCann against Teeter Mobile Home Sales, Inc., in the Ninth Judicial District Court for the Parish of Rapides. The claim was for unpaid rent. The proces verbal indicates that three of the above mentioned mobile homes were sold at the sheriff’s sale. Prior to the sale on November 7, Ackal, Teeter, and Hebert met, at which time Hebert was advised of the impending sale under foreclosure on the judgment obtained on the landlord’s lien. Willis was also advised prior to the sale of the impending foreclosure. Hebert and Ackal went to Alexandria in advance of the sale to look into the matter, but the record is unclear as to any steps which they took with respect to the sale. The three mobile homes were sold for $8,000 in excess of the judgment for unpaid rent, but this $8,000 was seized by the State of Louisiana in connection with a $370,000 tax lien against Teeter Mobile Home Sales, Inc.

In this suit the bank’s action against Willis was based on his endorsement of the note. Willis defended on the ground that the endorsement was conditioned upon a valid pledge of the eight mobile homes and that such a pledge did not in fact exist. The issues before this court are (1) whether the endorsement was conditioned and (2) whether the condition was met.

We agree with the trial court that “the evidence shows, without contradiction, that the bank, through Hebert, did assure defendant, Willis, that it did in fact have a pledge of the eight mobile homes involved herein. This is abundantly' shown by the testimony of Hebert, Willis and Teeter, and nowhere is it contradicted.” (Tr. 92). Furthermore, the notation on the reverse side of the note, mentioned above, indicated that the note was secured by a pledge of the eight mobile homes. This evidence on the note itself tends to corroborate the testimony of Hebert, Willis and Teeter that the endorsement of Willis was conditioned upon the bank holding a valid pledge of the eight mobile homes. Therefore, we find that the endorsement was conditioned upon the bank holding a valid pledge of the mobile homes, and it must next be determined whether this condition was met.

The evidence and testimony presented indicate, as the trial judge stated in his written reasons for judgment, that the pledgee and the custodian never at any time knew where the pledged property was until several months subsequent to the defendant’s endorsement. The uncontradicted testimony of Mr. Jack Broussard, the successor to Mr. Hebert as executive vice president of the New Iberia National Bank is as follows:

“Q. So to your knowledge, nobody from the bank saw any of these mobile homes except the three that you personally saw in Alexandria.
A. That’s right.
Q. At no time, if I understand your testimony, did the bank have any knowledge where these mobile homes were?
A. Not definitely, no.” (Tr. 227-228) He further stated the following:
“Q. Now, as custodian of the bank when he [Mr. Ackal] was appointed in accordance with the custodian agreement, he was supposed to hold that property for the bank. Did he at any time specifically tell you where all eight of these mobile homes were when you requested it?
A. No, I don’t think he ’had custody of them, and I don’t think he had control of them.
Q. Well, this is what I want to try to get straight. If he did not, who ■ had control of .it in view of these custodian agreements ?
A. I think Mr. Teeter as president of the corporation had the say-so on what was going to be moved or where or when or everything else.” (Tr. 233-234)

The trial judge had the following to say after quoting the above portions of the testimony :

“At the time of the alleged pledge, the pledgee and plaintiff in this suit had not the slightest idea as to the location of the eight trailers pledged. Supposedly they were on some of the lots of the Teeter Mobile Home Sales Company, on any one of sixteen different sales lots in any one of three different states, Mississippi, Texas and Louisiana. At the time of the alleged pledge, the custodian appointed by the bank, Anthony H. Ackal, all of the evidence shows, had no idea where any of the pledged trailers were located. Even Winston Teeter did not know where these particular pledged mobile homes were located. He assumed or thought they were in Louisiana, however, the one which was sold, and the proceeds credited to this obligation, was located in Texas.” (Tr. 96)

We agree with the trial court that the above quoted portions of the testimony indicate that the bank and its custodian, Ackal, did not know the location of the pledged mobile homes. Without knowledge of the location of the mobile homes it was impossible for the bank or its custodian to have possession of the pledged mobile homes.

Article 3152 of the Revised Civil Code of Louisiana states the following requirements with regard to the pledge:

“It is essential to the contract of pledge that the creditor be put in possession of the thing given to him in pledge, and consequently that actual delivery of it be made to him, unless he has possession of it already by some other right.”

This article was discussed and applied in D’Amico v. Canizaro, 256 La. 801, 239 So. 2d 339 (1970), and has been discussed and applied in countless cases in the past. See for example Steadman v. Action Finance Corporation, 197 So.2d 424 (La.App. 2nd Cir. 1967); Montaldo Insurance Agency, Inc. v. Culotta, 153 So.2d 899 (La.App. 4th Cir. 1963) ; T. A. Gaskin Lumber Co. v. Airline Lumber Co., 127 F.Supp. 461 (E.D.La.1953).

Since it is essential to a valid pledge that the pledgee or its custodian have possession of the pledged thing and since the evidence in this case indicates that neither the bank nor its custodian had possession of the mobile homes, we find that in the present case there was no valid pledged. Therefore, the condition upon which Willis based his endorsement was not met, and he cannot be held liable on his endorsement.

For the reasons assigned, we affirm the judgment of the District Court. The plaintiff-appellant is assessed with all costs of this appeal.

Affirmed.

WATSON, J., dissents and assigns written reasons.

WATSON, Judge

(dissenting).

I respectfully disagree with the majority’s affirmance of the judgment by the trial court releasing defendant Willis from his endorsement.

Pertinent to consideration of the validity of the pledge of the mobile homes is the fact that the plaintiff bank had constructive possession, holding the manufacturers’ certificates of origin, pledge agreements and custodian’s receipts for the mobile homes. J. Ferdie Hebert, who was executive vice-president of the New Iberia National Bank at the time of the transaction in question and handled the matter, testified that it was not customary for the bank to have physical possession or custody of trailers pledged on notes but rather to have possession of the certificates of origin. He also testified that the loan in question would not have been made without defendant Willis’ endorsement.

The statement in the majority opinion that the trial court found the bank to have an invalid pledge is incorrect. The judgment of the trial court specifically recognized the pledge. Only as to defendant Willis did the trial court find the pledge invalid, an inconsistent holding.

Willis admitted that he made no inquiry as to whether or not the bank had possession of the trailers. However, he claimed that the fact that the trailers were listed on the note as pledged to the bank gave him the impression that they were in the custody and control of the bank and that this constituted a misrepresentation on the part of the bank.

Defendant Willis contends that he was duped by the plaintiff bank. In other words, he contends that the bank led him to believe that it had a valid legal pledge on the eight mobile homes (actually he contends that the bank led him to believe the bank had the homes in its possession), whereas there was no valid legal pledge.

The record is replete with testimony which indicates that Willis knew as much about the mobile home dealer’s operations as did the bank. The record simply does not substantiate Willis’ contention that the bank misrepresented the situation and that Willis relied on these misrepresentations to his detriment. I view the trial judge’s conclusions as manifestly erroneous, lacking any reasonable evidentiary basis.

In fact, Willis was involved with Winston Teeter, president of Teeter Mobile Home Sales, Inc., in business transactions, acquiring the stock of a corporation known as Teeter Mobile Home Supplies, which subsequently sold certain property at a substantial profit.

Teeter also testified that Willis had been his attorney for a substantial period of time which indicates a knowledge of Teeter’s business and his business operations. Teeter’s testimony was as follows:

“Q: Was Mr. Willis your personal attorney during the year 1971 ?
My attorney for years — personal, business and everything else. A:
Q: And most of your corporations’ which we have discussed here today?
A: Yes, sir; and he hasn’t got paid for the last two years.” (TR. 187)

Willis’ position suggests that he was not aware that Teeter had the mobile homes and was going to keep them in order to sell them. Teeter testified as follows on this point:

“Q: Mr. Willis knew that the actual physical possession of these trailers was to be retained by Teeter Mobile Home Sales through Mr. Ackal as the custodian for the bank, correct?
A: Yes.
Q: Who was supposed to sell the trailer and turn the proceeds over to the bank?
A: Yes.
Q: Mr. Willis knew that this was the arrangement ?
A: Yes.” (TR. 197)

Willis is an experienced and able member of the bar. Considering his legal knowledge and his knowledge of the business activities of Winston Teeter and his corporations, I find no support for the contention by Willis or the conclusion by the trial court that the bank took advantage of Willis. The record reflects that Willis knew exactly the nature and extent of the security on the note, which he endorsed.

Failure to deliver the trailers to the bank did not invalidate the pledge. Not only was Willis fully cognizant of the business arrangements concerning the mobile homes, but the law does not require physical delivery. In Scott v. Corkern, 231 La. 368, 91 So.2d 569 (1956), the Supreme Court held that physical possession of the pledged property by the creditor is not necessary, it being sufficient that the property be held by a trustee for the account of the creditor, as was the case here. LSA-C.C. art. 3162 specifically provides for «possession of the pledged property by a third person agreed on by the parties.

Willis, as an accommodation endorser, had prima facie liability on the note and had the burden of proof to show that he is not liable. LSA-R.S. 7:29, LSA-R.S. 7:63; Fontenot v. LaFleur, 281 So.2d 868 (La. App. 3 Cir. 1973), writ not considered; LSA-C.C.P. art. 1005. I believe Willis has failed to demonstrate any release of his obligation as endorser.

As to the finding by the trial court that the plaintiff bank was guilty of gross negligence in its care of the pledged property by its failure to intervene in the Rapides Parish suit, I believe this case is distinguishable from the original decision in Central Sav. Bank & Tr. Co. v. Oilfield Supply & S. Mat. Co., 202 La. 787, 12 So. 2d 819 (1943) and similar cases relied on by the trial court. There is no proof in this record that the plaintiff bank could have taken any action in Rapides Parish that would have protected its claim on the pledged property. There is conjecture to this effect but no proof.

I cannot assume negligence on the bank’s part; the record may show poor judgment or poor banking practices, but not negligence. Therefore I conclude that the trial court was in error in holding that the bank was negligent and this negligence released Willis.

Defendant Willis was notified of the foreclosure in Rapides Parish and could himself have protected his interest in the pledged, property. In fact, to the extent that it was possible, he apparently did so, filing a claim for the excess $8,000, which was seized by the State of Louisiana under a tax lien exceeding $300,000.

I believe that the trial court erred in failing to find Willis liable on the promissory note as endorser. Willis is an attorney and should have been cognizant of the terms of the note which he signed. Found on the front of the note is the following language:

“All parties hereto severally consent and agree that the property hereby pledged may be exchanged or surrendered from time to time without notice to or assent from any party hereto, and without in any manner releasing or altering their obligations hereunder.” (TR. 59)

In Chrysler Credit Corporation v. Breaux, 293 So.2d 261 (La.App. 1 Cir. 1974); writ denied, 294 So.2d 548 (La.), it was pointed out that a creditor is allowed to proceed against each solidary obligor separately for the full amount of the indebtedness. In that case, co-signers of a note claimed that they were relieved from liability for deficiency judgment when an automobile subject to a chattel mortgage secured by the note was seized and sold without notice to them. Here, as in that case, there was an appraisal of the seized property. It was held in Chrysler Credit Corporation v. Breaux, supra, that an accommodation maker on a note is not relieved of liability by appraisal and sale of the mortgaged property without notice to him.

The trial court held that Willis made only a conditional endorsement. However, there is no language in the note or in connection with defendant Willis’ endorsement which justifies such a conclusion.

I respectfully dissent. 
      
      . LSA-C.C. art. 3162.
      Art. 3162. In no case does this privilege subsist on the pledge, except when the thing pledged, if it be a corporeal movable or the evidence of the credit if it be a note or other instrument under private signature, has been actually put and remained in the possession of the creditor, or of a third person agreed on by the parties.
     