
    No. 8448.
    J. N. Thibodaux vs. V. E. M. Anderson.
    An Act passed iu this State, purporting on its face to be a trust conveyance or deed of trust in fee simple, will not be given the effect of an act of mortgage binding on third parties, although recorded in the proper mortgage book, and although it might be considered between the parties as intended by them to secure' the payment of a debt, as therein mentioned.
    Parties contracting in this State are required in all their transactions affecting real estate here, to comply with the forms prescribed by the local law and customs, and to announce clearly the purpose of the Act. Reasonable doubt as to the true character of the Act will protect effectually third parties from its operation.
    APPEAL from the Twenty-second Judicial District Court, Parish of St. James. Gheevers, J.
    
      Sims é Poolié, for Godchaux, Appellant.
    
      Bayne & Denegre, 11. G. Dugué, for A. M. Boyd, Appellee :
    An act of mortgage or deed given to secure the payment of promissory notes described in the act, and which provides for the sale of the property to pay those notes at maturity, recorded in the office of the Recorder of Mortgages, in the Parish of St. James, in this State, where the propeity mortgaged is situated, is a good and valid mortgage, and will rank accordiug to its registry. Hayden vs. Nutt, 4 An. Rep., 65; Ells vs. Sims, 2 An. 253; 10 La. Rep.. 243; 32 An. Rep., 314.
   The opinion of the Court was delivered by

Bermudez,- C. J.

This is a contest over the residue of the proceeds of certain real estate sold at sheriff’s sale, under executory process.

After paying the plaintiff, who was the seizing creditor, there remained a balance of $1,823.88, which Godchaux, the purchaser, retained in his possession, claiming to be entitled to it, as the mortgage creditor next in rank.

A. M. Boyd, pretending to have a mortgage anterior to Godchaux’, the validity of which he does not dispute, took a rule to have said balance paid to him.

From a judgment in favor of Boyd, Godchaux has appealed.

The act upon which Boyd rests his claim and which he qualifies a “ mortgage," was passed in the Parish of St. James, and was recorded in the mortgage book. It is termed, in the body of it, a trust conveyance,” or deed of trust in fee simple. It declares substantially, that for the consideration of ten dollars, and for the securing of a sum of $29,950, evidenced by notes, Anderson grants, bargains, sells and conveys unto A. M. Boyd, trustee, the property in question ; that when the, debt shall have been paid, the deed will be void, and should there be a failure to pay, the trustee is to have the property sold, and is to satisfy the debt and to pay over to Anderson what balance might thereafter remain. It is not in the form in which acts of mortgage are usually drawn up in this State.

The act on which Godchaux relies is unmistakably an act of mortgage executed as is customary for such acts to be. It is clearly intended to secure the payment óf a sum of money due him, he, the creditor, in case of non-payment, to have the right to proceed judicially to the seizure and sale of it for the satisfaction- of his claim. It is dated July 28th, 1877, and was duly recorded in the proper mortgage book on the same day.

It is certain that, under the jurisprudence, had the act of Boyd been passed cntf of this State, between parties residing therein, relative to real estate in this State, it. could be recognized and enforced, but only between them, as a contract intended to secure the payment of a debt. In such a case, the intention of the parties, inter se, would be ascertainable beyond the act, and deducible from the fact of their residence at the place where such an act would be treated as, a mortgage act, because the form of written instruments is governed by the law and usages of the place where they are passed. As between them, effect could be given to such acts accordingly, at the place where they were, designed to be executed, or carried out; but this could not take place so as to affect third persons who could not be held to be bound by notice, unless such acts, designed to convey knowledge, were drawn in legal form and couched in clear language, unmistakably expressive, of their substance and object, under the laws and customs of this State.

The authorities relied upon, on behalf of the plaintiff in rule, are cases in which differences arose between the parties or privies to such acts, and lia-ve no bearing upon a case like the present one, in which a third person is sought to be affected by the form and substance of the act in question, recorded, as it was, long previous to Godchaux’.

The acts in those cases were given the effect which they received, not from what they expressed on their face, but from the evidence adduced on the trial of the parties, to show the intention which they had when they entered into the contract. In those cases the parties suing were generally persons seeking to acquire title to the thing as owners, but on evidence by the other parties, the. Court never held that the act was a mortgage, but merely declared that it was a security, and that the debtor or vendor, before he could recover, would have to pay the vendee or creditor the amount due him.

This is, indeed, the first instance of this description which ever was submitted to this Court for determination, on a question of mortgage affecting third persons.

We do not hesitate to declare that as this nondescript act does not indicate its character and does-not clearly-purport on its face to be a mortgage, third persons are not bound to ascertain its nature, object and purport, by analyzing its features by systems of reasoning which do not, with certainty, conduce to the conclusion that it is an act of mortgage. It is easier to say what the act is not, than to say what it is. Whatever contract it was intended to evidence, it surely cannot be claimed that it is 'expressive of a mortgage given by Anderson to Boyd, susceptible of affecting third persons, although it might be entitled to be considered as a security- between the parties. 14 A. 845 ; 18 A. 732; 12 A. 529; 23 A. 281, 665 ; 16 A. 12.

Parties contracting in this State are required, in all their transactions affecting immovables situated therein, conferring or divesting real rights in and to such property, to comply with the forms prescribed by the local law and usages and to announce distinctly, to avoid surprise, the purpose of the instrument which is made the depository of their intentions and contract; otherwise, third persons, sought to be affected thereby, will not be concluded. Index animi verbo.

Reasonable doubt as to the true character of an act will always protect effectually third parties from the operation of the same.

It is, therefore, ordered and decreed, that the judgment appealed from be reversed, and it is now ordered, adjudged aud decreed, that the rule taken by A. M. Boyd, for. the payment of the residue of the sale to him, be reversed, and that Leon G-odohaux be recognized as entitled to apply said sum to the satisfaction in part of his mortgage claim in the premises.

It is further ordered, that appellee pay costs in both courts.

Mr.- Justice Poché recuses himself.

Mr. Justice Todd dissents.

In this case, Mr. Justice Poché having recused himself, and Mr. Justice Levy being absent, and the remaining justices failing to agree, his Honor, A. L. Tissot, Judge of the Civil District Court, Division A, for the Parish of Orleans, having been called upon to participate in the deliberation on the petition for a rehearing, and having done so, took his seat on the Bench in the stead of Mr. Justice Poché, recused, under Article 85 of the Constitution, whereupon Mr. Justice Eenner delivered tlie opinion of the Court, the Chief Justice and his Honor Judge Tissot concurring, which decree is in the words and figures following :

On Application foe, Rehearing-.

Eenner,’ J.

This case presents no question except one, viz.: whether the record of the instrument in question, in the office of the Recorder of Mortgages, secures to the beneficiary the rights of a mortgage1 creditor as against third persons.

The provisions of our law relative to the inscription of mortgages, and regulating the effect of such inscriptions, necessarily refer to instruments known and defined in the law of Louisiana as mortgages, by which we do not mean that the use of the word mortgage” is sacramental, but only that the instrument must contain all the elements essential to constitute a Louisiana mortgage, and none inconsistent therewith.

It is needless to say that the mere record of an instrument in the mortgage book of a Recorder, cannot make that a mortgage which is not such, and that if the instrument be not a mortgage, its inscription cannot make it operate as such as against third persons.

Tiie instrument now under consideration is what is known as a common law mortgage. To ascertain whether or not a common law mortgage is the same thing as a Louisiana mortgage, we have only to examine the definitions of the former, given by the highest authorities :

“ Amortgage is a transfer oí property, as securityfora debt.” Conrad vs. Atlantic, 1 Peters, 386.
Mortgage is the conveyance of an estate, by way of pledge, for the security of debt, and to become void on payment of it.” 4 Kent’s Com. 136.
“ A mortgage, at common law, may be defined to be an estate created by a conveyance, absolute in its form, but intended to secure the performance of some act, such as the payment of money and the like, by the grantor or some other person, and to become void if the act is performed, agreeably to the terms prescribed, at the time of making such conveyance. It is, therefore, an estate defeasible by the performance of a condition subsequent.” 1 Washburn’s Real Prop. 478.

The mere statement of these definitions indicates at once the wide divergence and, indeed, inconsistency, between such an instrument and the contract known and defined as a mortgage in the law of Louisiana.

While it is essential, in the former, that the title should pass, and perfectly permissible that the possession also should pass to the mortgagee or to a third person for his benefit, it is equally essential, in the latter contract, that both the title and possession (as owner) should remain in the mortgagor or his subsequent assigns, so much so, tlmt the acquisition of title by the mortgagee would operate, eo instanti, to extinguish the mortgage.

A lawyer profoundly versed in the abstruse, shifting and complicated jurisprudence of England and our sister States of this Union, and perhaps some of our citizens bred in those States, would be aware that courts of equity in their interpretation and administration of rights and remedies of parties to these instruments, have so construed and modified their meaning and effect as to assimilate them more closely to our own mortgages, than would have been deemed possible from the plain expressions of the instruments. But the great mass of our people, who are to be affected with notice by the inscription of such instruments, have not these advantages; and we are at a loss to understand upon what principle we could- hold such persons bound to know, or to take notice, that an instrument, purporting- on its face to divest the title of the alleged mortgagor, could possibly operate as a mortgage granted by him.

They are certainly not in the slightest degree affected by the intentions of the parties to the act, except in so far as those intentions are expressed therein.

We rest our conclusion here.

We are not now concerned with questions as to what may be the effect of such instruments, as between the parties, nor what might be their effects, even as against third persons if recorded as conveyances.

We merely hold that the instrument before us is not, upon its face, in form or in substance, a mortgage, and that its record in the mortgage book cannot give effect to it as a mortgage against third persons.

We believe it to be sound policy to discourage the use of forms of contract not known to our law, and to save third persons from the effect of ambiguous contracts, not expressing their nature and effect upon their face, and only to be understood in the sense desired by reversing the ordinary meaning of words.

The question, in its present shape, is res nova, and former decisions, properly interpreted, contain nothing inconsistent with our present position.

Rehearing refused.

The Chief Justice concurs in this opinion and decree, and Judge Tissot, called in place of Justice Poché, recused, also concurs, with reasons assigned in his separate opinion.

Justice Todd dissents.

On Application fob Rehearing.

Tissot, Judge of the District Court,

participating:

The instrument under consideration, and upon which the Relator founds his pretensions, cannot be considered as a valid Louisiana conventional mortgage. There seems to be a marked difference between our mortgage and the common law mortgage of our sister States. It is impossible, under our laws and jurisprudence, that Boyd should have purchased the property described in the deed in question and, at the same time, have retained a mortgage thereon. Here the property could not be conveyed to him, and he be allowed to have a legal right thereon for the discharge of any such obligation as he claims.

Mortgage is defined by our Civil Code to be a right granted to the creditor over the property of his debtor, for the security of his debt, giving him the power of having the property seized and sold in default of payment. R. C. C. 3278, (3245).

It is a species of pledge, the thing mortgaged being bound for the payment of the debt or, fulfilment of the obligation. R. C. C. 3279, (3246). It resembles the pledge: 1, in that both are granted to the creditor, for the security of his debt; 2, in that both bind the thing subjected to them, and that the same thing cannot be engaged to a second creditor to the prejudice of the first. R. C. C. 3280, (3247).

It differs from pledge in this: 1, that mortgage exists only on immovables, ships, steamboats and other vessels, or such rights as are described by law, and that the pledge has for its object only movables, corporeal or incorporeal; 2, that in pledge, the movables and effects subjected to it are put into the possession of the creditor or of a third person agreed upon by the parties, while,the mortgage only subjects to the rights of the creditor the property on which it is imposed, without it being necessary that he should have actual possession. R, C. C. 3281, (3248). It only takes place in such instances as are authorized by law. R. C. C. 3283, (3250).

The conventional mortgage is a contract by wliicha person binds the whole of his property or a portion of it only, in favor of another, to secure the execution of some engagement, but without divesting himself of the possession. R. C. C. 3286, (3253); 3287, (3254); 3290, (3257). These provisions of our laws clearly repel the idea that one can buy property and retain, at the same time, a conventional mortgage on it in his own favor.

Tested by these provisions of our laws, the instrument above referred to must be declared invalid as a Louisiana conventional mortgage.

It is styled a deed of trust.” It purports to bargain, sell and convey to Alston Boyd, as trustee, the property described in its body. By its terms Boyd is to have and to hold said property, by himself, his heirs and assigns, forever, in fee simple. The grantor is therein given the right to reimburse the grantee the amount of its consideration, etc.

No mortgage is ever granted in these'terms in this State. And they cannot be so consented.

Deeds of trust” executed here are not known to be recognized by this Court. If this instrument be anything, it is a contract of sale with right of redemption.

Our laws clearly define such a contract as that embodied in this deed of trust.” This “ deed” or contract contains all the essential requirements of a regular act of sale. A thing sold, a price, and a consent. R. C. C. 2459, (2414). It is a perfect sale. The saléis considered tobe perfect between the parties, and the property is of right acquired to the purchaser, with regard to the seller, as soon as there exists an agreement for the object and for the price thereof. Although the object has not yet been delivered, nor the price paid. R. C. C. 2456, (2431). The tradition or delivery of immovables is considered as always accompanying the public act which transfers the property. Every obstacle which the seller afterwards imposes to prevent the corporeal possession of the buyer is considered as a trespass. R. C. C. 2479, (2455).

This deed” contains the power of redemption recognized by Article 2566, (2544) of the Revised Civil Code, and defined in Article 2567 (2545) of said Code. It is unmistakably a sale with power of redemption and cannot be tortured into a mortgage.

It is useless to seek for the intention of the parties. It is clearly expressed by the terms of the act. Why should it be held that the parties intended to make a common law mortgage, unknown’to our law, when the act shows that they actually entered into a valid contract of sale, with power and right of redemption fully recognized and defined by our law and jurisprudence.

It is believed to be of the utmost importance that the line of distinction between contracts should be kept as clearly marked and defined in our jurisprudence as it is by the law itself.

Boyd could have preserved his rights by properly recording this deed. Registry of such an act in the mortgage records can give Mm no mortgage.

There is no necessity to set aside the expressed intent of the parties, the substance, to seek for a latent intent, a mere shadow.

Those who live in this State must look to its law for the definition of their contracts. And, when they find a contract of sale with right of redemption erroneously inscribed in the mortgage registry, they cannot be asked or required to consider it as a mortgage, even if it be labelled as such.

For these reasons, I concur in the refusal of the rehearing sought herein, and give my adhesion to the decree herein rendered by his Honor the Chief Justice.

Dissenting Opinion.

Todd, J.

The instrument in question, executed by Anderson in favor of Boyd, by its very terms is a mortgage. As declared therein, it was given for the purpose of better securing the debt of $25,950, owing by Anderson to Boyd. If this debt was paid, the instrument was to be void. If not paid, authority was given to the creditor, Boyd, to cause the sale of the property, and out of the proceeds he was to retain only the amount of his debt, interests and costs, and the balance was to be paid over to Anderson. Anderson, the debtor, was left in possession of the property.

The nominal consideration or price of ten dollars, for property worth many thousands, is not to be considered as making or affecting the character of the contract.

It fulfilled substantially, and we might say minutely, all the essential elements of a mortgage, and constituted a security given by the debtor on an immovable, in favor of his creditor, with power to sell the same if the debt was not paid, thus meeting the requisites of such a contract as prescribed by our Code. C. C. 3278.

The effect of such a contract should' be governed, in my opinion, by the law of the place where the immovable is situated, which is the object of the contract, regardless of its form. In fact, there is no particular form for a mortgage prescribed by our laws.

Speaking of an instrument almost identically of the same form as this, Mr. Justice Slidell, as the organ of the Court, in the case of Hayden vs. Nutt, 4 An. 71, said:

“ It is difficult to exclude this instrument, taken in its fair intendment, from the scope and definition given in our Code. The conventional mortgage is a contract by which a person binds the whole of his property, or a portion of it only, to secure the execution of some engagement, but without divesting himself of possession.”

Such an instrument has always been construed to be a mortgage by this Court in a long line of decisions. 1 M. N. S. 418; 2 N. S. 22; 10 L. 243; 4 An. 71; 5 An. 99: 2 An. 253; 15 An. 386; 23 An. 665.

This is admitted in the majority opinion, but the effect of a contract in this form, as a mortgage, it is ruled, should be confined to the contracting parties, and cannot affect third persons, and also is not to be extended to contracts made, or acts passed in this State. In my opinion, these conditions do not affect its character. If it is a mortgage between the contracting parties, its registry as a mortgage, and in the mortgage record book of the parish where the property is situated, should import the same effect to it against all the world.

The instrument was so recorded, and in my opinion, Godchaux, nor any one else, on looking at that record in the mortgage book, could have had the slightest doubt that it gave unmistakable evidence of a mortgage.

If tiie effect of this contract is to be governed by the law of this State, where it was entered into, and if its terms and the language of the act fulfils the essential elements of a mortgage contract, as defined by our Code, as is manifest, then the fact that it was made and signed in this State by the parties personally therein, I think, rather strengthens than weakens its effect. At any rate, this circumstance should not, in my opinion, have any bearing prejudicial to the hypothecary character of the contract. In the case of Hutchings vs. Field et al., 10 L. 237, a writing similarly drawn was declared to be a mortgage, and effect was given to it as such against third persons, who claimed to have acquired rights under it at a sale from one of the original contracting parties, and this contract, in the case cited, was between parties living in this State, was passed here, and the subject of it was property situated in the State. See also, Wolf vs. Wolf, 12 An. 530; Watson vs. James, 15 An. 386.

I consider the contract essentially one of mortgage. It was recorded as such. Godchaux had notice of it, and was bound to knowthat itwas a mortgage. As such mortgage, it proved his, Godchaux’ mortgage, of a later date and, in my opinion, entitled Boyd, the holder of it, to a preference on the proceeds of the property.

For these reasons, I am constrained to dissent from the conclusions reached by the majority of the Court.  