Baton Rouge Wood Products, Inc. v. Ezell

• Decision Date: 21 November 1966
• Docket Number: No. 6795,6795
• Citation: 194 So.2d 372
• Parties: BATON ROUGE WOOD PRODUCTS, INC. v. Emile G. EZELL.
• Court: Court of Appeal of Louisiana — District of US

Page 372

194 So.2d 372

BATON ROUGE WOOD PRODUCTS, INC. v. Emile G. EZELL.

No. 6795.

Court of Appeal of Louisiana, First Circuit.

Nov. 21, 1966.

Rehearing Denied Dec. 28, 1966.

Writ Granted Feb. 23, 1967.

Frank P. Simoneaux, of Breazeale, Sachse & Wilson, Baton Rouge, for appellant.

Ashton L. Stewart, of Laycock & Stewart, Baton Rouge, for appellee .

Before LANDRY, ELLIS and BAILES, JJ.

LANDRY, Judge.

This appeal results from a foreclosure proceeding instituted by plaintiff-appellee, Baton Rouge Wood Products, Inc. (Wood Products), against its mortgage debtor, Emile G. Ezell, in which there was put at issue the validity of an antecedent mortgage held by another of Ezell's creditors, namely, Southern Pipe and Supply Company (Southern) from the judgment of the trial court declaring Southern's ranking mortgage cancelled because of payment and ordering payment of appellant's subsequent mortgage in preference thereto, Southern has appealed.

We think our learned colleague below has correctly resolved the issues presented for determination herein.

At the foreclosure sale held June 2, 1965, Southern became the adjudicatee of subject property upon a bid of $33,200.00. The necessary mortgage certificate prepared by the Clerk of Court disclosed that the property in question was subject to charges aggregating the sum of $36,965.90 consisting of costs in the sum of $419.93, taxes amounting to $59.45, a first mortgage in favor of one Florie Higgins totaling $9,504.81, the asserted second mortgage of Southern on which there was a balance due of $10,438.50, and finally, the mortgage of appellee, Wood Products, totaling $16,543.21.

Appellant paid into the hands of the Sheriff the sum of $13,256.69, the equivalent of that portion of its bid which exceeded the total of those obligations secured by encumbrances apparently superior or preferred to the claim of the seizing creditor, Wood Products. It follows that if the mortgage of appellant, Southern, is declared valid and ordered paid in preference to that of appellee, the funds available will leave an unsatisfied balance of $3,765.90 on the claim of the seizing creditor, Wood Products.

Appellee concedes appellant's mortgage was previously recorded and admits the priority of appellant's claim predicated upon order of recordation. Appellee argues, however, that appellant's mortgage was cancelled and extinguished by payment of the precise indebtedness thereby secured. On this ground Wood Products claims its mortgage is entitled to preferential payment over that of appellee.

On the other hand, appellant readily acknowledges that the specific debt for which its mortgage was granted, namely, a cash advance of $9,000.00 has been paid. Nevertheless, appellant argues that its mortgage was kept alive, valid and enforceable by virtue of a certain antecedent Collateral Pledge Agreement (Agreement) executed under date of April 3, 1962, in favor of appellant by the debtor Ezell, a plumbing contractor to whom appellant sold materials on account and made cash advances.

The agreement in question, appearing of evidence in the record, in substance recites Ezell's desire to carry on a general business relationship with appellant whereby the latter will from time to time sell materials on credit and make cash advances to the former. To secure these proposed transactions Ezell expressly pledged to appellant any and all funds or assets belonging to him and held by appellant as security for all such credit sales and cash advances. The agreement provides a limitation upon the arrangement in the sum of $30,000.00. It is further stipulated that such securities as shall be pledged to appellant are to be held as security for any and all debts, present or future, owed by Ezell to Southern. Appellant concedes that upon payment by Ezell of the $9,000.00 mortgage note in question, appellant retained possession thereof pursuant to the agreement.

Council for appellant recognizes, upon authority of Hibernia National Bank v. Succession of Gragard, 109 La. 677, 33 So. 728, Mente & Co. v. Levy, 160 La. 496, 107 So. 318; and Lacoste v. Hickey, 203 La. 794, 14 So.2d 639, that as a general rule a mortgage given as security for a specific indebtedness is cancelled and extinguished upon payment of the obligation thereby secured. Nevertheless, counsel maintains that in the present case the terms of the Agreement, by the express consent of debtor and creditor, breathed life into the mortgage in question upon payment of the specific debt by the debtor. Stated otherwise, it is appellant's position that the general indebtedness of Ezell to Southern constituted consideration for the mortgage in question consequently the terms of the prior Agreement effectively pledged the mortgage note held by appellant notwithstanding payment of the particular indebtedness for which the mortgage was granted. Further, counsel argues that since the Agreement was first in order of time, it should prevail and be given effect according to the will and intention of the contracting parties. In this latter regard, counsel takes the position that parties are presumed to know, understand and intend the nature of obligations undertaken by contracts expressed in unequivocable terms as held in Commercial Credit Corporation v. Dowdy, La.App., 180 So.2d 826. Finally, it is argued that contracts which contravene no prohibitory law must be enforced between the parties. Ogden v. Sanders, 12 Wheat. 213, 25 U .S. 213, 6 L.Ed. 606; Bill Garrett Leasing, Inc. v General Lumber & Supply Co., La.App., 164 So.2d 364, Molero v. California Company, La.App., 145 So.2d 602.

As correctly contended by counsel for appellee the law of this state is well settled to the effect that a mortgage executed as security for a specific indebtedness is extinguished and cancelled upon payment of the obligation and a subsequent reissue of the note cannot breathe life into the dead mortgage.

Germane to the issue under consideration is the following language appearing in Hibernia National Bank v. Succession of Gragard, 109 La . 677, 33 So. 728:

"When the mortgage is for a special debt, payment extinguishes debt and mortgage, and the subsequent (re)issue of the note will not revive the mortgage;' citing Hill v. Hall, 4 Rob. 416, 418, and a number of other decisions. Succession of Phillips, 49 La.Ann. 1019, 1020, 22 So. 202; Pertuit v. Damare, 50 La.Ann. 893, 905, 24 So. 681 .

The mortgage being extinguished, it is dead to all purposes. It cannot serve in any shape, or under any circumstances, as a live mortgage.'

Commenting upon the same subject matter, the Supreme Court in Lacoste v. Hickey, 203 La. 794, 14 So.2d 639, stated:

'With regard to mortgage notes, it appears to be well settled in the jurisprudence of this State that when such a note is given for a specific debt and payment of the debt is made and the note returned to the maker, both the note and the mortgage become extinguished and no subsequent reissue of the note can revive the mortgage. Mente & Co. v. Levy, 160 La. 496, 107 So. 318. In fact, this is the plain provision of the Civil Code. 'Hence it happens, that in all cases where the principal debt is extinguished, the mortgage disappears with it.' Civil Code, art. 3285.

It is otherwise when the mortgage note is not for a specific debt, but for future use, and in favor of any future holder. In such a case, the note may be reissued and used as a collateral and the accessory right of mortgage preserved intact. Hollingsworth v. Ratcliff, 162 La. 281, 110 So. 422; Citizens' Nat. Bank v. Loranger, 163 La. 868, 113 So. 129.'

Mente & Co. v. Levy, 160 La. 496, 107 So. 318, involved a factual...