Couret v. Conner

Citation118 Miss. 374,79 So. 230
Decision Date08 July 1918
Docket Number20050
CourtUnited States State Supreme Court of Mississippi
PartiesCOURET ET AL v. CONNER ET AL

APPEAL from the chancery court of Adams county, HON. R. W. CUTRER Chancellor.

Suit bye John F. Couret and others, trustees for the stockholders of the Canal Louisana Bank & Trust Company, against L. P Connor and others, receivers of the First Natchez Bank. From a judgment for defendants, plaintiffs appeal.

The facts are fully stated in the opinion of the court.

Reversed and remanded.

H. C Holden, J. N. Flowers and Farrar, Golgburg & Dufour, for appellants.

The First Natchez Bank, being the holder of all the notes of the Tensas River Planting Company secured by vendor's lien on land in Louisana and having assigned or pledged three of them to secure its own debt could not, with these notes of the series retained by it, participate in the proceeds of sale of the land when such proceeds were insufficient to pay the entire series of the notes and in this manner reduce the value of its own collaterals and avoid the payment of its own obligation.

II. The receivers of the First Natchez Bank stands in the place of the bank and their right to participate in the deficient proceeds of sale of the security is precisely the same as the bank itself would have had if it had continued in business till the time of the sale.

III. The proceeds to be distributed are the proceeds of sale by the Tensas River Planting Company, receiver, and not the proceeds of sale by the receiver of the First Natchez Bank made after they purchased at the sale made by the Tensas receiver.

The above propositions we will take up in order.

I. That the bank could not with the retained notes participate in the distribution of the proceeds of sale, when the proceeds were insufficient to pay all the notes until the notes which it has pledged or assigned were first paid.

A. The general rule as stated by Pomeroy (Eq. Jur., sec. 1203, Vol 3, 3rd Ed.) is as follows: "When the mortgagee assigns one or more of the notes, and retains the remainder of the series it is generally held that the assignee is entitled to a priority of lien as against the mortgagee, with respect to the note so transferred; and this rule operates without regard to the order in which the notes held by the two parties mature." 2 Jones on Mortgages (6 Ed.), sec. 1701; 27 Cyc. page 1304; Brewer v. Atkenson, 121 Ala. 410, 25 So. 992; Knight v. Ray, 75 Ala. 383; Preston v. Ellington, 74 Ala. 133; Kuppenheimer et al. v. Chicago, etc., Company, 163 Ill.App. 127; Knight v. Ray, 75 Ala. 383; Lawson v. Warren, decided in 1912, 124 P. 46, 42 L. R. A. (N. S.) 183; Ann. Cas. 1914 C. P. 139; McClintic v. Wise's Admr., 25 Gratt. 448, 18 Am. Rep. 694; Alden v. White, 32 Ind.App. 671, 102 A. S. R. 261; Ragan v. Hewlett, 7 Ky. Law Rep. 755; Douglas v. Blount, 22 Tex. Civ. App. 493, 55 S.W. 526; Whitehead v. Fisher, 64 Tex. 639; Roberts v. Mansfield, 32 Ga. 228, 234; Richardson v. McKin, 20 Kan. 346; Preston v. Morsman, 75 Neb. 358, 371; Mayes v. White 9 Kan. 640; Grattan v. Wiggins, 23 Cal. 16; Anderson v. Sharp, 44 Ohio St. 660; Foley v. Rose, 123 Mass. 557; Jenkins v. Hawkins, 34 W.Va. 799; Stephens v. Black, 1 N.J.Eq. 338; Parker v. Mercer (1842), 6 How. 320; Cage v. Idler (1845), 5 S. & M. 410; Henderson v. Henrod (1846), 10 S. & M. 631; Pugh v. Hold (1854), 27 Miss. 141; Trustees of Jefferson College v. Prentiss (1855), 29 Miss. 46; Davidson v. Allen (1858), 36 Miss. 419; Wooldridge v. Bomar, 64 Miss. 34, Bank of England v. Tarleton (1851), 23 Miss. 173.

In Louisiana the rule is well settled and strictly followed that "The assignor cannot, in the language of that court, complete with the assignee, and, as we shall hereafter show, the law of Louisiana is the controlling law in this case. In order that the question as to the law of Louisiana on this subject may be set at rest we devote some space to the decisions of that court. Edward Salzman v. His Creditors, 2 Rob (La.) 241.

The pledger of a note or other security has all the rights of an owner and is for all practical purposes the owner of the obligation. Mechanics Building Association v. Ferguson, 29, La. 548; Fidelity & Deposit Company v. Johnson, 117 La. 899, 42 So. 347.

The general rule which we have numbered 1 (page--, supra) controls and decides this case not only because it is the rule supported by the weight of authority and reason, but also because it is the adopted rule in Louisana and this contract of pledge was made in Louisiana and the rights of the pledgor and pledgee as between themselves are controlled by the law of that state. 13 C. J., pp. 580-581; 9 Cyc., p. 670; Clark v. Belt, 223 F. 573, 577; Wharton on conflict of Laws (3 Ed.), sec. 4220; Burton v. United States, 202 U.S. 382, 50 L.Ed. 1057, 1073.

From the above it must appear to the court too plain for argument that this was a Louisiana transaction. The next immediate inquiry is: Was it a Louisianan transaction to the extent that the rights of the parties are to be controlled by the laws of Louisiana?

The contract of pledge was made between the holder of all the notes of the series secured by one instrument evidencing a lien on land, on the one part, and the Canal-Louisiana bank and Trust Company, a creditor of the said holder. This was a separate and independant contract, separate from the notes themselves. The question at issue is between two holders of these notes as to their relative rights in the mortgage fund. Their rights are necessarily determined by the contract between them. The term, collateral security or collateral, means a pledge of incorporeal property assigned or transferred and delivered by a debtor or some one for him to a creditor as security for the payment of a debt or the fulfillment of an obligation. It stands by the side of the principal obligation as an additional means to secure the payment of the debt or the fulfillment of obligation. Jones on Collateral Securities Pledges, par. 1, Collateral security is defined by Bouvier as a separate obligation attached to another contract to guarantee its performance. "A pledge may be defined to be a deposit of personal property as security, with an implied power of sale upon default (Jones, Pledges, par. 1), the assignment or pledge is an independent contract. Bank v. Tarleton, supra, p. 181, where it is said: "The contract of assignment was separate and distinct from that of the notes. The assignment was made in Louisiana, where likewise the notes were payable. It is undoubtedly true, that as a general principle, that the law of Louisiana would govern the rights of the parties arising under the assignment." Jones on Collateral Securities, sec. 133; 5 C. J. P. 941; Partee v. Silliman, 44 Miss. 277; 9 Cyc. pp. 667-668; 13 C. J., pp. 247-248. The supreme court of the United States in Scudder v. Bank, 91 U.S. 406, 23 L.Ed. 245, 249; Dicey, Conflict of Laws, p. 563. This court has already held similar provisions in a contract of a New Orleans bank with this same Natchez Bank to be valid and subject to foreclosure in New Orleans. Commercial-Germania Trust & Savings Bank v. L. P. Conner, Receiver, 75 So. 445, 114 Miss. 2, R. C. L. pp. 626-627; 5 C. J. 969.

That the receivers stand in the place of the Bank and their right to participate in the insufficient proceeds is precisely the same as the bank itself would have had if it had continued in business until the time of the sale. Wooldridge v. Bomar, 64 Miss. 34; American Trust & Savings Bank v. McGettingan, 152 Ind. 582, 71 Am. St. Rep. 345, 52 N.E. 793; Gluck & B., Receivers, sec. 6; 20 Am. & Eng. Ency Law, p. 407; Woerishoffer v. North River Constr. Company, 99 N.Y. 398-402, 2 N.E. 407; Hubbard v. Hamilton Bank, 7 Met. 340; Minchin v. Second Nat. Bank, 36 N.J.Eq. 436; Snow v. Winslow, 64 Iowa 200, 6 N.W. 191; Hale v. Frost, 99 U.S. 389, 25 L.Ed. 419; Nix v. Ellis, 118 Ga. 345, 98 Am. St. Rep. 111, 45 S.E. 404; Powers v. Central Bank, 18 Ga. 658; Georgia Seed Company v. Talmadge, 96 Ga. 255, 22 S.E. 1001; Ryder v. Ryder, 19 R. I. 188, 32 A. 919; Mitford v. Mitford, 9 Ves. Jr. 87; Sherrington v. Yates, 12 Mees. & W. 855, 1 Dowl & L. 1032, 13 L. J. Exch., 160; Winston v. McCellan, 2 Story, 492, Fed. Cas. No. 17887; Fletcher v. Morey, 2 Story, 555, Fed. Cas. No. 4864; Mitchell v. Winslow, 2 Story, 630, Fed. Cas. 9673; Re Griffiths, 1 Low, Dec. 431, Fed. Cas. No. 3540; Re Dow, 6 Natl. Bankr. Reg. 10; Coggershall v. Potter, Holmes, 75 Fed. Cas. No. 3955; Johnson v. Patterson, 2 Woods, 443, Fed. Cas. No. 7403 Goddard v. Weaver, 1 Woods, 257, 269, Fed. Cas. No. 51495; Re Collins, 12 Natl. Bankr. Reg. 379, 12 Batchf. 548, Fed. Cas. No. 3007; Platt v. Preston (4. C.), Fed. 394; Yeatman v. New Orleans Sav. Inst., 95 U.S. 764, 24 L.Ed. 598; Stewart v. Platt, 101 U.S. 731, 739, 25 L.Ed. 816, 818; Houselt v. Harrison, 105 U.S. 401, 406, 26 L.Ed. 1075, 1076; Adams v. Collier, 122 U.S. 382, 30 L.Ed. 1207, 7 S.Ct. 1208; Brown v. Brabb, 67 Mich. 17, 22032, 11 Am. St. Rep. 549, 34 N.W. 403; Jones, Chat. Mortg., sec. 241; Miller v. Savage, 60 N.H. Eq. 204, 46 A. 632.

The general principle is sustained by the following cases; Kittredge v. Osgood, 161 Mass. 384, 37 N.E. 369; Cramer v. Iller, 63 Kan. 384, 37 P. 617; Reeves v. Pierce, 64 Kan. 502, 67 P. 1108; Smith v. Sioux City Nursery & Seed Company, 109 Iowa 51, 79 N.W. 457; Gillam v. Nussabaum, 97 Ill.App. 2771; Link Belt Machinery Co. v. Hughes, 174 Ill. 155, 51 N.E. 179; Arnold v. Weimger, 40 Neb. 216, 58 N.W. 709; State of New Jersey S. R. Co., Prosecutors v. Railroad Comrs., 41 N.J.L. 235; Commercial Pub. Co. v Beckwitk, 167 N.Y. 329, 60 N.E. 642; Battery Park Bank v. Western Carolina Bank, 127 N.C. 432, 37 S.E. 461; Pelletier v. Greenville Lumber Company, 123 N.C. 596, 68 Am. St. Rep. 837; 31 S.E. 855; Scott v. Armstrong, 146...

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