Edmonston v. A-Second Mortg. Co. of Slidell, Inc.

• Decision Date: 14 January 1974
• Docket Number: No. 53438,A-SECOND,53438
• Citation: 289 So.2d 116
• Parties: Grace Q. EDMONSTON v.MORTGAGE COMPANY OF SLIDELL, INC., et al.
• Court: Louisiana Supreme Court

Page 116

289 So.2d 116

Grace Q. EDMONSTON v. A-SECOND MORTGAGE COMPANY OF SLIDELL, INC., et al.

No. 53438.

Supreme Court of Louisiana.

Jan. 14, 1974.

Rehearing Denied Feb. 15, 1974.

Frank B. Hayne, III, Hammett, Leake & Hammett, New Orleans, for plaintiff-applicant.

Kenneth J. Berke, Stahl & Berke, New Orleans, Garic Kenneth Barranger, Barranger, Barranger, Jones & Fussell, Covington, for defendants-respondents.

SUMMERS, Justice.

Plaintiff Grace Q. Edmonston owned a house and lot in Pearl River, Louisiana, as part of her separate estate acquired prior to her marriage to Lucien E. Edmonston. After they were married she and her husband applied for and obtained a $16,000 loan from Standard Life Insurance Company of the South. As a condition precedent to the loan, Standard required plaintiff and her husband to insure their lives for $8,000 each in whole life policies with double indemnity benefits in the event of accidental death. These policies were assigned by the Edmonstons to Standard under an 'assignment of collateral security' agreement. The assignment, dated January 7, 1964, was executed contemporaneously with a first mortgage in favor of Standard securing the $16,000 loan bearing upon the Pearl River property.

Terms of the assignment agreement provided that, upon the death of either Mr. or Mrs. Edmonston, Standard would apply the proceeds to discharge the mortgage, or, at their option, pay the proceeds to the beneficiary. The policy insuring Lucien E. Edmonston's life named Grace Q. Edmonston as beneficiary.

Later, on September 24, 1964, plaintiff and her husband negotiated a $4,000 loan from A-Second Mortgage Company of Slidell, Inc. To secure the payment of this loan, the Edmonstons executed a second mortgage in the principal sum of $7,200 in favor of A-Second affecting the Pearl River property.

Two years later the Edmonstons experienced financial difficulties. To alleviate the problems involved, they agreed to convey the Pearl River property to A-Second for the satisfaction of their mortgage indebtedness to A-Second, as well as the indebtedness in favor of Standard. To evidence this agreement the Edmonstons executed a Dation en paiement conveying the property to A-Second. In turn A-Second declared the mortgage note of $7,200 in its favor satisfied, granting to the Edmonstone, at the same time, due acquittance and discharge of all indebtedness affecting the property. By this transaction, and by further agreements, A-Second assumed payment of the mortgage note held by Standard, agreeing to make all payments as they came due, and to maintain the life insurance policies in effect by premium payments. Although not objecting to the transfer of title to A-Second, Standard would not and did not release the Edmonstons from the effects of the mortgage obligation owed to Standard.

Lucien E. Edmonston was accidentally killed on March 28, 1967. According to the terms of the policy on his life, this event made the $16,000 double indemnity proceeds payable to his wife as beneficiary. On April 26, 1967 the balance due on Standard's mortgage loan was $14,512.87. At that time Standard prevailed upon Mrs. Edmonston to apply $14,512.87 of the $16,000 policy proceeds to the payment of the mortgage note which they held and to accept the balance of $1,487.13 in cash in full satisfaction of her claim as beneficiary. To manifest her agreement to this transaction, Mrs. Edmonston executed a document titled 'Release of Claimant' on May 1, 1967 wherein she acknowledged receipt of the $16,000 due her as named beneficiary in the policy. From this amount she applied $14,512.87 to the satisfaction of the mortgage note in favor of Standard, and the mortgage and the note secured thereby were cancelled in full. A check for the $1,487.13 balance was issued to Mrs. Edmonston, duly endorsed by her and deposited to her account.

This suit followed on March 7, 1968 in which Mrs. Edmonston, as plaintiff, seeks judgment against Standard for $14,512.87, plus penalties, attorney's fees, interest and costs. Alternatively, she prays for judgment in the same amount against A-Second and its successors C.A. Corporation and U.S. Thrift and Loan Corporation. Defendant A-Second and its successors (to whom we shall refer individually and collectively as A-Second) filed a third party petition against Standard for recovery of any amounts which they were adjudged to owe Mrs. Edmonston. Standard in turn third partied A-Second.

The trial court denied relief to Mrs. Edmonston. On appeal to the First Circuit the judgment was affirmed. La.App., 273 So.2d 707. We granted certiorari to review these judgments. La., 277 So.2d 440.

I.

Mrs. Edmonston's principal demand against Standard is based upon allegations that she was distressed by her husband's death and did not knowingly and voluntarily pay the balance due on the mortgage note held by Standard; hence, she alleges, Standard was not authorized by the policy assignment or otherwise to apply the proceeds to the satisfaction of the balance due on the mortgage note it held.

It is unnecessary in this connection to consider the enforceability of the policy assignment, for the record does not adequately support the contention that Mrs. Edmonston was unaware of her rights or obligatons at the time she agreed with Standard that the policy proceeds could be applied to the satisfaction of the balance due on the mortgage note. We do not agree with her contention that she did not act freely and voluntarily. As already noted, she accepted the balance due and signed the 'Release of Claimant' agreement. She had been furnished a full statement of the proposed disposition of the funds. In addition, she was knowledgeable, had some experience in affairs of this kind, and was fully aware of the fact that she and her husband had not been discharged from the obligation to Standard. She concedes she was aware of the fact that she was primarily liable on the note held by Standard despite the fact that A-Second had assumed its payment.

With this finding we dismiss Mrs. Edmonston's principal demand against Standard for return of the $14,512.87 paid on the balance due on the mortgage note.

II.

Mrs. Edmonston's alternative demand is, however, the central issue argued in briefs to this Court. The contention is that the trial court and Court of Appeal erred in not invoking and applying the Actio de in rem verso to permit her to recover $14,512.87 against A-Second. This restitutionary remedy is founded upon principles of unjust enrichment embodied in Civil Code articles 21 and 1965. ¹ The action derives from the maxim that natural justice requires that no one should be enriched at the expense of another. It is used to fill a gap in the law where no express remedy is provided. According to this position, A-Second was, in fact, relieved of the payment of that amount and thereby enriched to that extent while, at the same time, Mrs. Edmonston was impoverished by her discharge of an obligation which A-Second had assumed to pay on her behalf.

This Court set out the requirements to be met before the Actio de in rem verso was applicable in Minyard v. Curtis Products, Inc., 251 La. 624, 205 So.2d 422 (1967). The case concerned an action by a subcontractor, as buyer of a faulty caulking compound, against the successor to the manufacturer of the compound for the amount the subcontractor was cast in judgment to pay to the contractor as damages incurred in recaulking made necessary by the faulty compound. This Court applied the Actio de in rem verso to the subcontractor's claim for indemnity against the successor to the manufacturer, which it held was unjustly enriched by this payment.

To deter courts from turning to equity to remedy every unjust displacement of wealth with unregulated discretion, certain limitations are applicable to the Actio de in rem verso. The Minyard decision set forth five prerequisites which must be satisfied to successfully invoke the action: 1) There must be an enrichment; 2) there must be an impoverishment; 3) there must be a connection between the enrichment and the impoverishment; 4) there must be an absence of 'justification' or 'cause' for the enrichment and impoverishment; and 5) the action will only be allowed when there is no other remedy at law, i.e., the action is subsidiary or corrective in nature.

1) Enrichment

There must be an enrichment.

A-Second by the Dation en paiement executed on October 18, 1966 acquired the Edmonston house and lot for a recited consideration of $5,178.24--the balance due on the Edmonston obligation to A-Second--and the assumption by A-Second of the balance due on the first mortgage to Standard in the sum of $14,512.87, a total $19,691.11 paid for a property valued by Standard's appraisers at $24,100. Thus, when Mrs. Edmonston discharged the $14,512.87 obligation to Standard, A-Second was relieved of the payment of that debt which it had assumed and therefore A-Second's patrimony was enriched to that extent.

There is no merit to A-Second's contention that it acquired the Edmonston property subject to the encumbrances and for that reason it was entitled to all benefits derived from the life policies since it paid the premiums....