Pioneer Bank & Trust Co. v. Foggin

• Decision Date: 16 June 1965
• Docket Number: No. 10402,10402
• Citation: 177 So.2d 131
• Parties: PIONEER BANK & TRUST COMPANY, Plaintiff-Appellee, v. Howard F. FOGGIN, Defendant-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 131

177 So.2d 131

PIONEER BANK & TRUST COMPANY, Plaintiff-Appellee, v. Howard F. FOGGIN, Defendant-Appellant.

No. 10402.

Court of Appeal of Louisiana, Second Circuit.

June 16, 1965.

Rehearing Denied July 29, 1965.

Writ Refused Oct. 21, 1965.

Robert G. Pugh, Shreveport, for appellant.

Bodenheimer, Looney & Jones, Shreveport, for appellee.

Before GLADNEY, AYRES and BOLIN, JJ.

GLADNEY, Judge.

This action by plaintiff bank was brought for the purpose of securing a personal judgment against the accommodation endorser of a chattel mortgage note of which Herman M. Davis was the maker. Suit was instituted on February 17, 1964 for the balance due on the note after application of credits resulting from a judicial sale of the mortgaged automobile. From a judgment for plaintiff the defendant, Howard F. Foggin, has appealed.

The maker of the note, Herman M. Davis, shortly after entering the employment of the Shreveport Claims Service, a business owned and operated by the defendant, borrowed money from his employer in order to purchase an automobile. Foggin was repaid through a loan from appellee bank which was confected on March 16, 1962, the bank being represented in the transaction by Travis T. Hailey. In order to secure the indebtedness Herman M. Davis executed a chattel mortgage note evidencing the obligation of $2,909.50. The note was endorsed by Foggin. Monthly payments of $80.00 were paid as they came due by charges against the account of Davis, however, when the July payment became due the bank account of Davis did not have sufficient funds to discharge the monthly payment, and the bank thereupon transferred $80.00 from the bank account of the Shreveport Claims Service.

At this time Foggin became concerned as to his liability on the note. This was occasioned perhaps by several factors, one of which was that Davis had been discharged from the Shreveport Claims Service and had returned to Del Rio, Texas. Since the acquisition by Davis, the mortgaged Mercury automobile had been used by Mrs. Davis in Texas with the knowledge of Foggin. On May 14, 1962 the bank exchanged a Louisiana title certificate on the automobile for a Texas certificate of title at the request of Davis.

After the note was in default in July the defendant consulted with his attorney who advised cooperation with the bank in the recovery of the automobile which was located at the home of Davis in Del Rio, Texas. The bank informed Foggin that possession of the automobile could be obtained through a recovery bureau by an informal method, or through judicial proceedings taken in Texas and it would pursue the course selected by him. He directed the bank to seize the automobile in the quickest manner possible. After the car was returned to Shreveport by the recovery bureau and seized under a writ of sequestration while in the possession of the defendant, suit for its seizure and sale was instituted by the bank against Davis and Foggin, the action being in rem insofar as Davis was concerned. Foggin was personally served and judgment therein reserved all rights of the plaintiff bank against the defendant herein. At the judicial sale on July 24, 1963 the automobile, after due appraisal, was sold to the petitioning creditor for the sum of $1,200.00 which left a balance then due and owing on the promissory note of the amount herein sued for.

The case is defended upon two major grounds. First, it is charged that the endorser was released from his obligation to the extent of the impairment of the value of the property removed forasmuch as the bank consented to the removal of the mortgaged automobile from Louisiana to Texas without the consent or knowledge of the endorser. Second, it is contended the seizure of the automobile in Texas was illegal and in consequence thereof all judicial processes that issued from the Caddo Parish Court were null and void and could not form the basis for a deficiency judgment.

The defense first urged is based on LSA-C.C. Art. 3061 which provides:

'The surety is discharged when by the act of the creditor, the subrogation to his rights, mortgages and privileges can no longer be operated in favor of the surety.'

Whether or not Foggin had prior knowledge of and had acquiesced in the exchange of the Louisiana title certificate for a Texas title certificate is a question of fact. Hailey admitted that he had not expressly informed Foggin of the exchange but believed that this was unnecessary and in furtherance of an understanding between Davis, Foggin and Hailey had at the time the loan was negotiated. At that time Mrs. Davis was employed at an air force base in Del Rio, Texas, and she was attempting to get a transfer of her position to the Barksdale Air Force Base in Shreveport in order to be with her husband. Hailey testified that during the discussion which took place it was stated the car was to be used by Mrs. Davis and that Davis was arranging to purchase a house in Shreveport. It was explained that the Louisiana title certificate was exchanged in order that a Texas license could be secured for the automobile. Also it developed that Davis possessed other automobiles which were to be used by him in connection with his work in Shreveport. Foggin denied that he had any knowledge of the intended transfer of the title certificate. Because he was not so informed appellant urges his discharge from liability by reason of an impairment of his rights to the security which resulted from the removal of the mortgaged automobile from the State of Louisiana without his expressed or implied consent.

In order to obtain his release under the Civil Code Article quoted Foggin must show his right of subrogation was prejudiced by the transfer. Patterson-Redmond Equipment, Inc. v. Martin, La.App., 166 So.2d 65 (4th Cir. 1964); Central Sav. Bank & Tr. Co. v. Oilfield Supply & Scrap Material Co., 202 La. 787, 12 So.2d 819 (1943); Succession of Gravolet, La.App.,193 So. 218 (Orl. Cir. 1940).

As the defense urged, if sustained, would constitute an extinguishment of the obligation it has the same effect as a plea in payment or release and is therefore an affirmative defense. See LSA-C.C.P. Art. 1005 and comments thereunder. The burden of establishing this defense must be carried by the appellant who asserts that he had no knowledge of the title transfer. Cobb v. Davidson, 219 La. 434, 53 So.2d 225 (1951). In commenting upon the exchange of title of the mortgaged automobile the trial court observed: 'Under the circumstances set forth, we do not think plaintiff bank acted improperly in the removal of the automobile by Davis from the state of Louisiana to Del Rio, Texas. Defendant Foggin, as well as Mr. Hailey of the bank, knew when the loan was made that Davis' wife was living in the state of Texas, and both could anticipate at that time that he would be driving the automobile to Texas when visiting her.' Consideration of the testimony as adduced clearly implies that Foggin understood the car was to be removed to Texas and consented thereto without objection.

Having determined as did the trial court that Foggin had knowledge of the exchange of title certificates this finding is sufficient to dispose of the defense. however, we are also impressed with the fact that the record fails to disclose to our satisfaction any proof that appellant cannot be fully subrogated to all the rights possessed by creditor-appellee. Arguendo, conceding the title transfer was without knowledge and consent of Foggin, it is nevertheless incumbent upon the latter to show that the cannot be so subrogated. The title to the automobile is not in controversy as the mortgagee possessed the same remedy for possession of the vehicle under a Texas title...