Case ID: la-ann_5/html/0343-01.html
Source: Caselaw Access Project
Author: {"author": "Slidell, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Lee and Ritchie v. R. W. Galbraith et al.
    The vendor’s privilege is lost by the property passing out of the possession of the vendee. C. C. 3194.
    The holder of a tobacco warehouse certificate, who has made advances upon it, is entitled to retain the tobacco even without a formal act of pledge as against the original vendor who delivered the tobacco without being paid for it.
    It is more equitable that the vendor who delivers possession of his property to the vendee without being paid for it, should suffer by the acts of the vendee, than that third persons who made advances upon the faith of the vendees possession should lose by it.
    APPEAL from the Fourth District Court of New Orleans, Strawbridge, J.
    
      Benjamin and Micou, for plaintiffs,
    contended : It is perfectly manifest that there exists no lien nor privilege on this tobacco in favor of Warneken and Kirchhoff. The lien of the consignee does not exist, because the merchandise was not consigned for sale. The privilege of the pledgee does not exist, because the act required by article 3125 was not made; so that, in the language of that article, the privilege against third persons has not taken place.
    The judge of the court below agreed with the plaintiffs that Warneken and Kirchhoff had no claim valid against third persons; but decided that plaintiffs had lost'their privilege, because he was of the opinion that the property had “ passed out of the possession of the purchaser.” C. C. 3194. With due respect, we think Ihis an example of that mode of interpretation which is reprobated by jurisconsults as an adherence to the letter of the text, whilst it corrodes its spirit,. If the articles 3194 and 3195 are read together, and they are connected by the conjunction “but,” it will be seen that it was the will of the legislator that the privilege should exist, until the conflicting rights of third persons were concerned. The privilege is to last whilst the goods are in possession of the purchaser; but, if he allows the thing to be sold confusedly with a mass of other things, without making his claim, he shall lose the privilege. If the judge below be right in his literal construction, then a vendor, in case of the death or insolvency of the purchaser, loses his privilege, because the purchaser is no longer in possession; which amounts to determining that the privilege ceases to exist, by the fact which alone renders its existence of any value.
    But in the present case it. is plain, that the possession was not lost to the purchaser. The delivery of the goods to Warneken and Kirchhoff had taken place' it is true, but this was in execution of an agreement which, under the law, was of no effect against third persons, which, so far as we are concerned, was as if it had never taken place. Possession may have been lost, to Galbraith as between himself and Warneken and Kirchhoff. because his pledge was binding on himself, but when we, third persons, are concerned, the possession was not lost, because the pledge as against us is of no effect. It is clear that the judgment of the lower court, whilst it professes to consider the pledge null, really gives it full and entire effect against us.
    
      The intervenors in the court below relied upon the cases of Fetter v. Field, 1st Ann. 83, and Laughlin v. Ganahl, 11 R. R. 183. The judge says that the only authority on the subject thathe discovered was the case of Erwins. Torrey, 8 M. R. 90. We propose to make some comment on the series of decisions found in our reports, including not only the cases just named, but'that of Leverich v. Richards, 1st Ann. 357, and that of Willard s. Parker, 7 N. S. 483.
    
      Erwin v. Torrey, 8 M. R. 90, is the case of a conflict of privilege between a vendor and a factor who had made advances. Judge Martin expressly puts his decision on the ground that the claimants “had, as factors, a lien on the cotton for their advances.” The cotton was consigned to them for sale through their correspondents abroad, ns shown by the statement of facts. In the preséntense no lien whatever is shown to exist in favor of Warneken and Kirehhoff. The case quoted by Judge Strawbridge is therefore not applicable as authority to the point now at issue.
    
      Willard s. Parker, 7 N. S. 483, was the case of are-sale by the vendee to a third person; it is quoted by the court in the opinion rendered in Robinson s. Ganahl, but its application is not readily perceived either in this last mentioned case or in that now before the court. Wo could not think of maintaining the legal heresy, that the vendor’s privilege continued to attach on the moveable after it had been sold and delivered to a third person.
    
      Laughlin s. Ganahl, 11 R. R. 183, was identical in principle with Erwin v. Torrey. It was the case of cotton shipped for sale, and advances made by the consignee on the faith of the shipment. The cotton had passed into third hands by a valid and legal transfer in regular course of business, and therefore binding on third persons.
    
      Fetter v. Field, 1st Ann. 83, we consider to be directly in point in favor of our pretensions in this case. In this case, Corning ép Co. had possession of the merchandise under bills of lading; the possession had passed out of Field the purchaser. Yet the court gave judgment for the vendor’s privilege against Corning 8f Co., on the ground that under the circumstances they had not acquired any lien or privilege on the goods, that the transaction was not according to the usual course of trade, but was partly a security for a pre-existing debt. The court uses very guarded language, to which we in vain called the attention of the judge below. It says, “ our enquiry is confined to the fact of possession, and the change of possession according to the usual course of business.” It goes on to declare of art. 3194, that it appears “ to contemplate the conflicting claims of other creditors as opposed to the rights of the vendor, and not of those who have their claims as a want of possession in the vendee.” Finally, “that where any rights are acquired in relation to the. change of possession, it is our duty to give effect to them whenever the usages of commerce are observed, and the transaction is in other respects regular and unimpeached.” If this language has any meaning, its plain and obvious import when applied to our case is, that the article 3194 does not give the right to Warneken and Kirehhoff to interfere with our privilege, because, as they have no privilege on the tobacco, they are not parties presenting “ the conflicting claims of a creditor butpersous who base their claims on a want of possession in the vendee;” and because “ their transaction is not regular and unimpeached,” being made in disregard of the provisions of our law on the subject of pledge.
    
      Leverichv. Richards, 1st Ann. 357, bears adose analogy to this casein many of its features. In the statement of facts in that case the court say: “ Richards was a cotton broker, known generally and doing business as such, and having no credit except that which he derived from doing the business of other persons. Spence, up to the time of Richards’ absconding, had extensive dealings withhim, on his own account and on account of others; Richards sometimes trading in cotton in his own name.” Now this is the precise description given of Galbraith’ «.business in tobacco by the witnesses in the present case. The court then say that “ Spence did not purchase the cotton; he made an advance on it and took it in pledge.” The cotton had been regularly consigned to Spence, who had made advances on it; it had gone out. of the possession of Richards; but the latter was a broker, known to be such, and the court say “the whole affair originated and was carried through in the confidence which Spence thought proper to place in Richards, and if it is thought that such transactions are in the usual course of business, and can be supported by courts of justice, it is time that such an error should be dispelled.”
    ItAs true that the court in the last mentioned case considered Richards as a fraudulent purchaser, because he represented himself as a broker, although in reality purchasing for his own account; but in the case before the court, the fraud of the purchaser and irregularity of the transaction are still more glaring than in the other. Here the purchaser, although acting for himself, buys for cash, and immediately raises money on the goods without paying for them : an offence expressly by statute declared to be a fraud on the vendor. Act 1840, sec. 10. And the contract by which he raised the money, instead of being the regular and usual consignment for sale as in Spence’s case, is made in a form declared by positive provision of the code to be of no effect against third persons.
    We think that we have shown conclusively, under our Slate jurisprudence, that the claim of Warneken and Kirchhoff must yield to the vendor’s privilege, but beg leave to tax the patience of the court whilst we refer to authorities derived from the country on whose code our own is based.
    The Napoleon Code, art. 2102. gives a privilege on the price of moveables sold and not paid for, “s’ils sont encore en la possession du débil eur.” The same article gives a privilege to the pledgee, “ sur le gage dont le créancier est saisi.” These clauses correspond, almost in words: the first with our article 3194, and' the second with our article 3187. But our code, in excess of precaution, has provided in article 3188, that “fot'the exercise of this privilege it is necessary that all the requisites stated in the title of pledge should be fulfilled. The judge below, in defiance of this provision, has given effect to the pledge of Warneken and Kirchhoff in point of fact, although in words he says they are not entitled to it. In order to reach this strange result he says that Galbraith, had lost possession. We now affirm that this is not true in point of law ; that the principle of the civil law is that possession is not lost by the giving in pledge.
    Our code, art. 3389 et seq. defines possession and its different species, and recognises the distinction made by the civilians between natural and civil possession. It also speaks of the legal possession. Article 3396 recognises the possession of the owner as still existing, although the natural possession, i■ e. the corporeal detention (art. 3393) may be in third hands. It gives as examples the case of the tenant whose possession is that of the landlord, and the case of the depositary : “ and in general every proprietor may possess by the persons who hold th,e thing in his name.” The question then arises, whether the pledgee is in the class of precarious possessors, who possess on account and in the name of the owners.
    Merlin, Rep. verbo Précaire, says: “C’est ainsi que celui qui posséde ;\ titre de prét, d’usufruit, de nantissement, sont dits n’avoir qu’une possession précaire.” Our code, article 3522, No. 27, defines the word “ precarious” thus: “That possession is called precarious which one enjoys by leave of another, and during Iris pleasure. The title which excludes the ownership, such as a lease, is also called precarious.” Savigny, in his Treatise on Possession under the Roman law, examines at length the question whether the pledgee has the civil possession of the pawn, and determines that he has not; that it remains with the owner of the thing. Indeed the simple reflection that a pledgee cannot acquire by prescription under his possession, and that the possession of the pledgee counts in favor of the pledger for that purpose, would seem at once to establish this principle. Savigny, Traité de Possession, 65.
    So that, if all that is wanted to establish our rights is to show a possession in vendee, we are literally within the purview of article 3194. We feel sensible, however, that this is not the true point before the court, but that, in its own language, this is a conflict of privileges between creditors, and he whose title to a privilege is regular must prevail over the other. If Warneken and Kirchhoff have no privilege in the tobacco which belongs to the defendant, they have no right to contest our claim. If they have, then our privilege must yield to their’s.
    This is also the manner in which the question is treated by Troplong. In his Traité des Priviléges, he says, Nos. 184 bis. 185, that the privilege can only be exercised whilst the m'oveable is in possession of the vendee. So, if the purchaser had re-sold and delivered the article bought, by him, the privilege would be at an end. He then says, “How is it with regard to Pledge.” In a previous number (No. 49) he had explained that the vendor’s privilege continued, although the property had been delivered by the purchaser to a common carrier, because the purchasers civil possession still existed although he had lost the corporeal detention, or natural possession. He refers back to No. 102, where he had also established the same principle, and to article 169, bis., which he says might be construed as an opinion in favor of the vendor. He then goes on to show that where there is a pledge, the purchaser has parted wifh the possession towards one Who has an interest in, and right to, the possession, and that no sufficient posS6SS'on remains ¡n fhQ purchaser to entitle the vendor to claim the privilege. But he considers the case as a conflict between two privileges, and does not hint at the possibility of the strange doctrine asserted in the judgment of the court below, that the possession, when the vendor is asserting his privilege, is lost to the purchaser by a contract which in law is not a pledge. His reasoning in No. 169, bis., will be found very satisfactory; and we will close this brief by praying the attention of the court to the whole course of his reasoning in the Nos. 49, 101, 102, 16'9, bis., 184 bis., and 185. above quoted.
    
      L. Hunlon and E. A. Bradford, for intervenors,
    contended : That they come within the clear purview of article 3214 of the code. When they made advances upon the tobacco, it was put into their hands for sale in order to reimburse them. It was agreed between Galbraith and themselves, that the property should be sold for that purpose ; but, for the reason already stated, it was also agreed that the sale should be made by another party, who was to receive the commission for selling, but that the proceeds of the sale should be paid to them. It waB proved by Fisher, who was the person selected by Galbraith to effect the sale, that such an arrangement was not unusual nor irregular.
    On what principle, then, of commercial law, or of public policy, can it be held that the defendants should, on this account, forfeit their privilege on the property ? The object of the law in conceding a privilege to commission merchants for their advances, is to facilitate commercial transactions, by enabling the holders of property to obtain money upon it in advance of the sale, and thus wait a favorable market. The condition of the privilege is, that the advance shall be made upon property placed in the hands of the commission merchant to be sold. The only important question is, was the property held merely as collateral security for money, or was it to be sold for the re-payment of the advance ? If the property was to be sold, it cannot be material whether the sale was to be made by the defendants or by a third person selected for the purpose, either by Galbraith or themselves. May not a consignor lawfully stipulate with his consignee, that he shall be permitted to attend to the sale of his property himself, or to select the broker for that purpose ? Does such a stipulation necessarily involve a forfeiture of the privileges of the consignee ? Does he thereby lose his character as consignee?
    Had not the defendants in this instance a right, as commission merchants, to insist upon the sale of this property ? If Galbraith or his agent had neglected to sell it, would they not have been authorised to proceed to a sale of it themselves, at least to an extent sufficient to reimburse them ? Would there have been any disability on their part to sell, or any necessity for the “intervention of justice,” as in case of a pledge ? Certainly in such an event the defendants might legally have exercised all the rights of a commission merchant over the property. Their character as commission merchants was not lost or merged in that of mere money lenders. By the terms of the contract with Galbraith, they had conceded to him the privilege of selling the property himself or through his agent, but they had also stipulated that the property should be sold, and it would seem to follow that they were entitled to require a sale to be made in the ordinary course of business, or if their advances were not reimbursed to them, to sell it themselves.
    The course of proceeding in this case illustrates the position of the parties, and the nature of the control of Warnehen and Kirchhoff ov&rtiae properly. As the market here proved unfavorable, and no sale could be effected advantageously, the samples were delivered up to Warnehen and Kirchhoff, and the property was shipped by them to a foreign market. But it is insisted, that Warnehen and Kirchhoff are mere pledgees under a contract, not clothed with the legal formalities, and therefore conferring no privilege. It would be difficult, however, to show that the contract in this case was, in any legal sense, a contract of pledge. The tobacco was not placed in the hands of Warnehen and Kirchhoff merely as security for a debt. It was also a part of the contract that the property should be sold for the payment of that debt. Such astipulation is altogether at variance with the articles of our code in regard to a pledge. Yet such contracts are of daily occurrence among commercial men in nil countries. But, however frequent or familiar they may be, if excluded from the benefit of art. 3214, they are wholly unrecognised and unprotected by the code.
    This leads us to the important inquiry, whether the provision of the code in respect to pledges ought qver to be extended to commercial contracts. In the French Code it is expressly declared that they shall not be so extended. There is no similar provision in our code, but it is Well known that at the time our Civil Code was adopted, it was the intention of the Legislature to proceed to the enactment of a Commercial Code. That intention was never carried into effect; and in the absence of a Commercial Code, it has always been held that the general commercial law, the lex mercatoria of the commercial world is in force in this State. Kenner v. Wagner, 2 R. R. 120.
    It will not be denied that it is altogether repugnant to this system to incumber commercial transactions with the formalities of the contract of pledge, as required by the code. It is true that the system has not been fully recognised and uniformly upheld by the courts of this State. In sbipé instances it has been marred and impaired by the application of the provisions of the code to cases, to which it is believed they were never intended to apply, and where such application has produced nothing but mischief and confusion. In other instances, the inconvenience and evil consequences of such an infringement of the commercial law, as recognised by all other States, were so obvious and glaring that even the positive enactments of the code were made to yield to the “customs of merchants.” The result has been that our commercial system, if we may be said to have a commercial system, is deformed and incongruous. But in recent cases the courts have evidently sought to restore our jurisprudence to a conformity with the Commercial Code of the other States. The present case presents another opportunity to decide whether commercial contracts in this State shall be decided according to the Commercial Law, which has been so often held to be in force, or shall continue subject to the doubts and perplexities of conflicting systems of jurisprudence. Under the Commercial Law, it is admitted that this case would be free from difficulty; and even the counsel for the plaintiffs concurred with the judge of the court below, in regretting that it could not be decided by the Commercial Law.
    If, however, this case must be considered solely under the provisions of the code in reference to pledges, still it is believed that the defendants have a sufficient possession of the property to protect them against the claim of the plaintiffs. It is proved that Galbraith transferred the tobacco into their possession on the 7th June, 1849, and that, by the agreement of the parties, it was to remain in their possession till sold to reimburse their advance upon it.
    It is admitted by the counsel for the plaintiffs that even an informal pledge is binding upon the parties to it. It gives the pledgee no privilege, as against third persons, but it gives him the possession of the property, and is conch},, sive as to the right of possession between the parties. This possession of the pledgee is adverse to the pledger, and therefore displaces and defeats the privilege of the vendor. The law has carefully limited the duration of the vendor’s privilege, to the continuance of the possession of the vendee. The policy of this restriction is obvious.
    Under this aspect of the,case, the question is not one of privilege on the part of Warneken and Kirchoff, but one of possession. The privilege of the vendor is conditional upon the possession of the vendee. If, therefore, .the vendee of the plaintiffs had lost his possession, they have lost their privilege. If he had parted with his possession upon certain conditions, their privilege, which cannot exist independently of his possession, is subject to the same conditions and limitations.
    Such is the doctrine of the French law, from which the provisions of our law upon this subject were taken. It is there held that when a creditor has possession of the property of his debtor, and a right, whether derived from the law or from the contract between the parties, to retain that possession as against his debtor, till his debt is paid; even though he may have no privilege upon the property, he can hold it against the privilege of a vendor. Troplong 1, Priviléges et Hypothéques. § 256, 258.
    In this respect it is believed that the position of a vendor, who sequesters property in virtue of a claim of privilege, is different from that of a creditor levying upon property under an attachment or execution. A sequestration confers no privilege, it issues only in virtue of a privilege already existing. But the vendor’s privilege cannot exist after the vendee has parted with his possession. It gives the vendor no right to follow the property, when the vendee could not follow it. Accordingly, although our reports contain frequent cases in which an attaching or seizing creditor has prevailed against a creditor who held the property of his debtor, merely as collateral security, yet no case has been cited, in which a vendor has maintained his privilege under such circumstances.
    
      It has been expressly held, however, in the case of Laughlin v. Ganahl, II '■h* tbe privilege accorded to the vendor subsists only so long as the property sold remains in the possession of the purchaser; that the purchaser, in that instance, had lost the control and possession of it; that he could not have demanded a surrender of it without reimbursing the sums received, and all incidental charges; and therefore the court refused to enforce the vendor’s privilege upon it.
    In the very recent case of Fetter v. Field, 1st Ann. 80, the court say in reference to the claim of a vendor: “It will be observed that our inquiry is confined to the fact of possession, and the change of possession, according to the usual course of business. This is not the case of an attaching creditor, but of a vendor who sues to enforce his privilege, and a party relying upon his rights growing out of the fact of the purchaser’s having parted with his possession.” “This article (3194) provides for the exercise of the privilege only in the case of the property sold being in the possession of the purchaser, and appears to contemplate the conflicting claims of oilier creditors as opposed to the rights of the vendor, and not those who base their claims on a want of possession in the vendee, or an adverse possession. Under a state of facts like this, where any rights are acquired in relation to the change of possession, it is our duty to give effect to them wherever the usages of commerce are observed, and the transaction is in other respects regular and unimpeached.”
    It was urged, however, by the counsel of the plaintiffs, in the conclusion of his brief, that in the case before the court there was no change of possession •within the purview of the article No. 3194; that the purchaser’s civil possession still existed, although he had lost the corporeal detention, or natural possession.” If this argument proved anything it, would prove too much, for it would show that the vendor’s privilege subsisted, even in case of a formal and valid pledge. It is admitted, however, that “where there is a pledge, the purchaser has parted with the possession towards one who has an interest in, and a right to, the possession, and that no suffieient possession remains in the purchaser to entitle the vendor to claim the privilege.” Troplong, Traité des Priviléges. § '165.
    But it is said that Troplong “considers the case as a conflict between the two privilege.s.” That author expressly declares, on the contrary, that the right of possession, unsupported by any legal privilege, “ le droit de retention, privilége proprement dit,” is sufficient to overcome the vendor’s privilege. Nos. 256,257', 258.
    He appears to base his opinion upon the “fact of possession, and the change of possession, according to the usual course of business.”
   The judgment of the court was pronounced by

Slidell, J.

On the 5th June, 1849, the plaintiffs sold to Galbraith twenty-seven hogsheads of tobacco for $1803 60 cash, and delivered to him the warehouse certificates. The nature and effect of such instruments are declared by the act of 1846, p. 127, sec. 14: “This certificate shall be transferable by endorsement or otherwise, which shall be evidence of its delivery. When the legal holder of the certificate shall call for the delivery of the tobacco, it shall be the duty of the inspectors to have the hogsheads promptly delivered.” Two days after the sale Galbraith transferred the certificates to Warneken and Kirchhoff, merchants in New Orleans, and obtained from them cash advances. He neglected to pay his vendors for the tobacco, .although repeatedly called upon, with the exception of $200 paid on the 19th June, 1849 ; and after waiting till the 29th June, the plaintiffs sequestered the tobacco at the warehouse. Subsequently, on the 18th July, 1849, they caused the certificates to be sequestered in the hands of Warneken and Kirchhoff, and cited them to set up any claim to which they were entitled against the tobacco. Warneken and Kirchhoff, appeared and alleged that Galbraith owed them for their advances as commission merchants; that when they made the advances upon the credit of the tobacco he put it in their hands to be sold; that they had a privilege for their advances, and that the plaintiffs had lost their privilege as vendors.

The argument on the part of the plaintiffs maintains that Warneken and Kirchhoff have no privilege as commission merchants on the tobacco, because it was not placed in their hands for sale by them; and that they have no privilege as vendors, because no formal act of pledge, as required by our code, was made; that the possession has not, in legal contemplation, so passed out of their vendee as to destroy their privilege. Wameken and Kirchhoff maintain the opposite propositions, contending that they have a privilege under the art. 3214, and that the privilege is gone by the change of possession.

The facts proved at the trial are, in substance, as follows: when Wameken and Kirchhoff made the advances, the tobacco was put into their 'hands by the transfer of the certificates; and it was agreed that the tobacco should be sold, and the proceeds applied to the payment of the advances; but it was also agreed that Galbraith might attend himself to the sale, or employ some one else to effect it.

The question is not before us, whether the creditors of Galbraith could have reached this properly by fieri facias or attachment, so as to defeat the alleged preference of Warneken and Kirchhoff. The plaintiffs have attackccfthe property by sequestration in virtue of an alleged privilege as vendors. If, under the facts of the case, the vendors’ privilege still existed as against, the defendants Warneken and Kirchhoff, at the date of the sequestration, the action must be maintained i otherwise the judgment of the district court must be affirmed.

The privilege of the vendor rests upon the following article of our code: “He who has sold to another any moveable property, which is not paid for, has a preference on the price of this property over the other creditors of the purchaser, whether the sale was made on a credit or without, if the property still remains in the possession of the purchaser.” Art. 3194.

In the present case the possession has passed from the purchaser into the hands of parties, who in good Faith have advanced their money upon the credit of the goods, of which Galbraith was the ostensible owner. Whether the transaction is covered or not by the article 3214, so as to clothe the debt to Warneken and Kirchhoff with a privilege, it is at least clear that Galbraith could not take the property out of their hands without first paying them. He has clearly lost the present right of possession. Do the plaintiffs, as vendors, stand in a better position? We think'not. Under a literal application of the code, it cannot be said that the possession remains in the purchaser; and the well settled principle that privileges are stricti juris, forbids us to give an enlarged and liberal interpretation to its language, especially where the equity in favor of the adverse party is manifestly stronger than the plaintiffs can assert. For by their incautious delivery of possession they enabled Galbraith to appear as the unqualified owner of the goods, and so get credit in the market. It is more just that the consequences of their misplaced confidence should fall upon themselves than upon an innocent third person, whom they enabled Galbraith to deceive.

Judgment affirmed, with costs.