Case Name: Jean M. Begue vs. Mrs. E. A. St. Marc
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1895-05-06
Citations: 47 La. Ann. 1151
Docket Number: No. 11,596
Parties: Jean M. Begue vs. Mrs. E. A. St. Marc.
Judges: 
Reporter: Louisiana Annual Reports
Volume: 47
Pages: 1151–1167

Head Matter:
No. 11,596.
Jean M. Begue vs. Mrs. E. A. St. Marc.
The borrower insured the property mortgaged to secure the debt and in the policy tbe clause was inserted: Loss, if any, pay tibie “to the creditor” as interest may appear.
The policy was transferred to the possession of the creditor and he continuously, during five years, held possession.
Five years having elapsed since the maturity of the note; during which time the policy was renewed annually with the clause in question, the note in consequence is not prescribed.
Subsequent to the five years another policy containing a similar clause was taken out in lieu of the first.
The order annually given to pay the loss, if any, to the creditor, was an acknowledgment of the debt which had the effect of suspending prescription.
The possession by the creditor of the policy of insurance of the debtor, duly assigned by the latter to the former, and kept alive by payment of premium, is an acknowledgment.
The acknowledgment of a debt will interrupt prescription though such acknowledgment be not made to the creditor.
Watkins, .L, dissenting. — The object and scope of the stipulation in an act of mortgage whereby tne mortgagor agrees to keep the buildings and improvements, subject to the mortgage, insured, until the full and final payment of the mortgage, was to oblige the mortgagor to keep up the mortgaged property to its then standard value as a security for the debt; that in case of loss or damage by fire before the maturity of the note and its payment, the insurance policy would fully guarantee the mortgagee’s reimbursement to that extent.
The assignment of an insurance policy to a mortgagee is, in no sense, a pledge for the security for the debt; nor is it a contract with the mortgagee only. It is simply intended as a protection of the security of mortgage and not for the payment of the debt.
APPEAL from the Oivil District Court for the Parish of Orleans. Bightor, J.
Albert Voorhies for Plaintiff, Appellee:
Prescription does not run as long as the creditor, with the consent of the debtor, holds the latter’s valuables as collateral security, in pledge or otherwise. And the same is true of anteehresis, and generally of all agreements by which a debtor confers possession of his property to his creditor with the stipulation that the rents and revenues are to be applied to the extinguishment of the debt.
The transfer of a policy of insurance and its delivery- to a creditor as collateral security is a continuous acknowledgment of the debt.
The stipulation in a policy of insurance “loss, if any, payable to the creditor,” is a formal acknowledgment of the debt.
Partial payments made by the husband as agent of his wife is an interruption of prescription.
As long as the policy is operative between the mortgagor and the insurance company, the pledge in the hands of the mortgage creditor remains in full force; and as long as the latter holds the pledge “there is a standing acknowledgment of the debt,” and as a consequence prescription does not run. O. O., Art. 3520 (3486).
Elliott vs. Brown, Executor, 13 An. 579, is an able exposition of the law of admission. The court observes: “There must be an acknowledgment of the creditor’s right. O. O. 3486. An admission by the alleged debtor that a third person holds a note against him is not, of itself, an admission that he justly owes to such pei'son the amount of the note.”
The distinction is an obvious one. In the preceding paragraph the witness, it appears, said “that he has heard George Elliott say, within the last five years, that Bryce Elliott held a note against him, but did not acknowledge that he owed the note, or state the amount; but, on the contrary, stated that Bryce Elliott was largely indebted to him.”
Civil Code, Art. 3520 (3486) : “Prescription ceases likewise to run whenever the debtor, or possessor, makes acknowledgmeixt of the right of the person whose title he prescribes.” It is the right that must be acknowledged. That is what is decided in the case, Schultz vs. Houghton, 36 An. 407. Said the court: “It is perfectly clear that defexxdant in this case has never-acknowledged the right of the creditor — i. e., the. debt claimed by the creditor; but, on the contrary, declined to acknowledge it, and left it a matter of free and open discussion.”
Thos. J. Semmes and A. B. Phillips for Appellant:
The assignment of a policy of insurance to a mortgagee as interest may appear, does not suspend prescription as does a pledge for a debt. 115 Mass. 590; 75 New York, 10; 13 An. 579; 36 An. 407.
The policy in this case was made in 1880, and the assignment to the mortgagee was contemporaneous with the mortgage, 6th August, 1884. It was kept in force antil 1893 by payment of premiums —who made those payments is not known — that is, whether they were made by the husband or the wife; but whether made by one or the other, they were not payments on account of the debt secured by mortgage, and therefore are not annual interruptions of prescription. Those payments were made on account of a contract collateral to tne debt and the mortgage securing it, but not on account of the debt or the mortgage, for they in no manner diminished the debt or reduced the mortgage.
The object of those payments was to maintain intact the thing which had been mortgaged to secure the debt. If that thing were destroyed the debt secured by it would remain in full and undiminished vigor, but the thing pledged to secure its payment would disappear. It is therefore plain that the object of the collateral contract is, not to secure the payment of the debt, but to preserve the thing which is pledged to secure the payment of the debt. The thing may be a house mortgaged or a chattel pledged — the collateral agreement is to secure the rebuilding of the house or the replacement of the chattel in case of destruction or loss — and that agreement to rebuild or replace is made with a third person, who contracts with the debtor to rebuild the house if destroyed, or replace the chattel if it perish. Does it not follow that the assignee of such a contract is not in possession of the thing pledged to secure the debt, though he may be in possession of an agreement on the part of a third person to replace the thing pledged.
It is plain, therefore, that the possession of the agreement to replace the thing pledged is not the possession of the thing pledged, but of another thing, which is not the object of the contract of pledge, but the object of a contract collateral thereto. .
It is the possession of the thing pledged which prevents the running of prescription, the creditor being in possession has no interest to sue; the pledge is his guarantee, and the debtor by leaving the pledge in his hands recognizes the existence of his debt.
Such is not the case with a mortgage, because the mortgagee has no possession; but such is the case with antichresis, because the antichresis creditor has possession of the immovable, which is the object of the antichresis contract.
In its origin the pignus conferred on the creditor the right of retention only, and for that reason to-day possession is essential to a pledge.
The Supreme Court of Massachusetts say, in the case of Gordon vs. Savings Bank, 115 Mass. 591: “The issuance was for indemnity, to the mortgagee as well as to the mortgagor. To the mortgagee it was protection of the security, not for the payment of the debt.”
Now, what is the essence of a pledge? The Code, in Art. 8133, defines a pledge to be “ a contract by which one gives something to his creditor as a security for his debt; ” not a security that the thing pledged shall not perish.
An independent contract by a third person that the thing shall not perish, or if it does it shall be replaced, is certainly no part of of the contract of pledge; it is a distinct and independent agreement, not made by the debtor, but by a third person no party to the contract of pledge, and having no interest whatever in the debt, nor in the thing given to secure its payment.
The contract of insurance might have been made with the mortgagee only, to indemnify him against loss in case the mortgaged prop - erty should be destroyed.
Does it make any difference in the nature of the transaction that the insurance is effected in the name and at the expense of the mortgagor? In both cases the nature of the contract is the same; it is an agreement for the preservation of the security, not for the payment of the debt. In the one case the mortgagee insures his qualified right in the property; in the other the mortgagor insures as absolute owner, but, as said, the nature of the contract, for the preservation of the thing, is the same in both cases.
What is the reason that the possession of the pledgee is considered a continual tacit admission of the debt due to him?
The possession of the creditor is precarious; by no lapse of time can he acquire title to the thing pledged. The possession being precarious, its continuance is an admission by the owner that the possessor has some right that entitles him to possession, otherwise he would resume the enjoyment of his property. This has no application to a collateral agreement having for its object the preservation of the thing which is in the possession of another, and which in no manner relates to the title or possession of the thing possessed.
Argued and submitted March 1, 1895.
Opinion handed down May 6, 1895.
Rehearing refused June 21, 1895.
Plaintiff is the holder of a promissory note.
Against the maker's plea of prescription he invokes the payments made by defendant’s husband, endorsed on the note and signed by him. He represented himself at the time as his wife’s agent.
The following is the testimony upon the subject:
Q. Please state in what capacity Mr. Ferrandou appeared and made these payments and signed those documents.
To which question Mr. Philips in behalf of Mrs. Ferrandou objected unless counsel can show written authority from Mrs. Ferrandou to endorse these papers.
The court rules that the objection goes to the effect, but that the plaintiff must prove express authority either by parol or in writing. The defendant in rebuttal, on this point, testified that her husband was not authorized to make the payments of interest he had made, nor to sign endorsement on the note showing payments.
Regarding the policy of insurance invoked by plaintiff against the plea, of prescription, being plaintiff urged an acknowledgment of the debt; the transfer by defendant to plaintiff reads:
“ New Orleans, La., August 6, 1884.
“For value received I hereby transfer, assign and set over all my rights, title and interest in and to the within policy of insurance unto and in favor of Jean Marie Begue as his interest may appear.
(Singed) “ E. A. Ferrandou.
“To authorize my wife.
A. Ferrandou.”
The policy was in force at all times, and plaintiff’s claim referred to as insured.
Mrs. E. A. Ferrandou annually paid the premiums to the insurance company, to the lfth June, 1893, at which time, desiring to increase the amount of the insurance, she ordered and obtained another policy in which the following was inserted as it had been in the first policy.
“ Loss, if any, payable to Jean Marie Begue as interest may appear.”
This new policy in plaintiff’s possession was by him introduced in evidence.
With reference to the policies the defendant, Mrs. Ferrandou, testified:
Q. That is your signature to the transfer of the insurance policy to Mr. Begue?
A. Yes; that is my signature.
Q. And you were insured in the Home Insurance Company?
A. Yes.
Q. That renewal was made by you afterward, in 1893?
A. No. I went and got another policy, because I wanted to have the policy for more and pay less premium.
Q,. That is the reason why you increased the policy from $5000 to $5500?
A. Yes
Q. But that is your policy of insurance?
A. Yes; they told me they would send it to me.
Q. But they never sent it to you?
A. No; I never received it.
Q. But you paid for it?
A. Yes, I paid for it, but they never sent it.
It is. in proof that she paid for the first and second policies, each carrying plaintiff’s claims as an interest insured.
As to the second or new policy, although paid for by her it was not delivered to her.
Plaintiff urges that she could not thus annually retain her policy in torce and order in event of loss by fire, payments to him without acknowledging the validity and binding effect of her indebtedness to him.

Opinion:
The opinion of the court was delivered by
Breaux, J.
The defendant, the maker of a promissory note, secured by mortgage, alleges that it is prescribed. More than five years had elapsed from its maturity on the day that service of citation and petition was made.
But at the same time that the defendant gave the mortgage, she assigned a policy of insurance to the mortagee, in writing, with the authority of her husband, in compliance with the usual clause of the mortgage act covering such assignment.
This was on the 6th day of August, 1884.
Payment of small amounts of interest was made from time to time, including a payment made of interest on August-6, 1892, at which date payment of the note was extended one year.
With reference to the payment of this interest and extension of payment of the note, the defendant alleges that her husband, who made the payment and obtained an extension, was without authority to represent her and to sign the endorsement written on her note.
On the 14th day of June, 1898, the policy was renewed. This policy, different from what it was with the first policy, was not assigned to the plaintiff on the books of the company, but it contains the provision: "Loss, if any, payable to Jean Marie Begue, as interest may appear."
The defendant paid for this policy of renewal. It was not sent to her, although the officer at the insurance office had promised to send it to her.
The judgment was pronounced against the defendant. She has taken this appeal.
We will not stop to discuss the question of the assignment of a policy of insurance to a mortgage creditor, and whether or not it should, while in the creditor's possession, be considered as a pledge, which suspends prescriptions on the note secured by mortgage. But the payment annually by the debtor of premiums to keep the policy alive was, in our opinion, of itself an acknowledgement. The pur pose seems to have been an acknowledgment. The contract of insurance was in'possession of the mortgagee. It contained evidence of an agreement that gives rise to one inference only — an indebtedness of the insured to the mortgagee.
Every year that agreement was renewed by renewing the policy. It gave strength and effect to the policy which the creditor held. This annual renewal is inconsistent with the absence of liability.
Insurance is for the mortgagor's indemnity, as well as the mortgagee.
In securing the latter, it does seem to include an acknowledgment.
It was sufficiently fixed to operate as an acknowledgment by the order, in event of loss, to pay to the mortgagee the amonnt remaining due on his mortgage.
If the property insured had been destroyed by fire the sixth year after the maturity of the note, and while the policy in the hands of the creditor was kept in full force by payment by the debtor of the premium and the renewal of the policy by the company, the standing order that year to pay the losses of the insured should have had full force.
The direction to the company was absolute in terms.
It was a continuing, standing order to pay to the creditor the amount due him.
When a claim is not prescribed the insurance company can not ignore the provision made for the mortgagee's protection and violate the policy to the detriment of his interest.
An agreement securing such a right is surely an acknowledgment of the debt.
Moreover, the policy was owned by the defendant. She, by the payment of premiums annually, gave it value in the hands of the creditor.
The possession of this policy, kept alive by the debtor "prevented prescription from running in the same manner as in the case of a pledge, prescription does not run as long as the thing pledged
remains in the possession of the pledgee." Montgomery vs. Levistones, 8 Rob. 145.
It is true that the acknowledgment was not made directly to the debtor, but it is really as complete as if annually the debtor had handed to his creditor an amount to be applied to the insurance of his property and the greater security of his claim.
It is ordered, adjudged and decreed that the judgment appealed from be affirmed at appellant's costs.