Opinion ID: 597120
Heading Depth: 4
Heading Rank: 5

Heading: Louisiana Contracts and Jurisprudence

Text: 54 Despite such limited Code and statutory uses of hypothecate or its derivatives, referring only to mortgage, and the treatment of pledge under a separate title of the Civil Code, opinions of the Louisiana courts have used the terms hypothecate and hypothecation much less precisely and much less restrictively, usually as a result of language drawn from the specific contracts or security agreements under scrutiny at the time. Several examples demonstrate the importance of context in determining the intended meaning of the term. When hypothecate occurs in combination with terms such as pledge or mortgage, the conjunction and may or may not indicate that the additional term has a separate meaning, and or may or may not introduce a separate idea with a meaning exclusive of the other words in the same series. There seems to be no pattern to distinguish the use of hypothecate as a synonym from its use as a discrete transaction. For example, in Succession of Onorato, 35 opponents of a succession argued that a writing by the decedent acknowledging 1) himself as their debtor, and 2) that insurance proceeds should pay the debt constitute[d] a pledge or hypothecation of such life insurance policies[.] 55 This phraseology found use earlier in Fasterling v. Kahn. 36 Justice O'Neill, affirming the trial court's finding of fraudulent misrepresentation by which plaintiff had been relieved of valuable stocks, stated that the defendants were not the owners of the stock ... and had no right to pledge or hypothecate it. This eminent Louisiana jurist was clearly using hypothecate as a synonym of pledge, not as an additional mode of encumbering stock distinct from pledge. 56 First Guaranty Bank v. Alford, 37 addressed a wife's liability, under a pledge agreement executed as part of a collateral mortgage, for debts subsequently contracted by her husband. The court's description of the instruments executed by the husband included mention of two pledge agreements by which he pledged and hypothecated other instruments as security for the later obligations. Here again, hypothecated clearly is used as a synonym for pledge. 57 In Baton Rouge Wood Products, Inc. v. Ezell, 38 the language of a pledge agreement stipulated that the party executing it did pledge and hypothecate securities. Similarly, in Webster v. Harman, 39 the cited language came from a contract by which the plaintiff agreed to pledge and hypothecate into and in favor of [defendant] forty (40) shares of ... capital stock. This contract was later referred to by Justice Provosty in the same opinion as the pledge which [defendants] held of plaintiff's 40 shares of stock. 40 The opinion in that case also refers to a power of attorney that grants the power to sell, pledge, mortgage, hypothecate or otherwise incumber any and all shares of stock held by [plaintiff]. 41 As both pledge and mortgage are expressly listed, the scrivener's use of hypothecate must be as a synonym for either or both, much as is incumber there. 58 Additional examples are found in two Louisiana circuit opinions. In General Motors Acceptance Corp. v. Crain Chevrolet-Olds-Pontiac, Inc., 42 the court made note of the collateral mortgage provisions by which the dealer agreed that he mortgages, affects, and hypothecates his inventory, the merchandise, to remain so mortgaged and hypothecated until payment in full of the Note and any obligations secured by the pledge thereof. And in Plumbing Supply House, Inc. v. Century National Bank, 43 the court described an hypothecation agreement authorizing [plaintiff corporation] to pledge [a] ne varietur note as security. 59