Court Opinion

ID: 7208198
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:18:10.977878+00
Date Added: 2024-06-11T16:16:44.569360
License: Public Domain

Morphy, J.
In the beginning of 1837, C. F. Zimpel, who was largely indebted to the plaintiff and' others, departed for Europe, leaving for his agent here, Frederick Frey. The latter took possession of Zimpel’s property, and on the 19th of September of the same year, executed before Wm. Boswell, a notary public, two sales, whereby he conveyed a considerable amount of his principal’s property to G. P. Manouvrier. The purchaser assumed certain mortgages existing thereon ; and for the balance of the price gave four notes of $3058 33J each, and four other notes of $9750 each, drawn by himself to the order of and endorsed by E. Johns &. Co., payable respectively at nine, fifteen, eighteen and twenty-four months after date, and secured by mortgage on the premises sold. These notes, before their maturity, were passed by F, Frey to the Union Bank, Lizardi & Co., and F. Ganahl & Co, as the agents of Fabre & Merle of New York, *439in payment of, or as collateral security for pre-existing debts, which he owed to them. The present suit was brought by the petitioner, a judgment creditor of Zimpel, to annul these sales as fraudulent and simulated, and to subject the property, which was the object of them, to the payment of a balance due to him. The Union Bank, F. de Lizardi & Co., and F. Ganahl & Co., who were not originally cited as defendants, were subsequently made parties to the suit. After pleading the general issue, and the prescription of one year, they aver, in substance, that they are bona fide holders of the notes respectively held by them j that they received them before maturity, for a valuable consideration, and in the regular course of trade, without notice of the fraud and simulation set forth in the petition ; and that they are, therefore, entitled to all the rights of mortgage and privilege resulting from the notes, and the deeds of sale and mortgage with which said notes are identified. Manouvrier and Frey pleaded the general issue. There was a judgment below annulling and rescinding the sales, ordering the mortgages given by Manouvrier to be cancelled, and restoring the property to the possession of Zimpel, to be subject to the claims of the petitioner and of his other creditors ; but reserving to the holders-of the notes, any rights they may have against the parties to the same, by reason of their personal responsibility. From this judgment, the original defendants, Manouvrier and Fey, have not appealed ; but the Union Bank, Lizardi & Co. and F. Ganahl & Co., have brought up the present appeal.
The facts of the case in relation to the fraud and simulation charged in the petition are so clearly proved by the testimony, as to admit of no dispute. They fully sustain the judgment appealed from; but the counsel for the appellants contend, that admitting the sales made by Frey to be simulated, yet, inasmuch as they are holders in good faith of Manouvrier’s notes, secured apparently by a mortgage on the property, they cannot be deprived of that mortgage ; and they rely on the various decisions of this court which declare, that the negotiability of a note is not restrained by the circumstance of its being paraphed, ne varietur, by a notary public; and that the want of consideration cannot be opposed to a fair endorsee. 9 Mart, 87, 12 lb. 235. 1 Ib. N. *440S. 143. 3 La. 241. Giving to the appellants the fall benefit of the rule laid down in relation to instruments in a negotiable form,, although they took these notes in payment of, or as collateral security for pre-existing debts, and, therefore, not perhaps strictly in the usual course of trade, it appears to us, that these decisions do not exactly meet the case before us. They establish this rule of negotiability only with regard to the personal responsibility of the parties whose names are on a promissory note ; but the question here is, whether the mortgage given to secure the payment of such a note partakes' of this negotiability, or is merely assignable, and subject to the equities between the original parties.
It is clear, that a mortgage cannot be transferred to a third person, so as to give him greater rights than the mortgagee himself possessed. If so, does the mortgage change its nature according to the nature of the principal obligation which it secures ? Can it be said to be negotiable, so as to shut out equitable defences against third persons when it secures a promissory note, and merely assignable, so as to admit equitable defences, if granted to secure an open account 1 Whatever be the principal obligation to secure which a mortgage is given, does it not pass to the trans-ferree, such as it existed in the hands of the mortgagee? A principal obligation may be valid and binding, and the accessory be null. If, for instance, to secure a promissory note, A. without any authority, mortgages the property of B., the third holder of such a note could surely acquire no right whatever in the property, although the parties to the note would remain personally responsible to him. The transfer of the mortgage to the appellants, which results from the transfer of the notes they hol$, cannot certainly be stronger or more efficacious than an express transfer by public act would have been. Now, if Frey had gone before a notary, and declared that he transferred to them all his mortgage rights on the property as mentioned in the sales executed before the notary, Boswell, it is clear, that the appellants would not be, listened to, in an attempt to assert any rights under such a transfer, because a reference to the sales would at once show that the mortgage which Frey had undertaken to transfer in payment of his own debts, belonged to his principal, Zimpel. If such would be the effect of an express transfer, how can it be con*441tended, that they have acquired any rights by the implied transfer, resulting from the mere delivery of the notes'? But, it is said, that the appellants took these notes in ignorance of any fraud in the transaction, and that they were not bound to examine the acts of mortgage at Boswell’s office. This is true, as long as they ate satisfied with the personal responsibility of the parties to these notes, and look only to them; but the moment they assert any mortgage rights on the property under these sales, they at once make themselves privies to them, and are affected by the notice which these acts afford, that Frey had no right to transfer the mortgage notes which belonged to Zimpel, in payment of his own debts. Persons receiving negotiable notes secured by mortgage, cannot be benefited by their neglect to examine the acts with which the notes are identified. The appellants either had cognizance of the sales before Boswell, or they had not. If they had not cognizance of these acts, and did not take the notes on the faith of the mortgage, they cannot complain that the mortgage should be declared null and void, when proved to have been given in fraud. If, on the contrary, they took these notes relying on the mortgage, and examined the sales, they were fully informed that they were taking notes which belonged to Zimpel, and that, therefore, Frey had no right to use them to pay his own debts.
Article 1982 of the Civil Code, which is invoked by one of the appellants, is inapplicable to the present case. The complaint is not that Zirhpel, as owner of the property, has given illegal preferences to his creditors; but that Frey, as the mandatary of Zim-pel, has made false, feigned and simulated sales of the property, to the prejudice of the creditors of his principal, and has applied the proceeds to his own use. Petit v. His Creditors, 3 La. 28.

Judgment affirmed.

*

 Grima, for a re-hearing. — There appears to be no analogy between this case and that pointed out as an example in the judgment of the court: “ When A., without authority, sells the property of B., the third holders of the notes acquire no right to the property, although the parties to the sale remain personally responsible.” In such a case, the principle is no doubt correct. But in the present case, it is not contesied, that Frey was the duly authorized agent of Zimpel, and that, he had full authority to sell and mortgage. He did not, therefore, sell without authority. But it is contended, that the sale was a simulated one. Let it be conceded. The fraud existed between the vendor and vendee. The question then arises, and the *442only question in this case concerning these defendants : If a simulated or fraudulent sale be made, and notes secured by mortgage be given, can third parties who have negotiated such notes, or otherwise become the bona fide holders of them, be prejudiced by the fraud between vendor and vendee, in which they had no agency or concern 1
This is not the first time this question has been decided by this tribunal; and I shall confine myself to referring the court to the case of Foster’s Heirs v. Foster’s Executors et al. 11 La. 401.

Re-hearing refused.