Court Opinion

ID: 9883241
Source: CourtListenerOpinion
Date Created: 2023-10-06 01:38:49.366992+00
Date Added: 2024-06-11T07:48:17.318752
License: Public Domain

ON REHEARING
SANDERS, Justice.
Because of the importance of this case, we granted a rehearing to reconsider the *735following question: Is a subcontractor who pays wages to his employees as they become' due for labor on a building project subrogated under Article 2161 of the Louisiana Civil Code to the superior privilege granted laborers by LSA-R.S. 9:4801 and LSA-R.S. 9:4812?
The facts are clearly and completely stated in our original opinion, and we condense them here: In 1965, Ernest R. Eanes, Jr. purchased a lot in East Baton Rouge Parish, for the purpose of subdividing the property and constructing apartment buildings. To secure funds for the construction, Eanes executed a promissory note for $335,000 in favor of plaintiff mortgage corporation, secured by a collateral mortgage affecting the land upon which the development project was to be erected. Eanes also entered into an agreement with Buddy Eanes Home-builders, Incorporated, of which he was president, to construct apartments on the mortgaged property. Pursuant to this agreement, Buddy Eanes Homebuilders let various subcontracts to other firms to supply the labor and material necessary for construction. Although it did considerable work, Buddy Eanes Homebuilders defaulted as prime contractor. At the time of the default, plaintiff had advanced Eanes $263,-615.70 for the project.
On April 20, 1966 plaintiff sued Eanes in this proceeding on his promissory note and was awarded judgment for the amount then due. A writ of fieri facias issued under which the property subject to the collateral mortgage was seized and sold and, on June 8, 1966, plaintiff purchased the property at the sheriffs sale. This sale was made subject to certain previously recorded privileges.
Now competing with the mortgage holder, the claimants to these privileges are Livingston Roofing & Sheet Metal Company, Inc. for $2,961.74, representing wages paid by it for labor; J. R. McFarland, d/b/a United Masonry Company, for $5,606. 86, representing wages paid to his employees ($3,214.24) and wages of $2,396.62 for labor personally performed by McFarland, as subcontractor of the masonry work involved; and Capitol Detective Agency, Inc. for $1,446.26, representing salaries paid two night watchmen who were assigned to protect the project during its construction.
The parties concede that no laborer, except McFarland, filed a lien or privilege, but the subcontractors timely filed a claim for the privilege of their laborers.
The Court of Appeal, rejecting the subcontractors’ right of subrogation under Article 2161, LSA-C.C., held plaintiff’s mortgage primed all liens filed by the subcontractors, except the lien for labor personally performed by J. R. McFarland for $2,396.62. On original hearing, we upheld the subcontractors’ right of subrogation under our decision in Tilly v. Bauman, 174 La. 71, 139 So. 762 (1932), and reversed the holding of the Court of Appeal.
*737Subrogation is an ancient concept, having its origin in Roman law. It was more fully developed and refined in France and became part of the Code Napoleon of 1804.1 The Louisiana Civil Code Articles on this subject are almost identical to the corresponding articles of the French Civil Code. See Comment, 25 Tul.L.Rev. 358, 359.
As to legal subrogation, Article 2161 of the Louisiana Civil Code provides:
“Art. 2161. Subrogation takes place of right:
“1. For the benefit of him who, being himself a creditor, pays another creditor, whose claim is preferable to his by reason of his privileges or mortgages. * * *
“3. For the benefit of him who, being bound with others, or for others, for the payment of the debt, had an interest in discharging it.”
The foregoing article enumerates exceptions to the general rule of Article 2134, that when a third person pays the debt of another, no subrogation takes place and the debt is extinguished. Under familiar principles of statutory construction, these exceptions should be strictly construed. Succession of Andrews, La.App., 153 So.2d 470, cert. denied 244 La. 1005, 156 So.2d 57; 50 Am.Jur., Statutes, § 431, pp. 451-452; 82 C.J.S. Statutes § 382, pp. 891-894.
Subparagraph 1 of Article 2161 declares that subrogation takes place “for the benefit of him who, being himself a creditor, pays another creditor, whose claim is preferable to his by reason of his privileges or mortgages.” •
The subcontractors in the present case, of course, are creditors of the prime contractor, Buddy Eanes Homebuilders, and we can assume they are creditors of the owner. For subrogation to occur, however, the laborers must also be creditors of the owner at the time their wages are paid.
When this litigation arose, LSA-R.S. 9:4812 provided:
“The effect of the registry ceases, even against the owner of the property or the property itself, if the inscription has not been renewed within one year from the date of the recordation. Any person furnishing service or material or performing any labor on the said building or other work to or for a contractor or sub-contractor, when a contract, oral or written has been entered into, but no contract has been timely recorded, shall have a personal right of action against the owner for the amount of his claim for a period of one year from the filing of his claim, which right of action shall not prescribe within one year of the date of its recordation, or the reinscription thereof. This shall not interfere *739with the personal liability of the owner for material sold to or services or labor performed for him or his authorized agent. The said privilege shall be superior to all other claims against the land and improvements except taxes, local assessments for public improvements, a bona fide mortgage, or a bona fide vendor’s privilege, whether arising from a sale or arising from a sale and resale to and from a regularly organized homestead or building and loan association, if the vendor’s privilege or mortgage exists and has been duly recorded before the work or labor is begun or any material is furnished. The wages of a laborer for ■ work done by him on any building, shall, when properly presented and recorded by him in accordance with the provisions of this Sub-part, create in his favor a privilege on the land and improvements which will prime the right of mortgagees or vendors.” (Italics ours).
 Since the laborers had no contractual relation with the owner, they can be the owner’s creditors only if they are accorded that status by the foregoing statute. The statute provides, however, that a laborer shall have a personal right of action against the owner “from the filing of his claim.” Until the laborer files this claim, he never achieves the status of creditor. At best, he has only an inchoate right to become a creditor of the owner. Concededly, the laborers in the present case never filed an affidavit under the statute; their employers, the subcontractors, paid their wages as they became due. Hence, the laborers cannot be considered creditors of the owner to fulfil the conditions of subrogation.
Another equally valid principle bars application of the first Subparagraph of Article 2161. No subrogation takes place under this provision when the creditor and potential subrogee acquits a debt for which he is primarily liable.
In New Orleans Nat. Bank v. Eagle Cotton Warehouse & Compress Co., 43 La.Ann. 814, 9 So. 442, this Court recognized the principle:
“It is the essence of the legal subrogation which is defined in the foregoing paragraph that the person making payment should be a third person in respect to the obligee of the debt he is seeking to prime by making the payment, and also that such payor should himself be a creditor of inferior rank of the common debtor whose debt he pays.
“But Lallande was not only not a third person in respect to the obligee of the debt he sought to prime, but he was himself the original obligor, and more recently the plaintiff’s pledgor.”
The modern French authorities support this principle. See 2 Aubry and Rau, Obligations, § 321, pp. 187, 203 (English Translation by the Louisiana State Law Institute, 1965); 2 Planiol Civil Law *741Treatise, No. 491, Footnote 27, p. 278 (English Translation by the Louisiana State Law Institute, 1959); 2 Baudry-Lacantinerie, Obligations, § 1560, pp. 670-671 (3d ed. 1907).
The basic theory of this type of subrogation is that payment must be made by' another creditor for the benefit of the debtor. When such a payment is made, the debtor is not liberated. Instead, the credit paid is in effect transmitted to the paying creditor, who assumes the preferred status of the creditor who has been paid. A creditor who pays his own debt has done no more than he was obligated to do. He has given nothing for the benefit of the debtor. Hence, subrogation is normally disallowed.
To permit the subcontractors to invoke legal subrogation for the payment of their employees’ wages would in effect award them a first ranking privilege for their own credit against the owner.
We conclude subrogation must be rej ected under Subparagraph 1 of Article 2161.
The subcontractors maintain, however, they fulfil all requirements for subrogation under Subparagraph 3, declaring that subrogation takes place of right in favor of him, who “being bound with others” pays the debt that he had an interest in discharging.
Clearly this language presupposes the existence of a solidary obligation. If no solidary obligation exists, subrogation does not take place.
In denying subrogation under this clause, the Court of Appeal held:
“[T]he subcontractors and owners were not and indeed could not have been solidarily liable to the laborers whose claims are herein asserted. Under the circumstances herein the owner was never liable to the laborers as no liens were filed by any party occupying such status. Under the lien law, no liability arises on the part of the owner until the lien is recorded. Since the owner was never liable to the laborers, it necessarily follows he was not liable for such wages, solidarily or otherwise, with those primarily obligated for the wages earned.
“In the instant case when the subcontractors herein involved paid the wages for which they now claim subrogation, said subcontractors were the sole debtors and prime obligors of the laborers concerned.”
After reconsideration, we conclude the Court of Appeal correctly disposed of this issue. It is now apparent we erred in holding the owner became a debtor of the laborers “as soon as the services are performed.” As we have demonstrated, the personal liability of the owner comes into existence only when laborers file their claim. Since the owner was no debtor, there can be no solidary obligation.
*743In holding the owner a debtor of the laborers on original hearing, we relied upon Alfred Hiller Co. v. Hotel Grunewald Co., 138 La. 305, 70 So. 234, and Rathborne Lumber & Supply Co. v. Falgout, 218 La. 629, 50 So.2d 295. A reexamination of these cases discloses a lien affidavit was filed in them as a basis for personal liability under the statute. Hence, they are inapposite.
We hold, as did the Court of Appeal, that subrogation is unavailable to the subcontractors for their wage payments.
Concededly, the 1932 decision of this Court in Tilly v. Bauman is in direct conflict with our present holding. That decision stands alone in the jurisprudence and has been criticized ' as a “strained” construction of the pertinent statutes. See Steeg and Meyer, “When is a Security Not A Secured Right?” 39 Tul.L.Rev. 513, 516. The decision is unsound and must yield to the legislative will embodied in the statutes and code articles.
The clash of economic interests in this litigation has not escaped our attention. When asserted under the present circumstances, a laborers’ privilege protects no laborers. They receive their wages in full as they accrue. On the other hand, the construction lender may be deprived of reasonable security for money already advanced.
Our present holding converges with a salutary policy: the optimum protection of recorded mortgages from the intrusion of later claims, unrecorded when the funds are disbursed. Our holding safeguards the security of the recorded mortgage — a catalytic force in the state’s economy.
For the reasons assigned, the judgment of the Court of Appeal is affirmed. The right of the unsuccessful litigants to apply for a rehearing is reserved.
McCALEB, J., dissents adhering to the view expressed in the original opinion.
BARHAM, J., concurs.

. Arts. 1249-1252.