108 La. 39 | La. | 1902
The opinion of the court was delivered by
The notes to which the plaintiff refers in his petition are two of the five joint and several notes which Joseph Buhler, Fred G. Ernst and Felix Ernst, Jr., individually and as members of the commercial partnership of Ernst & Co., of which they were the partners executed on the 10th of January, 1887, before Collens, notary, to secure a loan of twenty-five thousand dollars made to them by plaintiff, Burbank, and which they secured as to payment by special mortgage on certain property described in the act before Collens, the title of which stood in the names of the three mortgagors. In order more effectuaaly to secure the payment of these notes the mortgagors bound themselves in their said capacities to cause all the buildings and improvements to be insured and kept insured against the risk of fire up to the full amount, and up to the final payment of the promissory notes, in capital, interest, and to transfer and deliver to the mortgagee until then the policy or policies of such insurance. The evidence shows that fire policies were taken out by the mortgagors under the stipulation just mentioned and were transferred to and held by him. These policies were not only a protection and security in aid of the payment of the plaintiff’s debt in its entirety and the extinction of the mortgage on the property, but also a protection to the owners of their property rights therein. Each one of these three mortgagors was interested in these policies — that they should be taken out, and being taken out, they
Fred G. Ernst and Felix Ernst, Jr., upon acquiring the entire property formed a new firm under the name of Ernst & Co., and continued in the business of millers, keeping up their business relations with, the plaintiff, who loaned them large amounts of money, some of which they secured by special mortgage on the Julia street mill property, which they by reason of their purchase of the Buhler interest, then owned in its entirety, but part of which was left unsecured. From the time of this sale to the two brothers Ernst, up to the institution of the present suit, the defendant seems to have been ignored by all parties, but affairs suddenly (by reason of the destruction by fire of the buildings on the mortgaged property) took such shape as to make her legal position in the premises a matter of very great concern to the plaintiff. By
It becomes necessary, therefore, to ascertain what rights the defendant had in this matter and how far plaintiff was justified in ignoring them. While Buhler, Fred. G. Ernst, and Felix Ernst, Jr., were all bound, as was the first partnership of Ernst & Co., for the debt evidenced by the notes executed in the act before Collins, each of these individuals was, separately, directly interested therein, and Burbank, as the creditor holding the notes, was bound to recognize and protect that interest. The collaterals furnished were given to Burbank for the protection''of a particular debt in the payment of which not only Burbank and the two Ernsts were concerned, but also the defendant, plaintiff neither acting alone nor in concert with the two Ernsts could legally divert the collaterals when once placed in his hands for a specific purpose to some other object. The Ernsts in obtaining these policies and placing them as collaterals in the hands of the plaintiff, were not acting in their interests alone, but for and on behalf also of the defendant, and the plaintiff knew this when he accepted the col-laterals given for that purpose. Neither he nor the Ernsts were at liberty to change their destination without defendant’s consent. Art.
What debt must he apply it to ? Evidently to the debt for which it was given him in pledge to pay. The interest of the defendant in 'the Julia street property was transferred to Fred. G. Ernst and Felix Ernst, Jr., charged with the obligation assumed by them of paying the plaintiff and of carrying out the obligation contracted by the mortgagors in the act before Collins of taking out fire policies on the property secured by the mortgage. This obligation they carried out, and defendant had a right to suppose that the plaintiff would respect her rights in the premises. Had they not taken out the policies, the defendant would have been entitled to have done so herself. (C. C. 213); to have held the policies not only for plaintiff but for her own protection in the premises. When the Ernsts obtained and gave them as collateral to plaintiff, it was his duty to hold them for defendant’s protection as well as his own. (Baldwin vs. Thompson, 6 La. 179; Gay vs. Blanchard, 32 Ann. 505.)
Had defendant paid the notes, it was plaintiff’s duty to have had control of the collaterals and to have either turned them over to the defendant or hold them for his security and benefit. He has diverted the collaterals which had been placed in his hands for the security of a specific mortgage debt to the payment of unsecured debts due him by the Ernsts for an amount larger than was sufficient to have paid the debt for which the policies were given to him as collaterals. Under such circumstances the debt as between the plaintiff and the defendant must be held to have been paid. The diversion of the collaterals carried with it as its result the obligation of the plaintiff to credit the debt to the amount diverted. (Bullet, Miller & Co. vs. Hewit, Norton & Co., XI Ann. 327.)
We think the judgment is correct. It is hereby affirmed.
Rehearing refused.