Opinion
No. 33877.
May 29, 1939. On Rehearing January 9, 1940. On Second Rehearing July 18, 1940. Rehearing Denied October 9, 1940.
Appeal from Civil District Court, Parish of Orleans; Wm. H. Byrnes, Jr., Judge.
Action on nine notes by Daniel J. Moriarty and others against Sol Weiss. From a judgment for the defendant, the plaintiffs appeal.
Reversed and rendered.
McCloskey Benedict, W. Sommer Benedict, and James H. Kepper, Jr., all of New Orleans, for plaintiffs and appellants.
Yarrut Stich and Louis H. Yarrut, all of New Orleans, for defendant and appellee.
The plaintiffs are suing to collect nine promissory notes for $3,500 each, plus the stipulated interest and attorney's fee. The notes were signed and issued by one Samuel J. Dessalles, but the obligation to pay the notes was assumed afterwards by Sol Weiss, who is the defendant in this suit. He pleaded in defense of the suit, that his assuming of the obligation was for the protection of Dessalles only, and not for the benefit of any holder or owner of the notes; that he assumed only a contingent or conditional obligation, dependent upon the condition that Dessalles should pay certain obligations which he, the defendant, owed, and which Dessalles assumed; that Dessalles defaulted on the obligation which he assumed; and that he, the defendant, was thereby relieved of his contingent obligation to pay the Dessalles notes, held and owned by the plaintiffs in this suit. The defendant pleaded that he was discharged from his contingent obligation by a judicial decree, rendered in a suit which he brought against Dessalles. The judge sustained the defendant's plea, after hearing the evidence, and dismissed the suit. The plaintiffs are appealing from the decision.
There is no dispute about the facts of the case. On November 28, 1928, the Moriartys, who reside in Chicago, sold to Dessalles a lot of ground in New Orleans, at the corner of Tulane Avenue and South Franklin Street, now Loyola Street. The price was $45,000, of which $10,000 was paid in cash, and for the balance of the price Dessalles issued his ten promissory notes for $3,500 each, secured by a vendor's lien and mortgage on the property. The notes were made payable to the order of the maker and were endorsed by him. They were payable in one to ten years, respectively. The note that matured on November 28, 1929, was paid. The remaining nine notes are the notes on which this suit is founded. They bear interest at 7 per cent per annum from date, payable annually, and they provide for the payment of 5 per cent attorney's fee in case of suit. The interest is paid to July 1, 1931.
On June 28, 1930, Weiss and Dessalles entered into an executory contract, commonly called "exchange or trade agreement," on a printed form furnished by a real estate agent. By the terms of this executory contract, Weiss agreed to transfer to Dessalles four pieces of real estate in New Orleans, and Dessalles agreed to assume, as a part of the price, the obligation to pay certain promissory notes which Weiss owed to the Conservative Homestead Association, amounting to $16,900, secured by mortgages on the real estate which Weiss agreed to transfer to Dessalles. In the same contract, Dessalles agreed to transfer to Weiss the Moriarty property, at the corner of Tulane Avenue and South Franklin Street, and as a part of the price of the property Weiss agreed to assume the debt represented by the remaining nine promissory notes which Dessalles owed to the Moriartys and which were secured by the vendor's lien and mortgage on the property. The contract was a private instrument, not a notarial act, and was not recorded.
On September 30, 1930, the executory contract, called "exchange or trade agreement," was executed and completed by the passing of five separate notarial acts of sale between Weiss and Dessalles. Dessalles bought Weiss' four pieces of property and assumed the payment of the $16,900 due to the Conservative Homestead Association and secured by mortgages on the property; and Weiss bought Dessalles' property, and assumed the payment of Dessalles' obligation represented by the nine unpaid promissory notes held by the Moriartys, and secured by the vendor's lien and mortgage on the property. The price stipulated in the act of sale by Dessalles to Weiss was $40,300. It was stated in the act that the accrued interest on the mortgage indebtedness of $31,500 amounted to $1,837.50, making the total indebtedness which Weiss assumed $33,337.50. Hence, Weiss paid the difference, $6,962.50, in cash, to Dessalles, and he acknowledged receipt thereof in the act of sale.
The so-called "exchange or trade agreement" was not mentioned in the act of sale from Dessalles to Weiss, or in any one of the four acts of sale from Weiss to Dessalles. Each one of the five acts of sale was made as an independent and separate transaction, without any reference to any other sale, or agreement or transaction.
On three different occasions, as the Moriarty notes came due, Weiss asked for and obtained from the Moriartys an extension of time for the payment of the notes, and at the time of the first and second extension Weiss paid the annual interest. The extension agreements were prepared by Weiss in New Orleans, at the request of the Moriartys, and were sent by him to them, in Chicago, for their approval.
The three extension agreements were all of the same tenor, the last one of them being dated December 8, 1931, and reading as follows:
"Whereas, Sol Weiss, of New Orleans, Louisiana, has purchased the property located at the corner of Tulane Ave. and S. Franklin (Loyola) St., and
"Whereas, said Sol Weiss has assumed from Samuel J. Dessalles, the original purchaser of said property, the outstanding mortgage and vendor's lien against the same, in favor of the Estate of Moriarty and/or the heirs thereof, and
"Whereas, the principal of said mortgage aggregates thirty-one thousand five hundred ($31,500.00) dollars, and
"Whereas, the mortgage note in the sum of thirty-five hundred ($3,500.00) dollars, representing part of said mortgage indebtedness, matured on November 28th, 1930, and
"Whereas, another mortgage note in the sum of thirty-five hundred ($3,500.00) dollars, also representing a part of said mortgage indebtedness, matured on November 28th, 1931, together with interest on the entire mortgage indebtedness, and
"Whereas, the interest on said entire mortgage indebtedness has been paid up to July 1st, 1931, and
"Whereas, by mutual agreement, the maturity of the mortgage note which matured, according to its terms, on November 28th, 1930, has been extended to November 28th, 1931,
"Therefore, for the mutual consideration given and received, it is agreed by the holders and owners of said mortgage notes that the maturity of the mortgage note of thirty-five hundred ($3,500.00) dollars which fell due on November 28th, 1930, is hereby re-extended to May 28th, 1932, and that the maturity of the mortgage note of thirty-five hundred ($3,500.00) dollars which fell due on November 28th, 1931, is hereby extended to May 28th, 1932, and that the payment-date of the interest on said entire mortgage indebtedness is also extended to May 28th, 1932; conditioned, however, upon the payment at the expiration of this extension of the accrued interest upon the entire indebtedness up until said date, May 28th, 1932, and the payment also of said two mortgage notes which matured, respectively, on November 28th, 1930, and November 28th, 1931."
The instrument is signed by Sol Weiss, who is the only defendant in this suit, and by Margaret Moriarty and Daniel J. Moriarty and Jennie Moriarty, who are the plaintiffs in the suit. The instrument is not signed by Dessalles. He was not a party to any one of the three extension agreements.
It is admitted in the defendant's answer that, at the time when he obtained the extensions from the Moriartys, Dessalles had not been put in default or declared in default on his obligation to Weiss, to pay the debts which Weiss owed to the Conservative Homestead Association. Hence Weiss pleads that he was then legally bound to Dessalles not to permit the obligation which Dessalles owed to the Moriartys to become in default with them.
On the 18th of May, 1932 — which was ten days before the last extension of the Moriarty notes would expire — Weiss sued Dessalles, in New Orleans, to cancel, rescind and annul the sale which Dessalles had made to Weiss of the property at the corner of Tulane Avenue and South Franklin Street (Loyola Street) on September 30, 1930, and to cancel, rescind and annul the assumption by Weiss of the mortgage debt due to the Moriartys. The cause of action which Weiss set forth in his suit against Dessalles was that Dessalles had defaulted on the obligation which he had assumed, to pay the debts which Weiss owed to the Conservative Homestead Association. Dessalles allowed judgment to go against him by default. Accordingly, the judgment was rendered against Dessalles on the 6th of July and signed on the 12th of July, 1932, cancelling, avoiding and annulling the sale which Dessalles had made to Weiss on September 30, 1930, of the property at the corner of Tulane Avenue and South Franklin Street (Loyola Street), and annulling the assumption by Weiss of the debt secured by the mortgage and vendor's lien on the property.
The Moriartys were not made parties to the suit which Weiss brought against Dessalles for cancellation of the obligation which Weiss had assumed, to pay the Moriarty notes. About the 1st of June, 1932, the Moriartys sent their notes to a real estate agent in New Orleans, with the request that he demand payment of Weiss. On the 3rd of June, 1932, the agent made demand on Weiss for the payment of the notes; and on the 18th of June, 1932, Weiss answered the demand, and in his answer said that he had filed suit against Dessalles to cancel his assumption of the Moriarty notes, for failure of the consideration for which he had assumed the obligation.
On October 11, 1932, the Moriartys sued both Dessalles and Weiss on the mortgage notes and prayed for a judgment against them in solido for the $31,500, plus the stipulated interest and attorney's fee, and for recognition of the vendor's lien and mortgage on the property at the corner of Tulane Avenue and South Franklin (now Loyola) Street. In answer to the suit Weiss set up the same plea that he is urging in defense of the present suit. On the trial of the suit against Weiss and Dessalles, counsel for the plaintiffs undertook to cross-examine Weiss on the subject of the three extension agreements that he had obtained from the Moriartys; but counsel for Weiss objected to the evidence on the ground that the plaintiffs had not sued on the extension agreements. The attorney for the plaintiffs then, realizing that he had not sued on the extension agreements, moved to discontinue the suit; whereupon the judge announced that he would allow the plaintiffs two weeks in which to sue on the extension agreements by means of a supplemental petition. Instead of filing a supplemental petition in that suit, the plaintiffs brought the present suit against Weiss alone, on his assumption of the debt and on the extension agreements. The defendant in this suit does not complain of the plaintiffs' failure to discontinue their suit against Dessalles and Weiss. He refers to the matter merely as indicating that the plaintiffs have not abandoned their right to proceed against Dessalles if they fail to collect from Weiss.
On the trial of this case the defendant offered in evidence the "exchange or trade agreement" made between him and Dessalles on September 30, 1930. The attorney for the plaintiffs objected to the evidence on the ground that the contract was only an executory contract, and was afterwards executed and completed, by the signing of the five separate notarial acts of sale. In support of the objection, the attorney for the plaintiffs invoked articles 2236 and 2276 of the Civil Code. The trial judge overruled the objection on the ground that it was aimed at the effect, and not at the admissibility, of the evidence. Our opinion is that the objection should have been sustained. Article 2236 of the Civil Code declares that an authentic act is full proof of the agreement contained in it, against the contracting parties and their heirs or assigns, unless the act be declared and proved a forgery. Article 2276 declares that parol evidence shall not be admitted against or beyond what is contained in a written instrument or as to what may have been said by the parties before or at the time of signing the instrument, or as to what may have been said by them since the signing of the instrument, with regard to any agreement that may have been had before or at the time of the signing of the instrument. This latter article is appropriate only to such verbal testimony as might have been necessary to connect the executory contract, called "exchange or trade agreement," with the authentic act of sale that was made afterwards by Dessalles to Weiss. Article 2236 sustains precisely the plaintiffs' objection to the evidence in this case. It makes no difference, though, whether the objection should be held to apply to the admissibility of the evidence or should be held to apply only to its effect, or its want of effect. The executory contract, called "exchange or trade agreement," was merely a reciprocal agreement to buy and sell the properties referred to, and to assume the debts referred to. When the contract was executed, it ceased to exist, and was superseded by the notarial acts of sale, each one of which acts is, as article 2236 declares, "full proof of the agreement contained in it." There is nothing ambiguous in the act of sale from Dessalles to Weiss. The obligation which Weiss assumed, to pay the mortgage debt on the property which he bought from Dessalles, was an unconditional obligation; and the obligation which Dessalles assumed, to pay the debt that Weiss owed to the homestead association, was an unconditional obligation.
The so-called "exchange or trade agreement" was not recorded, and the Moriartys had no knowledge whatever that any such agreement had been made until sometime after Weiss sued Dessalles to annul the sale which Dessalles had made to Weiss on September 30, 1930, and to annul the obligation which Weiss assumed in the act of sale, to pay the mortgage debt which Dessalles owed to the Moriartys. Therefore, assuming for the sake of argument that the so-called "exchange or trade agreement" had the effect of subjecting Weiss' assumption to the condition that Dessalles should pay the mortgage debts on the lots which he bought from Weiss, the "exchange or trade agreement" had no such effect as far as the rights of the plaintiffs in this suit were concerned. When the Moriartys consented to grant Weiss an extension of time in which to pay the mortgage debt which he had assumed, the Moriartys did not know of the "exchange or trade agreement," or know of any reason why Weiss might claim to be released from the obligation which he had assumed.
The defendant offered in evidence on the trial of this case the record of the suit in which he had obtained the judgment against Dessalles, annulling Weiss' assumption of the debt due to the plaintiffs in this suit. The attorney for the plaintiffs objected to the evidence on the ground that they were not parties to the suit which Weiss brought against Dessalles, and, therefore, could not be affected by the judgment rendered against Dessalles. The objection was overruled. Our opinion is that the objection should have been sustained. But it is a matter of no importance that the record of that suit, including the judgment that was rendered against Dessalles and in favor of Weiss, is in evidence in this suit. It is sufficient to say that the judgment cannot have any effect against the plaintiffs in this suit.
It may be conceded, for the sake of argument, that, when Weiss bought from Dessalles the property on which the plaintiffs have a mortgage and vendor's lien, and assumed the payment of the mortgage debt due to the plaintiffs, the obligation which Weiss assumed was only for the protection of Dessalles, and was not an obligation which the holders of the mortgage notes could enforce in an action against Weiss. But that was not true after the holders of the mortgage notes accepted Weiss as a debtor. Rev.Civ. Code, art. 1890. Up to the time when Weiss dealt with the holders of the mortgage notes, by asking for and obtaining an extension of the time allowed to pay the notes, Weiss and Dessalles alone might have cancelled the sale which Dessalles had made to Weiss, and might have released Weiss from his assumption of the obligation to pay the mortgage notes. Up to that time Weiss and Dessalles were not obliged to have the consent of the holders of the notes to release Weiss from his obligation to pay the notes. But, when Weiss dealt directly with the holders of the mortgage notes which he had assumed — when he asked for and obtained an extension of the time in which he might pay the notes, and when he paid the interest and renewed directly with the holders of the notes his promise to pay the debt — he made the debt his debt to the holders of the notes.
The granting of an extension of time in which to pay a debt is a valid and sufficient consideration for the promise of a third party to pay the debt. 13 C.J. p. 342, § 193, 17 C.J.S., Contracts, § 103; 6 R.C.L. p. 658, sec. 69; Am.Jur. p. 576, sec. 81; Isaacs v. Van Hoose, 171 La. 676, 131 So. 845; Wilkinson v. Adams, 179 La. 630, 154 So. 630. In the two cases last cited it was held that, where a mortgagee, without the knowledge of the mortgagor, consented to give to the grantee of the mortgagor further time in which to pay the mortgage debt, the mortgagor was thereby released from his personal obligation to pay the debt. We mention this merely to show what a serious consideration a mortgagee may give when he consents to give the grantee of the mortgagor further time in which to pay the mortgage debt. When Weiss obtained from the Moriartys the first extension of time in which to pay the mortgage debt which Dessalles owed, the debt became Weiss' debt; and the extensions which Weiss obtained thereafter were extensions of time in which to pay his debt, and were for his benefit. Thereafter, it required the consent of the Moriartys to relieve Weiss of his obligation to pay the debt which he had assumed as a part of the price for which he bought the mortgaged property from Dessalles. Rev.Civ. Code, art. 1890; Mayor v. Bailey, 5 Mart., O.S., 321; Flower v. Lane, 6 Mart., N.S., 151; Woodward v. Dashiell, 15 La. 184; Dupuy v. Dashiell, 17 La. 60; Mitchell v. Cooley, 5 Rob. 240; Union Bank v. Bowman, 9 La.Ann. 195; Vinet v. Bres, 48 La.Ann. 1254, 20 So. 693; Freedman v. Ratcliff, 183 La. 1, 162 So. 783; 11 Tulane Law Review, 18.
The defendant cites the following decisions in support of his plea that his obligation to pay the notes sued on was an obligation in favor of Dessalles only, and did not afterwards become an obligation in favor of the plaintiffs in this suit, viz.: Tiernan et al. v. Martin et al., 2 Rob. 523; Union Bank v. Bowman, 9 La.Ann. 195; Brandon v. Hughes, 22 La.Ann. 360; and Freedman v. Ratcliff, 183 La. 1, 162 So. 783. The facts in the cases cited, however, were different from the facts in the present case — as we shall point out.
In Tiernan et al. v. Martin et al., 2 Rob. 523, a third party, named Moses Hall, entered into an executory contract with the defendants, Martin and others, by which Hall was to sell to Martin and others fifteen slaves and a tract of land which was then encumbered with a deed of trust in favor of the plaintiffs, Tiernan and others; and, in part consideration therefor, Martin and others agreed, on certain conditions, that they would assume the payment of a debt of $5,200 which Hall owed to Tiernan and others. It was stipulated in the written agreement between Hall and the defendants that the price for which the land was to be sold by Hall to the defendants was to be fixed by third persons chosen mutually by the parties to the agreement, and that, on the plaintiffs' releasing their deed of trust on the land, the defendants were to pay to the plaintiffs the $5,200 which Hall owed. The contract between Hall and the defendants was never executed. Hall died, insolvent, leaving judicial mortgages on his property. Hall's death made it impossible to fix the price of the proposed sale; and the judicial mortgages prevented the plaintiffs from releasing their deed of trust on the land. In other words, the conditions on which the defendants agreed that they would assume the debt which Hall owed to the plaintiffs could not be fulfilled; hence the executory contract between Hall and the defendants was not executed, and could not be executed. It was in these circumstances that the court said that the plaintiffs had not acquired any greater right against the defendants than Hall himself had. The court said:
"The plaintiffs, therefore, cannot pretend to have acquired greater rights than Hall himself had; and it is clear that the payment which was to be made to them [the plaintiffs] in discharge of Hall's debt, was to depend on his strictly executing his obligation according to the terms of the contract.
* * *
"In this case, it has been shown that the agreement cannot be perfected, as originally contemplated between the parties, owing to Hall's death in insolvent circumstances, and to the fact of the creditors having, in the mean time, obtained judgments against him, which operate as a lien on the property: and we concur with the inferior judge in the opinion, that, there being no valid conveyance of the land to the defendants, the plaintiffs cannot be entitled to reap the fruits of Hall's imperfect contract and unexecuted obligation. Their claim must, therefore, be rejected."
The most striking difference between the case of Tiernan v. Martin and the present case is that in Tiernan v. Martin the defendants did not receive a deed for the land which they were to receive in consideration for their agreeing to assume the payment of the debt which Hall [like Dessalles in this case] owed to the plaintiffs. In Tiernan v. Martin, the contract which was violated, or which was never carried out, was the executory contract, in which alone the defendants agreed, on certain conditions which were never fulfilled, to assume the debt which Hall owed to the plaintiffs. In that case the defendants did not make any promise directly to the plaintiffs to pay the debt which Hall owed; and the defendants, in fact, were never unconditionally obliged to pay the debt which Hall owed to the plaintiffs. The decision in Tiernan v. Martin, along with others of the same purport, was explained in Vinet v. Bres, 48 La.Ann. 1254, 1264, 20 So. 693, 697, thus:
"Those decisions proceed upon the same line, and are to the effect that stipulations pour autrui, to be of avail, must be accepted by the beneficiary; but they go no further, nor say anything more than is expressed by the Code. It declares that `a person may also, in his own name, make some advantage for a third person the condition or consideration of a commutative contract, or onerous donation; and, if such third person consents to avail himself of the advantage stipulated in his favor, the contract cannot be revoked.' Rev.Civ. Code, art. 1890."
In the case of Union Bank v. Bowman, 9 La.Ann. 195, the bank held a mortgage on land belonging to a party named Gayle, and he sold the land to Bowman, who assumed, as a part of the price, the mortgage debt due to the bank. It developed afterwards that Gayle had no title to the land, and hence there was a failure of the consideration for which Bowman assumed the debt due to the bank. When the bank sued Bowman he pleaded the failure of consideration for the obligation which he had assumed; and the court sustained the plea, as far as any personal liability on the part of Bowman was concerned. The important point in that case was that Bowman and the bank did not deal with each other, as debtor and creditor, after Bowman assumed the debt which Gayle owed to the bank. The court virtually said that, if Bowman and the bank had consented to assume the relation of debtor and creditor, Bowman could not have pleaded successfully against the bank the failure of the consideration for which he had assumed the debt which Gayle owed to the bank. This is said on page 196 of the report of the case in 9 La.Ann., viz.:
"The promise [of Bowman] to pay the Bank was a promise sub modo — a promise to pay so much as part of the price of a sale, and justly subject to the defences incident to such a promise. We do not say that subsequent action between the person so promising and the third person in whose favor the promise is so made, might not change the character of their relations and convert the promise into a positive or qualified obligation, unaffected by the original equities."
In the present case, the consideration for which Weiss assumed the obligation of Dessalles to pay the notes held by the Moriartys was the property which Weiss bought from Dessalles. There has not been a failure of consideration in that respect, as there was in the case of Union Bank v. Bowman. The consideration for which Weiss afterwards gave to the Moriartys his direct promise to pay the debt was the extension of time which the Moriartys gave, for the payment of the debt. There has not been a failure of consideration in that respect.
In the case of Brandon v. Hughes, 22 La.Ann. 360, Brandon bought a plantation from Hughes, for $75,000, and assumed the outstanding mortgages amounting to $81,479.94, and taxes amounting to $808.24, on the condition that Hughes would pay Brandon the excess, $7,288.18, for which amount Hughes gave Brandon his promissory note secured by a mortgage on certain slaves. Hughes absconded with the slaves, and without paying the $7,288.18. It was held that the mortgage creditors of Hughes could not hold Brandon liable personally for the mortgage debts, because Brandon's assumption of the debts was subject to a condition, which was not fulfilled. In the present case, the assumption, by Weiss, of the debt which Dessalles owed to the Moriartys, was not made subject to any condition.
In Freedman v. Ratcliff, 183 La. 1, 162 So. 783, the plaintiff sought to hold the defendant, Ratcliff, liable on a promissory note for $7,500, secured by a mortgage on a house and lot which belonged to a man named Marx Levin, and which Ratcliff, in an agreement with Levin, agreed to take over as part of the price of 8,000 acres of land which Levin agreed to buy from Ratcliff at the price of $24,000. Ratcliff did not assume the payment of the mortgage note of $7,500, but merely agreed that he would assume the payment of the note if Levin would carry out his agreement to buy the 8,000 acres of land at the price stipulated. Levin failed to carry out his agreement to buy the 8,000 acres of land; and, for that reason, the court held, of course, that Ratcliff was not liable for the payment of the note for $7,500, held by the plaintiff, and secured by the mortgage on Levin's house and lot. The expression in the opinion rendered in the case, to the effect that Freedman, as holder of the mortgage note, could not have any better claim against Ratcliff than Levin had, must be taken in connection with the facts of the case.
The defendant cites also the case of Peoples' Homestead Association v. Garland, 107 La. 476, 31 So. 892, and the case of Allen Currey Manufacturing Co. v. Shreveport Waterworks Co., 113 La. 1091, 37 So. 980, 68 L.R.A. 650, 104 Am.St.Rep. 525, 2 Ann.Cas. 471. These decisions are not appropriate to the present case. In the Peoples' Homestead Association's case, it was held merely that the assuming of the payment of the municipal taxes by a purchaser of the property assessed, who immediately resold the property to the tax debtor, did not give the city the right to sue the party who had assumed the payment of the taxes. It was held that the character of tax debtor arose only from the operation of law, and not from any contract between individuals; and that the effect of the contract was merely to give the tax debtor a right to recover the amount of the taxes from the party who assumed the payment, if the tax debtor should be compelled by the city to pay the taxes.
In the Waterworks case it was held that the plaintiff, a private corporation, whose factory was destroyed by fire, had no right of action against the Waterworks Company for damages for an alleged violation of a contractual obligation on the part of the Waterworks company to supply the city's fire department with water for extinguishing fires. Obviously, the principle which controlled the decision in that case has little or no application to the present case.
Our conclusion is that the defendant is liable for the debt sued for.
The judgment appealed from is annulled and reversed, and it is now ordered, adjudged and decreed that the plaintiffs, Daniel J. Moriarty, Margaret Moriarty and Jennie Moriarty, recover of and from the defendant, Sol Weiss, thirty-one thousand five hundred dollars ($31,500), together with interest thereon at seven (7) per cent per annum from July 1, 1931, and five (5) per cent attorney's fee on the aggregate amount; the defendant is to pay also the costs of this suit; and the vendor's lien and special mortgage, dated November 28, 1928, and recorded in Conveyance Office Book No. 443, folio No. 642, and in Mortgage Office Book No. 1391, folio No. 495, in the City of New Orleans, is hereby recognized as securing the payment of this judgment, including the interest, attorney's fee, and all costs of this suit. This decree shall not affect any right which either of the parties may have against Samuel J. Dessalles.
FOURNET, J., absent.
On Rehearing.
This is a suit to recover the amount of nine promissory notes given as part payment of the purchase price of real property, the payment of which was assumed by the defendant, who purchased the property from the maker of the notes, and to have plaintiffs' vendor's lien and the special mortgage securing same recognized and ordered enforced.
The defendant admitted the purchase of the property from the maker of the notes and the assumption of the obligation, but averred that the consideration therefor had failed; that he had been legally and judicially discharged from his assumption; and that he is, therefore, not liable to the plaintiffs, the mortgagees.
On an appeal taken by plaintiffs, we set aside the judgment of the lower court in favor of the defendant and granted plaintiffs judgment as prayed for. We now have the matter for reconsideration on rehearing.
The record reveals that on June 28, 1930, the defendant, Sol Weiss, and Samuel J. Dessalles entered into an "exchange or trade agreement" whereby Weiss agreed to sell or exchange certain property owned by him and situated in Lakeview in the city of New Orleans, for the sum of $1,100 cash and the assumption of an outstanding mortgage againts the property in the sum of $16,900 in favor of the Conservative Homestead Association, and in order to effect this exchange, he offered to purchase property owned by Dessalles, located at the corner of Tulane avenue and Loyola street in the city of New Orleans (being the same property purchased by Dessalles from Daniel and Patrick Moriarty) for $7,400 cash and the assumption of the mortgage securing notes held by plaintiffs, including the accrued interest thereon, aggregating approximately $32,800. Dessalles also agreed to carry a second mortgage of $17,300-$10,000 of this amount, payable under the same terms and conditions as the mortgage on the lots in Lakeview assumed by Dessalles, and to pledge same to defendant to guarantee the reduction of the assumed mortgage of $32,800, the balance of $6,400 payable in three years, with interest. The offer was accepted by Dessalles on July 1, 1930. On September 30, 1930, in accordance with this "exchange or trade agreement," Weiss executed deeds of his properties in favor of Dessalles for the agreed consideration and Dessalles, in exchange therefor, executed a deed of the property he had purchased from the plaintiffs, and, in part payment thereof, Weiss assumed the outstanding mortgage and vendor's lien in favor of the plaintiffs.
The record further reveals that Dessalles failed to comply with his agreement to pay the Conservative Homestead and Weiss, because of this default, was called upon to pay the obligation to the Conservative Homestead Association. Immediately thereafter he (Weiss) instituted suit and secured judgment against Dessalles rescinding and cancelling the contract of exchange entered into between him and Dessalles on June 28, 1930, as well as the deeds executed in pursuance thereof on September 30, 1930, including his assumption of the mortgage affecting the property. In the meantime, Weiss had obtained extensions of time from the plaintiffs in order to meet Dessalles's obligation to them.
On October 11, 1932, plaintiffs instituted suit against Dessalles and Weiss in solido, the suit being based on the notes given by Dessalles to plaintiffs as part payment of the property purchased and the assumption of the same by Weiss. On the trial of the case plaintiffs sought to introduce the extension agreement they entered into with defendant Weiss, and its introduction was objected to on the ground that it was ultra petitionem; whereupon the trial judge gave plaintiffs time in which to file a supplemental petition to plead the same. Plaintiffs, instead of supplementing their petition, on May 4, 1934, instituted the present proceedings against Weiss alone, predicated on his assumption of the mortgage in the deed of September 30, 1930, and the extension agreement entered into between him and the plaintiffs on December 8, 1931, without dismissing the first suit, which is still pending.
It is the plaintiffs' contention that (1) the assumption of the mortgage by Weiss is a stipulation pour autrui and irrevocable inasmuch as they have accepted it, and (2) that Weiss has independently bound himself by the extension agreement to pay the entire debt.
This court, in the early case of Tiernan v. Martin, 2 Rob. 523, squarely held that stipulations of this character are not pour autrui within the meaning and contemplation of Articles 1890 and 1902 of the Revised Civil Code, but are for the benefit of the mortgage debtor or party selling the property. This rule of law has been maintained in a long and unbroken line of decisions, the last expression being found in the recent case of Freedman v. Ratcliff, 183 La. 1, 162 So. 783, 785, where it is said that: "* * * The obligation of one who buys property, subject to a mortgage held by a third party, and who assumes the payment of the mortgage debt as a part of the price to be paid for the property, is an obligation in favor of the party selling the property, and is not for the benefit of the holder of the mortgage. If the holder of the mortgage, in such a case, accepts the stipulation in his favor, he may enforce it against the new debtor, but has no better claim against the new debtor than the one who sold the property had." (Italics ours.) See, also, Union Bank of Louisiana v. Bowman, 9 La.Ann. 195; Brou v. Becnel, 20 La.Ann. 254; Brandon v. Hughes, 22 La.Ann. 360; Janney v. Ober, 28 La.Ann. 281; Vinet v. Bres, 48 La.Ann. 1254, 20 So. 693; Peoples' Homestead Association v. Garland, 107 La. 476, 31 So. 892; Allen Currey Manufacturing Company v. Shreveport Waterworks Company, 113 La. 1091, 37 So. 980, 68 L.R.A. 650, 104 Am.St.Rep. 525, 2 Ann.Cas. 471; 10 T.L.R. 75; 38 Cyc. 209, note 90.
It necessarily follows that the plaintiffs have no better claim against Weiss than Dessalles (the one who sold him the property) has, and, since, under the facts of this case, Weiss has been judicially relieved of his obligations as to Dessalles, plaintiffs are clearly without a cause or right of action against Weiss unless he has, by the extension agreement of December 8, 1931, bound himself for the payment of this indebtedness.
The agreement in question, after reciting the facts surrounding Weiss' assumption of the mortgage and the fact of the maturity of two of the notes, contains the following stipulation:
"Therefore, for the mutual consideration given and received, it is agreed by the holders and the owners of said mortgage notes that the maturity of the mortgage note of Thirty-Five Hundred and No/100 ($3,500.00) Dollars, which fell due on November 28th, 1930, is hereby re-extended to May 28th, 1932, and that the maturity of the mortgage note of Thirty-Five Hundred and No/100 ($3,500.00) Dollars, which fell due on November 28th, 1931, is hereby extended to May 28th, 1932, and that the payment-date of the interest on said entire mortgage indebtedness is also extended to May 28th, 1932; conditioned however upon the payment at the expiration of this extention of the accrued interest upon the entire indebtedness up until said date, May 28th, 1932, and the payment also of said two mortgage notes, which matured, respectively, on November 28th, 1930, and November 28th, 1931." (Italics ours.)
Under the clear and unmistakable terms of this agreement, the defendant bound himself to pay, at the expiration of this extension period, only the two matured mortgage notes and the accrued interest on the entire indebtedness up to May 28, 1932 (expiration date of the extension agreement), and inasmuch as the extension of the time of the payment of the two matured notes was sufficient consideration to sustain Weiss' promise to pay this part of the obligation owed by Dessalles to plaintiffs, he has made himself liable therefor. Isaacs v. Van Hoose, 171 La. 676, 131 So. 845; Wilkinson v. Adams, 179 La. 630, 154 So. 630; 13 C.J. 342, § 193, 17 C.J.S., Contracts, § 103; 6 R.C.L. p. 658, sec. 69; 12 American Jurisprudence, p. 576, sec. 81.
But counsel for plaintiffs, on rehearing, argued that Weiss by agreeing to pay the interest on the entire mortgage indebtedness thereby obligated himself to pay the entire mortgage indebtedness as "* * * interest stipulated by contract is an integral part of the principal debt." They cite as authority therefor 15 R.C.L. p. 3, sec. 2; 33 C.J. 178, p. 254; and Article 1935 of the Revised Civil Code.
These authorities are not apposite to the contention urged. Weiss, by the express terms of the extension agreement, unmistakably limited his liability to the payment of the two matured notes ($7,000) and "* * * the accrued interest upon the entire indebtedness up until * * * May 28th, 1932 * * *," $2,009.00 (7% interest per annum from July 1, 1931, to May 28, 1932), and his liability cannot be extended beyond that amount.
For the reasons assigned, the judgment of the lower court is set aside and it is now ordered, adjudged, and decreed that there be judgment in favor of plaintiffs and against the defendant, Sol Weiss, in the amount of seven thousand dollars ($7,000), with interest thereon at the rate of 7% per annum from May 28, 1932, until paid, plus 5% on the aggregate amount of the principal and interest as attorney fees, and for the additional sum of two thousand and nine dollars ($2,009) with 5% interest thereon from May 28, 1932 until paid.
It is further ordered, adjudged, and decreed that plaintiffs' vendor's lien and mortgage, recorded in Book 1391, folio 495, in the office of the Recorder of Mortgages for the Parish of Orleans, be and the same is recognized and ordered enforced, and that this judgment be paid in preference and priority over all other claimants out of the proceeds of the sale of the property. All costs to be paid by the defendant-appellee, Sol Weiss. The right to apply for a rehearing is reserved to the plaintiffs-appellants.
We granted a second rehearing in this case for the limited purpose of reviewing the decree entered on the first rehearing. In the decree we set aside our original judgment in favor of plaintiffs, holding defendant liable for the entire indebtedness sued for, and substituted therefor a judgment in favor of plaintiffs holding defendant liable for only a portion of the indebtedness sued for, ordering that plaintiffs' vendors' lien and mortgage be recognized and enforced, and that the judgment be paid by preference out of the proceeds of the sale of the property.
Plaintiffs contend that the latter portion of our decree is ambiguous and may be construed so as to permit the defendant to compete with them in the proceeds of the sale of the mortgaged property. We had no such intention in framing our decree.
As shown by our opinion, the defendant Weiss was not held liable under his assumption of the Dessalles mortgage notes, but he was held liable under the written extension agreements he entered into directly with the Moriartys, the plaintiffs. The written agreements, founded on adequate consideration, constituted new and independent contracts between the parties. The effect of the agreements was to bind Weiss as a primary obligor to pay the Moriartys the amount of the two matured mortgage notes, the accrued interest on the entire mortgage indebtedness, interest and attorney's fees. There is nothing in the language or in the contents of the extension agreements that limits the liability assumed by Weiss. His obligation is to pay without qualification the indebtedness incurred by him in favor of the Moriartys.
It is not the province of the court to alter by construction or to make new contracts for the parties. The duty of the court is confined to the interpretation of the agreements the parties have made for themselves, and, in the absence of any ground for denying enforcement, to give effect to the agreements as made. We can find no ground for refusing to enforce the extension agreements as written. This means, of course, that the personal judgment in favor of the Moriartys and against Weiss cannot be satisfied out of the proceeds of the sale of the mortgaged property in preference to or in competition with their claim under the mortgage. This does not mean, however, that if the proceeds of the sale of the mortgaged property should be sufficient or nearly sufficient to discharge the mortgage indebtedness due the Moriartys, Weiss should not benefit by that circumstance. We shall recast the judgment in line with these views.
For the reasons assigned, the judgment of the district court is set aside and it is now ordered that there be judgment in favor of plaintiffs and against the defendant Sol Weiss, in the sum of seven thousand dollars ($7,000), with interest thereon at the rate of 7% per annum from May 28, 1932, until paid, plus 5% on the amount of the principal and interest as attorney's fees, and for the additional sum of Two thousand and nine dollars ($2,009), with 5% per annum interest thereon from May 28, 1932 until paid.
It is further ordered that plaintiffs' vendors' lien and mortgage recorded in Book 1391, folio 495, in the Office of the Recorder of Mortgages for the Parish of Orleans be recognized and enforced, and that the claim of the plaintiffs arising from the vendors' lien and mortgage held by them be paid by preference and priority over all other claims out of the proceeds of the sale of the mortgaged property.
It is further ordered, that if the amount realized by plaintiffs under the judgment against Sol Weiss added to the amount realized by plaintiffs under the foreclosure sale of the mortgaged property shall exceed the sum of the indebtedness due plaintiffs under the notes and mortgage held by them, the excess or overplus shall be paid or returned to Weiss.
All costs of this proceeding are to be paid by Sol Weiss. The right to apply for a rehearing is reserved to all the parties.
HIGGINS and FOURNET, JJ., concur in the decree.
O'NIELL, C.J., adheres to the original opinion which he handed down on May 29, 1939, and to the dissenting opinion which he handed down on January 9, 1940, on the first rehearing.
The result of the litigation in this case is that the defendant Weiss is now liable for the debts secured by the two mortgages on the two pieces of property exchanged or transferred, although he is presently the owner of only one of the pieces of real estate. It was never contemplated nor intended by any of the parties that Weiss was to be liable for both debts, even though Dessalles defaulted on his part of the agreement of mutual transfer and assumption of the mortgages of each other. Surely, it is contrary to the spirit of the law, if not the letter thereof, to hold Weiss liable for the payment and discharge of the total exchange value or prices placed upon the pieces of real estate which were respectively transferred. This is particularly true, since Weiss stood ready and willing at all times to carry out his part of the agreement and the failure of consideration took place only on the part of Dessalles.
The fact that the conveyances were made simultaneously by Weiss and Dessalles to each other, in which they assumed the respective mortgages of each other as a consideration for the transfers, shows that the transaction was an exchange even though the conveyances were in the forms of sales. It is my view that the Dessalles and Weiss written executory contract, which was carried out by the mutual transfer of their respective properties and the assumption of each other's mortgages thereon, was admissible in evidence to prove the true facts of the case.
I do not agree with the opinion that the granting of the extensions of time by Moriarty placed him in a better position than Dessalles as against Weiss for the reason that when Dessalles, after the extensions were granted, defaulted in paying the mortgage that he assumed there was a failure of consideration and Weiss had the right to be relieved of his part of the obligation due to the breach of the contract of exchange by Dessalles.
In the case of Freedman v. Ratcliff, 183 La. 1, 162 So. 783, at page 785, the Court said:
"* * * The obligation of one who buys property, subject to a mortgage held by a third party, and who assumes the payment of the mortgage debt as a part of the price to be paid for the property, is an obligation in favor of the party selling the property, and is not for the benefit of the holder of the mortgage. If the holder of the mortgage, in such a case, accepts the stipulation in his favor, he may enforce it against the new debtor, but has no better claim against the new debtor than the one who sold the property had. Tiernan v. Martin, 2 Rob. 523; Union Bank v. Bowman, 9 La.Ann. 195; Brou v. Becnel, 20 La.Ann. 254; Brandon v. Hughes, 22 La.Ann. 360; Janney v. Ober, 28 La.Ann. 281, 285 * * *."
Furthermore, Moriarty, by granting an extension of time for the payment of two of Dessalles' mortgage notes and the interest on the whole mortgage, did not gain a greater right than Dessalles, because it was never contemplated by the parties at any time that Weiss was to be responsible for the mortgages on both pieces of property. This is clearly shown because Weiss was incapable of financially meeting the debts secured by the two mortgages, whereas, he was in a position to handle either one of them.
In any event, even if the line of reason adopted by the majority opinion were followed, nevertheless, Weiss, under the agreements of extensions of time to pay the two matured notes, bound himself to pay only the two $3500 notes and the interest on the mortgage. He did not bind himself to pay the remaining unmatured mortgage notes, nor the interest that might accrue on them in the future. I, therefore, respectfully dissent.
It is not contended that any mistake was made in the statement of the facts of this case in our original opinion. So far as the facts essential to the decision go they are very simple and are not disputed. On September 30, 1930, when Sol Weiss bought the Moriarty property from Dessalles, he assumed the payment of the nine mortgage notes for $3,500 each, which Dessalles owed to the Moriartys, and which were to mature on November 28, 1930, 1931, 1932, 1933, 1934, 1935, 1936, 1937, and 1938, respectively. Weiss afterwards obtained from the Moriartys three extensions of six months each, on the note that matured on November 28, 1930, and one extension of six months on the note that matured on November 28, 1931; and Weiss paid to the Moriartys the interest on the whole debt up to July 1, 1931. The first extension of six months extended the first note to May 28, 1931; and the second extension extended it to November 28, 1931. On that date the second note for $3,500 also came due. Weiss, therefore, obtained from the Moriartys, on December 8, 1931, the third extension; that is to say, a re-extension of the first note for six months and an extension of the second note for the same period; which made both notes fall due on May 28, 1932. The three extensions were obtained without any reservation on the part of Weiss, or any intimation that he did not intend thereby to become obligated to the Moriartys to pay to them in full the whole debt which he had assumed, as the notes would mature. The extension agreements were written by Weiss and were all of the same tenor. To show that Weiss, in obtaining the extensions, acknowledged to the Moriartys that he then owed the obligation to them, we copied in full, in the original opinion in this case, the third extension agreement; in which it is said, at the very beginning:
"Whereas, Sol Weiss, of New Orleans, Louisiana, has purchased the property located at the corner of Tulane Ave. and S. Franklin (Loyola) St., and
"Whereas, said Sol Weiss has assumed from Samuel J. Dessalles, the original purchaser of said property, the outstanding mortgage and vendor's lien against the same, in favor of the Estate of Moriarty and/or the heirs thereof, and
"Whereas, the principal of said mortgage aggregates thirty-one thousand five hundred ($31,500.00) Dollars, and", etc.
As the instrument is copied in full in our original opinion, there is no necessity for copying it again here. In the preambles which we have copied, Weiss said to the Moriartys, in explanation of his reasons for obtaining the extension, that he had assumed to pay the debt which Dessalles originally owed to the Moriartys, amounting to $31,500. After reciting that two of the notes were past due and that the annual interest on the whole debt was paid up to July 1, 1931 — and after reciting that the note which had fallen due on November 28, 1930, had been extended to November 28, 1931, and that the second note also had fallen due on that date, and after stating that the Moriartys had agreed to extend until May 28, 1932, the two past-due notes and the payment-date of the interest on the whole debt — it was stipulated that Weiss should pay "at the expiration of this extension", (on May 28, 1932) the accrued interest on the whole debt, as well as the two past-due notes for $3,500 each. The reason why Weiss was not obliged to pay the remaining seven notes "at the expiration of this extension" — May 28, 1932 — was that the remaining seven notes would not mature on that date, unless Weiss should fail to pay the accrued interest and the two extended notes on that date; in which event the whole debt would become due and exigible, under the so-called acceleration clause in the act of mortgage which the Moriartys held. The stipulation that Weiss should have to pay only the two extended notes and the accrued interest on the whole debt on May 28, 1932, meant merely that the acceleration clause would not be enforced against Weiss if he would meet his obligation promptly on May 28, 1932, to pay the two extended notes and the accrued interest on the whole debt. There was no other reason for the stipulation that Weiss should pay on May 28, 1932, the two extended notes and the accrued interest on the whole debt. The notes and the stipulation for interest in the act of mortgage spoke for themselves, and made it plain enough that Weiss had to pay the notes as they matured and the interest annually.
And now, after a rehearing of the case, the extension agreement, dated December 8, 1931, is construed as meaning that Weiss was not obliged to pay at any time the seven notes that matured after May 28, 1932, or the interest accruing after that date. I do not subscribe to that interpretation of the extension agreement. We must bear in mind that it was merely the obtaining of an extension that converted Weiss' obligation in favor of Dessalles into an obligation in favor of the Moriartys — into an obligation which they could enforce without consulting Dessalles. When Weiss obtained from the Moriartys the first extension of time in which to meet the obligation, the legal effect of the transaction was to make Weiss the Moriartys' debtor, and to give them the right to look to him for payment of the debt. Hence it was not necessary for Weiss to renew expressly his promise to pay the debt, in the extension agreements. Rev.Civ. Code, art. 1890; Mitchell v. Cooley, 5 Rob. 240; Union Bank v. Bowman, 9 La.Ann. 195; Brandon v. Hughes, 22 La.Ann. 360; Gay Co. v. Blanchard, 32 La.Ann. 497; Conte v. Cain, 33 La.Ann. 965, 968; De L'Isle v. Succession of Moss, 34 La.Ann. 164; Vinet v. Bres, 48 La.Ann. 1254, 1264, 20 So. 693; Freedman v. Ratcliff, 183 La. 1, 162 So. 783; 11 Tulane Law Review, 18.
Another effect which the law gave to the extension of time, which the Moriartys gave to Weiss without Dessalles' consent, was to release Dessalles from his obligation to pay the debt. Gay Co. v. Blanchard, 32 La.Ann. 497; Isaacs v. Van Hoose, 171 La. 676, 131 So. 845; Wilkinson v. Adams, 179 La. 630, 154 So. 630, Rev.Civ. Code art. 3063; Act No. 64 of 1904 (N.I.L.), Sec. 120, subd. 6. As we pointed out in the original opinion in this case, it was held point-blank, in Isaacs v. Van Hoose and again in Wilkinson v. Adams, that, where a mortgagee [like the Moriartys], without the consent of the mortgagor [Dessalles], gave to the mortgagor's grantee [Weiss] an extension of time in which to pay the mortgage debt which the mortgagor's grantee [Weiss] had assumed, the effect of the transaction was to release the mortgagor [Dessalles] from his personal obligation. That is this case exactly. The effect of the extension was to release Dessalles from the obligation which he had owed to the Moriartys. And now, by virtue of the decision rendered on rehearing, Weiss also is released from his obligation, except for two of the nine notes and the accrued interest on all of them from July 1, 1931.
Of course, if the Moriartys, with their eyes wide open had signed an extension agreement which expressly released or exempted Weiss from his obligation to pay the seven notes falling due after May 28, 1932, the Moriartys ought to be held to their agreement. But nothing like that was expressed in the extension agreement. And I respectfully submit that such a release of the obligation of Weiss is not a reasonable inference to be drawn from the stipulation in the agreement that he should pay, at the expiration of the extension — on May 28, 1932 — the two notes that would fall due on that date, and the interest accrued to that date. On the contrary, there is a strong presumption against the inference that, by the stipulation that Weiss should pay at the expiration of the extension the two notes that would mature on that date and the accrued interest to that date on the whole debt, the Moriartys intended to release Weiss from his obligation to pay the seven notes falling due after that date. It seems so strange to me that, by obtaining an extension of two past-due notes, and by promising to pay them and the accrued interest on all of the notes at the expiration of the extension, Weiss has become released from his obligation to pay the remaining seven notes, falling due long after the expiration of the extension of the first two notes — without an express stipulation to that effect — and notwithstanding Weiss did not fulfill his obligation, and has not yet paid either of the two extended notes, or any interest on the debt.
The reason why I did not mention this defense on the part of Weiss in the original opinion which I wrote for the majority of the members of the court is that no such defense was made by Weiss or his attorney — not even as an alternative defense either in his pleadings or in any of his briefs — until he applied for a rehearing, after the case was decided. In his application for a rehearing, which was in the form of a printed brief, he made this alternative defense, for the first time, only in his closing paragraph, viz.:
"No law or logic could result in holding Weiss liable, if at all, under the extension agreement, to a greater extent than he bound himself therein, to-wit: for the payment of the two first maturing notes."
The logical inference is that the reason why Weiss did not make that alternative defense before the case was decided by this court is that he construed the extension agreement as the Moriartys construed it, and as I construe it in this dissenting opinion.