Plaintiffs, heirs of Mrs. Viola M. Scott, instituted this suit against Mrs. Ruby Jones Corkern, widow of Dr. Ronald E. Corkern, individually and as natural tutrix of her two minor children, on five promissory notes executed by the late Dr. Corkern in favor of the late Mrs. Viola M. Scott totalling $2,300, each note bearing 4% interest from its date. Plaintiffs are claiming the sum of $5,029.20, this being the alleged amount of the principal and interest due on the notes, plus attorney's fees.
Plaintiffs' petition, as amended, alleges that on August 27, 1929, Mrs. Viola M. Scott entered into a contract with R. G. Corkern and his son, Ronald E. Corkern, whereby Mrs. Scott agreed to loan funds for the purpose of financing the medical education of Ronald E. Corkern up to the amount of $2,500 during the four years following the date of said agreement and that, to secure the payments of said loans, Ronald E. Corkern pledged and/or assigned unto Mrs. Viola M. Scott a certain life insurance policy in the amount of $2,000, issued by the Pan-American Life Insurance Company on the life of Ronald E. Corkern, with the designation of Mrs. Scott as beneficiary. Pursuant to the terms of the agreement, loans were made from 1929 through 1934 in the total amount of $2,300.
To this petition defendant, appearing individually and as tutrix of her two minor children, interposed a plea of prescription of five and ten years in which she denied that the aforesaid insurance policy had ever been pledged to Mrs. Scott to secure the payment of the notes and averred that it remained at all times in the physical possession of her late husband. After a trial on this plea, the judge, being of the opinion that the action was barred by the prescription of five years, dismissed the suit.
In this Court, plaintiffs are asserting that the insurance policy of Dr. Corkern was pledged to Mrs. Scott as security for the payment of all amounts for which he would become indebted to Mrs. Scott under the agreement of August 27, 1929 and that, this being so, prescription has never accrued on the obligations sued on as the existence
The contracts of pledge and assignment are entirely different and produce varied legal results. Assignment or transfer of credits and other incorporeal rights is a species of sale and is treated as such in our Civil Code, being found in Chapter 12 of Title VII ("Of Sale"). Article 2642 of the Civil Code provides that delivery of an assignment takes place as between transferrer and transferee by the giving of title. Accordingly, a vesting of title in the transferee is essential to an assignment. See Strudwick Funeral Home v. Liberty Ind. Life Ins. Co., La.App., 176 So. 679 and authorities there cited.
On the other hand, a pledge is another sort of contract, having characteristics completely diverse to those of an assignment. It is dealt with under a separate title (Title XX) of our Code and is essentially a contract of security, being defined in Article 3133 as "a contract by which one debtor gives something to his creditor as a security for his debt". This is the antithesis of an assignment (in which title passes) for, in the contract of pledge, the debtor retains the title of the thing which he places, either actually or constructively, in the hands of his creditor as security for the payment of the debt. See Article 3166 of the Civil Code. Hence, it is impossible to have an assignment and a pledge of the same thing at the same time. And this, notwithstanding the recent decision to the contrary of the Court of Appeal, Second Circuit, In re Pan American Life Insurance Company, 88 So.2d 410, a concursus proceeding for the determination of the ownership of the proceeds of the same insurance policy involved herein, where it was held that the agreement between Dr. Corkern and Mrs. Scott was a contract of assignment as well as a pledge of the policy.
An examination of the contract between Mrs. Scott and Dr. Corkern leaves no doubt whatever that it is a contract of pledge. It provides, in substance, that Mrs. Scott, Dr. Corkern and his father have entered into an agreement whereby Mrs. Scott is to lend the younger Corkern up to $2,500 to enable him to obtain a medical education and that he is to give his promissory notes for the particular amounts that are advanced and that, "in order to secure the payment of the sums advanced to him * * *", he will make Mrs. Scott beneficiary in a policy of life insurance carried by him in the Pan American Life Insurance Company in the sum of $2,000; that he would continue to pay the premiums thereon and not do any act that would decrease the cash or loan value of the insurance without the consent of Mrs. Scott, who agreed to reimburse his parents or his closest heirs any amount she would receive in the event of his death in excess of the amount loaned him. In conformity with his promise, Dr. Corkern wrote the insurance company enclosing the policy and effected a change of beneficiary from his mother to Mrs. Scott, directing that the policy be returned to the First National Bank of Oberlin, Louisiana "with instructions to just hold in escrow as they have already been advised concerning this transaction". The policy was delivered to the bank by the insurer in accordance with these instructions.
In this Court, defendant does not contest that the agreement effected a pledge of the insurance policy. However, her counsel maintains that the pledge was extinguished by the occurrence of certain events by which Dr. Corkern obtained possession of
Mrs. Scott died on March 1, 1948 and Dr. Corkern died on February 20, 1953. When the bank box of the latter was opened in his succession proceedings, the policy of insurance was found therein but no one knows how or when he obtained possession of it. Mrs. Scott's name still appeared thereon as beneficiary.
It is the position of defendant's counsel, as we understand it, that the pledge was extinguished when Dr. Corkern came into possession of the policy. Contra, plaintiffs contend that Dr. Corkern's possession was a precarious one in which he was acting as a trustee for the pledgee, Mrs. Scott.
We find plaintiffs' position is sustained by applicable authorities. See Jacquet v. His Creditors, 38 La.Ann. 863; Foote v. Sun Life Assur. Co. of Canada, La.App., 173 So. 477 and cases there cited, particularly Conger v. City of New Orleans, 32 La.Ann. 1250, where this Court, in determining the validity of a pledge of stock owned by the City in a railroad company, which had never been delivered by the City to the plaintiff but which was perpetually pledged in favor of the bondholders by Act 109 of 1854, said:
Thus, it is manifest that the mere circumstance that the pledged insurance policy was found in the possession of the pledgor does not justify the conclusion that the pledge was extinguished and, in the absence of any evidence showing that the parties intended that the pledge be terminated or even that the pledgor considered it terminated, it will be presumed that the possession of the pledgor was precarious or as an agent pro hac vice.
Since we find the pledge to have been presumptively extant between the parties,
And it is plain, for reasons given earlier in this opinion, that physical possession of the pledge need not be in the creditor himself, it being sufficient that it be in someone who holds for the account of the creditor, even the debtor himself, provided his tenure be precarious and clearly for the account of the creditor.
Since we find in the case at bar that Dr. Corkern held the pledged policy as trustee pro hac vice for Mrs. Scott, as evidenced by the fact that during his unexplainable possession of it he did no act with respect thereto which could be considered inconsistent with the pledge agreement,
Accordingly, the judgment appealed from is reversed; the exception of prescription is overruled and the case is remanded for further proceedings in accordance with law and consistent with the views herein expressed. The costs of this appeal are to be borne by defendant.
FOURNET, C. J., and HAWTHORNE, J., absent.