Lachman & Jacobi v. Henry Block & Bro.

47 La. Ann. 505

• Court: Supreme Court of Louisiana
• Decided: July 1, 1895
• Docket: No. 11,365
• Status: Published

Opinions

On subsequent and final hearing the opinion of the court was delivered by

Miller, J.

The important issues in this case, after the fullest discussion by counsel, have been re-examined with earnest attention.

The suit is founded on a paper dated 14th June, 1891, signed by-defendant, C. Lazard, addressed to plaintiffs, expressing that he-agrees to become surety for Block & Bro., jointly and severally with them, for ten thousand dollars, the agreement to bind till the 15th October, 1891. The argument for plaintiffs maintains that the paper-obtained from defendant, Lazard, by one of the firm of Block & Bro., by him transmitted to plaintiffs, residing in California, with no intercourse whatever between plaintiffs and defendant, either before or after the execution of the paper, binds him for ten thousand dollars of the indebtedness of Block & Bro. to plaintiffs, existing at the date of the letter, or contracted after, and even on terms of credit extending beyond the limits expressed in the paper. On the other hand, it is contended on behalf of defendant that the paper, importing merely an engagement to become surety, with -no designation of: the debt, can not, by construction, be deemed to cover past and future indebtedness, nor debts contractéd on terms of credit beyond the period of defendant’s suretyship stated in the paper; and along with these views of the meaning of the letter restricting the liability if any, the proposition of the defence is, that this paper, a mere proposition to become surety, not accepted in any mode whatever, never became a contract, and hence produced no obligation. There are other defences, but in our view they require no deter.mination.

In ordinary significance suretyship refers to an existing debt, as the Code puts it: .suretyship is the accessory contract of one who '■binds himself for the debt of another. But it is not to be doubted that under the Code the contract may bind for future as well as existing or past indebtedness.' The expansiveness of the Oode may be deemed to embrace suretyship in the largest sense, including, of course, the guarantees and bills of credit so familiar in commercial usage. Civil Code, Arts. 3035, 3036; 1 Bouvier’s Law Dictionary, 645. But it seems natural, if suretyship was intended to cover past and future indebtedness of the debtor, the purpose would be expressed. One proposing to bind himself as surety for indebtedness, future and past, andjdesiring to be understood, would hardly content himself with the mere expression of agreeing to become surety, with no indication of the debt intended to be secured. On the other hand, the creditor seeking a surety for existing, as well as prospective liability of his debtor, would not deem the purpose accomplished by the scant agreement to become surety, with no debt mentioned, future or past. The contention of plaintiffs is, this court is to read into this paper that which is not expressed, and give it the largest significance of suretyship: that is, a suretyship up to ten thousand dollars for the indebtedness, past and future, of Block & Bro. to plaintiffs. It must be borne in mind, too, that the surety is entitled to a strict construction of his contract. He is protected from any interpretation of his contract not resting on clear expression or plain implication. The Code declares: suretyship is not to be presumed, should be expressed, and is to be restricted within the limits intended. j; Civil [Code, Art. 3039; Bank vs. Hagan, 1 An. 62; Freeland vs. Briscoe, 3 An. 257. It seems to us, to make this paper cover past as well as future indebtedness would be to supply by inference that which is neither expressed or implied. If it stands for past indebtedness, the most liberal construction, if any, would be required to make it cover future debts. If accepted as suretyship-for the future engagements of Block & Bro., it would hardly be deemed rational to make the same words cover past indebtedness. The limitation of defendant’s responsibility to 15th October, to our minds, aids the construction. Such a stipulation might, it is true, be used with reference to an existing debt. It is more natural so to qualify suretyship for future engagements, and is not uncommon in such papers. Men are not disposed to become surety for future-debts, without restricting their responsibility as to its duration. That stipulation serves to mark the character of the paper, and coincides-with Hazard’s testimony. Plaintiff desired security for future and past debts. It is quite clear defendant never iutended to give that which plaintiff wanted, and did not, in signing the paper before us..

Indeed, the proof is in the record plaintiffs were not satisfied with the paper. In their communication to Block & Bro. acknowledging its receipt, they state it is not in correct form, and of no “ legal force,” that they will send another, but it was never sent. The-plaintiffs’ communication forcibly suggests whether they were ever influenced by the paper, of no “legal force,” as they expressed it, but on which they are now asserting defendant’s liability. If of any obligatory force, it would seem to be beyond their appreciation of it, expressed to their correspondent. On the character-of this paper, we have, too, the undisputed testimony of defendant, that he gave it on Block’s application, to enable him to make a purchase of wine from plaintiff, susceptible of speedy sale and quick profit, so that defendant’s suretyship would be short. Hence, defendant’s limitation not to be bound beyond 15th October, 1891. True, Block’s representation would not affect plaintiffs, if the paper was worded to cover a wider or different liability than that intended. The paper authorized no such interpretation as plaintiff now seeks to place on it. Nor are plaintiffs in any condition to invoke a construction beyond the fair import of its terms. It seems to us to-hold this paper had any reference to past indebtedness is to disregard its language [and close our eyes to the testimony of its purpose.

In the face of the limitation in the paper, the defendant is sought-to be held for purchases of Block & Bro. beyond the period announced in plain terms as the duration of his responsibility. Reaching. the conclusion the paper contemplated, the future purchase or purchases, how can we hold defendant for engagements extending ■beyond 15th October, 1891 ? Can this limitation be deemed to refer to the dates of the purchases ? ' They were limited to $10,000. ’There was no occasion to repeat that. It is obvious the express stipulation as to the time the defendant was to be bound, excluded the liability of any engagement of Block & Bro., maturing after 15th October, 1891. To hold otherwise, it seems to us, would be to avoid the fair import of the restriction in this respect, and deprive the defendant of the protection he designed securing. • On this ground alone the case is with defendant. But we have given attention to other phases of the cdntroversy.

Whether this paper is to be viewed as referring to past or future, ■or both past and future indebtedness of Block & Bro., the question remains, did the mere signing of the paper on Block’s request, and and its transmission by him to plaintiffs, produce any obligation on defendant’s part. In any point of view, is it not indispensable to the creation of any obligation arising on the paper that plaintiffs should have accepted it, and communicated their assent to defendant? If, as we hold, the contemplation of defendant was a suretyship for future debts, Block & Bro. might contract on the faith of his guarantee, was he not entitled to know that plaintiffs acted on it? Can it be admitted that without the slightest intimation to defendant, that his guarantee was accepted, plaintiffs could, at any future time short of prescription, present the paper and claim that defendant was bound for purchases by Block & Bro., of which defendant had neither knowledge or even opportunity of knowledge? If, without assent or communication of any kind by plaintiffs, they can claim in October that defendant’s paper, signed in June, became a contract the moment it was signed, and on that theory hold him liable for goods they chose to sell Block, with the same reason plaintiffs might assert such liability years after, or when their debtors become bankrupt, or in other changed conditions, when no sane man would ask or give the guarantee defendant was content to sign in June, 1891, for an apparently prosperous ñrm. The plaintiffs’ case assumes a most extraordinary contract subsisting and binding defendant, but with no assent on plaintiffs’ part made known to defendant, entitled to know if he was to be held on his guarantee; and another phase of the supposed contract is, that while defendant was Thus bound unknown to himself, not the shadow of an obligation rested on plaintiffs to furnish Block any goods whatever. It is difficult to conceive that a contract obligation of defendant came into full force by his proffered guarantee in June, 1891, with not the slightest intimation of assent or acceptance by those to whom it was tendered. Contracts, the Code declares, arise from proposition by one and acceptance by the other of the parties. As the Code again puts it: Consent being an operation of the mind, it can have no effect in producing the contract, unless evinced in some manner that shall cause it to be understood by the other party. In a varied form of expression the Code again declares, the agreement is incomplete until acceptance. Nor can there be any acceptance, unless given within the time it was the manifest intention to allow. The appropriate time for plaintiffs’ assent was June, when the paper was signed. It will hardly be claimed it could be given in October, when the first intimation came from plaintiffs to defendant of any claim of contract on his part. Then Block had failed, and acceptance on the then condition was precluded by both reason and law. Civil Code, Arts. 1797, 1798, 1800, 1808, 1804, et seq. The plaintiffs’ case rests on the basis of contract without consent, or rather of assent by one of the parties never given. It would seem to find its answer in those articles of the Code defining the essentials of contracts.

The paper on which this suit is based was executed here. If it imports any obligation, its performance was to be here. Payment, accordingly, is demanded here. In our view our Code is the law to be applied. The Code, too, is in harmony with the general law on the subject. The result would not be at all different if recourse is had to the rules of the commercial law applied in solving questions arising on letters of credit, or the contract of guaranty, as it is termed. It is to be observed that the application of these rules is not excluded, unless contrary to our codal or statutory provisions on the subject. Wagner vs. Kenner, 2 Robinson, 124; Thompson vs. Mylne, 4 An. 210. We think it clear that under the commercial law the guaranty or letter of credit does not bind without acceptance, express or implied. Indeed, this is, in our view, plainly announced in the Louisiana decisions, and to hold otherwise in this case would be a departure from jurisprudence. We state the earlier case in our reports thus: merchants here gave a letter of credit never accepted by the party from whom the proposed advances were to be obtained, the advances were made, and suit was brought against the merchants on their letter. The decision was the merchants were not bound, because, as the court puts it, the party giving the guaranty has a right to know whether or not it is accepted. The same question came again under discussion in a later case, and although the conclusion was reached that acceptance of the guaranty in that case was to be implied from the subsequent relations of the parties, there is no trace of any contention that acceptance, in some form, was not essential. Bank vs. Sloo, 16 La. 542; Menard vs. Scudder, 7 An. 385. Here, there is absolutely nothing on which acceptance can be implied. The challenge, as we appreciate the argument for plaintiff, is to the Code and our decisions, and affirms that no acceptance is requisite. Nor can the least benefit to defendant come from the case they cite from the United States Reports, dealing with this subject, in which it was held that acceptance was perfected by a consideration, however small, in that case one dollar, paid by the guarantee to the guarantor. Davis vs. Wells, 104 U. S. 160. That payment by the one and the receipt of the money by the other, completed the contract. It was a ease of proposition and acceptance. In that case the court refers to acceptance as essential, and to the line of decisions affirming it. Ordinarily, suretyship is com - pleted by the assent of both parties manifested at the time of the contract. True, it may be given after under the restrictions as to time and conditions so clearly stated in the Oode. Here, there is none at any time.

There is no more emphatic statement of the necessity of acceptance than is stated in one of the leading test-books, thus: Guaranty, like all other contracts, requires proposal and acceptance thereof. If, therefore, an offer of guaranty be made to any person, it'is his duty to give notice of his acceptance, or there will be no contract. Story on Contracts, Secs. 852, 853 et seq.; or in the language of the Supreme Court of the United States: “ On a letter of guaranty addressed to a particular person, or to persons generally, for a future credit to be given to a party in whose favor the guarantee is drawn, to charge the guarantor notice is necessary to be given to him that the person giving the credit accepted or acted upon the guaranty, or had given credit upon the faith of it. This is not an open question in this court, after the decisions which have been made in Russell vs. Clark, 7 ; Edmundson vs. Drake, 5 Peters, 624; Douglas vs. Reynolds, 7 Peters, 113; and Lee vs. Dick, 10 Peters, 482.”

The court further said:

“ It is in itself a reasonable rule, enabling the guarantor to know the nature and extent of his liability, to exercise due vigilance in guarding himself against losses which might otherwise be unknown to him, and to avail himself of the appropriate means in law and equity to compel the other parties to discharge him from future responsibility.”

The court, after referring to' the various decisions of that court on the subject, and after quoting and affirming 7 Peters, 125, says:

“It is unnecessary, after such clear and decided authority of this court on this point, to fortify it by additional adjudications. We are not aware of any conflict of decision on this point.” Adams vs. Jones, 12 Peters, 207.

It is claimed, however, neither our Code or the decisions afford any solution of this controversy. It is to be governed, it is urged on us, by a statute of California. This contention is on the idea that plaintiffs receiving the paper in California, it became subjected to the law there. The statute is, that on letters of credit notice of the advances is not requisite. It is assumed that the paper, a surety-ship, as it seems, under our Code, is within the purview of the statute, and that concludes the question. Notice of advances on letters of credit may well be dispensed with. The failure of such notice is not, in any case, a defence, unless causing loss to the guarantor. Louisville Mfg. Co. vs. Welsh, 10 Howard, 461 (475) ; Davis vs. Wells, 104 U. S. 170. It is contended the California statute goes further; applies to guarantees, letters of credit or suretyship, and dispenses with any consent to the contract on the part of the guarantor. If so, the law supplies consent, the foundation of contracts. We do not undertake to determine the scope of this statute. The law of a contract is used to denote, as well that of the place where the contract is made, as of the place of performance. The operation of the law of the place of performance is: where the contract made in one place is to be executed iu another. Story, Conflict of Laws, Secs. 233, 234, 280, 284; Pritchard vs. Norton, 106 U. S. 124. The defendant executed the paper in this State. The performance of his contract, if any, was to be here. Here the payment of his alleged obligation was to be demanded, and in our courts payment is sought to be exacted. We think his asserted contract is governed by our law. There is, it seems to us, no doubt of the character; this paper tested by our law, and it may be added, in questions of the application of laws to contracts, in all cases of doubt our courts follow our law.

In reaching our conclusion the contention as to the asserted estop-pel of the defendant, forming so large part the discussion in the briefs and at the bar, has not escaped attention. It is urged that his promise to pay plaintiffs’ demand, and his allegation and oath to the debt sued on in this suit of his firm against Block & Bro., conclude the defendant from disputing plaintiffs’ demand. The proof is, demand was made on defendant in the early part of October, 1891, for the money claimed on his paper of the preceding June. It may well, we think, be assumed that defendant was not at all informed on the question of his liability. The inquiry as to the effect of his paper occupying the attention of counsel and of the court for months, it is not to be supposed the defendant was competent to determine on the demand made on him through plaintiffs’ lawyer. But the demand assumed his liability, and defendant’s promise was expressed in his request for time to pay. But he consulted his counsel, was advised there was no liability, and on a second demand being made, defendant replied, through his counsel, he was not bound and would not pay. It seems to us utterly beyond the compass of reasonable discussion to hold the defendant bound, merely and only because of his recognition or promise to pay an asserted debt, promptly withdrawn, on being apprised he was not bound. The law does not bind a man irrevocably by his promise made in error, and admits of any explanation that will avoid the promise. A very familiar illustration, if any was needed that such promises do not bind, is furnished in the instance of the endorser, who, ignorant of his discharge, promises to pay. The law permits explanation of his error, holds the promise for naught, and if he has paid on such promise, gives the action to recover back his money. Story on Notes, Sec. 361; Citizens Bank vs. Dugue, 5 An. 12; Oakey vs. Bank, 17 La. 386; Heath vs. Bank, 7 Rob. 334. We can not, therefore, hold this defendant liable on the ground only, that on the lawyer’s demand he' made a promise, withdrawn soon after, and on which it is not pretended plaintiffs extended any forbearance, or adopted or omitted any action whatever. In the suit of Lazard & Co. against Block & Bro. for a large indebtedness, it is claimed the amount of defendant’s paper or guaranty was included, and in that suit the plaintiff made oath to obtain the attachment. The amount, forty-one thousand dollars sued for in that suit, included an item of ten thousand dollars as “outstanding.” It appears there was no explanation or discussion between Lazard and the counsel who brought the suit as to this item. If there had been, it is to be presumed the suit of C. Lazard & Co. for their debt would not have embraced ten thousand dollars, which, if due at all, would be due to C. Lazard individually. Least of all, is it likely that the counsel, if there had been any explanation on the subject, would have permitted defendant to swear to a debt including ten thousand dollars, which under no circumstances could become a debt until defendant paid the ten thousand dollars to plaintiffs, and which, by that payment, would become the debt of Block & Bro. to defendant, and not to his firm, the plaintiffs in the attachment suit. Along with the fact that the suit as to this item, “ outstanding, ten thousand dollars,” was preceded or accompanied with no special direction or information from defendant, we have the statement that the book-keeper of Lazard & Co. furnished the memorandum making up the forty-one thousand dollars. There is some discussion as to the memorandum, whether or not, it was the guide of counsel in framing his petition. We will accept the conclusion most favorable to plaintiffs, that it was furnished to the counsel, and we will assume it was intended to include the amount of ten thousand dollars. Still, it is quite evident the suit was brought hastily, often the case in attachments, evincing, as in this case, we infer, a race of ■creditors seeking to secure favored position. It is perfectly clear there was no special communication by defendant to his counsel, with reference to this ten thousand dollar item, and not the slightest knowledge on counsel’s part that this paper or guaranty of defendant formed any part of the attachment suit. We infer from the record, it was not until the demand came from plaintiffs, based on that paper, it became known to counsel the attachment suit embraced the guaranty. He then told defendant the explanation of the ten thousand dollar item, should have been given befoi’e the attachment suit was instituted, clearly implying that if given the item would not have included the guaranty. The suit as to the ten thousand dollars was thereupon discontinued on the ground of error. It is this suit, the allegations on which it was based, and defendant’s affidavit to the amount sued for, that it is urged on us, excludes defendant from denying his liabilities in the present suit. Let it be conceded when that suit was brought defendant conceived he was bound on the guaranty. If he was not in fact bound, are we to hold him on the ground that whether or not liable he became bound, because in the attachment suit of his firm against Block & Bro. the guaranty was included? Undoubtedly, the allegations of a party, in a suit, are evidence against him in favor of another not a party to the suit. But are they to be deemed conclusive? Even as admissions, their value is diminished by the fact the petition in the attachment suit was directed and framed with no examination or appreciation on the part of counsel or defendant, of the question of liability on the letter of guaranty. Is an impression of liability, when none exists, made the basis of an attachment suit against Block, to preclude the defendant from any defence against plaintiffs when his impression turns out to be erroneous, especially when the suit against Block was discontinued? If so, the error of the party in directing a suit, or the mistake or lack of attention of counsel in framing the petition, is attended with consequences more serious than are readily appreciated. We can not accept the theory that because in the suit of defendant’s firm against Block & Bro., the guaranty which had no place in that suit was included, although the suit was discontinued in that respect, yet we are to make the defendant liable, however clear it may appear to us he was never bound. That would be to bind defendant by his erroneous assumption of liability, or by an error of counsel, and not because of any obligation originally resting on him. But it is urged on us defendant derived an advantage from the inclusions of the guaranty in his attachment suit, and hence can not, holding on the advantage, repudiate the allegations in the suit which secured the supposed benefit. We can not perceive the basis of fact for this.argument. The firm’s debt, of course, excluding the guaranty, was thirty-one thousand dollars. The entire property attached did not exceed nine thousand dollars. Finally on this branch of the case, it is pressed on us, the allegations in the attachment suit are judicial confessions within the purview of Art. 2291 of the Civil Code. This, in our view, misconceives the judicial confession the subject of that article. It can be invoked as conclusive by the party to the suit in which the allegation is made, and even as to him may be revoked for error of fact. As to those not parties to that suit, the allegations are evidence in their favor, but open to explanation and correction by proof. 1 Greenleaf on Evidence, Secs. 206, 212; Mallard vs. Carpenter, 6 An. 397. Of course when any admission or declaration of a party has been acted on by another, can be withdrawn to his prejudice. Then the admission becomes an estoppel. 1 Greenleaf, Sec. 207. There is not the faintest pretence that the plaintiffs in this case, save in one respect, the beginning of this suit, were influenced in the slighest degree by the intercourse between their lawyer and defendant, from which his promise is deduced, nor by the attachment suit of defendant’s firm or the allegations of the petition in that suit. The plaintiffs were apprised defendant did not recognize their demand, and on that they acted, i. e., brought this suit. But no act or declaration of defendant is exhibited by this record on which, in our view, any estopel can be based.

In onr view the case is with the defendant on the terms of the paper the basis of this suit. That paper excludes liability for the engagements of Block & Bro. maturing after the 15th October, 1891. We have also considered the question whether any contract was ever formed, and on that issue our conclusion is adverse to plaintiff. The grounds of liability urged by plaintiff have had our careful attention. More might have been said with respect to the issues we deem controlling, as well as other phases of the controversy, but the views presented in this opinion dispose of the case.

It is therefore ordered, adjudged and decreed that our former judgment in this case be set aside, and it is now ordered, adjudged and decreed that the judgment of the lower court be affirmed, with costs.