Seixas v. Brugier

37 La. Ann. 509

• Court: Supreme Court of Louisiana
• Decided: May 15, 1885
• Docket: No. 9364
• Status: Published

Opinions

Tlio opinion of tlio Court was delivered "by

Eehher, J.

A. Carriére & Sons was a commercial firm of tills city, ■engaged in the banking and commission business, and composed of Antoine Carriére, Emile Carriére and Clias. J. Carriére.

This firm failed in June, 1884, and on the 18th of July, 1884, took the benefit of the insolvent laws of this State and made a cession of its property to its creditors $ and the plaintiff in this suit is duly appointed and qualified syndic.

' Antoine Carriére and Emile Carriére jointly and severally were the agents, general and special, of Mrs. Romain Brugier, the defendant -herein, under power of attorney, exceedingly broad in its terms, granting to “them and to each of them separately,” “full power and authority, in her name and helialf, to conduct, manage, transact and .administer all and singular her affairs, business, properties and con•cerns in this city and State, of whatsoever nature or kind, without •exception or reservation whatsoever.” The mandate proceeded to ■confer upon the agents a multitude of special powers, embracing those to collect all dues; to deposit and check out her funds; to sell all ■shares of stock in corporations; to vote in all meetings of stock-holders ; to lease property, collect rents and contract for repairs; to represent her in judicial proceedings; to transact and compromise, etc.

Amongst other special powers was that “to purchase real estate, mortgage notes, or any other securities or property, as the said constituents or either of them may think proper, for such price and on such terms and conditions as they shall think fit.”

No express power was granted, however, to sell, exchange or pledge1 •such securities when bought.

The affairs of Mrs. Brugier were important; the powers conferred were extensive; and in their execution, the agents seem to have been left entirely uncontrolled by any interference or supervision of Mrs. Brugier, who, from first to last, seems to have reposed unlimited confidence in her agents, and to have considered them as solvent as the Bank of,England.

In fact, however, the firm of Carriére & Sons was seriously embarrassed, though their credit retained the highest character in commercial circles down to the very day of the failure.

Besides being a cieditor for a very large amount, Mrs. Brugier had in the hands of her agents valuable securities, including $17,000 in city certificate bonds, $.14,500 in levee steam cotton-j>ress bonds, and $2000 in water-works bonds.

These securities seem oidinarilyto have been kept by her agents in a bank-box bearing her name, of which they had the key and full control.

In January, 1884, the firm of Carriére & Sons having urgent need of banking accommodations, which, in the then stringent monetary con•ditions, were more easily obtainable upon securities like those of Mrs. Brugier than upon the ordinary bills receivable in the firm’s portfolio, -a conference was held between the two agents, Antoine and Emile Carriére, at which it was determined that they would withdraw Mrs. Brugier’s securities and use them for the purposes of the firm, replacing them, however, at the same time by bills receivable of equivalent value belonging to the firm.

Accordingly, her securities, all negotiable and running to maturity, were withdrawn and pledged to about their value; while, at or near the same t;me, bills receivable of equivalent value were set aside to Mrs., Brugier. The latter were not placed in Mrs. Brugier’s bank-box,, but they were placed in an envelope, not bearing her name, but superscribed: “Pour remplacer: $17,000 City Certificate bonds; $14,500' Levee Steam Cotton Press bonds; $2,000 Water-works bonds.”

This envelope was not placed in the port-folio of the firm, but was kept in the private port-folio of Emile Carriere.

This first exchange of securities was followed by others. When the-bills receivable in the envelope would mature or other occasion for-their use by the firm would arise, Emile Carriere would withdraw and use them for the firm, replacing them, however, by others of equal value.

No entry of' these transactions was made upon the books until May 12, 1884, when, having made a fruitless effort to resume possession-of the misappropriated bonds, the following entries were made upon the cash-book of the firm: On the debit side: “Billets h recevoirpassós á Mine. Yve. R. Brugier,” describing them; on the credit side, the bonds described, “Achetós de Mine. Brugier.” On the same day, the envelope containing the bills referred to was placed in Mrs. Brugier’s bank-box, where they remained untouched until the 10th day of' Juno, when, for the first time, she was informed of what had been done, and the bank-box with the substituted securities were delivered to. and accepted by her in lieu of her alienated bonds.

These are the substantial facts as developed by the testimony of' Emile Carriere, supported by the production of the endorsed envelope,, the entry on the books of May 12, and the testimony of Mrs. Brugieras to the delivery to her.

His testimony, owing to the death of Antoine Carriere, is the sole evde nee touching the facts prior to May 12. Though assailed in argument as improbable and untrustworthy, the improbability is not apparent and its trustworthiness is not impeached by any evidence, direct or circumstantial. We must act upon it, or upon no evidence. M rs. Brugier is defendant in this suit and possesses these securities as. owner. We cannot be expected to divest her title and possession, unless they are conclusively overthrown by her adversary, who carries. e burden of proof.

The present action is brought by the syndic against Mrs. Brugier to. annul and avoid the transfer and to recover the securities or their-value. Tlie basis of the action is found in the allegations that the transfer was made on May 12,1884, within three months next preceding the failure, in order to give an unjust preference to Mrs. Brugier as a creditor and without any consideration delivered by her at the time— all claimed to be void under Section 1808 of the Revised Statutes.

The theory of the plaintiff is to isolate the conversion of Mrs. Brugier’s bonds from the concurrent replacement of them by other securities ; to treat said conversion as merely making Mrs. Brugier a creditor for their value; -and to have the transaction of May 12, 1884,, considered as a, prohibited transfer made, in tiempo inhábil, without present consideration, to a mere creditor for the purpose of giving an unjust preference.

We cannot accept this theory.

Its effect would be to suppress essential parts of an unique transaction and to extend the wrong done to Mrs. Brugier beyond the limitations imposed on it by the wrong-doers themselves. Fortunately for her, her agents did not commit the flagrant crime of embezzling and making way with her bonds without consideration. Their offense consisted in exchanging her bonds for other securities belonging to their firm. She might unquestionably have authorized her agents to make such an exchange even with their own firm, and, done under such authority, its validity would have been unquestionable. Executed without authority, the exchange was not binding on her. When informed of it, she might have repudiated it, and might have held her agents bound as debtors for the value of her converted bonds. But she possessed the undoubted right of ratifying the exchange and of thus imparting to it retroactive validity ah initio, unless prior to the-the ratification, right's of third persons had intervened, which the rati fication could not be permitted to defeat.

It is claimed that the ratification having taken place only after the failure and within three months preceding insolvency, the rights of the creditors of Carriére & Sons under our insolvent laws had intervened and operated as a bar to the ratification.

This claim may be disposed of in the language of the Supreme-Court of the United States in a case strikingly similar, arising under the bankrupt law. There an agent entrusted with the custody of bonds belonging to his principal, had, without authority, substituted for them bills receivable belonging to himself, and had used the bonds. Subsequently, he made a new substitution of a note and mortgage for the bills originally substituted. After his failure, and within less than a month of his bankruptcy, he informed the principal of his dealings, and delivered to him the note and mortgage, which the latter accepted. The assignee in bankruptcy brought against the principal an action precisely similar to this.

It is rare to find two cases running so exactly “on all fours.”

In discussing the effect of the ratification the court said: “The question in this case is, whether any rights of third parties did thus intervene between the substitution made by Homans and ratification by Tullis, which defeated the retroactive efficacy of the ratification. And the test is, could the, parties have made the transaction at the time of the ratification, without contravening the provisions of the Bankrupt Act 1 ” The court held they could ; that the dealing was an exchange of securities and not a transaction with a creditor, and, therefore, not subject to the prohibition against unjust preferences in favor of a creditor; that it was a fair exchange of values which could be made at any time prior to actual surrender in bankruptcy; that, if it had been made at the date of the ratification, it would have been obnoxious to no complaint; and, therefore, there was no obstacle to the retroactive effect of the ratification. The court concluded on this point by saying: “the position of counsel that the ratification, if sustained, only extended to the conversion of the bonds, and that all else ■consisted of dealings by Homans with his own property,” (precisely the •contention here) “is not tenable. The answer to it is that the ratification was of the whole transaction taken together; that of the appropriation of the bonds upon substituting an equivalent in value for them, not of a part without the rest, not of the appropriation without the substitution.”

But, independently of the question of ratification, the court held the transfer unassailable under the well-settled principle “that where property held upon any trust to keep, or use, or invest in a particular way, is misapplied by the trustee and converted into different property or is sold and the proceeds are thus invested, the property may be followed wherever it can be traced through its transformations, and will be subject, when found in its new form, to the rights of the original owner or cestui que trust.” And it held that the eonversion of the bonds was a conversion of them into the substituted securities which took their place and were subject to the claim of the ■original owner. Cook vs. Tullis, 18 Wall. 332.

The law is said to be a “science of distinctions; ” and it is the highest test of judicial acumen in the application of authorities to observe .and .enforce such distinctions.

We have exercised our whole powers of discrimination without being able to discover any substantial distinction between the case in band and that of Cook vs. Tullis.

On the other hand, the case of Casey vs. Cavaroc, 6 Otto, 467, relied ■on by plaintiff’s counsel, is obviously distinguishable. That was a ■case where the claimant of the securities was a simple creditor, as to whom the court said, “it must not be overlooked that the credit Mobilier has no other claim to the securities in question but that of pledge. A pledge and possession which is its essential ingredient, must be made out, or their privilege fails. * * Without the privilege or right of preference, the credit Mobilier has no claim to hold ■the securities in question as against the other creditors.” Holding that the pledge was invalid for want of the requisite transfer of pos.session, the court maintained the demand of the receiver.

Par from ovei ruling the case of Cook vs. Tullís, the court referred “to it with others, but said, “these were all cases in which the creditor claiming adversely to the assignee, had a. clear legal or equitable title to the property claimed. None of them stood, as the present case does, upon the claim of a privilege expressly denied by law.”

So, in the instant case, Mrs. Brugier sets up no right as pledgee or .as creditor, hut solely as owner.

There was never any claim or pretense of a pledge. The transaction was, in shape and in fact, an exchange of securities; one which, if the •agent had been authorized, would have operated an instant transfer of title; which, done without such authorization, was subject to the principal’s option of ratification; one which she did ratify; which would have been valid, if made at the date of ratification, and which, therefore, by the retroactive effect of the ratification, acquired validity ab initio, and must now he maintained.

We have not found it necessary to advert to the successive substitutions of new securities. The same feature was presented in Cook vs. Tullís. Evidently each stood upon the same basis with the ori.ginal substitution and is governed by the same considerations. Nor is the case affected by the fact that some of them were made within the three months preceding- the failure. Such exchanges, as we have seen, being of fair equivalents, fell within no prohibition of the insolvent laws. And it is admitted that the securities received by Mrs. Brugier were of less value than her bonds.

Such is the clear solution of the questions of law arising on the facts .as evolved from the testimony.of Emile Carriére. Bat, suppose we were to eliminate all the facts prior to the transaction of May 12, 1884, when, though disguised in the form a double sale, a real exchange was undoubtedly effected, At that date, Mrs. Brugier’s bonds stood pledged by her agents for their own debt without her authority.

That pledge, though subjecting them to the privilege of the pledgees, did not divest her ownership of the bonds. They were still her bonds. On that day, h.er agents made the final exchange of her bonds for the securities subsequently delivered to her. What prevented such an exchange? It was a fair exchange of values. If she had been a party to the transaction, would it not have been valid? Would the fact that her agents had unlawfully pledged her bonds for their own debt, have operated as an obstacle to such exchange? Would it not have been-their right and duty to liberate her bonds, by paying the debt for which they were pledged, or, if the pledgees would consent, by substituting in their place securities belonging to themselves ? Or, might they not have sold the securities and recovered her bonds by paying the pledged debt with the proceeds.

The answers to these questions seem sufficiently simple. And, if Mrs. Brugier chose to accept the securities directly in exchange for her bonds, we see nothing in the insolvent or any other law to prevent it. Her subsequent ratification, as we have seen, imparted to the transaction the same validity as if she had been originally a party to-it, and we see no ground on which her title can be successfully impeached.

The unlawful pledging of her bonds did not change her position-from that of owner to mere creditor. The relation of debtor and creditor would not have arisen until the agent had made default in the return of her property on demand. In this case it never arose,, because, on demand, she was notified of and ratified the exchange which had been made, and accepted the substituted securities. Under no view can the transaction be treated as a dealing with a creditor or giving an unjust preference as such.

It is, therefore, ordered, adjudged and decreed, that the judgment appealed from be annulled, avoided and reversed; and it is now decreed that there be judgment for defendant, rejecting plaintiff’s demand at his cost in both courts.

Rehearing refused.

Bermudez, C. J. and Poché, J. dissent.