Case ID: la-ann_27/html/0473-01.html
Source: Caselaw Access Project
Author: {"author": "Morgan, J. Ludeling, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

No. 5444.
    Milton Benner v. Warner Van Norden et al.
    The motives which influence a person to exercise a legal right do not destroy that right or affect its enforcement.
    A valuable consideration may, in general terms, bo said to consist either in some right, interest, profit, or benefit accruing to the party who malees the contract, or some forbearance, detriment, loss, responsibility or act, or labor or service on the other side; and if either of these exist, it will furnish a sufficient valuable consideration to sustain the mailing or indorsing of a promissory note in favor of the payee or other holder.
    . He who sells a credit or incorporeal right warrants its existence at the time of the transfer. The seller does not warrant the solvency of the debtor, unless he has agreed to do so. There is no lesion, in such sales, and no reliof can be granted.
    APPEAL from the Fifth District Court, parish of Orleans. Cullom, J.
    
      Randolph, Singleton (<s Broime, J. W. Huntington, for plaintiff appellee. Rice & WMtalcer, for defendants and appellants.
   Morgan, J.

Van Norden, one of the defendants, is sued on a promissory note for $2500. The note is dated'New Orleans, thirteenth June, 1874, and is payable seven months after date. Palmer, the other defendant, is sued as guarantor that the note would be paid at maturity. The execution of the note is admitted. The defense is, .as to the maker, that it was given without any legal or valid consideration, and that the transaction or contract under which the note was given was illegal, reprobated by law, and of no effect. Palmer pleads, first, tbe general issue, and second, be adopts Yan Norden’s answer.

The litigation grows out of transactions connected with the Missis sippi and Mexican Gulf Ship Canal Company, a corporation established by the Legislature. In 1871 the Legislature passed an act entitled “An act for the drainage of New Orleans.” See acts of 1871, p. 75. The first section of this act provides that the Mississippi and Mexican Gulf Ship Canal Company shall be authorized and empowered to excavate drainage canals and build protection levees within the then corporate limits of New Orleans and Carrollton, under certain conditions and stipulations therein expressed. Other sections mapped out the work which was to be done by the company. It was on the largest possible scale. One canal and protection levee was to be built near the shore of Lake Pontchartrain ; the canal was to be not less than sixty-five feet wide on the surface and fifteen feet deep in the middle-The protection levee was to be not less than one hundred feet wide, and of sufficient height to completely protect the city from overflow from Lake Pontchartrain. Another canal and protection levee was authorized to be built below the city to connect the lower end of the protection levee, along the lake, with the Mississippi river, of a sufficient size to fully protect the city from overflow, and to construct a like canal and protection levee above the city. The company was also authorized and empowered to excavate canals of the dimensions and at such localities as might be fixed by the board of administrators of the city as were necessary to fully drain the area bounded by the protection levees contemplated by the act. The company was also authorized to dig all the smaller canals required for the drainage of New Orleans and the lands in the rear of the city, the required width of which would be ten feet or more in width.

During the prosecution of these works, the board of administrators were required to build and run all the pumps and draining machines necessary to lift the drainage water from the canal or canals over into Lake Pontchartrain, and to keep the water in the canals in process of excavation, so far as practicable, at the proper level for the work of excavation, and at the same time assist the drainage of the adjacent lands. The eighth section of the act provided that at the end of every month, the city surveyor, or an engineer appointed by the board of administrators for that purpose, should examine the work which had been done by the company during that month, and upon a measurement of the width and depth of the canal, canals, or parts of canals dug, and protection levees built, certify as to the number of cubic yards excavated and the number of cubic yards of protection levees built during the said month. It was made the duty of the administrator of accounts, on the presentation to him of the certificate of the city surveyor or engineer, by the president of the company, to draw a warrant or warrants on the administrator of finance, in payment of the work done, at the rate of fifty cents per cubie yard of excavation, and fifty cents per cubie yard for the protection levee, the warrants to be of such denomination as might be required by the president of the company. It was made the duty of the administrator of finance to pay these warrants on presentation, and should there not be any funds in the city treasury, he was required to indorse upon the same the date of presentation, after which date the warrant or warrants were to bear interest at the rate of eight per cent, per annum until paid.

On the twenty-second May, 1872, the company, through its proper and authorized officer, by public act, declared that Whereas they had always been paid in warrants for the work done by them, which Warrants were only convertible to cash at a discount of twenty-five per cent, and more; whereas the expenditures of the company in constructing and executing their work have tobe paid in cash; and whereas, Warner Van Norden has agreed to advance to the company during the ensuing twelve months $150,000, to meet the expenses of their work, the $150,000 to be given in such installments as may be deemed necessary as the work progresses; therefore, to secure the payment of this loan, together with the interest thereon, the company transferred to Van Norden its rights and advantages granted under the act of the Legislature above quoted, as well as to all sums of money, profits and benefits that might inure or be realized by virtue of the performance and execution of the work therein provided for; and the company agreed to transfer to Van Norden all certificates, cash, warrants or bills that might be made out and delivered by the surveyor or other officers of the city for all work done by the company.

On the twenty-second November, 1872, the company, by public act, acknowledged itself indebted to Van Norden in the sum of $161,962 86, advanced by him, to the company to enable it to do the work required of it under the act of the Legislature. In part payment thereof it transferred to him certain property estimated at $50,000. This left the debt due him $111,962 86.

Benner was a director in the company. So was one Champlin. Benner frequently said to Van Norden, as is to be gathered from the testimony in the record (uncontradicted by him when on the stand), that Van Norden had what he, Benner, called “a big thing,” and that “he wanted some of it;” that some of the money received for the work done for the city should come to him; that he had got it all fixed, and that if Van Norden would come down and fix it as he wanted, he would make every thing all right; if not, he would lose by it.

To these appeals and threats Yan Norden seems to have turned a deaf ear. Champlin then instituted proceedings in the United States courts to force the company into bankruptcy. He was a director in the company, a stockholder and a creditor. His stock consisted of two hundred shares of $100 each. His credit was the company’s warrants for $1500. It was upon this last that the proceedings in bankruptcy were commenced. The act of bankruptcy, as alleged, was the sale of the company’s property to Van Norden, on the twenty-third of November, 1872.

Then commenced the publication of a series of articles in one of the public papers of this city, in which Van Norden’s conduct was severely criticized, and in which many things damaging to the character'of any man were boldly charged against him. They were conspicuously published, and attention called to them by their almost startling headings. In one of the articles it was stated that in the month of December preceding, the company had reached a condition which was regarded by the directors as one of hopeless bankruptcy.

By themselves these articles would amount to but little, and one of them would rather indicate that Champlin did not know anything about them. In one oí them it is stated: “ A director, Mr. Champlin, nest enters the field as a contestant for honors in this delectable squabble. We know nothing to this gentleman’s prejudice, and therefore can not say that his petition to place the company in the bankruptcy court resulted from disappointment, or because he did not share as liberally as more enterprising men did. Be this as it may, he has done so, and thus paved the way for a full disclosure of the affairs of this horribly managed company.”

But the author of these articles, a writer on the paper in which they were published, was examined as a witness with regard to them. He tells us that he was in the Customhouse on one occasion, when his attention was called to these proceedings in bankruptcy by Champlin. The first article, ho thinks, if not the second, was written at Benner’s house, that is, chiefly written there. He wrote in their presence, consulting with them, Benner aud Champlin, as to the facts. "They were both present, and when it was all prepared, they revised the copy, read it over, and corrected it, making some changes in it.” So that all the public knew of the inside workings of the company was disclosed to the reporter by Champlin and Benner — Champlin, the plaintiff in the bankruptcy proceedings; Benner, the plaintiff in this suit, and both of them stockholders of, and directors in, the company whose affairs, according to them, had been so horribly managed that it was hopelessly insolvent.

And so the conflict waged. Van Norden was pitilessly attacked in the public prints. This was a serious matter, not only as an individual, but because of a position of great trust which he held, viz: President of a savings bank. Besides this, he saw his enormous debt of over 8100,000 figuring on the debit side of a bankrupt company’s schedule, and he saw a likelihood of the property which had been, transferred to him going into the hands of an assignee in bankruptcy. It seems to be conceded on all hands that in such an event there would have been an end of it all. Just then propositions for negotiating were made to him. Benner held 1620 shares in the stock of the company. The transaction was a simple one. Van Norden was to purchase Benner’s stock, and Benner was to see that Champlin’s proceedings to force the company into bankruptcy should be dismissed. And so it was done. Van Norden gave him six notes for $2500 each, payable at various dates, and caused two of them to be discounted, thus paying him in cash $5000, and giving his notes of $2500 each for the balance. Benner then bought Champlin’s stock for $4000 — about twenty dollars a share — and the suit in the bankrupt court was discontinued. The suit now before us is on one of the $2500 notes.

In our opinion the evidence in the record shows that from first to last Benner was acting with the sole desire of forcing money out of Van Norden without any pretence of right thereto; that the stock which he made the pretext for his attempt was worthless when he made it, and was only a subterfuge to cover his original determination to get something from Van Norden to which he had no right. In our opinion courts of justice were not made to settle controversies standing on such a basis, and that their doors should be barred to such suits and suitors.

In regard to the defendant Palmer, he was bound only as surety. The principal obligation being declared null, the surety is discharged.

It is therefore ordered, adjudged and decreed, that the judgment of the district court be avoided, annulled and reversed, and that there be judgment in favor of the defendants, with costs in both courts.

On Rehearing.

Ludeling, C. J.

The plaintiff sued the defendant, W. Van Nor-den, as drawer of a promissory note, of which the following is a true copy:

“ $2500. “New Orleans, June 13, 1874. “
“ Seven months after date, I promise to pay to the order of myself twenty-five hundred (and 00-100) dollars, value received, with interest at the rate of eight per cent, per annum from maturity until paid.”
(Signed) “ W. VAN NORDEN.”
Indorsed “ W. Van Norden.”

The defendant, E. C. Palmer, was sued as guaranteeing the payment of this note at maturity, as per his agreement, found on page 85 of the record.

The following are true copies of the answers of these two defendants :

“And now comes Warner Van Norden, one of the defendants in aboye entitled cause, and for answer to the petition of plaintiff, denies all and singular the allegations therein contained, except so far as hereinafter specially admitted.
“ He admits signing the notes sued on; but specially denies that he is in any wise bound for the payment of the same; and avers that the same was given without any legal or valid consideration, and that the transaction or contract under which said note was given was illegal and reprobated of law, and of no effect.
“Respondent avers that said plaintiff, in combination and conspiracy with one Edward P. Champlin, and others, caused suit to be filed in the District Court of the United States for the District of Louisiana, in the month of May, 1873, numbered 1313 of the docket of said court, entitled 'Edwin P. Champlin v. The Mississippi and Mexican G-ulf Ship Canal Company,’ a corporation in which this respondent was largely interested; that in said suit the said Champlin, as petitioning creditor, alleged that he ‘ was a creditor of the said company in the sum of four hundred and sixteen dollars and sixty-six cents, and did pray that said company might be adjudicated a bankrupt.’
“That said Benner and said other persons did openly declare that the purpose of said suit was to extort money from this said respondent; and said suit was, ip truth and fact, brought for that purpose.
“That, being largely interested in the affairs of said company, and having large sums of money invested in the business of said company, as all said persons well knew, and being fearful of the proceedings instituted in the United States District Court, and that through the efforts of said Benner and others, the said company would be adjudicated a bankrupt, and respondent thus personally suffer a great loss, he offered to said Benner and said Champlin, and other said persons, to pay the amount of said claim, together with all acts, charges and attorneys’ fees, to which they might have been subjected; but his said offer was refused.
“And the said Benner and said other persons did demand and requiie of respondent, as the sole condition upon which they would discontinue said proceedings in said bankrupt court, the execution by him of six certain promissory notes, in the sum of five hundred dollars each, and their delivery to said Benner; all of which said respondent was compelled to do,.and did. Whereupon said proceedings were discontinued.
“ He further says that he has paid two of said series of notes, amounting to the sum of five thousand dollars, and that the present suit is upon another of said series of notes.
“Respondent shows further, that at the time of the execution of said notes, the said Benner and others transferred to him certain, say eight hundred, shares of the capital stock of said company; but that the same had no real market value, and has not had since. That the sum heretofore stated, paid by him, far exceeds any real or pretended claim held by said Benner, or said Champlin, or by other persons combining and conspiring with them, or by all of them, against said company, or respondent, and the value of the stock transferred as aforesaid.
“And he says that it is not in equity and good conscience that he is compelled to pay the note sued on.
“Wherefore he prays that plaintiff’s suit be dismissed, with costs, and that he have all general relief.”

From the admissions in the answer, and from the evidence, it appears that Yan Norden was a creditor of the company to a very large amount; that one Champlin, an admitted creditor of the company, had filed a suit in the United States District Court to put the company in bankruptcy, and it is not denied that he had just grounds for his suit; on the contrary, Yan Norden states in his petition that he was “fearful of the proceedings instituted in the United States District Court, and that, through the efforts of said Benner and others, the said company would be adjudicated a bankrupt, and respondent thus personally suffer a great loss.” He made propositions to compromise the suit, which resulted in the dismissal of the suit, and- the sale of eight hundred shares of stock of the company to Yan Norden for the price for which he executed his notes. It seems to us the consideration of the notes was good. The motives which influence a person to exercise a legal right do not destroy that right, or affect its enforcement. It would be against good conscience to permit the defendant to refuse to execute his obligation after having had the suit dismissed and received the stocks.

Article 1856 C. C. declares: ‘.‘If the violence used be"only legal constraint, or the threats of doing that which the party using them has a right to do, they shall not invalidate the contract. A just and legal imprisonmeut, or threats of measures authorized by law and by the circumstances of the case are of this description.”

Mr. Justice Story, in his work on Promissory Notes, says a valuable consideration “may, in general terms, be said to consist either in some right, interest, profit or benefit accruing to the party who makes the contract, or some forbearance, detriment, loss, responsibility or act, or labor or service on the other side. And if either of these exist, it will furnish a sufficient valuable consideration to sustain the making or indorsing a promissory noto in favor of the payee or other holder.” Section 186.

But the defendant says the stock had no value. The plaintiff’s answer to this is, that if the fact be as stated by the defendant, it was because the defendant had a hold upon the vitals of the corporation, and was himself absorbing its entire substance. But be this as it may, whether the stock had a market value or not, the existence of the stock is not denied. “He who sells a credit or an incorporeal right, warrants its existence at the time of the transfer,” etc. C. C. 2646. “ The seller does not warrant the solvency of the debtor unless he has agreed so to do,” C. C. 2694. There is no lesion in such sales, and the defendant can not get relief.

It is therefore ordered that our former opinion and decree be set aside, and that the judgment of the lower court be affirmed with costs of appeal.

Mr. Justice Morgan adheres to the decision first rendered in this case.