Case Name: Biscoe Block & Co. et als. vs. W. T. Jefferies et als. Interventions of J. P. Rowan and Scharff, Bernheimer Grocer Co. et als.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1894-05
Citations: 46 La. Ann. 1104
Docket Number: No. 11,468
Parties: Biscoe Block & Co. et als. vs. W. T. Jefferies et als. Interventions of J. P. Rowan and Scharff, Bernheimer Grocer Co. et als.
Judges: 
Reporter: Louisiana Annual Reports
Volume: 46
Pages: 1104–1113

Head Matter:
No. 11,468.
Biscoe Block & Co. et als. vs. W. T. Jefferies et als. Interventions of J. P. Rowan and Scharff, Bernheimer Grocer Co. et als.
The respite is a judicial contract between the debtors and creditors and among the creditors. Therefore neither debtor nor creditor can take advantage of the other, and the creditors must remain on an equal and fair footing.
If the debtor does any fraudulent act to give an undue preference, ipso facto he becomes an insolvent, and the respite proceedings are converted into a cession
Privilege claims are not affected by the respite, and by consenting to the same privilege creditors do not waive their liens and privileges.
Creditors in a respite can not sue to have property returned to the debtor’s estate for their individual benefit. Any action in other direction by an individual creditor will inure to the benefit of all the creditors.
If no opposition is made to. a respite in ten days it can not be set aside. The alternative is to convert the proceedings into a cession of the debtor’s property.
When the respite debtor laas absconded and abandoned the property on liis schedule the courts have power to issue the requisite conservative writs to protect the property, and to appoint a syndic until a meeting of creditors can be convened.
A written notice to the creditor in respite proceedings is essential, but when the debtor informs the creditor of his intention to ask a respite, and the creditor answers that he does not wish to participate in the proceedings for fear of losing some advantage, but will not take steps against the debtor if the creditors agree to give time, the creditor can not after the respite is granted, because of want of notice, seize the property placed on the schedule. To all intents and purposes he consented to the respite.
APPEAL from the Seventh Judicial District Court, Parish of Madison. Montgomery, J.
Wade B. Young Attorney for Plaintiffs and Intervenors, Appellants :
Articles 1986 and 1988 of the Civil Code are to be construed together, and do not apply in the case of an insolvent debtor who has obtained a respite, as the law does not contemplate that such debtor can pay his favored creditors in violation of the terms of the respite, or that the only consequence of such fraudulent payment shall be that the creditor so preferred shall be compelled to share the loss ratably with the complaining creditors.
“'The law gives to every creditor, when there is no cession of goods, or other proceedings by which they are collectively represented, an action to annul any contract made in fraud of their rights.” C. C. 1970.
“ The judgment in this action, if maintained, shall be that the contract be avoided as to its effect on the complaining creditors, and that all the property or money taken from the original debtor’s estate, by virtue thereof, or the value of such property to the amount of the debt, be applied to the payment of the plaintiff.” O. O. 1977.
Such is the penalty which the law and the jurisprudence have always imposed in such cases.
And such is to-day the law and jurisprudence of France, of England and of the other States of this Union.
In cases of concealed fraucl prescription begins to run from the date of discovery of the fraud.
■The case of Byrne & Oo. vs. Their Creditors is directly in point, in which it was decided that the prescription of one year, relied on in this case, does not begin to run, in cases of concealed fraud, from the date of the contract, but from the time the contract was brought to the knowledge of the creditor; it is sustained by all the weight of reason and authority, and there is nothing in our reports in conflict with it. Rosental vs. Walker, 111 U. S. 185; Bailey vs. Glenn, 21 Wall. 342.
In Brewer vs. Kelly, 24 An. 246, it was decided that the action of creditors to annul a contract made in fraud of their rights commences to run from the date the contract is recorded, and not from the date the fraud was discovered, but the court was careful to say: ‘ ‘ The creditor can not reasonably assert that the act has been concealed from him, or that his debtor has kept him in ignorance of it, when it has been placed upon the public records.”
In Reynolds vs. Batson, 11 An. 730, the court said of the doctrine contra non valentum agere non currit prescriptio:
“ It has been applied to prescriptions liberandi causa in three classes of cases. * * *
il The third class of cases is where the debtor himself has done some act to prevent the creditor from availing himself of his cause of action.”
In Hernandez vs. Montgomery, 2 New Series, 438, the court said:
“ Indeed, the idea of a man losing his right by not bringing an action, which it was impossible he could bring, involves such a contradiction in itself and leads to such monstrous injustice ' that nothing short of the most positive law could authorize any tribunal to sanction such a doctrine.”
In Martin vs. Jennings, 10 An. 553, the court said:
“ The objection that this rule is not to be found in the statute books does not impair its authority, for it is interwoven with our jurisprudence from the earliest times. It is impossible to compress every principle of law into a code. The Legislature has not intended to confine the mission of the jurisconsult to fields so limited.”
“ Any agreement of the debtor to buy the vote of the creditor, by giving security for the payment of the debt, must be considered a perversion of the course of justice, and a fraud upon the court charged with the homologation of the deliberations of the creditors.” Slidell vs. Pritchard, 5 Robinson, 104.
In the case of Morgan vs. Nye, 14 An. 30, cited by the court in the case of the Vicksburg Liquor and Tobacco Company, the court said of such a contract: “ The vote, therefore, of a single creditor is not a mere offer to make a new contract between the debtor and creditor, but is a quasi judicial act by which the rights of other creditors are to be affected.”
J. G. Ilawkes and W. M. Murphy Attorneys for Defendants Utz & Boney, Appellees:
Where a party seeks to avoid a contract of sale, payment or preference, as made in fraud of creditors, he must allege and prove three essentials, viz.: fraud, knowledge of insolvency of the debtor, and injury to plaintiff. 44 An. 424; 38 An. 422; C. O. 1978; Bouillon vs. Creditors, 44 An. 19; 32 An. 433.
The judgment homologating a respite meeting is res adjudieata as to all matters occurring prior to its rendition. C. C. 3092; 11 An. 36; 3 La. 217; 43 An. 1139.
If the transaction complained of benefited plaintiffs instead of injuring them, they have no ground for complaint. C. C. 1978.
If acts can be revoked as in fraud of creditors, the parties must be placed in the same position they were before the contract was made. O. C. 1982, 1983.
The payment of a just debt in money can not be revoked under any circumstanees, and there are no exceptions to this law. C. C. 1986; Loewenstein vs. Fredikas, 43 An. 893.
Actions to revoke fraudulent contracts, or those made to give preferences, are prescribed in one year from the date of the Contract. C. O. 1987; 4 R. 439; Bank vs. Girod, 31 An. 592; Bastían vs. Christensen, 34 An. 883; Morris vs. Cain, 39 An. 720; 28 An. 652f 29 An. 285; 39 An. 610; Babshaw vs. Douty, 39 An. 720; Mineral Water Co. vs. Deblieux et al., 40 An. 155.
A. L. Slack and H. P. Wells Attorneys for Chaffe & West, Liquidators and Appellees:
One of the essentials of a revocatory action is that it must be brought by a third person, no party to the contract sought to be revoked. Cross on Pleadings, Sec. 311. Here the plaintiffs are seeking to “ undo ” and “ annihilate ” proceedings they were the principal actors in.
Where a respite is granted the debtor is placed in the “ friendly custody ” of his property in order that the same — under the purview of the court — may be administered for the benefit of all his creditors. Such is the obligation he assumes, which creditors have the right to have secured them by a bond. R. O. O. 3093.
As Act 134 of 1888 authorizes a creditor to enforce his rights against his respited debtor by a rule to force him to insolvency, it results that the law considers the property still in its keeping, and that the respite is still a pending proceeding. If so, the only remedy the creditor has is under said act. This was what the court so strongly suggested in the V. L. & T. Oo. vs. J., 45 An. 621.
“Judicial proceedings, once regularly inaugurated, can not by any act of the parties * * * be annihilated.” State ex rel. Marx vs. Judge, 45 An. 1350.
A revocatory action can not be brought to annul a cession any more than a succession. For the same reason it could not annul a respite. Andrus vs. Creditors, 45 An. 1067.
The plaintiffs can not “ undo, and by undoing make to inure to their separate advantage, a judicial order.” V. L. & T. Oo. vs. J., 45 An. 621.
A respite is not a device to “ entrap the unwary,” but a quasi judicial act (14 An. 30), by which the debtor places in the hands of the law his property, to so remain subject to the rights of his creditors to change into an insolvency. Act 134 of 1888.
When there is a cession of goods the revocatory action does not lie (R. O. O. 1970). A respite is a cession in abeyance — in embryo —and no portion of the creditors consenting to it have the right to forestall this cession, and absorb all the property of a surrender made for the joint benefit of all. Such a proceeding, judicially recognized, would put it in the power of a favored or unscrupulous few to defeat the rights of all, and thus not only “ annihilate ” and “ undo ” their own judicial act, but defeat the very letter and spirit of the law.
While there rests upon the respited debtor an obligation to the creditors, there is also as strong an obligation resting inter sese among the creditors (14 An. 30), which they can not violate.
If the respite can not be revoked, there is no right in the plaintiffs to attack a judgment of a co-creditor, which judgment is a mere incident to the main action; for the reason, had plaintiffs forced the common debtor into insolvency, the judgment could have been thereby “ stayed” and its status determined in such form of proceeding, in concurso with all the creditors. A creditor who is not summoned by “letter,” under Art. 3087, C. 0., is not bound by the respite. Mohr, Hanneman & Oo. vs. Marks, 39 An. 576; Haydel vs. Girod, 10 Peters, 284.
The proces verbal of the notary should affirmatively show that the creditors were notified; where it does not, and this want of notice is alleged, the notary can not testify that such was given. Judicial records should make proof of themselves, and their absence can not be supplied from the “ uncertain memory ” of even the officers. A bill retained to such testimony should be sustained.
The basis of a respite is the solvency of the debtor. (42 An. 851.) So, where a debtor has applied for a cession, he can not subsequently apply for a respite — using as the basis of it the insolvent schedule. The two proceedings are inconsistent and in violation of the express prohibition of C. O. 3097, and are nuil. O. O. 12.
Where a respite is obtained, a second application for same relief can not be heard, except by the unanimous consent of all creditors. C. O. 3095.
What is absolutely null has no effect, and can be questioned by any interested party at any time. Willis vs. Ward, 30 An. 1285; 33 An. 618; 34 An. 740.
One who discloses, when interrogated, every detail of a connection, charged as fraudulent, shows his innocence and good faith. Fraud is never presumed.
Privileged communications of a client to his attorney are sácred, and can not be communicated to other parties with opposing interest, and be used by them as the only basis of a suit brought in their name by such attorney against his former client. This protection lasts forever. Greenleaf, Secs. 237, 246.

Opinion:
The opinion of the court was delivered by
McEnery, J.
This is a sequel of the suit of Liquor and Tobacco Company et als. vs. Jefferies et als, 45 An. 621.
The plaintiffs, making all the creditors parties as plaintiffs or defendants, instituted the present action to annul the respite granted to the debtor, Jefferies. Some of the parties plaintiff were plaintiffs in suit of Tobacco Company vs. Jefferies, reported in 45 An. 621. As to these creditors who were plaintiffs in that suit, the matters disposed of in the same are res judicata.
As the same facts are alleged to avoid the payments made to the defendant creditor by Jefferies, the respite debtor, we need only refer to that suit to render herein the same decree as in that suit against the additional complaining creditors.
The amount of cotton shipped to Chaffe, Powell & West was in the ordinary course of business; the business which the creditors, parties to the respite, permitted the debtor to carry on and conduct in order, within the delays granted, to pay his indebtedness.
Utz & Boney, were privileged creditors, and by consenting to the respite did not waive their privileges or postpone the payment of the special privilege they had on the effects surrendered. R. C. C. 3095.
In Bennett vs. Creditors, 45 An. 1019, a similar question was presented. In that case, on rehearing, we said: "The proceeds of the sale of this cotton could not be ratably, as contended for by opponents, applied to the payment of all the debts. By granting the respite the creditors do not relinquish the privilege and pledge they may have on particular property of Mrs. Bennett at any time after the respite was granted; in fact she was bound under agreement to turn the cotton or its proceeds over to the furnisher of supplies. The furnisher of supplies had a right to the proceeds of the sale sufficient to pay his privileged debt. The surplus only could be ratably applied to the payment of the other creditors. Opponents were in no way injured by the disposition of the cotton."
In the instant case the respite debtor was a merchant. He had rented property from Utz & Boney, to carry on his business. The rent was payable by the month and the rent had been regularly paid. The lease had some time to run, and the rent was paid monthly as before the respite. When these privileged creditors unnecessarily consented to the respite there was no judicial contract springing from the same that they should postpone the collection of rent yet to become due. The places leased were necessary for the debtor to carry on his mercantile pursuits, and by consenting to the respite, and to the carrying on of these pursuits the creditors necessarily consented to the continuance of the lease and the pay-. ment of its price.
This suit, in addition to the averments made in the tobacco company suit, asks that a certain judgment obtained by Ohaffe, Powell & West against the respite debtor be annulled, and the property seized under it be applied to the payment of the debts due the complaining creditors, thus ignoring the claims of other creditors.
So far as the suit is instituted for the purpose of annulling the order granting the respite, the plaintiffs are estopped by Art. 8092 of the Civil Oode, which says that the opposition to the homologation of the order must be made within ten days, in writing, dating from that on which the prooes verbal of the deliberations of the creditors was returned to the clerk's office. After this delay has expired the creditors are forbidden to interfere with the order or to urge any fact which would have been effectual in setting aside the order if presented in time.
It has been frequently stated by this court that the respite is a judicial contract between the debtor and the creditors, and among the creditors. Therefore no creditor can make any agreement or contract with the debtor, by which he can secure an undue advantage over the others, and the debtor must so conduct his affairs as to preserve equality among the creditors. Any act of his in violation of the contract resulting from the respice is a fraud, and ipso facto turns the respite into insolvent proceedings, a cession of goods for the benefit of the creditors, as though it had been offered in the first instance. It is to be assimilated to a case in which the respite is re - fused by the creditors. O. C., Art. 8098.
The contract by this fraud is ended, and the respite stands as though it had been offered to the creditors and refused. That this course, in such a contingency, is the proper one to pursue is clearly outlined in the ease of Tobacco Company vs. Jefferies, 45 An. 622.
It does not appear from the proces verbal that Chaffe, Powell & West were summoned to attend the meeting of creditors by letter, in accordance with law. They say under oath that they were never notified. But the record shows that they were awar.e of the con templated proceedings for a respite, and in a letter to Jefferies, the debtor, declined to participate in the meeting for fear of losing certain privileges which they held on the property of the debtor's wife, in Mississippi. Bnt they informed the debtor that, if the other creditors granted time to him, they would acquiesce and also delay the enforcement of their claims. The property in Mississippi paid some six thousand dollars on Ohaffe, Powell & West's debt, and for the balance, say five thousand dollars, they sued their debtor, obtained judgment, without opposition on his part, and seized the property surrendered, which was enjoined by the creditors. The testimony in the record shows that this judgment was obtained through the connivance of Jefferies, with his consent, and evidently for the purpose of giving Chaffe, Powell & West an advantage over other creditors.
Under these circumstances, to all intents and purposes, Chaffe, Powell & West were parties to the respite.
It would be inequitable and unjust, and would in fact practically annul the benefit of a respite, to permit a creditor to arrange with his debtor for non-participation, and, possibly, through his efforts, to escape summons in the respite proceedings, and thus obtain a judgment by consent of the debtor and execute it against the property surrendered. The evidence justifies us in believing that such was the case here.
The complaining creditors pray that the proceeds of the sale of the property be applied to the payment of their several and individual debts. Prom what has been said above, it is evident that the prayer can not be granted. No creditor can seek an advantage not common to all. Through the efforts of individual creditors, whatever property of the insolvent debtor is recovered and restored to his estate must inure to the benefit of all the creditors. Gumble vs. Andrus, 45 An. 1081; McGraw vs. Andrus, 45 An. 1073; Andrus vs. Creditors, 45 An. 1067; Anderson vs. Duson, 35 La. An. 915; Hayden vs. Yale & Bowling, 45 An. 362.
The evidence shows that the debtor has violated the contract of respite, and ipso facto committed an act of insolvency, and as such insolvent, he no longer has the right to administer his property, and it must pass to his creditors. In addition, he has absconded and abandoned his property.
The plaintiffs contend, under these circumstances, they are unable to force the debtor into insolvency. The fraudulent acts themselves, ipso facto, forced him into insolvency, and it is only requisite for the court to appoint a syndic to administer the property. Revised Statutes, 1810. The court has power to issue all conservatory writs to protect the estate. 42 An. 71.
The amounts due for clerk hire are established, and they should be paid as general privilege debts.
Complaint is made by plaintiffs of costs paid by the .sheriff, and the illegal disposition of a twelve months' bond by seizure and sale.
These matters can be adjusted in the settlement of the insolvent's estate. The facts before us are not sufficient to warrant a decree respecting them.
The injunction restraining the execution of the judgment of Chaffe, Powell & West against the property of Jefferies has served its purpose and there is no reason for a formal decree in reference thereto. The proceeds of the sale of the property not legally disposed of will be turned into the insolvent's estate.
We see no reason why we should disturb the judgment of Chaffe, Powell & West against Jefferies. We will only correct it so far as it affects the rights of the creditors of the insolvent in the seizure made of- his property surrendered on his schedule.
It is therefore ordered, adjudged and decreed that the judgment appealed from be annulled, avoided and reversed, and the seizure made under the judgment of Chaffe, Powell & West be set aside and the property restored to the estate of the insolvent debtor. It is further ordered that this case be remanded and proceedings therein continue as if the cession had been offered in the first instance by the defendant Jefferies. It is further ordered that payments be made and proceedings conducted as herein stated. The insolvent's estate to pay all costs.
Rehearing refused.