Case Name: Hewitt et al. v. Waterman et al.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1848-12
Citations: 3 La. Ann. 716
Docket Number: 
Parties: Hewitt et al. v. Waterman et al.
Judges: 
Reporter: Louisiana Annual Reports
Volume: 3
Pages: 716–720

Head Matter:
Hewitt et al. v. Waterman et al.
One who transfors by delivery, without endorsement, a bill, for a sufficient consideration knowing it to be of no value, where the assignee is not aware of its want of value, will be bound to repay the money received, though there was no representation of the solvency of the parties. C. C. 2619.
A PPEAL from the Fourth District Court, of New Orleans, Strawbrid-ge, J.
Molt, for the plaintiffs.
Rawle, for the appellants.
In this case, the contract is an exchange. C. C. 263Ü. Merchandize and a small sum of money were exchanged for a bill of exchange. In the case -of Shuff v. Cross, merchandize aud a small sum of money were exchanged for a note. The obligation proved to be of no value, and the defendant was sued for the price of the goods sold. The court said that it was an exchange, and that each party is considered as vendor and ven dee. See also C, C, 2637. “ What then are the obligations of him,” says the court, “ who disposes of an incorporeal right ? Positive law has defined them. He who sells a debt or an incorporeal right, warrants its existence at the time of the transfer. But he does not warrant the solvency of the debtor, unless he has agreed to do so.” Code. Pothier, Vente, 560. Dig. 21, 2,74. No such agreement is proved here, and the evidence has failed to establish fraud.” 12 Mart. 89. The contract extends no further than the existence of the debt or obligation: “ parceque le vendeur céde la créance, .telle qu’elle est, bonne ou mauvaise.” Rogron. “ L’acheteur nc saurait se plaindre de ce que le débiteur n’est pas solvable, &c., de ce que los cautions sont en déconfiture. Le cédant a transféré la crénnce duns l'etat oú elle était; it ne s’est engage á rién de plus.” Troplong, Vente, no. 934. The law is, that he who transfers an obligation ora debt, warrants its existence only. This is settled in every country in which either roman or english law is in force, and in Louisiana it is established by legislative enactment and judicial construction.
“ In regard to extrinsic circumstances, forming no part of the sale, but connected therewith and forming an inducement thereto, or enhancing the value of the thing sold, there is no obligation, on the part of the seller or buyer, to disclose his knowledge of them. Thus, a vendee is not bound to disclose the fact that the land, which he contracts to buy, contains a mine, although the vendor be ignorant of the fact, and although it would greatly enhance the value of the land. So, also, he is not bound to disclose the rise of the market, or any other knowledge which he may have from private sources, and unknown to the seller.” Story on Contracts, no. 84'3. “But, at the same time, each party must take care not to say or do any thing tending to impose on each other.” Laidlaw v. Organ, 2 Wheaton, 178. Misrepresentation or artifice will invalidate a contract, but-where both parties are in the same relative position, the contract is not destroyed by one failing to disclose the knowledge of extrinsic circumstances. Pothier, Vente, no. 298. 2 Kent, 491. *•

Opinion:
The'judgment of the court was pronounced by
Slidell, J.
The object of this action is to recover from the defendants the value of a quantity of bagging, which the plaintiffs sold to the defendants for a draft of Rayburn, accepted-by Rayburn, Scott Sf Co. for $1,250, at ninety days, and a small sum in cash. The defendants' counsel treats the contract as one of exchange; and it may be conceded, for the purpose of the present enquiry, that it does fall under that class of contracts. With certain exceptions, not relevant to the present controversy, an exchange is subject to tho principles which control the contract of sale; and each party is considered " in the double light of vendor and vendee." Civil Code, 2637.
It appears that Rayburn had bought, in June, 1846, some hardware from the defendants, who aro hardware dealers, for which he gave his note for $3.050 52, at four months. He also owed them upon an open account. In October, 1846, being unable to pay the plaintiffs, Rayburn gave them his note for the entire indebtedness, $4,182 41. payable one day after -date. On the* 24th October, 1846, Rayburn, at the request of the plaintiffs, and afler a conversation about his affairs,gave them acceptances of his own drafts by Rayburn, Scott Co., of which firm he was a member. One of them was the draft for $1,250 above mentioned. Rayburn, Scott Co. suspended payment on the 26th October, and subsequently proved to bo largely insolvent. On the same day on which the draft was drawn, the defendants employed a broker to trade it off for merchandize. The same broker had been employed by other parties to trade off acceptances of the same house. The broker applied to the plaintiffs' clerk to buy bagging for the paper; but Hcivill not being present at the time, he was requested to call again. Hewitt appears to have made some enquiries about the character of the paper ; and, not learning aDy thing to the disadvantage of the acceptors, made the sale of bagging the next day. It is conceded that the bagging was sold at its fair market value, and that the acceptance was taken at the usual rate of good unmatured acceptances. All the circumstances of the case, which it is not necessary to detail at length, justify the conclusion, which must have been adopted by the district judge, that the defendants knew at the time that Rayburn, Scott Co. were insolvent. No representation of their solvency appears to have been made at the time to the plaintiffs by the broker. There is no reason to believe that the plaintiffs had any ground for suspicions. The embarrassment of Rayburn, Scott Sf Co. does not appear to have been publicly known. The district judge gave judgment forth© plaintiffs ; and the defendants have appealed.
The legal conclusion resulting from the case stated is free from difficulty. In the earliest edition we have found of Mr. Chitty's work on Bills of Exchange, he lays down the law as follows : "When a transfer by delivery, without endorsement, is made merely by way of sale of the bill, as in the case of a discount, or where .the assignee expressly agrees to take it in payment, and to run all risks, he has in general no right of action whatever against the assignor, in case the bill turns out to be of no value." " But," adds that author, " there can be no doubt that, if a man were to assign a bill for a good consideration, knowing it to be of no value, he would, in all cases, be compellable to repay the money he had received." More than thirty years afterwards, he reiterates (with a qualification,) the same .doctrine : " There can be no doubt that if a man assign a bill for .any sufficient consideration, knowing it to be of no value, and the as. signee be not aware of the fact, the former would in all cases be compellable to repay the money he had received."
Mr. Story recognizes the same doctrine as the commercial law of our own country. He who transfers a note by delivery, " warrants that he has no knowledge of any facts which prove the instrument, if originally valid, to be worthless, either by the failure of the maker, or by its being already paid, or otherwise to have become void or defunct; for any concealment of this nature would be a manifest fraud. Thus, for example, if the instrument be a bank note, and, at the time of the transfer by delivery, the party knows the bank to have become insolvent, and conceals it from the other parly, it will be deemed a fraud, and the consideration for the transfer may be recovered back." Story on Notes, § 118. See also Camedye v. ALlenby, 6 B. & C. 373.
This doctrine, which rests upon the firm basis of good faith and mercantile honor, must be taken as the settled rule of the commercial law. We are not aware that it has been disputed since the time of Lord Kenyon, who observed in v'ery strong language, in Fenn v. Harrison (3 Term Rep. 757) : " If the holder of a bill of exchange sent it into market without endorsing his name upon it, neither morality, nor the laws of this country, would compel him to refund, the money for which he had sold it, if he did not know at the time that it was nota good bill; if he knew the bill to be bad, it would be like sending out a counter into circulation to impose upon the world, instead of the current coin."
It is not improper to observe that this principle of the commercial law as to bills and notes, accords with the doctrine of the civil law, as we find it expounded by Pothler. In speaking of the obligations which spring from the good faith required in the contract of sale of a debt, he observes: " La bonne foi oblige le vendeur, dans ce conlrat, de máme que dans le contrat de vente des dioses eorporelles, á ne rien dissimuler de tout ce qu'il sait, et de ce que Pacheteur á interct de savoir, concernant la créance qu'il vend. C'est pourquoi, s'il était ju&tifié que le veudeur d'une créance, lore du contrat, avait connaissance que le débiteur était entiérement insolvable; puta, si ce débiteur avait été discute dans lous ses biens meubles et immeubles, et que le créancier ebt fait opposition et n'eut rien touché; ce créancier, qui, depuis, vendrait sa créance, en dissimulant cette insolvabilité, qu'il ne pouvait ignorar, á l'acheteur qui n'en aurait pas eu connaissance, pecherait contre la bonne foi qui doit régner dans le contrat de vente, et serait obligé, envers l'acheteur, á reprendre la créance, et á lui restituer le prix, quoiqu'il n'y eut pas de clause dans le contrat, par laquelle il se fut obligé k la garantió de fait."
To the like effect is our own Code. The seller does not warrant the solvency of the debtor, unless he has agreed to do so. Art. 2617. But if it be proved that the assignor, who has not warranted the solvency of the debtor, knew, or had strong reasons to suspect, that the debtor was insolvent at the time of the assignment, the contract may be rescinded, and the assignor compelled to restore the price. Art. 2619. Judgment affirmed.
Note. — The following cases, decided during the period embraced in this volume, presenting only questions of fact, have not been reported.
At New Orleans: Moreno v. Welman; Cole v. Poole; Shaffer v. Green; Levy v. Forrest; Martin et al. v. Selleck et al; Brown v. Featherstonh' et al; Jordy et al. v. Warfield; Curry et al. v. Freligh; Merle v. Bowman; Montfort v. Gontier; Meyer v. Speyer; McLorinan v. Williams; Yale v. Nolan; Chanslor v. Stetson; Talley v. Blanchard; Rich v. Valentine; Julien v. Chevet; Phillips v. Rousseau et al.; Woodruff v. Bailey; Drummond v. Akin; Guesnard v. Pier Husband; Oxley et al. v. Waters et al.; Oakey et al. v. Lewis et al; Castro v. Claiborne et al; Gorman v. Imboden; Taylor v. Fitzpatrick; Davis v. Bondurant; Anderson v. Peirce; Owen v. Barker; Sterry v. Bailey; Brander et al. v. Smith; Perkins v. Coons et al; Larche v. Hood; Martin v. Amis et al.; Copley et al. v. Miller; Watt v. Dunlap; McCallister v. Gant et al.; Avart v. Newcomb et al; Davidson v. Kinchen; Stephens v. Hackett; Same v. Same; Wilkins v. Parish of EastBaton Rouge; Union Bank v. Hardesty; Harrell v. Kneely et al.; Hyland v. Lambeth et al.; Riley v. Wilcox; Gresham v. Fonbené; Conrey et al. v. McKee et al; Hebrard v. Curtius et al.; Chiapella v. Lefebvre; Freeport v. Lacroix et al; Borgstede et al. v. Mooney; Ganucheau v. Bach; Pennock v. Sparrow, Curator; McKinney v. Steamer Yalla Busha; Commercial Bank of New Orleans v. Sexé; Kirwan v. Heath; Tucker v. Agricultural Bank of Mississippi; Commissioners of Merchants' Bank v. Yorke; Succession of Church; Hardy v. Zacharie et al; State v. Atchafalaya Railroad and Banking Company; Ducongé v. Harker; Beguet v. Videau; Lee v. Hodge; Le Blanc v. Lallande; Bullard et al. v. Lewis et al; Same v. Same; Powell v. Kellar; Sutton v. Hines; Davezac v. Paulding; Mitchell et al. v. Mills; Byrne v. Fonbené et al.; Forman v. St. John; Frazier et al. v. Denton; Freeman v. His Creditors; Burbank et al. v. Lane, Tutor; Hays et al. v. Noonen; Randolph et al. v. Tourné; Vitta v. Brehier; Succession of Wurzschmitt; Davis v. McCargo; Succession of Argote y Villalobos; Gridley et al. v. Conner; Pargoud v. Weaver et al; Robertson et al. v. Thompson; Peterson et al. v. Hagan et al.; Hiestand v. Forsyth.
At Opelousas: Fanning v. McCaskell; Todd v. Saunders, Dartest v. Dungan; Walker v. Walker; Kemper v. Merriman; Fagot v. Briant; Broussard v. Duhon; Segura v. Segura; Deas et al. v. Pritchard et al; Moore v. Bowles.
At Alexandria: Esté, Executor v. Boyce; Lynch v. Cuny et al.; Same v. Same.
At Monroe: Copley v. Moore; Copley v. Dosson; Jones v. Holmes; Taylor v. Collins; Tutorship of Bonaventure; Copley v. Mullins et al; Atkinson v. Johnson; Floyd v. Gaster; Thompson et al. v. Martin; Gilmer v. Craig; Hailey v. Pitts et al.; Emsweller v. Holland; Jenkins v. De Graffenreid, Tutrix; Little v. Copley; Dosson v. Ward; Slater et al. v. Ward; Hill v. Head; Thompson v. McFarland; Cruger, Syndic v, Persons; Canfield v. Brice.
The Cases of Hartson v. Coleman; Murphy v. Wright; Roussel v. Wright; Welsh v. Barrow; New Orleans and Carrollton Railroad Company v. Hood et al.; Riddell v. Howard; and Donnell v. McMaster, decided at New Orleans, during the period embraced by this volume, are not reported, damages having been allowed in each for a frivolous appeal.