Court Opinion

ID: 7195255
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:01:58.032895+00
Date Added: 2024-06-11T16:16:18.655664
License: Public Domain

Dissenting Opinion.
McEnery, J.
The Act of the General Assembly authorizing the issue of the bonds sued on — the subsequent legislation concerning the same — the acts of the parties — the State, the bank, and the plaintiffs, Hope & Co., all show conclusively that the bonds were issued in aid of the Citizens Bank, which was the principal debtor. Although the bonds were issued by the State, still it is undeniable that the obligation of the State was that of surety.
The record shows that in 1880, by agreement, which was made for a consideration, the plaintiffs released the Citizens Bank from any liability on the bonds, and looked not to the corporation for payment, but to certain assets of the bank, set aside for this purpose. The fact of the release of the bank is not disputed.
Under the plain provisions of the Code, the State, by this release, was discharged from liability.
Art. 2205 of the Civil Code is as follows: “ The remission, or even conventional discharge, granted to a principal debtor, discharges the sureties.”
But suppose .that there was no conventional discharge, or remis■sion, of the debt in favor of the principal, the State was discharged from liability under her contract of suretyship.
“The surety is discharged when, by the act of the creditor, the subrogation to his rights, mortgages and privileges can no longer be operated in favor of the surety.” C. C. 8061; C. N. 2088.
*779The bank was a corporation created by the laws of the State of Louisiana. It was not divided into separate departments. Its assets were not so separated as to be mangaed by a separate department.
By agreement between Hope & Oo. and the bank, a portion of the bank assets was actually put in the hands of receivers for the benefit of the bondholders, Hope & Oo. The mortgaged property, which secured the bonds, was separated from the bank assets proper and devoted exclusively to the payment of the bondholders. This property was administered exclusively for their benefit. All claims of the bank upon this mortgage security were abandoned in favor of the bondholders. The bondholders accepted these securities in lieu of' any claim against the banking department of the Citizens Bank. Large amounts of mortgaged property were sold and remittances to large amounts forwarded to Hope & Co. It is immaterial in considering the effects of this agreement to accurately state the amounts. It is sufficient to state that the securities thus surrendered would have been the property of the State in case she had been called on in the first instance to pay the debt.
The State, now, can not be subrogated to the rights, mortgages and privileges which Hope & Oo. held against the Citizens Bank.
“The voluntary acceptance on the part of the creditor, of an immovable or any other property, in payment of the principal debt, is a full discharge of the surety, and in case the creditor should be afterwards evicted from the property so accepted,” C. C. 8062.
There is no doubt that the creditors, Hope &Co., accepted this transfer of the mortgage assets in satisfaction of their bonds. If not, why did they release the Citizens Bank from the obligation to pay the bonds? They evidently intended to look exclusively to the securities set apart by the bank, under the agreement, for the payment of their bonds. They have squeezed, wasted and diverted the bank effects until scarcely any available assets are left. They now come, in a desperate fit of disappointment, to make the State assume the indebtedness. There is neither law or equity in this demand. To fund these bonds, I think, would be to make an absolute donation to Hope & Co., equally as wrongful and illegal as the first issue of the bonds upon which this suit is brought. '
I think the bonds are null and void, so far as they attempt to bind the State.
These bonds were issued for no legitimate purpose of government. *780The bank was not an institution of the State, and in no way was it connected with the government as an adjunct to its financial department. The obligation of the State either as surety or principal was not warranted by the Constitution. That it did not prohibit their issue did not authorize the Legislature to transcend the legitimate pui’pose of government, and give way to a pxdvate corpox-ation the money of the taxpayer.
To pay the amount ordered to be funded will require the levying ■of an additional tax burden for this purpose.
In the case of Loan Association vs. Topeka, 20 Wal., p. 664, Mr. Justice Miller, the organ of the court, said:
“We have referred to this history of the contest over aid to railroads by taxation, to show the strongest advocates for the validity of these laws never placed it on the ground of the unlimited power in the State Legislature to tax the people, but conceded that when the purpose, for which the tax was to be issued, could no longer be fully claimed to have this public character, but was purely in aid of private or personal objects, the law authorizing it was beyond the legislative power, and was an unauthorized invasion of private rights.
“It must be conceded that there are such rights in every free government, beyond the control of the State. A government which recognized no such rights, which held the lives, the liberty and the property of its citizens subject at all times to the absolute disposition and unlimited control of evexi the most democratic depository of power, is after all but a depotism.”
* * * * * * * * *
“The theory of our government, State and National, is opposed to the deposit of unlimited power anywhere. The executive, the legislative, and the judicial branches of these governments are all of limited and defined powers.
“Of all the powers of government, that of taxatioxi is most liable to abuse.”
* * * * * * * * *
“The power to tax is, therefore, the strongest, the most pervading, of all the powers of government, reaching directly or indix’ectly to all classes of the people.”
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“ This power can as readily be employed against one class of indi*781viduals, and in favor of another, so as to ruin the one class and give unlimited wealth and property to the other, if there is no implied limitation of the uses for which the power may be exercised. '
“ To lay with one hand the power of the government on the prop? erty of the citizen, and with the other to bestow it upon favored individuals, to aid private enterprises and build up private factories, s none the less a robbery because it is done under the forms of law, and is called taxation. This is not legislation. It is a decree under legislative forms.” Cooley on Con. Lim. 479.
The bonds of plaintiffs were issued in aid of a purely private enterprise, in favor of a banking corporation, in no way connected with the State. They were not issued by the State to raise money for public purposes. These bonds are covered by the opinion of the United States Court, quoted above.
If the State is liable as principal, she can only be made so with the Citizens Bank as a solidary debtor. O. C. 2088, 2091.
Article 2203 of the Code says: “ The remission or conventional discharge in favor of one of the co-debtors in solido discharges all the others unless the creditor has expressly reserved his right against the latter.
“ In the-latter case he can not claim the debt without making a deduction of the part of him to whom he has made the remission.’<
Under this view of the case, the State owes the plaintiffs nothing.
Under the funding act of 1874, the State could only be held liable for the bonds, less 40 per cent. Deduct this amount, and after which the amount remitted to the Citizens Bank, and credit the amount which would then be due by the State by the amounts paid since out of the mortgage assets turned over to the bank, and I do not think the liability of the State could be fixed for any appreciable amount.
The bonds in suit are not fundable, whether the State is considered as a surety or as a solidary debtor with the Citizens Bank. The Board of Liquidation has no judicial powers. From the statements in the record, it is evident that there are many questions to be determined, both as to law and fact. The liability of the State, if for any amount, must be ascertained by a judicial decree. The State, plaintiffs, and the bank, and the bank’s relations with Hope & Co., the law applicable to the facts, and the facts which establish the amount and the State’s liability, all have to be ascertained by *782judicial investigation. Certainly the Board of Liquidation is without power to make this inquiry. The judicial investigation is referred to the courts, and expressly taken away from the Board. But what power is vested in the courts? It is defined by law, in Act 3 of 1874.
When suit is brought on a bond or valid warrant rejected by the Board of Liquidation, the investigation of the judiciary is entrusted exclusively to testing 1 ‘ the legality and validity of any issue of bonds of the State, or warrants drawn previous to the passage of said Act No. 3 o’f 1874,” * * the legality and validity of which may have been, or may hereafter be, questioned, and to inquire into the consideration for which said bonds or warrants may have been issued.
If the State is liable as surety, her indebtedness depends upon a condition, and we have no power to say whether or not the circumstances are such as to fix her liability.
If' the State is to be treated as a solidary debtor with the Citizens Bank, her liability depends upon whether or not the debt has been released, under what conditions it was released; and the exact amount for which she is liable is to be ascertained from the long and intricate transactions between Hope & Co. and the bank. These questions reach far beyond the investigation as to the legality and validity of certain issues of bonds.
Hope & Co., before these questions can be determined, must go to the political department cf the government and get the required permission to sue the State.
It was never contemplated by the State, the bank and the bondholders, that these bonds were fundable. The State was never considered primarily liable.
The committee or commission, appointed by the Governor, in 1874, to ascertain the amount of the indebtedness of the State, never in its report included the bonds. On the amount of the existing debt against the State, as ascertained by the committee, which reported a list of valid obligations of the State, a,constitutional amendment was adopted by the people limiting the debt. The bonds now before the eourc were not included in the list furnished by the committee and the amount upon which the indebtedness of the State was fixed. There was no protest by the holders of these bonds. They acquiesced in the legislation fixing the amount of the indebtedness of the State at *783fifteen million dollars, which excluded these bonds. They after-wards dealt exclusively with the bank and looked to it for the payment of the bonds.
Seventeen years of silence is a period long enough to presume acquiescence in the action of the State in fixing her debt:
The suit of Hope & Oo. has all the odor of .a stale demand, and should be rejected on this, if no other grounds had been urged.
I dissent.