623 So. 2d 136 | La. Ct. App. | 1993
Lead Opinion
These consolidated suits on a promissory note were filed by the Conservator of Champion Insurance Company (Conservator), a now defunct Louisiana insurer, against Mrs. Kathleen M. Bailey, the alleged maker of the note. By virtue of a consent judgment, Capital Insurance Company (Capital) was adjudged to constitute a “single business enterprise” with Champion Insurance Company. The Conservator was therefore vested with authority over the assets of Capital which include the note in question. The Conservator filed a petition seeking a declaratory
The note at issue is a demand note made by Kathleen M. Bailey dated October 6,1987, in the amount of $100,000.00 payable to the order of United Financial Services of Baton Rouge (UFS), a company owned and operated by Naaman Eicher, who also owned Champion and Capital. The funds were transferred from UFS into an account controlled by Mrs. Bailey, and then, transferred by Mrs. Bailey to the Doug Green Campaign Committee. Approximately eight months after the creation of the note Capital purchased it from UFS. The instant suit was filed on October 23, 1990. The Conservator contends that Capital owns the note and that the defendant has no valid defenses with respect to the note’s enforceability.
The defendant alleges the following in her affidavit:
As the backer of Doug Green, Naaman Eicher explained that it would “look funny” in the newspapers if United Financial Services loaned $2 million to Doug Green’s campaign, and he needed someone else to “loan” the funds to the campaign during what he described as a “contribution window.” He assured Ms. Bailey that his attorneys had thoroughly examined the proposed transfer of funds to the campaign and concluded that it was completely legal. Ms. Bailey was only told that the papers she signed would permit United Financial Services (Mr. Eicher’s company) to transfer money to the Green campaign. Ms. Bailey was told that the funds would be placed in her account and that she must immediately transfer those funds to the Doug Green Campaign Committee. She was also told that while this was being characterized as a “loan,” she was not free to do anything with the money other than to immediately transfer it to the Doug Green Campaign Committee. Ms. Bailey was also told that she would not be personally liable for the funds, but simply had to return the funds when the Committee returned to her the funds transmitted through her to the Committee.
The defendant contends first, that the note is not enforceable as she was fraudulently induced into the transaction by Naaman Eicher. Secondly, the defendant claims that the note is unenforceable as the cause of the transaction, to circumvent Louisiana campaign finance law, was contra bones mores, and therefore the obligation is an absolute nullity. The defendant also argues that based on an oral agreement with Naaman Eicher the enforceability of the note is subject to a suspensive condition, to wit, that the defendant would not be called upon to pay the note until the Green Campaign Committee returned the funds to the defendant.
The trial judge ruled that there were no material facts in dispute and granted the Conservator’s motion for summary judgment. The trial judge gave the following oral reasons for granting the plaintiffs motion for summary judgment:
If I’m going to be consistent with what I did a week or two ago in the Louisiana Ethics Commission Case v. Green I’ll have to deny his motion for summary judgment and grant yours, which is probably what I’m going to do.
Mr. Charrier, you weren’t privy to this, of course, but about three weeks ago after many months of briefs, arguments and so forth, I ruled in favor of Mr. Jones and others dismissing on a no cause of action exception, a suit by the ethics commission against all of them. The basis of that dismissal was that the law at the time of all these transactions in 1988 did not cover as an illegal act those things which were done by all of these people. There’s [sic] a lot of reasons for it. Mr. Miller can give you a copy of that.
In order to be consistent, I’m going to take that position. Submit a judgment.
It is from this ruling that the defendant appeals.
The defendant-appellant contends the trial judge erred:
1. In accepting as sufficient to support summary judgment affidavits submitted that were not based on personal knowledge of the affiants;
2. In not ruling that the promissory note in question was void as contra bonos mores pursuant to the unequivocal language of Civil Code Articles 7, 1968 and 2033 and, therefore, unenforceable as an absolute nullity;
3. In not ruling that even if the note were not an absolute nullity it is nonetheless unenforceable in that Ms. Bailey was fraudulently induced into executing the note; and
4 In not ruling that if the note were enforceable, the conditions of the advance and repayment of the funds pursuant to which Ms. Bailey executed the note have not yet occurred and therefore the note is not yet due.
DISCUSSION
La.Code Civ.P. art. 966 expressly provides a summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact, and that mover is entitled to judgment as a matter of law.” (Emphasis ours).
As noted above, the Conservator does not allege nor seek to be declared a holder in due course. Thus as a mere holder of the note he is not free of defenses to the note. La. R.S. 10:3-305.
Mrs. Bailey’s answer to the petition is not in the appeal record, however we glean from a memorandum filed by the Conservator that in her answer Mrs. Bailey asserted various affirmative defenses including the illegality of the transaction as in violation of the Louisiana Election Campaign Finance Disclosure Act, La.R.S. 18:1481-1532.
Because it is not clear without a trial on the merits that the Conservator is entitled to judgment as a matter of law and genuine issues of material fact regarding the viability of the asserted defenses do exists, we find the trial judge erred in granting the summary judgment.
Therefore, for the above and foregoing reasons, the judgment of the trial court is reversed, and this matter is remanded for further proceedings. Costs are assessed against the Conservator.
REVERSED AND REMANDED.
. Plaintiff does not allege nor does he seek to be declared a "holder in due course” as defined in La.R.S. 10:3-302.
Concurrence Opinion
concurring.
I file this special concurring opinion because of the action of the trial court in finding as a matter of law that the transaction sued upon was not illegal at the time it occurred.
The note in question was executed on October 6, 1987, and the law in effect at that time, the Louisiana Campaign Finance Disclosure Act, La.R.S. 18:1481-1532, and in particular La.R.S. 18:1505.2(A), prohibited persons from contributing to a campaign through or in the name of another. The legislature originally established this principle as public policy in 1975 by the enactment of Act 718 of 1975. Further, a violation of the 1975 act of the legislature was a misdemeanor. And in 1987, a violation thereof carried both a civil and a criminal penalty. La.R.S. 18:1505.5 and 1505.6. Thus, it is against the law and public policy of this state for any person to “give, furnish, or contribute moneys, materials, supplies, or make loans to or in support of a candidate or to any political committee, through or in the name of another, directly or indirectly.” La.R.S. 18:1505.2(A).
The Louisiana Civil Code expressly provides that “[t]he cause of an obligation is unlawful when the enforcement of the obligation would produce a result prohibited by law or against public policy,” La.Civ.Code art. 1968; that “[pjersons may not by their juridical acts derogate from laws intended for the protection of the public interest” and “[a]ny action in derogation of such laws is an absolute nullity,” La.Civ.Code art. 7; and that “[a]n absolutely null contract ... is
The jurisprudence is replete with examples of contracts against the law or void of public policy which are not enforceable. As two examples see: Henderson v. Kentwood Spring Water, Inc., 583 So.2d 1227 (La.App. 1st Cir.1991), an agreement between employer and employee to delay final paycheck declared void in violation of La.R.S. 23:631 and public policy; and Russo v. Mula, 49 So.2d 622 (La.App. 1st Cir.1950), check issued in payment of gambling debts was not collectable as in violation of La.Civ.Code art. 2983 and public policy.
The public policy of the State of Louisiana, as articulated in the Campaign Finance Disclosure Act, is to prevent the covert financing of political campaigns. If the cause of the contract between Naaman 'Eieher’s companies and the defendant was to allow Mr. Eieher’s companies to finance the campaign of Doug Green through “loans” made by individuals with funds provided to them by Mr. Eicher’s companies, then this is a clear violation of the law and public policy. As such, the entire transaction, including the note, would be an absolute nullity, void from its’ inception and, therefore, unenforceable. The legislature could have provided for the enforcement of obligations such as in this case as an added incentive not to violate the law and public policy against covert financing of political campaigns. However, the legislature apparently reasoned that both civil and criminal penalties were sufficient to discourage such activities.
Plaintiffs argument that defendant’s knowledge of the illegality of the transaction deprives her of the “clean hands” necessary to invoke the nullity of the contract is of no moment. La.Civ.Code art. 2033, third paragraph expressly provides: “Absolute nullity may be raised as a defense even by a party who, at the time of the contract was made, knew or should have known of the defect that makes the contract null.”
As I see it, if the purpose of the transaction was to circumvent the law and funnel money into the Doug Green Campaign Committee through third persons in violation of the Louisiana Campaign Finance Disclosure Act, then the promissory note as evidence of the transaction is an absolute nullity and cannot be enforced. Whether you like the result or not is not the question. Under the laws of this state, the promissory note is unenforceable.