Syndic of McManus v. Jewett

| La. | May 15, 1834

Bullakd, J.,

delivered the opinion of the court.

The plaintiff as syndic of the creditors of McManus seeks to avoid two sales of town lots made by the insolvent on the eve of his absconding, upon several grounds, which we shall proceed to notice in the order in which they have been argued.

In acts of sale or conveyance of immovable pro perty the sale is not complete until all the parties sign the act 5 and until all have signed those that first signed may re- Biit; in a contract of sale signed by the vendor and vendee in which the price and terms of payment are settled, the stipnlation that a third person named in the act, . will releaso a certain mortgage, is a stipulation in favor of the purchaser, is collateral to the conrract and the sale does not depend on that condition and is valid without the signature of such third person. The voluntary execution of a contract carries with it a renundatum 0f all ex-the'pSty executing midit have set up against it in relation to vi~ ces^or nullities of

I. The first alleged nullity in one of the acts of sale is that it was not signed by Mr. Burthe. The act recites that there exists on the lots a mortgage in favor of the Union Bank to secure certain stock, but that the stock had been transferred to Mr. Burthe who had engaged to have the mortgage can-celled. It then goes on to say, that for greater certainty Mr. Burthe appeared before the notary and declared that he had purchased the stock and was the only person interested, and consequently engages to cause the mortgages to be released within sixty days, but he did not sign the act. The judge charged the jury, that every party mentioned in a deed must sign, otherwise the other parties may retract, and that the plaintiff representing Mr. McManus, the vendor may retract.

This court has held that until all the parties to an act have signed, the act is not complete and those who have signed may recede. Villeré et al. vs. Brognier, 3 Martin 326. Wells vs. Dill, 1 N. S. 592.

The rule is founded on the principle that each party signs on the tacit condition that all the other parties will sign; that until the final assent is given there is no concurrence of different minds and that before that is given any one may retract. But the question in this case is different. The contract is one of sale, both the vendor and purchaser signed with the notary and witnesses. The price and terms of payment are settled in the act. The stipulation that Mr. Burthe should release the mortgage was in favor of the purchaser and only collateral to the principal contract. The sale is not made to depend on that condition and the purchaser does not insist on the stipulation, Mr. Burthe was a stranger to the principal contract and its validity in our opinion as be. tween the vendor and vendee does not depend on his signing the act.

But there is another principle which appears to the court applicable to this case. The voluntary execution of a contract carries with it a renunciation of all exceptions which the party executing might have set up against the act in relation to vices or nullities of form. 8 Toullier, No. 140.

A ‘'"‘4 p°reo“ i0ftsef%hereinPto gt'lcTon^"pro{¡“‘Liua1’ n?aa witness by the vendee to prove that he had released the mortgage as stipulated j¡^°¿shtb®ne™[ thl>

McManus received in presence of the notary a note secured by mortgage on the lot and paraphed by the notary for four thousand dollars as a part of the price. The Bank pf Louisiana received the further sum of one thousand dollars . t ♦ • according to the conditions of the contract, this is protanto an ^ - execution of the contract. It seems to us clear that McManus cannot now retract, at least without refunding what has been received, much less his syndics.

In connexion with this part of the case we will notice a bill of exceptions in the record. Mr. Burthe was offered as a witness to prove that in point of fact he had released the mortgage as was contemplated by the parties. His testimony was refused on the ground that parole evidence is inadmissible to supercede the necessity of the signatures of all the parties, and that it did not go to contradict the allegation in the petition that the act was not signed, the effect of such want of signature being a question still open for discussion.

If it be true that the voluntary execution of a contract will cure mere vices of form and that assent to a contract may be in some cases shown by evidence aliunde, it would seem to follow, that evidence of such execution is admissible. In ,. _ , i i _ , , . this case the purciiaser who alone had any interest m having r the mortgage released offers to prove that it was released. It ° ° A is true the evidence does not go directly to negative the aliegation that Mr. Burthe did not sign the act, but it goes to prove the performance of an act, which renders such a stipulation wholly superfluous. We are of opinion that the court erred in refusing the testimony.

II. Another ground relied on to annul the sale is that it was made within three months preceding the failure of McManus and is presumed to be fraudulent and that the purchaser must show the fairness of the contract. In support of this position the plaintiff’s counsel has cited the act of 1817. The 24th section of that act is in the following words: “Any debtor who shall be convicted of having at any time within the three months next preceding his failure, sold, en£aSe<^ or mortgaged any of his goods and effects or of having otherwise disposed of the same or confessed judgment in order t° give an unjust preference to one or more of his creditors over the others, shall be debarred from the benefit of this act and the said deeds or acts shall be declared null and void, provided however, that if the purchaser of said property shall prove that the said property was either sold or engaged to him for a true and just consideration by him bona fide deliv ered at the time of such deed the said sales and mortgages shall he declared valid.” 2 Moreau's Digest, 431.

a sale made 10 kyan°insoTventOT tor, even within preceding hisfaiime, is not prosumed to ire dulent, and in an Sie “burthen1"1 ot p™“/ ’attacking the contract.

The words “ in order to give an unjust preference to one or more of his creditors over the others,” appears to us to relate to all the preceding clauses of the sentence. The proviso must therefore apply to the same class of persons. A sale made to one not a creditor even within the three months is not presumed to be fraudulent, and in an action to annul such sale, the burden of proof is on the party attacking contract. This statute, as the mdge very properly ’ J o J r r J remarked to the jury, is to be taken in connexion with the provisions of the Code. Article 1979 declares, that “ every contract shall be deemed to have been made in fraud of creditors, when the obligee knew that the obligor was in insolvent circumstances, and when such contract gives to the obligee, if he be a creditor, any advantage over other creditors of the obligor.” Other circumstances attending the transaction, such as the vendor retaining possession, may throw the onusprobandi on the purchaser; but unless it be shown that the purchaser knew of the insolvency, or was a creditor at the time, the legal presumption is in favor of the contract.

-‘ .HI. The plaintiff further contends that the sale of two is null and can have no effect as to the creditors, hedíais was not registered in the office of the register of topygyafees before the sequestration was sued out. That the (fiMlitors of McManus, represented by the syndic, are ijfird persons, and he relies on the 5th section of the act of 182^./2 Moreau's Digest, 303.

"Dn the other hand it is contended, that the plaintiff is a third person only in a modified sense; that to a extent he represents and is the ay ant cause of McManus, that the Code has distinguished between creditors individually and the creditors in cases of failure, for whose benefit the ceding debtor has surrendered his property, and that in this latter case the creditors can claim the privilege of third persons only in relation to such contracts as they entered into with the insolvent in ignorance of the rights which he had transferred to another: And he cites the last paragraph of the Civil Code, which declares, that “ in cases of failure, third persons are particularly the creditors of the debtor who contracted with him without knowledge of the rights which he had transferred to another.” certain

We will not affect to conceal the difficulty we find in giving a construction to this clause. We think ourselves bound to give effect to it if we can ascertain what the legislature intended, and to what extent it meant that the creditors of an insolvent should or should not be bound by his contracts. The general rule is that all who are not parties to a contract or judgment, are third persons; then comes the clause above recited. State the proposition in a different form. The creditors of an insolvent are third persons, particularly when they contracted with him without knowledge of the rights which he had transferred to another. If they are third persons generally, it was wholly unnecessary to say they are in particular. Take the converse of the proposition. Creditors are not third persons; that is to say, are bound by the contracts of their debtor, of which they had knowledge when they became creditors. In that form it would seem to be merely a paraphrase of the old maxim, that he who complains of a fraud must show an interest the time the alleged fraud was committed. Those tracted afterwards have no right to complain, ex< in ignorance of rights which had been transferred ti There might be among the creditors of an insolv| who, according to these principles, could not in* avoid a contract of their debtor, of which they had the date of their debts, and others who might complain of len h injured by the contract. The 1988 article of the Code declares, that “ no creditor can by the action given by this section sue individually to annul any contract made before the time his debt accrued.” On the failure of his debtor, can he acquire any new action or right by being represented in common with the other creditors by a syndic? The judgment in the revocatory action must be, that the contract complained of be annulled as to its effect on the complaining creditors only. By that we understand those who had a right to complain. Civil Code, art. 1972. There may be cases then, in which a part of the creditors of an insolvent would have no right to complain; and a part might cause a particular contract to be annulled as respects its effects on them. But the syndic represents them all. If this be the construction of this part of the Code, of which we give’ no positive opinion, it seems to have no application to the case before the court, because it is hardly possible to conceive that any of the debts of McManus were contracted after the date of his deed to Jewett.

The words of the act of the legislature are positive, that such contracts shall have no effect against third persons, hut from the day of their being registered; until then, the contract, though passed before a notary public and two witnesses, has no existence as to third persons.

But may it not be said, that if the creditor is a third person as to the contract of his debtor with a stranger, by which he sells á part of his property, the purchaser is also a third person as to the debt, which being simply chirographic has no date and no existence as to him, without notice.” Are they hot reciprocally third persons as to each other’s contracts? “Les actes sous signature privée, says Pothier, étant sujets á étre antédaíé ne font ordinairement foi contre les tiers que la chose qu’ils renferment s’est passée, sinon du jour qu’ils sont rapportés et produits au tiers.” 2 Pothier des Ob. M. 715.

The Code provides that an individual creditor cannot exercise the revocatory action until he has obtained a judgment against his debtor, unless the defendant in such action is also made a party to the action to liquidate the debt. It would seem an anomaly if a single chirographic creditor could cause to be annulled a sale made by his debtor to a stranger, merely on the ground that the sale is to have no effect as to him, and yet deny to the purchaser the right to urge in his defence the same principle; that he also is a third person without notice in relation to the very debt which forms the basis of his action. If the law requires notice to the creditor or third persons, to give effect to a contract against them, does it not equally require some notice of the debt to give it effect against those who contract with the debtor? Wherever there is a recorded judgment or an attachment levied before the registry, the statute applies.

The 5th section of the act creating the office of register of conveyances, requiring all acts of transfer of immoveable property and slaves, whether passed before a notary or otherwise to be registered, or to have no effect against third persons but from the day of registry, docs not apply to purchasers withoutnoiice and operates in favor of such creditors of the vendor as have a recorded judgment or an attachment levied before registry. The registry of an act of sale in the office of the register of conveyances before any proceedings are had against the purchaser, or notice to him of the claims of the creditors of the vendor, renders the sale valid, although not made until a sequestration issues against the property.

In the case of Williams vs. Hagan et al. the plaintiff had levied an attachment on the slaves before the conveyance to the defendant was registered according to the statute, and this court sustained the attachment, considering the conveyance without effect as to the attaching creditor, and that the property was still as to him the property of his debtor. There was notice to the purchaser, and a species of lien created on the property, but if the creditor had waited until the conveyance was registered, the sale would have had effect against the creditor, unless proved fraudulent. 2 La. Rep. 122.

In the case now before the court, the deeds appear to have heen registered before any proceedings were had against the purchaser. He was not a party to the proceedings against the absconding debtor, who appears to have been in good credit up to the day of his departure. The question therefore is, whether it was too late to record the deed after the issuing of the sequestration?" At what time was the purchaser still at liberty to register his deed, so as to give it effect against third persons, supposing the transaction a fair one, entered into bona fide in ignorance of the insolvency, and for a valuable consideration?

The writ of sequestration was issued on the 16th, and executed on the same day, hut it does not appear that the lots in question were sequestered, nor had the defendant so far as it appears, any notice of the proceeding. The deed was registered on the 18th, and provisional syndics appointed two days afterwards. It is contended that the sequestration is equivalent to an attachment, and that the creditors thereby acquired such a lien as to render the conveyance of no effect. A sequestration is a judicial deposit, and is essentially conservatory measure. It does not divest the title of the owner, ana gives the creditors no greater right than they had before. The purpose of a sequestration in such cases . x x x is the safe keeping of the property of the absconding debtor until provisional syndics are appointed to take possession.

a sequestration s?t? M?d‘feoMonla tory act which the title of the owner, and gives the creditor «o he imd before,

The defendant was no party to these proceedings, and to give effect to them against him, would be in violation of the very rule we are called on to enforce. The proceeding on the part of the defendant was undoubtedly suspicious and worthy of consideration by the jury on the question of fraud' All we intend to say is, that if the sale was in other respects bona fide, it was perfect as to McManus, and might be registered at the time it was done, so as to give it effect against third persons. The fact that McManus retained possession of the lot under a precarious title, furnishes presumptive evidence of simulation, and in cases of this kind, the purchaser must produce proof that he was acting in good faith, and estahlish the reality of the sale. Civil Code, art. 2456. If the sale was simulated or in fraud of the rights of creditors, it is liable to be annulled notwithstanding the registry. All these questions are left to the decision of a jury as of their peculiar province. But the parties have a right to a fair and impartial trial by jury, uninfluenced by any misconceptions of the law on the part of the court in the hurry of the trial.

Upon the whole, we think the court erred in instructing the jury that one of the deeds was null as to all the parties, because not signed by Mr. Burthe, and that the creditors obtained by the sequestration on the 16th of February, such a lien as is contemplated by the authorities cited by the defendant’s counsel; if by that the judge meant to convey the idea that it was too late to register his deed after the ■ sequestration issued, so as to give it effect as to third persons; and in refusing to permit Mr. Burthe to be sworn to prove the fact that he had released the mortgage referred to in the conveyance.

Whether the contract was simulated or in fraud of creditors, or void in other respects, must be left to another jury to decide according to the evidence which may be adduced by the parties.

It is, therefore, ordered, adjudged and decreed, that the judgment of the Parish Court be avoided and reversed, and that the case be remanded for a new trial, with directions to the judge not to refuse any legal evidence that the mortgage mentioned in one of the deeds was released by Mr. Burthe, and to abstain from instructing the jury that the said deed was null as to all parties, and that the plaintiff had a right to retract for McManus, because the act was not signed by Mr. Burthe; and that the sequestration created such a lien in favor of the creditors, as to preclude the defendant from the right of registering his other conveyance, so as to give it effect against third persons; and that the plaintiff pay the costs of the appeal.