Lowenstein v. Fudickar

On Application for Rehearing. An extended and earnest application is presented in this case, but there are only one or two questions upon which we deem it necessary to make any additional expression of opinion. I. Counsel complains of the construction placed, by the opinion, upon R. O. C. 1984 and 1986, to the effect that they have “ exclusive reference to reprobated transactions between debtor and creditor;” and cite us to 84 An. 902 and 10 La. 868 , as having been referred to in his brief. In this, counsel is in error. These authorities are not mentioned in his brief, but in the syllabus we find cited 84 An. 995 and 10 La. 870 . But an investigation has resulted in the discovery of the ease of Thompson vs. Freeman, 34 An. 992, which discusses a proposition germane to the one under consideration, and which is predicated upon Rhodes vs. Beaman, 10 La. 369 . But those cases deal with R. C. C. 1985 exclusively, which is not mentioned in the opinion, and they are addressed, solely, to the question of the insolvency of the debtor as affecting the bona fides of the sale attacked. In Rhodes vs. Beaman.the court said: “ It is contended that the defendant, Beaman, was not a creditw, and that he is not shown to have had knowledge of the failing circumstances of the vendor. We consider Article 1979 (Rev. O. O. 1985) as merely establishing a presumption against the contract, whenever it is first shown that the obligee knew of the discomfiture of the obligor, and when being a creditor, he gains an advantage over other creditors. But it does not exclude other evidence of fraud and collusion,” etc. (Italics ours.) *893 Quoting and emphasizing this precept as sound, the court said in Thompson vs. Freeman: “ Therefore, when satisfied, as we are in the present case, that the contract was made in execution of a collusive purpose between the parties, to defraud and defeat creditors, and when the direct result of the contract is to leave the obligor insolvent, and actually to defeat his creditors, we will not hesitate to frustrate' such schemes by annulling the contract.” These decisions are precisely in line with our opinion and the cases therein quoted. In Rhodes’ case it was distinctly held that Article 1985 of the Code merely established “ a presumption against the contract when it is first shown that the obligee knew of the discomfiture of the creditor of the obligor, and when, being a creditor, gains an advantage over other creditors.'’1 Then the court adds, that this does not exclude other evidence of fraud and collusion. And the opinion in Thompson’s case was predicated upon “ other evidence of fraud and collusion; ” just as we hold the plaintiff should have done in this case. But not having done so, Fudickar was not connected with the fraud of the transaction. A mere reference to Articles 1984 and 1986 will show that their provisions are in harmony with this view. The last named article creates two exemptions from the law of fraud: (1) All sales of property, or other contracts made in the usual course of a party’s business, and (2)-, the payment of a just debt in money. It seems quite clear that it has exclusive reference to transactions between debtor and creditor, for, surely, an article of the Code is not necessary to authorize a party to make sales, or contracts, with a stranger in the usual course of business. This being the case, we must look outside of it and the two preceding articles, for authority to hold Fudickar, as the court did in Thompson’s case and in Rhodes’ ease. We have carefully observed the comments of counsel, on the case of Pochelu quoted in our opinion; and, while there is a complete parallel between that case and the instant one, in the particulars mentioned, yet there are two essential differences between them, the Pochelu case being one en declaration de simulation, and it having been defeated, by proof of the price having been paid in cash. Now, while it is perfectly true that, in that case, we held that the sale having been made to one not a creditor, and for cash *894 ‘ ‘ it must be considered as one made in the usual course of business,’’ it does not follow that the sale by Covington to Fudickar on terms of credit, was not such a transaction. Had we thus regarded it, further comment would have been supererogatory and unavailing. What our opinion in the Pochelu case says in reference to the character of the action, was intended to be merely suggestive and not controlling; and even if it was, the turning point therein is, the inadequacy of price, not existing here. Our opinion simply holds that Fudickar not being a creditor, the price of the goods was not absorbed as a part of, or all, the consideration paid therefor; in other words, the purchaser parted with value for them, and the fact that the price, or the note given for the purchase price, was by Covington subsequently applied to the discharge of his debts, did not .vitiate the sale as an onerous contract, and it will not impair any recourse creditors may have against the recipient of the proceeds thereof. ( II. Holding as we do in our opinion, that, conceding Covington’s acts to have been fraudulent, the sale could not be annulled without convicting Fudickar of participation, we considered plaintiff’s bill of exception of no practical importance, as the contemplated evidence which was rejected did not have any seeming applicability to Fudickar as vepdee. The question asked of Covington was, viz.: “ State the subject of this conversation with Mr. Hudson.” To it the objection was that it related to professional communications between client and attorney; and if it related to his contract with Fudickar, it was inadmissible, not having occurred in his presence. The judge’s rejection of this testimony appears quite plausible, and nothing has been said on the subject to convince us that he erred. Reexamination of the record and application has only served to strengthen our convictions in the correctness of our opinion. Rehearing refused.