Mayor v. Blache

Bullard, J. delivered the opinion of the court. These two cases, relating to alleged defalcations in the accounts of one of the defendants, as treasurer of the city of New-Orleans for a series of years, were consolidated and tried together in the District Court. Judgment was rendered in favor of the sureties and endorsers, and on the appeal both have been' argued together. We shall consider them separately, beginning with that which relates to the notes given for the supposed deficit of 1829 occasioned by the infidelity of Jean Guerin. In this first case the corporation sues to recover the amount of a note drawn by C.L. Blache, then treasurer of the city, and endorsed by Joseph Le Carpentier and Martín Blache, which was protested for non-payment at maturity. The drawer admits that he signed the note but denies that he owes any thing to the plaintiffs and requires strict proof. The endorsers admit in their answer that they endorsed the note, but they allege, that it was given and endorsed together with four others of the same date, amounting in all to fourteen thousand seven hundred and fifty-one dollars and twenty-six cents, in pursuance of an agreement between the defendants and the mayor of the city of New-Orleans, on the 20th October 1829, which they allege was altogether founded and executed in error, and consequently, not obligatory. This agreement, which is annexed to the answer, entered in pursuance of several resolutions of the city council, recites that C. L. Blache having been appointed city treasurer for the current year, the other defendants had become his sureties in [511] a bond in the penal sum of twenty thousand dollars, that the treasurer had lately sustained a'"loss of fourteen thousand seven hundred and fifty-one dollars and twenty-six cents, by the infidelity of Jean Guerin his collector, which loss is acknowledged to relate to his administration for the year 1829, that in order to enable him to meet this deficit, the city Council had offered to give the treasurer and his securities, a delay of one, two, three, four and five years to reimburse the treasury, upon the treasurer giving five notes endorsed by his securities, making together the amount of the loss with interest at six per cent added. The parties declare that it is well understood, that this arrangement is not to operate a novation, but the bond for the faithful administration of the treasurer shall remain in all its force and vigor for the sum and cause therein stipulated until he shall be regularly discharged. It is further stipulated that Le Carpentier and M. Blache are bound for the notes merely as simple endorsers, the payment of these not being secured by the mortgage resulting from the original bond. This agreement appears to have conformed to the terms and conditions required by the resolutions of the city council, a copy of which is annexed to the act and expressly referred to. Among other things the mayor was authorized to raise the mortgage existing in favor of the City, on the property of the Treasurer in order to facilitate him in selling it to pay the deficit. 11 y, not tT“™.at0Tic error SStorSa avío?consider^ witií whom7*°£ subject matter of the contract. Such is the substance of the settlement and agreement, which the endorsers allege was founded and executed in error. They were the securities on the bond for 1829; and supposing the bond valid, a question which we shall examine hereafter in another part of the case, does the record furnish us evidence to show, that the notes were given in error and consequently void? It is not every error, that will invalidate a contract; it must he in some point, which was a principal cause for making it, either as to the motive for making it, the person with whom it is made, or the subject matter of the contract itself. The principal cause is the motive or consideration, without which the contract would not have been made, the real existence [512] of which is a condition precedent, without which the consent, -1 would not have been given. These are the principles established by the Code on this subject, and by which this contract mus¿ ke tested. considered as mere endorsers, s'iowing why’the sadthTnotM°í¡i boiwcenthchoidapioa* that0 thoy out consideration them. Considered as mere endorsers it is impossible to ascertain why the defendants endorsed the notes in question, and indeed as between the holder and endorsers a plea, that they endorsed without consideration would not avail the latter, But place them in a more favorable light, and allow them the right of pleading every exception which the principal might do in avoidance of the contract and what are the facts. They appear already liable for the deficit occasioned by the infidelity of Guerin, as securities for Blache. If there was a real deficit, their previous liability was a sufficient consideration. But the contract was favorable to them, it gave a long delay, it enabled the treasurer to sell off his property in order to meet the demand, it prevented an immediate recourse against them on the bond. It is contended that they supposed this the only deficit, and were therefore induced to come into the agreement. If by this is meant, that if they had known the deficit to be greater, they would not have consented to- the arrangement, such an assertion contradicts the agreement itself, by which they stipulate that this bond should continue in force till the end of the year, when alone the full extent of their liability could be ascertained. It is further said that the defalcation occasioned by Guerin was not so great as was represented and there was error in this. It is however certain that the deficit in the treasury was much greater at that time, and how much was caused by Guerin, the treasurer had the best, if not the only means of ascertaining. The evidence before us shows, that the greater part of the sum for which the notes were given was lost by the misconduct of Guerin. The treasurer himself does not allege error in this settlement, and if he did, it could not avail him, because whether the loss was caused by Guerin or not, he was accountable for the real deficit on the books of the treasury. ... If the original bond was valid, we are of opinion that the [513] plea of error cannot be sustained in relation to the note sued on. . In the other case. No. 9315, the plaintiüs allege that C. L. Blache was annually elected treasurer of the city from 1823 to 1829 both inclusive, and for the faithful performance of his duties gave'bond with two sureties in the sum of twenty thousand dollars. That for the three first years Joseph Le Carpentier was surety in solido with Nicolas Lesconfiair. For the year 1826, he bound himself in solido with Joseph Jardela, and for the years 1827, 1828, and 1829, with Martin Blache as co-surety. They allege that the treasurer did not faithfully discharge his duties, but that there is a deficit in his accounts of moneys not accounted for, or which through gross negligence he failed to collect, amounting to forty-four thousand seven hundred and nine, teen dollars. They pray judgment against the treasurer for that amount; against Joseph Le Carpentier in solido for the same sum as found for each and every year, against Lesconflair for the alleged deficit of the three first years in solido, of twenty thousand five hundred and eighty-three dollars and three cents; and against Martin Blache for twenty-four thousand one hundred thirty-five dollars and ninety-seven cents in solido, with C. L. Blache and Le Carpentier for the three last years. The treasurer is charged with gross negligence and fraud. The answers of the sureties are separate, and present various grounds of defence, which we shall proceed to examine separately in relation to each of the defendants, beginning with that of Nicolas Lesconfiair for the years 1823, ’24 and ’25. Among other things not necessary to mention now, this respondent says that the plaintiffs cannot recover of him as the surety of Blache, without subrogating him in the rights, actions and mortgages, which they had against the treasurer, in virtue of the bonds signed by him as security. That by the law in force at that time, the city had a legal mortgage on the estate of the treasurer, wrhich, by the acts of the plaintiffs, has since been released, and the treasurer permit [514] ted to sell this property so mortgaged; and i't is no longer in their power to subrogate him on his paying the debt. discharged13when l>y the act of the creditor the subrogation of liis rights, privileges operated°mfiivor ®t the surety. i?1'mortgage'“sin certain property surer'; /íczVtfrat □harged0 tb«oby. The surety, says the Code, is discharged when by the act 0f the creditor the subrogation of his rights, mortgages and privileges, can no longer be operated in favor of the surety. ° & 1 J La. Code, art. 3030. ]gy the Civil Code in force when the three first bonds were executed, the city had a tacit mortgage on all the real estate of the treasurer. Old Code, p. 457, art. 25. If, therefore, it be shown that the plaintiffs, by their acts, without the consent of this defendant, have put it out of their power to enforce the mortgage, and consequently that it could not, either by legal or express subrogation, inure to the benefit of the surety on his paying the bond, it follows that the defendant Lesconflair is discharged. It is shown by a resolution of the city council, on the 7th of October, 1829, that the mayor was authorised to cancel the mortgage which the corporation had on a lot of ground belonging to the treasurer, in the faubourg Marigny, and on his undivided half of another lot, held in common with Jean Guerin, in order to facilitate him in making sale of his pro-a deficit in his accounts, as treasurer for that yeaiv The property was afterwards sold with the consent °f the corporation, and the mortgage cancelled by the mayor, R is not contended that Lesconflair consented to this arrangement, and it is clear that if he was now to pay the alleged deficit for the years for which he was security, it would not be in the power of the corporation to enable him to enforce the mortgage, in order to reimburse himself. The court therefore considers him as released from all liability. Joseph Le Carpentier the co-surety of Lesconflair, pleads, among other things which we shall notice hereafter in connexion with the defence of Martin Blache, that he is released from all liability on the bonds for 1823, ’24 and ’25, because the mayor, by an act before a notary on the 13th of May, 1826, gave a full discharge to Lesconflair, who was bound in solido with him. The mayor, in that act, refers to a resolution of the city council of the 25th of April, 1826, [515] as his authority. That resolution is as follows: -u On motion of Mr. Marigny, resolved that the council accepts as sureties of Mr. C. L. Blache, treasurer of the city, Messrs. Joseph Le Carpentier and Joseph Jardela.” But where a co-amT cons?n?sseto the release of a mortgage on the property of the principal debtor, ™^ppMtoth0 “ounVíú aíuré[hereby released* although his co-him, is released. surety not con- ¿» sondo with That resolution only authorised the mayor to accept Jardéla as surety for the year 1826 in lieu of Lesconflair who had been so previously. It did not authorise the mayor to release Lesconflair from his previous liabilities, nor does it appear that the city council ever approved the accounts of the treasurer for the year 1825. There is in the record the report of a committee charged to examine an account of receipts and expenditures for the first six months of that year, that they found the account exact and correct. But it does not appear, that even that report was adopted by the council, much less was there any verification of his accounts or of the state of the treasury, at the end of the fiscal year ending in March 1826. The charter does not authorise the Mayor alone to bind the Corporation by contracts. But he contends further that he is discharged in consequence of the release of the mortgage on the property of the treasurer above spoken of, by which his co-surety was exonerated. That if his co-surety in solido is released, no recovery _ . mi»» ■» i can be bad against bim. lo this it may be answered, volenti ° J 7 non fit injuria. Le Carpentier assented to that release of mortgages, and the sale of the property of the treasurer, he was the agent of the parties in making the sales as auctioneer, the transaction turned to his advantage, was intended for his relief as surety for the year 1829 when it took place, it was one oí the conditions upon which he signed the notes on account of the deficit of Guerin. We proceed to examine the most important ground of defence set up by J. Le Carpentier and Martin Blache in relation to the validity of the three last bonds subscribed by them as sureties for the years 1827, ’28 and ’29. They allege that these bonds were signed by them in error and that they were induced to give their consent by the conduct of the corporation in annually approving the accounts rendered by the treasurer and re-electing him. That the gross [516] negligence of the plaintiffs amount to fraud, (dol,) which invalidates the contract, that they were ignorant of any previous deficit, and were authorised by the conduct of the plaintiffs, £0 believe that none existed, and that without that belief, they would not have subscribed the bonds, and that their consent thus procured by false representations is not binding on them. The facts in relation to the rendition of accounts and of their approval, are the following. On the 15th of February, the city council resolved, that the account rendered by the treasurer for the years 1821 and ’22, up to the last of April, be approved, and the treasurer be requested to publish it. On the 11th of May, 1824, it was resolved, that the account of receipts and expenditures rendered by the city treasurer for the year 1823, be approved; and the treasurer be requested to publish it with an alteration, so as to show, whether the balance in favor of the city at that time, of ninety-four thousand four hundred and thirty-two dollars and twenty-four cents, was in cash, or in notes. On the 6th of March, 1825, the chairman of the committee of finance, submitted to the council, the account rendered by the treasurer for the year 1824, and having reported that the committee had examined it and found it correct, it was approved by the council, and they authorised its publication. On the 20th of August 1825, the chairman of the committee of finance, reported that they had examined the account rendered for the six months ending, June 30th, and found it exact and correct. No resolution was taken on this report. This appears to have been the last account ever rendered. Nor does it appear that the real state of the treasury was ever inquired into previously to 1829. No inquiry was ever made whether the treasurer had faithfully administered, and whether the balances exhibited by his accounts were really on hand. By the 3d section of an act, supplementary to the several acts concerning the city and corporation of New Orleans, approved March 14th, 1820,itis declared that it shall be the duty of the mayor and council, to cause the treasurer of the corporation to publish on the first Monday of March in each year, an accurate, detailed and just statement of the receipts and [517] expenditures and condition of the treasury, of said body politic, and publish the same in at least two of the Gazettes printed in New Orleans; the said statement before it is printed, shall be carried by the treasurer aforesaid before some judge or justice of the peace, before whom he shall testify on oath, that the same is a faithful and correct statement. Section 9th, should the treasurer of the said corporation, refuse to account as directed by this act, he shall pay a fine of two thousand dollars. Said fine to be recovered on motion before the District Court by the attorney general or his assistant,ten days notice of which shall be given to the said treasurer, and it is hereby made the duty of the attorney general, to inquire and see that the provisions of this act are faithfully fulfilled, and proceed as the case may require. The rules of proceeding in the city council provide for the appointment of a standing committee of ways and means, among whose duties is, that of examining and verifying the accounts of the treasurer. Thoiawsorthe qSgStho3 settle tlie accounts of tlieir dobtora at stated periods, is dircctory, and constitutes no part of thLurctief-'and a failure to call them to an account does not discharge sureties. [517] But the annual publication of the detailed account of receipts and expenditures, for the information of the citizens, forms hut a small part of the duties of the treasurer. ■It is made his duty by law £i to receive and pay all monies belonging to said corporation, to keep regular accounts of their real and personal property, to collect the rents, dues and demands, belonging thereto, once in every year, at such time as shall be directed by the said mayor and city council; to publish an account of the receipts and expenditures of the said treasury, provided that no payments be made by the said treasurer, unless the same be authorised hy a warrant drawn by the persons exercising the functions of mayor, in pursuance of an order of the city council.” We derive but little aid on this question from adjudicated cases. Two cases have been cited by the plaintiffs’ counsel, decided by the Supreme Court of the United States; those of the United States vs. Kirkpatrick, 9 Wheaton, 720, and the United States vs. Vanzandt, 11 Wheaton, 188. The first was an action against sureties on a collector’s bond. It is the duty of the comptroller of the treasury to call collectors to [518] an account quarterly, and in case of failure to account, and to issue a warrant of distress against the delinquent; and jjle qUesfton waS; whether the neglect of the comptroller to call the collector to an account periodically, according to 7 7 . . . . law and the consequent injury to the sureties, released them 1 ° J from iheir liability, on the ground of laches. The court J 0 say? “ it *s said the laws required that settlements should be t0 look to this as their security. But these provisions made at short and stated periods, and the sureties have a of the law are enacted by the government for its own security and protection, and to regulate the conduct of its own officers. They are merely directory to such officers, and constitute no part of the contract with the surety.” In the second case, which was against the sureties of a paymaster, the same principle was re-affirmed. (treasurerto elected, his new foomi is for a new •;contract, and tho sureties who sign it cannot avail nogTcct'ofdutyto to11 accounTUIfoí íiiepas^year. of It is apparent that the question in those cases was as to the effect of negligence on the part of public officers upon an existing contract. Those cases and the one now under .consideration would be analagous, if the treasurer had been elected to continue in office during the pleasure of the corporation, with an obligation to render an account annually, .and the defendants had been sureties for the whole term. But the question here is not as to an existing contract, but what effect shall be given to the repeated omissions and neglect of the mayor and city council, as relates to a new contract about to be entered into; and the question seems he narrowed down to this, shall it be considered as a condi- . ........... tion precedent implied m this new contract, that the corpora- * . x tion had complied with the law in strictly calling the treax •/ a surer t0 an account under a preceding one. If, in relation a confract already entered into, it was considered by the Supreme Court of the United States, that the obligation to call the officer to an account according to law, did not form a tacit condition of the contract itself, it is not easy to perceive how we are to declare, that as to a new contract, It formed a substantive stipulation or condition, that under a previous one the treasurer had been regularly called to render his accounts, and that he was not a defaulter. If a [519] new treasurer had been elected, and new sureties had been offered, could they have set up such a defence as to the treasurer oi the preceding years? where on oMiftfui" 'prinéfpai tS cannot a“o?a cumd^undJr8 it wifhout showing t,Ky ara deceived, and induced sie“ i( dejjei]’ractisea 011 The treasurer of 1827 must be regarded as totally distinct from that of 1828, although the same man was elected. The obligations of the sureties is expressly limited to the year. But it is said here is an error, created by the conduct of the plaintiffs; the argument is that if the sureties had known that the treasurer was in arrears for the preceding years, they would not have signed the contract; that their ignorance was owing to the gross negligence of the mayor and city council, and that this gross negligence is equivalent to fraud, (dol,) which vitiates all contracts. “Fraud,” says the Code, :i as applied to contracts, is the cause of an error, bearing on a material part of the contract, or continued by artifice with design to obtain some unjust' advantage to the one party, or loss to the other.” Civil Code, art. 1841. This error must be on some material part of the contract, and the artifice or manoeuvre must be designed to obtain an unjust advantage. The maxim that gross negligence is equal to fraud, will not supply the want of proof, that the conduct or acts by which the sureties were deceived, was done with intent to deceive them in relation to this contract. That the maxim might perhaps be invoked to prove the members of the city council and the mayor personally liable to the city corporation for any loss sustained in consequence of their palpable neglect of duty, but we cannot see its bearing on the contract in question in the absence of all proof to show design, nor can we perceive how it forms a material part of this new contract, that a former one had or had not been complied with. Merlin’s Rep. verbo dol, sect. 1. It is not pretended that these bonds are not valid as to the principal obligor, and the sureties having acceded to a valid obligation, cannot avoid the responsibility incurred without . -i*-. i showing that they were deceived, and induced to enter into the contract by devices practised on them with that intention.t0 These principles seem to us applicable with great force to [520] cont1,acts °f suretyship- Such are supposed to be the intimate and confidential relations existing between the principal and surety, that it is not easy to show what may have been the inducement for entering into such an engagement. if the city treasurer, under a resolution of the city council, keep1”?,5 and puts withdraw °moncy wX)ut0ttiowii o¿” and disguise false entries and fraudulent accounts, instead of being a mere bZmZhe coi"u?ontl0trrasurorf ids misconduct”1 The principal defendant has urged a variety of matters in his defence, which we shall now proceed to notice. I. He contends that most of the defalcations charged against him are attributable to the misconduct-of a bookkeeper, whom he was compelled to employ by a resolution of the city council, and who was paid by the corporation. ° ' x «/ x That the false entries in the books are in his hand writing, ° an(l that the corporation is accountable for his conduct. It is true, the treasurer was authorised by a resolution of the chy council to employ a book-keeper, but the selection of a person so to be employed was left to himself. If his confidence was betrayed, if instead of making him merely a book-J keeper, the treasurer put it in his power to withdraw money r ' x x j from the treasury without the warrant of the mayor, and to disguise his peculations by false entries and fraudulent accounts rendered to the city council, it is clear that instead of a mere book-keeper, he became the confidential agent of the defendant, and that the latter is liable to the corporation for his misconduct. II. It is further alleged that the city council improperly interfered in the manner of keeping the treasury accounts, and thereby created such confusion and embarrassment in the books, that the treasurer appears to have received large sums, which in fact never came into his hands. By a resolution of the 27th of April, 1822, the treasurer was directed to keep the following books, viz: a cash book, a journal, a grand livre, a book for bills payable and receivable, a book for taxes and one for rents. The method of keeping the books according to this ordinance, does not appear to us difficult to comprehend, and in relation to the cash book, nothing is more simple; he is directed to debit himself with all sums received, and credit himself with all sums paid by him, and strike a balance every month. [521] III. It is further contended that the mayor had been entrusted with funds belonging to the corporation, and that he ought first to be called on to render his account. It appears that the mayor, on various occasions, was authorised by the city council to procure the discount of notes at the different banks for the corporation. His authority extended no further, and the court cannot presume that he acted beyond his powers. But it is shown by positive evidence, that most of the money procured in this way, was paid over to the treasurer, and by very strong presumptions, that the whole was. The total amount of deficit, as relates to the principal defendant, is forty-four thousand four hundred thirty-seven dollars and eighty-eight cents, independently of that occasioned by the infidelity of Guerin. The responsibility of Joseph Le Carpentier commenced on the 4th of April, 1823; he must be credited in the above account with a charge for taxes in 4822, amounting to six hundred sixteen dollars and ninety cents, and one hundred thirty-five dollars and sixty cents in cash, deficit for 1822 and ’23, and eight dollars charged in November, 1822, in all, seven hundred sixty dollars and fifty cents, leaving a balance of forty-three thousand six hundred seventy-seven dollars and thirty eight cents. The deficit of 1829, greatly exceeded the amount of the bond, and the defendants, Le Carpentier and Blache, having already arranged in solido with their principal for upwards of fourteen thousand dollars, although nominally as endorsers, yet we think it was not the intention of the parties that the legal liability of the sureties for that year should exceed twenty thousand dollars. The excess of the deficit should therefore be deducted from the above sum, which will leave a balance against the defendant Le Carpentier of thirty thousand nine hundred twenty dollars and twenty-eight cents. The liability of Martin Blache for the years 1827, ’28 and ’29, upon the same principles, appears by the evidence, to amount to seven thousand seven hundred fourteen dollars and thirty-three cents. [522] We have reached these results after the most minute and critical examination of the evidence, and the most anxious consideration of the questions of law involved in these cases. may n0t be misplaced to state here, that we have detected no evidence of intentional fraud or peculation on the part of the treasurer, personally. He appears before us rather as the victim of a too liberal confidence abused and betrayed; and of that looseness in conducting the business of his department, which is not incompatible with the purest personal integrity. It is, therefore, ordered, adjudged and decreed, that the judgment of the District Court be annulled, avoided and reversed, and proceeding to render such judgment as in the opinion of this court ought to have been given below: it is further ordered, adjudged and decreed, that the plaintiffs recover in the case, No. 9118, of the defendants C. L. Blache, Joseph Le Carpentier and Martin Blache, in solido, the sum of three thousand one hundred and twenty-seven dollars and twenty-six cents, with interest at five per cent from judicial demand and costs of protest and of this suit in both courts. And it is further ordered, adjudged and decreed, that the plaintiffs recover of the defendant Charles Louis Blache in the case, No. 9315, the sum of forty-four thousand four hundred and thirty-seven dollars and eighty-eight cents; of Joseph Le Carpentier in solido with said C. L. Blache, the sum of thirty thousand nine hundred and twenty dollars and twenty-eight cents; and of Martin Blache in solido with the said C. L. Blache and Joseph Le Carpentier, the sum of seven thousand seven hundred and fourteen dollars and thirty-three cents, and that there be judgment in favor of Nicolas Lesconflair: and it is further ordered, that the said defendants, except Lesconflair, pay the-costs of both courts.