Macready v. Schenck

The opinion of the Court was delivered by Bermudez, C. J. This is a suit by tlie executors of Margaret Haugliery against tlie defendants as sureties on tlie bond furnished by Bernard Klotz as liquidator of tlie partnership once existing between him and her. Tlie defendants filed exceptions which, on being overruled, were followed by au answer. After hearing evidence and argument, the District Court, however, sustained the exceptions, and without passing on the merits, rendered judgment for the defendants, from which the plaintiffs appeal. The record discloses the following salient facts: Margaret Haugliery and Bernard Klotz were partners engaged in the bakery business. By tbe articles, it was provided that in the event of the death of either, the survivor would wind up the partnership affairs within six months. Margaret Haugliery died leaving a will appointing the plaintiffs the executors thereof. At the expiration of the six months following her death, Klotz, who had retained possession of the partnership property, had himself appointed contradictorily with the objecting executors, liquidator of tlie concern, giving bond for $40,000, with the defendants as sureties therein. On appeal by the executors tlie appointment was vacated, 35 Ann. 596. In a cross suit, thereafter brought; judgment was • rendered by this Court against Klotz, as surviving partner, for $30,717 25, 39 Ann. 639. This judgment remaining unsatisfied notwithstanding due demand, the executors instituted the present action against tlie, sureties on the bond, to hold them responsible for Klotz’ maladministration of tlie property of tlie concern while he acted as liquidator, and his failure to account and indemnify. Viewing the bond either as a judicial or as a conventional obligation, tbe defendants contend that they are in no way liable. They say that, if it be a judicial bond, no recovery can be bad on it from them, until after execution against their principal has been returned unsatisfied, and that, even then, tlie bond is a nullity, because there was no law authorizing its exaction and execution. They further insist that were the bond not considered as a judicial — 459 — bond, but. as a conventional bond, it discloses no privity between the plaintiffs and themselves; that its consideration failed and that no breach of its condition was shown. T. The defendants’ contention that the bond sued on is strictly and exclusively a judicial bond, is not well founded. Judicial sureties are such as are, furnished under judicial direction, in the absence of any law. In the case of Whitehead, 3 Ann. 42, the surety on a bond given under an order of court made in the exercise of equity powers, for the faithful discharge of the duties of one appointed receiver of a partnership, in which no succession was involved, — was'properly declared tobe judicial, for, there was no law requiring such surety. In the case of Walmsley, 31 Ann. 156, in which the surviving- partner, appointed to liquidate the partnership once existing- with the deceased, had furnished bond, the court said that the bond was an ordinary obligation, on which suit could be brought both against principal and surety. The court could more appropriately have qualified the bond an ordinary legal bond, for there was law authorizing its execution. A legal bond is that which is required by law. The Code discriminates betweenpersons bound by law and persons bound by judgment to give a surety. R. C. C. 3064. In the present controversy, the bond furnished by Klotz as liquidating-partner, was given in furtherance of a special provision of law, which declares that the surviving partner appointed to liquidate a partnership between him and a deceased partner, is bound to give security to the amount of one-fourth over and above the estimated value of the portion coming to the deceased from the partnership property, according to the inventory. R. C. C. 1139. It is curious that the law has established a sort of parallel between sureties and mortgages. As there exist conventional, legal and judicial sureties, so there' are conventional, legal and judicial mortgages, arising from contract, law or judgment, producing kindred effects. Nevertheless it would seem that the Code treats of legal and judicial sureties as though they belonged to the same class, and that the term judicial has been applied to sureties furnished pursuant, either to law or to judicial decree. Be this as it may, however, it cannot be perceived, if the bond sued on be judicial in character and the sureties therein judicial sureties, to — 460 — what extent the distinction can shield the defendants, if they are liable otherwise. II. The defendants further contend that the plaintiffs have no right of action, for the reason, that it is neither alleged nor proved, that necessary steps have been taken to enforce payment of the judgment, against Klotz, their principal, and in justification, they point to Article 3066 E. C. C. True, it provides that no suit shall be instituted against any surety on any appeal bond, or bond of any administrator, tutor, curator, executor or syndic, until such steps have been taken. It is admitted that no execution has issued against Klotz, but. the record shows demand for payment and failure by him to pay. Traced to its origin, the article is found to be in part, an Act of 1842, No. 120, which provided that the courts of probate should have exclusive cognizance of all suits or actions against sureties on the bonds of appeal and all others which they are bound by law to receive, or exact from appellants and administrators, tutors, curator's and testamentary executors generally, and no suit shall bo instituted against the surety, until the necessary steps have been taken to enforce payment against the principal. The act was considered deficient and was amended in 1855, so as to embrace besides, sureties on bonds furnished by syndics and sureties on any appeal bond. Act 300, Sec. 5. By the amendment, the word tutor, found in the act of 1842, was inadvertently left out; but in 1866, the omission was supplied. No. 22, p. 42. It is apparent that, in legislative intent, the sureties proposed to be protected were .those serving on bonds furnished by succession and bankruptcy representatives, and by persons representing minors or interdicts or absentees, and that it was not designed that the sureties of liquidators of partnerships, in which successions were concerned, should be included. From the circums’tance that Articles E. C. C. 1140, 2, 4, which relate to surviving partners term his gestión or management of the affairs, an ■“ acl/mmistration'’' it cannot be inferred that this official must be viewed as a succession representative, and that his sureties are therefore embraced within those denominated in the article. Their duties are essentially distrinct and independent, even antagonistical. — 461 — It is a staring fact tliat a liquidator lias-no mandate, to administer the succession of the deceased partner and pay its creditors. He gives a bond, not in favor of the court, but in favor of the succession representative, when an appointment is legally made. In such cases, there necessarily must be both a liquidator and a succession representative,— the former to manage the concern in which the succession has an interest and account to the succession representative, the latter to administer the succession in which the liquidator has no direct interest, and to account, not to the liquidator, but to the court, creditors, legatees and heirs, if there bo any. No doubt the Legislature had the power to extend to the sureties on a liquidator’s bond, a similar protection; but it did not do so. Inserting such sureties within the letter of the text, would be judicial legislation. When a law is clear and free from ambiguity, its letter must not be disregarded under the pretence of pursuing’ its spirit. R. C. C. 13. The inclusion of the sureties named in the article amounts to the exclusion of all others, not mentioned in it. It therefore follows, that, as the law does not require that steps be taken against a liquidator to enforce a judgment against him, as a condition. precedent to a suit like this against the sureties on bonds furnished tinder Article 1139 of the R. C.'C., the executors were not bound to issue execution against'Klotz, and that they had authority to stand in court to bring this action against the defendants as 1ns sureties, just as they could have sued them, when they originally proceeded against him. III. ■'file next contention is that, whereas this Court has decided in Klotz vs. Macready, 35 Ann. 596, that Articles 1138 et seq., E. C. C., entitling tiny survivor of a commercial partnership to bo appointed liquidator of the concern, do not apply to testamentary successions, and that the appointment of Klotz was unauthorized and a nullity, it is a sequence that whatever was done in furtherance of the appointment is of no effect, and that the bond sued on being' therefore void, it must be viewed as having never been uttered. In support of this position, the defendants rely on a number of cases in which it was held, that no recovery could be had from sureties on bonds furnished, when there existed no law authorizing the execution. Tlie correctness of the rulings invoked surely cannot be, nor is it, assailed. To the reverse, it is admitted; but the trouble is that they have no bearing on the present controversy, as, in the matter in which — 462 — the bond sued on was furnished, there was a law requiring the giving of the bond, and the court has the power and it was its duty, to require it. R. C. C. 1139. In the case, the decision of which is invoiced, this Court did not hold that there was no law authorizing the appointment of a liquidator to settle the partnership in which a deceased was concernel, and it did not decide that the court had no right to make the appointment, in a jiroper case. All it did rule, was that the succession of Margaret Haughefy was not vacant and was represented bjr testamentary executors, who had the right, for valid reasons, to oppose the appointment of a liquidator, and that, as the six months following the death had expired, within which the partnership affairs had to be wound up, the District Court had erred in making the appointment, which, consequently was rescinded. This judicial declaration could not and did not release Klotz from the obligation which he had incurred to administer and account, nor could it, nor did it, discharge the sureties from responsibility. The bond which Klotz furnished was given to enable him to retain and obtain possession of the i>artnership actual and eventual accounts, for the maladministration of which he has heen judicially held liable. The furnishing of the bond, with the defendants as sureties on it, has accomplished its purpose and has produced legal effects, the benefit of which the executors can demand, although the appointment was annulled. This is not one of the cases in which the maxim: Quod est nullum, nullum, produtit effectual, applies. To all rules, there are exceptions which confirm them. R. C. O. 1120. The law is indisputably clear, that no administrator can be legitimately appointed to a succession, when there are no debts to pay, when all the heirs are, of age and present, when they accept it unconditionally and oppose the appointment sought. Assuming a case in which an application of that sort is made and granted, in which the party appointed qualifies and gives bond, taking possession of the succession assets, notwithstanding appeal by the heirs, in which the aiqiointment is annulled, — could it be claimed for a moment that when the heirs would demand possession of the assets from the administrator, who would fail to turn them over, notwithstanding judgment and unavailing' steps to enforce it, — the sureties could shirk all responsibility, because, the order appointing the administrator had heen annulled, the appointment vacated and the bond thereby avoided ? Surely not, simply because, although the court improperly exercised its discretion, there was a law authorizing the appointment in a proper case, under which an order was made by which the appointee possessed — 463 — liimself of the succession assets, the order producing legal effects until annulled. R. C. C. 1120, Succession of Altemus, 364; Webb vs. Kellar, 39 Ann. 66. It would be monstrous to hold otherwise. The case certainly would be different, if, although the bond had been furnished, the appointed administrator liad taken no possession of the assets and had made himself in no manner responsible for the same. IY. Another defence set up by the defendants is, that the bond was furnished payable to the judges of the Civil District Court; that the plaintiffs are not parties or privies to it, or the assignees thereof. It is a ready answer to such objection, that the bond, being a legal bond, and the sureties therein being legal sureties, the bond should be read by the light of the law under which it was required and received. That law specially provides that the liquidator shall furnish bond in favor of the succession representative for a certain amount. R. C. C. 1138 et seq. Under the well settled doctrine that were a bond is given under the authority of a law, whatever is included in the bond and which is not required by the law, must be read out of it, and, whatever is not expressed and ought to have been incoiqmrated, must be read as if inserted into it, it follows that the words found in the bond by which it is made payable to the judges of the Civil District Court, must be left out, and the words to the succession representatives, must be deemed as embodied in their place. By reason of all the foregoing views, it becomes unnecessary to consider what the consequences would be to the sureties, were the bond, instead of being what it is found to be, a conventional obligation. V. It cannot be, urged that the consideration of the bond failed, for, the stipulated condition was that the appointed liquidator would properly manage the. property entrusted to him, account therefor and otherwise discharge the functions and duties incumbent upon him, and that, on his failure to do so, the sureties would make good his default. Tt was not only the appointment, but also the taking of possession, the gestión of the partnership assets, the liquidation of the concern, and the proper accounting for the same, that constituted the consideration of the bond. Sureties have never been permitted to escape responsibility, when the bond, which they signed, had served as an instrument for obtaining — 464 — possession of property, which, subsequently had not, on proper demand, been lawfully accounted for. They have been taught that, in such cases, signing is not an idle or vain formality. VT. Neither can it be, claimed that there was no breach shown. The judgment by which Klotz was condemned to pay a large sum because of his maladministration and failure to account for the partnership assets in Ms possession, both, previous, during and subsequent to his appointment, and his default after his appointment had been declared null and been vacated, to settle for that judgment, are prima, fade evidence, to a certain 'and sufficient extent, against his sureties of his delinquency, to justify the saying, that he has broken his contract and his sureties are responsible with him and in his place eventually, as is written and promised in the bond. VII. The extent of that liability is the last matter to be considered. It is apparent that the defendants cannot be held as fully as Klotz was, (29 Ann. 638) for, their obligation, towards the succession of Margaret Haughery, are to be measured by a different standard. Klotz was condemned to pay for the value of all the partnership assets which were in his possession as surviving partner, less proper deductions, as it appeared that certain portions thereof, although seemingly sold at public auction, under judicial authority, had been adjudicated, for his account and benefit, to persons interposed, who, after-wards transferred their ostensible title to the same, to him at cost price. His position as liquidator of the concern, subsequently annulled, may well be assimilated to that of a succession representative where official acts are valid, although, on appeal, his appointment be annulled. R. C. C. 1120; 32 Ann. 364; 39 Ann. 66. Whatever was accomplished by him by fraudulent devices, as liquidator, was considered as illegal and as producing np effect to exonerate him, for the reason, that no third person was at the time concerned in the litigation, and that such persons could be shielded by the authority in furtherance of which Klotz was acting. The case is not the same as to the sureties, who, for the time being, were and are presumably sueh persons. They are responsible, under the law and tlie terms of their bond, only for a proper administration by Klotz., as liquidator, of the assets of which ho had possession in that capacity, unless they or either of them — 465 — be shown to have collnsively participated in a dishonest and illegal disposition of those assets by their principal, whether in his individual or official capacity. The quantum of their liability was not passed upon by the District Judge, owing to the peculiar decision which lie made on the issues presented. To arrive at a correct conclusion on that subject, would require an onerous examination of intricate matters which, in preference, appertains to the tribunal of first instance, rather than to a court having-appellate jurisdiction. Following precedents in kindred instances, whatever might be strictly our authority presently to investigate and adjudicate upon the amount and extent of the respective responsibility of the sureties, we deem it preferable to remand the case to the lower court, primarily to ascertain the same. It is, therefore, ordered and decreed that the judgment api>ealed from he reversed; and it is now ordered and adjudged, that the exceptions filed by the defendants he overruled; and, that the case he remanded to the lower court, to be further proceeded with according to the views herein expressed and otherwise according to law, and that the defendants pay costs of appeal, and that those of the lower court abide the final determination of the suit.