Lewy v. Wilkinson

• Decision Date: 13 April 1914
• Docket Number: 19,821
• Citation: 64 So. 1003,135 La. 105
• Court: Louisiana Supreme Court
• Parties: LEWY v. WILKINSON

64 So. 1003

135 La. 105

LEWY v. WILKINSON

No. 19,821

Supreme Court of Louisiana

April 13, 1914

S. I Foster and W. A. Mabry, both of Shreveport, for appellant.

Blanchard Barrett & Smith and Alexander & Wilkinson, all of Shreveport for appellee.

O'NIELL J., takes no part.

OPINION

PROVOSTY, J.

This suit is upon two notes for $ 1,666.66 each, and one for $ 5,000. They are promissory notes in the simplest form, containing nothing on their face but the mention of the date and place when and where executed and the promise to pay to the order of W. H. Powell the amount named, one year after date, followed by the signature of Powell Bros. & Sanders Company, Limited, and nothing on their back but the signature of said company, and those of D. G. Sanders, T. C. Wingate, and defendant, and, under or following these signatures, an indorsement over to plaintiff in these words:

'Pay to the order of Gus Lewy. W. H. Powell.'

Defendant filed an exception of no cause of action. This exception was referred to the merits, notwithstanding the fact that an exception of no cause of action must be disposed of on the face of the petition; that no evidence can be considered in connection with it. Said exception was well taken, and should have been sustained. The notes, being annexed to, and made part of, the petition, show that defendant's liability is as indorser, and not as surety; and the petition does not contain the allegation that notice of the presentment of the notes for payment was given to the defendant -- an allegation which this court has held must be made expressly for showing a cause of action against an indorser. Wisdom & Levy v. Bille, 120 La. 700, 45 So. 554. It only alleges that the notes were duly protested. True it contains also the allegation that the defendant obligated himself as surety; but the notes show differently; and it is well settled that documents annexed to a petition control the averments of the petition founded upon them. Had the proces verbal of the protest been, like the notes, annexed to, and made part of, the petition, it might have constituted a sufficient allegation that this notice had been given; but it was only alleged to be 'filed herewith,' and hence was no part of the petition. The trial court did not pass upon this exception at all (notwithstanding that defendant had expressly and guardedly reserved it in his answer), but decided the case upon 'the law and the evidence.' Defendant took no appeal from the judgment which thus overlooked this exception, and has not filed in this court any answer to the appeal. We, therefore, are not in a position to pass upon the exception, and have noticed it merely for the purpose of again calling the attention of our brethren of the trial courts to the advisability and importance of disposing of such exceptions on the face of the papers, and not by referring them to the merits.

On the merits, the case was elaborately contested on the defense of the notes being null because of having been obtained through misrepresentation and fraud. In view of this defense having been the one upon which the case was mainly contested, and upon which the large record was made up, and of its being the one to which nine-tenths of the briefs is devoted, we have thought best to notice it, although the doing so is not necessary for disposing of the case. The facts, in that connection, are these:

Powell was president of the Powell Bros. & Sanders Company, which was a sawmill corporation, owning a sawmill, a store, timber lands, and a lot of lumber on its yards. It was placed by the state court in the hands of a receiver, who was the same Wingate who is indorser on the notes. After the company had been under the management of the receiver for something over a year, it made an arrangement with D. G. Sanders, the indorser on the notes, by which Sanders was to investigate the affairs of the company, and, if he found them satisfactory, was to furnish it the money necessary for taking it out of the hands of the receiver. This is not the same Sanders whose name figures in that of the company. He made this investigation, but says it was not 'very satisfactory.' It was satisfactory enough to lead him to furnish some $ 150,000. By means of this money, the company obtained its release from the receivership, and resumed operations. It operated for some three months, until the said D. G. Sanders and Powell had a falling out. Sanders then combined with other creditors, in an effort to have the receivership reinstated; but, failing in this, he addressed himself to the federal court in a like effort; and it was pending this application to the federal court, and by way of settlement and compromise of this litigation, that the agreement in pursuance of which the notes sued on were given was entered into. By its terms Powell retired from the presidency of the company and severed his connection altogether with it, transferring his stock to Sanders, Wingate, and Hicks.

The contention of defendant is that Powell misrepresented the amount and value of the assets of the company. This contention does not appear to us to be even plausible. As a necessary incident to the receivership, a complete inventory of the affairs of this company had had to be made. This inventory was readily accessible to all. Wingate, as receiver, must be conclusively presumed to have informed himself as to the condition of those affairs; and, since he, Sanders, and Hicks were acting together in this transaction -- each acting for, and representing, all -- this knowledge of his is conclusively imputable to his said associates. Sanders had made an investigation of these same affairs. True, between the time of this investigation and of the discharge of Wingate as receiver, which occurred at about the same time, and the time of the compromise with Powell, some three months elapsed, during which Powell was in charge of the affairs of the company; but it is not pretended that any change took place in these affairs during these three months, except that it is said that the stock of goods in the store -- an altogether minor item -- was greatly deplated. The complaints are that the quantity and quality of the lumber on the yards was misrepresented by Powell; that the quality of timber on the lands was misrepresented; that the titles to much of the lands was not good, etc., etc. Nothing shows that Powell was better informed than Wingate as to the titles, or than Sanders as to the lumber and timber, or as to the condition of the stock in the store. The store was in the charge of employes of the company, who, so far as the record shows, would have furnished information as to the condition of the stock just as readily to Wingate or Sanders as to Powell. Sanders, under the contract by which he furnished the $ 150,000, acquired an interest in the business which would have entitled him to require this information to be furnished him. There is no certainty that Powell made any misrepresentation, and still less that, if he made any, he did so intentionally. Wingate, Sanders, and Hicks made no effort to rescind their bargain with Powell. They took active charge, and, even after the lapse of 12 months, they were still paying the notes to Powell without demur. It is only after this suit had been brought upon the notes that complaint was heard.

Defendant and his counsel discuss the case as if the transaction had been a sale pure and simple; whereas it was the compromise of a litigation, and Powell was not merely selling his interest in the corporation, but was relinquishing his control of the corporation, and the other parties to the agreement were obtaining this control. This control may have been valuable; in fact, may have been, itself, worth the amount of these notes, irrespective altogether of whether the corporation was solvent or insolvent. Fraud, no doubt, is fraud, and vitiates all acts it enters into, compromises as well as sales; but, in the appreciation of the alleged acts of misrepresentation in any particular case, it makes quite a difference whether the parties, in entering into their contract, acted in confidence, relying easily upon each other's statements, or dealt at arm's length, as in the compromise of a litigation, when each party is to be supposed to have acted more upon his own knowledge of the matter involved than upon any information derived from his adversary. From all the circumstances of the case, it is evident that Wingate and Sanders were acting on their own knowledge of the situation, and not upon the mere statements of Powell.

In Exchange Bank v. Williams, 120 La. 901, 45 So. 935, this court said:

'One may engage in a business transaction with his eyes closed if it pleases him, but, if no unfair advantage be taken, there is no reason why he should thereafter complain of a lack of information, which me might readily have obtained if he had kept his eyes open. Where one undertakes to transfer only the interest in particular property that he...