Bernhardt v. Curtis

• Decision Date: 17 March 1902
• Docket Number: 13,949
• Citation: 109 La. 171,33 So. 125
• Court: Louisiana Supreme Court
• Parties: BERNHARDT v. CURTIS. In re CURTIS

33 So. 125

109 La. 171

BERNHARDT v. CURTIS.

In re CURTIS

No. 13,949

Supreme Court of Louisiana

March 17, 1902

Rehearing granted.

BANKRUPTCY -- ADJUDICATION -- EFFECT ON UNEXPIRED LEASE -- NOTES FOR RENT -- INDORSER'S LIABILITY.

McCloskey & Benedict, for applicant.

B. R Forman, Jr., and Benjamin Rice Forman, for respondent.

PROVOSTY J. BREAUX, J., dissents.

OPINION

PROVOSTY, J.

There is no dispute in this case as to the facts, both sides submitting the case on the question of law involved. That question is whether a lessee's adjudication in bankruptcy under the bankruptcy act of 1898 [U.S. Comp. St. 1901, p. 3418] has the effect of liberating the surety on the rent notes given for that portion of the term of the lease subsequent to the adjudication.

It is not contested by plaintiff, and the law seems to be settled, that a lessee's adjudication in bankruptcy puts an end to his lease as of the date of the adjudication. In re Jefferson (D.C.) 93 F. 951; Bray v. Cobb (D.C.) 100 F. 270.

From this the liberation of the surety would seem to follow as a necessary consequence. If there is no longer any lease, and the leased premises have reverted to the lessor, and no rent can possibly accrue, the surety, if he were made to pay, would be made to pay a debt that had never and could never come into existence.

Nor is there any technical obstacle to his urging his liberation. He may plead exceptions "inherent to the debt" (Civ. Code, art. 3060); and this exception is pre-eminently of that character. He may plead the failure of the consideration of the principal obligation. Adams v. Cuny, 15 La.Ann. 485.

Plaintiff's counsel submits two reasons why the surety is not liberated, as follows:

"(1) Because one of the reasons for requiring a surety is to protect the lessor and property owner from the bankruptcy of his tenant. To hold otherwise would be to hold that the obligation of suretyship is doubly conditional, -- that the surety binds himself to pay not only upon condition that the maker does not pay, but also upon condition that the maker does not go into bankruptcy.

"(2) Because the very act of congress of which the maker avails himself to go into bankruptcy, the bankrupt act of 1898, § 16 [U.S. Comp. St. 1901, p. 3428], provides that 'the liability of a person who is co-debtor with or guarantor, or in any manner a surety for a bankrupt, shall not be altered by a discharge of such bankrupt.'"

That these grounds have a striking plausibility is undeniable.

The first derives its plausibility from the fact that the word "bankruptcy" has two meanings, -- one the popular meaning, in which it is convertible with the word "insolvency," describing the mere inability of the debtor to pay; and the other the technical meaning, describing a legal process by which the lease is put an end to. In the latter meaning of the word the lessee's not going into bankruptcy does enter as a condition into the obligation of the surety. The obligation is conditional upon the continuation of the lease; and, if the lease is put an end to from any cause, the obligation also is put an end to. What the cause may be is immaterial, so long as the effect is realized. Plaintiff would not deny that the possible destruction of the leased premises enters as a condition into the lease. Why not, then, the possible destruction of the lease? Will it be said that the destruction of the leased premises is more efficacious in checking the obligations that were to flow from the lease than is the destruction of the very lease itself?

The second reason...