Hibernia Bank & Trust Co. v. Succession of Cancienne

• Decision Date: 12 February 1917
• Docket Number: 21944
• Parties: HIBERNIA BANK & TRUST CO. v. SUCCESSION OF CANCIENNE
• Court: Louisiana Supreme Court

74 So. 267

140 La. 969

HIBERNIA BANK & TRUST CO. v. SUCCESSION OF CANCIENNE

No. 21944

Supreme Court of Louisiana

February 12, 1917

Editorial Note:

Until expiration of the fourteen day rehearing period this decision is not final.

Appeal from Twenty-Seventh Judicial District Court, Parish of Assumption; Charles T. Wortham, Judge.

The Judgment appealed from is affirmed at the cost of the appellant.

Marks Le Blanc & Talbot, of Napoleonville, and Grant & Grant, of New Orleans, for appellant.

McCloskey & Benedict and Frank Wm. Hart, all of New Orleans, for appellee.

OPINION

O'NIELL, J.

The administratrix of the succession of Leo Cancienne has appealed from a judgment rendered against the succession for the sum of $ 15,000, with legal interest from judicial demand.

The suit was upon two written instruments dated, respectively the 16th of August, 1911, and the 23d of September, 1911 signed by Leo Cancienne, for $ 7,500 each, purporting to guarantee the payment of any indebtedness to that amount due or to become due to the Hibernia Bank & Trust Company by the Sugar Planters' Storage & Distributing Company. The instruments, being on printed forms furnished by the bank are identical, except as to the date. In the following copy of one of them the words and figures written with a pen are produced in italics, to distinguish them from the printed matter in the form of the instruments, viz.:

"Continuing Guaranty.

"In consideration of the giving of credit to Sugar Planters' Storage & Distributing Co., hereby give this continuing guaranty to the Hibernia Bank & Trust Company, New Orleans, La., for the payment in full, together with all interest, fees, and charges of whatever nature and kind, of any indebtedness of said company to said Hibernia Bank & Trust Company, up to the amount of seventy-five hundred dollars, whether on open account or evidence by note, secured or unsecured, due and owing at the present time, or that hereafter may be due and owing by Sugar Planters' Storage & Distributing Company, I, holding myself, my heirs and assigns, in solido with the said company responsible for the said obligations, precisely as if the same had been contracted and due or owing by me in person; and, waiving pleas of discussion and division, I agree to pay upon demand at any time, the full amount due by said company to said bank, up to the amount of this guaranty, together with interest and charges, becoming subrogated in the event of payment in full by me to the claim of said bank, together with whatever security it may hold against said indebtedness.

"This done and signed this 23d day of September, 1911.

Witness: [Signed] L. Cancienne.

"[Signed] Emile Cancienne.

The defenses to this suit are as follows viz.:

First. That Leo Cancienne's signature to the instruments was obtained by the Sugar Planters' Storage & Distributing Company by fraud and misrepresentation, when the latter was not legally incorporated and was insolvent, to the knowledge of the plaintiff.

Second. That each of the instruments sued on is a nudum pactum, because the bank did not give notice to Leo Cancienne of an acceptance of his guaranty or offer of guaranty, and, In fact, did not accept the same, and hence there was no obligation on the part of the bank to loan or advance money to the Sugar Planters' Storage & Distributing Company after the signing of the instruments.

Third. That whatever indebtedness, if any, was due to the bank by the Sugar Planters' Storage & Distributing Company before the instruments were signed by Leo Cancienne has since been paid and satisfied by collections made by the bank from, or for account of, the Sugar Planters' Storage & Distributing Company.

Fourth. That the plaintiff has no cause or right of action against the defendant without having obtained judgment against, and without having discussed and exhausted the property of, the Sugar Planters' Storage & Distributing Company, and that no judgment can be obtained against the latter in this suit, because the company is not a party hereto.

Taking up the defenses in the order stated above, we find no merit whatever in the first of them. The instruments sued on were signed by Leo Cancienne voluntarily and with full knowledge of the responsibility he was incurring. The allegation that the Sugar Planters' Storage & Distributing Company was not legally incorporated is not borne out by the evidence and would be unimportant to the issues in this case, if true. Leo Cancienne was one of the directors of the company continuously from the time of its incorporation until liquidators were appointed to settle its affairs. He was present at the meeting of the board of directors at which one of its officers explained the proposition of the Hibernia Bank & Trust Company to have the directors sign the continuing guaranties, of which Mr. Cancienne afterward signed the two sued on. There is evidence to the effect that, when Mr. Cancienne signed the instruments, only the amount. $ 7,500, written in the printed form, and that be said he was signing only as a matter of form. It also appears, however, that the idea expressed at the previous meeting of the board of directors that the signing of these instruments was only a matter of form was based upon the belief that the guarantors would he fully protected by the pledges that were afterwards made to the Hibernia Bank & Trust Company of certain molasses bought with the funds loaned by the bank on these guaranties. The binding effect of signing as guarantor or surety with such an under standing was recognized in the decisions in Interstate Trust & Banking Co. v. Irwin, 138 La. 325, 337, 70 So. 313, 317, and First State Bank v. Davis et al., 139 La. 723, 72 So. 185, 186.

Mr. Cancienne delivered the instruments to the manager of the Sugar Planters' Storage & Distributing Company to be turned over to the bank; and all of the writing on them was done before they were delivered to the bank. Mr. Cancienne knew that the bank would not accept his guaranty only as a matter of form.

The question of solvency or insolvency of the Sugar Planters' Storage & Distributing Company at the time these guaranties were signed is a matter of no importance whatever. The evidence shows that the capital stock of the corporation was paid in, but that the corporation had no funds with which to buy molasses except what money it borrowed from the Hibernia Bank & Trust Company. It was to secure the loans made and to be made for that purpose that these guaranties were signed. It is presumed that Mr. Cancienne, as a director of the Sugar Planters' Storage & Distributing company, had knowledge of its financial condition and transactions. The directors of a corporation are trustees, and its creditors, like the stockholders, are the cestui que trust. On account of that fiduciary relation of the directors to the corporation and to its creditors, the directors are under a certain moral obligation to see that its creditors are paid. See Brashear v. Alexandria Cooperage Co., 50 La.Ann. 587, 589, 23 So. 540; Cahill v. People's Slaughterhouse & Refrigerating Co., 47 La.Ann. 1483, 17 So. 784; Hancock v. Holbrook, 40 La.Ann. 53, 3 So. 351; Frellsen v. Strader Cypress Co., 110 La. 877, 34 So. 857; Cochran v. Ocean Dry-Dock Co., 30 La.Ann. 1365; Jackson v. Ludeling, 88 U.S. 616, 21 Wall. 616 22 L.Ed. 492; Drury v. Cross, 74 U.S. 299, 7 Wall. 299, 19 L.Ed. 40: Twin-Lick Oil Co. v. Marbury, 91 U.S. 587, 23 L.Ed. 328. Hence the directors are charged with knowledge of the contractual obligations of the corporation.

With regard to the Second defense it is conceded by the plaintiff that the bank did not notify Mr. Cancienne of its acceptance of his contract guaranty. The bank did accept the, guaranties and acted upon them by making further loans to the Sugar Planters' Storage & Distributing Company. Our opinion is that it was not necessary for the bank to notify the guarantor of the acceptance of his guaranty, for the following reasons: (1) The instruments were not mere offers to guarantee the indebtedness of the Sugar Planters' Storage & Distributing Company, but were direct and absolute promises on the part of the guarantor to be responsible in solido with the company for its debts to the amount stated in the instruments, and waiver of notice of acceptance is implied from the terms of the instruments; (2) the guarantor in this case, having been a director of the corporation whose debts he guaranteed, is charged with knowledge of the debts contracted by the corporation on the faith of his guaranty; (3) the instruments sued on were executed and delivered at the request of the plaintiff bank, and their execution and delivery to the bank was an acceptance of the latter's proposition and completed the contract of guaranty.

In support of the proposition that it was necessary for the bank to give notice to the guarantor of the acceptance of the guaranty. In order to complete the contract and hold the guarantor liable under it, the defendant's counsel cite the following as authority, viz.: Bank of Illinois v. Sloo & Byrne et al., 16 La. 539, 35 Am. Dec. 223; Lachman & Jacob v. Block & Bro., 47 La.Ann. 505, 17 So. 153, 28 L. R. A. 255; Douglass et al. v. Reynolds, Byrne & Co., 32 U.S. 113, 7 Pet. 113, 8 L.Ed. 626; Davis Sewing Machine Co. v. Richards, 115 U.S. 524, 6 S.Ct. 173, 29 L.Ed. 480.

In Bank of Illinois v. Sloo & Byrne et al., 16 La. 539, 35 Am. Dec. 223, Sloo & Byrne, in New Orleans, addressed a letter to the cashier of the bank at Alton, Ill., authorizing A. G. Sloo & Co., of Alton Ill., to draw on them, Sloo &amp Byrne, at such times and for such sums as might suit the convenience of A. G. Sloo & Co., to the amount of $ 50,000. The firm of Shields, Turner & Renshaw and the...