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Opinion of the Court.

cultural College bonds unlawfully issued under similar circumstances to those here presented, and one being a consolidated bond unlawfully issued after its surrender in exchange for another bond. The Supreme Court of Louisiana, after elaborate consideration, held, for one among other reasons, that the seller having been obligated to the warranty of the existence of the bonds at the time of the sale, and the bonds being void under the constitution, he was obliged to return the price. This implied obligation to warrant the existence of the claim at the time of the sale has also been frequently recognized in a collateral way by the court of last resort of the State of Louisiana. Thus, where the owner of several notes, secured by one mortgage, has transferred some of the notes, and where on a sale of the mortgage property, to pay the debt, the proceeds have proven inadequate to pay all the notes, the settled doctrine in Louisiana is that in consequence of the obligation of the seller to warrant the existence of the debt, he cannot take a part of the proceeds of the mortgaged premises to pay the notes retained by him and thus frustrate the right of his transferee to take the entire amount of the security to the extent necessary to pay the notes transferred. Salzman v. Creditors, 2 Rob. 241.

The provision of the civil law of Louisiana, imposing upon the seller of a credit or incorporeal right the obligation of warranting the existence of the debt at the time of the sale is not original in the code of that State, but was drawn in so many words from the Code Napoleon, article 1693. It was not new in that code, and but expressed the settled rule of the Roman and ancient law. L. L. 4, 5, 7, 10, 11, ff. de Hæredit. vel act. vendit.; L. 68, sec. 1; L. 74, ff. de Evictionib.; L. 30, ff. de Pignor et hyp. Merlin Rep. vol. 13, Verbo Garantie des Créances.

Where the provisions of the Louisiana Code and the Code Napoleon are identical the expositions of the civil law writers and the adjudications of the French courts are persuasive as to the proper construction of the Louisiana Code. Viterbo v. Friedlander, 120 U. S. 707, 728; Groves v. Sentell, 153 U. S. 465, 478.

Opinion of the Court.

Marcadé, in his Commentary on the Law of Sale, thus states the rule:

"All sales of a credit subject the seller, unless there be a stipulation to the contrary, to a guarantee of the existence and the validity of the credit, as also of his right of ownership to it. Article 1693 speaks, it is true, only of the guarantee of the existence of the credit. But as the credit existing to-day, if subsequently declared to have been void, would in contemplation of law have never existed, and also as it would be equally immaterial for the buyer if the credit had a real existence, if that existence was available only to some one else, it is evident that by an existing credit is to be understood one which validly exists as the property of him who transfers it. The one who transfers, then, is held to guarantee in three cases: 1. If at the time of the sale the credit did not exist, either because it had never existed or because it was extinguished by compensation, by prescription or otherwise. 2. If the credit should be declared to have been void or the obligation be rescinded. 3. If it belonged to another person than the transferrer." Marcadé, De la Vente, 335.

Troplong, in his learned treatise on the same subject, thus expounds the doctrine:

"In the sale of a credit, as in that of every other object, legal warranty is always understood. The vendor guarantees to the vendee the existence of the credit at the moment of the transfer, although there should be no expression in the contract to that effect. It is this which caused Ulpian to say: 'When a credit is sold, Celsus writes in the ninth book of the Digest, that the seller is not obliged to guarantee that the debtor is solvent but only that he is really a debtor, unless there has been an express agreement between the parties on this subject.' This guarantee is more strictly obligatory in the sale of a credit than in other matters, because the right to a credit is neither visible or palpable as it is in the case of other movable or immovable property. . And here let there be no misunderstanding. Do not confound the credit with the title by which it is established. Both law and reason exact that the credit should exist at the time

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Opinion of the Court.

of the sale, and it is not sufficient that a title should have been delivered to the buyer. The title is not the credit. It can materially subsist, whilst the credit is extinguished. Thus, if the credit had been annihilated by compensation or by prescription it would serve no purpose to deliver to the buyer a title which would have nothing but the appearance of life. The buyer in such case would have a right to avail himself of the warranty." 2 Troplong, De la Vente, $$ 931, 932.

And Laurent, the latest and fullest commentator, says:

"Article 1693 says 'that the seller guarantees the existence of the credit.' We must understand this word 'existence' in the sense given to it by tradition. 'Whoever,' says Loyseau, 'sells a debt or a rent, guarantees that it is due and lawfully constituted, because, without distinction in all contracts of sale, the seller is bound to three things by the very nature of the contract, (1) that the thing exists; (2) that it belongs to him; and (3) that it had not been engaged to another.' Pothier resumes this doctrine by saying 'that the guarantee of a right consists in the undertaking that the right sold is really due to the vendor;' and the code is yet more brief since it speaks only of the existence of the debt. We must, therefore, see what the existence of the debt signifies according to the explanation of Loyseau. Firstly, the vendor is held to guarantee that the debt exists and subsists ('soit et subsiste'). If the debt has never existed because one of the conditions necessary for the existence of the contract makes default, the vendor has sold nothing; there is no object; he is held by the guarantee; this is obvious. The same rule would apply if the debt had existed, but was extinguished at the time of the transfer, because it is as if it had never existed. Such would be the case of a credit which was prescribed, or which had been extinguished by compensation. It is necessary, in the second place, that the credit should be as constituted, says Loyseau; if it is stricken with a vice which renders it void, the vendee has a right to the warranty. This is not doubtful, since the right is really annulled or rescinded, because the judgment which has an


Opinion of the Court.

nulled the credit destroys it as if it had never existed." Laurent, vol. 24, Nos. 540-41-42.

The views thus expressed by the foregoing writers are substantially concurred in by the French commentators. Duranton, vol. 9, p. 183; Aubrey & Rau, vol. 5, p. 442. The courts of France from an early day have applied the same principle.

In Prat c. Dervieux the facts were these: Dervieux transferred the amount of a claim against the government, which by a subsequent liquidation of accounts was compensated by a claim held by the government which resulted from another matter. The Court of Cassation held that under article 1693 of C. N. the obligation to guarantee the existence of the claim at the time of the sale compelled the seller to restore the priceJournal du Palais, 1807, p. 311.

In Revel c. Lippman a transfer was made of a claim against the government, which was stated to be subject to a future settlement of accounts. On the ultimate liquidation it was found that nothing was due, and the Court of Cassation held that the obligation, therefore, arose to return the price paid on the sale. Journal du Palais, 1825, p. 963.


Of course, this warranty of existence, as established by the law of Louisiana and as found in France and other civil law countries, does not govern a contract of sale when the object contemplated by a sale is a thing whether existing or not existing; in other words, where the parties buy, not an existing obligation, but the chance of there being one. is illustrated by Knight v. Lanfear, supra, where the court, per Martin, J., said, in speaking of the thing sold: "Whatever may be its value, if it be not in substance what the purchaser believed he was receiving, his error must invalidate the sale, because it prevented his consent; non videtur, qui errat, consentire."

And, in speaking of a sale of doubtful or non-existing things, this great judge said: "This claim was a fair object of sale if its nature had been disclosed, but that was concealed and was probably unknown to them, and what was offered for sale was something quite different from this claim."

Opinion of the Court.

The same distinction has been considered and applied by the courts of France. Dulac c. Clusel et Cie., Lyons, Nov. 30, 1849, Journal du Palais, 1, 1852, 32.

The defendant in error does not dispute that the foregoing principles exist in and are controlling under the Louisiana law, under the law of France, and also under the civil law generally from which the law of Louisiana is derived. But whilst thus admitting, he denies that the contract of sale, involved in this case, was governed either by the Louisiana code or the general principles of the civil law. This proposition rests on the contention that when the Civil Code of Louisiana was compiled, its framers contemplated the simultaneous enactment of a Commercial Code which was then drafted, and therefore omitted from the former code the necessary provisions to govern commercial contracts under the hypothesis that the latter would also be enacted; that in consequence of the failure to adopt the Commercial Code, the courts of Louisiana have held that cases arising under the law merchant are governed by that law in the absence of an express statutory requirement to the contrary. From this premise the conclusion is drawn that as the contract in question involved the sale of negotiable bonds, the obligations resulting from the sale are commercial in their nature, and are controlled by the law merchant, by which it is asserted the vendor in such a case, when selling in good faith, war rants only that the signatures to the paper sold are not forgeries. In a restricted sense the part of the proposition relating to the operation of the law merchant, in the State of Louisiana, is well founded. Harrod v. Lafayre, 12 Martin, 29; Wagner v. Kenner, 2 Rob. La. 122; Barry v. Insurance Co., 12 Martin, 498; McDonald v. Milloudon, 5 Louisiana, 403. Whilst this is true, the contention is yet erroneous in a twofold sense; first, in presupposing that a mere contract of sale of commercial paper, without recourse, is governed as to the obligations, between the vendor and vendee, by the law merchant; second, in assuming that in such a sale, either under the principles of the civil law or what the argument presumes to be the law merchant, the only warranty resting

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