96 U.S. 467 (1878), Casey v. Cavaroc

Citation:96 U.S. 467, 24 L.Ed. 779
Party Name:CASEY v. CAVAROC.
Case Date:April 15, 1878
Court:United States Supreme Court
 
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Page 467

96 U.S. 467 (1878)

24 L.Ed. 779

CASEY

v.

CAVAROC.

United States Supreme Court.

April 15, 1878

OPINION

APPEAL from the Circuit Court of the United States for the District of Louisiana.

The National New Orleans Banking Association, an organization formed under the National Banking Act of 1864, failed and suspended payment on the 4th of October, 1873, and on the 27th of that month was placed in the hands of a receiver, under the fiftieth section of the act. At or about the time of the failure, Charles Cavaroc, the president of the bank, took therefrom certain bills and notes to the amount of $325,011.26, and delivered the same to his firm of C. Cavaroc & Son, who claimed to hold them as agents for the Société de Crédit Mobilier of Paris, by way of pledge to secure said society for certain acceptances of bills drawn by the bank in July previous. The bill in this case was filed by the receiver to recover possession of said securities, alleging that they were delivered by the bank to Cavaroc & Son, in contemplation of the insolvency of the bank, not by way of pledge, but with a view to give a preference to Cavaroc & Son and the Credit Mobilier over other creditors of the bank,

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contrary to the provisions of the fifty-second section of the banking act. The defendants, Cavaroc & Son and the Credit Mobilier, by their several answers, deny that the securities were delivered by way of preference in contemplation of the insolvency of the bank, and insist that they were actually pledged to the society by virtue of a distinct agreement, as a consideration and security for the acceptance by if of bills drawn by the bank to the amount of one million francs; which bills were drawn in pursuance of said agreement, and were negotiated by the bank for over $218,000, and were duly accepted by the society upon the faith of the pledged securities. The answers aver that at the time of this transaction the bank was in good credit and standing.

The parties having gone into proofs, the following facts were shown:----

From May, 1873, until the time of its failure the bank was in a weak financial condition, and constantly becoming weaker. The cashier testified that on the 31st of May it had hardly any funds to meet current checks, whilst the amount due to depositors was $680,775. A deposit of $25,000 was opportunely made by a customer on that day; but the president, Cavaroc, was so apprehensive of immediate suspension, that he refused to let it be used, telling the paying teller that if any thing should happen, he did not want the depositor to lose this money. By getting temporary relief from the other banks of the city, and from the New Orleans Insurance Association, and other large loans, it kept its doors open until the 4th of October, though, in connection with most of the other banks of New Orleans, it ceased, from and after the 24th of September, to pay cash, except for very small amounts, paying only in clearing-house certificates, which it obtained by depositing collaterals with the trustees of the clearing-house. Although it held notes and bills receivable amounting to about a million of dollars, a large portion of these were comparatively worthless, being either protested or renewed at maturity, and the makers constantly failing; and all of them, of any value, being pledged, or agreed to be pledged, for its various loans. Although this condition of the bank was not generally known, and presumably unknown to the Credit Mobilier, yet suspicion

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of its solvency began to be entertained by many of the business men of New Orleans as early as June or July, and its stock became almost totally unsalable in the market.

In the early part of July, 1873, Charles Cavaroc, Jr., a member of the New Orleans firm of C. Cavaroc & Son, being in Paris on behalf of the New Orleans National Banking Association, entered into negotiation with the Credit Mobilier for procuring the acceptance of the latter for the accommodation of the bank; and, on the 11th and 12th of July, the said negotiation was concluded in the form of a letter addressed by Cavaroc to the society, and of an answer thereto by the latter. The following are the material parts of this correspondence. Cavaroc, in his letter dated July 11, 1873, says:----

'The verbal agreements entered into between us relative to this operation can, we think, be thus resumed:----

"In order to benefit by the difference in the rates of exchange between the summer months and end of the year, time when the large shipments commence, the Society of the Credit Mobilier authorizes the New Orleans National Banking Association to draw upon it, and binds itself to accept these drafts at ninety days, up to 1,000,000 francs.

"The drafts made under these conditions shall be renewable under the same conditions, but it is expressly specified that, ten days before maturity, the Society of the Credit Mobilier shall be covered by Mr. Cavaroc, president, to the amount of the payments to be made.

"The funds realized from these emissions shall be used by the bank against guaranties and securities of the first class, which shall be deposited by the bank with the firm of Messrs. Cavaroc & Son, which shall be the depository thereof, and advise the Credit Mobilier of such deposit.

"The bank shall guarantee the investment of these sums, and the interest shall be carried to the credit of the joint account, at the rate of seven per cent per annum.

"This account shall in no manner allow any commission or privileged charge on either side,--there shall figure only brokerage, stamps, and divers charges, really and honestly incurred by either side.

"The accounts shall be stated at the closing of each operation.

"Profit and loss shall be equally divided between the Credit Mobilier and the New Orleans National Banking Association."

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The answer of the society, dated on the 12th of July, 1873, repeats this contract, and accepts its terms.

During the negotiation, on the 11th of July, Cavaroc and the Credit Mobilier, respectively, despatched the following successive telegrams to the bank in New Orleans:----

1. 'Bank exchange one million, ninety days' sight, Société de Crédit Mobilier, giving best securities deposited with house.

(Signed) 'CAVAROC.'

2. 'Defer drawing, the agreement is not yet completed.

(Signed) 'CREDIT MOBILIER.'

3. 'Draw bank one million, ninety days' sight, Credit Mobilier accepting our guarantee.

(Signed) 'CAVAROC.'

In pursuance of these advices, on the 12th of July the bank drew its bills on the Credit Mobilier to the aggregate amount of one million francs, and negotiated them through Schuchardt & Co., of New York, realizing therefrom $218,454.34. The bills were accepted by the society in due course, and were afterwards paid by it, no funds being provided by the bank for that purpose.

The answers allege that in this transaction Cavaroc & Son acted as the agents of both parties. The answers further allege that the securities in question were delivered by the bank to Cavaroc & Son, for the Credit Mobilier, in pursuance of the agreement; that a portion thereof, to the nominal amount of $220,021.41, a list of which is contained in a schedule annexed to the answer of the society, marked 'Exhibit B,' were delivered on the day the drafts were drawn, to wit, July 12, 1873; and that these not being deemed sufficient, another deposit, representing about $100,000, was made a few days afterwards; that some portion of these securities coming to maturity and being paid, Cavaroc & Son allowed the bank to receive the cash paid thereon, upon other securities being given equal thereto, in lieu thereof.

It was proved that the securities were delivered, or pretended to be delivered, as stated; but the evidence as to the time and manner of the delivery, and the manner in which

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the securities were afterwards treated, presented serious questions for the consideration of the court. It was evident that the identical securities specified in 'Exhibit B' could not have been delivered as early as the 12th of July, because they were dated and discounted after that day, and 'Exhibit B' itself was not made out until the nineteenth day of August. There was some evidence that securities to the amount of this schedule had been delivered to Cavaroc & Son at or soon after the twelfth day of July, and that those named in the exhibit had been substituted for them as they severally became due, and were renewed, or paid, as stated in the answer. The other securities, amounting to about $100,000, could not have been added until after Aug. 19, when 'Exhibit B' was made out, or they would have been included therein. This list, contained in 'Exhibit B,' was made out for the purpose of being transmitted to the Credit Mobilier. A letter from C. Cavaroc & Son to the society, bearing date Aug. 19, 1873, was exhibited in evidence, with which, as Cavaroc, Sen., testified, a copy of the list 'Exhibit B' was forwarded to the society. It contained the following passage:----

'If we have not sent you, at first, the memorandum of the valuables we have received from the bank, to guarantee our house and yourselves, it is because the subsequent despatch of our son gave us to understand that the operation was made under our guaranty, and we had ourselves taken these valuables. But we think it more just that we should not only transfer you this deposit, but that we should give you the details of these notes, which are all of the first class.

'As soon as certain of them will mature, we will take care to replace them by others, and will advise you.'

A letter from the society to the bank, dated Sept. 5, acknowledges the receipt of this letter of Cavaroc & Son, in the following terms:----

'By their letter of the 19th of the same month, Messrs. Cavaroc & Son, of your city, have sent us the memoranda of the valuables which you deposited with them to secure your...

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