Boatmen's Nat. Co. v. MW Elkins & Co., 9564

• Decision Date: 03 February 1933
• Docket Number: 9565.,No. 9564,9564
• Citation: 63 F.2d 214
• Parties: BOATMEN'S NAT. CO. v. M. W. ELKINS & CO., Inc., et al. M. W. ELKINS & CO., Inc., v. BOATMEN'S NAT. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

63 F.2d 214 (1933)

BOATMEN'S NAT. CO. v. M. W. ELKINS & CO., Inc., et al.

M. W. ELKINS & CO., Inc., v. BOATMEN'S NAT. CO. et al.^*

Nos. 9564, 9565.

Circuit Court of Appeals, Eighth Circuit.

February 3, 1933.

Charles Claflin Allen, Jr., of St. Louis, Mo., and Charles T. Coleman, of Little Rock, Ark. (Walter G. Riddick, of Little Rock, Ark., on the brief), for Boatmen's Nat. Co.

Wallace Townsend, of Little Rock, Ark. (L. P. Biggs and S. S. Jefferies, both of Little Rock, Ark., on the brief), for M. W. Elkins & Co., and Union Trust Co.

Before KENYON, GARDNER, and SANBORN, Circuit Judges.

GARDNER, Circuit Judge.

The Boatmen's National Company is an investment company, engaged in business at St. Louis, Mo.; M. W. Elkins & Co., is a corporation, organized under the laws of the state of Arkansas, and engaged in buying and selling bonds and other securities at Little Rock, Ark., while the Union Trust Company is a banking corporation, organized under the laws of Arkansas, and doing a banking business at Little Rock, Ark.

The Boatmen's National Company, plaintiff below, seeks to recover of M. W. Elkins & Co., Inc., and the Union Trust Company, $8,572.27, with interest, as damages suffered by it in a bond transaction, the material facts of which may be summarized as follows:

In February, 1931, the county judge of Pulaski county, Ark., initiated proceedings for a supplemental bond issue for that county, and on February 21, 1931, entered an order to the effect that the indebtedness of the county on December 7, 1924, was $646,012.65, of which the sum of $350,000 had been refunded into bonds of the county, leaving a balance of $269,012.65 of floating or warrant indebtedness which could be transformed into refunding bonds of the county.

On January 15, 1931, the Elkins Company offered to buy an issue of $296,000 of Pulaski county refunding bonds, dated March 1, 1931, bearing 6 per cent. interest, payable semiannually, subject to the right to convert the bonds from 6 per cent. to 4¾ per cent. bonds, and to pay for the same on the basis of 6 per cent. bonds. This offer contained provision that it should be subject to the securing of an unqualified approving opinion of B. H. Charles, an attorney of St. Louis, Mo. This offer was accepted by the county judge of Pulaski county, and the contract, with a nunc pro tunc order confirming it, dated April 11, 1931, was spread on the records of the county court. The Elkins Company elected to take 4¾ per cent. bonds, which called for an issue of $325,500, as the equivalent of an issue of $296,000 of 6 per cent. bonds. The county judge delivered the bonds to the defendant Union Trust Company, which in turn sent them to the First National Bank of Chicago for delivery to the purchasers thereof, on payment of the purchase price, and remittance to the Union Trust Company.

On April 2, 1931, the Boatmen's National Company offered to purchase from the Elkins Company $139,500 par value of these bonds. In the letter transmitting this offer it was said: "Our purchase is further subject to your furnishing us with the unqualified final approving opinion of Hon. B. H. Charles, Attorney, St. Louis. We would appreciate it very much if you would furnish us with two original copies of his opinion."

On the same date this offer was accepted by the Elkins Company. On April 4, 1931, Mr. Charles, who is referred to in the record as a bond attorney of repute, in a letter relative to this bond issue, addressed to the Elkins Company, said: "In my opinion these proceedings show that this County has lawful authority, under the Laws of the State of Arkansas, to issue these bonds, that all of the taxable property of the County is subject to the levy of a tax to pay the same, and that when said bonds shall have been delivered and paid for at a price allowed by law, they will be the legal and binding obligations of the County."

On April 7, 1931, the Boatmen's National Company advised the Elkins Company that it would not take up the bonds because the opinion of Mr. Charles was not an unqualified final opinion, and that Mr. Charles would have to have evidence that the bonds had been paid for before issuing his unqualified final opinion. Following this, correspondence and telegrams passed between Charles, the Boatmen's National Company, and the Elkins Company, in which the Elkins Company attempted to satisfy the requirements of the Boatmen's National Company by arranging for the delivery of the bonds on receipt of the money from the Boatmen's National Company, but this that company declined to accept without an unqualified approving opinion of Mr. Charles. Mr. Charles refused to give such an opinion until the county had received the money for the bonds. The Elkins Company was unable to pay for the bonds unless it could sell them and thus secure the money for the county. It then prevailed upon the county treasurer of Pulaski county to furnish a certificate, dated April 1, 1931, in which he falsely recited that the bonds had been paid for in full by the purchasers thereof "in accordance with the terms of sale and award, being $296,000 plus accrued interest, being a price not less than par, as required by law, said purchasers having fully complied with their contract."

Armed with this false certificate, the Elkins Company obtained the final approving opinion of Mr. Charles on April 10, 1931, and the Boatmen's National Company was so advised by him on that date and consummated the purchase of the bonds on April 13, 1931. By April 14, 1931, all the bonds in question had been paid for, so that the contract of sale was fully executed. In the meantime litigation was threatening with reference to this bond issue, and soon an actual suit was brought which terminated in the Supreme Court of Arkansas on June 29, 1931. Stahl, County Treasurer v. Sibeck, 183 Ark. 1143, 40 S.W.(2d) 442. That suit was commenced to determine the proper distribution of the proceeds arising from the sale of this issue of bonds in the treasurer's hands. Other parties, citizens, and taxpayers intervened, however, and attacked the whole proceedings forming the basis of this supplemental bond issue. The trial court sustained the bond issue, except for the sum of $67,287, but, on appeal, the Supreme Court of Arkansas held the entire proceedings without authority and the bonds void, on the ground that under the statutes and Constitution of Arkansas, the order of the county court authorizing the issue of refunding bonds in the sum of $350,000, the first issue of refunding bonds above referred to, became res judicata and exhausted the power of the county court to make any further orders respecting refunding bonds. The court, in disposing of the matter, said: "It appears that the total purchase price of the bonds is held in the county treasury and they (holders of the bonds) may therefore receive back their money on surrender and cancellation of said bonds illegally issued."

The county court, on July 9, 1931, pursuant to this decision, directed the county treasurer to make refund to the holders of the bonds. The Boatmen's National Company had paid the Elkins Company $135,562.19 for its bonds, but it received from the county, on surrender of the bonds, only $126,989.92, or $8,572.27 less than it had paid. This represented the profit received by the Elkins Company on the sale of these bonds. It is to recover this amount that the present action was brought; the Union Trust Company being joined as a defendant on the ground that it knowingly participated in the fraud alleged to have been perpetrated upon the plaintiff. The complaint sets out the alleged facts of the transaction involved, and charges the defendants with fraud and deceit. The lower court, at the conclusion of the evidence, directed the jury to return a verdict in favor of the plaintiff and against the Elkins Company for the amount claimed, but directed a verdict of dismissal as to the Union Trust Company. From the judgment entered against it, the Elkins Company has appealed, and, from the judgment of dismissal as to the Union Trust Company, the Boatmen's National Company has...