Lacombe v. Forstall
| Decision Date | 05 December 1887 |
| Citation | 31 L.Ed. 255,8 S.Ct. 247,123 U.S. 562 |
| Parties | LACOMBE and others v. FORSTALL and others |
| Court | U.S. Supreme Court |
W. S. Parkerson and C. Kennedy, for appellants.
Jos. H. Choate, for appellee.
This is an appeal from the decree of the circuit court of the United States for the Eastern district of Louisiana, dismissing the bill of the complainants, who are appellants here. The appellants are commissioners of the Mechanics' & Traders' Bank, a corporation organized under the laws of the state of Louisiana, which being in liquidation, they were appointed as such by one of the state courts of New Orleans. Before the failure of the bank, which was declared to be insolvent on the nineteenth day of March, 1879, there had been placed by it in the hands of Edmund J. Forstall's Sons, as agents of Baring Bros. & Co., a very considerable amount of public securities, bonds of the city of New Orleans, and coupons, under an agreement that they should hold them as security for the indebtedness of the bank to Baring Bros. & Co., an English banking house. It is said that these securities, at the time the bill was filed, were of the value of $336,400.
It is alleged in the bill that shortly after the bank was declared to be insolvent, to-wit, on or about the twenty-second day of May, 1879, the said E. J. Forstall's Sons fraudulently pretended to sell said bonds, and thereby attempted to deprive the complainants of a large portion of the assets of the bank, which was a great wrong and detriment to the creditors and depositors. The fraud alleged in regard to this pretended sale was that, offering the bonds without any advertisement, at a private sale, and without notice to complainants, the defendants employed one firm of brokers to sell the securities, and instructed another to buy them in on account of said Forstall's Sons, as agents of Baring Bros. & Co., and that they were not sold according to the well-known usage in the city of New Orleans in such cases, nor according to the terms of the contract of pledge. They insist that this sale was made contrary to law and equity, and is therefore void as against the bank and its creditors; they protested against said sale; and that thereafter, to-wit, about the third of March, 1880, their right to sue for said bonds and any damages arising from said illegal sale was expressly reserved in an agreement and settlement with said Forstall's Sons, as such agents, as well as by judgment rendered by the Fifth district court in a suit entitled State ex rel. Wogan v. Mechanics' & Traders' Bank. They further say that the bonds, which were sold for a very small amount, less than 50 per cent. of their face value, are now worth in the market fully such face value, if not more.
The bill requires an answer from the defendants under oath, and appends six specific interrogatories to be answered. The relief prayed is that the pretended sale of the bonds may be decreed to be null and void, and the complainants to be their owners, and that the defendants, Edmund J. Forstall's Sons, be ordered to return them to complainants; and that in default thereof they be decreed to pay their full value of $336,400, subject to the claim of Baring Bros. & Co. against the bank of about $120,000, and for such other and further relief as the nature of the case may require. The answer to this bill sets out a copy of the agreement under which Forstall's Sons held the securities, as follows:
'NEW ORLEANS, March 11, 1876.
'Whereas, Messrs. Baring Bros. & Co., of London, have continued in favor of the Mechanics' and Traders' Bank of New Orleans a credit of forty thousand pounds sterling, in accordance with the terms of the letter of Messrs. Baring Bros. & Co. dated twenty-fourth May, 1873, and addressed to the said bank, and confirmed by their cable of October 27, 1873, to Edm. J. Forstall & Sons: now, in order to secure the full and punctual payment of such amount as may be or become due on account of said credit, the Mechanics' and Traders' Bank does hereby pledge to Messrs. Baring Bros. & Co., and place in the hands of Edm. J. Forstall's Sons, as their representatives, the property described on the list annexed to the present. And it is hereby agreed that in the event of the non-payment of the amount due as above stated, Edm. J. Forstall's Sons are hereby authorized, as agents of Messrs. Baring Bros. & Co. and of the bank, to cause said pledged property to be disposed of for cash, at public or private sale, at the option of said Edm. J. Forstall's Sons, and the proceeds of said sale shall be applied to the payment of the amount due as aforesaid, with interest accrued thereon, and all commissions, costs, and charges attending said sale, the obligation of the bank for any balance that may be left uncovered by the proceeds of said sale remaining in full force.
'MOSES HARRIS, Cashier.
The defendants deny any fraud in the sale of the securities, but admit that, finding it necessary on the failure of the bank to sell the bonds held under the foregoing agreement, they put them into the hands of a broker to be sold on the market in the usual way, and instructed another broker to see that they were not sacrificed, authorizing him to say that they would pay oneeighth of 1 per cent. more for them to the purchaser than they would sell for. They claim that in this way the securities were returned to them, and that this was done without any fraudulent purpose, but to secure the highest market price for the bonds at the sale. They further deny that they ever made any agreement by which they recognized the right of complainants in the bonds after this sale. They admit that in one or two settlements made in the Fifth district court, in the course of the liquidation of the bank, certain reservations were made in regard to the rights of the commissioners to assert further claims on those bonds by litigation; but that they never admitted the existence of any right of recovery against these defendants. They say, however, that whatever right complainants may have had to call these defendants to account for any value in the bonds beyond that for which they were sold, was abandoned and expressly given up by the act of the complainants in indorsing the bonds under an order, obtained on the application of said commissioners, from the said Fifth district court of the parish of Orleans, under whose jurisdiction the bank was being liquidated; and that thereafter, on or about the twentieth day of May, 1880, the complainants did indorse all said bonds to bearer under the certification and seal of office of A. Abat, a notary public, for the purpose of giving authenticity to such action. And complainants did then deliver said bonds so indorsed by them to Forstall's Sons, to be by them sold and disposed of at their free will and pleasure, without any further notice to complainants or accountability or responsibility of Baring Bros. & Co. They further say that the said bonds were duly and regularly sold and disposed of to strangers by said Edmund J. Forstall's Sons, in good faith and in accordance with the usual and customary course of such business in New Orleans, at the dates and for the prices stated in Exhibit No. 3, annexed thereto, and that such prices were the full and fair values of said bonds at the time of sale, and the utmost and best prices that could be had or obtained for...
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