Reynes v. Dumont Dumont v. Fry

• Decision Date: 08 April 1889
• Citation: 130 U.S. 354,32 L.Ed. 934,9 S.Ct. 486
• Parties: REYNES v. DUMONT et al. DUMONT et al. v. FRY et al. 1
• Court: U.S. Supreme Court

130 U.S. 354

9 S.Ct. 486

32 L.Ed. 934

REYNES v. DUMONT et al.

DUMONT et al.

v. FRY et al.¹

April 8, 1889.

On the 14th of June, 1877, Frederick Dumont, August Henry Reine, and John David Moekel, who composed the firm of F. Dumont & Co., filed their bill in the circuit court of the United States for the Southern district of New York against Charles M. Fry, trustee of Schuchardt & Sons, bankrupts; Francois Laborde and E. H. Reynes, assignees of Charles Cavaroc & Son, bankrupts; the Louisiana National Bank of New Orleans, and N. W. Casey, receiver of the New Orleans National Banking Association, claiming to be the owners of 232 bonds of the city of New Orleans, each for the amount of $1,000, which had been in the possession of Schuchardt & Sons, and were then in the possession of Fry, their trustee in bankruptcy, who also held moneys received from the coupons attached to the said bonds; and by amendment set forth that the bonds were purchased by Cavaroc & Son with the money of Dumont & Co., for their joint account, but not in the name of Dumont & Co., nor in the joint names of Dumont & Co. and Cavaroc & Son; that Fry, trustee, refused to deliver up the bonds, and claimed to hold them as security for sums due him from Cavaroc & Son and Casey, as receiver; and that Fry is not entitled to hold the bonds. The bill prays that he be decreed to deliver them up, with the money received from the sale of coupons cut therefrom, and for further relief. Fry claimed to hold the bonds upon a banker's lien for a balance of account due Schuchardt & Sons by Cavaroc & Son, and upon a lien by agreement for an unsecured balance due by the New Orleans National Banking Association, to the extent of $100,000. A decree was rendered December 6, 1882, sustaining the liens asserted by the defendant Fry, and directing him to account as to the amount of the same, and of certain coupons which he had collected. March 5, 1884, a final decree was entered, adjudging the amounts due on account of the alleged liens, respectively, and directing that so much of the said bonds as might be necessary to pay the same, with interest, should be sold under the direction of the master. This was done, and Fry was paid the amount of said liens, and the balance was turned over to Dumont & Co. and Reynes, surviving assignee, Laborde having died pending the action. The master's final report was confirmed February 11, 1885, and appeals were prosecuted by Dumont & Co. and Reynes, surviving assignee, to this court.

The following facts appear in evidence: Schuchardt & Sons were bankers at the city of New York during the period covered by the transactions in question, and correspondents and financial agents of Cavaroc & Son, who were engaged in the commission and banking business in the city of New Orleans. Charles Cavaroc, the senior member of the latter firm, was at the same time president of the New Orleans National Banking Association, with which Schuchardt & Sons had similar business relations. Two hundred and seventy-five bonds of the city of New Orleans,—a large part of them belonging to Dumont & Co., though it is not shown that Schuchardt & Sons had notice of this,—were left by Cavaroc & Son with Schuchardt & Sons in September, 1870, the number having been subsequently reduced to 232. The bonds were purchased in 1870 with the proceeds of drafts on Dumont & Co. to the amount of about 1,000,000 francs, which had been renewed from time to time until after the failure of Cavaroc & Son, when Dumont & Co. paid them to the amount of 484,000 francs. Cavaroc & Son had negotiated drafts for 200,000 francs on Dumont & Co., with Schuchardt & Sons, shortly before the failure, growing out of the original purchase of bonds, and these, not having been paid, were charged back to Cavaroc & Son by Schuchardt & Sons, thereby contributing to produce a debit balance of $7,454.22 on January 12, 1874, although protested drafts on Max-quelier Fils for $6,562.23 were also included. These drafts for 200,000 francs had been accepted by Dumont & Co., and were protested, not for non-acceptance, but for non-payment; and an action was commenced January 3, 1874, by Schuchardt & Sons against Dumont & Co. on their acceptances in the supreme court of New York, and an attachment levied on the bonds in question here in the hands of Schuchardt & Sons. Satisfaction of recovery in this suit would more than pay the debit balance of Cavaroc & Son as finally stated in these proceedings. It was stipulated between the attorney for Dumont & Co. and the attorneys for the assignee of Cavaroc & Son that the balance of the bonds and moneys to be paid over after the liens awarded by the court were satisfied, should be divided in the proportion of 74 per cent. to Dumont & Co. and 26 per cent. to Cavaroc & Son.

Both the Cavarocs testify that the bonds were left with Schuchardt & Sons for safekeeping; Cavaroc, Jr., referring to a particular loan on them in the fall of 1870, which led to their being sent to New York, where they then remained on account of the heavy express charge, and the fact that New York was a better market in which to dispose of them; but Wells, a member of Schuchardt & Sons, testifies: 'On the 20th of September, 1870, we deposited with M. Morgan's Sons the above $275,000 New Orleans bonds against a loan made by them of $200,000 to the Bank of New Orleans, and $110,000 to C. Cavaroc as part collateral for those loans. On the 21st December, 1870, M. Morgan's Sons returned us the above bonds against the payment of the two loans. On the 6th of March, 1871, we delivered $5,000 of the above bonds to Henry Beers by order of C. Cavaroc. On the 1st of April, 1871, we delivered $160,000 of above bonds to Marks & Febre by order of C. Cavaroc. On the 29th of May, 1871, we delivered $110,000 of above bonds to M. Morgan's Sons against a loan of $100,000. On the 30th May, 1871, Marks & Febre returned us above $160,000 bonds, against which we loaned Cavaroc $100,000, falling due 2d of October, 1871. On the 2d of October, 1871, M. Morgan's Sons returned us the $110,000 bonds on payment of their loan. On the 27th of February, 1872, we forwarded to Cavaroc, at New Orleans, $8,000 of above bonds as per his order. On the 13th of April, 1872, we delivered $160,000 of above bonds to Importers' & Traders' National Bank of this city by order of Cavaroc. On the 28th of June, 1872, the Importers' & Traders' National Bank returned us the above $160,000 bonds. On the 31st of August, 1872, we delivered $30,000 of above bonds to Spofford Bros. & Co. by order of Cavaroc. On the 27th of May, 1873, we delivered $50,000 of the above bonds to the Importers' & Traders' National Bank of New York by order of Cavaroc. On the 3d of September, 1873, the Importers' & Traders' National Bank returned the above $50,000 bonds.' He considers that the bonds were held by his firm for any balances that the New Orleans National Banking Association might owe, and says that Schuchardt & Sons held them up to the time they were pledged to the bank as security for 'whatever Cavaroc & Son might be indebted for,' but that they had no written authority to hold the bonds collaterally for the bank's indebtedness, that he knew of, other than the letter of Cavaroc, Sr., of February 15, 1873, hereinafter set forth. He testifies, however, that there was 'a general understanding to that effect arrived at with [in] conversations with C. Cavaroc, Jr., at different times when he was in New York, among others, in August or September, 1873;' although in another portion of his evidence he says: 'I think they were alluded to in 1873, during his visit to New York in the fall of 1873. I feel quite confident they were alluded to in 1873;' which is 'as positive' as he 'can be upon the subject.' Any such understanding is specifically denied by Cavaroc, Jr., who asserts that he 'never made any agreement, verbal or otherwise, in reference to the bonds, with Mr. Wells or any one else, and never made with Mr. Wells or any one living any agreement or arrangement about the bonds or any other bonds to be held as general security in matters with the New Orleans National Banking Association, or even C. Cavaroc & Son; never had any conversation with Mr. Wells about the bonds in any manner whatever, outside of a remark, as above stated, in the summer of 1873, to know if our trust was all right in their vault, which any merchant would pass upon in conversation, to be certain that no accident happened to the trust or deposit for safekeeping.'

The New Orleans National Banking Association dealt largely in foreign bills of exchange, which it negotiated through Schuchardt & Sons. By the course of business the amount of the foreign bills it remitted from time to time to Schuchardt & Sons was credited by the latter to the former, and the latter drew upon the former from time to time, as funds were required. According to the custom of business at New Orleans, advances are made by bankers to shippers in anticipation of the actual delivery of drafts with accompanying documents, and the New Orleans Bank consequently advanced funds before it could remit drafts, so as to be credited by Schuchardt & Sons with their amount. For the mutual profit of both concerns the bank had at times been permitted by Schuchardt & Sons to draw in advance of remittances. Cavaroc & Son were not only bankers, but large shippers of cotton abroad, and drew against the proceeds of their bills of exchange, which were accompanied by bills of lading. On the 4th of December, 1871, Schuchardt & Sons wrote the cashier of the New Orleans National Banking Association the following letter:

'New York, Dec. 4th, 1871.

'N. Augustine, Esq., Cashier New Orleans Banking Association, New Orleans, Louisiana—Dear Sir: In reply to your inquiry about drawing in advance against purchases of exchange we beg to say that we granted that facility at a time when your foreign exchange business with us was much more extensive, and...