Statement of the Case. "CALLED MEETING. "NEW ORLEANS NAT. BANKING Ass'N, "NEW ORLEANS, Sept. 20th, 1873. "Present: C. Cavaroc, Pres't.; A. Tertrou, J. Aldige, John Rocchi, H. A. Mouton, P. S. Wiltz, L. Haas, Jr. "The president stated that the object of the meeting was to inform the board of the unpleasant state of affairs in general, and particularly of the panic then prevailing in New York. "The suspension of Jay Cooke & Co., which was already announced, and which no doubt would be followed by many others, would surely tend to increase the present uneasiness and render our money market still more stringent. He would therefore ask the board to suggest or adopt such measures as in their judgment they would think expedient to avert the impending crisis; whereupon it was unanimously. "Resolved, That all precautionary measures to be taken be left entirely to the discretion of the president, the board hereby ratifying all that may be done by him. It is further "Resolved, That with a view of securing the president against any eventual loss of the 232 7 per cent city of New Orleans bonds belonging to the firm of C. Cavaroc & Son, and actually pledged to F. Schuchardt & Sons, agents of the bank at New York, as collateral security for the payment of all foreign exchange bills sent them for negotiation and by them indorsed, that he be, and is hereby, authorized to select as guarantee from the portfolio of the bank such papers as he may think proper, to the extent of ($100,000) one hundred thousand dollars. "On motion it is further "Resolved, That the board hereby tender their thanks for the aid he is individually lending by leaving undisturbed a large cash balance, ($80,000) eighty thousand dollars, standing to the credit of C. Cavaroc & Son on the books of the bank. "And the board adjourned." October 4, 1873, the bank and Cavaroc & Son failed. N. W. Casey was appointed receiver of the bank, and François Laborde and Edward H. Reynes, assignees of Cavaroc & Son. Statement of the Case. Schuchardt & Sons were adjudicated bankrupts February 19, 1876, and Charles M. Fry was appointed their trustee in bankruptcy. The balance due from the New Orleans Bank to Schuchardt & Sons on October 4, 1873, the date of the failure, adding $3.20 interest, from October 1, was $4125.12, which was increased, by charging back protested drafts or acceptances and some minor items, to $197,501.35, as per the following account : DR. 1873. N. W. Casey, Receiver New Orleans Nat'l Banking Assoc. 66 f'cs 165,000-487 Nov'r 17. unpaid acceptances of S. Frank & Co. "protest charges on same Dec'r 29." protested drafts on Seignouret Frères & Co., Bordeaux, p'ble per Paris f'cs 250,000 10 per cent damages 25,000 f'cs 275,000-487 56,410 26 1874. Jan'y 12. " protested drafts on A. Dutfoy 10 per cent damages & Co. at Paris . . . . f'cs 200,000 29 Nov'r, 73. 66 66 From this debt, certain amounts collected being deducted, a balance of $180,624.58 was left, making, with $14,691.05 due on gold account, a total indebtedness from the bank to Schu Statement of the Case. chardt & Sons of $195,315.63, for which a certificate was issued by the receiver April 8, 1879. Schuchardt's cashier testified: "The drafts on Dutfoy, Seignouret and Honorat were foreign exchange bills known as 'clean'—that is, unaccompanied by documents-drawn by the New Orleans Banking Association on those parties. The one on the National Park Bank was drawn by the New Orleans National Banking Association to settle a collection made. The bills of exchange that figure up on the gold account were mainly cotton shippers' exchange, accompanied by bills of lading." The debit balance of the bank on the gold account, October 1st, 1873, was $68,231.17, afterwards reduced to $14,691.05. It appears from the evidence of Casey that Schuchardt & Sons, or Fry their assignee, claimed about $38,000 in the Union Bank of London belonging to the New Orleans Bank, and other funds in the hands of Dutfoy & Co. of Paris, amounting to forty thousand francs, and that at the time of the failure of the bank "certain assets belonging to the bank were in the hands of parties claiming to hold them as collateral security for the indorsement of certain bills of exchange which had been negotiated through Schuchardt & Sons, said bills being drawn by the bank upon Seignouret Frères of Bordeaux, France. Suit was brought for the recovery of these assets, which resulted in my favor, as will appear by the decision of the Supreme Court of the United States in the case of Casey, Receiver, v. F. Schuchardt & Sons, reported in 6 Otto, [96 U. S.] p. 494." In that case, Mr. Justice Bradley, delivering the opinion of the court, said: "Schuchardt & Sons were bankers, in New York, through whom the New Orleans National Banking Association was in the habit of drawing on foreign houses, and who indorsed and disposed of the drafts, or transmitted them for collection, and made advances thereon. They were thus in the habit of indorsing and advancing on bills drawn by the bank on Seignouret Frères, of Bordeaux. In August and September they became uneasy, and required security; and it was agreed Statement of the Case. between them and the bank that they would receive and indorse drafts on Seignouret Frères, and accept the drafts of the bank on themselves to a certain limited amount, upon being secured by a pledge of commercial securities, to be deposited in the hands of Charles Cavaroc & Son. In pursuance of this arrangement, on the 17th of September, the bank transmitted to Schuchardt & Sons its drafts on Seignouret Frères to the amount of 250,000 francs, and, at the same time, drew on Schuchardt & Sons against said drafts for the sum of $50,000. On the same day, or the day following, securities of the bank to the amount of $60,000 were selected by the note clerk, by direction of Charles Cavaroc, president of the bank, put into an envelope indorsed with the name of Schuchardt & Sons, and handed to Cavaroc, who handed them to the cashier; and thereafter they were treated in precisely the same manner as the securities which were selected for the Crédit Mobilier and the Park Bank, as shown in the cases which have just been decided." October 9, 1873, Cavaroc & Son telegraphed Schuchardt & Sons: "NEW ORLEANS, Oct. 9, 1873. "F. SCHUCHARDT & SONS, New York: "Please deliver to L. Monrose two hundred and thirty bonds, one thousand dollars each, city of New Orleans seven per cent, held in trust for us. Monrose replied: "C. CAVAROC & SON." "NEW YORK, Oct. 9, 1873. "C. CAVAROC & SON, New Orleans: "Schuchardt refuses delivering; says you pledged as security for bank. And Schuchardt & Sons telegraphed: "L. MONROSE." "NEW YORK, Oct. 9th, 1873. "C. CAVAROC & SON, New Orleans: According to your written authority we hold New Orleans city bonds as collateral security against Bank of New Orleans. Statement of the Case. We insist on your delivering to Reynes the bills receivable held by you in trust. Answer; also reply about bill lading per Queenstown. "F. SCHUCHARDT & SONS." October 11, Cavaroc & Son wrote Schuchardt & Sons: "NEW ORLEANS, Oct. 11, 1873. "Mess. F. SCHUCHARDT & SONS, New York: "Gentlemen: According to your written authority we hold New Orleans city bonds as collateral security against Bank of New Orleans.' "By this phrase you seem to imply that our 232 bonds ought to serve as a guarantee to you for the reimbursement of all kinds of debts and of all sums due by the bank. "In response we refer you to the letter of our senior partner, C. Cavaroc, February 15th last, which you yourselves invoke as the authority on which you base your rights (according to your written authority'). "Our authority is contained in the following terms: 'In your letter of the 11th inst. you say: "The credit of $100,000 à découvert was predicated upon the deposit of New Orleans city bonds, and on their withdrawal we, of course, supposed the agreement cancelled." You know that exchange at New Orleans is purchased by making advances until such time as the drafts are delivered, and it was with a view of making our mutual transactions more active that we asked this credit à découvert at the time. In view of your remark, I have nothing to say except to authorize you to consider a portion of the bonds belonging to my firm, which you have in your possession, as collateral security in case you should not be covered.' "You see that according to the authority which you invoke you have no right to cover yourself by means of these bonds, except those uncovered sums for which you might not have received the paper against which they were drawn at the moment of the demand for the restitution of the bonds. "According to the books of the bank, which correspond VOL. CXXX-24 |