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.
'H. GALLY, President.
'MOSES HARRIS, Cashier.