Marsh v. Whitmore
APPEAL from the Circuit Court for the District of Maine.
On the 12th of March, 1869, Marsh, of Maryland, filed a bill in the court below against Whitmore, an attorney and counsellor of Maine, to compel him to account for certain bonds of the Kennebec and Portland Railroad Company, and to charge him with certain notes of the same corporation, received from him, the complainant; and which bonds and notes the bill alleged that he, the complainant, had, in the year 1855, placed in the hands of the defendant as security for advances to be made by him in effecting a compromise with the complainant's creditors in Maine, and for a reasonable compensation to himself for his own services as counsel.
As to the bonds. The bill alleged that in the year 1856, they had been sold by the defendant at public auction in disregard of his duty, and at the sale were bid in by himself, through the intervention of third parties, at an amount greatly below their value at the time, which conduct the bill charged to have been in fraud of the complainant's rights, and not to have come to his knowledge 'until lately.'
As to the notes. The bill alleged that at the time they were placed with the defendant, he was instructed to institute suits upon them and to attach certain personal property of the corporation pointed out to him, and if the notes were not thus paid, to collect them from the stockholders, who were personally liable; and that the defendant agreed to attend diligently to their collection; that they could have been collected of the company or stockholders, and that if they were not collected the failure was attributable to his gross neglect. The prayer of the bill was that the defendant might be charged with the full amount of the notes and interest, and might be decreed to surrender the bonds, or, if that was impossible, to pay their full value in money; or that such other or further relief might be granted as the justice of the case might require.
The bill called upon the defendant to answer its several allegations touching these two matters; and to answer also certain specific interrogatories which were annexed.
Among the interrogatories was this one, relating to the bonds:'Did you or did you not represent to the complainant, after the sale of the bonds, that you had made such sale at public auction after advertising the same; and that such sale was bon a fide?'
The answer denied that the bonds and notes were intrusted to the defendant for the purpose alleged in the bill, but averred—
In regard to the bonds. That they were placed with him as security for any liabilities which one Paine and himself might incur for the complainant and for the payment of his three promissory notes, exceeding in amount $3000, and one note for $90, upon which the defendant was surety for the complainant; that the complainant never paid either of these notes, and that after having informed him, on the 27th of August, 1856 (the promissory notes of the complainant being then due and unpaid), that the bonds would be sold on the 1st of October following, and after repeated postponements, made at his request, the bonds, in June, 1857, after notice to him, were sold at public auction in order to pay his, the complainant's, notes; that at the sale some of the bonds were purchased by third persons, but that the larger portion were bid in by the defendant; that the prices given were the full and fair value of the bonds at the time, and greater than their market value for years afterwards; that the amounts bid were indorsed on the notes of the complainant, and an account of the sales, showing the prices obtained and the names of the purchasers, was transmitted to him; that subsequently, in 1858, in an interview at Augusta, the defendant offered to obtain the bonds and return them to the complainant if he would pay his notes, and that he replied that the bonds were not then worth as much as they were sold for, and that the defendant must keep what was obtained, and if he were ever able he would pay the balance; that subsequently the bonds were greatly depreciated in the market, and in 1858 and 1859 were sold as low as at the rate of ten dollars for the hundred.
To the specific interrogatory, abovementioned, as having been put to him about the bonds, the defendant answered:'I did after said sale send to the complainant the auctioneer's account of the sale, giving names of purchasers and prices for which the bonds sold, and afterwards, at the interview in Augusta, in 1858, I did state to the complainant, in substance, but not in the precise words, that I made the sale at auction after duly advertising the same, and that the sale was a good sale. I did not, to my recollection, use the words 'bon a fide.' I then stated to the complainant the gross amount of the sale, and that it had been applied on the notes.'
As to the notes. The defendant met the several allegations of the bill by direct denial, and averred that the corporation was hopelessly insolvent, and that all its property was mortgaged for more than it was worth, and that this fact was known to the complainant at the time the notes were placed in the defendant's hands; and that a suit was commenced against the corporation with a view of enforcing their collection from the stockholders, but was abandoned in consequence of a decision of the Supreme Court of the State of Maine, made in 1858,  that the stockholders were not liable; a decision which was subsequently, to wit, in 1864,  reversed in this court, but which previously had been by many acted on as practically ending controversy.
In respect to both bonds and notes. The material allegations of the answer were sustained by the evidence, except that one in regard to the bonds, which alleged that an account of the sales, showing the prices obtained, and the names of the purchasers, was transmitted to the complainant. That rested on the interrogatory and the answer to it.
The evidence showed also that no demand had been made on Whitmore to account, until January 23d, 1869, in which year, after the great depressions already mentioned in the answer to the price of the bonds, following the sale now in question, they suddenly rose in value.
The court below held:
As to the notes. That the insolvency of the company and the decision of the Supreme Court of Maine were a sufficient defence. It said:'This decision was made in 1858, and was almost universally acquiesced in by the profession; hundreds of actions were decided in accordance with it, and it was not until December, 1864, that the decision was reversed by the Supreme Court of the United States. An attorney certainly cannot be chargeable with negligence when he accepts as a correct exposition of the law a solemn decision of the Supreme Court of the State.'
As to the bonds. That the answer to the specific interrogatory about the transmission of the account of sales, &c., was responsive to the averments of the bill and to the specific interrogatory put, and was evidence in the respondent's behalf to prove that soon after the sale the complainant had full information as to the prices obtained, and as to the persons by whom the bonds were purchased; that this being so, the complaint was stale.
The court below therefore dismissed the bill. The complainant took this appeal.
Mr. A. G. Stinchfield, for the appellant; Mr. Artemus Libbey, contra.
^1 46 Maine, 302.
^2 Hawthorne v. Calef, 2 Wallace, 10.