full, faithful and punctual payment and redemption of each and all the bonds issued un der it to any and all the future holders thereof, and to each and every one of them when the same should become due and payable, together with the interest accruing thereon. The relief sought by the bill is, that the mortgage may be declared to be a valid lien upon all the property described therein; that a sale averred to have been made under it in 1866 to the defendant Ludeling and his associates may be set aside, and the deed made to them by the sheriff may be declared to be fraudulent and void, that the defendants may be enjoined against setting up any title under the sale in the deed prohibited from selling any of the property, rights and privileges of the Railroad Company, and required to account for all money received by them on account of the Corporation, and that mortgaged property may be decreed to be sold for the benefit of the bond holders, the preferred and other stockholders. The bill also prays for the appointment of a receiver and for

other relief.

To the bill and the relief asked the only de fense set up is what is alleged to have been a judicial sale of the property under executory process at the suit of William R. Gordon, one of the defendants, and the only question of in portance presented by the record is, whether that sale, as against these complainants, extinguished the lien of the mortgage.

fice. The sale was appointed for the first Saturday of February, which was the earliest day on which it could be made under the law of the State. By that law the property seized was required to be appraised, and could not be sold for less than two thirds of its appraised value. It consisted of a railroad about one hundred and ninety miles in length, with numcrous water stations, buildings, warehouses, depots and depot grounds, cars, locomotive engines, wagons, machinery, utensils, bills receivable from numerous promisors, aggregating more than $40,000, unpaid stock subscriptions execeeding $320,000, and a large land grant of several hundred thousand acres, together with the franchise of the Company. To appraise all this property the appraisers were summoned to meet on February 3, the day of the sale, at 10 o'clock A. M. They were appointed by Gordon and Bry, both of whom were purchasers at the sale. Obviously it was impossible for the persons appointed to make any fair appraisement at that time, Yet they reported one of all the the sale proceeded. From the sheriff's return property at $75,000 in legal tender notes, and Gordon's attorney. and one of the purchasers, as first made, drawn up by John T. Ludeling, the sheriff exacted an illegal and onerous condition. The condition was, that the purchaser should pay cash to pay the interest coupons then due, with credit to meet the immature interest The sale was made under an ex parte order, and bonds, and should give bonds, with perobtained from a judge in chambers on the 23d sonal security, for the credit portion of[*621 of December, 1865, at the suit of Gordon, who the bid. At the first cry the property was described himself as the owner of four of the struck off to George M. Branner & Co. for mortgage bonds, upon which coupons amount- $550,000; but because they failed to pay at ing to $720, were due and unpaid. The peti- once the interest coupons then due and presenttion for the order of sale did not aver that Gored, the sheriff immediately set up the property don was the owner or bearer of the mortgage, again in bulk, and sold and adjudicated it to or that he had any rights therein superior to John T. Ludeling, John Ray, Francis P. Stubbs, the rights of any other bond holder for whom Wesley J. Q. Baker, William R. Gordon, Henry the mortgage was a security. It might, per- M. Bry, Joseph F. McGuire, John A. McGuire, haps, be doubted, therefore, whether under the Robert Ray, Joseph P. Crossley, Charles W. law of Louisiana he was in a condition to peti- Phillips, Robert C. Strother, Christopher H. tion for executory process for a sale of the Dabbs, George C. Waddell, William M. Pinmortgaged premises, and whether the judge caird and James U. Horne, the said John T. had any authority on his petition to order a Ludeling having bid in the property for them sale. No question of this kind, however, is for the sum of $50,000, and they having complied seriously made here, and we proceed to notice with the terms of sale by paying the proporat once the manner in which the process was tional amounts of the several coupons due used, the proceedings prior to the sale, and at which were presented for payment, to wit: the sale, and the actions and relations of the $10,739.83, to William R. Gordon, John T. purchasers. Gordon's petition made no dis- Ludeling and James U. Horne, the holders of closure of the name of any other holder of bonds one hundred and fifty-four bonds, and to F. P. secured by the mortgage. Ostensibly he sued Stubbs $850.68, being the amount due on the for himself alone. He asked for no notice, and coupons he presented for payment. Such was none was given, of his application to any other the sheriff's return. Two days afterwards he 620*]bond holder,* though there were seven made a deed to the purchasers. hundred and sixty-one bonds outstanding held principally in other States. The order of seizure was granted by the judge on the 23d day of December, 1865, but it was not filed in the clerk's office until Saturday, the 30th of that month, late in the afternoon, and on that day the sheriff made a seizure and served a notice thereof upon H. M. Bry, who was then acting as the president of the corporation, and who subsequently became one of the purchasers at the sale. On the 2d of January, 1866, the sher iff advertised the property for sale in one news paper published in the Town of Monroe, and by posting a copy of the advertisement on the church door and another at the door of his of

Were there nothing more in this case then is narrated by the brief history thus given, which is uncontradicted, it would be difficult to characterize the transactions as anything less than a great wrong perpetrated by the agency of legal forms. The great body of the bond holders could have known nothing of the proceeding to sell the mortgaged property and discharge their lien. Their residence was remote, and the sale was hurried as fast as the forms of law permitted. Not a day was lost. They were not afforded an opportunity to attend and bid at the sale. or pay off Gordon's small claim of $720. Neither they nor their trustee were conulted. The sale was made in a village far in the

They had no right to enter into or participate | for the exclusive advantage of some directors.
in a combination, the object of which was to The agreement was made after Wadley, the
devest the Company of its property and obtain president, had left the State and gone to Geor-
it for themselves at a sacrifice, or at the lowest gia, where most of the bond holders resided,
price possible. They had no right to seek their with a view, if possible, to effect such an ar-
own profit at the expense of the Company, its
rangement as the resolution of October 11th
stockholders, or even its bond holders. Such a
course was forbidden by their relation to the recommended. There is no direct evidence that
Company. It was their duty, to the extent of at this time these parties were in combination
their power, to secure for all those whose in- with Gordon to obtain the property for them-
terests were in their charge the highest possible selves by a hurried sale, conducted with the
price for the property which could be obtained least possible opportunity for notice of his pro-
for it at the sheriff's sale. They could not ceeding to those stockholders and bond holders
rightfully place themselves in a position in resident at a distance, who had the greatest in-
which their interests became adverse to those of terest. But that such a confederacy subse-
either the stockholders or bond holders. And quently existed we thing ought to be inferred
this rule was peculiarly applicable to these de- from what subsequently occurred. Indeed,
fendants. On the 11th of October, 1865, only many facts point to such a combination and
about two and a half months before Gordon can be accounted for only by it.
instituted his proceedings to effect a sale of the
road, the directors had resolved that, "In pur-
suance of resolutions passed by a meeting of the
stockholders held on October 2d, the president
of the Company be appointed to make arrange-
ments with any company who, in his judgment,
might be able to put the road in repair, which
was theretofore in operation, and complete the
balance of the road, and pay the debts of the
Company; and, if such arrangements could be
made, that the same be reported to the directors,
and upon their approval, that such steps should
be taken as might vest the road, its franchises
and other property in such Company." One of
the purposes of this resolution was the payment
of the debts of the Company. How, then, can
it be claimed that directors who had thus re-
solved, in obedience to the instructions of the
stockholders, were at liberty to participate in a
scheme, the object and effect of which was to
devest the Company of all its property and
franchises without the payment of its debts?
How can they be permitted to join hands with
those who sought to obtain that property at
the lowest price, whose interest it was to have
no other bidders than themselves at the sale,
and whose action tended to defeat the avowed
626*] object of the resolution passed by the
directors, as well as to make worthless the se-
curity which it was their duty to protect and
render in the highest possible degree fruitful?
Having thus noticed the relation in which
these defendants stood towards the Company,
its shareholders and its bond holders, and some
of the duties and disabilities attendant upon
that relation, we are prepared to inquire how
those duties were performed. It is proved that a
combination was formed as early as November
18, 1865, by some of these directors, to become
the purchasers of the property and franchises of
the Company exclusively for their benefit and
the benefit of those whom they might consent to
associate with them. A written agreement to
that effect was made and signed by John Ray,
William S. Parham and W. J. Q. Baker, both
Ray and Baker being then directors. By the
agreement John T. Ludeling was appointed the
agent of the parties to make the purchase in
their name. This was very shortly after the
resolution of the Board of Directors, to which
we have called attention, was adopted. The
agreement was repugnant to that resolution,
which contemplated no disposition of the prop-
erty which did not provide for the payment of
the debts of the Company, none that might be

On the 10th of January, 1866, Ludeling, Baker and John *Ray entered into another [*627 agreement with Gordon, Stubbs and Waddell (Stubbs being then a director of the Company), by which, after reciting that proceedings had been instituted to sell the railroad, with the property thereto attached and appertaining, they agreed severally to deposit with Ludeling a sum of money to be used for the purpose of forwarding the interests of the Company (i. e., the associated parties) relatively to the railroad and property bought, and that the parties to the agreement should be interested in the stock, shares and property of the Company in the proportion of the amount of money put in by each one, regardless of what the property might have cost. Ludeling was designated to bid for the property, and should he buy, was required to take the title in the names of the contracting parties and such others as might be necessary to preserve the existence of the Vicksburg, Shreveport and Texas Railroad Company. No one was permitted to sell out his interest within six months after the purchase without the consent of a majority of the other joint owners or copartners, and after that time, namely: the expiration of the six months, the refusal was given to the Company. This agreement was also signed about February 1, 1866, by Robert Ray, another director, as he has testified. Thus these directors became avowedly confederates with Gordon to purchase the property and to purchase it for their own benefit. Thus they took a position in which it became their interest that the property should be sold at a low price; that there should be as little competition as possible, and that no efforts should be made to stay the sale, or give any more notice than a formal compliance with the law required. Thus their interests were brought into direct antagonism with the interests of the stockholders and bond holders. Thus they combined to defeat the accomplishment of the arrangement proposed by the resolution of the directors of October 11th, 1865. It is impossible to regard this combination as anything less than a plain violation of their duty, a breach of the trust re posed in them and, if not an actual, at least a constructive, fraud.

The plan proposed by this arrangement, however, was disturbed "unexpectedly by the [*628 arrival in Monroe of James U. Horne, another director of the Company. He appeared in the latter part of January, 1866, shortly before the day of sale, commissioned by the holders of a

large number of the mortgage bonds (nearly Such were the combinations organized, and three hundred) to mave the railroad sold and such was the object of the combinations, when purchased by a trustee or trustees, to be selected the day arrived on which the sale had been adby the bond holders and creditors of the Com-vertised to be made. This large property was pany, in which class the preferred shareholders about to be sold for a claim of $720, at a village might be placed; a new Company to be formed remote from the residence of the great body of of the purchasers upon a basis to be previously those most interested in it. It must have been agreed upon and signed by the several interests, known that notice of the sale in all probability the bond holders to be placed in the class of pre- had not reached those parties. Their agent, ferred shareholders, and the other creditors and sent to protect their interest, had been tampered preferred shareholders to have common stock. with and overcome. Not one of the defendants This plan proposed the extinction of common who were residents at Monroe and directors of stock and the creation of a new mortgage for the Company, who had combined to become the purpose of repairing and stocking the road. purchasers at the sale, and not one of those Horne's commission was in writing. On his who subsequently united in the purchase and way to Monroe he met Gordon in New Orleans, became directors of the new Company, not and there learned for the first time that pro- even Bry himself, the vice-president, had lifted ceedings had been instituted to bring the prop- a finger to stay the sale, or, so far as [*630 erty to sale. Gordon then proposed to him to appears, had requested any delay, or had made unite his interests and those of his constituents any effort to prevent the probable sacrifice of with those of the party in Monroe, namely: the the property and when Mr. Garrett, a lawyer party that had combined to purchase the prop- and resident stockholder at Monroe, obtained an erty. Upon Horne's arrival at Monroe he had injunction against the sale he was bought off several interviews with Ludeling, and it appears by the payment of $2,500 for common stock, that he endeavored to procure a postponement confessedly not worth a cent, yet taken at its of the sale, representing that Gordon had con- par value; and he was required to stipulate sented to such postponement. To this Ludeling that he would take no fee from, or in any manreplied that Gordon had no authority to make ner counsel or advise, either directly or indisuch an offer or consent. Considering that rectly, any person who might desire to attack Ludeling was then a party to and the active the sale. This arrangement was negotiated by agent of the combination that had been formed, Baker, and the money was paid by Ludeling. this reply is most remarkable. It shows that We have already noticed the appraisement made the confederacy had then the control of the ex-aften ten o'clock on the morning of the sale by ecutory process and of the sale, and that the directors of the Company had put themselves in the position of both sellers and buyers of the property they held in trust; for if Gordon had no authority to consent to the postponement of the sale, it must have been because of his arrangements with the directors. But, passing this by, after many propositions, Horne was persuaded by Ludeling, and without any communication with his constituents, to enter into 629*] an agreement, *which was made on the 2d of February, 1866, one day before the sale. The material port of this agreement was that Gordon, Ludeling, Baker, Stubbs, Waddell and John Ray, of the first part, and Horne, of the second part, for himself and friends, should club their funds to buy the property of the Vicksburg, Shreveport and Texas Railroad Company, advertised for sale on the morrow, in partnership, and, if the property should be bought by them, that the party of the first part should own two thirds and the party of the second part should own one third. The agreement reveals apprehension that the sale might be stopped by injunction, or declared null and void. It was signed "John T. Ludeling, for himself and friends," and "J. U. Horne, for himself and friends," and it is proved that, when it was entered into, Ludeling was informed of Horne's mission and of the plan he was instructed to carry out.

It is impossible to characterize this agree ment as anything else than a gross fraud. Its obvious purpose was to remove competition at the sale. It was a flagrant breach of trust on the part of Horne, and it was a fraud in Ludeling, with knowledge of the trust Horne had undertaken, to persuade him to violate his instructions and sacrifice the interests of his constituents, himself becoming a party to the violation.

two persons appointed by Gordon and Bry. Of its character we propose to say little more. Manifestly it had been prepared before the appraisers were selected. It was conveniently low to enable the associates to purchase for a sum almost nominal, and one of the appraisers at least was appointed by a person who had combined with others to become a purchaser, and who was, consequently, disqualified from selecting an appraiser, or certainly, was unfit to make such a selection.

Everything having been thus prepared, the sale proceeded, but the scheme of the associates was at first deranged by the interference of other bidders; Branner & Co., who bid for the property $550,000, more than seven times the amount of the appraisement, and to whom it was first struck off. Then ensued what we must regard as a most remarkable effort to prevent an adjudication to these bidders and an acceptance by the sheriff of their bid. Ludeling, for himself and his associates, and acting as their chief agent, presented one hundred and fifty four of the mortgage bonds, four of which were Gordon's, one Bry's, and most, if not all, the remainder obtained from Horne, and demanded immediate payment of the past-due coupons. He had no right to make such a demand. He knew the bonds had been placed in Horne's hands for other purposes. He knew that it was a breach of faith in Horne to allow them to be thus used, and a fraud upon their owners thus to use them, *Stubbs pre- [*631 sented seventy-two coupons taken from other bonds, and also demanded immediate payment. And he had no authority to make such a use of those coupons. They had been placed in his hands for another purpose, which failed, and their owners had directed them to be returned. Bry also had one bond, and he presented it with

its coupons. This one bond, with the four of Gordon, were all that there was any authority to present. Yet the confederates, taking advantage of Horne's breach of trust and of Stubb's unauthorized act, were enabled to present the coupons of one hundred and fifty-four bonds, and part of the coupons of thirty-six other bonds, for immediate payment. The sheriff joined in the demand and, because Branner & Co. were unable at once to pay this unauthorized claim, he set up the property again immediately for sale, when it was struck off on Ludeling's bid of $50,000, to the persons we have named. This was on Saturday, late in the afternoon and on the Monday next following the sheriff's deed was delivered; but the bidders, though receipting in part to each other, have still in their hands the whole of their bid except $468.75, the amount of costs paid to the

sheriff.

Thus directors of the Company, owing duties to its stockholders and creditors, not only combined to obtain the company's property for themselves at a sacrifice, through the formality of a judicial sale, but were active participants

in successful efforts to defeat a sale for $550,000

for $50,000.

in order that they might become the purchasers It is impossible to sustain such a transaction. Throughout it was grossly inequitable. That the property was sacrificed by means of an unlawful and wide-spread combination is abundantly proved, and that the directors who were parties to it, and who became the purchasers, were guilty of an inexcusable violation of confidence reposed in them admits of no doubt. Ludeling, it is true, was not a director, but he was a leading member of the combination and its chief agent to carry out its plans. He knew its purposes. He knew its illegality. He had negotiated the surrender of Horne, with full knowledge of Horne's breach of trust. He 632*] assumed the *control of Gordon's executory process and, as we have noticed, when told that Gordon had consented to stay the sale, he declared that Gordon had no power to do it. Indeed, Ludeling appears to have had complete possession of the sheriff. He drew up the sheriff's return, carefully stating in it that all the requirements and formalities of the law had been complied with, in the second offering as they had been in the first, and he was, as the evidence shows, most active in defeating an adjudication to Branner & Co. on their large bid.

give encouragement to faithlessness to trusts, and confidence reposed, and countenance combinations to wrest by the forms of law, from the uninformed and confiding, their just rights.

The new

No words need be expended to show that the defense of the new Company, the North Louisiana and Texas Railroad Company, must fall with that of the other defendants. Company was formed by the purchasers at this illegal and void sale. It was organized while this suit was pending, and it has no other title than that of these purchasers.

It remains only to consider the effect of the judgment in the monition suit instituted by these defendants on the 21st day of [*683 April, 1866. They contend that the judgment of homologation rendered in that suit conclusively establishes the validity of the sale made to them, and bars the present bill. But we think such is not the effect of the judgment. The proceeding to homologate a sheriff's sale is peculiar to Louisiana. It is authorized by an Act of the Legislature passed March 10, 1834. R. S., tit. Monition, secs. 2374-2380. That Act authorizes purchasers at a sheriff's sale to apply for set up any right, title or claim to the property a monition to all persons interested who can described in consequence of any informality in the order or decree, or judgment of the court under which the sale was made, or any irregularity or illegality in the appointment and advertisement in time or manner of sale, or for any other defect whatsoever, to show cause why the sale should not be confirmed and homologated. If no cause be shown, the judgment of confirmation in the case is conclusive upon the world. But conclusive of what? Conclusive that there have been no fatal informalities, or irregularities, or defects; we think of nothing more. The Act has relation to mistakes or omissions of the officers of the law. But there is nothing in it which authorizes an inquiry into or an adjudication upon questions of fraud; nothing which concludes the question whether the purchasers have obtained their title by fraud or whether they are trustees mala fides for others. And such has been the ruling of the Louisiana courts. In Bk. v. Walden, 1 La. Ann., 46, the court considered the effect and scope of the Act. "It was passed," they said, "for the protection of bona fide purchasers at judicial sales from litigation concerning matters of form, a non-observance of which frequently exposed purchasers to unreasonable and The connection of Stubbs and Waddell with vexatious suits. The difficulty of administering the combination we have already sufficiently and preserving proofs of the observance of forshown; and it is not claimed that the other de-malities was, in the hands of the unscrupulous, fendants, Crossley and Phillips, are anything the instrument of great annoyance and expense more than volunteers. They have paid noth- to those who had purchased and paid for proping. The sheriff adjudicated the property to erty exposed to sale under the authority of our them, and his deed was made to them, in com- courts. We do not understand *the ope- [*634 mon with others, but it is proved that their in-ration of the Act to extend beyond the matters terest is only nominal, each having had one share given to him. They were introduced to enable the confederates to carry out their scheme. Pincaird, according to his own statement, was a party to the agreement of Feb. 2, 1866, between Ludeling and his friends, and Horne and his friends. He was, therefore, one of the parties to the unlawful combination.

The defendants can take nothing from such a sale, thus made. Were we to sustain it, we should sanction a great moral and legal wrong,

of form, nor that it purports to operate upon matters 'dehors' the record." This is manifestly the true construction of the statute, and it is quite consistent with the enactment that the judgment of homologation is to be received and considered as "full and conclusive proof that the sale was duly made according to law, in virtue of a judgment or order, legally and regularly pronounced on the interests of the parties duly represented." Fraud and trust are entirely outside the record. A sale may have been