New Orleans Republican. [volume] (New Orleans, La) 1867-1878, 1871-12-03
CAVEAT EMPTOR.

CAVEAT EMPTOR.
A recent decision rendered in England
by Lord Romilly, master of the rolls il
the case of Peek VS.. Quincy, settles yer,
important question relative to the right
of an investor in stocks of joint stock com
panies The subject came up in the form
Of bill in chancery, fled by Mr.. Peek
one Of the shareholders in the celebrated
house of Overend, Quincy & Co., limited
to recover his losses from the directors
on the ground Of Misrepresentation, by
which he was induced to invest. In The
year 1865, the firm of Overend, Quincy
i Co. was one of the largest and was sup.
| posed to be one Of the most substantial
in Great Britain. Its capital was meas.
ured by millions, and it was reputed in
monetary circles to be as strong as the
Bank Of England. Yet financial storm
beat upon it, and before July, of the year
1865, it went down hopelessly insolvent.
Its liabilities exceeded twenty millions of
| dollars, while its assets, including the
private estates of its members, and the
good will of their discount and banking
business, showed a deficiency Of between
two and three millions. A large part Of
these assets were fictitious, and to make a
truthful show Of them, would g: once
have excited suspicion, and inevitable dis
covery and ruin would have followed
To avoid this catastrophe, the firm i'm
mediately formed limited company on
the basis Of the old house, with paid up
capital which would continue the busi-
ness until the partners could gradually in
troduce their private fortunes and restore
the concern. A dattering prospectus was
issued with an imposing board O. direc-
tors, and extensively circulated. Upon
the faith of this prospectus Mr.. Peek
was induced to purchase shares in this
new company to the amount Of $500, 000.
This he did without any knowledge or in
formation as to the insolvency of the old
firm. About year after this investment,
in May, 1866, the company again ex-
ploded and became insolvent A criminal
trial Of the prominent members OF the
firm followed, but they were acquitted Of
the charge of intentional fraud. n the
chancery case just decided, the master OF
the rolls holds that Mr. Peek, in not
making an investigation and inquiry into
the affairs Of the firm Of Overend, Quincy
& Co., without regard to the prospectus
which they issued, has not exercised that
which he ought before he made
bis investment, and, therefore, the loss is
his own, and the directors of the
company are exonerated from liability on
the ground Of misrepresentation.
Mr.. Peeks prayer for relief was refused |
because be never made any inquiry into |
he condition Of the concern until after |
he failure, and but for the failure would, |
doubtless, have made no inquiry at all,
he rule being that when a man takes
shares in company he ought TO ascertain
It once whether the representations on
,he faith Of which he took his shares are
correct or not. SO far as the moral cul- |
oability Of the directors in this case is
Lord Romilly expressed his
ense by refusing them costs as against
he plaintiff.
Whatever may be the professional view
# this important decision, it would seem
o be eminently just and right, and the
ase Of Mr.. Peek should be warning to
II who may be invited to invest in many
f the brilliant ION paper schemes which
re gotten up in this city and country to
ull and wheedle innocent people out of
heir money.
The disposition for speculation and de-
ire to become suddenly enriched by in
estment in bubble companies, especially
4 this country, renders it necessary for
very one who has money to invest to be
xceedingly watchful of the enticing al
1rements of even seemingly respectable
irectors and stockholders of magnificent