298 MOVIUS,
FEDERAL REPORTER.
Receiver, etc.,
'V.
LEE and, others. March 23,1887,)
(Oirouit Oourt, N. JJ.lff/llJ York.
8.
4.
5. ,
In Equity. Ansley Wilcox, for plaintiff. E. a. Sprague. for defendant Spaulding. Beni- H. Williarn8, for defendant Johnson. David F., Day, for defendant Cushing. Humphre;y &- Lo<-kwood, for defendants Coit and
Ex'rs· ·,1'
WHEEJ,ER, J. The First National Bank of Buffalo was organized December 7,1863, under the provisions of the national bank act of l!'ebru ary 25, 1863, for which the national bank act of June 3, 1864. was substituted, (13 St. at Large, 100,) with a capital stock of $100,000, divided into 1,000 shares of $100 each. At the annual meeting of its shareholders holden January 11, 1881, Charles T. Coit, R. Porter Lee, Thomas W. Cushing, John H. Vought, and George Coit were elected 5
.),{OVIUI:l V. LEE.
299
directors. They took the oath of office required by law, and chose Coit president, and R. Porter Lee cashier. George eoit Charles died, and May 20, 1881, the rest of the directors filled the vacancy caused by his death by electing Francis E: Coit a director in his place, who took the required oath of office. Mr. Cushing sold his stock, by bargain made at the bank, to Charles T. Coit, the president, SepiRmber 24, 188Lat the price of $125 per share, to be paid and transfer to be made afterwards. In consequence of this trade, he then and there, so far as he could by words, resigned his office of director to the president, and never afterwards assumed to be or to act as a director. The health of the president became poor; and at a meeting of the four directors, ineluding. himself, remaining after the withdrawal of Cushing, he stated that fact, and that he desired to be relieved somewhat of his official duties, whereupon they voted that he be given leave of absence for such intervals and at such times as he might see proper, for one year from that date, which was October 3, 1881. They then chose the cashier, R.Porter Lee, vice-president, and Theodore W. McKnight assistant cashier. The bank then had an apparent surplus of$50,OOO,andundivided profits to the amount of $24,277.03, and it is not claimed in this suit but that these items were real. Mr. Charles T. eoit paid Cushing for his stock at the price agreed upon October 7, 1881, and took a transfer of the certificates'signed in blank, which was entered on the books ofthe bank in November, as made September 24, 1881. Charles T. Coit sold most of his stock, 510 shares, to Lee, was absent from the bank on account of his health, and took no part in its management afterwards. ,He died Decemberl1, 1881: The control and management of the bank was left to Lee, who used its funds in the form of discounts to his associates in business: and speculations until great losses were inClUTed.Prior to the annual election in 1882, he spoke of the vacancies in the board of directors to the defendant Spaulding, and also to the defendant Johnson, and proposed to transfer· stock to them, and that each should become a director. Spaulding was president ofanother 'national bank, and connected with other corporations, and did not wish to assumenew responsibilities, and so told Lee, but consented to the arrangement, and Johnson did likewise. At the meeting January 10, 1882, Spaulding, Johnson, Francis E.Coit, Vought,and Lee were elected directors, who took the oach of office required by law. Leewaschosen president, Rnd McKnight was elected cashier. The control and management of the bank were left to Lee as before. Vought sold his stock to Lee, January 19,1882, and did not act as director afterwards. Spaulding was .engaged with his other business, the family of Johnson was sick, and his son died, and neither of them did anything about the management of the. bank. .Coit went once, and. looked ovt>r the loans and discounts. Lee stood well in the community as a man of honor and integrity, as financier and bank manager,and'neitherof them had any suspicion:that the affairs of the bank were not being well and faithfully attended to by him. Lee sent a request to Spalliding, April 11, 1882, for the return of the stock transferred to him, and Spaulding
300
FEDJlJRAL REPORTER.
signed a transfer upon the back of the certificate and returned it, in pursuance of an understanding. between them that he wO'uld return it on request, and, as he suppos,ed, ended his connection with the bank. The bank had become helplessly insolvent and stopped business April 13, 1882, and was soon afterwards placed in the hands of a receiver. The whole capital surplqs. undivided profits, and reserves were gone, and the individual liability of the directors would not pay the depositors. The losses incurred amount in all to more than $600,000. This bill is brought to charge the directors who are living, and the estates of those who are dead, with the amount of. these losses. The bill alleges, in substance, that the defendant Spaulding sold and transferred his stockin the bank on the eleventh day of April, 1882. The evidence shows. that· he signed· the transfer of the stock in blank, and delivered the certificate to the messenger from Lee, without any negotiation with Lee, or anyone,at that time, with ,reference toa'sale of the stock. The plaintiff's counsel moved on the hearing to amend the bill to have it allege that'the:r!ransfer was formal merely, without consideration, and that ,there Was aot ,any sale or valid transfer in effect. It: is argued, in support ·of the ameudment,that tbis would make the bill conform to the proofs'metely,iand that it 'should be allowed for that reason. The eviden,ce shows, however,in addition to this, that Spauld;. ing had riot paid Lee anything fell·the stock,and that it was understood between them that Lee might have the stock back for someone else, if he' should so desire, ahny time. It appears from the whole transaction that, when Lee sent the messenger for the stock, it was in pursuance of that understanding, and that Spaulding acted upon the understanding in complying with the request. There was therefore an agreement for and an actual resale of the stock. The blank in the transfer was filled with the name of a third person to whom Lee had sold the stock, but that was merely a method of carrying out the two sales, and required no negotiation between Spaulding and the other person to make it effectual. The bill now, therefore', alleges. the sale as it in fact was, and there is no ocqasion for the amendment. Johnston v. Laflin, 103U. S. 800. Some question has been made, 'and discussion had, with reference to the right of the plaintiff to enforce ,the liability of the defendants, if any eXists, for the benefit ofstock;holders, creditors, or depositors, as the results might, if realized,. eventqaHy inure to them, respectively. It seems, however, that the receiver, as the name implies, hat! in his hands the rights of the bank itself against all and any persons, however the rights may have arisen, to enforce for the benefit of whoever may be entitled to the avails of them; and these rights may be enforced by him in his own name, or in the name ofthebankwhose corpol'ateexistence is tinued for that purpose. Kennedyv.GibsO'n, 8Wall.498;National Bank of the MetrlYfJolia v. Kennedy, 17 Wall. 19; Case v. 'l'et-rell, 11 Wall. 199. If the bank had a right or claim in this respect whioh it could enforce against the defendants, or any of them, the plaintiff has the same now, which he is entitled to enforce to the same extel1t;and none appears to have accrued to. him which the bank in its own, right did not have. The
MOVlUS V. LEE.
301
right rests :entirely upQn the alleged non-performance or negligent performance of duties as direotor oitha bank. The defendants stand upon different grounds, in S(l)me respects, in their defenses to this claim to charge them. The defendant Cushing sets up in defense, among other things, that he was not a director at all, and therefore owed po duty in that behalf, at the time when the ,alleged losses took place: Whether he was or not depends upon the effect of what occurred about the sale of his stock and resignation. He bargained for its sale on the twenty-fourth of September, 1881, and orally resigned his office of director, so Jar as he so could) to the president of the bank, in his place of president at the bank. This was prior to the time of any of the losses as alleged. He delivered the stock certificate, with authority to transfer, on the seventh of October following, and received his pay for it. This may be after soine of the losses occurred. ' The transaction of September 24th may therefore be of importance. The statutes provide that every director must own,in his own right at least 10 shares of the capital stock of the association ,of which he'iis a director; 'and that any dire(l.tor,who ceases to be,the OWMr of 10 shares of the stock shall thereby Rev. 'St.ll.S. § 5146'. The purpose of this statute obviously is Ito require the office of director to be kept in the hands of those who are personallY,ahd cunil1rily interested in the affairs of the bank. When Cushing bargained his stock,he ceased to be so interested. Good faith to the other shareholders; as their interests were guarded by these provisions of thelaw, would seem to require that'he should then cease to be a director. He have taken this view, and to have done what he could to carry ii out. There was no calamity or contemplated by him to be avoided by vacating his office, or which he could prevent by retaining it. There was no reason why he should not resign if he could. He was an officer elected to his place; it was an office that he was not obliged to accept, and would seem to be one that he was not obliged: to hold.'U.S.v. Wright,l McLean, 509; People v. Porter, 6 Cal. 26;Olm$ted v. Dennis, 77 N. Y. mode of resignation was provided by law, and an oral one would be as good as any. Rex v; Mq,yor oj Rippon,l Ld. Raym. 563. The president was the head of the b(i)aI'd of directors, who alone could fill the vacancy, and a resignation' to!uim would be a resignation to the board. PortJervia v. Firat Nat. Bank; 96 N. Y. 550. The statute provides that the directors shall be elected at meetings to be held on such day in January of each year assha:llbe epecified ill' the articles of association, and that they· shall hold office for Qne year, and until their successors are elected and have qualified. ,Section5145. It is urged that this section prohibits resignation dlir,ingthe year. This!is not, however,understood to be its effect. The apparent purpose of the provision in regard to the term of office is to makeit conform to the time of the new election, and not to absolutely require every director to serve the full term. Such provisions as to terms of office are common for this purpose. It is said in argument that, if he resign, he would not be relieved from duty until his place should be
FEDERAL REPORrER.
·filledrby·theremainder of the boardi and that,if:theY'lfouJd not fill it without,: it would be incumbent on him to compel them by mandamus .or other appropriate proceeding to fill it. But uutil l:l,ehad vacated the place there would be no vacancy which they could filli and 1 when he had sold' his stock, he would be. out of the corpor/l.tion, ,/,Lud would have ,no interest orstauding f upon which to institule any proceedings whatevertoaflect the conduct,of its affairs. The interests of the corporabe left with the other directors elected by the stockholders, whose dutyitwould be, and on whom the stockholdets had relied, to fill the vacancy; or act upon it as they should be advised. Upon these considerations it appears that· the defendant. Cushing was not a director at the time of the alleged losses, and cannot beheld for any duty as such at that time. .; The liability of Charles T. Coitalso stands upon diffel'entfooting from that of any of the others. His health had failed,' and waS failing him, 80 that. he: was and was being disabled for the performance of the duties of his office; He had owned more :than half of the stock up to near that time; and.: so far as appears, had been diligent andfaitbfuUn the performance orall his duties. Of his associates in theboaJ;d,Vought had been directOr since 1875, Lee since 1877, and Francis E. Coit then'3ince ·theMay previous, and for several years at a time previoua, .and all were good reputb;, He could. accepttheir leave of absence, which was tantiLmountto an undertaking, and assurance on their Pl:U't that they ,would, perform the duties which"might otherwise upon him. They were: 8. majority of the board, and,,if they wOllld; could control, ,whether he was present or. absent... The oath of office required by law bonndhimiso.far as the duty devolved on him, diligently.and honestly to administer the affairs of the bank. Section 5147. .The duties which they could perfol1ID.,and assumed. to and did perform, would not appear Jto have devolved on him so as: to make him chargeable inany degree for ·the niitDner ,He did nothing hiU\self for which it is claimed that. he became in, any)manne'r chargeable; and i.tdoes not appear that he was so responsible {or,what the others did. that their misdoings could make him chargeable.·)' , . . Neither. Lee,; nor the executrix of Vought, make any defense to this sllit, and the bill has been taken. for confessed against:the:m. The pol!ljtions of Francis E.Coit,Spaulding, and Johnson, with reference to the banK, were so. similar in most respects that the questions ·to .the liability" of each of thE'·m, may be examined somewhat together. It is to look into the :manner of the losses ·more closely.: , . The.ldssesiappear to have begun by thedisconnt of the of persons engaged with Lee in business and speculations not adequately responsiblefor the' amount of the :discounts. The' paper was usuallyinidorsed' ;by him, and sometimess.ecu:red, to some extent,' by. ·collaterals resulting from the avails of the discounts. Great losses from the trans;actions, in which he was. engagecl:ieU upon him,and, through him,upon <,the bank. As the paper fell due. it was renewed or replaced by other
HOVIUS V. LEE.
303
paper of liKe character, until a large part of the loans and discounts of the bank consisted in these notes of irresponsible persons indorsed by him. All these discounts, renewals, and substitutions were correctly entered, as in the usual course of business, upon the books of the' bank, and appeared there fully with the entries of its other current business. These discounts were in violation of the prohibition in the banking law. of an excess of one-tenth the amount of capital paid in of any person, company, or firm for money borrowed. Section 5200. They did not, however, appear to be so always or generally, for they might be, so far as they showed, . commercial or business paper actually owned by the/person negotiating them, within the provisions of the. same law allowed to be discounted. On January 18, 1882, he took from the cash of the bank $23,680"and put a slip of paper, with his name and the amount upon it, in place of the money in the cash drawer, and on, February 15,$16,737.50 in like manner, .without giving any other evidence of his indebtedness for these amounts. The former amount was reduced, by replacementsof cash, to $12;405, and the latter to $U,435.These transactions were not concealed from the cashier or employes in financial mat.tersoUhe, bank, but did not appear on the books of the bank, except that they were shown on the cash blotter. of the teller. These 'Were clear Violiuions of the provisions of the banking law mentioned. As Lee was the president and at the head oithe bank, and was supposed by the cashier and ,subordinates to be a man of integrity and wealth; and these things :were done by him and by,his direction, they excited nos1,lspicion among these persons that loss to the bank would be occasioned thereby until the very last days ofthebusiness, of the bank, after all these loss£l,'l had been incurred. As the suspicions of these perSons were not aroused, they sajd!nothing to anyoLthe directors about what was and they had no knowledge, supposition, or suspicion but that the.l>usiness of the bank was proceeding lawfully, regularly, and prospetously. In ,the banking law it is furtheri provided that if the directors of'any bank .shall knowingly violate, or knowingly permit any of the officers, agents, -Of servants of it to' violate, any of the' provisions. of that, law, .every director who participated.in or assented to such violation shall be lia!Jle for all sustained in consequence of such viola14on. Section 5239. IUs not claimed. that any of thes.e three directors flO knowingly permitted or,assented to any of these violations of. this law as ,to liable at aU under this provision. . ' . · As th,erewasno misconduct, default, or irregularity on the cashier,. or of'the .clerksor llgents of the :bank in anyrespept tha.t Oc'CRsioned .these .losses, and what was done that did occagio.l).,· tJ,l;exn· was done by Lee, and by his expreSs direction, the these directors by their became liable to the for associate director Lee did. By t}le bank act·of.1864,· it was ..that these associations ahou:ld bel>odies corporate, and, by the. nm:QeEhdesig.nated iIi their organization 'oertificates, should have .20 ,years unless dissolvedj'thfl.t by s,ucbnames, tPeY ,tmots"Jiueandbesued, and; elect or appoint j
304
of directors appoint officers, and exercise under that act all such incidental powers as should be neceslmry to carry on the business of banking, by discounting and negotiating promissory notes, drafts, bills of exchange, and otherevidimces of debt, by receiving deposits, by buying and selling exchange, coin, and bullion, by loaning money on personal security, and by obtaining, issuing, and circulating notes according to the provisions of that act. 13 St. at Large, 100, § 8. Some courts were of the opinion that·· this specification of the means by which the powers granted might be exercised was a limitation of the general expression preceding it. Wiley v; 'First Nat. Bank,47Vt. 546; First Nat. Bank v. Ocean Nat. Bank, 60 N. Y. 278; Weckler v.Ji'irst Nat.: Bank, 42 Md. 581; Whitney v. First Nat. Bank, 50 Vt. B88.0thers construed this part of .this section as if it had stopped with the generalwbrds. National Bankv.Gralta'fl.1, 79Pa. St. 106; Pattuon v. SymcusdNat.Bank, 80 N. Y. 82. ,The business of lmnking, in either 'view, was, as ,that section then 'stood, to be carried on by the board of directors·. In the Revised Statutes as enacted in 1874, this part of that section was brought into the seventh subdivision of section 5136, and so:added to 8.S t() authorize a national bankto exercise, by its board ofdil'ectors or duly.-authorized officers or agents, subject to law, the powers mentioned. After this alteration in the law the busi. ness'of the banks could be lawtullydone by the president, cashier, ()r other'Officer, as weHas by the directors It was not necessary that the directors, or a/mlljority of then'l, or any of them, shOuld take part in individual tranSactions in the authorized business. It is said, in some books ana in argument, that the directors are trustees of the funds and' property of the· bank. This may be true in some sense and under Some circumstances; but the relations of the directors to and their duties tovvards the assets of the')bank cannot be determined properly upon names merely. The bank, being a body corporate under the law, ia a person, although artifi cial, with legal identity ,and capable ofowning and ;holding its own property; and its property I in the hands of those by whom jt'acts, is held by itself, for not by any other person for it. Therefore the directors are Ddt, and from the nature ofthings cannot be, 'dliargeable for the assets of the batiJk as for property to which they have ,taken title·or possession for sotile:use or purpose,for the carrying out of Which. they may be charged and held. They have no ownership in or title'to the' assets,and cannot act· otherwise than as the officers and agents of the bank about them, unless they actually misappr.opriate them, and 'thereby' b'ecome wrong-doers aboutihe assets themselves.' Theycannot lYe held toa.ccount for any assets they have not themselves had. These direetors. are not, andarenWolaimed to be, chargeable in this view· As ·the' statute ptovideswhat directors shall be liable,.aml how, for violations of thei statutes,other .directors cannot be made feir those things lwftbbut;in effect, adding 'to the statute. . .. . , .; .·. Directors' may doubtlessbe'Uable for· many things which are not ex. . Brinckerhojf v. Bostwick, 88 N. Y. 52, and 'press violations of the 119 N.W. 185, l' MoE. Rep. 683. This would probably be the case with 'tespeet:to any groBS ttlismanagementinthe actual transaction ofthe bank's
t1.LEE.
805
business, .or the handling of its property. These directors are not sought to be charged in this view. The complaint against them is not that they acted negligently or carelessly in actually doing anything, but that they neglected to do anything. What they did not do, the omission to do which caused damage, was the restraint of Lee in what he did. So the real question is whether they are chargeable for the consequences ofwbat he did, beGause they did n()tprevent it. He was a director elected by the stockholders, and of equal rank and authority with them. He derived his authority from the stockholders, and not from them, and acted authority . The president has no greater authority, as such, of, than any other director. They had no rea,soq, t(;) suppose that he would not act honestly and fairly within the law, any than the stockholders had, whoha<J repeatedly elected him to the office of directl)r; or than the depositors had, 'Who trusted the visibly under his management. He was apparently more interested· in the success of'the bank, during the time of these losses, than anyone else, for he held more than a majority of all the stock. :Tbe question is not as to the liability of the bank for the negligence of its agents) but is as to the liability to the bank of some agents for not controlling others. The bank itself would not be liable to others for the frauds or. thefts of its· eashier or other officers unless ,his untrustworthiness was known, and his employment continuednotwithstallding notice Foster v. Essex Bank, 17 Mass. 479; Prath.cr v. Kean, 29 of that Fed. Rep: 498. "The obligation of the corporation would be measured. by the duty Of and the liability of one officer for the misdoing of another would not appear to be any greater than that of the corporation :for ,acts of the Same nature. Generally. one officer is not liable for the misconduct ofanother not appointed by him. Whitfield v. LeDCipC'ncer . Cowp. 754; Nicholson v. Mouns&Jj, 15 East, 384; Dunlnp v. Munroe., 7'0ianch, 242. Directors of banks and other corporations appear to stand on the same footing as other offi.<lers in this respect. The pody of directors of a national bank is charged with the supervision and managenient;ofits officets,andis bound to use as much diligence and care as the proper performance of these duties requires. Mor. Corp. § 571; Off. 356. But this obligation does not appear to require every director ito attend himself to every part of 'corporate business, nor make each. liable for every act done by any of them. They do not for the others. .. In CargiU v. Bower, 10 Oh. Div. 502, it was held that directors were not liable Jor the frauds of their co-directors unless they participated in the fra.uus, 9r wholly abstained, from inquiry in order that they might be coipinitted., FRY, J.,. said: "I think that there was great negligence, but tqat it wall merely negligence, and undue trust in Feigan, and that there was not any intention to allow him to cominitftaud, and therefore I responsible for his acts." Feigan was a director. cannot In Pirry's,eJase, 34 Law (N. S.) 716, Perry had consented to be a .director at the request' of on the understanding that his qualifishares wquld be found for him. '. and was appointed . .!v.3dF'.rio.5-20: '.. ...
August 5, 1871, attended ameeting .tanuary 25, 1872; and'resigned May, 1872. Duncan misapplied funds in February,18'i2, for which Perry, with others, was sought to be charged. As to this BACON, V. C., .said: . "!think that no case is Perry. Mr. Bradford's argument is that, inasmuch ashe accepted paid-up shares in order to qualify him as director, he is tobe treated as the paid agent of Mr. Duncan to do whatever Mr. Duncan desired him to do. It is very easy to say that, but I see no kind of foundation for it. It is said that Duncan misconductedhimllelf in various ways, and tbat Mr. Perry is liable for all the consequences of that because he was Duncan's paid agent. It would be monstrous to entertain any such a proposition ·. He became director, and is liable for all that he did as director, but he was not boiInd to attend every meeting of the directoril. It is not part of the duty of a director to take part in every transaction which is conducted at a boatd·meeting. His business or his pleasure may call him elsewhere, and it would: bea ,most unheard-of thing to say that if anything wrong was done he being named among the directors, bnt, not present, he ,at a board fOJ,';whatisd.one inhis absence." .. f In Joint-8tock Di8cown,t 00; v. Broum"L. R. 8 Eq. 876, in, speaking of the liability of directors for acts of others in which they took no part, or .. :measures to prevent,JAMEs, V.C., said: "Now, with regard to Mr. Gillespie,I have held tha.t therais no sufficient , evidenMof his cOnCurrence or connivance to make biro responsible. I have, ·however, thought it not. right to give him his costs, although I dismiss him :trolp the, suit" I think a man who is director, and goes on as director for months of this: kind is going on,.is ,not justified hi saying: 'IreaHydid n9t pay the slightest attention to it:r had a sort of vague 'notion of'what was' going on. I was apaid director, but I left it to the other directors to attend to. , I did nothing. ,I took for granted it Was all right.' I ,think he is entitled to go; that I cannot fix him with liability; but I think it ill not too much ,of,a penalty for bJm,tQ. pay for his he shall have beenrendeJ,'ed necessary in .not have any costs of 1;he which he took, no' pains t6 inquire this court by proceedings of his ' . into 01' interfere witn." .. all' a director, ·Lprd Chief Justice COCKBURN said:
In
weir v. BeU, 3 Exch. Div. 238, in speaking of the liability of Bell
"In the res:ultB.ell has been guilty of no fraUd. He is not. a principal deriving a ben")tit,frD;m afraud committe<J by his agent in procuring that benefit; nor, indeed;. ,hall[ pe derived any benefl,t from the fraud committed by the subagents who'm he was authorized to employ on behalf of the company. Upon this state of facts I think the pJaintiff fails to establish the liability of the defendant Bell."
,(Jharitable CO'1'Po/qtion v. Sutton, 2 Atk. 400, much relied on for the plain,tiff in ,this, ,cmly the committeemen, who fqrmed what· was called a confederacy ot conspiracy, were held ' is not for the faults or frauds of a co-director ap'rhat, a in New York.. Wakeman v. Darley, 51 N. Y. pears to 1;le 27; Arthurv.(tl'f.Swold, 55 N. Y. 400., In Hun v. Gary, 82 N_ Y.,65, where"thetriistees' Of a 'savings bank who in Ii
L. R. 4
The same
pervade other English cases.
Purqtfa'l1d v. Marshall, Land Oredit 00. ,v. Lord FerTI1,(J'!J, L,. R.8 Eq. 7." In
, KOVIUS. V.LEE.
307
tion"df"the' funds resuItingin'loss were held liable for the loss, Smith, a ·who took no part in the transactions, does not appear to have been' held: And in Hand V.' Burrows, 23 Hun, 330, supreme court, First department, June, 1881, it was- held (BARRE'lYf, J.) that the directors of a national bank who knowingly participate in retaining an untrustworthy cashier were liable:for his subsequent defalcations, and that one who 'did,not know of the untrustworthiness was not liable; which case does not appear to have gone any further. There is no case which has been cited or observed in which it has been decided that a director of a cor'potation was liable to make good a. loss occasioned by the fraud or mig,. ora. co-director,in which he had no part, and which was perpe-without his connivance or knowledge. Robinson v. Smith, 3 Paige, 222; Brinckerhoffv.B08twick, 88 N. Y. 52, and 99 N. Y. 185, 1 N. E. Rep. 668; Ackerman v. Hal8ey, 37 N. J. Eq. 356, and 38 N. J. Eq. 501; New England8crew 00., 1 R. 1. 312, and3,R. 1. 9. , " Tbemeasure of the duty of directors is frequently and emphatically laid doWn; and is clear and plain; but it is nowhere adjudged that all must always act, or that they must not trust one another to act, or that any are liablafor the mere omission to watch and restrain the others, without.wtong intention on their own part, or actual knowledge of the wrong on 'the part oftheothers. Neither are there cases where persons standing in similar relations to the property ofothers hava been held liable for the acts of others standing in the same relation, without some fraud or connivance on their own part. The,generall'ule as to trustees is that they are responsible only for their own acts, and not for the acts of each other, unless by express agreement, "or they have by their own voluntary co-operation or .connivance enabled the other to accomplistt some known object in violation of the trust." Story, Eq. § 1280. In Perry on t;he la", is stated to the sameeftect. Section 417. 'l'be law is the same as to executors and administrators.' Bac. Abr. "Executors," D; Brazer v. Olark, I) Pick. 96; Peter v. Beverly, 10 Pet. 532. In the 'case; Mr: Justice THOMPSON said: "For it is a well-settled rule that one not responsible fo],' the devastavit of his eo-executor any further than he is shown to have been knowing and assenting the time to such deva8tavit or misapplication of the assets; and merely permitting his co-executor to possess the assets, without going further and concurring in the application of them, does not render him answerable for the receipts of his co-executor. Each executor is liable only for. his own acts, and what he receives and applies, unless he joins in the direction and miSapplication of the assets. Hargthrape v. Milforth, Oro. Eliz. 318; Hoo6y:v. BUtkernan, 4 Yes. 596; Briggs v. Lq,w, 4 Johns. Oh. 23; ManaiuJlnv. Gibbons, 19 Johns. 427." And a bailee of goods without reward is only liable. because they actually come to his hands, and he is guilty ofaome wrong in respect to them while there. Ooggs v. Bernard, 2 Ld. Raym. 909. the:cal:'eful arid thorough presentation of this case in all its aspects by counsel on all hands, and much and repeated consideration of the facts and principles involved, no just ground of liapility on the ,part
loa
FEDERA.L BEPOR'r]m.
oftbese direbtors is perceived,-not on the express pl'ovil'lions of the I'ltatute on the subJeot, for they do not, and are not olaimed .to, come within that; not by thecomrrion law, for by that each is liable only for his own miscarriages, and none are shown. These conclusions make it, unnecessary to consider whether this cause ofaotion, if made. out; would survive against the personal representatives of Francis E. Coit, or those of Charles T. Coit. The .bill must, qpon the conolusions reached, be dismissed as to them, and as to the defendants and Johnson. The expressions of Vice-ohancellor JAMJJ:s,a!l to costs, in Joint-stock Discount Co. v. Brown, Btlpra, seem reasonable, andapplioabJe to the direotors FranoisE. Coit,Johnson, and Spaulding;'al'ld no costs were allowed in .Hand v. Burrt;YIJ,J8,aupra, to the director ,not' held to' be liable. .Those caseS are foUowed. and .nocosts ,are allowed -to Johnson and Spaulding arid the representative of Francis 'E. Coit.·. There ill! nothing suffioient to take the cases of Cushing alid.Charles ,T. Coit out of the usual rule 9.I'l to costs. No question bas;been made as to :completion of tbe decrees entered against Lee;and:theexecotors ofNougbt. . " .Let a decree 00 entered dismi$sing the bill of complaint as to the defendants Spaulding, Johnson,. and Caroline E. Coit, executrix, ;witbout costs; and asto the defendant ,Gushing and the defendants Frank S. Coit and J osephC. Barnes) administratorS, with costs.
PLATER
9J.
MENG. 1
«(Jircuit (Jourt. E. D. Penn81/Zvanfa. :March 92, 1887.) ASSIGNMENT-:-EQUITABLE-COMMISSIONS TO COLLECTOR.
An agreement, by a creditor, to pay an agent a pllrt of a sum collected from a debtor. as ,a compensation for .services rendered' in collecting such sum, is not an equitable assignment of any part of the debt, and gives the agent no claim against the debtor.
Sur Rule to Set Aside Release of Verdict. Mr. Beck, for the rule. J. Levering Jones, contra. BUTLER,J.. This is an informal appeal to equity. Harlan and Meng alone are interested. To sustaintbe application,.tbe right set up by Harlan must beelear. III my judgment, it is not. On the contrary, it is open to very serious doubt whether be has any right as against Meng. The agreement between Harlan and Plater is an arrangement for oom· pensating the former's services, in collecting the debt from Meng. Ii , does not purport to transfer any present (nor indeed any future) interest lReported by C. B. Taylor, Esq., of the Philadelphia bar.
UNITED STATES 'D. WILLIAMS.
309
in the debt. It simply confers a right to a portion of the money which may be ·collected. This portion is uncertain, depending on the amount eventually recovered. Certainly the agreement should not be regarded as a transfer of any part of the debt, or the verdict subsequently recovered for it. Under circumstances of great hardship, when serious injustice is threatened, the doctrine of equitable or constructive assignment has _been carried very far, but it has never been applied under circumstances such as are shown in this case. No doubt Harlan acquired rights against Plater, and has a cause of action against him for part of the money received. This, however. does not .touch the question of Meng's liability. Indeed, had the agreement beeJ;ra transfer in form, of a part ofthe debt, it is doubtful, to say the least, whether Harlan could have asserted a right against Meng. At law he certainly could not. A creditor:cannot divide his clal:tninto several parts l and, by assignment to$everal persons, make' hi6' debtor answerable in ,suit to each. Why should he be allowed to make his debtor answerable in equity under such circum!ltances? It is said in more than one itlstance in this state that eqnity will· recognize.and enforce such assignments. I am not convinced of the soundness oHhis, when applied to ordinary circumstances, guch as exist·here. . .. Then, again,the agreement on which the right depends, is not such as equity should enforce. . At common law such contracts were <lhampertous, and Harlan would have been liable to indictmenUor entering into it. While: this is no longer so, generally. the fact remains that such contracts are of doubtful policy and morality; that they tend to ilpeculation, and involve danger of injustice and oppression. Equity ilhould not, tHerefore, lend its aid for their enforcement. . . The rule must be dismissed. _, '. _t'-........
(Oircuit Oourt. D. Ne'Dada. November 23, .1886.
1., PUBLIO LA!fDS-'-"WHAT ARE APPROPRIATED." By act ·of congress approved June 16, 1880, there was granted to the state of Nevada 2,000;000 of acres onand, in lieu of the sixteenth ..ad thirty-sixth sections of land theretofore granted for school purposes. the same to be selected fr9m "any unappropriated, non-mineral land in said state, "in the manner provided in said act. Held, that lands of which parties had been in the peaceable possession for several rears, and on which they had erected costly and valuable improvements prior to the passage of the act, and prior to any selection ·thereof by the state, were not "unappropriated * * * public lands, " within the meaning of said act. '2. SAKE-LANDS SUB JUDIOE. While ,a contest is pending and .undecided in the general land-office. as to the right of the state to select certain lands. and. have the same listed to it, such landS are 8ub judice, and lJ,ot within the terms of said act. :S. SAME-FRAuD IN OBTAINING · . Where title to government land has been obtained by fraud perpetrated upon the officers of the land-office, the United States can maintain a suit to vacate and set aSIde such transfer of title. -(Syllabus 'by ·tMOourt.)