12
FlWQAL REPORTER,
vol. 44.
MCCULLOH 'lJ. SMITH.
(Circuit Oourt, S. D. New York. October 1, 1890.) '3ALB-F.ULURE TO AOOEPT-REMEDllllS OP SELLER.
Where a corporation wrongf'':!ly refused to lK'Cept and pay for certain watch movements made for it, the maker may himself sell them, though the name of the coIllOration was, by its direction, inscribed on each movement.
·
NATIONAL EXCR. BANK fl. PETERS.
13
NATIONAL
ExcR. BANK OF BAJ.TIMORE
V. PETERS
et al.
(Circuit Court, E. D. Virginia. October 25, 1890.) NATIONAL BANKS-LIABILITY OF DIRECTORS-EQUITY JURISDICTION.
Rev. St. U. S. §§ 5234, 5239, prescribing the method of enforcing the liability of the directors of national banks for violation of t1:le banking law, are exclusive of other remedies, and a crefiitof of an insolvent bank, for which a receiver has been appointed, cannot sue its directors for the purpose of making them personally liable for the mismanagement of the bank.
In Equity.
On demurrer to bill.
G. M. Dillord and John Neely, for complainant. Alfred P. Thorn, Sharp &: Hughes, and John B. Jenkins, for defendants. HUGHES, J. The complainant is one of the creditors of the late and now insolvent Exchange National Bank of Norfolk. The bill is brought against the late directors of the insolvent bank, one of whom was president and another cashier, and against the present receiver of that bank. The complainant bank transacted with the Norfolk bank the business of collections, each for the other. In the fortnight preceding the closing of the doors of the insolvent institution, which occurred on the 2d of April, 1885, a balance of 814,883 was in favor of the complainant against the Norfolk bank, less dividends, not exceeding 60 per cent., that have been paid by the receiver. The bill, after setting out this claim, charges that the defendant directors"Did not give that care, supervision, and attention to the affairs of the banIl: which the duties of their otfice and the nature of the trust reposed in them required; but, on the contrary, neglected the same, and intrusted the entire bu,siness concerns of the bank to [its president and cashier,] who recklessly and improvidently loaned the money and securities of the bank to \-ariolls embarrllssed and insolvent firms and individuals. without taking proper allel sufficient securities for the protection of the creditors and others confiding in the directors' management of the bank. and recklessly converted the money of the bank to their use; the said president and cashier carrying a joint-account at said bank, which at the time of its failure was overdrawn in the enormous sum of over sixty thousand dollars." The bill proceeds to set out a detailed series of "facts and circumstances," similar to the statement as to the president and cashier,relating to these officers and two other of the defendant's directors, with a view of showing more specifically what it characterizes as the "g;ro!'s negligence and mismanagement of the bank by its directors and officers." It charges that "it was the custom of the directors to meet only to organize and to declare dividends," and that the misappropriation of the funds, and wrongful acts which it describes, occurred during the management of the affairs of the bank by the directors, who are defendants in this suit. The bill prays for a discovery on oath from each of the defendllnts of all facts in their knowledge, and which they may have heard and believe, touching the mismanagement complained of, and that they shall severally answer, generally and specifically, the charges which
,
14
J'JiIDERALREPORTER,
voL 44. ",
it sets out. It prays that the matters charged may be referred to a commissionei,of the C01.'lrtl to 'ascertain ,the truth,. of the 'statements and charges which it makes, and the liability of the defendants severally to make good the loss complained ofl and to ascertain and report all other matters pertinent to this case which complainant has not had the means of optajning. There imiyer for general relief." ", , ' The'epitome thus given of the bill shows sufficiently the character of thiSStlit,and, its face the grounds of demurrer on which the case comes before the court; anel the question presented is whether a creditor of an insolvent national bank of the United States can sue its directors for the purpose of fixing upon them a personal liability for the mismanagement of such 'an institution. It ir,loot a question whether these'direotors are liable or not, or may be sued or not, and subjected to the liability, but only whether a creditor of a national bank can sue its directoJ'S Jor mismal;lagement andp.egligence of his own mere volition. It is, law thllt, if Jones injures Smith's perE.!0p, and Smith a debt, Brow,n cannot sue Jones for damages as a means of making"goodhis debt against Smith. So, if Jones buys a horse from. Smith, BrQwnl Smith'lil creditor, cannot aue Jones, Smith's debtor, for the ,purch,:ase money. There is no privity between Jones and Brown, either o£;contract or tort, Qn which the :action can rest. The universal rule, as oI!! ,as the law itself, is that, unless there be privity between plaintiff and ,defendant, nonction will lie; and in this respect equity follows the IIlW, although equ:ity,whenonce ha,ving cognizance of a cause between principal parties in privity, will then, when necessary:to effect its persons incidentally conpolicy, of doing complete justice, nected with the subject of controversy before it, whether these latter are in privity or not. Therule<has no relaxation except where statute law to'relieve a'oatdship, which, in exceptional cases, would result fr6ulits and except where equity, after a wrongful refusalto' $u,ebythe pr9P13r ,plaintilt', then authorizes suit under its own A case in which the statute1aw intervened wasttaat of Trus.tee8 v. BOsaieux, 4 Hughes, .(U. S.) 387, 3 Fell. Rep. 881, .on brief for complainant. The ('ase iii known to the profession of Virginia as "The Dollar Savings Bank That suit was brought by trustees in baukruptuyagainst the directors of a insolvent bank, by trustees whom the nationalbankruptcy. act expressly authorized and directed to sue for assets!of,thebankrupt. That suit went to a decree from· which there was no appeal, and the directors paid into the assets in bankruptcy the amouut settled upon as proper in the case. Iftb.ll, receiver of the late Exchange National Bank of Norfolk. instead of a !single creditor, bad brought the: suit now under consideration, the question: of demurrer would haNeheen ,similar in its main feature, but its ,features; ,to ,tbatwhich was decided onderilurrer in the Dol1a.r Sa'lJings Brmk Oase;, because; under the national banking act, the insolventinationalbank is authorized and required, under thedil'l"Ction ofthe cQmptroller of the ctlrrency;to take possession of the assets of tbe insolvent bank, and to collect all debts,
Case."
N4-lrIONAL ,EXCH. 'BANK'V.PETERS·
'1:5
.dues, ,a1'19to it·. Section 5234. IIi respect to directoTs of 'llninsolvent national. bank, the national' banking act provides if they knowingly violate, or knowingly permit any of. its officers, agents, or servants to violll:te, lj,ny provisions of law enacted ,to secure a proper administration of the affairs oCsuch banks, its charter may be forfeited, on a decree by a proper court of the United States, in a suit brought by the com,ptrolle;r of the currency in his own name for that purpc;>se.. Section 5239.· It further provides that every director who shall havepartiqipated in or a!\sen:ted to the violation shall be liable in his personal and qapacity for all damages which the association ,or its s.hare,holders shall have sllstained in consequence .of such ,violatioQ., Thus the13tatute law makes directors .ofanational bankliahIe ill: v:iolation,s of their duty, or negligence or malfeasance ,prescribes bow they sball he subjected to liability. as d,jrectQr's, .liable in damages1they are .amenable to suit for damages in a jury not,.! infer, to suit in any other form, whether at ,law or in eq\lity. But, if they Were amenable to liability in a sounding in !lamltges, then, the recoverable betpe lawem,powersawlrequires,thereing ceiver of,the injured bank, Under: the direction of the comptroller, and , him for the claiD:\. EXCept the receiver, the statute.law nowhere authorizes suit to be brought. by any person not in privity · of national 'banks. , The ;bill of complaint under consideration hItS therefore no sltnction in Jlespect to its party the statute ).aw oft\1e land. Does it present a case in which equitYI,in the exercisec;>f high. preregative to which it feels at liberty sometimes to resort, will relieve against the rule of privity, and entertain this suit, though brought by a. to sue? Certainly the bill contaips nothing on,its face to requi,re or to justify such a recourse. Exceptional authority to sue is given Duly in the rare .cases in which. competeptto sue wrongfully refuse to do so. When ·such a case is presented. equity will sometimes authorize and direct suit .. to be brought by some other plaintiff whom it may approve. As before said, whatever is claimed in the suit at har would be an a'l;set in the of receiver if recovered. and the statute law imposes iduty of suing rQr it, under the comptroller's direction. upon ·But this bill contains no allegation either that complainant called upon the comptroller to direct the receiver to sue, and he refused, or that the was called upon and re1)lsed. Containing no such alrecei legation, the bill makes no case for a suit by a person other than the receiver. Nor would it follow, even if such an application had been made and refused, and the fact had been duly alleged in the bill, that this suit could be maintained; for in cases where directors of national banks have violated, or negligently permitted the violation of, the laws regulating those banks, the statute law seems to require that the question of violation shall be judicially determined in a proper court of the United States, in a suit instituted in his own name by the comptroller for that specific purpose, before the liability can attach to the directors; and
16
nDERAL REPORTER,
therefore it would seem that directors cannot be pursued individually for such violation until after such an adjudication thus obtained. So tbat, if the receiver and the comptroller, though called upon to sue the defendants in this suit, had refused to do so, even the allegation of such application and refusal would have been insufficient ground of authority for bringing this suit. I am of opinion that the provisions of the national banking act enter as part into the contracts of creditors with the national banks, and that those provisions which define the liability of directors, and prescribe the proceedings to be taken against them, when guilty of violations of the act, are exclusive of other liability and other proceedings; and that it is not within the prerogative of equity to authorize a disregard of the provisions ofthe national banking act, defining such liability and pre·scribing such proceedings. In view of sections 5234 and 5239 of the ·act, I am of opinion, therefore, that this court cannot entertain the suit of a creditor against the ;directors of the late Exchange National Bank. It is useless to maintain that the bill under consideration is a general creditors' bill, and as such may be entertained, in accofdance with the usual practice of equity, in creditors' suits. A creditors'bill is one brought by creditors of an insolvent debtor ,against the debtor and such person ·as may have custody of his estate, having for its object an equitable distribution of his effects. It isa suit betwe.en creditors and their debtor; between parties standing in the relation to each other of direct and complete privity. No statmtory authorization or extraordinary stretch of the equity prerogative is required to validate such a proceeding. In this respect, a creditors' bill is the antipodes of the one at bar. That rests on full privity between plaintiffs and defendant; this has no shadow of privity to stand upon. But even if this were a bill resting on privity, it would be a creditors' bill only in form. It was filed on the 31st March, 1890; whereas, on the 2d April, three days afterwards, the fifth ·amliversllry of the closing ·of the doors of the Exchange. National Bank of Norfolk recurred, when the claims of all creditors who could come in and participate in the benefits of the bill became barred by limitation. No;petitibhwasfiled in the case by any creditor befote the 2d April, 1890, and of' course Ilone have been filed since. 8'0 that, in fact, the billis"that of one creditor alone or an insolvent national bank, brought without previous application to the comptroller and receiver, alid a' refusal ontheiI' part to sue. The demurrer must'be sustained, and the bill must be dismissed.
M'BRIDE
tI.
BOARD OF COMMISSIONERS.
17
McBRIDE ". BOARD OF COMMISSIONERS OF PIERCE CoUNTY. {Circuit Court, D. Washington, W. D. October 15.1890.) 1. INIUNOTION-WASTE-DISPUTED TITLE.
A bill for an injunction to prevent the commission of waste, which shows that the plaintiff is an applicant to purchase the premises from the United States as mineralland; tbat his right to so acquire the title is being contested in the United Statesland-oftlce; and that the defendants claim title adversely to him,-does not state a <iase within any known exception to the general rule, that equity will not interfere by injunction to prevent waste when the complainant's title is disputed. Under the rule for construing statutes, that an act of the legislature is not bindingupon the state unless made so by special and particular words, a state law, authorizing an injunction to prevent waste where two or more persons are opposingclaimants to the same tract of public land under the laws of the United States, is not·applicablf' in a case in which the state is ODe of the claimants. The word "persons." when used. in a statute. does not include the state.
9.
SAME-INTERPRETATION OJ!' STATUTE.
8.
S.unl..,.." PERSONS. "
(SyZlabus by the Court.)
Wm. H. Ried, for plaintiff. Snell, Bedford
« Claypool and Calkins« Shackleford, for defendants.
HANFORD, J. This is a suit for an injunction, brought against the defendants in their official and representative capacity as the board of county commissioners of Pierce county. A demurrer on the ground that there is no equity in the bill has been interposed, and the questions so raised are now to be passed upon. The sole object of the suit is to prevent the commission of waste upon portions of section 16. in township 20 N., of range 3E., in Pierce county, which, as the bill alleges, the defendants, in their official character, threaten and intend doing by cnusing the timber trees growing thereon to be cut down and removed, Which will materially lessen the value of the inheritance. The plaintiff shows no title to the lands, nor interest therein, other than as an applicant to purchase the same as mineral land from the United States, under the laws providing for the sale and disposal of lands valuable for the mineral therein, and the bill shows that his claims are being contested in the United States land-office by the state of Washington, and that the register and receiver of the land-office have not yet given' their decision as to his right to acquire title. As now administered in some of the courts of this country, equity will not deny to one having the title to land an injunction to restrain the commission of waste thereon, seriously impairing the value of the inheritance, on the ground of the title being disputed, or because of the pendency of an action to establish the title or todetermine any question affecting it. Such relief has been granted in a few cases, under peculiar CIrcumstances, or where by statute the equity power of the courts has been enlarged, as in the case of Lanier v. Alison. 31 Fed. Rep. 100. But in general such relief will be granted only for the protection of an existing right, and only in favor of one in whom an estate ofinheritauce is shown to be vested by unquestioned proof. v.44F.no.1-2