Banks v. Darden

By the Court.

Lumpkin, J.

delivering the opinion.

[1.] The only error, it seems to us, that was committed by the Court, relative to the continuance of the cause, was the construction put upon the Act of 1853'-’4. The Court held that the defendant should state, in writing, under oath, what he expected to prove by the absent witness, before the plaintiff could be called upon to admit the truth of the facts expected to be established.

The Act reads thus: “ No continuance shall be allowed in any case, in any of the Courts of this State, on account of absent witnesses, or for the purpose of procuring testimony, when the opposite party is willing to admit, and docs not -contest the truth of the facts expected to be proved; and it shall be the duty of the Court in-which the case'is tried, to order the proof so expected to be made, to be reduced to writing.” (Pamphlet Acts, p. 52.)

The words of this Act are too plain to need interpretation.All that it requires of the party is, that he reduce his statement to writing. To rule, therefore, that in addition to that, he shall swear to it, is to add to the Statute. And the omission thus supplied by the Court, was not accidental; there was a good reason for it. By the rules of practice, when, on application for a continuance, the party made an affidavit of the facts which he expected to prove by the absent witness, the opposite party was not allowed to force a trial, by admitting the facts stated in such affidavit. (36th Common Law Rule, 2 Kelly, 473.)

Why not allow a trial to be forced, by admitting the facts sworn to ? The reason was, because the applicant would be tempted to commit perjury, by making oath, that he expected to prove moro than he really could; and thus obtain a continuance or force his adversary, by making an undue admission, to give him an unconscicntious advantage. The Statute was passed to change this rule; and the Legislature having in mind tho old practice, and the policy upon which it was predicated, determined to obviate the mischiefs of delay which it occasioned, and at the same time, not to hold out to the applicant any temptation to forswear himself. Hence, it intentionally dispenses with an affidavit, and requires only that tho statement, as to what the party expects to prove, be reduced to writing. And upon this point we reverse the judgment of the Circuit Court.

[2.] Was the Court right in over-ruling the demurrer of defendant’s Counsel to plaintiffs’ writ ?

The objections to the declaration were two-fold — 1st. Because the liability -Sf-dlie directors created by the 4th rule of the charter of, tke.ffiank, was penal, and not remedial; and 2dly, That this liability was joint and not several; and that consequently, Sill oí tho directors ought to have been included in the suit, or a satisfactory reason assigned for the omission; as that the patties left out were beyond the jurisdiction of the Court, &c.

As to the first ground of demurrer, that the suit should have been for the excess, and that this provision of the Statute was penal; and that any creditor of the corporation, even for , five dollars, was entitled to recover the whole amount of excess, leaving tho rest remediless, ¿Cs to this particular security, we cannot, for a moment, yield our assent to such a construction. And we consider the case of Neal against Moultrie et al. (12 Ga. Rep. 104,) a full adjudication of the point to the contrary.

The Legislature were anxious to protect the community against the evils of over-banking, and an irredeemable currency. And to effect that object, they restricted the issue of bills to three times the amount of specie actually paid in; that being considered, from experience, tho proper relation which paper should bear to specie — the basis of all legitimate banking. In the next place, not only the corporation, itself, was bound, but the directors were made liable in their individual and private capacities, to any creditor, for transcending this ratio, of three to one. And in the last place, they allowed the bill-holder, in common with every other creditor, to resort, not only to tho corporation and to this recourse against the directors, but they gave him, in favor of the circulating medium, over every other class of creditors, the additional right, to hold the persons and property of the stockholders pledged and bound for the ultimate redemption of the bills of' the bank.

This construction, and none other, willj ing and policy of the law. If support tain the previous decision of this Cou® argument of Mr. Moses, who never lightening the labors of this Court, is ncj stration.

The second ground of demurrer, is as ü^¿he non-jjámlor of the co-directors. This suit is brought upon twovfertificates of deposit made by the bank, of which the defendant was a director, and while he was a director; and they constitute a part of an excess created by the administration of the board of which he was a member, and for which ho ivas personally liable. These certificates were issued by the cashier, Matthew Robertson, and regularly entered on the books of the bank; the director sued being absent, at the time, at the city of New York, attending to the business of the bank.

Did the charter mean to give a separate action against any one of the directors ; and is that according to its spirit and intent ?

The 4th part of the 6th section of the charter under which this action was brought, is in these words:

“ The total amount of debts which the said corporation shall at any 'time owe, whether by bond, bill, note or other security, shall not exceed three times the amount of their capital stock actually paid in, over and above the amount o£ specie actually deposited in the vaults for safe-keeping. In case of excess, the directors under whose administration it shall happen, shall be liable for the same, in their private and individual capacities, and may be sued for the same in any Court of record in the United States, by any creditor of the' corporation, any condition, covenant or agreement to the contrary, notwithstanding; but it shall not be so construed as to-exempt the said corporation, or the lands, tenements, goods- and chatties of the same from being liable for and chargeable with the said excess.” (Prince, 127.)

In the first place, we say, that the language of the Statute is in the plural — “the directors” shall be liable, &c. It is said that this is not to determine that the action shall be joint, but that it designates a class that shall be liable for the excess; as it speaks of the stockholders as a class who shall be liable for the Mils. But the analogy fails in this: the-stockholders are jointly liable in Equity, and rvould be at Law, but for the fact that different judgments would be recovered against each, in proportion to his stock. And for this cause, only a joint action, at Law, cannot be brought against the stockholders. The words of the Act would justify, and seem to require it, but the remedy is impracticable, for the reason just giveir. But no such difficulty lies in the way of a joint suit against the directors. The same verdict and judgment would be rendered against all the defendants.

But it is said, that the directors are not made liable, in their private capacity, but in their private and individual ca,~ parities. And it is asked, why is the word individual super-added, if not to show separate — single; and why is capacities-used instead of capacity, but to show that the Legislature had in its mind the separate capacity of each director ?

I am never satisfied, when the rights of persons are made-to depend upon this sort of verbal nicety and critical dissection of a Statute. The'Acts of our General Assembly are frequently drawn by laymen instead of lawyers; and to apply the legal acumen of Dwarris and Saunders to their interpretation, is a very uncertain method of arriving at their true meaning. It was simply intended to annex a personal liability to the official delinquency of the directors.

In the parallel provision, in the Commercial Bank of Macon,, and a dozen others, the Legislature declare that the directors shall be liable in their “ individual, natural and private capacities,” thus supperadding the term natural to the phrase as it stands in the Planter’s & Mechanic’s Bank charter; still,, they did not suppose that all these words, together, gave the right to sue any one of the directors separately; for it is added, in every one of these charters, “and an action of debt may, in such case, be brought against them or any of them,., their or any of their heirs, executors and administrators.” (See Prince, Title Banks.)

For the official misconduct of the board of this bank, in creating an excess, there is no escape — neither absence nor' dissent from the proceedings; and it is a remarkable fact, too much so to be fortuitous, that every charter which I have examined, from that of the Bank of Augusta in 1810, to the Planter’s & Mechanic’s in 1836, whenever this personal liability clause, as to the directors, has been introduced and a-separate suit is given, there is a way of escape provided for such as did not participate in the tortious act. This coincidence, I repeat, is not accidental. Indeed, the reason is manifest. Here are seven directors, one of whom was absent from the State when the illegal act was committed, and another dissented and entered his protest upon the minutes, leaving five only liable to the creditors. But for the provision that any of the directors might be sued, the action must have been joint. The creditor would be compelled to include, in his writ, two defendants who were not in default, and who must-be acquitted upon the proof at the trial. What, then, would have become of the suit, which could only be joint, when two of the defendants were discharged ? Under ,the law as it ' stood at the date of these charters, or at any rate, as administered by the Courts, the action would have abated. Who-does not see the propriety, therefore, of allowing separate actions against one or more of the directors under such circumstances ?

But no way of escape is afforded for any director, under any plea or pretence whatever, under the Planter’s & Mechanic’s Bank charter. The director may have been a thousand miles off in the service of the institution, as Banks was; still, if an excess of indebtedness be contracted, that excuse will not avail him. Ho may have been present, laboring to prevent the very abuse by his colleagues for which he is sued, and when the measure was carried over his head, and in despite of his opposition, ho may not only have recorded his vote in the negative, but entered his solemn dissent upon the minutes of the board. The law will take no excuse. He was one of the board of directors, under whose administration the charter was violated — that fixes his liability. The bond demands the pound of flesh, and it must be paid.

I ask, under such a charter, is it not mete and proper for all the directors to bo joined, seeing that all are responsible and no way of escape is provided for any?

Counsel contend earnestly for their construction, and insist, that in the present case it works well; that here the defendant was not only a director, but president of the bank; and consequently, the manager of its business — the executive head of the concern; that he was in New York for the purpose of raising means outside of the capital, on which to extend the issues of the bank, when ho knew that such issues were illegal, and made himself and his co-directors personally liable.

Suppose this were true, and that this bloody legal picture is not over-colored nor- the testimony misapprehended, and that, in this instance, the justice, wisdom and foresight of the Legislature, would be amply vindicated, by so construing the charter as to enable “ the defrauded creditor to select from an innocent board of directors, who are all equally liable, the great architect of the wrong and ruin that has been thus boldly and recklessly perpetrated on the community.” Every medal has its reverse. Instead of selecting this particular defendant, steeped in guilt, as Counsel imagine and represent him to be, this same construction, it will be observed, would have entitled this plaintiff to have passed him by entirely, notwithstanding he had “ fattened on the fruits of the evil he had scattered abroad,” and have enforced his demand against any other innocent member of the board of directors. What, then, would have been thought of the “justice, wisdom and foresight” of the Legislature in passing such a law ?

Again, it is asked, shall the rules of construction and the laws of pleading, be strained to shield this trustee of the stockholders and of the public, that the plaintiff may lose his debt entirely, and the bill-holders be turned from the directors to innocent stockholders, who confided to the direction, . generally, but particularly to this defendant, the president of the bank, the due administration of their affairs'?

Admit that the evidence warranted the assumption, that the stockholders, in -the Planter’s & Mechanic’s Bank of Columbus, confided to John Sanies, particularly, the management of their monetary affairs, how docs the joinder of all the directors, instead of a suit against him alone, cause the plaintiff “.to lose his debt entirely, and the bill-holders be turned from the directors to the innocent stockholders ?” We are at a loss to comprehend this logic ; on the contrary, the very reverse of this result is true: Better -for the creditor, and better the stockholders, that all seven should be sued, rather than one.

We feel no difficulty,, then, in holding that, under the charter of this bank, an action cannot be brought against a single 'director, unless a sufficient 'averment is made, showing why the others are left out. The Legislature has not authorized a separate suit, as in most of the other bank charters, in each one of which provision is made for the innocent director to relieve himself from accountability; no such door is opened for the directors of this bank; they are all considered in pari delicto. In case of excess, the directors, (plural,) under whoso administration it shall happen, shall be liable for the same. Rut it is not added, as it is in the charters of the Rank of Augusta, Planter’s & State Rank, Farmer’s Rank of Chattahoochee, Commercial Rank of Macon, and Insurance Rank of Columbus; “ and an action of debt in such case, may be brought against them, (the directors,) or any of them, their, or any of their heirs, executors or administrators,” which, or similar words, were indispensably necessary for the purpose of giving a several action against each of the wrongdoers.

After what has already been said, we deem it scarcely necessary to add, that the defence set up, that Ranks was absent at the time the debt sued on was contracted, and for some time prior and subsequent, is wholly unavailing. A Statute is a stubborn thing; we can neither add to nor take-from it; and the very same course of reasoning by which wo satisfied ourselves, that all the directors must be joined, establishes the further fact, that neither absence nor dissent constitutes any legal excuse for a director under this charter. This plea is'expressly given where a separate action can be brought. Rut neither a separate action nor this defence are allowable under this charter. We concede that this is a stringent restriction; but, without it, the 'personal liability clause would be a mockery.

The decision of these questions disposes of many of the minor points.

[3.] This being a Statutory remedy, a party seeking the benefit of it must pursue it strictly. The non-joinder of all the directors may be taken advantage of at any time, and need not be pleaded on abatement. The plaintiff must make out his case under the law, and according to law. He must .stand rectus in curia.

[4.] The 4th plea was unnecessary. The fifth was properly stricken. The Statute of Limitations of six months, applies only to a penalty; but this being a Statutory remedy, the cause of action was not barred under 20 years. The .same reason justifies the striking out the 6th, 7th, 10th, 11th and 12th pleas, they being all pleas to limitations of six months, and five and six years. The 8th plea- is a duplicate of the 3d, and we have already decided that that was properly stricken out, the Act of incorporation not making the absence of the defendant from the State a good defence. The 9th plea is a duplicate Of the 4th, which has already been disposed of.

I would remark, that plaintiffs’ Counsel have correctly understood the decision of Thornton and Lane, (11 Ga. R. 500,) namely: that the individual liability of the directors and of the stockholders, under this charter, is not strictly a contract, although, from convenience, it is frequently called so; but it is an obligation, quasi ex contractu, which is imposed by operation of mere lato. The State passes a law— the law of incorporation of the Planter’s & Mechanic’s Bank. This law, unlike public law, is binding upon no one until some one voluntarily assents to make it the rule of his conduct. The stockholders, in accepting the charter, and the directors, when elected, made it, for themselves, a rule of conduct. By the issue of more than three dollars to one, the directors committed an illegal — a tortious act, and made them selves personally liable to the plaintiff for a breach of duty, because he was a creditor of the corporation. And an action quasi ex contractu is raised in his-favor against the directors. This is a Statute liability — it is quasi ex contractu —but it cannot be called, technically, a contract; it need not be proved as contracts between parties must be.

[5.J As to the next assignment of error, while we admit that the books of the bank are evidence, both for and against the corporation; still, it was competent to prove, by parol, independent facts, such as the division and distribution of the stock, and the issuing of $280 or $300.000 in bills.. Wo deem it unnecessary to extend the argument upon this point.

[6.] As to the teller’s settlement, we apprehend the rule to be this: When books are admitted in evidence, they are testimony before the Jury, as to all entries appertaining to the same transaction; still, the party offering them may sellect and read to the Jury such portions as answer the purpose for which they were introduced by him, leaving it to the opposite party to submit any other parts that he may see fit.

[7.] It is in proof, that Francis Cottinett was the owner of the certificates in litigation; that ho came by them in the due course of trade and for a valuable consideration, and before they were dishonored; and that the demand, by the Notary, of payment, was made at his request; and that the paper was subsequently transferred to II. D. Dardon, the plaintiff; therefore, if Cottinett’s title to the certificates was good, Darden’s was. And all requests made or charges given, contrary to the facts thus proven and uncontradicted, were either hypothetical or erroneous.

We consequently hold, that the Court was right in overruling the defendant’s motion to non-suit the plaintiff, because no demand on the bank had been proven by one authorized to make it.

[8.] The Court charged the Jury, that if they believed that the bank, at the time of issuing these certificates, owed more than three times the amount of capital stock actually paid in in specie, the directors, at the timo, were guilty of an excess, -and therefore liable.

In order to charge the directors, it must be made appear that there Ayas an excess, and that it happened during their ¡administration, viz : that the total amount of debts AAdiich the corporation OAved, exceeded three times the amount of capital -stock actually paid in at that time, the charter requiring, not ¡the Avhole amount of the capital stock to bo paid in specie, but tAventy-fivc per cent, thereof, or $250.000 only.

But Iioay absurd the struggle over this and many other matters in this record, some of AA¡hich Ave have intentionally overlooked, upon the maxim, de minibus. The defendant was a director of this bank, from its first organization, in 1887, to 1841, Avhen these certificates Avere issued — a capite ad cal-c\em. And Ayhat is the startling fact disclosed by the proof before us ? Beginning with an issue of $52.000 on a specie basis of $199.88, and ending with an indebtedness of $766.-544 26, on a specie capital, including capital stock paid in, and deposits of $1,855 ! Or a circulation of 375 to 1, instead of 3 to 1! And yet, about one half of the bill of exceptions is made up of a Sebastopol fight — mining and counter-mining —assaults and repulses — over the question, of whether or not there was an excess of indebtedness created under the administration of Col. Banks!