Gores v. Field

109 Wis. 408 | Wis. | 1901

Lead Opinion

The following opinion was filed January 8, 1901:

Wikslow, J.

The amended complaint, to which the demurrers before us were interposed, contained the same allegations of official misfeasance and nonfeasance (with one immaterial omission) as those contained in the original complaint, which was passed upon by this court in the case of Gores v. Day, 99 Wis. 276. The grounds of demurrer which were considered and decided in that case were the general , ground that no cause of action was stated, and the further ground that the court had no jurisdiction of the subject of the action. It was there held, in substance, that the complaint stated an equitable cause of action at common law, namely, an action by a creditor to enforce the right of the corporation to compel corporate officers to account for and pay over to the assignee assets of the bank lost through their wrongdoing. This was the sum and substance of that decision, and we are entirely satisfied with the conclusions there reached upon the questions presented, and shall not re-examine them. There are, however, other questions now presented which require consideration.

1. It is argued that two causes of action have been improperly joined, namely, an action in equity to recover of bank officers moneys of the bank negligently dissipated, and an action at law for damages suffered by a depositor who was induced to deposit his money in the bank by deceitful representations as to its solvency. Were the premises of the argument correct, doubtless the conclusion would follow, because not only is the one an action in equity and the other an action at law, but the former is brought to enforce a right of action accruing to the bank, in which the recovery, if any, must go to the assignee for distribution, and the latter is brought to enforce a liability for damages to the individual creditor, caused by the deceit. Kitten v. Barnes, 106 Wis. 546.

It is true that the complaint contains allegations to the effect that false statements as to the solvency of the bank were given out and published by the defendants, and that the plaintiffs relied thereon in making their deposits, and it is certainly true that these allegations would be pertinent and necessary in an action at law for deceit; but, viewing the complaint as a whole, we do not regard them as introduced in this action for the purpose of claiming individual recoveries by the plaintiffs on that ground, but rather as historical in their nature, and simply as intended to fully place before the' court a full statement of the acts of the defendants in their management of the affairs of the bank. Such was, in effect, the conclusion reached in the case of Gager v. Marsden, 101 Wis. 598, where similar allegations were contained in the complaint, although the effect of the allegations in question is assumed and not discussed in the opinion.

2. It is argued that the complaint shows that an action has already been brought to close up the affairs of the corporation, and therefore that no subsequent action can be maintained; citing Foster v. Posson, 105 Wis. 99, and Cunningham v. Wechselberg, 105 Wis. 359. The allegation relied upon is as follows: “That the legal liability of stockholders to contribute to the loss of said corporation, as plaintiffs are advised and believe, has been enforced and'paid.” It is sufficient to say, as to this contention, that it does not imply that any action to enforce the liability of stockholders has ever been brought. The stockholders may have discharged their liabilities upon demand and without action, and such payment would properly be alleged as an enforced payment. Even fif the allegation in question implied the bringing of an action, it would not necessarily follow that such action was a winding-up action.

3. The defendant Field insists that the complaint shows that more than six years has elapsed since the cause of action accrued against him, and hence that it is barred by sec. 4222, Stats. 1898. The complaint alleges that Field ceased to be a director February 23, 1893. Another allegation of the complaint is to the effect that the plaintiffs did not know the facts until the filing of the inventory of the bank by William Plankinton, the assignee, to wit, on the 21st of June, 1899. Hence it is argued that the complaint, on its face, shows that the action could not have been commenced until after June 21, 1899, or more than six years after Mr. Field's official connection with the bank ceased. The difficulty-with the argument is that the complaint shows on its face that the date of June 21, 1899, is an error. The complaint shows that the voluntary assignment of the bank to Mr. Plankin-ton was made June 1,1893, and that the assignee duly qualified and entered on his duties, and was still in possession of the assets of the bank when the complaint was drawn. The statute requires the assignor to file its inventory, certified by the assignee, within twenty days after the assignment (Stats. 1898, sec. 1691), and there is no allegation that such duty was not performed. How it could be delayed for six years is certainly not apparent. We think that no such effect can reasonably be given this allegation as the appellant claims; that it must be considered a clerical error, and hence can furnish no basis for a conclusion as to when the action was commenced. So concluding, we cannot say that there is anything on the face of the complaint to show that more than six years has elapsed since the cause of action accrued and before .the action was commenced against Mr. Field.

In this connection a contention made by the respondent should properly be noticed to the effect that the statute of limitations properly applicable to this action is not sec. 4222, Stats. 1898, which is the general six-year limitation statute, but rather sec. 4252, which provides, in substance, that actions against directors or stockholders of a moneyed corporation or banking association to recover a forfeiture imposed or enforce a liability “ created by law ” may be brought within six years after discovery of the facts by the aggrieved party. We are satisfied that the words “liability created by law ” refer to a liability created by statute law, and that, as the liabilities attempted to be enforced in this action are common-law liabilities, the section cannot be held to apply. Such was the ruling upon a statute identical in terms in New York. Brincherhoff v. Bostwick, 99 N. Y. 185. See State v. Grove, 77 Wis. 448.

4. It is claimed in behalf of the defendant Murphy that the complaint does not charge him with any act of mismanagement by which the assets of the bank were lost. Murphy was not a director of the bank, but simply cashier; and it is ■certainly true that many of the acts charged,— such, as allowing the defendant Day to have control and management of the bank,— are acts which, ordinarily at least, could only be done by the directors; but there are some allegations in the complaint, which, though very general in their nature, we think must be reasonably construed as charging that moneys of the bank were lost by the negligence of the cashier. One of these allegations is to the effect that, “ by the negligence and want of ordinary care and diligence on the part of the defendants, and each of them, in the discharge of their duties as directors and managers of said bank, and inattention to its affairs, permitted and allowed the funds and deposits therein and belonging thereto to be squandered and lost, and said bank made insolvent,” etc. We think this allegation must be held to include the cashier as one of the delinquent officials.

5. There remains to be considered the single ’question whether there is a defect of parties by the nonjoining of the corporation itself or the- assignee as a party defendant. In considering this question the nature of the action must be remembered. It is not an action to recover property of the plaintiff, but an action to enforce rights of the banking corporation against its officers, and allowed to be brought by the plaintiff simply because the proper officers of the corporation either actually or virtually refuse to bring it. The recovery, if any, becomes part of the assets of the corporation, and goes to the assignee. Gores v. Day, 99 Wis. 276. Logically, the corporation should be made a party to suck an action, and must be an indispensable party where the corporation is in fact a “ going concern,” and the recovery, if any, will go into the corporate treasury. 2 Pomeroy, Eq. Jur. (2d ed.), § 1095; Land, L. & L. Co. v. McIntyre, 100 Wis. 245-256. It is believed that this has been the uniform practice in such actions, and. for the palpable reason suggested above, namely, that the cause of action which is being enforced is the cause of action of the corporation, and the moneys received will go to the corporation as trustee for its members, subject, of course, to the rights of creditors, if any such rights exist.

The reason for the ride disappears, however, when it appears, as in the present case, that the corporation, for all practical purposes, is defunct. While not, perhaps, legally dissolved, the allegations of the complaint show that it has ceased business for years, that all its property and property rights have passed to its assignee, and that the recovery here, if any, must go to the assignee, to be distributed under the order of the court, and can never reach the corporate treasury. These considerations effectually remove from the case the necessity of the presence of the corporation, which at best is now little more than a name; but they call all the more loudly for the presence of the assignee of the corporation, who must administer the fund recovered, and we cannot but regard his presence in the action as indispensable. It is true that William Plankinton, who is alleged to be the assignee, is a party to the action in his personal capacity; but we cannot regard this as sufficient. The test must be whether a judgment in the action would be binding and conclusive upon Mr. Plankinton’s successor in office. Manifestly, it would not as the action is at present constituted. It would be dangerous to hold that a judgment in an action to which a person is made'a party simply as an individual would be binding on such person as a public officer, and upon his successor in office. We therefore conclude that the assignee of the bank in his official capacity is a necessary party to the action, and that, not having been made a party, the demurrers should have been sustained.

By the Court.— The orders appealed from are reversed, and the action is remanded with directions to sustain the demurrers.

BardeeN, J., took no part.

Motion by the respondents for rehearing were submitted for the appellants on a brief by Miller, Noyes & Miller, attorneys for Murphy, and C. T. Hickox, attorney for Field, and for the respondent on a brief by M. M. Riley, Moritz Wittig, and Joseph B. Doe, of counsel.

. To the point that the assignee is not a necessary, and not even a proper, party to an action to enforce the liability of directors and other corporate officers for neglect of duty, counsel for the respondents cited Frost v. Citizens’ Nat. Bank, 68 Wis. 234; Kyes v. Merrill F. Co. 92 Wis. 35; In re Gilbert, 94 Wis. 108; Farnsworth v. Wood, 91 N. Y. 308; Bank of Niagara v. Johnson, 8 Wend. 645; Gainey v. Gilson, 149 Ind. 58; Runner v. Dwiggins, 141 Ind. 238, and cases cited; Angell & A. Corp. § 312; Greaves v. Gouge, 69 N. Y. 154; Brinckerhoff v. Bostwick, 88 N. Y. 52; Maxwell v. Northern T. Co. 10 Minn. 334.

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Rehearing

The following opinion was filed March 19, 1901:

Winslow, J.

Upon motions for rehearing made by respondents in these cases, we are ■ asked to review and reverse that part of the former decision which holds that the words “liability created by law,” in sec. 4252, Stats. 1898, refer to liabilities created by statute law alone, and it is said that, by so holding, we have overruled the decision in the case of Hurlbut v. Marshall, 62 Wis. 590. We have given the point careful consideration, but are not convinced that we have erred, nor are we convinced that Hurlbut v. Marshall has been overruled. In that case the meaning of the words, “ made liable by law,” in sec. 3221, R. S. 1818, was under consideration, and it was held that they included all statutory and common-law liabilities. This holding was based upon the evident intent shown in that section, and the other sections in immediate connection therewith, that all legal liabilities of the officers or stockholders of a banking corporation to its creditors should be settled in one action in equity.

As to the meaning of the words, “liability created by law,” in sec. 4-252, however, none of these considerations applies. This section is a part of the chapter on limitations of actions, and stands by itself. It simply declares that the chapter “ shall not affect actions against directors or stockholders of a moneyed corporation or banking association to recover a forfeiture imposed or to enforce a liability created by law,” etc. That the law named in this section is statute law seems to us quite clear. The law referred to is one which imposes a forfeiture or creates a liability. Forfeitures are only imposed by statute law. We see no occasion to retrace our steps on this question of construction, nor do we think that the case of Hurlbut v. Marshall has been in any respect overruled.

We are asked by respondents to decide what statute of limitation is applicable to the cause of action stated in the complaint. This seems a question of some difficulty, and as it has not been adequately argited, and its decision is not necessarily called for upon the complaint as it stands, we refrain from expressing an opinion on the question.

By the Gowrt. — Motions denied.