237 N.W. 718 | S.D. | 1931
This action is brought by the superintendent of banks on behalf of the Cottonwood State Bank, which is in the hands of the superintendent of banks for liquidation. The action is based on the provisions of sections 8980 and 8990 of the Revised Code of 1919. Section 8980 reads as follows: “No individual, firm or corporation ‘transacting a banking business in this state shall loan to any corporation, partnership or individual, including all loans made to the several members of such corporation or partnership, more than twenty per cent of the paid up capital and surplus of such bank. And in no case shall the total liabilities of the several stockholders of any bank, including any and all liabilities of any partnership or corporation in which such stockholders may be interested, to such bank, exceed fifty per cent of the paid-up capital of such bank. But the discount of bills of exchange drawn in good faith against actually existing values, and the dis
Section 8990, so far as applicable to this case, reads as follows: “Every officer and director of any bank shall be held personally liable for all excessive loans made by his bank, in such amount as such loan may be in excess of the amount limited by law.”
The complaint alleges that during the years 1919, 1920, 1921, and 1922 and up to the suspension of the said bank on September 25, 1923, the defendants as directors of said bank made excessive loans to the following parties and in the following amounts, to wit:
A. R. Morse .......................$ 1,741.00
John P’enzein ...................... 3,189.55
Rozenberger Bros.................... 10,000.00
Hall Bros.......................... 9,482.78
P. W. Hickman.................... 5,000.00
To illustrate the theory of the plaintiff, and the manner by which he arrives at the amount due on account of the loans made to each debtor, we set out the details of the P’enzein loans as follows:
On October 4, 1920, the bank had loaned John Penzein $7,115.99, of which amount $2,245.36 was in excess of the amount to which he was entitled under the provisions of section 8980. Thereafter, .payments were made on said indebtedness by P'enzein which reduced his indebtedness to an amount within the legal loan limit. Thereafter his loans were increased until they exceeded1 the legal limit to the extent of $115.99. Again his indebtedness was reduced by payments to an amount within the legal limit. Thereafter his indebtedness was increased to an amount $291.60 in excess of the legal loan limit. Again his indebtedness was reduced to to an amount within the legal loan limit and then increased to an amount $536.60 in excess of the loan limit. These four amounts added together equal $3,189.55, and this is the amount of the excess claimed on account of the Penzein loans. The amount of the excess on the loans of other debtors was arrived at in the same manner and aggregate the sum of $29,413.33. In, computing the amount of the indebtedness for the purpose of ascertaining the amount of the excess, unpaid interest has properly been excluded.
It is the contention of the respondents that where excessive loans have been made and the directors have become liable for the excess under the provisions of Section 8990, the debtor may pay an amount equal to the excess thereby reducing the amount of the loan to within the legal limit and that this would release the directors. from liability; or that the directors may pay into the bank an amount equal to the excess and take an assignment from the bank of an equal amount of the debtor’s paper, and thereby become released from liability for the excess. With this contention we are not able to agree. The purpose of enacting section 8980 was to prevent the loaning of too great a percentage of the bank’s capital and surplus to one person or company, and the purpose of section 899Ó was to malee the directors liable for the amount of loans in excess of the amount permitted by section 8980. It was the intent of the Legislature in enacting section 8990, to add to the liability'’ of the debtor the liability of the directors to the extent of the excess. Payment by the debtor of an amount equal to the excess does not release the directors, neither does advancing that amount by the directors, if they take out an equal amount of the debtor’s paper. If this were allowed the directors could then reimburse themselves by collecting from the debtor and in this way exhaust the ability of the debtor to pay without benefiting the bank. In this way they would be- taking out as much
The liability of the directors arises immediately upon the making of an excess loan and continues until the directors pay the amount of the excess or until the debtor pays the entire 'debt. Farmers’ State Bank v. Youngers, 47 S. D. 592, 200 N. W. 1019.
To put upon this law the construction contended for by the respondents would work a practical nullification of the law. If a debtor made a loan of $5,000 of which amount $1,000 was in excess of the legal limit and then was able to pa3' but $4,000, the $1,000 excess would be lost because the first $1,000 paid by the debtor would be applied on the liability of the directors and they could not be called upon to pa}' anything. It was to take care of just such cases that the law was enacted.
Section 8990 makes every officer and director liable only for “excessive loans made by his bank.” “The discount of bills of exchange, drawn in good faith against actual existing values, and the discount of commercial paper actually owned by the person negotiating the same, shall not be considered as money borrowed by such person.” ' Section 8980. It is contended by respondents that there is no evidence showing- or tending to show that the loans involved in this case were not discounts of commercial paper actually owned by some other person and sold to the ■bank, and that there is no proof to show that the notes involved were not forgeries. This contention is not supportedi by the record. The contents of the books of the bank were introduced in evidence. The entries in these books indicate that all the transactions with these debtors were cash transactions. There is nothing to indicate that these notes were taken in payment for “property sold.” When a note was taken the maker was credited with cash, indicating that the note was taken for money loaned to the maker.
It is contended by respondents that no sufficient foundation was laid for the admission of testimony of the contents of the books of the bank. An expert accountant was called by the plaintiff who testified to an audit he made of the books of the bank after it closed to determine the excess liability of the directors. But respondents claim that he “did not in any way attempt to verify whether or not these books were correctly kept, nor make any trial balance of the bills or any complete audit,” but that none of the books were introduced in evidence, nor were all of the books used in making computations and calculations brought into court for the purpose of examination by the respondents. This claim is too indefinite to present any tangible question to the court. No particular book or instrument is designated, and no demand was made for anything that was not produced! in court nor does it point out how defendants were in any manner prejudiced. The books were identified by a witness who acted as cashier of the bank for several years before it closed. He testified that the books were kept in the regular routine of business and under the supervision of the president and cashier of the bank. He told who kept the books and testified that they were kept by employes of the bank in the performance of their regular duties as such employes. Respondents cite and rely upon State v. Yegen, 74 Mont. 126, 238 P. 603, in support of this contention. But the cases are not analogous. The documents involved in that case were certain reports that had been made and filed by the public examiner, no part of which was verified in any manner, and much of which, was the mere opinion and estimate of the party who made the reports, and were hearsay in the highest degree.
It is contended by respondents that plaintiff’s cause of action, in part at least, is barred by the statute of limitations. This depends upon whether the case is governed by section 2298 or section 2299, Rev. Code of 1919, as amended by chapter 282, Faws 1921, § 2. Section 2298 (as amended by Faws 1921, c 282, § 1) provides the six-year limitation, and subdivision 2 thereof reads as follows: “An action upon a liability created .by statute, other than a penalty or forfeiture.” Section 2299 provides the three-year limitation, and subdivision 2 thereof reads as follows: “An action upon a statute, for a penalty or forfeiture, where the action is given to the party aggrieved, or to such party and the state, except where the statute imposing it prescribes a different limitation.” That the cause of action involved in this case is based upon a statutory liability cannot be questioned, but this does not imply that it is for a penalty or forfeiture. It is clear from the wording of subdivision 2 of section 2298 that all actions based upon a statutory liability are not for a penalty or forfeiture. Section 8990 is not penal. It was not enacted for the purpose of punishing a person for an offense against the state, but to provide a remedy to a person who had been injured 'by a wrongful act. Hunt
In respondents’ brief they say: “The true distinction between ■whether a statute is penal or remedial, is that if a statute authorizes a recovery without regard to the actual damage sustained, or whether no damage has been sustained, it is penal; while if it merely authorizes a recovery of the actual damage sustained, it is remedial and not penal.” Assuming that this is a correct statement of the law, the statute under consideration is remedial only, because the directors can never be called upon to pay any part of a debt that has been paid by the debtor, and only so much of any debt as is “excessive” under the provisions of section 8980 can be collected' from the directors. Another reason why this class of actions should be governed by section 2298, rather than section 2299, is that the directors occupy a position in some respects analogous to that of principal and surety, and therefore the directors should not be permitted to escape liability by the statute of limitations so long as an action may be maintained against the principal debtor.
The question of whether a statute is penal or remedial depends upon “whether its purpose is to punish an offense against the public justice of the state, or to' afford a private remedy to a person injured by the wrongful act.” Huntington v. Attrill, 146 U. S. 657, 13 S. Ct. 224, 230, 36 C. Ed. 1123. This action is clearly for the purpose of affording a private remedy.
In holding, as we do, that the liability of the directors under section 8990 is purely statutory, we are aware that we are in conflict with what is said in Ranchman’s State Bank v. Lenning, 53 S. D. 250, 220 N. W. 485, where, by a divided court, we held that the liability imposed by section 8990 is contractual in nature and falls within the provisions of section 3389, Rev. Code 1919, which forever bars all “claims arising upon contract,” unless presented within the time fixed by section 3387, Rev. Code 1919. We are satisfied that we were wrong in our holding' in that case. The idea that the liability created by section 8990 is contractual, is'based upon the theory that by accepting the position of director or officer of a bank such director or officer impliedly agrees to pay to the bank or the bank’s creditors all excess loans made by the bank, regardless of whether he participated in the making of such loans or had knowledge of the making' thereof. This we believe is carrying the doctrine of implied contract beyond reasonable bounds, and hereby expressly overrule what is said in the Ranch-man’s Bank Case.
Upon the record before us the plaintiff is entitled to judgment, but not for the amount claimed in the complaint. When Penzein borrowed $7,115.99, there was an excess of $2,245.36. Payments were afterwards made by him which reduced the amount he owed to an amount within the legal loan limit. The loan was then increased by a renewal to an amount exceeding the loan
The judgment and order appealed from are reversed, and the cause is remanded for further proceeding's in conformity with this opinion.