66 Barb. 402 | N.Y. Sup. Ct. | 1873
Assuming the allegations in the complaint to be true, the action, in effect, is an action for damage sustained by the plaintiff as a stockholder of “the First National Bank of Elmira,” by reason of the illegal and fraudulent acts of the defendants as a part of the directors and officers of the said bank, and by their omissions of duty as such officers. The allegation is, that in and prior to 1867 one Van Campen, the president of said bank, in violation of his duty as president and contrary to law, loaned from the funds of said bank to divers individuals and to insolvent persons, without sufficient security, large sums of money, exceeding at times one-tenth of the capital of the bank, whereby
And that the said Simeon Benjamin and John T. Bath-bun, while such officers of said bank in and prior to 1867,. were informed and knew Of the doing of the said wrongful acts by the said Van Campen, that he had thus violated and was violating his duty as such officer of the bank; that they negligently permitted and allowed him to do, and aided, countenanced and assisted him in so doing, and concealed the facts from the plaintiff and other stockholders, and allowed and permitted and assisted the said Van Campen to so draw out, loan and use and waste the funds and property of said association, the said bank, and to remain and act as president thereof, and thus defrauded and injured the plaintiff, whereby the plaintiff has sustained damage.
1. The point that the court has not jurisdiction of the action, is not now urged before us on appeal.
2. I think it cannot with reason be urged, that the complaint does not state facts sufficient to constitute a cause of action.
The acts set forth in tfie complaint are fraudulent acts,
The objection that they were acting officially and as directors of the bank, does not at all affect the question whether a cause of action is stated. It was held in Robinson v. Smith (3 Paige, 222) that the directors of a corporation were liable to the parties injured by a fraudulent breach of trust. And this principle is repeated in Cunningham v. Pell, (5 id. 612.) The question whether the action is in the proper form, will be discussed under a subsequent point.
The complaint alleges that the capital stock of said bank was $100,000. By the 29th section of the act of congress, commonly called the National Bank Act, passed June 3, 1864, it is provided “that the total liabilities to such (banking) association of any person * * shall at no time exceed one-tenth part of the amount of the capital stock of such association actually paid in,” &c. By the 53d section of the same act, it is provided that in case of any violations of any of the provisions of the said act, every director who participated in or assented to the same, shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person shall have sustained in consequence of such violation. The plaintiff also claims that the provisions of this statute cover this
The more serious question in this case is whether a part of the directors of a banking association can be sued by a stockholder, for acts which have affected the value of his stock, without making the corporation or association itself a party to the action. Without reference to the provisions of the Code, sections 113,119, &c., as the action seems to be based upon "the ground of a breach of trust, it becomes necessary to determine, who are the real legal parties in interest; that is, who are trustees: and who is the real cestui que trust. Are the directors of the bank the trustees of the corporation ? Or, are they the trustees of the stockholders ? Or, do they hold that same relation to both ? Is the corporation the trustee of the stockholder ? May the stockholders sue the corporation for the breach of trust?
1. “ That the plaintiff cannot recover in an action at law against defendants, as trustees of the corporation, for any damage by their acts which consists solely of his loss of his share of the assets embezzled by them.
2. “That he has not alleged any damage to himself specially, beyond such loss.
3. “ That in order to get his share of the damages for injury done to the corporation by the embezzlement of its assets, he must make such corporation a party to the action.”
This decision and the cases cited at page 576 proceed upon the principle that the funds wasted or misappropriated were in law the money of the corporation; and the damage primarily was directly a damage done to the corporation; that the defendants were liable for their misconduct to the corporation; that the latter could recover .therefor; and is the only person at law that had any legal right of action for the money so embezzled. It is called an action at law, though I do not see for what reason. The pleadings were under the Code; and although it does not seem to have been made a point, yet if the theory is sound that the title to the moneys squandered was in the corporation, then under the provisions of sections 111 and 113 of the Code the demurrer should have been overruled on that ground, as well under the Code; it is immaterial what the action is called. See Allen v. Curtis, (26 Conn. 456, 7,) which holds that
Upon a view of the whole case, I think the order of the Special Term must be reversed on the ground of a defect of parties, with costs.
Miller, P. J., and Parker, J., concurred in the result.
Order reversed, with leave to serve an amended complaint, upon payment of costs.
Miller Potter and Parker, Justices.]