31 F. 1 | U.S. Cir. Ct. | 1887
This bank was organized and continued in existence, with a capital stock of S100,000, under the laws of the United States relating to national banks. It failed and stopped doing business April 8, 1884, and was soon after placed in the hands of a receiver. The defendants, except Hall, Edward A. Sowles being president, and Albert Sowles cashier, were directors, with George W. Foster, now deceased,
The directors all resided at St. Albans, AA’here the bank Avas located, except Burton, who resided at Burlington. The business of the bank AAras managed principally by the cashier, Avho Avas of large experience, able, and competent, and of good reputation, and, until near the time of the failure, of considerable Avealth. All the loans and discounts Avere approved of and made by him, and he voted for and concurred in all the dividends. The increase of the debt of Marshall appears to have been accomplished by bills of exchange drawn against existing values, and by the discount of business paper OAvned by him to such an extent as not to be in violation of any express Irav. Those Avho took part in it on behalf of the bank appear to have acted, in vieAV of the liabilities he Avas already under to the bank, and of the condition of his business as then understood by them, in good faith, and as they thought would be for the best interests of the bank. They had no interest with him, nor any apparent object to accomplish by increasing his accommodations aside from taking the wisest course for the interests of the bank. As these loans and discounts have resulted, they were uiiAvise and hazardous looked back upon, but they are to be considered as they could be looked forward to, and not from the present stand-point. In this AdeAv there is no just ground upon which any of the directors can be properly charged for that debt. Scott v. Depeyster, 1 Edw. Ch. 513; Spering’s Appeal, 71 Pa. St. 11; Thomp. Liab. Off. 233.
The loans to Albert Sowles, and some of those for Avhich he became liable as surety or indorser, appear to have been in violation of the provisions of section 5200, Rev. St. U. S., by Avhich liabilities of any person to a national bank for money borroAved in excess of one-tenth of the
This bill is not brought to charge the defendants for money received by them as stockholders from dividends, but for losses to the bank itself for unlawfully or wrongfully declaring dividends. By section 5204, dividends 10 a greater amount than net profits, after deducting losses and bad debts, are prohibited; and debts on which interest is past due and unpaid for six months, unless well secured and in process of collection, are defined to he bad debts. The assets of this bank did not so consist of bad debts, within this definition, at the time when they were made, as to make the dividends improper. There were debts which were in fact had in 1 lie result to an extent so great as to wipe out ihe profits from which dividends could be made, when the later ones were declared. The defendant Burton is not shown to have participated in making the dividends. Those who did misjudged as to the value of the assets. The evidence does not warrant the conclusion that they took this method of dividing the assets of the bank among themselves when they knew that dividends could not properly he made. It is not considered, therefore, that the defendants are liable for the amount of the dividends because they were unlawfully or wrongfully declared. Whether those who received the dividends are chargeable for the amount received, on the ground that the money from which they were paid was needed to pay the liabilities of the bank, is a question not presented in this ease. Spering's Appeal, before cited; Thomp. Liab. Off. 351; U. S. v. Britton, 108 U. S. 199, 2 Sup. Ct. Rep. 531.
It is strongly urged that the defendants are liable at common law for inattention to duty as directors, although not liable under the express
The question as to the liability of directors of national banks for mere inattention was much considered in Movius v. Lee, ante, 298, in the Northern district of New York, lately decided. It was there held that directors were not liable for the acts of their associates in which they had no part, and of which they had-no knowledge, and towards which they did not connive in any manner. Upon these principles, these defendants are not liable on account of the loans to Albert Sowles, or of those for which he became liable, because they did not participate in them, nor assent to or connive at the making of them, so far as has been made to appear.
There remains the liability of the defendants Albert Sowles and Burton for the loan to Edward A. Sowles. If there were liabilities of these defendants alone, or with other defendants for other loans, or for dividends, it would be somewhat anomalous to include them in a decree with this liability, which is entirely distinct, although of the same nature. It is not necessary to consider whether the liability of directors, under such circumstances, is for the whole debt, or only for the excess; for this loan, which was $36,000, in the first place, was reduced to $26,000, the exact amount of the excess, December 5, 1882. It then stood in the form of drafts of Edward A. Sowles,—one of $5,000, on H. B. Weeks, due January 8; one of $5,000, on B. C. Hall, due January 11; one of $5,000, on H. B.’Weeks, due February 8; one of $5,000, on B. C. Hall, due February 11; and one of $6,000, on H. E. Lewis, due January 15, 1883.
These appear to have remained of the identical ioan for which the money was passed over to him, with the full knowledge and assent of Albert Sowles and Burton, and of the other two directors now deceased. This debt was not, according to the evidence, further reduced, but was wholly lost. The damages resulting to the bank-in consequence of this loan are equal to the amount of the sums due on these drafts, with interest from the times when they respectively fell due. This interest to April 6, 1887, amounts to $6,559.33, and the whole amount of the loss or damage resulting from this loan is $32,559.33. This money was
Let a decree he entered that the defendants Albert Sowles and Burton are chargeable for the amount of the loss on the loan of $36,000 to Edward A. Sowles, ascertained to be $32,559.33, and that they pay that sum to the orator, with costs to be taxed, within 20 days from the entry of the decree, and that the bill be dismissed as to Edward A. Sowles and Hall, without costs.