Adams v. Clarke

• Decision Date: 05 December 1927
• Docket Number: No. 5247.,5247.
• Citation: 22 F.2d 957
• Parties: ADAMS et al. v. CLARKE.
• Court: U.S. Court of Appeals — Ninth Circuit

22 F.2d 957 (1927)

ADAMS et al. v. CLARKE.

No. 5247.

Circuit Court of Appeals, Ninth Circuit.

December 5, 1927.

Ransom Cooper, Sam Stephenson, and W. H. Hoover, all of Great Falls, Mont., for appellants.

George E. Hurd and H. C. Hall, both of Great Falls, Mont., for appellee.

Before HUNT, RUDKIN, and DIETRICH, Circuit Judges.

DIETRICH, Circuit Judge.

The First National Bank of Sidney, Mont., was closed, and the appellee was appointed receiver thereof, on February 26, 1924. He brought this action against the appellants, former directors of the bank, to recover losses sustained by reason of excess loans made to M. A. Wilson and L. H. Turner, and to the partnership of Wilson-Turner Stock Farms, of which they were the only members. During the entire period covered by the loans, Turner was either assistant cashier or cashier of the bank, and all of the defendants were continuously its directors, and its only directors, and were also holders of a majority of its capital stock. The receiver did not and does not rely upon common-law negligence, but exclusively upon violations of the provisions of section 5200 (12 USCA § 84), and upon section 5239, R. S. U. S. (12 USCA § 93), which declare that the total liabilities to a national bank of any person, company, or firm, for money borrowed, "including, in the liabilities of a company or firm, the liabilities of the several members thereof," shall at no time exceed 10 per centum of the capital stock of the bank, and that, if any of the directors shall knowingly violate or knowingly permit the violation of this provision every participating or assenting director shall be held personally liable for such damages as the bank, or the stockholders, or any other person shall have suffered as a consequence. It is not disputed that the excess loans were knowingly made or assented to by defendants as charged, and the court below found that the net loss to the bank resulting therefrom amounted to $6,244.26, besides interest, or a total of $11,134.52 on March 10, 1927, upon which date judgment was entered for that amount in favor of the receiver and against all the defendants jointly and severally.

The appealing defendants interpose the objection that the action should have been tried as one at law instead of in equity. Were there but a single defendant, admittedly, that view would be correct. Corsicana National Bank v. Johnson (C. C. A.) 218 F. 822. Where, however, the defendants are numerous, similar actions have been entertained on the equity side of the court. Illustrative are McCormick v. King (C. C. A.) 241 F. 737; Bowerman v. Hamner, 250 U. S. 504, 39 S. Ct. 549, 63 L. Ed. 1113; Curtis v. Connly (C. C. A.) 264 F. 650; Id., 257 U. S. 260, 42 S. Ct. 100, 66 L. Ed. 222; Curtis v. Metcalf (D. C.) 259 F. 961; Id. (D. C.) 265 F. 293; Bailey v. Babcock (D. C.) 241 F. 501. See, also, Brown v. Allebach (C. C.) 156 F. 897.

But, however that may be, defendants did not present to the lower court their request for a transfer to the law side until after the cause was actually called for trial upon the equity calendar, and we think they thus waived such right, if any, as they may have had. Greenberg v. Penn. Trust Co. (C. C. A.) 19 F.(2d) 824; Rosenthal v. Heller (D. C.) 266 F. 563. The point, as we understand, is seriously pressed only in the bearing it has upon the applicability of the statute of limitations. In brief, defendants' position seems to be that, if such an action is maintainable upon the equity side of the court for no reason other than to avoid a multiplicity of suits, the cause of action is in essence one at law, and in applying the statute of limitations it should be so regarded. For the purposes of the decision we accept this view without discussion. Bank of United States v. Daniel, 12 Pet. 32, 9 L. Ed. 989; Metropolitan Nat. Bank v. St. Louis Dispatch Co., 149 U. S. 436, 13 S. Ct. 944, 37 L. Ed. 799; Curtis v. Connly, 257 U. S. 260, 42 S. Ct. 100, 66 L. Ed. 222.

In like manner we accept the further view that such causes of action are subject to the application of state statutes of limitations. Curtis v. Connly, supra. The statute relied upon by appellants is section 9061 of the Revised Codes of Montana of 1921, which provides that actions like this "must be brought within three years after the discovery by the aggrieved party of the facts upon which * * * the liability was created."

This suit was commenced on August 6, 1925, and the majority of the excess loans involved were made more than three years prior thereto. The cause of action in such a case is deemed to have arisen when the excess loan was made. Corsicana National Bank v. Johnson (C. C. A.) 218 F. 822; Id., 251 U. S. 68, 40 S. Ct. 82, 64 L. Ed. 141. And apparently the bank is chargeable with knowledge disclosed by its records and the information possessed by its directors. Curtis v. Connly, supra. But here, during the entire period in question, defendants not only held a majority of the capital stock, but constituted the entire board of directors. As trustees in exclusive control of the bank's affairs, they cannot take advantage of inaction for which they alone are responsible. Morse on Banks (5th Ed.) § 125; 37 C. J. 725; National Bank of Commerce v. Wade (C. C.) 84 F. 10; Rankin v. Cooper (C. C.) 149 F. 1010; Ventress v. Wallace, 111 Miss. 357, 71 So. 636, L. R. A. 1917A, 971; Williams v. McKay, 40 N. J. Eq. 189, 53 Am. Rep. 775; Boyd v. Mutual Fire Association, 116 Wis. 155, 90 N. W. 1086, 94 N. W. 171, 61 L. R. A. 918, 96 Am. St. Rep. 948; Ellis v. Ward, 137 Ill. 509, 25 N. E. 530; Bremer v. Williams, 210 Mass. 256, 96 N. E. 687.

In Cooper v. Hill (C. C. A.) 94 F. 582, Corsicana National Bank v. Johnson, 251 U. S. 68, 40 S. Ct. 82, 64 L. Ed....