Atherton v. Anderson

• Decision Date: 11 November 1936
• Docket Number: No. 7298.,7298.
• Citation: 86 F.2d 518
• Parties: ATHERTON et al. v. ANDERSON.
• Court: U.S. Court of Appeals — Sixth Circuit

86 F.2d 518 (1936)

ATHERTON et al. v. ANDERSON.

No. 7298.

Circuit Court of Appeals, Sixth Circuit.

November 11, 1936.

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W. W. Crawford and Churchill Humphrey, both of Louisville, Ky., and Newton D. Baker, of Cleveland, Ohio (Charles G. Middleton, A. C. Van Winkle, T. Kennedy Helm, and Edw. A. Dodd, all of Louisville, Ky., Howard F. Burns, of Cleveland, Ohio, and Henry E. McElwain, Jr., John C. Doolan, Graddy Cary, Herman H. Nettelroth, J. Wheeler Campbell, Huston Quin, Herman G. Handmaker, Thomas A. Barker, and Henry J. Tilford, all of Louisville, Ky., on the brief), for appellants.

Eugene P. Locke, of Dallas, Tex. (E. B. Stroud, Jr., and Maurice E. Purnell, both of Dallas, Tex., Arthur Peter and John G. Heyburn, both of Louisville, Ky., Locke, Locke, Stroud & Randolph, of Dallas, Tex., and Peter, Heyburn, Marshall & Wyatt, of Louisville, Ky., on the brief), for appellee.

Before HICKS, SIMONS, and ALLEN, Circuit Judges.

SIMONS, Circuit Judge.

For losses sustained by a closed national bank in consequence of acts, ultra vires, and excessive loans, a decree was entered awarding the bank's receiver damages against its officers and nonofficer directors. The latter were assessed varying sums aggregating approximately $4,000,000, and they alone have appealed.

The suit was in equity by appellee's predecessor as receiver appointed by the Comptroller of the Currency under the National Banking Act. The bill counted both upon breach of statutory duty and upon common-law negligence. The cause was referred to a master, who after extended hearings made an exhaustive report upon the voluminous testimony, with findings of fact and conclusions of law. Though he recommended a decree against nonofficer directors for damages aggregating upwards of $500,000, yet in respect to the transactions for which liability was by the decree adjudged, exonerated them of common-law negligence or knowing and intentional violations of the statute. Exceptions were taken by both receiver and appellants. Those of the latter were in all respects sustained, while those of the former were sustained in so far as they related to alleged violations of the Banking Act in the transactions here reviewed. In respect to them, there was no finding that the appellants were negligent.

In the principal opinion in the case (7 F.Supp. 924, 959), the court directed that, "Except as hereinbefore otherwise indicated, the report of the master will be confirmed." It was undoubtedly in response to this direction that section 55 was incorporated in the decree. It is as follows: "All claims asserted by the plaintiff in the bill of complaint as amended, other than those hereinbefore specifically adjudged in plaintiff's favor, are hereby adjudged in favor of the defendants respectively, and the bill of complaint as amended is hereby dismissed as to all other such claims, as to the respective defendants against whom such claims were asserted." The plaintiff did not appeal. In this situation it becomes necessary at the outset to define the scope of this review, and to ascertain precisely the questions here involved.

It is clear that the duty which rests upon directors of a national bank by reason of the provisions of the National Banking Act are entirely separate and distinct from the duties imposed upon them by the common law, Yates v. Jones National Bank, 206 U.S. 158, 27 S.Ct. 638, 51 L.Ed. 1002; Jones National Bank v. Yates, 240 U.S. 541, 36 S.Ct. 429, 60 L.Ed. 788, and, "it is obviously possible that a director may neglect one or more of the former, and not any of the latter, or vice versa" (Bowerman v. Hamner, 250 U.S. 504, 511, 39 S.Ct. 549, 551, 63 L.Ed. 1113), though "there is no sound reason why a bill may not be so framed that, if the evidence fails to establish statutory negligence, but establishes common-law negligence, a decree may be entered accordingly," to which the court significantly added, "and thus the necessity for a resort to a second suit avoided."

Notwithstanding section 55 of the decree and his failure to appeal therefrom, the appellee urges upon us the negligence issues raised below, first, upon the ground that since appeals in equity bring up the whole case, the decree below should be sustained if right for any reason; and, second, on the ground that the negligence counts were not disposed of in the District Court. We are, of course, familiar with the principle invoked governing reviews in equity, and have uniformly applied it. Mills Novelty Co. v. Monarch Tool & Mfg. Co. (C.C.A.) 49 F.(2d) 28, 29; A. O. Smith Corp. v. Petroleum Iron Works Co. (C.C. A.) 73 F.(2d) 531, 538. We think, however, that the appellee confuses reasons for decision with causes of action, which arise only because of the invasion of some essential primary right of the plaintiff or breach of some duty by the defendant. It is quite clear that where an appellee defends a decree he may do so not only upon the grounds upon which it was based, but also upon all grounds urged below, Langnes v. Green, 282 U.S. 531, 51 S.Ct. 243, 75 L. Ed. 520, but to press a cause of action foreclosed by the decree is to seek to overthrow it and not to defend it.

The identity of the circumstances under which two distinct primary rights, or from which separate and distinct liabilities arise, does not preclude recognition of separate and distinct causes, for "separate causes of action may arise out of the same transaction, in which event a recovery or judgment in an action on one does not ordinarily bar an action on the other." Freeman on Judgments (5th Ed.) § 594, so "if two separate and distinct primary rights could be invaded by one and the same wrong, or if the single primary right should be invaded by two distinct and separate legal wrongs, in either case two causes of action would result," Pomeroy Code Remedies (5th Ed.) 367, cited with approval in United States v. Pan-American Petroleum Co., 55 F.(2d) 753, 777 (C.C.A.9), certiorari denied, 287 U.S. 612, 53 S.Ct. 14, 77 L.Ed. 532. Where rights arise under the laws of distinct sovereignties, a judgment based upon the violation of the one is no bar to a suit upon rights declared under the other, and the identity of parties, subject-matter and the extent of the relief to be granted is not controlling. Troxell, Administratrix, v. Delaware, Lackawanna & Western R. R. Co., 227 U.S. 434, 33 S.Ct. 274, 57 L.Ed. 586. This is in harmony with the rule applied to crimes that an act denounced by both national and state sovereignties is an offense against both, and may be punished by each, notwithstanding constitutional immunity against double jeopardy. United States v. Lanza, 260 U.S. 377, 43 S.Ct. 141, 67 L.Ed. 314. While the broad language of the Troxell Case was somewhat limited in Baltimore S. S. Co. et al. v. Phillips, 274 U. S. 316, at page 321, 323, 47 S.Ct. 600, 602, 71 L.Ed. 1069, the principle was not denied, the court saying: "A cause of action does not consist of facts, but of the unlawful violation of a right which the facts show. The number and variety of the facts alleged do not establish more than one cause of action so long as their result, whether they be considered severally or in combination, is the violation of but one right by a single legal wrong. The mere multiplication of grounds of negligence alleged as causing the same injury does not result in multiplying the causes of action. The facts are merely the means, and not the end. They do not constitute the cause of action, but they show its existence by making the wrong appear. "The thing, therefore, which in contemplation of law as its cause, becomes a ground for action, is not the group of facts alleged in the declaration, bill, or indictment, but the result of these in a legal wrong, the existence of which, if true, they conclusively evince."' Chobanian v. Washburn Wire Co., 33 R.I. 289, 302, 80 A. 394, 400, Ann. Cas.1913D, 730." So is clarified the excerpt we have quoted from Bowerman v. Hamner, supra, "And thus the necessity for a resort to a second suit avoided."

The contention that the purpose of section 55 of the decree was merely to dismiss claims based on transactions neither negligent nor violating the statute and was without reference to charges of negligence in the transactions which led to findings of statutory liability alone, must be rejected. The case was pleaded and tried as one involving causes of action based upon violation of the statute, and other causes based upon common-law negligence. It was so analyzed in the report of the master. When the court came to enter a decree against the officers as distinguished from nonofficer directors, it granted recovery in relation to each transaction, both for staatutory violation and for common-law negligence. Finally, since the court specifically ordered that the report of the master would be confirmed except as otherwise indicated, section 55 must be response thereto, since there is no other, and the opinions are incorporated in the decree by its terms (section 59) in respect to the sustaining and overruling of exceptions.

We conclude, therefore, that no question of common-law negligence as such is presented to us for review, and that the case as submitted involves in respect to each transaction in issue the sole question as to whether there has been a breach of statutory duty imposed upon the directors by the National Banking Act.

It becomes necessary to consider another contention of general application. It is, of course, the rule (Equity 61½, 28 U.S. C.A. following section 723), that in reference to a master his report shall be treated as presumptively correct, and may be modified or rejected by the court only when in the exercise of its judgment it is fully satisfied that error has been committed. It is urged, however, that since the order of reference recited that the report of the master was to be advisory only, little weight need be given his findings. To what extent this...