Benton v. Deininger

• Decision Date: 10 August 1927
• Citation: 21 F.2d 659
• Parties: BENTON et al. v. DEININGER et al.
• Court: U.S. District Court — Western District of New York

21 F.2d 659 (1927)

BENTON et al. v. DEININGER et al.

District Court, W. D. New York.

June 30, 1927.

On Entry of Order August 10, 1927.

Barber B. Conable, of Warsaw, N. Y., and Louis L. Thrasher, of Jamestown, N. Y., for plaintiffs.

Hubbell, Taylor, Goodwin & Moser, of Rochester, N. Y., for Julia Breed French.

HAZEL, District Judge.

The question submitted is whether a particular cause of action alleged in the complaint survives, and, if it does, concededly it may be continued against the personal representative of the deceased in question. Rev. St. § 914 (28 USCA § 724 Comp. St. § 1537); Gerling v. Baltimore & Ohio R. Co., 151 U. S. 673, 14 S. Ct. 533, 38 L. Ed. 311.

In the instant case, the death of George J. French occurred after this action was brought and process served upon him. Its basis is to recover damages for violation of the National Banking Act (Rev. St. §§ 5211, 5239 12 USCA §§ 93, 161), the deceased person having been a director of the National Bank of Commerce of Rochester. The complaint alleges that the deceased and other directors made false reports as to the condition of the bank upon which plaintiffs relied in their purchase of bank stock, and suffered pecuniary loss.

The various authorities cited in the briefs have been considered, but I incline to the view that the cause of action has not abated, but survives against the personal representatives of the deceased. The statute, authorizing the action, is remedial, and its intendment was that directors should become personally liable for damages which its shareholders or other persons sustained in consequence of failure to comply with their statutory duties. Although in a sense the statute is penal, it was nevertheless intended to afford a civil remedy for a wrongful act, without involving a direct issue of tort. There is no fixed penalty, and the recovery depends wholly upon the extent of damages proven. Stephens v. Overstolz (C. C.) 43 F. 46.

In Boyd v. Schneider, 131 F. 223, the Circuit Court of Appeals for the Seventh Circuit regarded an action brought against directors of an insolvent national bank for failure to properly apply its assets, as in the nature of an implied contract, which survived against the personal representatives of a deceased director.

In Yates v. Jones National Bank, 206 U. S. 158, 27 S. Ct. 638, 51 L. Ed. 1002, the suit was against directors of a national bank for mismanagement and waste of assets and general neglect of duty, resulting in plaintiff's damage. It was continued against an administrator of a deceased director.

In Allen v. Luke (C. C.) 141 F. 694, a receiver of a national bank brought action for misconduct or negligence of the directors on behalf of creditors and stockholders and the cause of action was also held to survive against the executor of a director.

This action was removed to this court from the state Supreme Court, and, under the Decedent Estate Law (Consol. Laws N. Y. c. 13) § 120, survived against the representatives of the deceased director.

Counsel for the executrix, appearing specially, relies upon actions for penalties and forfeitures under the copyright laws, which, however, specifically declare the amount of the penalty that may be recovered, qui tam actions for penalties, and, in some instances, for negligence wherein personal injuries were sustained, and generally actions arising ex delicto, which I conceive are not strictly apposite. Nor does Chesbrough v. Woodworth (C. C. A.) 195 F. 875, modify the decisions above cited. Indeed, in that case the learned court declared that making a false report, under the statute here considered, did not constitute an underlying wrong, since it was "the medium of necessary causal relation between wrong and damage," without involving a direct issue of negligence. It must therefore be ruled herein that the cause of action alleged in the complaint did not abate...