Blythe v. Enslen

Citation85 So. 1,203 Ala. 692
Decision Date18 December 1919
Docket Number6 Div. 897
PartiesBLYTHE v. ENSLEN et al.
CourtSupreme Court of Alabama

Rehearing Denied Jan. 29, 1920

Appeal from Circuit Court, Jefferson County; Hugh A. Locke, Judge.

Bill by Sylvester Blythe and others against Eugene F. Enslen and others, as stockholders and officers of the Jefferson County Savings Bank, for an accounting and a money decree. From a decree sustaining demurrers to the bill, complainant Blythe appeals. Affirmed.

John W Altman, Jerome Edmundson, and Jas. A. Mitchell, all of Birmingham, and Wert & Hutson, of Decatur, for appellant.

Johnston & Cocke, of Birmingham, for appellees.

GARDNER J.

In January, 1915, the Jefferson County Savings Bank, an Alabama corporation which had been conducting a general banking business in the city of Birmingham for a number of years prior to that date, was ascertained to be insolvent, and the assets and business of the bank were taken over by the state superintendent of banks, as authorized by the statute.

There was subsequently organized the Jefferson County Bank, which for convenience will be referred to as the new bank, a separate and distinct institution from the Jefferson County Savings Bank, hereafter referred to as the old bank. In July 1915, in the course on the liquidation of the affairs of the old bank, and pursuant to an agreement between the superintendent of banks and the new bank, and also pursuant to a decree of the chancery court of Jefferson county, the superintendent of banks sold and assigned to the new bank all the assets of the old. On January 28, 1916, about six months subsequent to the sale of the assets of the old bank to the new, the latter bank also went into liquidation, and was taken over by the superintendent of banks, who is now administering its affairs.

Blythe and Edmundson are stockholders in the new bank, and filed the original bill against the appellees who were directors of the old bank, seeking to assert the right to enforce, as an asset of the new bank, an alleged right of action against the appellees for the benefit of the stockholders, as well as certain depositors of the latter bank, who were made parties to the bill in the court below, over respondents' objection, but who do not appeal.

It is alleged in the bill as a reason why the suit is brought by appellant individually that demand was made upon the superintendent of banks to institute such proceedings, and he declined to do so. Right of recovery is rested upon the alleged negligent and wrongful conduct on the part of the directors of the Jefferson County Savings Bank, which resulted in impairment of its assets. Summarily stated, the directors of the old bank are charged with failure to charge off losses, as required by section 3548 of the Code of 1907; failure to meet and examine the books semi-annually, as required by its by-laws; making or permitting to be made excessive loans in violation of section 1 of an act of 1911 (Laws 1911, p. 50), known as the "banking act"; by permitting to be carried on the books of said bank thousands of dollars of bad or worthless paper in violation of the section of the Code above cited; by declaring dividends when the condition of the bank did not justify the same; by allowing unsecured loans to be made from assets of said bank to the Jefferson County Realty & Building Company, in violation of the statutes of Alabama; in permitting the bank to invest $400,000 of the bank's money in common stock of said realty company, in consequence of which all, or a large part of, said sum was wasted or lost--all to the detriment of said bank. There is no contract relation alleged to have existed between said directors and the old bank other than their acceptance of the duties of such office.

It is alleged that the assets of the old bank, which were sold and transferred to the new bank by the state superintendent of banks, as before stated, included all rights of action or choses in action which had vested in the old bank; and that, therefore, this right of action of the old bank to recover of its directors damages for their neglect of duty passed by reason of said transfer to the new bank; and that these complainants, as stockholders of said new bank, have a right to prosecute this cause for the enforcement of said right of action, the state superintendent of banks declining to do so upon request.

There were numerous assignments of demurrer interposed to the bill, and from the decree sustaining the demurrer the appellant has prosecuted this appeal.

While many questions are here presented for consideration, yet we are persuaded there is one vital weakness to the maintenance of this bill by these complainants, growing out of the nature of the cause of action, and we therefore confine our decision to that question alone.

Stripped of its general phraseology, and reduced to its last analysis, the bill merely charges the relationship of the directors to the old bank as one of confidence and trust, and the duties devolving upon them as such directors, and their negligent and wrongful conduct as a breach of such duty. In short, it but charges a breach of duty growing out of the relationship, and, in our opinion, states a cause of action in form, ex delicto and case.

Speaking of the distinction between the actions ex delicto and ex contractu, this court, in Western Union Tel. Co. v. Littleton, 169 Ala. 99, 53 So. 97, said:

"In one of our early cases, which has been a leading case ever since, it was said that: 'Perhaps the best criterion is this: If the cause of action, as stated in the declaration, arises from a breach of promise, the action is ex contractu; but if the cause of action arises from a breach of duty, growing out of a contract, it is, in form, ex delicto, and case. For instance, if the declaration allege the hiring of a horse to ride to a certain place, and that the defendant rode him so immoderately that he died, this would be case, for the contract of hire imposed upon him the duty to ride in reason, or not unreasonably fast; but if the declaration allege the hiring, and that he promised to ride with reasonable speed, but, not regarding his promise, he rode the horse immoderately, whereby he died, the action would be considered assumpsit.' Wilkinson v. Moseley, 18 Ala. 288, 290, 291.
"This case has been frequently referred to and followed, but for terseness of expression and simplicity of illustration we doubt if it has ever been surpassed. See Mobile Life Ins. Co. v. Randall, 74 Ala. 170, 177; White v. Levy, 91 Ala. 175, 8 So. 563; Postal Tel. Cable Co. v. Ford, 117 Ala. 672, 23 So. 684."

So, also, in Western Union Tel. Co. v. Kirchbaum, 132 Ala. 535, 31 So. 607, the court said:

"The plaintiff had the right to frame the count either in assumpsit or case. He could have maintained the former by relying upon a breach of the contractual obligation to deliver the message for a recovery, or the latter by relying upon a breach of duty in failing to deliver it, whether that duty arose out of the contract or is imposed by law. *** Applying the foregoing principles to the count under consideration, it is clear that a breach of duty in failing to deliver the message is the gravamen of the complaint, and not the breach of a promise by defendant to deliver."

The bill charges, in substance, but a breach of duty arising out of the relationship of the directors. We are of the opinion that the foregoing authorities will suffice to demonstrate that the cause of action is ex delicto and not ex contractu, and that no elaborate discussion is here necessary. See, also, Florence Hotel Co. v. Bumpas, 194 Ala. 69, 69 So. 566, Ann.Cas.1918E, 252; Mobile L. Ins. Co. v. Randall, 74 Ala. 170; Carpenter v. Walker, 170 Ala. 659, 54 So. 60, Ann.Cas.1912D, 863.

Indeed as far back as the case of Godbold v. Branch Bank of Mobile, 11 Ala. 191, 46 Am.Dec. 211, it was held that injuries of the character here involved "may be redressed by special action on the case."

In our opinion, that the cause of action here stated is ex delicto was clearly shown by the somewhat analogous case of Wynn, Adm'r, v. Tallapoosa County Bank, 168 Ala. 469, 53 So. 228, where the wrong complained of grew out of the alleged negligent or wrongful conduct on the part of the cashier of the bank, in violation of his duty arising from such relationship. There it was held that a cause of action growing out of the negligent performance of the duties of cashier of a bank, or other wrongful conduct in violation of such duties, which did not result in increase of or benefit to his estate, was a tort action of a purely personal character.

Here, the directors are charged with negligent conduct, but not with the conversion or misappropriation of the corporate funds to their benefit (as was the case in Montgomery L. & P. Co. v. Lahay, 121 Ala. 151, 25 So. 1006), such as would support an action of assumpsit, the tort being waived.

It results, therefore, from the foregoing that the cause of action here is one falling within the statute of limitations of one year, coming within the influence of subdivision 5 of section 4840 of the Code of 1907, which provides for those causes of action not otherwise therein specifically enumerated. A review of our...

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  • American Life Ins. Co. v. Powell
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    ...(other than Wert and Montgomery). The charge laid to them under the allegations of the bill is simply one in tort. See Blythe v. Enslen, 203 Ala. 692, 85 So. 1, where it was held that such an action was ex delicto, the statute of limitation of one year applying (reaffirmed in 209 Ala. 96, 9......
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    ...I. Co. v. Randall, 74 Ala. 170; White v. Levy, 91 Ala. 175, 8 So. 563; Postal T. C. Co. v. Ford, 117 Ala. 672, 23 So. 684; Blythe v. Enslen, 203 Ala. 692, 85 So. 1. The thus tersely expressed and adhered to in this jurisdiction is: If the cause of action given expression in the complaint (1......
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