Charles Yates v. Jones National Bank

• Decision Date: 13 May 1907
• Docket Number: No. 230,230
• Citation: 206 U.S. 158,51 L.Ed. 1002,27 S.Ct. 638
• Parties: CHARLES E. YATES et al., Plffs. in Err., v. JONES NATIONAL BANK
• Court: U.S. Supreme Court

206 U.S. 158

27 S.Ct. 638

51 L.Ed. 1002

CHARLES E. YATES et al., Plffs. in Err.,

v JONES NATIONAL BANK.

No. 230.

Argued March 8, 11, 1907.

Decided May 13, 1907.

Messrs. Halleck F. Rose, J. W. Deweese, and Frank E. Bishop for plaintiffs in error.

[Argument of Counsel from pages 158-161 intentionally omitted] Messrs. Lionel C. Burr, John J. Thomas, Charles L. Burr, Richard S. Norval, and William B. C. Brown for defendant in error.

Mr. Justice White delivered the opinion of the court:

This writ of error is prosecuted to secure the reversal of a judgment of the supreme court of the state of Nebraska affirming one entered by a court of Seward county, in that state, upon a verdict of a jury awarding damages against the defendants below, plaintiffs in error here, because of certain acts charged to have been done by them as officers and directors of the Capital National Bank of Lincoln, Nebraska.

We briefly summarize a statement contained in the opinion of the court below concerning a prior action between the same parties. That action, and three others of like character, brought by different plaintiffs, were begun in a county different from that in which the present one was commenced, and recovery was sought, with one exception, from those who were defendants below in this case, of the sum of a loss occasioned by the insolvency and suspension of the Capital National Bank, a corporation organized under the national bank act. The actions referred to were removed into a circuit court of the United States, and in each a motion to remand was overruled, and in one of the cases (brought by Thomas Bailey) the circuit court sustained a demurrer to the petition and dismissed the cause, and the judgment so doing was affirmed by the circuit court of appeals. 11 C. C. A. 304, 27 U. S. App. 339, 63 Fed. 488. The plaintiffs in the other cases thereupon dismissed their actions and commenced new ones, as also did Bailey, in Seward county, of which the case before us is one. The same persons who were impleaded in the prior actions were made defendants, and in two of the actions one Thompson, a director of the bank, who had not been previously sued, was joined as a defendant. The defendants were sought to be made liable for acts done as officers and directors of the Capital National Bank, although it was not expressly alleged that the bank was organized under the national bank act. Reliance in each action was placed upon alleged untrue written and oral statements and representations of the financial condition of the bank, alleged to have been made and published by the defendants, which were fully set out in various forms of expression, but in none of the averments was it specifically asserted that the acts in question were done in consequence of and in com- pliance with the provisions of the national bank act, although the exhibits attached to the petition disclosed the character of the written reports, which were in part relied upon. The state court overruled an application to remove, and, a transcript of the record having been filed in the circuit court, on motion the action was, by that court, remanded to the state court, upon the ground that the petition was 'clearly based, not upon the provisions of the national banking act, but upon the liability claimed to arise under the principles of the common law.' See Bailey v. Mosher, 74 Fed. 15.

An amended petition was filed, changing somewhat the averments originally made, and supplementing the same by new allegations. After a considerable lapse of time a second amended petition was filed. This latter enumerated many acts of negligence and mismanagement in the conduct of the affairs of the failed bank charged to have caused its insolvency, in addition to the averments which had been made in the original petition. The defendants demurred on the ground of want of jurisdiction, because the result of the pleading as amended was to demonstrate that the whole cause of action relied upon was based upon the violation by the defendants of provisions of the national bank act, and because, under that act, no cause of action in favor of the plaintiff was stated. The day the demurrer was filed the action was removed by the defendants to the circuit court of the United States. That court overruled a motion to remand (see Bailey v. Mosher, 95 Fed. 223), and subsequently the court sustained the demurrer and dismissed the action. Reviewing the action of the circuit court, however, the circuit court of appeals held that in any event the removal had been made too late, 'and that the judgment of the lower court dismissing the plaintiff's case was rendered without lawful jurisdiction over the case.' 46 C. C. A. 471, 107 Fed. 561. As a result the case went back to the state court, and in that court the demurrer to the second amended petition was argued and overruled.

There was judgment against Stuart, one of the defendants for failure to answer the original petition, and this judgment was affirmed by the supreme court of Nebraska. Stuart v. Bank of Staplehurst, 57 Neb. 570, 78 N. W. 298. A separate answer to the second amended petition was filed on behalf of the defendant Thompson and a joint answer on behalf of the defendants Yates and Hamer. In the answer of Thompson it was averred that, while a stockholder, he was not a director of the Capital National Bank at the time the plaintiff made its various deposits; it was denied that any of the reports set out and referred to in the petition were signed or attested by Thompson, and specifically for himself he denied 'all alleged misconduct and mismanagement of said bank on his part, and all of the alleged neglect of duty and the causing of the insolvency of said bank, as charged in the said amended petition.'

The following paragraph was also set up in the answer:

'This defendant further says that the cause of action set out in the plaintiff's amended petition, if it have any, is founded upon alleged facts which, if true, constitute a violation by this defendant, as a director or stockholder, of his duties as such director or stockholder, as laid down and defined in the national banking laws of the United States above referred to, concerning the government and management of national banks. And this defendant alleges that if any liability attaches to him as a director or stockholder of said bank for any act done or duty neglected as set forth in said amended petition or otherwise, that such liability is determined and controlled by the national banking act concerning the management of national banks; and that, in determining the liability of this defendant, there is necessarily involved the construction of said national banking act relating to the duties of directors and stockholders of national banks. That a Federal question is involved in determining the liability of this defendant by reason of the alleged mismanagement of said bank and the alleged neglect of duty on the part of this defendant.'

Matter alleged to constitute an estoppel against the further prosecution of the action, and to operate as a bar to recovery was set up in special defenses, which need not, however, be further noticed.

The answers of Yates and Hamer were similar in effect to that of Thompson, except as to the allegation that Thompson was not a director when the plaintiff made his deposits.

The cause was put at issue. Before the trial three of the defendants—Walsh, Hamer, and Phillips—died, and the action was revived against the administrator of Walsh and Hamer, but was not prosecuted further against the estate of Phillips. The companion actions brought by different plaintiffs were tried with the case at bar by a jury, and there was verdict against all the defendants then before the court, upon which judgment was entered except as to the administrator of Walsh, in whose favor judgment was entered by the court upon special findings as to him made by the jury. After the correction of an error in the amount of the judgment the case was taken to the supreme court of Nebraska, where the judgment was affirmed. 105 N. W. 287. This writ of error was then sued out, apparently on behalf of all the defendants. We assume, however, that Charles W. Mosher and R. C. Outcalt, two of the defendants below, have abandoned the prosecution of the writ. We so assume because no cost bond appears to have been furnished by either; because neither has appeared at the bar by counsel and no brief in their behalf has been filed, and, on the contrary, in the brief of the defendants in error it is stated that the persons named did not prosecute error, which we take to mean that the parties referred to have abandoned in this court the prosecution of the writ of error which was sued out in their names, and because the bill of exceptions does not contain the answers of those defendants nor the evidence relating to their case, which would be pertinent to consider if we were called upon to determine whether prejudicial error was committed as to them. None of the remaining plaintiffs in error were officers of the bank, and they were sued simply for acts done as directors thereof.

A motion to dismiss first requires attention. The asserted want of jurisdiction in this court in based upon the contention that no Federal question was raised in or decided by the state court. But, as will hereafter appear, the record plainly shows that both in the trial and appellate courts an immunity was claimed under § 5239 of the Revised Statutes (U. S. Comp. Stat. 1901, p. 3515), at least in respect to the rule of liability applied below, and such immunity was expressly denied by the state court, and there is, therefore, jurisdiction, even if, in other respects, jurisdiction might not be exercised, as to which we are not called upon to decide. Schlemmer v. Buffalo, R. & P. R. Co. 205 U. S. 1, 51 L. ed. 681, 27 Sup. Ct. Rep. 407; Tullock v. Mulvane, 184 U. S. 497, 46 L. ed. 657, 22 Sup. Ct. Rep. 372; Metropolitan Nat. Bank...