Coddington v. Canaday
| Decision Date | 10 October 1901 |
| Docket Number | 18,721 |
| Parties | Coddington et al. v. Canaday, Receiver |
| Court | Indiana Supreme Court |
From Delaware Circuit Court; G. H. Koons, Judge.
Action by Jesse Canaday as receiver of the Citizens Bank of Union City against Benjamin F. Coddington and others as directors for damages resulting from alleged negligence in the management of the affairs of the bank. From a judgment for plaintiff, Coddington and Smith, appeal.
Affirmed.
S. R Bell and J. B. Ross, for appellants.
J. W Thompson, J. W. Ryan and W. A. Thompson, for appellee.
Dowling J. Monks, C.J., did not participate in this decision.
This action was brought by the appellee, in his own name, as the receiver of the Citizens Bank of Union City, Indiana, against the appellants, and others, who were the directors of that corporation. Its object was to recover damages alleged to have been sustained by the bank by reason of the negligence of the directors, and the gross mismanagement of the financial affairs of the corporation by them. The suit was commenced in the Randolph Circuit Court, the venue afterwards being changed to Delaware county. Motions were made by appellants to strike out parts of the complaint; to strike out the entire complaint; to separate it into paragraphs; to make it more certain; to strike out the 109th specification; and to make that specification more certain. Appellants Coddington and Smith each demurred to the complaint on the grounds that the court had not jurisdiction of the subject of the action, that the plaintiff had not the legal capacity to sue, that there was a defect of parties defendant, that there was a misjoinder of causes of action, and that the complaint did not state facts sufficient to constitute a cause of action. The demurrers were overruled. The appellant Coddington filed an answer in a single paragraph, to which a demurrer was sustained. He then answered in three paragraphs, the first of which was a general denial. The second and third paragraphs of this answer were stricken out on motion of the appellee. The appellant Smith filed his separate answer in five paragraphs, to the first, second, and third of which demurrers were sustained. The fourth paragraph was stricken out on motion of appellee. The fifth was a general denial of the matters stated in the complaint. The cause was tried by a jury, who returned a general verdict in favor of the appellee, assessing his damages at $ 50,000. With their verdict, the jury returned answers to nearly 1,000 questions of fact submitted to them by the parties. Motions for a new trial, and in arrest of judgment, filed by each appellant, were overruled, and judgment was rendered on the verdict. Coddington and Smith appeal, notice having been served upon their codefendants.
Errors are assigned by appellant Coddington as follows: "(1) The complaint does not state facts sufficient to constitute a cause of action; (2) the court had not jurisdiction of the subject of the action; (3) the court erred in overruling the motion to strike out parts of the complaint; (4) the court erred in overruling the motion to strike out the entire complaint; (5) the court erred in overruling the motion to paragraph the complaint; (6) the court erred in overruling the motion to make the complaint more certain; (7) the court erred in overruling the demurrer to the complaint; (8) the court erred in overruling the motion to make the 109th specification of the complaint more certain; (9) the court erred in sustaining the demurrer to the answer; (10), (11), (12) the court erred in sustaining the motion to strike out the second and third paragraphs of appellant Coddington's answer; (13) the court erred in overruling the motion for a new trial; (14) the court erred in overruling the motion in arrest of judgment."
The errors assigned and discussed by appellant Smith are: "(1) The complaint does not state facts sufficient to constitute a cause of action; (2) the court erred in overruling appellant's demurrer to the complaint; (3), (4), (5) the court erred in sustaining demurrers to the first, second, and third paragraphs of appellant's answer; (6) the court erred in striking out the fourth paragraph of appellant's answer."
The following is an abstract of the material parts of the complaint: It is alleged that on May 16, 1896, in a suit in the Randolph Circuit Court, in which the State of Indiana on the relation of the Auditor of State was the plaintiff, and the Citizens Bank was the defendant, the purpose of which was to have the said bank judicially declared insolvent, and to have its affairs placed in the hands of a receiver and wound up, the said appellee Jesse Canaday, was, by the order of the court, appointed such receiver to take charge of, and reduce to his possession, all of the property, rights, credits, demands, and choses in action of every description, and however arising, belonging to said bank that the said Canaday as such receiver was, by the said order, empowered and directed to bring and prosecute in his own name, as such receiver, all actions necessary in the discharge of his duties as receiver; that the said Canaday accepted the said appointment, was duly qualified in the manner required by the statute, and entered upon, and is yet acting in, the discharge of his said duties; that for twenty years a bank of discount and deposit, known as "The Citizens Bank," organized under the statutes of this State, having a capital of $ 80,000, had been in existence and carrying on business in Union City, Indiana; that said bank did a large business in receiving deposits, and in buying and selling notes, bills of exchange, and other commercial paper; that said bank owned a large quantity of real estate; that on March 27, 1893, the term of the corporate existence of said bank expired and that said bank then owned notes, bills, and real estate; that on said 27th day of March, 1893, the Citizens Bank was organized under the laws of this State as a bank of discount and deposit, with a capital of $ 60,000, divided into shares of $ 100 each, and that the said corporation became the successor of said original "Citizens Bank"; that by the action of the directors of both of said banks, the notes, bills, commercial paper, and real estate of the old bank were transferred and conveyed to the new bank; that from March 27, 1893, until May 6, 1896, the said new bank was actively engaged at Union City in receiving deposits, loaning money, buying and discounting notes, bills, etc., and in carrying on a general banking business; that on May 6, 1896, said bank closed its doors because of its insolvency; that it had been insolvent for six months previously to said date, and that it has done no business since May 6, 1896; that the defendants were directors of said original "Citizens Bank" for five years prior to April, 1893, and that, upon the organization of the new bank, they were elected directors of that corporation, and acted as such, being thereafter annually reelected to that position, and so continuing to act until said new bank ceased to do business; that during all of said time, from March 27, 1893, until May 6, 1896, each of said defendants and directors negligently and carelessly failed to perform his duties, and negligently and carelessly refused and neglected properly, prudently, and carefully to manage the business of the said new bank in this, to wit: The complaint here charges the defendants with some 109 specific breaches of duty. It alleges that they took the real estate held by the old bank at excessive estimates, and carried the same on the books, at such valuations, and in the published statements of the financial condition of the bank, thereby deceiving the public as to its solvency; that said directors took from said old bank $ 50,000 of worthless notes, drafts, checks, etc., at their face value, and carried the same on the books of the bank at such face value; that said directors failed to hold regular monthly meetings, but suffered the business of said bank to go by default, in consequence whereof said bank became hopelessly insolvent; that the said directors, at their first meeting, elected one Nathan Cadwalader, president of said bank, and his son, Charles H. Cadwalader, cashier thereof, and thereafter kept both of them in said offices; that the said Nathan and Charles H. Cadwalader were engaged in other kinds of business, and were known to said directors to be unfit for said positions, the said Charles being a gambler and libertine; and that neither of said officers gave sufficient time to the business of the said bank, but that they neglected the same; that the said directors negligently failed to require any bond from either the said president or cashier, conditioned for the faithful performance of their duties, by means whereof large sums were lost to said bank; that said directors negligently failed to appoint a finance committee to examine the books of said bank, and to pass upon loans to be made by it, but that they permitted the president and cashier to make all such loans, and to carry on the business of the bank as they pleased, to the great injury of the bank; that large sums were loaned and invested by these officers in, and upon, worthless paper, and to irresponsible persons, or without security, whereby the bank was subjected to great losses; that the said directors negligently permitted many depositors to overdraw their accounts; that they suffered the president to buy 100 shares of the capital stock of the bank at a premium of ten per centum, and to pay for the same out of the moneys of the bank; that the said directors negligently failed to examine the books of the bank, and to acquaint themselves with its business and condition, until...
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