Curtis v. Connly, 1439.

• Decision Date: 04 March 1920
• Docket Number: 1439.
• Parties: CURTIS v. CONNLY et al.
• Court: U.S. Court of Appeals — First Circuit

264 F. 650

CURTIS v. CONNLY et al.

No. 1439.

United States Court of Appeals, First Circuit.

March 4, 1920

Edward F. McClennen, of Boston, Mass. (George H. Huddy, Jr., and Huddy, Emerson & Moulton, all of Providence, R.I., and Dunbar, Nutter & McClennen, of Boston, Mass., on the brief) for appellant.

William W. Moss, Arthur M. Allen, Edward A. Stockwell, Percy W Gardner, and Claude R. Branch, all of Providence, R.I. (Rathbone, Gardner, Gardner, Pirce & Thornley, Green Hinckley & Allen, Edward P. Jastram, Edwards & Angell, and John S. Murdock, all of Providence, R.I., on the briefs), for appellees.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

ANDERSON Circuit Judge.

Careful consideration of the appellant's able argument and examination of the authorities cited fail to convince us that the court below erred in holding that the statute of limitations bars the right of action against these six defendants.

A question of jurisdiction calls for brief comment. The defendants contend, rather faintly, that the decision is not now appealable, on the ground that the decree in their favor is not a final decree. We think this contention is without merit. On the allegations of the bill, each defendant is under a separate liability, and a separate action of law might have been brought against him. The decree in favor of these six defendants is therefore a final decree, from which an appeal lies under the statute. U.S. Comp. Stat. 1916, Sec 1120; Hill v. Chicago, etc., R.R., 140 U.S. 52, 11 Sup.Ct. 690, 35 L.Ed. 331. We agree with counsel for the plaintiff that each defendant is under a several liability; that, in effect, we are dealing with 21 lawsuits combined into one equity suit.

It would serve no useful purpose to elaborate-- largely to repeat in other words-- the reasons set forth in the learned opinion of the District Court (Curtis v. Metcalf et al., 259 F. 961) for the conclusion there reached and now affirmed.

The gist of the case may be stated in a few sentences: When these six defendants ceased to be directors, the bank was still solvent. The rights of no creditor had then been impaired. This fact negatives any possible contention, concerning the validity of which no opinion is intimated, that the receiver has, as against these defendants, any other or greater rights than accrued to the corporation, and through it to its stockholders. Thereafter at least 11 new directors were chosen, who had had no part in the wrongdoings charged against these retiring defendants. Every director remaining or succeeding knew of the wrongs to the bank participated in by these defendants, and is charged with additional liability for failure to collect damages therefor from these defendants. No collusion between these 6 defendants and the old directors or the new directors is alleged. The bank, therefore, knew of the cause of action against them, and failed for more than 6 years to bring suit. 1 Morse on Banks (4th Ed.) Sec. 134; 10 Cyc.p. 1057; Nat. Sec. Bank v. Cushman, 121 Mass. 490. Under these circumstances, we think the action barred, whether the question be tested under the strict provisions of General Laws of Rhode Island, c. 284, Sec. 7 (McClaine v. Rankin, 197 U.S. 154, 25 Sup.Ct. 410, 49 L.Ed. 702, 3 Ann.Cas. 500), or under the broader and more flexible rule laid down in Kirby v. Lake Shore R.R., 120 U.S. 130, 136-138, 7 Sup.Ct. 430, 30 L.Ed. 569, Exploration Co. v. U.S., 247 U.S. 435, 38 Sup.Ct. 571, 62 L.Ed. 1200, and Bailey v. Glover, 21 Wall. 342, 22 L.Ed. 636.

The basic misrepresentations complained of consisted in carrying assets known to be bad on the books as good at face value, with resultant false reports to the Comptroller, to the stockholders, and to the general public. But these misrepresentations by these defendants ceased when these defendants ceased to be directors. They made thereafter no attempt to conceal the truth from their successors or from any one else. They did not in fact conceal the true condition from either the old or the new directors, all of whom knew all the facts. The facts were also easily discoverable by competent and careful bank examiners.

Nor can the contention made, not with much apparent confidence, that the statute did not begin to run in favor of the retiring directors until the bank passed into the control of a board, the majority of whom had not participated in the wrongs alleged against the retiring members, be sustained. Under such a rule, the statute would not in the case at bar be applicable to these 6 defendants. But, as already noted, the retiring directors are not charged with collusion or conspiracy after their retirement, either with their former associates or with the new directors. Without such collusion or conspiracy, the wrongdoing of each of these 6 defendants ended when he retired; it cannot be projected forward for an indefinite period, except through some subsequent act of each defendant. It was within the power of the bank to have removed the entire board when it knew, as it did, through the new directors, of the wrongs participated in by the old board. The 6 who retired cannot be held responsible for the control of the corporation, when they had nothing whatever to do with that control. Such a rule, if adopted, would be as applicable after 17 years' (or any other number of years) retirement as after 7 years' retirement. All the evils of stale claims, asserted after material facts have been forgotten, important witnesses have died or become otherwise unavailable, exonerating papers been destroyed or lost, would be let loose. Compare Wood v.

Carpenter, 101 U.S. 135, 139 (25 L.Ed. 807), where Mr. Justice Swayne said:

'Statutes of limitation are vital to the welfare of society and are favored in the law. They are found and approved in all systems of enlightened jurisprudence. They promote repose by giving

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