Dep't of Banking v. McMullen

• Citation: 134 Neb. 338,278 N.W. 551
• Decision Date: 25 March 1938
• Docket Number: No. 30072.,30072.
• Parties: DEPARTMENT OF BANKING v. MCMULLEN ET AL.
• Court: Nebraska Supreme Court

134 Neb. 338

278 N.W. 551

DEPARTMENT OF BANKING

v.MCMULLEN ET AL.

No. 30072.

Supreme Court of Nebraska.

March 25, 1938.

Syllabus by the Court.

1. A statute may be remedial in one part and penal in another. Globe Publishing Co. v. State Bank of Nebraska, 41 Neb. 175, 59 N.W. 683, 27 L.R.A. 854.

2. That part of section 8-150, Comp.St.1929, which provides that every director of a bank who participates in, or knowingly assents to, an excessive loan shall be held liable in his personal and individual capacity for all damages which the bank, its shareholders,or any other person shall have sustained in consequence of such violation, is remedial in character.

3. A cause of action against a director participating in or assenting to an excessive loan as provided in section 8-150, Comp.St.1929, is complete the moment the loan is made, and then is entire.

4. The statute of limitations begins to run against a cause of action thereon as of the date of the making of such excessive loan, and is barred after four years in the absence of fraud or concealment.

5. Petition examined, and held to show on its face that any and all causes of action, if any, asserted by plaintiff were barred by the statute of limitations, and the demurrer thereto was properly sustained.

Appeal from District Court, Garfield County; Kroger, Judge.

Action by the Department of Banking, as receiver and liquidating agent of the First State Bank of Burwell, Neb., against Cora McMullen, executrix of the last will and testament of William L. McMullen, Sr., Harry J. Coffin, and others, for damages for the making of excessive loans by bank directors. From a judgment sustaining the demurrer of the named defendants, and dismissing the petition, the plaintiff appeals.

Affirmed.

Clarence G. Miles, of Lincoln, Glenn E. Runyan, of Burwell, and F. C. Radke and Robert H. Downing, both of Lincoln, for appellant.

Guy Laverty and B. A. Rose, both of Burwell, and Prince & Prince, of Grand Island, for appellees.

Heard before GOSS, C. J., ROSE, EBERLY, PAINE, CARTER, and MESSMORE, JJ., and CHAPPELL, District Judge.

CHAPPELL, District Judge.

The department of banking of the state of Nebraska, appellant, as receiver and liquidating agent of the First State Bank of Burwell, Nebraska, filed a petition in the district court for Garfield county, for and in behalf of creditors, against all of the directors of the First State Bank of Burwell, Nebraska, seeking a judgment for $8,215.88 as damages because of alleged making of excessive loans by them in violation of section 8-150, Comp.St.1929. It is admitted that, at the time of the filing of the petition on March 27, 1936, two years, two months and fifteen days after plaintiff took over the bank for liquidation, two of the directors were unable to be served with summons because no one knew their whereabouts; two directors were deceased and the representatives of their estates were made parties but not served with summons; and the two other directors, William L. McMullen, Sr., and Harry J. Coffin, were served with process, but before this appeal was taken the defendant William L. McMullen, Sr., died and the proceeding was revived against the representative of his estate, Cora McMullen executrix. Therefore, the defendants, appellees herein, are Cora McMullen, executrix, and Harry J. Coffin. Defendants McMullen and Coffin demurred to plaintiff's petition for the reasons, generally, that the petition did not state facts sufficient to constitute a cause of action in favor of the plaintiff and against the defendants, or either of them, and especially because the petition shows on its face that any and all claims asserted by plaintiff were barred by the statute of limitations. Their demurrer was sustained and, plaintiff having elected to stand upon its petition, the action was dismissed at plaintiff's costs. Motion for new trial was overruled and appeal taken to this court.

The petition alleges in substance the corporate organization of the bank, issuance of its charter and general conduct of a banking business from March 1, 1920, until January 12, 1934, at which time it became financially embarrassed and involved to such an extent that the department of banking of the state of Nebraska took it over for liquidation; that, as liquidating agent and receiver, the department of banking proceeded to collect and dispose of its property and liquidate the bank, among the assets of which was this alleged cause of action; that the paid-up capital stock was $50,000 and the surplus $10,000, a total of $60,000, 20 per cent. of which was $12,000; that William L. McMullen, Sr., and Harry J. Coffin, together with the other defendants, continuously constituted the board of directors of the bank charged with the management and control thereof as required by law; that, while defendants were officers and directors, the bank made excessive loans of its funds to one F. J. Grunkemeyer, a single individual, for his use and benefit. The petition sets out separately some 42 loans on separate dates beginning on October 9, 1928, and continuing down to and including April 11, 1931, the total sum thereof being $48,567.19; that each of said loans going to make up this aggregate sum was an excessive loan, and each loan at the time it was made, added to the amount already owing to the bank, increased the amount of his loans from the bank to exceed 20 per cent. of the paid-up capital stock and surplus of the bank; that defendants each and all participated in, knowingly assented to, and negligently permitted the making of such excessive loans upon which there has been paid and credited the sum of $40,351.31, the amount still due and unpaid being $8,215.88, by reason of which the bank has been damaged in that sum, for which plaintiff prays judgment.

We have given careful study to the allegations of the petition but have been unable to determine from pleaded facts that there ever was an excessive loan. The allegation that each of the loans going to make up the aggregate sum was an excessive loan cannot be true because the greatest single loan was $9,000, and it must have been more than $12,000 before the loan could be excessive. The statement that each of the loans at the time it was made, when added to the amount already owing to the bank, increased the amount to exceed the sum of 20 per cent. of the capital and surplus could be true only as to the first two loans, one made on October 9, 1928, and the other October 16, 1928, either one or both of which we must assume were paid when due in the absence of pleaded facts as to the time of payment. From the statement that there has been paid and credited upon such excess loans the sum of $40,351.31, with no date or designation of the time of payment, we are unable to come to any other conclusion except that the borrower made these payments on the first owing indebtedness. To make an overloan out of the last amounts borrowed, we must return to December 3, 1929. From this pleading we must assume, in the absence of pleaded facts, that he paid a part of the $40,351.31 at a time after excessive loans were made. This court cannot assume facts not pleaded to establish such a basis of recovery. In other words, this court cannot take the sum of $40,351.31 paid upon the loan without knowing the date of payment and, by any procedure, apply it either up or down upon the scale of the account and thereby make an excessive loan upon any date.

[1] We find no allegation that any excessive loan caused the insolvency of the bank or that any creditor for whom this action was brought was a creditor at the time of making any excessive loan or that they were damaged as a consequence thereof. We do not find any allegation in the petition, outside of the general statement that the bank has been damaged, which shows that the Grunkemeyer loans are not now perfectly good and may still be collected. To hold the directors of a bank liable under this statute, facts pleaded by plaintiff must show that an excessive loan was, in fact, made; that the directors participated in or knowingly assented thereto, and that the person or persons for whom the action is brought were creditors or otherwise interested at the time and sustained damages in consequence of such violation.

We find plaintiff's petition shows upon its face that any and all claims asserted by plaintiff in this action were, at the time of the filing of the petition, March 27, 1936, barred by the statute of limitations. In the case of Wood v. Carpenter, 101 U.S. 135, 139, 25 L.Ed. 807, 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 security and stability to human affairs. An important public policy lies at their foundation. They stimulate to activity and punish negligence. While time is constantly destroying the evidence of rights, they supply its place by a presumption which renders proof unnecessary. Mere delay, extending to the limit prescribed, is itself a conclusive bar. The bane and antidote go together.” We approved this statement in Branham v. Ayers, 126 Neb. 688, 254 N.W. 259.

Counsel for the parties have, at great length and very ably, discussed the question of whether section 8-150, Comp.St.1929, is remedial or penal in character, having in mind sections 20-206 and 20-208, Comp.St.1929, which, in effect, provide that, if remedial, the action must be brought within four years, and, if penal, within one year. Section 8-150, Comp.St.1929, provides, in so far as it relates to this case: “No corporation transacting a banking business in this state shall directly or indirectly loan to any single * * * individual * * * for the use and benefit of such * * * individual, more than twenty per cent of the paid-up capital and surplus of such bank. * * * Any officer or employee of any corporation transacting a banking...