Dykman v. Keeney

• Decision Date: 14 December 1897
• Citation: 154 N.Y. 483,48 N.E. 894
• Parties: DYKMAN v. KEENEY.
• Court: New York Court of Appeals Court of Appeals

154 N.Y. 483

48 N.E. 894

DYKMAN

v.KEENEY.

Court of Appeals of New York.

Dec. 14, 1897.

Appeal from supreme court, appellate division, Second department.

Action by William N. Dykman, as receiver of the Commercial Bank, against Seth L. Keeney and others. From a judgment of the appellate division (47 N. Y. Supp. 352), affirming a judgment overruling a demurrer of defendant Binns to the complaint, he appeals. Reversed.

Henry M. Dater, for appellant.

Herbert T. Ketcham, for respondent.

GRAY, J.

This action is brought by the receiver of the Commercial Bank against certain persons, who either were formerly directors of the bank, or who are the personal representatives of deceased directors. The complaint alleges that these directors were such between April, 1886, and August, 1893; some during all of that period of time, and others during varying periods of time between those dates. It charges the defendants, during the several periods while they were in office, with conduct which was negligent, wasteful, and in violation of the statute in many respects, and the result of which was to effect the ruin of the bank. It shows that loans and discounts were made in excess of the amount allowed by law; that losses were permitted to occur to an amount in excess of the undivided profits, thereby creating a deficit in the capital of the bank; that debts were suffered to remain without prosecution, and on which no interest had been paid for more than one year; that, in the calculation of profits for the purpose of dividends, debts and the interest accrued and unpaid on the same were included; that pretended dividends on the shares of bank stock were made as from undivided profits, when, in fact, they were paid out of the capital stock; that obligations were permitted to be renewed without the payment of the accrued interest; that overdrafts were permitted to be made; that loans were made to persons who were already indebted to the bank, or who were known to be engaged in hazardous enterprises, or upon pretended security known to be inadequate; that certain of the directors were allowed to obtain a preference over the bank by judgment and execution against a certain mining company, which was largely indebted to the bank, when, if the bank's claim against the company's property had been duly enforced, it might have been, at least in part, collected; that they retained in office a cashier, with knowledge that he was dishonest, incompetent, and guilty of a falsification of the books of the bank; and, finally, that reports were caused to be made to the superintendent of the banking department which contained misstatements and which were made to insure a continuance of the bank in business. It is alleged in the complaint that none of the acts complained of were completely accomplished by all of the directors; that certain of them were done during their several periods of office; that the persons mentioned as having done the acts complained of within periods of time specified are severally liable for the separate and personal misconduct of such acts, and in separate and different amounts therefor; that, as to many of the acts complained of, the plaintiff is unable to determine or allege the degree in which the particular directors have respectively participated or the proportion or amount of their liability. The complaint alleges that the acts complained of were numerous and complicated, and that many were not recorded in the books of the bank; that the books and accounts do not contain accurate records of the acts which were done in the name of the bank by the directors, while they were respectively in office, and that plaintiff is unable to determine the number or the nature of the said acts, or the sums of money involved therein, respectively. It is alleged that the plaintiff has not knowledge or information sufficient to enable him to prove the acts complained of, unless a discovery and an account thereof be made by the defendants, and that, unless relief is granted to him against all of the defendants, as hereinafter prayed for, it will be necessary for him to bring and maintain a multiplicity of actions, to the delay of his administration, and that, by reason of the matters alleged, he has no adequate remedy at law in the premises. The prayer of the complaint is for a judgment-First, that the defendants were guilty of negligence, waste, and violation of duty, under the law, in doing the acts alleged; second, that the bank had suffered loss and damage by reason of such acts, and that the plaintiff is entitled to recover from each of the defendants, respectively, the amount which shall, upon an accounting in this action, appear to be due from them, respectively; and, third, that an account be taken between the plaintiff and each of the defendants, and that each defendant make discovery, not only as to the acts and transactions done in the name of the bank by any of the directors, but also as to the liability of each of the defendants, and the degree and proportion of such liability, and that upon such an account the damages sustained by the bank may be ascertained, and that the plaintiff recover from the defendants, respectively, the separate and different amounts for which each of the defendants may be found to be severally liable for the several and personal misconduct in the premises of himself or his decedents.

One of the defendants has demurred to the complaint, upon the grounds that there was an improper joinder of causes of action, and that the complaint does not state facts sufficient to constitute a cause of action. The demurrer was overruled at the special term, and, upon appeal to the appellate division, there was an affirmance of the special term judgment. An application for leave to appeal was granted by the appellate division, and two questions of law were certified for review by this court, viz. whether the complaint in this action sets forth a cause of action in equity; and, second, whether there has been an improper joinder of causes of action in the complaint herein.

I think that the present appeal is controlled by our disposition of the case of O'Brien v. Fitzgerald, 150 N. Y. 572, 44 N. E. 1126. That, like this, was an action brought by receivers of a bank to recover against its directors for the negligent performance of their duties, and the demurrer to the complaint raised a similar question to that now before us. When that case first came before this court (143 N. Y. 377, 38 N. E. 371) we all concurred in the opinion that the demurrer should be sustained. Judge Finch, who delivered the opinion of this court, observed that, on its face and in its form, the action was one at law, to recover damages for negligence, and that no facts were stated which indicated a need of the intervention of a court of equity. He pointed out several respects in which the complaint was wanting in proper averments to make out an equitable cause of action, and he concluded...