Foster v. Bank of Abingdon

• Citation: 88 F. 604
• Parties: FOSTER et al. v. BANK OF ABINGDON et al.
• Decision Date: 27 July 1898
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

88 F. 604

FOSTER et al. v. BANK OF ABINGDON et al.

United States Circuit Court, W.D. Virginia.

July 27, 1898

Rhea &amp Peters, Curtain & Haynes, and D. F. Bailey, for complainants.

White &amp Penn, Fulkerson, Page & Hurt, and Honaker & Hutton, for defendants.

PAUL District Judge.

This suit is brought by the plaintiffs, who were depositors in the Bank of Abingdon. They sue for themselves and all other creditors who may come into the cause and contribute to the costs thereof. The only questions now before the court are raised on demurrer filed by the defendants. The grounds assigned for sustaining the demurrer are the following:

'(1) That it appeareth by the complainants' own showing by the said bill that they are depositors in the Bank of Abingdon, an ordinary bank of discount and deposit, of which the defendants were directors, and that, being such they have no right to institute this suit against the said defendants, there being no allegation in said bill that the authorities of said bank decline to sue.

'(2) That the said bill is exhibited against these defendants by complainants, on behalf of themselves and all other creditors of said bank, to hold them responsible as directors of the said Bank of Abingdon for losses alleged to have occurred to the said complainants by reason of the misconduct of said directors; and in said bill several distinct and independent matters and causes, which have no relation to each other, are embraced,-- matters in which all the said complainants are not interested, and other matters which do not affect all of said defendants.

The demurrer admits the properly pleaded allegations of the bill. The bill alleges the insolvency of the defendant bank charges that no regular meetings of the stockholders or of the board of directors had been held for a long period of time; that the business of the bank had been conducted from year to year under the reckless and careless management of the directors of said bank; that the bank, under their management, was completely wrecked, the moneys of its depositors squandered in wild speculation, worthless securities and loans, in consequence of which the bank became hopelessly insolvent, and was forced to make an assignment. It further charges 'that the liabilities of said bank amount in the aggregate to the sum of $230,000 or more, whereas the available assets will not pay one-fourth of the indebtedness'; that a large part of the debts due the bank are owed by insolvent parties, to whom the money was loaned with reckless and gross negligence of the interests of the depositors. It charges that large sums of money were loaned to insolvent individuals and firms, designated in the bill, for which there were no indorsers, or, if any, they were insolvent, and that the insolvency of the borrowers and indorsers was known to the board of directors; that these officers themselves obtained large loans, a part of which they pretended to secure with what are charged to be worthless collateral securities; that one of the directors is due the bank $10,000 for money loaned him without any security whatever, and that the collection of the same is now barred by the statute of limitations; that a large portion of the collateral received by the bank for money loaned consists of spurious stock of the Abingdon Development Company, which was in this way converted into money by the officials of the bank, thus practicing a transparent fraud on the complainants and other depositors. It alleges that, if ordinary care and prudence had been exercised by the officers of the bank, all of the money of the complainants and of other creditors of said bank would have been saved, and the wreck of the bank averted. The bill further charges that the president of the bank, by representing to the complainants that the bank was solvent, and that its stock was worth $110 on the share, induced them to deposit in said bank about $18,000. It charges that the officers and directors have violated the laws of the state of Virginia, and the general law governing their conduct and management of said bank; that they failed to use ordinary care and diligence in the...