Frank Chesbrough v. Frank Woodworth, No. 179

CourtUnited States Supreme Court
Writing for the CourtMcKenna
Citation61 L.Ed. 1000,244 U.S. 72,37 S.Ct. 579
PartiesFRANK P. CHESBROUGH, Plff. in Err., v. FRANK T. WOODWORTH
Docket NumberNo. 179
Decision Date21 May 1917

244 U.S. 72
37 S.Ct. 579
61 L.Ed. 1000
FRANK P. CHESBROUGH, Plff. in Err.,

v.

FRANK T. WOODWORTH.

No. 179.
Argued April 19 and 20, 1917.
Decided May 21, 1917.

Page 73

Mr. Thomas A. E. Weadock for plaintiff in error.

Messrs. Edward S. Clark and John C. Weadock for defendant in error.

Mr. Justice McKenna delivered the opinion of the court:

Action in ten counts charging plaintiff in error and one Joseph W. McGraw with violating the National Bank Act, and alleging damages resulting to defendant in error therefrom.

In description of the parties we shall designate them respectively as plaintiff and defendants.

In all the counts defendant Chesbrough and McGraw are alleged to have been at certain dates directors of the Old Second National Bank, a national banking corporation organized and doing business under the National Bank Act of 1864 [13 Stat. at L. 99, chap. 106, Comp. Stat. 1916, § 495], and the amendments thereto, and having its office in the city of Bay City, Michigan.

The following violations of the act are charged: (1) Signing, attesting, and permitting and assenting to the publication of, a report of the conditions of the bank required to be made by U. S. Rev. Stat. § 5211, Comp. Stat. 1916, § 9774, of such act, which report was false. (2, 3, 4, 5.) The Comptroller of the Currency having made a requisition upon the bank for a report of the resources and liabilities of the bank upon a day specified, as required by the act, the defendants permitted and assented to a violation of the act by signing, attesting, and permitting and assenting to the publication of, a false

Page 74

report of the resources and liabilities of the bank and its condition at the close of business of such day. (6, 7, 8.) Violation of the act in that defendants and each of them permitted and assented to the declaration of the semiannual dividend, being payable December 1, 1902, knowing that it would necessarily be paid out of the capital stock of the bank, and not out of net profits, and knowing that losses had theretofore been sustained equal to or exceeding the undivided profits then on hand, and that the sums so declared as dividends exceeded the profits then on hand, after deducting therefrom losses and bad debts. (9) Defendants knowingly violated and permitted and assented to the violation of the act (U. S. Rev. Stat. § 5200, Comp. Stat. 1916, § 9761) in that they knowingly participated in, permitted, and assented to the creation of, certain liabilities to the bank, and knowingly permitted and assented to the continuance of the liabilities and the carrying of the same among the loans and discounts of the bank after defendants and each of them had knowledge of the nature and character of the liabilities, and that they had been created and were being carried in violation of the act. The liabilities are set out. (10) Violations of the act (U. S. Rev. Stat. §§ 5199, 5200, 5204, 5211, 5239, Comp. Stat. 1916, §§ 9760, 9761, 9766, 9774, 9831), being portions of a general design and conspiracy on the part of the defendants to deceive the public, including plaintiff, for the purpose of giving the stock of the bank a fictitious market value and enabling each of the defendants and his relatives and friends to dispose of certain shares of the stock then and there held by them at a price exceeding the value of the stock.

In each count damage is alleged to have been caused to plaintiff, he having purchased stock upon the faith of the action of defendants. The total amount of damage is alleged to be $35,000.

Plaintiff in error Chesbrough (the case is here on his writ of error, McGraw not having joined) filed a demurrer to the declaration, which was overruled. He then filed

Page 75

several pleas, one of which alleged that he was not guilty of the wrongs and injuries complained of, and gave notice that under the latter he would 'insist [upon] and give in evidence' certain matters of defense.

The case was tried to a jury. The 3d, 6th, 7th, 8th, 9th, and part of the 10th counts were withdrawn from their consideration. A verdict was returned for plaintiff in the sum of $22,662.98, upon which judgment was entered. It was affirmed by the court of appeals. 137 C. C. A. 482, 221 Fed. 912.

This case had once before been to the circuit court of appeals, where its facts were reviewed, and we may refer to the report of the case for them. 116 C. C. A. 465, 195 Fed. 875.

It there appears that in October, 1902, the bank reported a capital of $200,000, a surplus of $75,000, and undivided profits of $27,000. Its total loans and discounts were about $100,000.

On October 3, 1902, the bank held as loans (so considered by the court and the Comptroller of the Currency) the paper of the Maltby Lumber Company...

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45 practice notes
  • Sunrise Securities Litigation, In re, No. 89-2116
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • October 17, 1990
    ...does not support plaintiffs' position that they should be permitted to proceed with their nonderivative claim. In Chesbrough v. Woodworth, 244 U.S. 72, 37 S.Ct. 579, 61 L.Ed. 1000 (1917), also relied upon by plaintiffs, the Supreme Court found "no reversible error" in a lower court ruling t......
  • Leach v. Federal Deposit Ins. Corp., No. 87-1921
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 2, 1988
    ...buys stock in reliance on false information from a director as personally injured by the director's conduct. See Chesbrough v. Woodworth, 244 U.S. 72, 88, 37 S.Ct. 579, 586, 61 L.Ed. 1000 (1917). On a certain level, the difference is a matter of diffusion of injury. That is, when all shareh......
  • Marx v. Centran Corp., No. 83-3602
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • November 8, 1984
    ...against the directors of a national bank." Harmsen v. Smith, 542 F.2d 496, 500 (9th Cir.1976) (citing Chesbrough v. Woodworth, 244 U.S. 72, 37 S.Ct. 579, 61 L.Ed. 1000 (1917)). But see Russell v. Continental Illinois National Bank & Trust, 479 F.2d 131 (7th Cir.), cert. denied, 414 U.S. 104......
  • Adato v. Kagan, No. 772
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • January 29, 1979
    ...Harmsen v. Smith, 542 F.2d 496, 502 (9 Cir. 1976); Michelsen v. Penney, 10 F.Supp. 537, 540 (S.D.N.Y.1934). Cf. Chesbrough v. Woodworth, 244 U.S. 72, 77 (1917) (showing of reliance on statement of bank's condition required for Section 93 suit). Alternatively, plaintiffs have been required t......
  • Request a trial to view additional results
45 cases
  • Sunrise Securities Litigation, In re, No. 89-2116
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • October 17, 1990
    ...does not support plaintiffs' position that they should be permitted to proceed with their nonderivative claim. In Chesbrough v. Woodworth, 244 U.S. 72, 37 S.Ct. 579, 61 L.Ed. 1000 (1917), also relied upon by plaintiffs, the Supreme Court found "no reversible error" in a lower court ruling t......
  • Leach v. Federal Deposit Ins. Corp., No. 87-1921
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 2, 1988
    ...buys stock in reliance on false information from a director as personally injured by the director's conduct. See Chesbrough v. Woodworth, 244 U.S. 72, 88, 37 S.Ct. 579, 586, 61 L.Ed. 1000 (1917). On a certain level, the difference is a matter of diffusion of injury. That is, when all shareh......
  • Marx v. Centran Corp., No. 83-3602
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • November 8, 1984
    ...against the directors of a national bank." Harmsen v. Smith, 542 F.2d 496, 500 (9th Cir.1976) (citing Chesbrough v. Woodworth, 244 U.S. 72, 37 S.Ct. 579, 61 L.Ed. 1000 (1917)). But see Russell v. Continental Illinois National Bank & Trust, 479 F.2d 131 (7th Cir.), cert. denied, 414 U.S. 104......
  • Thompson v. Kerr, No. C-3-81-035.
    • United States
    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
    • November 16, 1982
    ...can only bring suit under § 93 for alleged violations of express and specific duties imposed by the Act. See Chesbrough v. Woodworth, 244 U.S. 72, 37 S.Ct. 579, 61 L.Ed. 1000 (1917) (failure to file report with Comptroller of the Currency, 12 U.S.C. § 161(a)); B.C. Industries v. First Natio......
  • Request a trial to view additional results

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