Gaither v. Bauernschmidt
| Citation | 69 A. 425,108 Md. 1 |
| Parties | GAITHER v. BAUERNSCHMIDT et al. |
| Decision Date | 01 April 1908 |
| Court | Court of Appeals of Maryland |
Appeal from Circuit Court of Baltimore City; Thomas Ireland Elliott Judge.
Bill by George R. Gaither, as receiver of the American National Bank against John Bauernschmidt and others. From a decree sustaining a demurrer to and dismissing the bill, plaintiff appeals. Reversed and remanded.
For former report, see Emerson v. Gaither, 103 Md. 564 64 A. 26, 8 L. R. A. (N. S.) 738.
Robert Lee Slingluff and Leon E. Greenbaum, for appellant.
Bernard Carter and Thomas C. Weeks, for appellees.
This is an appeal from a decree of the circuit court of Baltimore City dismissing a bill filed by the appellant, as receiver of the American National Bank, against the directors of that institution. The bill was filed on April 18, 1902, against 16 defendants, each of whom had been a director of the bank at some time between January 1, 1898, at which time it was alleged in the bill to have been solvent, and the 22d of December, 1900, when it was declared insolvent, and a receiver of its affairs appointed by the Comptroller of the Currency of the United States. The executors and distributees of a deceased director were also made defendants to the suit. The purpose of the bill was to hold the directors liable for various loans, alleged to have been made by the bank during their respective periods of service with their knowledge and consent, in excess of one-tenth of its paid-up capital stock; and also for the payment of two dividends when the bank was in such condition as to make their payment unlawful. The bill sought to hold the defendants liable for losses alleged to amount in the aggregate to $200,000 thus incurred by the bank, both under the provisions of acts of Congress relating to national banks and the principles of equity and common law applicable to negligent and unlawful acts of corporate directors. The prayer of the bill was for an account of the bank's funds alleged to have been thus wasted and diverted, and for an ascertainment of the losses thereby sustained by the creditors and stockholders, and for a restoration thereof, when ascertained, to the receiver for the benefit, first of the creditors of the bank, and then for its stockholders other than the defendants; and that the mode of contribution to be made by the defendants and the equity and right of all parties as well as the liabilities of the defendants be ascertained and adjusted, "and that judgment for such sums as shall be found to be the loss which has thus been sustained be rendered against the defendants for the respective amounts which upon accounting they shall be respectively liable for."
There were 30 specific acts complained of in the bill, of which only 1 was alleged to have been done before Wilmer Brinton and Fred Walpert, two of the defendants, ceased to be directors, and only 3 were alleged to have been done before Charles H. Dickey and R. H. P. Ellis ceased to be directors. No one of six of the defendants--Messrs. Brinton, Ellis, Walpert, Dickey, McDevitt, or Marts--was alleged in the bill to have participated in unlawful declaration of dividends, and there was no allegations in the bill that the deceased director had left any estate or that assets had come to the hands of his executor or distributees. Furthermore, the bill was not filed until more than three years after some of the defendants had ceased to be directors. The defendants Horner, Emerson, and the executors and distributees of Walpert demurred to the bill upon the grounds of want of jurisdiction in the court, limitations and multifariousness, and want of equity in the bill. The circuit court by its order of June 21, 1902, overruled the demurrers. Upon an appeal from that order to this court, the issues there presented received a careful consideration and review at our hands in the case of Emerson v. Gaither, 103 Md. 564, 64 A. 26, 8 L. R. A. (N. S.) 738. The conclusions reached by us on that appeal were summarized by us in our opinion as follows: (1) That a court of equity has jurisdiction. (2) That the bill is multifarious. (3) That the bill discloses that the claim against Isaac E. Emerson for the declaration of a dividend while he was a director is barred, but it does not sufficiently disclose such facts as to the other claims as would enable the court to determine on demurrer that they are barred. (4) That there are not sufficient allegations in the bill to hold the distributees of Frederick Walpert liable. We reversed the decree in part and affirmed it in part, and remanded the case for further proceedings, suggesting to the court below to grant the plaintiff leave to amend his bill within such time as it might deem proper. When the case went back to the circuit court it passed an order on October 5, 1906, in conformity with our opinion sustaining the demurrers of Emerson and the executors and distributees of Walpert, and overruling that of Horner, and granting permission to the plaintiff to file an amended bill within 20 days. On October 25, 1906, the circuit court on the application of the plaintiff granted him leave to dismiss the bill as to certain defendants therein named, leaving as the remaining defendants to the bill Joshua Horner, John Bauernschmidt, Napolean B. Woolford, John McPhail, Geo. A. Hartman, and Edward W. Thompson. An order of dismissal in conformity with the leave so obtained was filed by the plaintiff, but no amended bill was ever filed. It is to be observed that all of the parties now remaining as defendants were directors of the bank during the entire period from January 1, 1898, until the appointment of the receiver on April 1, 1900, with the exception of Edward W. Thompson, who, the counsel for the receiver stated in open court, was intended to be dismissed, but through inadvertence his name was not included in the order of dismissal. After the dismissal of the bill as to certain defendants in the manner mentioned the defendant John McPhail demurred to the bill in the then condition of the case, and the defendant John Bauernschmidt moved to dismiss the bill. The demurrer and the motion to dismiss the bill assigned substantially the same grounds which were that no amended bill had been filed by the plaintiff; that the striking out of certain defendants was not a compliance with the order of October 5, 1906, requiring an amended bill to be filed; that the bill of complaint, in the present condition of the case, with its original allegations, but without many of the parties in reference to whom the allegations were made, and who are alleged by the remaining defendants to be necessary parties, is multifarious and otherwise defective, and does not require an answer. The demurrer also set up the statute of limitations. The circuit court upon hearing the demurrer and motion sustained the demurrer and granted the motion and dismissed the bill, by the order from which the present appeal was taken.
Having determined on the former appeal that equity had jurisdiction but that the bill in the then condition of the case was multifarious, the question now arises whether by the mere dismissal of certain of the defendants from the case the faults of the bill have been cured. Assuming that the presence of the defendant Thompson in the case is due to inadvertence, and that there is no purpose to hold him, the present defendants consist only of persons who were directors during the entire period in which the negligent and unlawful acts set out in the bill are alleged to have occurred. The reduction in the number of defendants thus accomplished does not afford ground for sustaining the demurrers unless the receiver in bringing an action of this character was bound to include in the same bill all of the directors who participated in any of the alleged negligent or unlawful acts complained of. The authorities do not support the claim that the receiver was under any such obligation, but distinctly uphold the opposite doctrine. In view of the allegations of the bill as to the dates at which the alleged improper acts occurred and the different terms of service of the various directors with reference to the respective commission of those acts, to have held the receiver obliged to unite them all in one bill would not only have involved a breach of the rule against multifariousness in equity pleading, but would also have disregarded the conclusion at which this court arrived in Fisher v. Parr, 92 Md. 274, 275, 48 A. 626. Fisher v. Parr was one of several suits brought by the receivers of an insolvent corporation to hold the directors of the company personally liable for losses sustained through their negligence in the performance of their duties. That suit was instituted against certain ones of the directors to recover for losses alleged to have been incurred through the negligent and unlawful making of loans by several boards of directors of which the defendants were alleged to have been members. The lower court having by its decree sustained a demurrer to the bill, it was upon an appeal from that decree...
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