Gerner v. Mosher

• Decision Date: 23 February 1899
• Docket Number: 8707
• Citation: 78 N.W. 384,58 Neb. 135
• Parties: HENRY GERNER v. CHARLES W. MOSHER ET AL
• Court: Nebraska Supreme Court

78 N.W. 384

58 Neb. 135

HENRY GERNER v. CHARLES W. MOSHER ET AL

No. 8707

Supreme Court of Nebraska

February 23, 1899

ERROR from the district court of Lancaster county. Tried below before HALL, J. Reversed in part.

Judgment reversed as to Yates. Affirmed as Thompson phillips, stuart, and Hamer. Reversed and remanded as to Musher, Outcalt, and Yates.

Joseph R. Webster, Halleck F. Rose, and Cyrus W. Fisherdick, for plaintiff in error:

The official report is a public representation, and plaintiff had a right to rely on it. (Bartholomew v. Bentley, 15 O. 666; Merchants Nat. Bank v. Thoms, 28 W. L. B. [O.] 164; Morse v. Swits, 19 How. Pr. [N. Y.] 275; Prescott v. Haughey, 65 F. 659; Delano v Case, 121 Ill. 247; Seale v. Baker, 70 Tex 283; Salmon v. Richardson, 30 Conn. 360; Tate v. Bates, 118 N. Car. 287; Prewitt v. Trimble, 92 Ky. 181; Bedford v. Bagshaw, 4 Hurl. & N. [Eng.] *548; Solomon v. Bates, 24 S.E. [N. Car.] 478; Morgan v. Skiddy, 62 N.Y. 325; Kinkler v. Junica, 84 Tex. 116; United States v. Allis, 73 F. 169; National Exchange Bank v. Sibley, 71 Ga. 726; Upton v. Vail, 6 Johns. [N. Y.] *182; Barney v. Dewey, 13 Johns. [N. Y.] 224; Allen v. Addington, 7 Wend. [N. Y.] 22; Williams v. Wood, 14 Wend. [N. Y.] 126.)

The right to maintain the action against national bank directors is clearly and distinctly given by section 5239, Revised Statutes U. S. (Welles v. Graves, 41 F. 459; Hayden v. Thompson, 67 F. 273; Potter Dwarris, Statutes & Constitutions 275, note 5; Lowry v. Chicago, B. & Q. R. Co., 46 F. 83; 3 Thompson, Corporations sec. 4113; Stephens v. Overstolz, 43 F. 771.)

As to the character of proof required to establish knowledge on the part of directors of the financial condition of a bank, see: Merchants Bank v. Rudolf, 5 Neb. 540; United States v. Allis, 73 F. 165; Allis v. United States, 155 U.S. 117; Finn v. Brown, 142 U.S. 71; United Society of Shakers v. Underwood, 9 Bush [Ky.] 609; Hauser v. Tate, 85 N. Car. 84; German Savings Bank v. Walfekuhler, 19 Kan. 60; Hubbard v. Weare, 79 Ia. 678.

A stockholder in a bank, by virtue merely of that relation, is not chargeable with notice of its financial condition. (Hardy v. Veasey, 3 L. R. Ex. [Eng.] 107; Foster v. Bank of London, 3 F. & F. [Eng.] 214; Commonwealth v. Phoenix Iron Co., 105 Pa. St. 111; 4 Thompson, Corporations sec. 4428; Foley v. Holtry, 43 Neb. 133.)

Charles O. Whedon and J. W. Deweese, contra.

References: Brackett v. Griswold, 112 N.Y. 454, 467; Honnewell v. Duxbury, 154 Mass. 286; Arthur v. Griswold, 55 N.Y. 400; Wakeman v. Dalley, 51 N.Y. 27; Kountze v. Kennedy, 147 N.Y. 124; Nash v. Minnesota Title Ins. & Trust Co., 163 Mass. 574; Pier v. Hanmore, 86 N.Y. 95; Bonnell v. Griswold, 89 N.Y. 122; Stebbins v. Edmands, 12 Gray [Mass.] 203; Peek v. Gurney, 7 Eng. Ruling Cas. 527; Derry v. Peek, 14 Appeal Cas. [Eng.] 337; Crocker v. Manley, 164 Ill. 282; Southern Development Co. v. Silva, 125 U.S. 247; Runge v. Brown, 23 Neb. 817; Byard v. Holmes, 34 N. J. Law 296; Humphrey v. Merriam, 32 Minn. 197; Lord v. Goddard, 13 How. [U. S.] 198; Wells v. Cook, 16 O. St. 67; McCracken v. West, 17 O. 16; Caldwell v. Bates, 24 S.E. [N. Car.] 481; Nudd v. Hamblin, 8 Allen [Mass.] 130; Wood v. Carpenter, 101 U.S. 135; Hecht v. Slaney, 72 Cal. 367; Jesup v. Illinois C. R. Co., 43 F. 503; Parker v. Kuhn, 21 Neb. 413; Wright v. Davis, 28 Neb. 479; Gillespie v. Cooper, 36 Neb. 775; State v. Boyd, 49 Neb. 311; Rugan v. Sabin, 3 U.S.C. C. A. 578; Stearns v. Page, 7 How. [U. S.] 819; Moore v. Greene, 19 How. [U. S.] 69; Beaubien v. Beaubien, 23 How. [U. S.] 190; Badger v. Badger, 2 Wall. [U. S.] 95; Lorenzen v. Kansas City Investment Co., 44 Neb. 99; Slayton v. Fremont, E. & M. V. R. Co., 40 Neb. 840; Dehning v. Detroit Bridge & Iron Works, 46 Neb. 556; Briggs v. Spaulding, 141 U.S. 132.

F. M. Hall, also for defendants in error.

IRVINE, C., NORVAL, J. HARRISON, C. J., SULLIVAN, J, and RAGAN, C., concurring.

OPINION

IRVINE, C.

Henry Gerner brought this case against Charles W. Mosher, Richard C. Outcalt, Charles E. Yates, David E. Thompson, Rollo O. Phillips, Ambrose P. S. Stuart, and Ellis P. Hamer. Homan J. Walsh and Emma H. Holmes, the latter as administratrix of the estate of William W. Holmes, were also named as parties defendant, but as to them the proceedings seem to have been abandoned. The petition alleges that Mosher was the president of the Capital National Bank, Walsh its vice-president, and Outcalt its cashier, and that the other defendants named, together with Mosher, constituted its board of directors. The petition is in two counts, the first alleging that on May 18, 1887, a report was made by the defendants, to the comptroller of the currency, of the resources and liabilities of said bank as they existed May 13, 1887; that said report was sworn to by Outcalt as cashier and attested as correct by Mosher, Holmes, and Yates as directors; that the defendants caused said report to be published in the State Journal, a newspaper published in Lincoln, "for the purpose of inducing others, and particularly this plaintiff, to deal with said corporation and to repose in it and them, its directors and managing officers, and to induce others, and particularly this plaintiff, to purchase its capital stock and make investments therein, and represented and held out said statement to be a true statement of the financial condition of said corporation." The report is then set out in terms, and it is alleged that said report was false, in that it overstated the mortgages, stocks, and bonds held by the bank to the amount of $ 30,000, the amount due the bank from reserve agents, about $ 76,000, and its loans and discounts $ 50,000; that said report and false representations were made by said four defendants with the knowledge, assent, and co-operation of all the other defendants, and the same were, as they and each of them well knew, wholly false and untrue; that plaintiff believed said representations to be true, and on the faith thereof purchased from Charles Hammond on July 11, 1887, fifty shares of the capital stock of said corporation for the sum of $ 6,250; that it would have been worth said sum had the said report been correct, but in fact the bank was insolvent and the stock worthless; that January 22, 1893, the bank failed; that the stockholders have been assessed one hundred cents on the dollar on their stock, and judgment rendered against the plaintiff for said assessment; that notwithstanding that the bank had no net earnings, dividends were from time to time declared, and suit has been brought against the plaintiff to recover dividends by him received. The second cause of action is, substantially, pleaded in the same manner, charging a false report of the condition of the bank September 30, 1889, and the purchase by the plaintiff, in reliance on that report, in November, 1889, of fifty shares of stock from Henry E. Lewis for the price of $ 7,250. The defendants filed separate answers, denying the material averments of the petition, pleading the statute of limitations, and also pleading that the action was one whereof the federal courts had exclusive jurisdiction, and that it had been removed to the circuit court for the district of Nebraska. At the close of the trial the district judge peremptorily instructed the jury to return a verdict for all the defendants. The plaintiff brings the case here for review.

The plaintiff contends that he was entitled to relief under the provisions of section 5239 of the Revised Statutes U.S. relating to the liability of directors of national banks. It, however, partly appears from the record, and is stated in both of the briefs, that the action was at one time removed to the federal court; that a motion to remand was overruled, but that subsequently, the case arising in that court, Judge Shiras presiding, on a demurrer to the petition it was found that the federal court had no jurisdiction and the case was therefore remanded to the district court of Lancaster county. The opinion of Judge Shiras, remanding the case, is found in Gerner v. Thompson, 74 F. 125, and proceeds on the ground that an action under section 5239 of the Revised Statutes may be maintained only by the receiver of the bank, so that an action by a private individual against directors for making false reports must be maintained, if at all, as an action at the common law for deceit, and therefore presents no question under the laws of the United States. Judge Shiras also expresses his opinion to the effect that in order to maintain an action under the federal statute it must appear that a forfeiture of the bank's charter has been adjudged at the suit of the comptroller of the currency. Plaintiff vigorously attacks this opinion, especially the latter part. But under the circumstances we would not be free, if we were so disposed, to give the statute a construction different from that which was given it by the federal court in this very case. The construction of the statute was necessary for the purpose of the demurrer, and as leading to the order remanding the case, and it being a federal statute, construed by a federal court in determining its own jurisdiction, we are bound to accept the result of that construction, and are not at liberty to here review it. (Missouri P. R. Co. v. Fitzgerald, 16 S.Ct. 389, 40 L.Ed. 536.)

The defendants, to sustain the action of the trial court, contend that the action was barred by the statute of limitations, the first cause of action arising in 1887, the second in 1889 and the suit not having been brought until 1894. It is evident that if the action may be maintained at this late date it must be by virtue of section 12 of the Code of Civil Procedure, providing that actions may be brought "Within four years, * * * an...