Howe v. Barney

• Decision Date: 24 April 1891
• Citation: 45 F. 668
• Parties: HOWE v. BARNEY et al.
• Court: U.S. District Court — Southern District of Ohio

45 F. 668

HOWE v. BARNEY et al.

United States Circuit Court, S.D. Ohio, Western Division.

April 24, 1891

Milton Sater and Follett & Kelly, for plaintiff.

Paxton & Warrington, Harmon Colston, Goldsmith & Hoadly, Jordan Jordan & O'Hara, and C. W. Baker, for defendants.

SAGE J.

The plaintiff sues as the owner and holder of 100 shares of$100 each, of the capital stock of the Metropolitan National Bank a corporation organized under and by virtue of the laws of the United States for the purpose of carrying on the banking business, which business it did carry on in the city of Cincinnati, Ohio, from the 1st day of January, 1884, to the 1st day of February, 1888, its capital stock being $500,000. The petition sets forth that the defendants constituted the board of directors of said bank, and by reason of their mismanagement, carelessness, neglect, bad faith, and unlawful conduct in the administration of their office, permitted and caused the money, property, assets, and capital of the bank to be squandered, wasted, and loaned upon insufficient security or without security, and the capital stock to become almost worthless, to such an extent that the bank become embarrassed and insolvent, by reason whereof the comptroller of the treasury of the United States, on the 6th day of February, 1888, seized upon and took possession of the bank displaced the defendants from the management and control thereof, and turned over its money, property, and assets to a receiver duly appointed, who proceeded to close out and wind up its affairs according to the laws of the United States. The petition sets forth in detail the acts of the directors complained of, and alleges that from the property and assets of the bank sufficient money was realized to pay its creditors and depositors in full; and that dividends at different times have been declared and paid to the stockholders, including the plaintiff, of 49 per cent. of the face value of the stock held by them, the dividend to the plaintiff amounting to $4,900.

The petition further alleges that by reason of the acts of the defendants complained of the plaintiff has lost 51 per cent of the stock so owned and held by him as aforesaid,-- that is to say, the sum of $5,100,-- for which he prays judgment, with interest and costs.

Four of the defendants have filed answers. The cause is now before the court upon general demurrer on behalf of the defendants Charles M. Holloway and Edward N. Roth. The demurrer is upon the ground that, admitting the facts alleged in the petition, the right of action is in the receiver, and not in the individual stockholders. The precise point was before the court in Bank v. Peters, 44 F. 13, (circuit court of the United States, eastern division of Virginia,) where it was held that a creditor of an insolvent national bank, for which a receiver has been appointed, cannot sue its directors for the purpose of making them personally liable for the mismanagement of the bank, but that the suit must be instituted by the receiver. This decision is in harmony with the entire line of authorities upon the subject.

Smith v. Hurd, 12 Metc. (Mass.) 371, is a leading case on this point. It was there held: First. That there is no privity relation, or connection between the holders of shares in a bank, in their individual capacity, on one side, and the directors of the bank on the other, and that the bank is a corporation and body politic, having a separate existence as a distinct person in law, vested with the entire stock and property thereof, and that its agents, debtors, officers, and servants are responsible to it for all contracts made in reference to its capital, and for all torts...