Huff v. Union Nat. Bank of Oakland
| Decision Date | 24 September 1909 |
| Docket Number | 14,794. |
| Court | U.S. District Court — Northern District of California |
| Parties | HUFF et al. v. UNION NAT. BANK OF OAKLAND et al. |
Charles S. Wheeler, for complainants.
Milton S. Hamilton, for defendants.
This is a bill in equity for an accounting to which the defendants have demurred upon the ground that the facts alleged do not state a case within the jurisdiction of this court. There is no diversity of citizenship, the parties being all citizens of the state, but the jurisdiction of the court is invoked upon the ground that the suit is one arising under the Constitution and laws of the United States within the terms and meaning of the judiciary act (Act Aug. 13, 1888, c. 866, 25 Stat. 433 (U.S. Comp. St. 1901, p. 508)).
The complainants sue in the capacity of stockholders of the defendant corporation, a national banking association, and for its benefit; it being alleged that the latter has, after proper notice and demand, failed and neglected to bring the action. The material features of the bill are, in substance and effect, that at the times of the commission of the acts complained of the individual defendants were officers of the defendant bank, one of them being the president and a director and the other two directors thereof, and as such officers having the control and being intrusted with the management and conduct of its business and affairs; that while acting as such officers the last-mentioned defendants were guilty of acts of malfeasance in office, in that at divers times, which are alleged with particularity and detail, they wrongfully and without right withdrew from the funds of the bank large sums of money, and employed the same to their own private use and benefit, and without adequate return to the bank, and made loans of the funds of said bank to irresponsible and insolvent borrowers, without adequate or any security, for the purposes of speculation, in which such officers were privately interested; and it is alleged that such withdrawals and loans were knowingly had and made by said officers in sums largely in excess of the limit allowed by specific provisions of the national banking law and contrary to and in violation thereof, and that said acts of the defendants have resulted in great loss to the bank much in excess of the jurisdictional amount, for which loss it is asked that the defendants be compelled to account.
I am of opinion that these facts make a case arising under the laws of the United States and within the jurisdiction of this court. In defining the powers of national banking associations and their officers Congress has provided in section 5200 of the Revised Statutes (U.S. Comp. St. 1901, p 3494) that:
'The total liabilities to any association, of any person, or of any company, corporation, or firm, for money borrowed including, in the liabilities of a company or firm, the liabilities of the several members thereof, shall at no time exceed one-tenth part of the amount of the capital stock of such association actually paid in.'
This provision is very clearly a restriction upon the power of the officers of such an association in conducting its business against making loans of its funds, either to themselves or others, beyond the limit therein specified; and this provision the averments of the bill show was violated by the defendants in the instances counted upon.
Congress has also fixed the measure of liability of the officers of such associations for a violation of any of the provisions of the law governing them by providing in section 5239, Rev. St. (U.S. Comp. St. 1901, p. 3515), that in case of any such violation 'every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person, shall have sustained in consequence of such violation.'
Thus it appears that the specific right, the alleged violation of which it is sought by the bill to redress, is one given by a law of the United States-- not remotely or indefinitely, but directly and positively-- and that the measure of liability and recovery for such violation is likewise specifically furnished by the same law. Obviously it seems to me that in such a case the suit must be held to be one arising under a law of the United States, because the right to recover, if it exists, is thus directly given by an act of Congress, and the court if bound, therefore, in determining the controversy to decide whether or...
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