Murphy v. Penniman

• Decision Date: 02 April 1907
• Citation: 66 A. 282,105 Md. 452
• Parties: MURPHY v. PENNIMAN et al. THOMAS v. SAME.
• Court: Maryland Court of Appeals

66 A. 282

105 Md. 452

MURPHY v. PENNIMAN et al.

THOMAS v. SAME.

Court of Appeals of Maryland

April 2, 1907

Appeals from Circuit Court of Baltimore City; Alfred S. Niles, Judge.

Bill by George Dobbin Penniman and another, receivers of the City Trust & Banking Company, against Frank J. Murphy, William B Thomas, and others, to enforce their liability as directors for certain losses. Frank J. Murphy filed two pleas which were overruled, and William B. Thomas filed demurrers to the bill which were also overruled, and they appeal. Order overruling demurrers and pleas affirmed, excepting in so far as it overruled the demurrer to the nineteenth paragraph of the bill, and order reversed as to that, and cause remanded for further proceedings.

Argued before BRISCOE, BOYD, PEARCE, SCHMUCKER, and BURKE, JJ.

William S. Bryan, Jr., for Murphy.

Francis Neal Parke and Jas. A. C. Bond, for Thomas.

Clifton Doll Benson and Thomas Hughes, for Penniman and others receivers

BOYD J.

The bill of complaint was filed in this case in the name of George Dobbin Penniman and Campbell Carrington, receivers of the City Trust & Banking Company, against 17 of the 18 directors of that company, who were elected at the annual meeting held on January 14, 1903. The company was placed in the hands of the receivers on June 6, 1903, by an order of circuit court No 2 of Baltimore city, on a bill filed by John A. Sherdian company and others, which amongst other things, alleged the insolvency of the company, which the answer admitted. The bill in this case alleges that the defendants were all of the directors of the company from the election on january 14, 1903, excepting one Frank J. Kohler, who left the state in the early part of June, 1903, and whose whereabouts is unknown to the complaints. Thomas Hughes and Clifton Doll Besnon, attorneys, were directed by the court to institute and conduct, in the name of the receivers, the legal proceedings necessary for the enforcement of the liability of the directors of the company for certain losses, and this bill, as well as another against the directors elected in 1902, which will be considered in a separate opinion, was accordingly filed by them. Frank J. Murphy, one of the defendants, filed two pleas, which were overruled and Wm. B. Thomas, another defendant, filed demurrers to the bill, which were also overruled. Appeals talks by those defendants from the order overruling their pleas and demurrers, respectively, present the questions for our consideration. We will consider that of Mr. Thomas. There are 12 causes for the demurrers assigned, some of which can be considered together.

1. It will be well to first consider the cause assigned which is numbered 2. It is that Campbell Carrington is both a party plaintiff and a party defendant, and that his position as defendant is wholly antagonistic, inconsistent, and irreconcilable with his position as plaintiff. Mr. Carrington was one of the directors of the company, and was also one of the receivers. It is not a practice to be commended to have a person in his representative capacity sue himself as an individual, especially under such circumstances as this bill discloses. It would generally be better for a receiver so situated to resign, or, in case he declined to do that, for the court to remove him, and appoint another, if necessary, for, even if suit be brought in the of the corporation, the receiver has such control over its books, papers, effects, etc., as to make it very undesirable to continue in that control when a suit, particularly of this character, is being carried on against him. But in this case the court, having jurisdiction of the trust, authorized and directed Messrs. Hughes and Benson to institute and conduct the proceeding in the name of the receivers, and hence, although the receivers are the technical plaintiffs of record, the solicitors in reality have control over the case. Any interference or obstruction placed in the way of the solicitors by the receivers, or either of them, could be reported to and corrected by the court having jurisdiction over them, and hence the reason for the rule prohibiting, or at least disapproving of, the same individual being on both sides of the record, does not leave the same force as it ordinarily would. Of course, we do not mean to intimate that either of these receivers have acted, or would act, improperly about the suit, as there is no such suggestion in the record, but we are speaking of what might happen under such conditions. While the practice of a person appearing on both sides of the record was condemned in Owens v. Crow, 62 Md. 497, it was referred to is one "which has to some extent prevailed," and neither in that ease nor in those of Stein v. Stein, 80 Md. 306, 30 Atl, 703, and Lovey v. Lovey, 86 Md, 655, 38 A. 1071, did this court refuse to consider the questions involved by reason of such practice. Of course, such a suit at law would present another question (Grahame v. Harris, 5 Gill & J. 489), but in a court of equity, "where the court can determine the respective rights of the parties without much regard to whether they appear as plaintiffs or defendants" (15 Ency. Pl. & Pr. 482), the rule is not of such importance as to require the court in all cases to dismiss a bill, or sustain a devourer to it, because such practice has been followed. The other defendants cannot be injured, and we do not deem this a sufficient cause for the demurrer, under the circumstances of this case.

2. The first, third, and fourth causes assigned have to the whole bill, and may be considered together. They allege that the bill does not state a case which entitles the plaintiffs to such discovery or relief as is sought against this defendant; that it is vague, indefinite, ambiguous, uncertain, and argumentative, and does not state with sufficient certainty any fact which would give the plaintiffs cause of complaint against him. There is no longer any question in this state about the Jurisdiction of equity in cases of this character. Emerson v. Gaither, 103 Md. 564, 64 A. 26, and cases there cited. In Booth v. Robinson, 55 Md. 438, Alvey, J., in delivering the opinion, said that the cases "all concur in holding that, in equity, the directors are personally liable for the consequences of their frauds or malfeasance, or for some such gross negligence as may amount to a breach of trust, to the damage of the corporation or its stockholders." That principle has been repeated in Fisher v. Parr, 92 Md. 245, 48 A. 621, and Emerson v. Gaither, supra. There is no charge of fraud against the defendants in this bill, and, with the possible exception of the charge of making loans to officers and directors, it can hardly be claimed that there is any malfeasance charged which resulted in loss. So Question really is whether there is such negligence charged against Thomas as makes him responsible, if proven. The bill is undoubtedly very skillfully drawn, although it is difficult to avoid the impression, when reading it, that some of the allegations have been made in a way that may make then sufficient on demurrer, but vill be very difficult to prove. The expression running through the bill of "the said directors, and each and all of them," was evidently used to meet one of the questions raised in Fisher v. Parr, as to whether all of the defendants were charged with the acts of negligence, etc., relied on; but the use of it in some connections would seem to be inappropriate and to make some of the allegations uncertain, as to the meaning of the pleader. For example, in paragraph 7, division "a," the several defendants are left in great uncertainty as to whether they are charged with permitting conduct of the affairs of the company by being absent from meetings of the board, or by being present and taking part in them. Paragraph 8 is in direct conflict with that statement in 7a which alleges "the failure of each and all of said directors to keep in touch with its management by attendance upon meetings of the board," so far as W. F. Wheatly is concerned, for it shows that he attended every meeting during the year and it also shows that Messrs. Schulze, Pollock, Reitz, Blake, and Carrington attended six out of the eight meetings; there being only five general and three special meetings that year. But, while we see this and other apparently conflicting statements, the demurrers we are now considering are to the whole bill, and, under the well-established rules of equity practice, cannot be sustained, if there be sufficient in the whole bill to require the defendant to answer, although some parts of it may be defective.

If we are to he governed by the decision Of Fisher v. Parr, which we must be, it seems clear that the grounds of demurrer under consideration, being to the whole bill, cannot be sustained. The bill alleges that the said directors, and each and all of them, "failed to perform each and every of their official duties to diligently and carefully administer the affairs of the company, as they were" bound to do; that "each and all of them permitted the assets of the company to wasted and the corporate property lost and squandered by negligence so culpable amount to a legal breach of trust"; that "their acts and omissions were not mere defaults mistakes of judgment, but were into the duties of their trust and abuses of their authority"; that "they failed to do what men of ordinary caution and prudence ought to do to protect the interests of the corporation"; that they disregarded, without good cause not only the charter and by-laws of the company and general laws of the state, which prescribed the limits of their authority, but the ordinary rules and habits of business, by which even fairly prudent men are guided; and many other...