National Exchange Bank of Baltimore v. Peters
| Decision Date | 25 October 1890 |
| Citation | 44 F. 13 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | NATIONAL EXCH. BANK OF BALTIMORE v. PETERS et al. |
G. M Dillord and John Neely, for complainant.
Alfred P. Thom, Sharp & Hughes, and John B. Jenkins, for defendants.
The complainant is one of the creditors of the late and now insolvent Exchange National Bank of Norfolk. The bill is brought against the late directors of the insolvent bank, one of whom was president and another cashier, and against the present receiver of that bank. The complainant bank transacted with the Norfolk bank the business of collections each for the other. In the fortnight preceding the closing of the doors of the insolvent institution, which occurred on the 2d of April, 1885, a balance of $14,883 was in favor of the complainant against the Norfolk bank, less dividends, not exceeding 60 per cent., that have been paid by the receiver. The bill, after setting out this claim, charges that the defendant directors--
'Did not give that care, supervision, and attention to the affairs of the bank which the duties of their office and the nature of the trust reposed in them required; but, on the contrary neglected the same, and intrusted the entire business concerns of the bank to (its president and cashier,) who recklessly and improvidently loaned the money and securities of the bank to various embarrassed and insolvent firms and individuals, without taking proper and sufficient securities for the protection of the creditors and others confiding in the directors' management of the bank, and recklessly converted the money of the bank to their use; the said president and cashier carrying a joint account at said bank which at the time of its failure was overdrawn in the enormous sum of over sixty thousand dollars.'
The bill proceeds to set out a detailed series of 'facts and circumstances,' similar to the statement as to the president and cashier, relating to these officers and two other of the defendant's directors, with a view of showing more specifically what it characterizes as the 'gross negligence and mismanagement of the bank by its directors and officers. ' It charges that 'it was the custom of the directors to meet only to organize and to declare dividends,' and that the misappropriation of the funds, and wrongful acts which it describes, occurred during the management of the affairs of the bank by the directors, who are defendants in this suit. The bill prays for a discovery on oath from each of the defendants of all facts in their knowledge, and which they may have heard and believe, touching the mismanagement complained of, and that they shall severally answer, generally and specifically, the charges which it sets out. It prays that the matters charged may be referred to a commissioner of the court, to ascertain the truth of the statements and charges which it makes, and the liability of the defendants severally to make good the loss complained of, and to ascertain and report all other matters pertinent to this case which complainant has not had the means of obtaining. There is a prayer for general relief.
The epitome thus given of the bill shows sufficiently the character of this suit, and suggests on its face the grounds of demurrer on which the case comes before the court; and the question presented is whether a creditor of an insolvent national bank of the United States can sue its directors for the purpose of fixing upon them a personal liability for the mismanagement of such an institution. It is not a question whether these directors are liable or not, or may be sued or not, and subjected to the liability, but only whether a creditor of a national bank can sue its directors for mismanagement and negligence of his own mere volition. It is elementary law that, if Jones injures Smith's person, and Smith owes Brown a debt, Brown cannot sue Jones for damages as a means of making good his debt against Smith. So, if Jones buys a horse from Smith, Brown, Smith's creditor cannot sue Jones, Smith's debtor, for the purchase money. There is no privity between Jones and Brown, either of contract or tort, on which the action can rest. The universal rule, as old as the law itself, is that, unless there be privity between plaintiff and defendant, no action will lie; and in this respect equity follows the law, although equity, when once having cognizance of a cause between principal parties in privity, will then, when necessary to effect its policy of doing complete justice, bring other persons incidentally connected with the subject of controversy before it, whether these latter are in privity or not. The rule has no relaxation except where statute law intervenes to...
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