Noble v. Martin

• Decision Date: 26 July 1937
• Docket Number: 26158.
• Citation: 191 Wash. 39,70 P.2d 1064
• Parties: NOBLE v. MARTIN et al.
• Court: Washington Supreme Court

70 P.2d 1064

191 Wash. 39

NOBLE v. MARTIN et al.

No. 26158.

Supreme Court of Washington, En Banc.

July 26, 1937

Appeal from Superior Court, Spokane County; Fred H. Witt, Judge.

Action by Frank R. Noble against Clarence D. Martin and others Cecil Jenks, Supervisor of Banking of the State of Washington in charge of liquidating the American Bank, and Harry Wilson Deputy Supervisor of Banking of the State of Washington in charge of liquidating the American Bank. Judgment of dismissal, and plaintiff appeals.

Affirmed.

M. S Hanauer, C. W. Greenough, and Lyle D. Keith, all of Spokane, W. H. Hanson and F. C. Keane, both of Wallace, Idaho, and A. H. Oversmith, of Moscow, Idaho, for appellant.

Graves, Kizer & Graves, Danson, Lowe & Danson, Post, Russell, Davis & Paine, E. A. Cornelius, Don F. Kizer, Robertson & Smith, Dillard & Powell, and Hart Snyder, all of Spokane, for respondents.

ROBINSON Justice.

In this cause, after the trial court had sustained demurrers interposed on all the statutory grounds to each of the three causes of action pleaded in the third amended complaint, the plaintiff elected to stand on that complaint and refused to plead further. A judgment of dismissal was entered, and from that judgment this appeal was taken.

Upon opening the oral argument in this court, the appellant's attorney conceded that the demurrers to the second and third causes of action were properly sustained, and, as the filing of the third amended complaint waived any errors which may have been committed in ruling upon the three preceding complaints [ Sunset Motor Co. v. Woodruff, 130 Wash. 516, 228 P. 519; Goshert v. Wirth, 130 Wash. 14, 226 P. 124; Port of Seattle v. Fidelity & Deposit Co., 185 Wash. 247, 53 P.2d 740], it follows that the appeal presents but one question: Did the trial court err in sustaining the demurrers to the first cause of action pleaded in the third amended complaint?

The action grows out of the failure of the American Bank of Spokane, which closed its doors on April 14, 1932, and has since been in the hands of the supervisor of banking. It was brought by Frank R. Noble, as assignee of Nobles, Incorporated, and some eighty other depositors, against eighteen individual defendants, alleged to have been officers and directors of the bank prior to the time it closed. Its purpose is to recover losses alleged to have been suffered by plaintiff's assignors through the failure of the bank, and the action is based upon the ground that the directors and officers permitted the bank to receive their deposits, and assented to the receipt thereof, although they knew when the deposits were made that the bank was hopelessly and irretrievably insolvent. The original complaint was filed December 31, 1934.

In his second amended complaint, plaintiff made the supervisor of banking and his assistant in charge of the liquidation parties defendant, upon the allegation that they had wrongfully failed and refused to bring the action. This complaint pleaded an additional cause of action, alleging various acts of negligence and misfeasance on the part of the directors and officers. Recovery was sought for the benefit of all the creditors of the bank. It was pleaded that it was the intention of the plaintiff to prosecute the suit on behalf of the supervisor and liquidator, 'who in truth and in fact are and should be the plaintiffs herein.'

The second amended complaint was demurred out of court, but traces of the theory upon which it was based still linger in the first cause of action of the third amended complaint. It is alleged, in paragraph 12 thereof, that the plaintiff and his assignors were compelled to spend a large sum in preparation and had become obligated to pay the plaintiff's attorneys reasonable compensation, and that these sums constituted a proper charge against any fund which might be recovered. If paragraph 12 be regarded as surplusage, which we think may properly be done, the first cause of action of the third amended complaint is substantially the same as the original action; that is to say, an action to recover against the defendant officers and directors upon the ground that they permitted the bank to receive deposits at a time when they knew it to be hopelessly insolvent.

The plaintiff prayed for recovery in the amount of the aggregate of the sums deposited by his assignors, said amount, however, to be diminished by 27 per cent. thereof, which such depositors had received as liquidating dividends prior to the time the complaint was filed.

At common law, the receipt of a deposit by the officers of an insolvent bank did not make such officers personally liable. Daniels v. Berry, 148 S.C. 446, 146 S.E. 420; Forbes v. Mohr, 69 Kan. 342, 76 P. 827; Hart v. Hanson, 14 N.D. 570, 105 N.W. 942, 3 L.R.A.(N.S.) 438; Vroom v. Thompson, 227 Mo.App. 531, 55 S.W.(2d) 1024; Minton v. Stahlman, 96 Tenn. 98, 34 S.W. 222; 3 R.C.L., Banks, § 103; Fletcher, Cyc., Corporations (Perm.Ed.) § 1151.

There are, of course, cases where recovery has been allowed against directors and officers who, by false and fraudulent representations directly made, induced the plaintiff in the case to make a deposit in an insolvent bank or to refrain from withdrawing a deposit already made; that is, where the facts made out a case of ordinary common law fraud. Examples of this class of cases are Hinson v. Drummond, 98 Fla. 502, 123 So. 913, and Ellett v. Newland, 171 La. 1019, 132 So. 761.

In one of the numerous briefs filed on behalf of the respondents, it is contended that the pleadings in the case at bar do not state sufficient facts to constitute a cause of action on the ground of fraud. We shall not enter into a discussion of that matter. The pleadings do not purport to state such an action, and the appellant clearly stated, at the very beginning of his opening brief, at the beginning of his supplemental brief on reargument, and, also, in both oral arguments Before this court, that the action was brought to enforce a liability created by section 12, art. 12, of the Constitution of the State of Washington. It is certain that the appellant never departed from that position in this court, and, if he departed from it in the court below, the record does not show it.

The liability sought to be enforced in this action is created and defined as follows: 'Any president, director, manager, cashier, or other officer of any banking institution who shall receive or assent to the receiption of deposits after he shall have knowledge of the fact that such banking institution is insolvent or in failing circumstances, shall be individually responsible for such deposits so received.' Const. State of Wash. § 12, art 12.

The record does not show, and we are not otherwise advised, upon which ground or grounds the demurrers were sustained. However, we have reached the conclusion that it appears from the face of the complaint that the action was not commenced within the time limited by law.

With respect to the limitation period, the respondents contended that the action is upon a liability created by statute and falls within Rem.Rev.Stat.§ 165, which reads as follows: 'An action for relief not hereinBefore provided for shall be commenced within two years after the cause of action shall have accured.'

The appellant contends that the action is provided for in sections prior to section 165 and may properly be held to fall within subdivision 2 of section 157, or within subdivisions 2, 3, 4, or 6 of section 159.

Subdivision 2 of section 157 provides a limitation period of six years for actions 'upon a contract in writing, or liability express or implied arising out of a written agreement.' Appellant cites the case of Guaranty Trust Company v. Scoon, 144 Wash. 33, 256 P. 74, 75, an action brought to enforce the unpaid stock liability created by section 4 of article 12 of the Constitution, and the case of Bennett v. Thorne, 36 Wash. 253, 78 P. 936, 68 L.R.A. 113, an action brought to enforce the superadded liability created by section 11 of article 12, in both of which the limitation provided by subdivision 2 of section 157 was held to apply; and contends that, by analogy, this subdivision should also apply to this action, since it is expressly brought to enforce the liability created by section 12 of the same article. We quote from the case first cited: 'Contrary to appellant's contention, the six-year statute of limitation applies in this case. While it is true the state Constitution, art. 12, § 4, provides for the liability of stockholders in this kind of a corporation for the debts of the corporation to the amount of their unpaid stock, and no more, the liability against these appellants sought to be enforced in this action is not a statutory one, as defined in the two-year statute of limitations, but arises from their subscriptions for the stock of the corporation. Their subscriptions were made, it is true, with reference to the provisions of the Constitution then in force, the terms of which became a part of their contracts or subscriptions for the capital stock. Thomas v. Kalbfus, 97 Ohio St. 232, 119 N.E. 412. But the cause of action is on the subscription contract.'

It thus definitely appears that that action was upon a contract in writing, the subscription contract. Since subdivision 2 of section 157 can never apply to an action unless there is a written contract between the parties, it follows that the court, in Bennett v. Thorne, must also have regarded that action as brought on the subscription contract, or some other agreement in writing. The application of the six-year statute in that case can be accounted for on no other theory. The case at bar is not an action upon 'a contract in writing,' or upon an implied liability 'arising out of a...