Paris v. Beckner

• Decision Date: 18 March 1930
• Docket Number: Case Number: 19061
• Parties: PARIS v. BECKNER et al.
• Court: Oklahoma Supreme Court

1930 OK 123

289 P. 276

143 Okla. 238

PARIS v. BECKNER et al.

Case Number: 19061

Supreme Court of Oklahoma

Decided: March 18, 1930

Syllabus

¶0 1. Banks and Banking--Reception of Deposits by Insolvent State Bank--Individual Liability of Directors to Depositors for Damages.

Directors of a state bank who participate in the violation of the laws of the state relative to banks and banking by permitting or conniving at the reception of deposits with knowledge that the bank is then insolvent, are individually liable to a depositor for the damage sustained by him by reason of such violation of the law, and in that event a single depositor may bring an action against the directors to recover of them the amount of his damage for his sole benefit.

2. Same--Right of Action Against Directors Personal to Depositors.

The right of action against directors of a state bank to recover of them the damage sustained by a depositor by reason of their violation of the banking laws of the state by permitting or conniving at the reception of deposits with knowledge that the bank is then insolvent, is personal to the depositor, and exists independently of the power given by statute to the State Bank Commissioner to take over and wind up the affairs and business of the bank for the benefit of creditors collectively.

3. Same--Right of Action not Affected by Fact That Bank Is in Hands of Bank Commissioner.

The right of action by an individual depositor against directors of an insolvent state bank given to him by section 4119, C. O. S. 1921, to recover of them the damage sustained by him, is unaffected by the fact that the affairs and business of the bank are in the process of liquidation by the State Bank Commissioner pursuant to law for the benefit of creditors collectively.

Commissioners' Opinion, Division No. 1.

Error from District Court, Cleveland County; Tom P. Pace, Judge.

Action by C. B. Paris against O. L. Beckner et al. for damages resulting from insolvency of bank. Judgment for defendants on demurrer to petition, and plaintiff brings error. Reversed and remanded, with directions.

Ben F. Williams, Sam S. Harlan, Homer H. Cowan, and S. A. Horton, for plaintiff in error.

Wilson & Wilson and Hardie & Grim, for defendants in error.

TEEHEE, C.

¶1 In this cause the parties occupy the same relative positions as they occupied in the trial court. They will be so designated here.

¶2 The plaintiff, C. B. Paris, was a general depositor of the Security State Bank of Wanette, of which the defendants O. L. Beckner, J.

¶3 M. Schoemann, E. E. Lightner, W. H. Skinner, and three others who are not parties here, were the directors.

¶4 On January 1, 1924, the bank closed its doors, at which time plaintiff's deposit account with the bank was $ 413.75. On July 31, 1925, plaintiff sued defendants to recover damages of them in the amount of his deposit account. By his petition he alleged, to wit:

"Plaintiff, for his cause of action against the defendants and each of them, alleges that prior to January 1, 1922, the Security State Bank of Wanette, Okla., was organized as a state bank under the banking laws of the state of Oklahoma. That at all times subsequent to January 1, 1922, the defendants above named were the directors of said bank; and, as such directors, had charge of the affairs of said bank and were such directors during the years of 1922 and 1923.

"That said bank was insolvent at all times and dates since January 1, 1922, which fact of insolvency the defendants and each of them knew. That said bank was insolvent for the reason that the actual cash market value of its assets was insufficient to pay its liabilities. During the times hereinafter mentioned, said bank was unable to meet its creditors in the usual and customary way. That during said times and dates hereinafter mentioned, the said bank did not keep its reserve as required by the banking laws of the state of Oklahoma. That during said insolvency, and at the time when said bank was insolvent, the said directors above named and each of them permitted deposits to be made in violation of law, and openly solicited deposits to be made, well knowing that said bank was insolvent, which fact of insolvency was unknown to plaintiff.

"That on or about the day of and at various times during the year of 1923, the plaintiff deposited with said bank various sums of money; and that on or about January 1, 1924, the said bank was taken over by the Banking Board of the state of Oklahoma, at which time this plaintiff had on deposit with said bank the sum of $ 413.75, the same having been received by the directors of said bank, and said bank and its officers as a deposit subsequent to the time the said bank had become insolvent, with the knowledge of said defendants and each of them.

"That on the last day the said bank was open for business, when said directors and each of them knew that said bank would have to close its doors immediately, to wit: On December 28, 1923, said directors permitted said bank to receive deposits in the sum of $ 8,308.16 in violation of the banking laws of the state of Oklahoma.

"That the assets of said bank will not pay in excess of ten cents on the dollar, and that by reason of said defendants having received the deposits of this plaintiff at the time it was insolvent, and in violation of the law, the plaintiff is damaged in the sum of $ 413.75, and for which amount this plaintiff is entitled to recover against the defendants and each of them.

"The plaintiff further alleges that the defendants violated, during the time they were insolvent, all of the banking laws of the state of Oklahoma, for in that they loaned money to the officers and directors of said bank in violation of law; they permitted officers of said bank to discount worthless paper in large quantities. They made false reports to the Banking Department of their financial condition; and after said bank had become hopelessly insolvent, said defendants caused a report to be made that the bank was in good condition, and that $ 50,000 worth of new capital had been placed in said bank, when, in truth and in fact, said officers and directors above named, and each of them, had attempted to withdraw all of their own funds from said bank and had sought to charge off worthless paper; but, in doing so, attempted to acquire all of the real property of said bank.

"That the amounts of money loaned and the discounts made in violation of law, the falsity of the reports made to the Banking Board, and the details thereof, are peculiarly within the, knowledge of these defendants. They have in their possession, and have had at all times, the facts in relation to these various transactions. Therefore, the plaintiff is unable to allege, in detail, the manner and method used by these defendants in violation of the law."

¶5 To the petition the defendants named demurred, to wit:

"Comes now the defendants above named, and demur to the amended petition heretofore filed in said cause by the plaintiff, and for grounds thereof state:

"1. That the said plaintiff has no legal capacity to sue.

"2. That there is a defect of parties plaintiff appearing on the face of the petition.

"3. That said petition contains two or more causes of action improperly joined.

"4. That said petition does not state facts sufficient to constitute a cause of action in favor of the plaintiff and against these demurring defendants, or either of them, nor to entitle the plaintiff to the relief in his petition demanded as against these demurring defendants, or either of them, or any part thereof."

¶6 The demurrer was sustained for that the petition did not state a cause of action. Plaintiff elected to stand on his petition, whereupon the court rendered judgment for the defendants.

¶7 The demurrer questions the right of a single depositor, among many of the bank, to bring a separate action for damages in the amount of his debt owing to him by the bank, and recover judgment therefor against the directors, though the allegations of his petition be true, and though the bank is then in the hands of the State Bank Commissioner for the purpose of liquidation as provided by the banking laws of the state.

¶8 The rule of test of plaintiff's right to maintain his action is to be found in section 4119, C. O. S. 1921, read with section 4128, C. O. S. 1921. While section 4119, since the accrual of plaintiff's cause of action, has been amended, the relevant part here remains as a part of the existing law, which provides:

"Any director, officer, or other person, who shall participate in any violation of the laws of this state, relative to banks and banking, shall be liable for all damages which the said bank, its stockholders, depositors, or creditors shall sustain in consequence of such violation."

¶9 Section 4128 provides:

"No bank shall accept or receive on deposit, with or without interest, any money, bank bills or notes, or United States treasury notes, gold or silver certificates, or currency, or other notes, bills, checks or drafts, when such bank is insolvent; and any officer, director, cashier, manager, member, party or managing party of any bank who shall knowingly violate the provisions of this section, or be accessory to or permit or connive at the receiving or accepting of any such deposit, shall be guilty of a felony, and upon conviction thereof shall be punished by a fine not exceeding $ 5,000, or by imprisonment in the penitentiary not exceeding five years, or by both such fine and imprisonment."

¶10 The force of these provisions was considered by this court in Hughes v. Martin, 81 Okla. 89, 196 P. 951, which involved a state of facts in several particulars similar in effect to that of the case in hand. The court there said:

"Are these provisions of the statute broad enough to cover the transaction alleged in the petition, the truth of which is admitted by demurrer, We think the foregoing question must be answered in the affirmative.

"When a depositor is in the act of drawing his funds from a

...