Penn Bank v. Hopkins

• Decision Date: 04 January 1886
• Citation: 111 Pa. 328,2 A. 83
• Parties: Penn Bank to Use of Warner v. Hopkins et al
• Court: Pennsylvania Supreme Court

2 A. 83

111 Pa. 328

Penn Bank to Use of Warner v. Hopkins et al

No.

Supreme Court of Pennsylvania

January 4, 1886

Argued November 11, 1885

Error to the Court of Common Pleas, No. 2, of Allegheny county: Of October and November Term, 1885, No. 168.

This was an action in case by The Penn Bank, a corporation under the laws of the State of Pennsylvania, to the use of Henry Warner, assignee for the benefit of creditors, against the directors of the said bank to recover large sums of money alleged to have been lost to the corporation by reason of the carelessness, negligence and want of due and proper care on the part of the defendants in the control, direction and management of the affairs, business and property of the bank.

The bank made the assignment to Warner on May 28th, 1884; this action was brought October 30th, 1884. To the declaration filed the defendants pleaded in abatement (1) That before the commencement of the action by Warner as assignee a bill in equity had been filed in the Court of Common Pleas, No. 2 for Allegheny County, against the same defendants for the identical causes of action complained of, by E. W. Swentzel J. M. Montgomery and over a hundred other creditors of the Penn Bank, whose names were set out in the plea, and who filed the bill for themselves and such other creditors of the Penn Bank who might join therein, which said suit was still pending at the time of plea pleaded; (2) That before the commencement of the action a bill in equity for the identical causes of action had been brought in the Court of Common Pleas, No. 2, of Allegheny County, against the same defendants and Warner assignee as aforesaid, by Elias J Unger and others, alleging themselves creditors of the Penn Bank, and that they had filed the bill for themselves and any other creditors who might join therein, which said suit was still pending at the time of the plea pleaded.

The plaintiff demurred to the plea, on the ground that it was double, and also uncertain, informal and insufficient, etc. After argument the Court overruled the demurrer and entered judgment in favor of the defendants, that the writ be quashed.

The plaintiff took this writ assigning for error the judgment of the Court quashing the writ.

Judgment affirmed.

SYLLABUS

A creditor's bill may be maintained against the directors of an insolvent corporation for mismanagement of its affairs.

Where a creditor's suit has been brought against the directors of an insolvent corporation to which the assignee, for the benefit of creditors of the same has been made a party defendant, the pendency of the suit is a good plea in abatement to an action at law subsequently brought for the same cause by the assignee in the name of the bank against the directors.

Although where a right of action lies exclusively in a corporation, creditors cannot file a bill to enforce the right until after a demand upon and refusal by the corporation to proceed, yet where the wrong complained of is one perpetrated by the managers of the corporation, a creditor's suit may be immediately brought.

This right of the creditor is not taken away or postponed by the existence of a voluntary assignment for the benefit of creditors of the corporation.

Creditors filed a bill against the directors of an insolvent bank, the assignee thereof subsequently brought an action against the directors for the same cause in the name of the bank:

Held, that as the parties were substantially the same, each case being against the same defendants and brought by or for the corporation for the benefit of its creditors, the pending of the bill was well pleaded in abatement in the action at law.

S. A. McClung and A. M. Brown, (with them, H. A. Miller) for the plaintiff in error.

The plea is double in that it sets out two independent suits. The statute of Anne does not apply to pleas in abatement, and the leave of Court is never granted to file more than one dilatory plea: Stephens on Plead., p. 266; P. & C. R. R. Co. v. Mt. Pl. R. R. Co., 26 P. F. S., 489. This is not urged on technical grounds alone, for the defendants in order to state the exact facts were obliged to set up the pendency of both suits. Two bills were filed by two different sets of creditors, and both were sustained by the Court below. Now if two suits by two different plaintiffs are sustained, it must be because the sole right to maintain the suit is not in either.

The parties are different in the bills and the action, and to sustain a plea of the pendency of a prior action the parties, as well as the cause of action, must be the same: Cornelius v. Vanarsdallen's Adm., 3 Barr, 434; Blackburn v. Watson, 4 Norris, 241; Thomas v. Freelon, 17 Verm., 138; Casey v. Harrison, 2 Dev., 244. The fact that the present plaintiff is a defendant in one of the pending bills does not abate the writ in this action: Osborn v. Cloud, 23 Iowa 104. The plea of lis pendens applies exclusively to the case where the plaintiff in both suits is the same and both are commenced by himself: In re Certain Logs of Mahogany, 2 Sumn., 589.

Whether the cause is the same as in the suits pleaded in abatement or not, the right of action is in the plaintiff in this action. Creditors may maintain bills if the assignee refuses or neglects to sue. It is not averred here that there has been any neglect or refusal on the part of the assignee to sue the directors: See Taylor on Corp., § 615; Ackerman v. Halsey, 37 N. J. Eq., 356; Hersey v. Veazie, 24 Me. 9; Smith v. Hurd, 12 Metc., 371; Hun v. Casey, 82 N.Y. 65; Hodges v. N. E. Screw Co., 1 R. I., 312; Brinckerhoff v. Bostwick, 88 N.Y. 52; Conway v. Halsey, 15 Vr., 462.

D. T. Watson (with him Knox & Reed, Isaac Van Voorhis, Thos. C. Lazear, J. F. Slagle and Sol. Schoyer), contra. -- The action of the Court below is directly sustained by the case of the Pittsburgh & Connellsville R. R. Co. v. Mt. Pleas. & Broad Ford R. R. Co., 26 P. F. S., 481. The test is, Could a final decree in favor of the defendants in the equity suits be pleaded in bar of the common law action? If it could, then the pendency of the suits can be pleaded in abatement. Here the allegation, admitted by the demurrer, is that each of the cases in equity was brought for "the identical causes of action complained of" in the common law action. Hence in the equity cases as well as in the common law case there can be a recovery against the defendants if the alleged causes of action exist, and a decree against the defendants would be a decision on the identical questions raised in the action at law, and would be a bar, if to both the equity and law cases the real parties are the same. The law regards only the real, the legal parties and not the use party: Memphis R. R. Co. v. Wilcox, 48 Pa. St., 168. Any cestuis que trust may use the name of the legal plaintiff, and a recovery by one will be pleadable in bar of the action of the other: Armstrong v. City of Lancaster, 5 Watts, 68; Insurance Co. v. Smith, 1 Jones, 124. Here the equity and law cases alike claim that the defendants, the directors are liable for losses suffered by the Penn Bank through their alleged negligence as directors. In each suit it is the loss to the Penn Bank that it is sought to recover. The Penn Bank is the real party entitled to recover in each. Neither the assignee nor the numerous creditors could maintain an action at common law to recover from these directors. The Penn Bank is made in each of the equity cases a defendant, and in the Unger bill, Warner, assignee, is also made a defendant. It is immaterial in equity whether a person appears as a party plaintiff or defendant, for in either case he can obtain the same relief: Mitford Eq. Pl., pp. 17, 18.

The theory of the equity cases is the same as that of this case, i. e., that assignee and creditors may both sue the directors for losses suffered by the bank. The only difference is a technical one, i. e., at law the person in whom is the legal title must be made plaintiff, in equity the cestuis que trustent claiming as creditors of the Penn Bank may sue, but in either case the bank is the real party: Craig v. Gregg, 83 Pa. St., 21. The liability is to the corporation, if it decline to sue, any creditor or the assignee may sue if at law, in the bank's name, if in equity some creditors representing the others may sue, and in such cases all the creditors are protected: Chambers v. Waterman, 1 Leg. Gaz. Rep., 60; Cunningham v. Pell, 5 Paige Ch., 607; Robinson v. Smith, 3 Id., 222; Maisch v. Saving Fund, 5 Phila., 32. The assignee has no rights superior to the creditors to maintain such an action, indeed, it is doubtful whether his rights in that respect are equal to those of the creditors: See the remarks of Sharswood, J., in Maisch v. Saving Fund, supra.

Before Mercur, C. J., Paxson, Trunkey, Sterrett and Green, JJ. Gordon and Clark, JJ., being interested in the decision of the cause did not sit. Mr. Justice Paxson delivered the opinion of the court.

OPINION

Mr. Paxson, Justice

There are three suits pending against the defendants. The first in point of time is a bill in equity, in Common Pleas No. 2, of Allegheny County, No. 304, of July Term, 1884. This bill was filed by numerous creditors of the Penn Bank for themselves and any other creditors of said Penn Bank who may join therein. The second is also a bill in equity filed in said Court, No. 370, of July Term, 1884. In this suit Henry Warner, assignee of said bank, is joined as a defendant. The third and last suit was an action at law, brought in the name of the Penn Bank to the use of Henry Warner, its assignee. To the plaintiff's declaration in the latter suit the defendants pleaded specially in abatement, the pendency of the two prior equity suits, to which plea the...