Shoemaker v. National Mechanics' Bank of Baltimore

• Decision Date: 26 November 1869
• Citation: 31 Md. 396
• Parties: SAMUEL M. SHOEMAKER v. THE NATIONAL MECHANICS BANK OF BALTIMORE, Charles Coleman, Cashier, and Robert J. Baldwin and Others, Directors.
• Court: Maryland Court of Appeals

31 Md. 396

SAMUEL M. SHOEMAKER v. THE NATIONAL MECHANICS BANK OF BALTIMORE, Charles Coleman, Cashier, and Robert J. Baldwin and Others, Directors.

Court of Appeals of Maryland

November 26, 1869

Appeal from the Circuit Court of Baltimore City.

The appeal in this case was taken from an order of the court refusing to grant an injunction. The facts are sufficiently detailed in the opinion of the court.

The cause was argued before BARTOL, C.J., STEWART, BRENT, GRASON MILLER and ROBINSON, JJ.

J Dean Smith and Joseph H. Bradley, Sr., for the appellant.

The loans made by the individual defendants, directors and officers of the bank, being ultra vires and in violation of the charter of the bank, were void, and the securities taken therefor were void, and the bank acquired no title to the securities taken for such loans. Albert v Savings Bank, 2 Md. 160; Beach v. Bank, 3 Wend 583; Life Ins. Co. v. Mechanics Ins. Co. 7 Wend. 31; Baltimore v. B. & O. R. R. Co. 21 Md. 50; Tracey v. Talmadge, 4 Kernan, 162; Curtis v. Leavitt, 15 N.Y. 239; Md. Hospital v. Foreman, 29 Md. 524.

The complainant, as a stockholder of the bank defendant, is entitled to the injunction, as prayed in his bill, to prevent the defendants, directors and officers of the bank from doing the acts complained of, which were ultra vires the charter, and from misapplying the funds of the bank in a manner complained of, which, in fact, amounted to a breach of trust. Dodge v. Woolsey, 18 How. 331; Campbell v. Poultney, 6 G. & J. 94.

Robert J. Brent and I. Nevitt Steele, for the appellees.

The appellant cannot set up the illegality of the loan. It is an executed contract--Bayne has the money, and the bank has the assets. Harvey v. Tyler, 2 Wall. 328.

Even if the stock be spurious and fraudulent, it still is valuable, as entitling the holder to recover damages against the company whose officers issued it. R. R. Co. v. Schuyler, 34 N.Y. 49-74.

The appellant charged that the bank was prosecuting or defending eleven suits, of which eight were in Federal courts and three in the State courts of Virginia.

He annexed no copies of the pleadings in these cases, and omitted the names of the parties and all description of their purposes and objects. They may involve the entire capital of the bank, and they may be prosecuted by the appellant himself as the adverse party.

This, in connection with his failure to furnish or allege the facts showing the fraudulent character of the stock or of the organization of the rail road company, was fatal. Union Bank v. Poultney, 8 G. & J. 332; Nusbaum v. Stein, 12 Md. 319; Mahaney v. Lazier, 16 Md. 73; Laupheimer v. Rosenbaum, 25 Md. 221; Hankey v. Abrahams, 29 Md. 590-1.

In support of his allegation that the bank was spending its money in building a railroad bridge, the appellant exhibited the copy of a contract made by Riddle, trustee, with Mr. Clephane, the receiver of the road, appointed by the Supreme Court of the District of Columbia; and it charged that Mr. Riddle was the secret agent of the bank. But the exhibit showed that even if the bank were a party to the contract, the bank was not building a bridge, but that it was loaning money upon the credit of the road, secured by a pledge of its revenues.

The object to which Mr. Clephane might apply the loan, certainly could not impair the corporate power to loan.

Robinson J., delivered the opinion of the court.

No principle is better established, than that the granting or refusing of a writ of injunction, is a matter resting in the sound discretion of the court.

It is the duty of a party making application for it, not only to make a full and candid disclosure of all the facts of his case, but also to produce if in his power, strong prima facie evidence, in support of the averments, upon which his alleged equity rests.

Thus it has been repeatedly held, that the mere oath of a party to the existence of a debt, of which he holds in his possession the written evidence, but which he fails to produce or to assign a satisfactory reason therefor, will not on an application for an injunction, be regarded as any proof of the debt. Union Bank v. Poultney, 8 G. & J. 332; Nusbaum v. Stein, 12 Md. 318; Hankey v. Abrahams, 29 Md. 588.

This rule applies with peculiar force to this case. Here the court is called upon to interfere with the management of the affairs of a corporation, the exclusive control of which is by the charter confided to the officers and directors chosen by the stockholders themselves. And although it is the duty of the court to interpose to prevent the diversion of the funds and assets to purposes foreign to and inconsistent with the plain and obvious purposes of the charter, yet in such a case to entitle a party to an injunction, the bill and exhibits ought to present a clear and undoubted claim for relief. Otherwise, instead of being a remedial process to promote the ends of justice, it may become the instrument of oppression and irreparable injury.

Has the complainant presented a case coming within these general principles? is the question to be decided on this appeal.

The bill in substance alleges, that the bank defendant was incorporated under the General Currency Act of Congress, approved June 3, 1864, with a capital stock of six hundred thousand dollars; that the 29th section of that Act provides:

"That the total liabilities to any association formed under said Act, of any person, or company, or of any corporation for money loaned, shall at no time exceed one-tenth part of the capital stock of such association actually paid in;" that its officers and directors, in violation of said section, constantly and habitually loaned to a certain firm of Bayne & Co., sums largely in excess of said amount, and that in 1866 the said firm became insolvent, owing to the bank on account of said loans, over three hundred thousand dollars.

That to secure these loans, Bayne pledged certain collaterals, including 1250 shares of the Washington, Georgetown, and Alexandria Rail Road Company; that said loans being illegal and void, no title or interest in said collaterals passed to the bank.

That notwithstanding these facts, the defendants are expending the money of the bank in conducting sundry suits, involving their pretended title to said stock, and in building or repairing a bridge belonging to said company.

After a prayer for general relief, the complainant further prays that the defendants may be restrained from further prosecuting said suits, or in expending the money of the bank in regard thereto, or in building or repairing said bridge.

Now what proof is offered in support of these material and vital averments? Do they not rest solely upon the oath of the complainant. No exhibits are filed-- not even copies of the pleadings or proceedings, from which the court might learn the nature and character of the suits, the names of the parties, and the grounds upon which their respective claims are based. What if these exhibits should disclose the fact that the complainant is a party claiming adversely, in the very suits which he seeks to enjoin, or that the defendants claim title to the stock through other persons than Bayne & Co.

If in Union Bank v. Poultney, 8 G. & J. 333, the oath of a party as to the existence of a debt was held insufficient to prove the debt, the written evidence of which was in his possession but not produced, so in this case, the failure to file...