Solomon v. Bates
| Decision Date | 07 April 1896 |
| Citation | 24 S.E. 478,118 N.C. 311 |
| Parties | SOLOMON et al. v. BATES et al. [1] |
| Court | North Carolina Supreme Court |
Appeal from superior court, New Hanover county; Hoke, Judge.
Action by S. & B. Solomon against Isaac Bates and others. There was a judgment for plaintiffs, and defendants appeal. Affirmed.
In an action against the directors of a corporation to enforce their liability for torts, the plaintiff may elect whether to join the corporation.
Ricaud & Weill, H. G. Connor, and D. L. Russell, for appellants.
Allen & Dortch and A. D. Ward, for appellees.
This is an action brought by a depositor in a bank which has become insolvent, against the directors thereof personally. The first cause of action sets out: That the defendants were directors. That, under the by-laws adopted by the stockholders and directors, it became the duty of the defendants actively to manage and superintend the business of the bank; to examine each Tuesday the discount book, containing a statement of all loans made, to whom made the securities therefor, and when due; to appoint, each three months, a committee of two from the board of directors to examine the books of the bank, its valuable effects, and other matters; to count the money on hand, and compare with the books, and report to the board of directors. That the defendants failed to perform these duties imposed by the by-laws, and by reason of such failure, large loans were made by the bank to insolvent persons upon inadequate security and the bank became insolvent about the year 1889. That after the bank became insolvent, the defendants made annual statements to the stockholders, showing the bank to be solvent, its capital stock unimpaired, and a surplus on hand, and declared and paid out annual dividends of between $20,000 and $25,000. That, after the bank became insolvent, the defendants, willfully and fraudulently, caused semiannual statements to be published in the newspapers, sworn to by the president or cashier, and attested and verified by three directors, showing the bank to be solvent, its capital stock unimpaired, and that it had a surplus on hand. That such statements were made for the purpose of establishing the credit of the bank, to conceal its real insolvent condition, and to induce the public to deal therewith and to deposit money therein. That the plaintiffs knew of such statements, and, believing the same to be true, and relying thereon, made deposits with the bank in December, 1892. and in 1893, and allowed the deposits to remain therein, and the same were lost. The second cause of action is the same as the first, except it alleges, in direct terms, that the defendants knew that the statements made and published by them were false. The third cause of action alleges the duties imposed upon the defendants, as set out in the first cause of action, and their failure to perform them; that the bank became insolvent; and that the defendants had knowledge of this insolvency, and, with such knowledge, negligently and fraudulently permitted the bank to continue in business, and received the deposits of the plaintiffs, who were ignorant of the insolvency of the bank. The fourth cause of action (by mistake numbered the fifth) alleges the duties set out in the first cause of action, and, in addition, that from the year 1889 to the 19th day of June, 1893, the defendants, as directors, negligently and fraudulently caused and permitted standing advertisements to be published, falsely setting forth the solvency of said bank, with the purpose of inducing the plaintiffs and the public generally to deposit and keep moneys in said bank; that, at the time said statements were so made, said bank was insolvent, and the defendants knew, or ought to have known, of such insolvency; and that the plaintiff, relying upon such statements, and believing the bank to be solvent, made the deposits, etc. The fifth cause of action (by mistake numbered sixth) is identical with the first cause of action, except the allegations as to the cause of the insolvency of the bank. In the first cause of action it is alleged that many loans were made to insolvent persons, upon inadequate security; and in this cause of action, that loans were made to insolvent persons, or, if made to solvent persons, the defendants negligently failed to collect or to cause them to be renewed, and they became worthless. The sixth cause of action (by mistake numbered seventh) is identical with the first cause of action, except in the fifth paragraph. In this cause of action, in addition to the allegations of the fifth paragraph of the first cause of action, it is alleged that many of the insolvent persons to whom loans were made, upon inadequate security, were relatives and favorites of the defendants and other officers of the bank, and some of them officers of the bank. The defendants demurred, upon three grounds:
As to the first ground of demurrer: While breach of a duty imposed by statute or by express contract is ex contract, the breach of a duty imposed by law arising upon a given state of facts is a tort. Hodges v. Railroad Co., 105 N.C. 170, 10 S.E. 917. An action for damages for breach of duty in the latter case is an action for tort. Bond v. Hilton, 44 N.C. 310; Williamson v. Dickens, 27 N.C. 264. And, even if there had been a special contract or a statutory provision, the plaintiff might sue for the negligence in tort. Robinson v. Threadgill, 35 N.C. 41; Purcell v. Railroad Co., 108 N.C. 414, 12 S.E. 954, 956. Here, the failure to discharge the duties required by the by-laws was a wrong caused by defendants' negligence,--a tort,--and is properly united in the same action with a tort by the fraud and deceit charged in the same complaint. Indeed, there was no contract between the directors individually and the plaintiffs, and their remedy is for the tort,--the wrong they have caused them by their misconduct. Salmon v. Richardson, 30 Conn. 363. But, had the failure to comply with the duties required by the by-laws been a cause of action ex contract, there would still have been no misjoinder, for all the causes of action "arose out of the same transaction, or transactions connected with the same subject of action." Code, § 267, subd. 1; Hodges v. Railroad Co., supra; Bank v. Harris, 84 N.C. 206; State v. Quinn, 74 N.C. 359; Hamlin v. Tucker, 72 N.C. 502; Heggie v. Hill, 95 N.C. 303; Benton v. Collins (at this term) 24 S.E. 122. There is the same "subject of action" throughout, i.e. the plaintiff's loss of his deposit. If this ground of demurrer had been well founded, the remedy would have been not to dismiss, but simply to divide, the action (Code, § 272; Hodges v. Railroad Co., supra; Street v. Tuck, 84 N.C. 605; Finch v. Baskerville, 85 N.C. 205), which would have caused a multiplicity of actions, with increased costs to the parties and the public as well, without any benefit apparently to the defendants.
As to the second ground of demurrer: The complaint does not allege several acts committed by different defendants, but that the defendants, acting together, committed the acts complained of. This would make them jointly and severally liable, and the averment of a common design or conspiracy is unnecessary. Long v. Swindell, 77 N.C. 185; Mode v. Penland, 93 N.C. 295.
As to the third ground of demurrer: The complaint alleges a demand for payment from the bank, and that the bank is "wholly insolvent." As the demurrer admits this allegation there can be no reason why the plaintiffs should not prosecute, without further delay, whatever remedy they may have against the directors, whose negligence, fraud, and deceit they allege to have been the cause of his loss. Besides, if ...
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