Stephens v. Overstolz

• Decision Date: 13 October 1890
• Citation: 43 F. 771
• Parties: STEPHENS v. OVERSTOLZ.
• Court: U.S. District Court — Eastern District of Missouri

43 F. 771

STEPHENS v. OVERSTOLZ.

United States Circuit Court, E.D. Missouri, Eastern Division.

October 13, 1890

Draffen & Williams, Lubke & Muench, and Geo. D. Reynolds, U.S. Atty for plaintiff.

Chester H. Krum, for defendant.

THAYER J.

We have heretofore held in this case that the cause of action did not abate with the death of the director, but survives against his executrix. Since then the petition has been amended, and a demurrer, and also motions to compel an election as between causes of action, have been filed and argued, which present some questions not explicitly decided on the former hearing.

First in order of importance is the demurrer, and it presents two propositions in the alternative.

It is said, in the first place, that the remedy under section 5239 is statutory, in the sense that, before a recovery can be had against a bank director under that section, on account of an excessive loan, it must be averred and proven that the charter of the bank has been forfeited in a proceeding taken by the comptroller, because of the excessive loan in question, and that, inasmuch as the Elliottville Mill's loan was not counted upon in the comptroller's proceeding, there can be no recovery of the damage sustained by that loan. On the hearing of the demurrer, we expressed the opinion, and further consideration of the subject has strengthened the conviction, that the right to recover, under section 5239, of a bank director the damages sustained in consequence of an excessive loan under section 5200, is in no wise affected by the fact that the comptroller has or has not procured a forfeiture of the charter. According to our view of section 5239, two results, in no respect dependent upon each other, may follow the making of an excessive loan; that is to say, the comptroller may, if he thinks proper, proceed to have the charter revoked, alleging the excessive loan as a violation of law; but, whether he does so or not, a director of the bank, who knowingly participates in or assents to the loan, may be compelled to make good whatever damage results to the bank from making the same. This seems to us to be the obvious meaning of the law.

Failing on the proposition last mentioned, that the action is statutory in the sense above indicated, counsel for the executrix next insists that, if the right of action is not statutory in that sense, then the remedy for the alleged wrongful acts is in equity, and not at law, and that the demurrer should be sustained for that reason. This we regard as the most important point presented for consideration.

Under statutes imposing a liability on directors or stockholders of corporations without prescribing the form of remedy, the question has frequently arisen whether the appropriate remedy was at law or in equity; and the decisions on that point have usually turned on the nature of the liability imposed, the difficulties standing in the way of the enforcement of the liability in a strictly legal proceeding, and on other considerations of a similar character. Thus in the case of Hornor v. Henning, 93 U.S. 228, an act of congress authorizing the organization of savings banks in the District of Columbia provided, among other things, that, 'if the indebtedness of any company organized under the act, should at any time exceed the amount of its capital stock, the trustees of such company assenting thereto should be personally and individually liable for such excess to the creditors of the company. ' A suit at law having been brought under this statute against several trustees of a savings bank by a single creditor, the court held that notwithstanding the literal reading of the statute, congress did not intend to make the trustees liable beyond the debts of the bank which it failed or refused to pay, that the act was intended for the common benefit of all the creditors of the bank, and that the liability of the trustees for an excessive indebtedness at any time created was in the nature of a trust fund, in which all the creditors were entitled to share in proportion to the amount of their debts, so far as it might be necessary to resort to the fund to pay the same. Viewing the statute in that light, the court further held that the remedy for its enforcement was in equity rather than at law, inasmuch as it was necessary to take an account of all the liabilities and assets of the bank, to determine to what extent it was necessary to resort to the fund in question, and for the further reason that a proceeding in equity would avoid a multiplicity of suits, and prevent one creditor from absorbing a...