Thomas v. Penniman

• Decision Date: 02 April 1907
• Parties: THOMAS v. PENNIMAN et al.
• Court: Maryland Court of Appeals

66 A. 291

105 Md. 475

THOMAS v. PENNIMAN et al.

Court of Appeals of Maryland

April 2, 1907

Appeal from Circuit Court of Baltimore City; Alfred S. Niles, Judge.

Bill by George Doblin Penniman and another, receivers of the City Trust & Banking Company, against William B. Thomas and others, to enforce their liability as directors for certain losses. From an order overruling the demurrers of Thomas to the bill, he appeals. Affirmed, excepting in so far as the order overruled the demurrer to paragraph 15, and reversed as to that, and cause remanded for further proceedings.

Argued before BRISCOE, BOYD, PEARCE, SCHMUCKER, and BURKE, JJ.

Francis Neal Parke and Jas. A. C. Bond, for Thomas.

Clifton Doll Benson and Thomas Hughes, for Penniman and others receivers.

BOYD J.

It will not be necessary for us to express our views at length on the demurrers of Wm. B. Thomas to the bill in this case, as the opinion filed in the previous case of Thomas et al. v Penniman et al., 66 A. 282, sufficiently states them as to the most of the questions raised. The principal difference between this bill and that in the other case is the charge against these directors, who served during the year 1902 that they declared two dividends, which impaired the capital stock, contrary to section 5 of the charter of the company. They are referred to in paragraphs 10 and 11 of the bill which are specially demurred to. Paragraphs 14 and 15 are also specially demurred to, and they refer to alleged illegal loans made to officers of the company.

1. Mr Thomas was present at the meeting of directors on June 26, 1902, at which a dividend was declared, and although he was not at the meeting on December 10, 1902, at which the other dividend complained of was declared, the bill alleges that the directors who were not present received the dividends upon the stock held by them, assented thereto, and ratified the same. The mere fact that directors declared dividends, when subsequent developments show they ought not to have done so, does not, of course, make them liable, under such a provision as that in this charter. Some of the acts relied on in the bill, as reasons for not declaring dividends would not of themselves reflect much, if any, upon the question. For example, it is difficult to see how the failure of officers of the company to make the reports required by chapter 109, p. 153, of the Acts of 1892 (now section 94 of article 23 of the Code of Public General Laws), can properly be used against the directors to show negligence, or that they were not informed as to the company's condition. That act requires officers, as the State Treasurer may designate, to make the report to him, and, unless he brings it to their attention, it would not be fair to draw any inference of neglect on the part of the directors, from the failure of officers to make such report, and surely the directors are not expected to go to the Treasurer of the State to ascertain the condition of the company with which they are connected. But in paragraph 11 there are such charges of negligence on the part of the directors in failing to inform themselves of...