Woodward v. Stewart
Citation | 101 S.E. 749,149 Ga. 620 |
Decision Date | 12 December 1919 |
Docket Number | (No. 1341.) |
Parties | WOODWARD. v. STEWART. |
Court | Supreme Court of Georgia |
(Syllabus by the Court.)
Error from Superior Court, Fulton County; J. T. Pendleton, Judge.
Suit by A. M. Stewart, receiver of the Citizens' Bank of East Point, against J. C. Woodward and others. Demurrers of defendant Woodward to the petition as amended overruled, and he brings error. Reversed.
Brewster, Howell & Heyman, of Atlanta, for plaintiff in error.
Edgar A. Neely, Geo. Westmoreland, and Alfred Broom, all of Atlanta, and J. F. Golightly, of Fairburn, for defendant in error.
The judge of the superior court of Fulton county, in response to a petition filed by three named stockholders of the Citizens' Bank of East Point, made an order requiring the receiver of the bank to bring suit against the directors of the bank to require them to account to the stockholders for their loss by reason of the alleged failure of the directors to perform their duty, or duties, as such. Suit was accordingly filed by the receiver against several persons alleged to be the directors of the bank. The petition alleged that the bank had lost large sums of money on account of bad loans made by the cashier of the bank by reason of the negligence and nonfeasance on the part of the directors, and because of the failure of the directors to perform the duties required of them by the by-laws of the bank and the laws of the state of Georgia. The prayers of the petition were for a judgment against the defendants for the use of three named stockholders, for the cost of their stock to them, besides interest, after deducting dividends which had been paid upon the stock, that such other persons as might be similarly situated be permitted to come in and be made parties to the case, and that judgment be rendered for such persons, and that the directors be required to account to all stockholders not directors for any loss sustained by them by reason of the negligence of the defendants. The plaintiff in error, J. C. Woodward, filed general and special demurrers to the petition. The several grounds of the special demurrer were sustained, save one; but the court did not pass upon the general demurrer at that time, and allowed the plaintiff 30 days within which to amend. Within the time allowed the plaintiff offered several amendments for the purpose of curing the defects pointed out by the special demurrer. The amendments were allowed over the objection of the defendant on the ground that the petition as it stood set out no cause of action against him, and did not contain enough to amend by. Woodward also renewed his original demurrer to the amendment as offered, and also to the petition as a whole after the amendment was allowed. Certain paragraphs of the amendment were stricken on special demurrer, after which all the demurrers were overruled, and Woodward excepted.
The question to be determined is: What is the measure of duty imposed upon bank directors by the laws of this state and the by-laws of the bank, and whether the plaintiff in error is liable to other stockholders of the Citizens' Bank of East Point, who are not directors, for a breach of such duty under the allegations of the petition; in other words, what is the degree of care which should be exercised by directors of a bank In the performance of their duties? And does the petition show such breach of duty? In 2 Thompson on Corporations (2d Ed.) § 1265, the author, after stating that the courts are not agreed upon the extent of the liability of directors, says that they are practically unanimous on the proposition that directors are bound to administer the affairs of the corporations according to the terms of the charter or governing statute with diligence and in good faith, and that, if they fail in either respect, they are liable to the party in interest who is injured by such breach of trust, and a court of equity will compel an accounting. This liability of directors to the corporation for damages caused by the negligent or unauthorized acts is said to rest upon the common-law rule which renders every agent liable who violates his authorityor neglects his duty to the damage of his principal. And it is now generally agreed, continues the same author, that no matter whether the act is prohibited by the charter or by-laws, the liability is on the ground of violation of authority or neglect of duty. See, also, to the same effect, 10 Cyc. 828 (19m).
The degree of care required of directors is thus laid down in Thompson on Corp. § 1266:
In Stone v. Rottman, 183 Mo. 552, 82 S. W. 76, Fox, J., delivering the opinion of the court, said:
Judge Hughes said, in Trustees v. Bossieux (D. C.) 3 Fed. 818 " Stapleton v. Odell 47 N. T. Supp. 15; Savings Bank v. Caperton 8 S. W. 885, 12 Am. St. Rep. 488.
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Woodward v. Stewart
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