Zinn v. Mendel.

• Decision Date: 31 October 1876
• Parties: Peter E. Zinn v. George Mendel et al.
• Court: West Virginia Supreme Court

9 W.Va. 580

Peter E. Zinn

v.George Mendel et al.

Supreme Court of Appeals of West Virginia.

October 31, 1876.

1. A creditor of an incorporated monied institution, cannot generally maintain an action at law against the directors thereof for simple non-feasance of duty to the corporation, or fraud in the management or disposition of the money or property of the corporation.

2. But directors of such institutions, may make themselves liable in an action at law for loss and damages, for false representations made or caused to bo made by them, and perhaps acts done or caused to be done by them, with intent thereby to deceive and defraud ths plaintiff, and which had the designed effect, and caused loss and damage to the plaintiff, but the false representations made or caused to bo made, or, acts done or caused to be done by the defendants, and relied on by the plaintiff! and the intent thereby to deceive and defraud the plaintiff, must be averred or alleged in postive terms.

8. When money has been deposited with such institution, and there has been no contract that a different rule shall prevail, such institution, when the deposit is made, ordinarily, becomes the owner of the money deposited, and consequently a debtor for the amount, and under obligation to pay, on demand, not the^identical money received, but a sum equal in legal value. But it seems this rule does not apply where the thing deposited is not money but a com modity.

4. A declaration in ease against the directors of such institution held to be insufficient in law, as well as each count thereof.

Supersedeas to a judgment of the circuit court of Ohio county rendered on the sixteenth day of May, 1873, in a cause therein then pending, in which Peter.E. Zinn was plaintiff, and George Mendel and others defendants.

The facts sufficiently appear in the opinion of the Court.

Hon. Thayer Melvin, Judge of said circuit court, presided at the hearing below.

Pendleton, Davenport, Peck and Caldwell for said Zinn, plaintiff.

Allison and Lamb for defendants in error.

Haymond, President:

This is an action of trespass, on the case commenced and determined in the circuit court of the county of Ohio. The action is against the defendants, who were directors of the Wheeling Savings Institution. The declaration is very lengthy, and to set it out in full in this opinion is unnecessary.

The action was commenced on the nineteenth day of February, 1872. On the second day of November, 1872, the defendants, on whom the process was served, appeared to the action in court, and filed their demurrer to the plaintiff's declaration, and to each count thereof, and the plaintiff joined in the demurrer. Afterwards, on the sixteenth day of May, 1873, the cause was heard upon the demurrer, and was argued by counsel, and the court sustained the demurrer to the declaration, and in its judgment, says: "And the plaintiff, not desiring to amend his declaration, and having nothing further to say or allege, it is further ordered and adjudged, that this cause stand dismissed, and that the defendants go hence, without day, and recover of the plaintiff their costs in this behalf expended." To this judgment the plaintiff has obtained a supersedeas, and it is now to be determined whether the circuit court erred in its judgment, so as to require this Court to reverse it.

The act incorporating "The Wheeling Savings Institution" was passed by the legislature of Virginia, on the twenty-eighth day of February, 1834. See Acts of 1833 and 1834, page 199. The second section of the act provides for the election of nine directors, from the members, by the stockholders. The third section provides that the directors, for the time being, or a majority of them, shall have power to elect a president from their own body, or from the other members; to appoint all such officers, agents, and servants, as they shall deem necessary to conduct or execute the business and affairs of the institution; to fix their compensation, and, in their discretion, to dismiss them: to provide for the taking bonds to the corporation, from all, or any, of the officers, agents, or servants, by them so appointed, with security, conditioned in such form as they shall prescribe, for the faithful execution of their several duties, and to secure the corporation from loss; to regulate the manner of making and receiving deposits; the form of certificates to be issued to depositors, and the manner of transferring the same; to provide for the investment of the funds of the corporation in such manner as they shall deem most safe and beneficial; to provide for the admission of members, and furnish proof of such admission; to provide for all necessary expenses of conducting the affairs of the corporation, and generally, to pass all such by-laws as shall be necessary to the exercise of said powers, and of the other powers vested in said corporation by "this" charter; and said by-laws, from time to time, to alter and repeal: Provided, that all such by-laws, as shall be made by the directors, may be altered or repealed by a majority of the members present, at any annual meeting, or at any general meeting called in pursuance of any by-law made for that purpose; and a majority of the members may, at any annual or general meeting, pass by-laws, which shall be binding upon the directors: Provided, That a majority of the stock shall be represented by said stockholders. And also provided, that such by-laws shall not be contrary to the laws of this State, or of the United States.

The second section also provides that, the " nine directors to manage the affairs of said institution," shall be elected for twelve months thereafter, and until a new election shall take place.

The fourth section provides that said corporation shall be capable of receiving from any free person, or persons, any deposit, or deposits, of money, and that all moneys so received shall be invested in public stocks, or other securities, at the discretion of the directors, and in the manner deemed most safe and beneficial: Provided, always, That such investment of the funds of the corporation shall be in the manner provided by the by-laws, and that no director or member shall be liable, in his person or property, for any debts, contracts, or engagements, of said corporation; but that the money, property, rights, and credits, of said corporation, and nothing more, shall be liable for the same.

On the 28th day of February, 1835. the legislature of Virginia passed an act amending said act of incorporation. Sec Acts of 1834 and 1835, page 159. Tins act made no amendment material to notice here, further than by reference.

The fifth section of the act of incorporation provides, "That it shall be the duty of the directors, Lt least once every six months, to appoint, from the members of said corporation, three competent persons, wdiose duty it shall be to investigate the affairs of said corporation, and to make and publish a report thereof, in one or more newspapers printed in the town of Wheeling; and it shall also be the duty of the directors, on the first Monday in January, and on the first Monday of July, in each and every year, to make and declare a dividend of the interest and profits of said corporation, after paying its expenses, and the same to pay over to the members, or their legal representatives, within ten days thereafter.

The seventh section provides that the act shall be in 'force for twenty-five years.

The charter of said institution was extended by an act of the legislature of Virginia, passed twelfth of January, 1858, to 1884.

This action is brought to recover from the defendants the sum of $3,853.59, deposited in money by the plaintiff, as alleged, in the said Savings Institution, on the first day of January, 1870, and on different days in the declaration mentioned, between the said first day of January, 1870, and the twenty-fourth day of February, 1870, inclusive, for the causes and reasons alleged and set forth in the declaration. I think it may be safely stated, that a great part of the gravamen of the action, as against the defendants, as alleged in the declaration, in legal effect, is for the grossly negligent, and the wilfully negligent, discharge of their duties to the corporation, as these duties are expressly prescribed, or (in view of the declaration') implied, by the charter. It is true, that, in some of the counts, or parts thereof, there seems to be an effort at something more, but it seems to me that it is not accomplished, in legal effect. There is no distinct and sufficient allegation, in any count of the declaration, of such fraudulent conduct, or deceit, upon part of the defendants, as would entitle the plaintiff to maintain this action against the defendants. To arrive at the proper conclusion upon the questions presented, the authorities bearing thereon, and determining principles analagous to those here involved, may be consulted with profit, especially, as the questions involved are of great public and private interest. In arriving at conclusions in matters of so much interest, we should not be controlled simply by a blind instinct of justice, without regard to well established legal principles.

Well established legal principles, as a general rule, may, with safety and profit, be adhered to in the administration of justice they are the most safe and sure guides. In fact, when they are cast aside and disre- garden], there is neither safety or security, to persons or property. Cases against the directors of corporations anal ago us to this, are not numerous in the books, but there are some in which principles similar to those involved here have been determined. And with the view of ascertaining the legal principles which should properly determine this case, I shall quote largely from such authorities as are before me.

The first case widen I shall notice, is the case of Vose v. Grant decided in 1819 by the supreme court of Massachusetts and is found in vol. 15...