The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-02-14

ers VS. Underwood, Bush. Cxy.) 500: Is A.
.ep. I5l, 734. was an action against the di-
rectors OF a bank to recover of them person
ally damages for loss of deposits wrong
fully converted. and it is there said: The
cislon is whether the directors who had
knowledge of these alleged wrongful sales,
DEPOSITS So conye answer pnraas insist that
they cannot be so held because of the want
OF privity between the depositors and them
selves. They concede that for gross negli-
gence or mismana cement upon their part,
resulting in loss to the bank, they may be
held to account to it, but urge that inasmuch
as their undertaking was to the corporation,
they can be preceded against by it alone,
and that these appellants must look to the
plausible, but it cannot, in our opinion, be
maintained. Bank directors are not mere
They are N trustees for the the stockhoiders;
and as to their dealing with the bank. they
not only act for it and in its name; but, in
the duty of the board to exercise a general
supervision over the affairs of the bank.
subordinate officers in all important trans
actions. The community has the right to
assume ass M , that the directory does its duty
Letting it, (Morse on Banking, 76 10
Tn na co contract is mot, not alone Ion With
to deal with the corporation and when
anyone accepts their invitation he has the
good faith at their hands; and If they fail
in either, they violate duty they owe not
only to the stockholders but to the credi-
also Graves VS.. Lebanon National Banir 10
Bush Qky) %, National Bank Case. 1872
CASE WITH SIMILAR POINTS.
"The case of Bartholomew VS.. Bentley,
16 Ohio 659. As Am. Dec. 500, was suit by an
individual creditor Il insolvent bank
against the officers of the bank to make
them personally liable for losses sustained
by the plaintiff as the holder of bank
hxy Of nd
upon false representations made by them.
The court there said Tt may be regarded
as a wel-setted principle, that for every
fraud or deceit which results in consequential
special action on the case. The principle
is one of natural justice, long recognized
IN the law And it matters not, SO far as
the means of accomplishing the deception
be complex or simply deep laid scheme
OF sWindling or a direct falsehood, a COM
bined effort of a number of associates or
the sole effort of solitary individual
provided the deception be effected and the
damage complained Of be the consequence
of the deception A valid act OF incOrpora-
ton, invalid and pretended right to
exercise corporate franchises, is alike pow
erless to secure the guilty from the conse-
quences of their fraudulent conduct, where
it has been knowingly resorted to as the
mere means of deception and injury. Were
it otherwise it would be reproach to the
law If the defendants. with the design to
defraud the public generally, have knowing
ly combined together and held forth false
and deceptive eolors and done acts which
were wrong, and have thereby injured the
plaintiff, they must make him whole by re-
spending to the full extent of that injury
and they cannot place between him and
justice with any success, the charter of
the German American Bank of Wooster
whether it be valid or void, forfeited
in esse Nor is it material that
there should have been an intention to de-
was a general design to defraud all such
as could be defrauded by taking their paper
issues. it is sufficient. and the plaintiff
maintain his suit provided he has taken
the paper and suffers from the fraud.
1t is first said that to allow bill holders
who have been defrauded to sue the mem
bers of the company individually at law,
a w Se re ass sy na Hhen
do equal justice to all the creditors, or to
the members of the company. 1t may be
that numerous suits. will be. prosecuted.
And yet the doctrine that because
they have cheated thousands they safer
than 9fap they would be # only one man had
sought is = +. trust fund and bill bill
would be much propriety in the position,
were it in point of fact true that a party
has no redress save out of the fund COM
posed wholly of the proceeds of the imposi-
ton. In that case strict equity might
quire that all those whose injuries had been
tho source of the fund should share equitably
in it. But the rule that person sustaining
damage by fraudulent acts of another can
only look to a particular fund of the wrong
doer for redress never existed anywhere
"The cases OF Cross VS.. Sackett, 6 Abb.
Pr. Rep, 247. and Word VS.. Sackett, 2 Bosw.
6lo, We're actions by purchasers of stock OF
a corporation to recover of directors money
paid for stock, upon the ground of false rep
RESERVATIONS made by the directors in a pros
rectus and other advertisements in regard to
the value of the stock. In these cases it was
held that the actions could be maintained,
and that there is no wrong or frau1 which
the directors of a joint stock company, in
corporated or otherwise, can commit which
"a
quate remedies
.'The case of Cazeaux VS.. Mali. p Barb,
o7S, was an action brought by the stock
Officers and directors ''0 to recover .. Of
him in depreciation in the value Of
the stock caused by the fraudulent issue of
stock beyond the authorized amount. 1t was
there held that the action was properly
brought by the stakeholder in his own rame.
without Joining other stockholders, the in
jury to each stakeholder being separate and
distinct from that sustained by the others.
and that the action was brought against
the defendants.
.sThe case of Morgan VS. Skiddy 81 N Y,
325, was action brought by the purchaser
OF the stock of corporation against the
paid for the stock, upon the ground that the
plaintiff had been induced to purchase the
prospectus issued by the defendants. 1t was
there held that the action was properly
brought by the plaintiff and was maintain
able against the defendants as directors.
SAME PRINCIPLE IN ENGLAND.
THE same principle is held in England in
Johnson VS. Goslett, Com. Bench n. s.,
500. and Clarke vs.. Dickson 6 Com Bench
n. s.. 452. In the recent case of Peck VS..
Derry, L. r. 81, Oh. Div. Sal, 5S5, q Am. &
Eng. Corp. 245, which was an action of de-
ceit against the directors of a corporation
founded upon Misrepresentation in pros
pectus. the result of the is thus
summed up by Lopes, l.. j.: If a person
makes to another a material and definite
statement of a fact which is false, intending
that person to rely upon it, and he does rely
upon it and is thereby damaged, the person
making the statement is liable to the per-
sen to whom it is made; % If 1t is false to
the knowledge of the person making it; GU
If it is untrue in fact, and not believed to be
true by the person making it; 90 if it is I'M
true in fact, and is made recklessly, for in
stance. without any knowledge on the SUBJ
ject and without taking the trouble to ascer-
if ii be true or false. 4. If it is untrue in
fact, but believed to be true, but without
reasonable grounds for such belief
1.-The case of Delano VS.. Case, III, Ill, 241,
was action by a general depositor in a
in permitting 1t to be held out as solvent,
when, in fact, 1t was at the time, involvent.
1t was there held if the directors of bank
are guilty. of negligence in permitting it
to be held out to the public as solvent,
when, in fact, it is insolvent, and thereby
induce one to deposit his money with the
bank which he loses by reason of its in
solvency, he may recover of such directors
personally in an action on the case the