Case Name: Knoop, Hanneman & Co. et al. vs. J. A. Blaffer et als.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1887-01
Citations: 39 La. Ann. 23
Docket Number: No. 9755
Parties: Knoop, Hanneman & Co. et al. vs. J. A. Blaffer et als.
Judges: 
Reporter: Louisiana Annual Reports
Volume: 39
Pages: 23–32

Head Matter:
No. 9755.
Knoop, Hanneman & Co. et al. vs. J. A. Blaffer et als.
1. An action under E. S. 301, to enforce against the directors of a bank liability for having furnished false statements of the affairs of the bank to the State Treasurer, is ex delicto and prescribed by one year.
2 An action, under E. S., Sec. 300 and 301, to enforce the liability of the directors of a hanking corporation for the debts of the bank, on the ground that they had participated in, or assented to, the bank making loans and discounts, whilst in an insolvent condition, is one ex quasi delicto, and prescribed by one year.
3. The act which gives use to a qxiasi contract, is a lawful one, and is permitted. That which gives use to a quasi offense is unlawful, and is prohibited.
4. Prescription cannot be eked out by inference, nor extended from one cause to another by analogy; neither can the legal interruption of prescription be so extended.
A PPEAL from the Civil District Court for the Parish of Orleans. A Lazarus, J.
Henry Denis for Plaintiffs and Appellants.
T. J. Semmes <& Legendre for Defendants and Appellees.
Hranglm, Buelc, Dinlcelspiel and Hart ou the same side.

Opinion:
The opinion of the Court was delivered by
Watkins, J.
Plaintiffs filed this suit on the 29th of January, 1886, against the defendants as directors of the Mechanics and Traders' Bank of New Orleans, organized under the banking laws of this State, claiming that, on the 39th of March, 3879f, and before, they were de positors therein for large sums, for which they are indebted to them in solido.
They allege that, on the 19th of March, 1879, said bank was declared insolvent, its charter forfeited, and liquidating commissioners were appointed to close its affairs; and at that date their respective deposits were due and not been withdrawn.
They further allege " that, on January 1,1878, the said bank did not have on hand an amount in specie equal to one-third of all its cash liabilities at that date, exclusive of its circulating notes; and did not have on hand for the other Iwo-thirds of its cash liabilities an equal amount in specie, specie-funds, bills of exchange, on discounted paper maturing within ninety days and not renewable; that, at no time since the 1st of January, 1878, has the bank had on hand an amount in specie equal to one-third of its cash liabilities, exclusive of its circulating notes, nor lias it had at any time in hand, for the two-thirds of its cash liabilities an equal amount of specie, specie-funds, bills of exchange or discounted paper maturing within ninety days and not renewable; that all these facts were to the knowledge of the said defendants, and each of them, while and during the time they were acting as directors of the said bank ; that in violation of lato, on every legal day since the first day of January, 1878, up to the 19th of March, 1879, the said bank made loans and discounts, and that each of said defendants, as directors of said bank, participated in or assented to each of said loans and discounts, knowing that said loans and discounts were made in violation of the law contained in sections 300 and 301 of the Revised Statute of the State of 1870; that by said violation of law the said directors and defendants herein rendered themselves individually liable for all debts and obligations of the said Mechanics and Traders' Bank."
They further allege that said directors in 1878 and 1879 furnished to the State Treasurer statements of the condition, assets and liabilities of said bank for publication, and which were published, and " that in every one of those statements the said directors wilfully misstated the condition of the bank, representing same to be solvent, when, in truth and fact, the said bank was and had long before been hopelessly inslovent," and that said directors caused and assented to said statements being published, and knew that the items thereof were falsely stated, and that bjr said false statements they gave the bank credit and reputation for solvency, when it was entitled to none; and that had they known the true condition of the bank, they would have with drawn their deposits.
They aver that by their tortious conduct, concealments and misstatements the said directors have made themselves liable in solido unto them for the various amounts due them by said bank," of about $50,000.
The defendants plead in the lower court the prescription of one year to the cause or causes of action set out in plaintiffs' petition; and from a judgment sustaining the plea plaintiffs have appealed.
In this Court defendants tender an additional plea of prescription of six months under the provision of R. S., 986,
I.
On the face of the petition, the demands of the plaintiffs, in so far as they are founded on the alleged false statement furnished to the State Treasurer, and the concealment from depositors of the alleged insolvent condition of the bank by defendants as its directors, the plea of prescription of one year is undoubtedly good.
The conduct and acts of the directors are charged to have been wrongful, wilful and tortious, and for the resulting damage suffered the plaintiffs asks judgment in solido.
II.
The plea, predicated on the charge that while in a condition of insolvency to the knowledge of the directors, the bank made loans and discounts with the acquiescence and participation of said directors, and in violation of law, is not free from difficulty.
This suit was brought under the provisions of Secs. 26 and 27 of Act 338 of 1853, it being an act " to establish a general system of free banking in the State of Louisiana." They were embodied in Secs. 300 and 301 of the Revised Statutes.
Under Sec. 2 of that Act, banking corporations created under its provisions were authorized to discount bills, notes, and other evidences of debt; to receive deposits; to buy and sell gold and silver bullion and foreign exchange; to loan money " and to exercise all incidental powers necessary to carry on said business."
Section 26 declares : " Every banker or banking company, doing business under this act, is required, in addition to securities for circulation deposited with the Auditor, to have on hands, at all times, in specie, an amount equal to one-third of their other cash liabilities; and for the other two-thirds of said liabilities, an amount equal in specie, specie-funds, bills of exchange, or discounted paper, maturing within ninety days, and not renewable." R. S. Sec. 300.
Section 27 provides : " If at any time the specie, specie-funds, and short paper held by such banker or banking company, should fall bo low the proportions to cash liabilities prescribed in the preceding section, and shall remain so for a space of ten days, it shall not be lawful thereafter for such banker or banking company to make any loan or discount whatever, until its or their position is re-established according to the terms of the preceding section.
"A violation of this provision shall be held to be an act of insolvency and the Auditor shall cause the necessary steps to be taken for the liquidation of the affairs of such banker or banking company as in cases of insolvency; and every director or manager of a banking company, who may pa/rticipate in or assent to such violation, shall become indwidualhj liable for all its debts and obligations."
In effect the statute declares that if a banking corporation shall permit its specie, specie-funds and short paper to fall below the standard fixed, and to so remain for a period of ten days, " it shall not be lawful" for said corporation to make any loan or discount whatever, until its position is re-established and its affairs are put in line again.
"A violation of this provision " is per se an act of insolvency on the part of the corporation, and its effect upon any director of said corporation "who may participate in or assent thereto," is to make him "individually liable for all the debts and obligations " of the corporation.
The statute under consideration conferred the power upon such cor porations as might be organized under it, " to name and appoint such managers and directors to administer the affairs of the corporation as they may think necessary and proper." R. S. Sec. 277.
No additional or more specific duties or responsibilities were therein prescribed for directors than had heretofore existed, in respect to private corporations generally, other than those indicated in R. S. sec. 301.
Under the general law, " no stockholder shall ever be held liable or responsible for the contracts or fcmlts of the corporation, in any further sum than the unpaid balance due to the company on the shares owned by him." R. S. 690.
This provision certainly includes the directors of a corporation.
Thus, it is perfectly clear that, by the " free banking law " of 1853, the legislature intended to place additional restrictions around corporations that should be created under it, and to impose upon persons who might be chosen to direct and administer their affairs a greater responsibility.
Hence it denominated any violation of the quoted provisions an <wnlaivful act on the part of the corporation, and declares that the assent thereto or acquiescence therein by any director, should make him liable. for all the debts and obligations of the corporation.
It is, therefore, a violation of laio that fixes his liability. The extent of his liability is the amount of the debts and obligations of the bank; bnt the debts and obligations are those of the corporation. If the debts and obligations of the corporations were, at the same time, the debts and obligations of its stockholders and directors, the statute did not increase their responsibility, and failed in the accomplishment of its beneficent purpose.
The serious question there is, what is the liability sought to be imposed upon the directors, and not what are the debts sought to be collected.
That there axe just such debts and obligations in favor of plaintiffs as depositors in the Mechanics and Traders' Bank, as set out in their petition, is conceded by defendants for all the purposes of their pleas of prescription.
The plea under consideration is placed under R. C. C. 3536, which is to the effect that actions for damages " resulting from offenses or quasi offenses," are prescribed by one year. R. C. C. 2315 et seq.; 25 Ann. 414, Lizardi vs. The New Orleans, Canal and Banking Company; 20 Ann. 151, Williams vs. Grevier; Id. 214, Jennings vs. Gasselin; Id. 323, Millspough vs. City; 23 Ann. 162, Harvey vs. Waldon; 32 Ann. 220, Caillonet vs. Franklin.
Does the liability sought to be enforced grow out of an offense or a quasi offense? Did it result from any act of the defendant directors, whereby damage was caused the plaintiffs, and which they are obliged to repair on account of their fault f R. C. C. 2315. Did it result from the negligence of the directors, or through their imprudence or want of skill? R. C. C. 2316.
Or was it occasioned by the act of persons for whom they are answerable? R. C. C. 2317, 2320.
But the plaintiffs contend that their action arises ex quasi contráctil, and not ex delicto.
To determine its true interpretation, we must contrast the articles of the Civil Code relating to contracts and quasi contracts.
Article of the Code, 2293, declares : " Quasi contracts are the lawful and purely voluntary acts of a man, from which there results any obligation whatever to a third person."
Article 2294 provides : " That all acts from which there results an obligation without an agreement in the manner expressed in the preceding article, form quasi contracts. But there are two principal kinds which give rise to them, to-wit: The transaction of another's business, and the. payment of a thing not due." C. P. 30.
In the present case, it is not claimed that defendants entered into any specific covenant, or agreement, with the plaintiffs, in any event to become liable for the debts and obligations of the bank. Thus there was no contract. It is not contended that the directors, of their own accord, undertook the transaction of any business for the plaintiffs ; nor is it contended that the directors unduly received plaintiffs' money that was deposited in the bank, or that they, through inadvertance or mistake, delivered "over their deposits to the directors, instead of delivering them to the officers of the bank. On the contrary the plaintiffs in their petition declare that the bank made loans and discounts "in violation of law," and "that the directors of said bank participated in and assented to each of said loans and discounts, hnouiing that said loans and discounts were made 'in violation of the law."
All "personal actions are grounded on one of the four causes which give rise to personal obligations. The causes are contracts, or quasi contracts; offenses, or quasi offenses." C. P. 28.
"Personal actions arise from offenses, as when one has become liable to another for the injury he has inflicted on him by some crime or offense, such as theft or slander." C. P. 31.
"Personal actions arise from quasi offenses, when the ground of action is the injwry done to another by one of those fcmlis which are not considered as real crimes or offenses."
These different articles of the two codes have frequently passed under judicial investigation with the substantial result of placing the cases examined, in reference thereto, under one or the other of them, according to their respective features, without making any plainer the words of the text.
This Court in a recent case had occasion to examine and interpret the law under consideration; i. e., the Rev. Stats., secs.300, 301.
We refer to Lacombe vs. Milliken, 36 Ann. 367, in which the Court say: "The action is founded on sections 300 and 301, R. S. Two other grounds for the infliction of & penalty are alleged in the petition." etc.
In Kent's Commentaries the rule is laid down : "If a statute inflicts a penalty for doing an act, the penalty implies a prohibition, and the thing is unlawful, though there be no prohibitory words in the statute. The rule is now settled that, the statutory prohibition is equally efficacious, and the illegality of the breach of a statute the same, whether a thing be prohibited absolutely or under a penalty. 1st vol., p. 467.
The statute of 1853 contains a prohibition against the corporation doing certain acts. It prohibits it from making any loans or discounts during the period of time it is out of line and declares that the same " shall not be lawful."
It inflicts upon the corporation the penalty of insolv&ncy ; and upon the directors participating therein the penalty of being made liable for all the "debts and obligations" of the bank."
The defendants are not, by the Statute, declared liable for injury suffered by plaintiffs through "a crime or offense committed ; but for that inflicted by a fault, which is not considered as a real crime or offense." C. P. 31, 32; R. C. C. 2315.
Their liability, as stated, has been incurred by reason of their failure to perform a lawful act, and also for their participation in an unlawful act. This was a fault, a wrong-doing, though not denounced by the Statute as a crime or misdemeanor.
Plaintiffs' action is one ex quasi delicto and not ex quasi contractu.
In City of New Orleans vs. Southern Bank, 31 Ann. 566, the Court said: "The marked distinction between a, quasi contract and an offense or quasi offense is that the act which gives rise to a quasi contract is a lawful act, and is therefore permitted; while the act which gives lise to an offense or quasi offense is unlawful and therefore forbidden.
The court sustained the defendant's plea of prescription of one year, and so did the judge a quo, and we think he rvas correct in so doing.
III.
But the plaintiffs' counsel claims that the prescription was legally interrupted by the suit of Lacombe vs. Miliken, 36 Ann. 367.
This suit was filed and service accepted by defendants on the 29th day of January, 1886, and that suit was finally decided by this court in'April, 1884.
More than one year had elapsed between the decision of the one and the institution of the other suit.
Even if that were not conclusive against the plaintiffs' petitions in that regard, wo cannot consider that suit as having the legal effect of an interruption. It was held in that case that " the liability of the directors is not in favor of the bank, or its liquidators, but in favor of the creditors of the concern, who may, or may not, at their option, enforce it, for their separate benefits." The plaintiffs, in that case, were without a cause of action, and this is the first appearance of the creditors of the bank.
Prescription is stricti juris, and cannot be eked out by inference, nor extended from one cause to another by analogy ; neither can the legal interruption of prescription.
Under tlie views herein expressed it is unnecessary that we should pass upon the plea of prescription of six months, urged by defendants.
Judgment affirmed.