Opinion ID: 1547681
Heading Depth: 1
Heading Rank: 4

Heading: Personal Liability of the Directors.

Text: The trial court correctly held that the directors were charged with the supervision of liquidation under 12 U.S.C. A. § 181, and that in the discharge of such duties they acted in a fiduciary capacity. [9] It follows that they would be chargeable with any loss resulting from their failure to discharge their functions in a manner required by such a relationship. What then is the duty of a director toward the bank while it is a going concern, and toward its creditors when it is in liquidation? The relationship in either event is the same, for in each case a director is a fiduciary or a trustee. Officers and directors of banks are fiduciaries and at common law the liability for their acts is such as stems from such a relationship. [10] The duty resting upon directors has been variously defined as requiring such care and diligence as an ordinarily prudent man would exercise with reference to the administration and management of such a moneyed institution. [11] It has been said that they owe a high degree of duty to the general public and stockholders. [12] National bank directors are subject to both a statutory liability and a common law liability in the discharge of the duties of their office. [13] 12 U.S.C.A. § 182 makes it the duty of the board of directors to certify to the Comptroller of the Currency a notice of their intention to liquidate and to publish a notice for a period of two months in a newspaper published in the City of New York, and also in a newspaper published in the city or town in which the bank is located. This notice is for the benefit of creditors and of necessity must be published before the funds of the institution are distributed. Admittedly this statutory requirement was not complied with prior to the distribution of the $240,000 to the stockholders. 12 U.S.C.A. § 93 provides that any director who shall knowingly violate any of the provisions of the chapter, which includes the provision for the publication of the notice, shall be personally liable for all damage sustained in consequence of such violation. It has been held that before a director becomes personally liable for the violation of a statutory duty, it must be established that he intentionally violated the statutory requirement. Establishment of mere negligence is not sufficient. [14] We think there is a clear absence of any showing that the directors acted wilfully or intentionally in their failure to publish this notice prior to the disbursement of these funds. The court found that they acted in good faith; none of the appellants contend that they acted in bad faith; nor is there any reason why they should have wilfully or intentionally refused to publish the required notice. None of the appellant directors knew or had reason to believe that there was any claim outstanding against the bank. But although the directors may not be liable for violation of their statutory duty to publish this notice prior to the distribution of these funds, they may nevertheless be liable if they violated their common law duty as directors in the liquidation of the bank. As pointed out above, at common law directors must exercise such care as ordinarily prudent men would exercise in the administration and management of such an institution, and they will be held to a high degree of care, both to the stockholders and the general public. But a director is not an insurer and is not absolutely liable for loss resulting from his inattention. He is liable only for loss that results from his negligence. [15] Every known claim had been paid and satisfied. No one connected with the liquidation of the bank had any reason to believe that there existed any possible claim against these funds. Under these circumstances we do not believe it can be said that there was a violation of their common law duty to exercise reasonable care in paying this money to the stockholders. But even if it be said that they were negligent in the disbursement of this money, still they are not personally liable. They are liable only for such loss as proximately results from their negligence. [16] The mere fact that the directors do not know of the existence of a claim does not relieve them from failure to publish the notice. One purpose of the notice is to permit those who have claims of which the bank has no knowledge to present them and call them to the attention of the officers. But here the appellees themselves did not know at that time that they had a claim against the American National Bank. They did not know it for considerably more than a year after the bank ceased doing business and went into liquidation. It must then be conceded that had this notice been published, this claim would not and could not have been presented. It follows that the failure of the appellees to reach this fund of $240,000 in the hands of the liquidating agent was not the proximate result of any claimed negligence on the part of the directors. Nothing that could have been done in the course of an orderly, timely liquidation would have made the fund available for the satisfaction of a claim the existence of which was unknown to any of the parties to this litigation for more than a year after the liquidation was undertaken.