Court Opinion

ID: 8018583
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:07:47.158535+00
Date Added: 2024-06-11T16:36:31.138628
License: Public Domain

CONCURRING OPINION.
FARIS, J.
I concur most heartily in the result reached upon the facts in judgment in this case hy my learned associate, Judge Bond;, hut I note certain language in paragraphs 3 and 4 of his opinion, which, whether he has so intended it or not, may give rise to the view that he has held bank directors to he insurers, so far as concerns the duty owed hy them to the hank’s depositors. With such holding I cannot agree.
The flagrant lack of diligence on the part of the defendants here, has, it may well he, so aroused the just condemnation of my learned brother, as to cause him dum opus fervet, to put his thoughts in language as strong as his disapprobation and thus to pass beyond the view which judicial caution and the orderly and practical conduct of the hanldng business seem to my mind to compel us to take.
For example, the majority opinion says:
“The terms in question (i. e., the term ‘ordinary care’ as applied to the duty owed hy a hank director) mean the duty of care equal to the occasion, and, hence, due and adequate care and diligence at all times. When this is shown, no liability accrues in actions like the one under review. When it is not practiced, then full • responsibility attaches whether the negligence thereby *563resulting might' have been previously termed slight, ordinary or gross.”
If my learned associate means by this language only.that duty which he proceeds to express in his next sentence but one, following, to-wit:
“The law assumes this to be a reasonable standard of conduct and has generally defined it by the terms, ‘that care or diligence which an ordinarily careful or prudent person would exercise under the same or similar circumstances.’ ”
then I most cordially agree with him; but if he means that a director of a bank must exercise such degree of care as at once, or inevitably,-to detect or prevent theft and peculation on the part of the bank’s managing officers, or failing therein, respond in dam•ages, Í cannot agree.
The various grounds upon which liability of a bank •director accrues are collated from the authorities and are thus stated in 5 Cyc. 480:
“The liability of directors is in many cases prescribed by statute or charter, and is not extinguished by its expiration; but unless so fixed (i. e. by statute, constitution or charter) the act must in some way possess an element of fraud (Fusz v. Spaunhorst, 67 Mo. 256), or show the lack of knowledge they ought to have possessed when accepting office (Godbold v. Bank, 11 Ala. 191; Delano v. Case, 121 Ill. 247; Jones v. Johnson, 86 Ky. 530; Commercial Bank v. Chatfield, 121 Mich. 641; Union Bank v. Hill, 148 Mo. 380; Dykman v. Keeney, 154 N. Y. 483; Swentzel v. Penn Bank, 147 Pa. St. 140; Briggs v. Spaulding, 141 U. S. 132; Fisher v. Parr, 92 Md. 245). The essential taint of fraud or abuse of trust may consist of the continued employment of officers who are known to be speculating, or otherwise absorbed primarily in their own personal affairs to the known detriment of those of the hank (Prather v. Kean, 29 Fed. 498; but see, Brannin v. Loving, 82 Ky. 370, where it is said that a single wrongful *564act of the president is not sufficient to charge directors with negligence); of not making the returns or reports required by the State, or of knowingly making incorrect ones; of making false representations concerning their bank’s condition with the view of selling their stock to better advantage or attracting business; of making fraudulent issues and sales of stock; of receiving deposits when their bank is in an insolvent condition (Cummings v. Winn, 89 Mo. 51); of making fraudulent representations of its solvency to depositors and misleading them; or of lending moré money than the law will permit to a borrower (Banks v. Darden, 18 Ga. 318; Thompson v. Greeley, 107 Mo. 577).”
In consonance with the view that the liability of a bank director to a creditor accrues, in the absence of fraud or malice, not from the common law but by virtue of a statute, or from a provision in the organic law (Cummings v. Winn, 89 Mo. 51), or as the text quoted says, by virtue of the bank’s charter, our own court has said in the case of Fusz v. Spaunhorst, 67 Mo. l. c. 264:
“Aside from statutory provisions or one of similar nature in the organic law, the directors or officers of an incorporated bank would not be individually responsible in an action at law, for injury resulting to a creditor or depositor, unless the injury were occasioned by the malicious or fraudulent act of the party complained of.”
Aside then from fraudulent or malicious acts, under our statutory provisions and by our Constitution, the duty deduced as imposed upon a director of a bank, is the duty of exercising the same degree of care which an ordinarily careful or prudent person would exercise under the same or similar circumstances. This does not mean an ordinarily careful or prudent expert in figures, or an ordinarily careful or prudent professional accountant, but it means the ordi*565narily careful and prudent man, such as the usual bank directorates in city and country are made up of.
This was the holding of this court in the very last case in which the liability of a bank director was up for discussion and ruling. [Stone v. Rottman, 183 Mo, 552.] In that case we said:
‘ ‘ ‘ The director of a bank is only required to act in good faith and to exercise such a degree of care as a reasonably prudent man would exercise under the same circumstances. He is not bound to exercise the same degree of care which a prudent man would exercise in his own business. This is too high a standard. “To expect a director, under such circumstances, to give the affairs of the bank the same care that he takes of his own business, is unreasonable, and few responsible men would be willing to serve upon such terms. In the case of a city bank, doing a large business, he would be obliged to abandon his own affairs entirely. A business man generally understands the details of his own business, but a bank director cannot grasp the details of a large bank without devoting all his time to it, to the utter neglect of his own affairs.” [Swentzel v. Penn Bank, 147 Pa. St. 140.]’ ”
' I am willing to go even farther than this, and I think we ought to go as far as to hold unequivocally, that while a director of a bank is not required to exercise about the bank’s business the same amount of care, i. e., devote the same amount of time thereto, which he devotes to his own affairs; yet that is so only in the matter of degree or in time expended. He ought not to perform his duties perfunctorily, nor beg the question by assuming as a major premise thát identical honesty of the bank’s officers which his office makes it his duty to investigate. In other words, when he is about the bank’s business,.when he is performing his statutory duties of “passing upon the business of the bank” (Sec. 1099, R. S. 1909), he ought to be held to a degree of care at least equal to that which an ordi*566narily careful and prudent person would under similar circumstances exercise in Ms own personal- business. This for the reason, if no other, that he is the trustee and agent of the bank, which bank is the debtor of its depositors. [Utley v. Hill, 155 Mo. l. c. 259.] The funds of the bank of which the director is the conservator, bear the same relation to the depositors of the bank as the property of the director himself bears-to the creditors of the director. Why then should the director, when actually engaged about the affairs of the bank, not exercise the same degree of diligence in the one case as in the other ? He cannot be expected-serving as he does, in most cases without compensation — to devote the same amount of time to the bank’s business that he does to Ms own personal affairs; but at such times as the statute requires him to look after the bank’s business, and in the manner, degree and thoroughness with which he performs these duties enjoined upon him by statute or by the Constitution, no reason for any distinction as between the degrees of care with which he looks, or should look, to Ms own affairs and that with which he looks to those of the bank, can be seen. - And the general duty of exercising that degree of care which an ordinarily careful and. prudent person would exercise under similar circumstances is pei'ennial and follows him ever. If he cannot, unless hindered by an act of God, give this attention and this degree of attention to his duties, he owes it to the bank’s depositors to resign, or take the consequences.
Subject to this view, the case from which I quote above (Stone v. Rottman, supra), well expresses some of the director’s duties, his limitations and the reasons therefor, and the prescience with which the Legislature acted when it made the statute. Thus:
“ ‘A director is expected to attend the meetings of the board with reasonable regularity and to exercise a general supervision and control. He is not required *567to know the details or contents of the hooks and papers. “The framers of the organic and of the statute law must he held to have understood how the business of a bank is conducted. They must have known that the directors are drawn from the busiest men in the community; men who have carved success out of chaos, who have succeeded where the great multitude have failed; men who are not expected, and could not afford, to give their whole time to the business of the bank. The lawmakers knew that the active management of a bank usually devolves upon the president and cashier, and that to the latter is usually entrusted the management of the details. They know that few directors had the time, and fewer still the capacity, to examine the books of a bank and ascertain its solvency; that even in their own business they could not take off a trial balance from the books they employed experts to keep for them, either because they had not the time to do so for themselves or because they did not have the capacity to do so. ’ ’ [Utley v. Hill, 155 Mo. l. c. 265; Queen v. Hincks, 10 Cent. L. J. 127 (cited in Thompson on Liability of Agents, etc., p. 477); Dunn v. Kyle, 14 Bush (Ky.), 134; Savings Bank v. Caperton, 87 Ky. 306.]’ ”
Nor do I think the statute quoted by my learned associate uses the term “existing indebtedness and liability,” in the exact sense suggested by him. If either the word “indebtedness” or “liability” means a debt or liability arising out of the tort, that is, the thefts or embezzlements of the cashier or managing officers, then the effect of this section is to make the directors insurers. The statutory language used, neither by its terms nor by the setting in which it is found, will in my view bear so harsh and far-reaching a construction. The compelling verbiage is: “The board of directors . . . shall meet at least once per month and pass upon the business of the bank back to the previous meeting of the board, and shall keep a *568written record of its approval or disapproval of each and every loan, and at each monthly meeting the records shall show the aggregate of the then existing indebtedness and liability of each of the directors and officers of the bank.’’ It will be noted that the “indebtedness and liability” of the directors themselves, though they possess scant if any opportunity to steal or embezzle, and none to falsify the bank’s books, is yet required to be entered upon the records of these monthly meetings just as, and along with, the indebtedness and liability of the president, cashier or other active managing officer, who has full opportunity to steal and embezzle. Evidently the word liability is ejusdem generis with indebtedness, and evidently the records upon which such indebtedness and liability are to be set down, are the minutes required to be made in the corporation’s journal of proceedings, so that he who runs may read and, reading, see that the indebtedness and liability of no director or officer is “in excess of ten per centum of the capital and surplus” of the bank which is forbidden by a subsequent provision of the self-same section 1099. In the instant case the defendants as directors set down in their records such several indebtednesses of themselves and of the cashier, but they did not set down the cashier’s indebtedness as the books of the bank upon their face patently showed it to be, though this is all that the statute quoted requires in this behalf. For, I labor to show that the indebtedness and liability required by this stat-. ute to be shown upon the director’s records means debts accruing in the natural and ordinary course of business as contradistinguished from those growing out of torts builded upon thefts and embezzlements uniformly hidden, usually with much of criminal ingenuity. To the acts of the defendants here, as to the acts of all bank directors in passing upon the business of the bank, and in setting down the indebtedness of themselves and the officers of the bank, I apply, without the abatement of *569jot or tittle, the salutary rule exacting a diligence equal to that which an ordinarily careful or prudent man would exercise under the same or similar circumstances in his own personal business affairs. But I go no farther. And this is, to the extent and in the manner I point out above, just a little farther than any other court in any other jurisdiction has ever gone before.
So limiting the opinion of my learned associate in the behalves mentioned, I concur in the result which he reaches.
Lamm, G. J., and Brown, J., concur in the views expressed herein.