Court Opinion

ID: 7809205
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:10:45.447659+00
Date Added: 2024-06-11T16:30:25.242899
License: Public Domain

HART, J., (on rehearing). In the case of Bank of Commerce v. Goolsby, 129 Ark. 416, 196 S. W. 803, cited in our original opinion, it was held that where a statute places banking corporations under the control of boards of directors, corresponding duties and liabilities, in the absence of any statute, must be ascertained and controlled by common law rules applicable generally to their relations and powers. So we held (there being no statute defining their liabilities) that it rested on the implied liability created under the law by the relation of the directors, as its officers, to the bank. The transaction of the bank with the canning factory so far as the negligence of the directors is concerned was closed when the bank had a settlement with the canning factory, took a mortgage to secure it for the balance due it, and refused to make any further advances to it. This occurred in December, 1911. Thereafter other persons leased the plant of.the canning factory and operated it. It is true they secured a loan from the bank but they did this wholly on their personal endorsement just as any third person might do and neither the canning factory as a corporation, nor its assets were-in any way involved. Therefore, we adhere to the ruling in our original opinion that the statute of limitations began to run in December, 1911. (5) John F. Magale was a' minor at the time the suit was brought. He was a stockholder of the bank and joined with his mother in bringing the suit. On account of his minority, it is claimed that the statute of limitations has not run against his cause of action and that a rehearing should be granted as to him. The proper mode of enforcing the liability of'the directors in a case of this sort is by a suit in equity on behalf of all the creditors and in which the corporation itself is a party. Clark & Marshall on Private Corporations, Vol. 3, Par. 832, p. 2643, and Mitchie on Banks and Banking, Vol. 1, Sec. 55 (3). In Cook on Corporations (7th Ed.), Vol. 3, par. 701, it is said: “The usual and proper remedy is for the corporation itself to institute a suit at law against the guilty directors. If, however, the corporation is under the control of the guilty parties, or if it refuses to sue when requested by stockholders to do so, then the stockholder himself may bring suit in equity in his own behalf, and in behalf of all other stockholders who may wish to come in, making the corporation and the guilty parties the defendants, and compel them to make good to the corporation the corporate money or property lost by their negligence. The money or property recovered in such an action belongs to the corporation, and not to the stockholder who brings the suit. ’ ’ Hence it will be seen that the suit when instituted by the stockholder is a derivative o.ne and for that reason must be brought within the time in which the corporation itself should have brought the suit. It follows that the motion for rehearing will be denied.