Court Opinion

ID: 3865252
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:58:58.103904+00
Date Added: 2024-06-11T14:14:56.046322
License: Public Domain

This is an action of assumpsit, brought by the plaintiff, as receiver of the Warwick Bank, to recover of the defendant, late the president thereof, the value of certain securities of the bank, fraudulently, and without authority, or value given, appropriated by him to his own use, as so much money by him had and received to the use of the bank. That whilst president of the Warwick Bank, the defendant, tempted by a large bonus, sold his stock, being the large majority of the whole capital stock of the bank, to irresponsible persons from other and distant states, stipulating and receiving therefor and for his bonus, all the valuable assets of the bank, and knowing, or having every reason to believe, that their place was to be supplied by the worthless notes of the purchasers, has been, after a full trial, found by the verdict of a jury; and further, that this has been done without the prior assent, or subsequent ratification, of a board of directors authorized by the charter of the bank to act for it, and for the purpose of making the bank, through large and illegal issues of paper, the instrument of swindling the public. That this last portion of the scheme was not fully carried out by the purchasers, is due only to the intervention of commissioners appointed under the bank act, who early applied for and obtained from this court an injunction and a receiver, that the threatened mischief might be stayed, and by the winding up of the bank, *Page 141 
justice, as far as possible, done to its creditors of every degree. Although the motion for a new trial, filed by the defendant, alleges that the verdict in this case was against the weight of the evidence, yet this ground was not pressed at the hearing of the motion, and we are not aware of any just view of the evidence that will sustain it.
The first objection urged to the verdict is, that the court misdirected the jury when instructing them that the plaintiff represented the creditors of the bank, and could look behind its acts in the assertion of their rights. It is difficult, however, to see the force of this objection in a case where the charge and the proof is, that the defendant, in breach of his trust, as president of the bank, connived with sharpers to sell out the bank to them, and take payment from them in the assets of the bank, knowing or having every reason to know, that their purpose in the purchase was to defraud the public. One would think, especially if this was done without authority even formally legal, that it was a wrong for which the bank itself might have redress, if it was ever rescued from the hands into which it had fallen so as to be able to seek it, and that the plaintiff might maintain this action as representing the corporation only. Considering, however, the purpose of the bank act, we deem this a very narrow and false view of the scope of the receivership provided by it. The proceeding under which the receiver is appointed, is not a proceeding by the corporation, butagainst it. It is not for the corporation, but exclusively for the public, as billholders, and for those having funds in its hands as depositors; and it is only when they are in danger of being defrauded, or the bank has become insolvent, that commissioners or the court can act. Rev. St. Ch. 126, § 47. The duty of the receiver, as marked out by the statute, regards the creditors, and not the corporation, which is to be wound up. The 49th section provides for the payment of the debts of the corporation out of its assets, giving a preference to billholders; and it is only after the creditors are satisfied and the expenses of the trust paid, that the stockholders are to receive anything. It is true, that by the 50th section, the receiver is clothed with all the powers and rights of the corporation in respect to the collection of debts, conferred upon it by charter or *Page 142 
otherwise; but this, so far from being designed to limit his powers, was designed to clothe him with special powers and authorities. His principal office, under the law, as we have seen, is, to care for and represent the interest of creditors; and in all such cases, the receiver or assignee, call him by whatever name you will, may take advantage of any fraud in derogation of the rights of creditors, to which the insolvent debtor was a party. A deed which is void as against creditors, is void also as against those who, by law, represent creditors. Doe d. Grimsby v. Ball, 11 M.  W. 531, 533. If this principle were not applied to the receivers of insolvent banks, the receivership would, in a great number of cases, be of very little use.
The second objection to the verdict, that the court refused to instruct the jury, that in order to recover in this action, the plaintiff should satisfy the jury that some billholder, depositor, or other creditor, or some stockholder, had been injured by the act of the defendant, wholly ignores the existence of the bank as a legal entity, created by law for certain purposes, possessed and required to be possessed of certain property and endowed with certain rights, to enable it to perform them, and confounds the corporation with its creditors and corporators. Above all, it ignores the duties which such an institution, dangerous from its power to issue bills as a circulation, is bound to perform to the public; and silently lays aside the course of administration of its property and effects, marked out by the law, when, as in this case, for a violation of, or an inability to perform, those duties, it is undergoing the process of winding up. The bank act, in such case, imperatively requires the receiver to collect the property and effects of the bank, — its officers being enjoined from intermeddling therewith, — and to apply the proceeds thereof to the payment of the expenses of the trust, to the payment of the bills of the bank, to the payment of its other debts, in the order named, and to distribute the balance, if any, amongst the stockholders, equally, according to their rights. Rev. St. Ch. 126, § 49. For the purpose of this administration of the property, the receiver is, as we have seen, by the 50th section, expressly armed with all the powers and rights, special as well as general, of the corporation, to recover and collect it. If, therefore, the property sought *Page 143 
in this action is the property of the corporation, of which the defendant has wrongfully deprived it, we see no reason for imposing upon the receiver, as a condition to his right to recover it, that he should prove a special injury from the wrong to some creditor or stockholder of the bank. In bringing his action, the plaintiff is in the performance of a statute duty, necessary to the distribution required of him by law. The only questions are, — was this the property of the bank? and has the defendant, in breach of his trust as an officer of the bank, wrongfully appropriated it to his own use? and, under such circumstances, will an action for money had and received lie for it, at the suit of the receiver? The first two of these questions have been answered by the verdict; and as the note and check of the defendant were due to the bank, and the other securities were collected by him before this action was brought, we see no reason why the receiver might not, under the general rule, waive the tort, and pursue the defendant for so much money had and received to the use of the bank. On the trial of this action, it was of no consequence who, or whether any one but the bank, would be injured by this wrongful appropriation of its property. Indeed, until the property is collected and ascertained, and the expenses of the trust paid, it could not be known who, or whether any one but the bank, would suffer from this wrong, or to what extent. In this case, there had been no call by the receiver for the bills of the bank, for the very reason that he was delayed by the defendant in collecting the property with which to pay them; and he was not bound to know, and still less bound to prove, their existence or amount, in order to be entitled to collect the property of the bank, that he might administer it as the statute directs.
Again, it is objected that if the property of the bank came into the possession of the defendant in the course of an illegal transaction, that both parties are in pari delicto and for that reason the plaintiff cannot recover; and that the court refused to give this in charge in application to the case at bar, but did charge, that if the bank had been fraudulently or illegally deprived of its funds or paper by the defendant, who had converted them to his own use, and reduced them to money, the plaintiff could recover the amount so converted in this action. *Page 144 
In this suit between a bank and its principal officer for abstracting, without warrant or value, all its assets, it is difficult to see how the parties can be in pari delicto, — how the victim can be equally in fault with the officer, who, in breach of trust, has abstracted its funds. In such a contest, the only moral agent, — when, in addition to this fraud, further fraud upon the public was designed, — was the officer, who was capable of reason as well as of discourse, and not the legal entity, whose interests he betrayed, and which was capable of neither. To talk about equality of wrong in such a case, would be, not only to shut our eyes to all moral
distinctions, but to the very nature of things, — both of which the common law is supposed to recognize.
A further ground for a new trial laid in this motion is, that the court, though requested, refused to charge, that before this action could be maintained by the receiver, he must, as a condition precedent to his right to recover, prove that he tendered back, or offered to convey to the defendant, the shares in the capital stock of the bank, parted with by the defendant in consideration of the securities for which this suit is brought.
Had the bank bought his shares, there would have been some pretence for this request; but we cannot see why the bank should return shares sold by the defendant to others, and for which he wrongfully took his pay out of the bank-till, in order to recover of him the amount thus abstracted. The last person upon whom the obligation to return rested, we should think, was the victim of such a wrong.
The last objection to this verdict, is, that the court refused to admit, as evidence to the jury, the memoranda of discounts made on the books of the bank, at a meeting held by persons not shown to have been legally elected as directors of the bank, after the time of the transactions which are the subject of this suit, and after the defendant had finally left the bank. In other words, in consideration of a large bonus, the defendant conveys his stock in this bank to worthless adventurers whom he would not trust with a penny, first carrying off all the valuable assets of the bank in payment, and then desires to prove by certain memoranda kept by these persons in the books of the bank, which, according to the charter requisites they were not entitled to represent, that *Page 145 the bank received their valuable notes by discount, in exchange for those abstracted.
The answer to this objection is obvious, that memoranda kept by those who are not entitled to represent a corporation, are not evidence, merely as such, of its doings; and if they were, the subsequent substitution, by the purchasers, of their own worthless paper for that abstracted by the defendant from the bank, would not help his defense, in the least.
For these reasons this motion must be overruled, and judgment be entered upon the verdict.