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against the further prosecution of the action, and to operate as a bar to recovery, was set up in special defenses, which need not, however, be further noticed.
The answers of Yates and Hamer were similar in effect to that of Thompson, except as to the allegation that Thompson was not a director when the plaintiff made his deposits.
The cause was put at issue. Before the trial three of the defendants-Walsh, Hamer, and Phillips-died, and the action was revived against the administrator of Walsh and Hamer, but was not prosecuted further against the estate of Phillips. The companion actions brought by different plaintiffs were tried with the case at bar by a jury, and there was verdict against all the defendants then before the court, upon which judgment was entered except as to the administrator of Walsh, in whose favor judgment was entered by the court upon special findings as to him made by the jury. After the correction of an error in the amount of the judgment the case was taken to the supreme court of Nebraska, where the judgment was affirmed. 105 N.. W. 287. This writ of error was then sued out, apparently on behalf of all the defendants. We assume, however, that Charles W. Mosher and R. C. Outcalt, two of the defendants below, have abandoned the prosecution of the writ. We so assume because no cost bond appears to have been furnished by either; because neither has appeared at the bar by counsel and no brief in their behalf has been filed, and, on the contrary, in the brief of the defendants in error it is stated that the persons named did not prosecute error, which we take to mean that the parties referred to have abandoned in this court the prosecution of the writ of error which was sued out in their names, and because the bill of exceptions does not contain the answers of those defendants nor the evidence relating to their case, which would be pertinent to consider if we were called upon to determine whether prejudicial error was committed as to them. None of the remaining plaintiffs in error were officers of the bank, and they were sued simply for acts done as directors thereof.
A motion to dismiss first requires attention. The asserted want of jurisdiction in this court is based upon the contention that no Federal question was raised in or decided by the state court. But, as will hereafter appear, the record plainly shows that both in the trial and appellate courts an immunity was claimed under § 5239 of the Revised Statutes (U. S. Comp. Stat. 1901, p. 3515), at least in respect to the rule of liability applied below, and such immunity was expressly denied by the state court, and
there is, therefore, jurisdiction, even if, in other respects, jurisdiction might not be exercised, as to which we are not called upon to decide. Schlemmer v. Buffalo, R. & P. R. Co. 205 U. S. 1, 51 L. ed. 681, 27 Sup. Ct. Rep. 407; Tullock v. Mulvane, 184 U. S. 497, 46 L. ed. 657, 22 Sup. Ct. Rep. 372; Metropolitan Nat. Bank v. Claggett, 141 U. S. 520, 35 L. ed. 841, 12 Sup. Ct. Rep. 60; Logan County Nat. Bank v. Townsend, 139 U. S. 67, 35 L. ed. 107, 11 Sup. Ct. Rep. 496.
To dispose of the controversy presented by the record before us we need only consider the following assignments of error:
"7. The court has erred in deciding that the fact that those plaintiffs in error who were directors were without knowledge of any falsity of the reports attested by them or some of them, mentioned in the petition, was immaterial, and that such directors or any of them were liable under the proofs showing that they were without knowledge of the falsity of such reports; the said decision is in violation of the provisions of § 5239 of the Revised Statutes of the United States, which makes liability of the directors dependent upon the fact that they knowingly violated or knowingly permitted the violation of the provisions of the national banking act, and participated in or assented to such violation.
"8. The court has erred in deciding that a common-law action of deceit based upon reports of the Capital National Bank made to the Comptroller of the Currency and attested by the directors of such bank can be maintained against such directors, without knowledge of any false statements in such reports, and without any participation in or assent to any violation of the national banking act as essential elements of the cause of action as required by § 5239 of the Revised Statutes of the United States."
The basis for these assignments is found not only in instruction given by the trial court, but in refusals to give instructions asked by the defendants. The instructions given, which are pertinent to the assignments, and which were duly excepted to below, read as follows:
"Bank officers and directors who make or participate in a published report of the financial condition of the banks of which they are such officers and directors may become liable for damages sustained by one depositing money in such bank in reliance upon the false representation of the condition of the bank contained in the report. even though such director or officer did not know that his report so published was in fact false or untrue.
"The director of a bank who publishes or participates in the publication of a report of its condition, by such act asserts that the
statements contained in such report are sub- | fendants made and published false and misstantially true, and he cannot rely upon his ignorance of the true condition of the bank as a defense to an action, when he, in such published reports, represents the bank to be solvent, if in truth it is not solvent and its assets are fictitious or worthless or its liabilities so much greater than its assets as to render the bank insolvent.
leading statements concerning the financial condition of the bank, whereby the plaintiffs were induced to become and remain its creditors, to their damage. In short, whatever other allegation may be contained in the petition, they also contain sufficient to constitute a common-law action for deceit. That the party upon whom the deceit or imposition was practised by the officers of a national bank may maintain an action against them in his own name and behalf for damages resulting to him therefrom, and that his right of action does not rest on the Federal statutes, but the common law, is no longer an open question.
"A director or executive of a national bank is responsible for the making and publication of a false report of its financial condition, though he did not personally make and publish such statement, if he, in any manner, participated in the making or publication thereof. A director of a national bank is presumed to know its true condition and that the law requires a true statement of its affairs to be made and published by the bank from time to time, and if one has been a director or executive officer of such a bank for a long period of time he is pre-dition of the Capital National Bank or parsumed to have knowledge of the making and publishing of the statements of its condition, and the burden is cast upon him to overcome this presumption by competent ev-statements and believed them to be true, idence.
"The jury are instructed that inasmuch as the law required that all reports made by a national bank to the Comptroller of the Currency shall be published at the expense of the bank, in a newspaper at the place where the bank is established, you have a right to consider such published reports as have been introduced in evidence in this action, purporting to have been signed and whose names appear in such published reports as having been authorized by such defendants so appearing to have signed the same."
Of the instructions refused, to which exceptions was taken, we need only quote the following:
"The jury are instructed that if you find from the evidence introduced in reference to any one of the directors named in any one of the said cases that such director did not knowingly violate any of the requirements of the national banking act under which he was acting as such director, but acted in good faith, trusting and confiding in the of ficers, agents of the bank, having no reason to suspect the integrity and honesty of any one of such officers and agents, then you are instructed that your verdict should be in favor of such defendant."
Concerning the cause of action and the proof required to justify a recovery, the supreme court of Nebraska said:
"The petitions show misfeasance and misznanagement on the part of the defendants, as officers of the bank, and that the bank thereby sustained damages, but they show more than that. They show that the de27 S. C.-41.
"It was incumbent on the plaintiffs to establish, by a preponderance of the evidence: (1) That the defendants published the statements purporting to show the financial con
ticipated in the publication thereof; (2) That such statements were false; (3) That the plaintiffs severally relied upon such
and were thereby misled, to their injury. As to the first proposition, the evidence shows that none of the statements were actually made by all of the defendants, but that each defendant participated in making some of them. It is urged on behalf of the defendant Thompson that he participated in making but one of them. That is a mistake; the evidence is conclusive that he signed and participated in making at least four of them, the first being that made and published December 28, 1886, the last, that made and published July 9, 1891. The mistake arises, perhaps, from the construction which the defendants seem to place on the petitions. The petitions set out two of the statements at length, but it is also alleged that at divers other times and dates, between the 28th day of December, 1886, and the 21st day of January, 1893, the defendants made and published other false and misleading reports purporting to show the condition of the bank which were relied upon by the plaintiff. The defendants appear to take the position that plaintiffs should be restricted to the two reports set out at length. We do not think so. The allegations of the petitions are sufficiently broad to admit proof of any and all statements made on and between the dates just mentioned. If definiteness and certainty required all such statements to be set out at length, the remedy was by motion."
It is not to be doubted that, although the plaintiff alleged the making of false verbal and written statements, there was no attempt to establish any verbal misrepresentations. It is also certain, even if it be
eration, since proof of a scienter is not necessary to a recovery. This court has frequently asserted that, to maintain an action for false representations, it is not essential that it be shown that they were intentionally or knowingly made by the defendant. This is the rule in ordinary causes, and no valid reason can be suggested or pointed out why the same principle should not apply in actions for deceit against the directors of a banking corporation. Certainly no case has come under our observation which has made an exception in their favor."
The proper solution of the question above propounded necessitates a consideration of the legislation of Congress respecting national banks.
conceded, arguendo, that there was some evi- | the bank is wholly an unimportant considdence tending to show the making of alleged written representations other than those contained in the official reports made by the association to the Comptroller of the Currency, and published in conformity to the national bank act, that such latter statements were counted upon in the amended petition, and were, if not exclusively, certainly principally, the grounds of the alleged false representations covered by the proof. Under this state of the record, irrespective of the nature and extent of the proof required to maintain an action of deceit at common law, the question is: Did the supreme court of Nebraska rightfully decide that the plaintiff was entitled to recover against the defendant directors upon proof merely of the following facts: "(1) That the defendants published the statements purporting to show the financial condition of the Capital National Bank or participated in the publication thereof; (2) That such statements were false; (3) That the plaintiffs severally relied upon such statements and believed them to be true, and were thereby misled, to their injury?" And the exact import of the propositions which were thus stated by the court below and were made the test of the right of the plaintiff to recover is plainly shown by an opinion of the Nebraska court cited in its opinion in this case; viz., Gerner v. Mosher, 58 Neb. 135, 46 L.R.A. 244, 78 N. W. 384, which involved the liability of the directors of the very same national bank with whose failure this record is concerned. The court said:
By 24 of the national bank act of February 25, 1863 (chap. 58, 12 Stat. at L. 665, 671), each association was required to make and forward to the Comptroller of the Currency quarterly reports, containing "a true statement of the condition of the association making such report," in respect to enumerated items, and it was provided that such report "shall be verified by the oath or affirmation of the president and cashier, and all wilful false swearing in respect to such report shall be perjury, and subject to the punishment prescribed by law for such offense." It was made the duty of the Comptroller to publish full abstracts of such reports, as to specified items, in newspapers printed in the cities of Washington and New York, "and a separate report of each association" was required to be published, at the expense of the association, in a news"The defendants in the present suit, who, paper published in the place where such asas directors, attested the reports made by sociation was established. Associations lothe Capital National Bank to the Comp-cated in a number of the leading cities were troller of of the Currency, by such act vouched for, or certified to, the absolute truthfulness of the statements therein contained, and not that the report was correct so far as the directors knew or had been advised by the proper performance of their duties as directors. The means of information, this record shows, were accessible to them. It was their duty to know whether the reports were correct or not.
also required to publish, in a newspaper published where the association was located, a statement, under the oath of the president or cashier, of the condition of the association, showing the average amount of loans and discounts, specie, deposits, and circulation. By § 45 the cashier of each association was required after each dividend to make, under oath, "a full, clear, and accurate statement of the condition of the association," enumerating specified particulars, which statement was to be forthwith transmitted to the Comptroller of the Currency. The national bank act of June 3, 1864 (chap. 106, 13 Stat. at L. 109), substantially reenacted, in a much condensed form, the requirements as to quarterly reports of the financial condition of each association. The abstract of such reports was required, however, to be published by the Comptroller only in the city of Washington, and every association was required to make a monthly statement of its condition under the oath
of the president or cashier. For each day | 8 9 of the act of 1864, a director of a naafter five days' delay in making a report each bank was made liable to a penalty of $100. The act of 1864 did not contain a requirement for the making and transmittal to the Comptroller of a statement following the declaration of a dividend.
tional bank was required, inter alia, as he is now required by § 5147, Rev. Stat. (U. S. Comp. Stat. 1901, p. 3464), to "take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such association, and will not knowingly violate, or willingly permit to be violated, any of the provisions of this title." In the acts of 1863 and 1864 the concluding word used was not "title," but "act."
Sections 50 and 52 of the act of 1863 (12 Stat. at L. 679, 680, chap. 58) were practically identical, and §§ 53 and 55 of the act of 1864 (13 Stat. at L. 116, chap. 106, U. S. Comp. Stat. 1901, pp. 3515, 3497) were also substantially alike, and by those sections civil and criminal liabilities were authorized to be assessed against and imposed upon directors of banking associations in certain contingencies. Section 52 of the act of 1863 and § 55 of the act of 1864-as supplement
By an act approved March 3, 1869 (chap. 130, 15 Stat. at L. 326, U. S. Comp. Stat. 1901, p. 3498), in lieu of the reports required by the national bank act of 1864, it was made the duty of each association, on the requisition of the Comptroller, to make not less than five reports in each year. These reports were not only required to be verified "by the oath or affirmation of the president or cashier of such association," but to be "attested by the signature of at least three of the directors." Publication of such reports was required to be made in a newspaper published in the place where the association was established, and a penalty of $100 for each day's delay after a specified time in making and transmitting the reported by the act of April 6, 1869 (chap. 11, was authorized to be retained by the Treasurer of the United States out of interest due the association. Each association was also required to make a report, attested by the oath of its president or cashier, within ten days after the declaration of a dividend, stating the amount of each dividend and the amount of net earnings in excess of such dividends.
As embodied in the Revised Statutes the provision became § 5211 (U. S. Comp. Stat. 1901, p. 3498), and is copied in the margin.† By § 39 of the act of 1863, as well as by
16 Stat. at L. 7), construed in the act of July 8, 1870 (chap. 226, 16 Stat. at L. 195, U. S. Comp. Stat. 1901, p. 3497), making it an offense to aid or abet an officer or agent of any association in doing the acts prohibited in § 55 of the act 1864, with intent to defraud or deceive-became § 5209 of the Revised Statutes (U. S. Comp. Stat. 1901, p. 3497). It is copied in the margin.‡
Section 50 of the act of 1863 and § 53 of the act of 1864 became § 5239 of the Revised Statutes, reading as follows:
"Sec. 5239. If the directors of any national banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association
†Sec. 5211. Every association shall make to the Comptroller of the Currency not less than five reports during each year, according to the form which may be prescribed by him, verified by the oath or affirmation of the cashier, teller, clerk, or agent of any asso# Sec. 5209. Every president, director, president or cashier of such association and ciation, who embezzles, abstracts, or wilattested by the signature of at least three attested by the signature of at least three fully misapplies any of the moneys, funds, of the directors. Each such report shall exhibit, in detail, and under appropriate heads, out authority from the directors, issues or or credits of the association, or who, withthe resources and liabilities of the [associations] [association] at the close of business puts in circulation any of the notes of the on any past day by him specified; and shall issues or puts forth any certificate of deposassociation; or who, without such authority, be transmitted to the Comptroller within it, draws any order or bill of exchange, five days after the receipt of a request or makes any acceptance, assigns any note, requisition therefor from him, and, in the bond, draft, bill of exchange, mortgage, judgsame form in which it is made to the Comp-ment, or decree; or who makes any false entroller, shall be published in a newspaper published in the place where such association is established, or, if there is no newspaper in the place, then in the one published nearest thereto in the same county, at the expense of the association; and such proof of publication shall be furnished as may be required by the Comptroller. The Comptroller shall also have power to call for special reports from any particular association whenever, in his judgment, the same are necessary in order to a full and complete knowledge of its condition.
try in any book, report, or statement of the association, with intent, in either case, to injure or defraud the association or any other company, body politic or corporate, or any individual person, or to deceive any officer of the association or any agent appointed to examine the affairs of any such association; and every person who, with like intent, aids or abets any officer, clerk, or agent in any violation of this section,-shall be deemed guilty of a misdemeanor, and shall be imprisoned not less than five years nor more than ten.
to violate, any of the provisions of this
and that among such duties is the furnish-
Considering the text of the national bank act, as now embodied in the Revised Statutes, including § 5239, we think the latter section affords the exclusive rule by which to measure the right to recover damages from directors, based upon a loss alleged to have resulted solely from the violation by such directors of a duty expressly imposed upon them by a provision of the act. By the first sentence of the section mentioned a forfeiture of the charter is entailed "if the directors of any national banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate, any of the provisions of this title." And the last sentence ordains the rule by which civil liability is to be determined, by providing that "every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person shall have sustained in consequence of such violation." As the section thus comprehends all the express commands to do or not to do, as to directors, contained in the national bank act, and besides specifies the nature of the conduct of directors from which their civil liability for violation of such commands may arise, it
As in the early acts relating to the national banks, so in the sections of the Revised Statutes on the same subject, there are many provisions specifically enjoining the doing or not doing of certain acts by the association or its officers. Thus, by § 5137, Rev. Stat., U. S. Comp. Stat. 1901, p. 3460 (formerly § 28 of the act of 1864), a national bank is prohibited from acquiring real estate for purposes other than those specified in the act, and is forbidden to hold real estate, under certain contingencies, more than a specified length of time; by § 5200, Rev. Stat., U. S. Comp. Stat. 1901, p. 3494 (formerly § 29 of the act of 1864), it is prohibited to loan to any person or corporation in excess of one tenth of the capital stock of a bank; by § 5201, Rev. Stat., U. S. Comp. Stat. 1901, p. 3494 (formerly § 35 of the act of 1864), banking associations are forbidden to loan or purchase their own stock; by 8 5202, Rev. Stat., U. S. Comp. Stat. 1901, p. 3494 (formerly § 36 of the act of 1864), associations are forbidden to become indebted or become in any way liable exceeding the amount of their capital stock except on account of specified demands; by § 5203, Rev. Stat., U. S. Comp. Stat. 1901, p. 3495 (for-results that liability cannot be entailed upon merly section 37 of the act of 1864), a restriction is imposed upon the use of circulating notes; by § 5204, Rev. Stat., U. S. Comp. Stat. 1901, p. 3495 (formerly s 38 of the act of 1864), the withdrawal of the capital of an association while continuing its operations is forbidden, either in the form of dividends or otherwise; and § 5206, Rev. Stat., U. S. Comp. Stat. 1901, p. 3496 (formerly § 39 of the act of 1864), embodies a restriction upon the use of notes of other banks. In addition to these sections of course may be considered the various sections enjoining the making and publishing of periodical reports of the association, to which we have heretofore referred.
It thus becomes obvious that the national bank act imposes upon directors duties which would not rest upon them at common law,
them by exacting a different and higher standard of conduct as regards such commands than that established by the statute without depriving directors of an immunity conferred upon them. That the words "shall knowingly violate, or knowingly permit," etc., found in the first sentence of § 5239, Rev. Stat., were intended to express the rule of conduct which the statute established as a prerequisite to the liability of directors for a violation of the express provisions of the title relating to national banks, is additionally shown by the oath which a director is required to take, wherein, as already stated, he swears "that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such association, and will not knowingly violate, or willingly permit to be vio