and that a joint and several money judgment | defendants and overruled, when answers were [443]be entered against them for the sum of $400, filed denying in general the allegations of the 000, with legal interest thereon from the bill. The court subsequently entered judgtime of such loss. ment against the three directors, but, being unable to determine the proper amount, appointed a referee to take proof of the amount appearing to be due and owing to the bank from certain named individuals. Upon such report having been made, a stipulation was entered into between the plaintiff stockholder and the defendants Thompson and Wilson, whereby the plaintiff renounced and withdrew his action against such defendants, and the court, upon such stipulation, entered a judgment dismissing the action against them. The court thereupon made a finding of all the facts in the case, among which was one to the effect that there had been collected of the two defendants Thompson and Wilson the sum of $27,500, leaving a net loss to the bank of $139,419, for which judgment was entered against the defendant Thomas. Thomas thereupon appealed to the supreme court of the state from the judgment so entered. The defendants answered the bill, denying the allegations as to negligence on their part. Upon the cause being submitted to the court, a judgment was entered in favor of the plaintiff and against Richard P. Thomas, Robert R. Thompson, and Robert A. Wilson," and the case was referred to a master, who found the actual loss of the bank to be $166,919. Before a final judgment was rendered by the court, however, the suit was dismissed by the plaintiff as to Robert R. Thompson and Robert A. Wilson, from whom had been collected the sum of $27,500, thus leaving a net loss to the bank of $139,419, and judgment for this amount was rendered against Richard P. Thomas. Thereupon, Thomas appealed to the supreme court of the state of California, by which court the judgment was reversed, and the case remanded to the trial court, with directions to enter a judgment in favor of the defendant Thomas. (113 Cal. 414.) The plaintiff thereupon sued out a writ of error to this court, assigning as the principal ground to give this court jurisdiction that the judgment of the supreme court of the state was rendered without due or any process of law, and deprived the plaintiff of its property without due process of law, contrary to the Constitution, etc., and Revised Statutes, § 5136, relating to national banks. dismissed. *That court was of opinion that the com- [445] plaint, though entitled "a bill in equity for the accounting and settlement of a trust," contained nothing more than a charge ex delicto against the directors for a breach and nonperformance of their duties. It did not consider it necessary to dispose of the objec tions to the complaint; but assumed, without deciding, that the complaint was sufficient to state a cause of action in its averments of misconduct. It then proceeded to decide (1) that the complaint was one sounding in tort, and that the defendants were charged as joint tortfeasors; that their negligence was pleaded as their joint neglect to perform duties, not individually imposed members of the executive committee; that in upon them, but collectively undertaken as the findings of fact no mention was made of any dereliction of duty on the part of Thompson and Wilson, and that there was an absolute failure by the court to find upon the most material issues of the case-the joint negligence of the three defendants, which The bill of complaint, filed in the superior alone, it was alleged, had occasioned loss to court of San Francisco by a stockholder of the bank. "Such," said the court, "is the the California National Bank, sought to cause of action pleaded in the complaint. charge three directors of the bank with neg- The findings, if it be conceded that they give ligence in the performance of their trust, evidence of a meritorious cause of action and particularly in failing to comply with against the defendant Thomas, do so because certain by-laws of the bank, by which large of a showing that he was negligent, not with amounts of money were lost to the bank, the other defendants and as member of the which the bill prayed that the defendants executive committee, but that he was individ. might be decreed to make good and restore. ually and separately negligent in the perThe bank was chartered under the national formance of his duties as president. But banking act and the by-laws were adopted this is not the cause of action pleaded against in pursuance of Revised Statutes, section him, and it is well settled that, where the 5136, which authorizes associations in-case made out by the findings is a different corporated under the act to define the duties case from that presented by the pleadings, of the president and other officers and to reg- the judgment will be reversed; for the relief ulate the manner in which its general busi- decreed must be the relief sought, and a vaness shall be conducted. Certain transac- riance, even if it be such as could have been tions of the directors are also alleged to be cured by amendment, is fatal to the validity infractions of Revised Statutes, section 5200, of the judgment." The court further held for which the directors are made liable in (2) that, as the defendants in error were section 5239, although no violations of this sued jointly for a tort, a withdrawal of the section are specifically alleged in the bill. action in favor of Thompson and Wilson opeDemurrers were interposed by the several rated also to release the defendant Thomas. Messrs. Robert Rae, E. G. Knapp, and John Chetwood, Jr., for plaintiff in error. Mr. A. H. Ricketts for defendant in er ror. Mr. Justice Brown delivered the opinion of the court: Unless the plaintiff in error was denied some right under the Constitution or statJutes of the United States, "specially set up and claimed" by it, this writ of error must be This was in fact the main reason given for National Bank v. Thomas [ante, 231] to ob- [446] *In all this record there was no Federal Pending the insolvency and winding-up proceedings of the California National Bank, and subsequent to the appointment of a rethe petitioner Stateler was elected "agent" ceiver by the Comptroller of the Currency, tion. The motion was opposed upon the ground that of the whole number of 2,000 shares, 1,020 shares only were voted to elect Stateler as agent of the bank, and that they were either owned or controlled by Richard P. Thomas, the former president, against whom there was a judgment outstanding in favor [448] of the stockholders in the amount of $139,419, besides an unpaid assessment of $20,000 levied upon him as a stockholder by the Comptroller of the Currency. Upon affidavits read at the hearing of the motion the court denied the order prayed for, whereupon Stateler appealed to the supreme court of the state. That court held that the regularity of the appointment of the agent could not be questioned in a proceeding of this kind, inasmuch as it had been approved by the Comptroller of the Currency, and that the agent's demand to have the money paid over to him should have been granted. The court thereupon reversed the order "with directions to the trial court to enter the order prayed for, after making reasonable allow Bubmitted May 4, 1898. Decided October ance to the plaintiff Chetwood for his costs, Whether a judgment should be ordered in favor of Thomas for a dismissal of the action against him or simply for a new trial, involved merely a question of the procedure under the law of the state. The court might have been, and probably was, of the opinion that an action would lie upon the separate liability of Thomas, and have reserved for future consideration the question whether the dismissal of this action upon a joint liability would operate as estoppel against a new action upon his individual liability. There was no Federal question involved in the disposition of this case, and the writ of error is therefore dismissed. [447] CALIFORNIA NATIONAL BANK et al., Plffs. in Err., v. THOMAS K. STATELER et al. What is not a final order. of IN ERROR to the Supreme Court of the See same case below, 113 Cal. 649. An order directing the trial court to enter disbursements, and attorneys' fees" as con- [No. 37.] the Pacific Short Line from Sioux City west- | the obligations of the improvement company In June, 1891, Tod & Co. loaned Garretson $75,000 on $200,000 Nebraska & Western bonds as collateral. III. October 1, 1891, Garretson entered in to a contract with Tod & Co. to borrow one The Manhattan Trust Company held $2,100,000 of the Nebraska & Western bonds to secure the $1,050,000 loan and, subsequently, $483,000 more to secure other loans. About November 1, 1890, it became neces-million dollars, which recited that Garretson sary to provide for the payment of the loan by Belmont & Co. On that date Garretson borrowed through the Manhattan Trust Company $500,000 on his individual notes secured by $750,000 Sioux City & Northern bonds, and took up the Belmont loan of $500,000. He at the same time negotiated with the officers of the Manhattan Trust Company touching other loans to the improvement company under the underwriter's agreement to the effect that the Manhattan Trust Company should cause said loans to be renewed or placed elsewhere and that the Nebraska & Western bonds in possession of the Manhattan Trust Company should be used as collateral. was the holder of $2,500,000, or thereabouts, And January 28, 1891, Garretson entered thereon at once $200,000, if required in ob taining title, the collateral to be held by Tod & Co. for the equal benefit of the holders of the notes; on the reorganization of the Nebraska & Western Railway Company under the foreclosure, a new mortgage to be executed to the Manhattan Trust Company The testimony of Garretson was relied on to secure a new issue of bonds at the rate (484] to sustain the charge that the Manhattan of $18,000 per mile, and the whole amount of Trust Company perpetrated a fraud on him such issue, $2,340,000 and one half of the at the time he entered into negotiations to capital stock of the new company to be de assume or take up the obligations of the im-livered to Tod & Co. in the place of the Ne provement company, in the acquisition of the Nebraska & Western road, in that it misrepresented the amount of that company's indebtedness. The officers of the Manhattan Trust Company positively denied any such misrepresentation; and the eighth paragraph of Garretson's contract with the Manhattan Trust Company of January 28, 1891, declared: "This agreement and the settlement braska & Western bonds and stock. If the Nebraska & Western bonds were required to be deposited in court, the road was to be purchased in the name of trustees, and until the new corporation was formed and new bonds and stock delivered, no more than $600,000 was to be paid over to Garretson, the balance to remain to his credit with the banking company. The new bonds were also to be further se herein made is in full adjustment and settle-cured by all the stock of the Pacific Bridge After Garretson had become the holder of ' One million of the Nebraska & Western der the law of Nebraska to contract so large bonds were delivered to Tod & Co. October | the railway company was not authorized un19, 1891, $800,000 by the Manhattan Trust Company and $200,000 by Tod & Co.'s cashier, which had been pledged to them to secure the loan of $75,000, and these bonds 186] were sent that day to Wickersham, Tod & Co.'s attorney and agent at Omaha, to be used in the purchase under the foreclosure. One hundred and fifty thousand dollars of the bonds had been delivered to the St. Charles Car Company, and were received by Tod & Co. October 27, and forwarded to Wickersham that day. Of the remainder of the bonds, 500 were held by the Manhattan Trust Company as collateral to the $250,000 subscribed hy Garretson and Hedges to the underwriter's agreement, and had been shipped to the Union Loan & Trust Company by the Manhattan Trust Company by direction of Garretson, December 2, 1890. The Pacific Short Line Bridge Company was a corporation of Iowa, organized for the purpose of constructing a bridge across the Missouri River at Sioux City, as a part of the Nebraska and Western enterprise. Its stock was divided into 20,000 shares of $100 each, which were issued November 13, 1891, in four certificates of 5,000 shares each, in the name of "A. S. Garretson, trustee," and these certificates were delivered by GarretAnd $933,000, which had been lodged in son, November 19, 1891, to Tod & Co., who, Tod & Co.'s custody by Garretson, had been on December 14, delivered them to the Mansent to the company in August, 1891, on his hattan Trust Company as trustee under the instructions, which contained nothing to in- mortgage of the Sioux City, O'Neill, & Westdicate that the Union Loan & Trust Com-ern Railway Company, pursuant to the mil pany had any claim of lien thereon, or right thereto, while Tod & Co. testified that they supposed they were transmitted as a mere matter of safety deposit. These bonds for $1,433,000 were sent to Garretson at Omaha by the Union Loan & Trust Company, and delivered by him to Wickersham. The railroad was sold under the foreclosure decree October 23, 1891, and bought in by Garretson and Wickersham as trustees for the holders of the first-mortgage bonds of the Nebraska & Western Railway Company, and on October 30 the entire issue, $2,583,000, was deposited by Wickersham with the clerk of the court, and the sale thereupon confirmed. The road was reorganized under the name of the Sioux City, O'Neill, & Western Railway Company, and Wickersham and Garretson as trustees conveyed the property to the new company in exchange for the issue of the bonds and stock. Pending the issue of the engraved bonds of the Sioux City, O'Neill, & Western Railway Company, a temporary bond was issued and delivered to Tod & Co., and afterwards exchanged for the engraved bonds. All the bonds of the company were thus pledged to secure the $1,000,000 loan with 487] the full knowledge and participation of Garretson, and of Smith, secretary and treasurer of the Union Loan & Trust Company. Some of the notes issued under this loan were sold to various parties and some retained by Tod & Co. lion-dollar-loan agreement of October 1, December 26, 1892, the Pacific Short Line It having been intimated that payment of December 30, 1892, between Garretson and | The Union Debenture Company was a cor that company, which recited that the notes poration of New Jersey, with a capital stock were to be secured by the 2,340 Sioux City, of $300,000 and over $800,000 of assets, and O'Neill, & Western bonds and 14,206 shares of had issued and had outstanding $500.000 of the Sioux City & Northern stock, by an in- twenty-year debenture bonds, which had been denture of trust with Tod & Co. December 31, sold mainly in England, Scotland, and HolGarretson entered into this indenture of land. Tod & Co. owned one third of the trust whereby he pledged the said bonds and capital stock, and the business of the comstock to Tod & Co. as trustees for the equal pany was transacted through Tod & Co. as and pro rata benefit and security of all the brokers. The notes in question, except holders of the notes, it being provided that about $40,000 retained by the debenture.com if default should be made in the payment of pany, were sold by them as brokers to various the principal or interest of any of the notes, persons, including $590,000 to parties abroad the trustee, on request, might declare the and $500,000 to the Great Northern Railway [489]* principal and interest due and sell the bonds Company, but Tod & Co. took no part of the and stock at public auction, and that the loan. holders might appoint a purchasing trustee, in whom, if he bought at the sale, the right and title to the bonds and stock [should vest] | in trust for all the note holders in proportion to the amounts due them respectively. The note holders were given certain options, and Garretson agreed to pay the debenture company three and a half per cent commission. The commission of three and one-half per cent, $52,500, was paid to the debenture company by Tod & Co. The remainder of the proceeds of the $1,500,000 loan, after the discharge of the million-dollar loan, the payment of the commissions, and of a temporary loan of $39.000 to Garretson, was paid over on Garretson's drafts, to the Union Loan & Trust Company, to be applied to the payment of bridge estimates and to the credit of Hornick, trustee. About $200,000 was applied on bridge aecount. All the members of the syndicate were parties to the agreement by which the bonds and stock in controversy were sold to the bridge company, and knew of the use Garretson proposed to make of the notes and se As already set forth, Tod & Co. then held the 2,340 bonds and 7,200 shares of Sioux City & Northern stock. Of the remaining 7,000 shares of this stock to be pledged under the agreement, 6,190 shares were delivered to Tod & Co. by Garretson in December, 1892, in New York, and certificates for 1,000 shares were sent to Tod & Co. by Smith, secretary, January 16, 1893. All these shares were transferred by members of the syndi-curities. They did not repudiate the transcate. In March, 1893, Tod & Co., as authorized by the indenture of trust, at the request of Garretson, released and delivered to the treasurer of the Great Northern Railroad Company 3,600 shares, which Garretson had sold to that company for $350,000 in cash, all of which was received by Garretson. W. S. Tod testified that his firm supposed the proceeds of this sale were to be applied towards the construction of the bridge, and the evidence tended to show that the money was paid over to the Union Loan & Trust Company to be applied in payment of notes of the syndicate. action, and never made any complaint or gave any notice to Tod & Co. that Garretson was wrongfully pledging the collateral. Tod & Co. rendered full accounts of the two loans to Garretson, which were sent by him to Smith as they were received. Great Northern Railway Company, of which J. Kennedy Tod was a director. Mr. Tod stated that they believed during the negotiations between their firm and Garretson that he was a man of large wealth. Garretson was a prominent man in banking, financial, and railroad circles when be began his dealings with Tod & Co., and continued to be so until 1893. He had been, or was, an officer of many business corporations or companies; and one of the chief promot-(491) ers and builders of the Sioux City & Northern Railway, and organizers of the Union Loan The notes for the $1,500,000 were executed & Trust Company. He was highly recomand indorsed by Garretson, and the transac-mended to Tod & Co. by the president of the tion closed, January 30, 1893, and on that date the Union Debenture Company turned over to Tod & Co. $1,507,500, being principal with accrued interest, and thereupon Tod & Co. paid off the million-dollar loan with accrued interest. $1,004,833.33. They thus released the $2.340.000 Sioux City, O'Neill, & Western bonds, the 18,000 shares of Sioux City & Western stock, and 7,200 shares of Sioux City & Northern stock, and delivered to themselves as trustees under the indenture of trust the bonds, 10,200 shares of Sioux City & Northern stock and also 4,000 of the latter stock; and certified and delivered the bridge notes to the debenture company. [490] *These notes contained the provision that they might be declared due on default in payment of interest or principal, and that they were secured by the indenture of trust of December 31, 1892, and the deposit of the bonds and stock as collateral. The Tods testified that they knew nothing of the dealings between the Manhattan Trust Company and the improvement company, or of the loan transactions of the improvement company, and had no connection therewith; that they had no knowledge or notice of any claims of the Union Loan & Trust Company to these securities at or before the time they were pledged to secure either the loan for $1,000,000, or the loan for $1,500,000, and the first information they had of any such claim was after default had been made in the pay ment of interest on the latter loan. The interest on the notes was payable July 1, 1893, and January 1, 1894, and the interest due July 1, 1893, not having been paid. |
