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.

*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
The court thereupon ordered
the judgment to be reversed, and the cause
remanded with directions to enter judgment
in favor of the defendant Thomas.

National Bank v. Thomas [ante, 231] to ob-
tain the possession of the sum of $27,500
paid to the plaintiff Chetwood by the de-
fendants Thompson and Wilson in the settle-
ment of the suit of Chetwood against them
as codefendants with Thomas.

[446] *In all this record there was no Federal
right specially set up or claimed by the
plaintiff in error until after the judgment in
the supreme court, when a petition for writ
of error was filed by the California National
Bank, a codefendant with Thomas in the
original action, in which various allegations
were made of a denial of Federal rights. But
assuming that a Federal question might be
extorted from the allegations of the com-
plaint, it is sufficient to say that the case
was not disposed of upon the merits of such
complaint, which was treated as sufficient,
Statement by Mr. Justice Brown:
but upon a variance between its allegations ler in the case just decided of the California
This was an intervening petition by State-
and the proofs, and upon the settlement made
with the defendants Thompson and Wilson,
and the withdrawal of the action against
them. These were purely questions under
the law of the state, as to which the opinion
of the supreme court was conclusive. Not
only was no suggestion of a Federal question
made to the trial court or to the appellate
court, but there was nothing to indicate that
the judgment rendered could not have been
given without deciding a Federal question.
Indeed, the opinion shows that the cause
was decided, as it might well have been, by the stockholders pursuant to the act of
solely upon grounds not involving such ques- Congress of August 3, 1892 (27 Stat. at L.
345). As this act provided that the per-
son so elected agent "shall hold, control, and
dispose of the assets and property of such
association which he may receive under the
terms hereof, for the benefit of the share-
holders of such association," Stateler ap-
plied by affidavit to the superior court of the
city and county of San Francisco, in which
the Chetwood action was then pending, for an
order upon the plaintiff Chetwood to appear
and show cause why the moneys collected of
Thompson and Wilson, as well as certain
stock and other securities, should not be
turned over to the affiant as such agent.

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.

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.

of

IN ERROR to the Supreme Court of the
State of California to review a
that court reversing an order made by the
Superior Court of the City and County of
San Francisco denying a motion to require
the plaintiff Chetwood to appear and show
cause why moneys collected of defendants
Thompson and Wilson and certain stock and
other securities should not be turned over
to Thomas K. Stateler as agent of the stock-
holders of the California National Bank and
directing the trial court to enter the order
prayed for, after allowing plaintiff for his
costs, etc. On motion to dismiss. Dis-
missed.

See same case below, 113 Cal. 649.

the Pacific Short Line from Sioux City west- | the obligations of the improvement company
ward to O'Neill," they would raise $350,000, and the Nebraska & Western bonds, he caused
$250,000 to be loaned the improvement com- the bonds to be sold on May 27, 1891, and
pany on the security of $500,000 first-mort-June 24, 1891, pursuant to a demand made
gage bonds of the Nebraska & Western Rail-on the Manhattan Trust Company as trustee
way Co., held by the Manhattan Trust Com- and to notice given, and at the sale purchased
pany, and $100,000 certificates of the im- all the bonds of the Nebraska & Western
provement company to be assigned to the Railway Company.
syndicate by the original subscribers.

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,
of Nebraska & Western bonds; of 25,000
shares of the stock of the Nebraska & West-
ern Railway Company, and of 7,200 shares
of the stock of the Sioux City & Northern
Railroad Company; that proceedings were
pending for the foreclosure and sale of the
Nebraska & Western Railway; and that Gar-
retson desired to borrow money, purchase
the road, form a new corporation, and obtain
a new issue of bonds and stock; *and Tod 485)
& Co. agreed to make or procure him a loan
on these terms: Garretson to deliver to Tod
& Co. his two hundred promissory notes of
$5,000 each, dated October 1, 1891, and paya
ble on demand, and to deposit as security
for the equal and common benefit of all who
should become holders thereof the Nebraska
& Western bonds, the shares of Nebraska &
Western stock, and the shares of Sioux City
& Northern stock; Tod & Co. to procure the

And January 28, 1891, Garretson entered
into a written agreement with the Manhat-
tan Trust Company for the taking up of the
then outstanding notes and receiving the col-
lateral held as security therefor.
Among the transactions, Garretson bor-sale of the notes at par, and to advance
rowed in February, $190,000 secured by 170
Sioux City & Northern bonds, and the equity
in the 750 bonds held to secure the $500,000
loan. These loans were paid out of the pro-
ceeds of the sale of the whole issue of the
Sioux City & Northern bonds, as before
stated.

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
ment of all questions heretofore arising be-
tween the parties hereto, in reference to the shares as should be necessary to qualify
Company except such part not exceeding fifty
said improvement company or the construc- directors. The note holders were also given
tion of the Nebraska & Western Railway, and certain options, and Tod & Co. were to re-
the first party agrees that his note for $500,-ceive one per cent commission for their serv
000 heretofore given on taking up certain | ices.
loans shall be paid at or before maturity." The notes representing this million-dollar
The evidence did not show that if there had loan were not executed October 1, 1891. but
been any misrepresentation, Tod & Co. had were thereafter prepared and sent to Garret-
any knowledge in fact thereof, though at one son at Sioux City, were there executed by
time a member of the firm, now deceased, him, and were received by Tod & Co. October
was a director of that trust company, and 26, Garretson being credited with the prin
its counsel was also Tod & Co.'s.
cipal and twenty-five days' interest.

After Garretson had become the holder of '

One million of the Nebraska & Western

der the law of Nebraska to contract so large an indebtedness in excess of its outstanding bonds, and thereupon it was suggested that Garretson should sell the securities to the Pacifie Short Line Bridge Company and receive back the notes of that company for $1,500,000, to be secured by a pledge of said securities, and that Tod & Co. should negotiate a sale of these notes on the strength of the securities thus pledged.

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.

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.