BOYD et al. v. SCHNEIDER et al., 131 F. 223

GROSSCUP, Circuit Judge, after the foregoing statement of facts, delivered the opinion of the court. We do not deem it necessary to pass on the question whether, between directors of a national bank and its depositors, there subsists such a trust relation as would bring this case, as one arising out of a trust, under equitable cognizance; nor need we pass upon appellants’ contention that the receiver of a national bank, being a trustee for the depositors, who has refused to bring action, courts of equity on that account are clothed with jurisdiction to proceed against the directors at the suit of the depositors.

In our judgment the case stated in the bill is one of equitable cognizance, but on considerations entirely distinct from the propositions just stated. To this we will recur after dealing with some of the affirmative propositions of the appellees. The chief insistence of the appellees is, that the right of action stated in the bill, if anything at all, is an asset of the bank vested by law in the receiver on his appointment, and therefore not one on which simple contract creditors are entitled to bring suit.

If there be no privity of contract, or obligation of duty, between the directors and the depositors, this contention may be sound; but if the nature of the contract of deposit is such that the duty of the directors in the premises runs directly to the depositors, there can be no doubt that the depositors can, in their own right, bring such action as may be essential to the fulfillment of their rights. This leads to an examination of the nature of the relation that subsists between the directors of the bank and its depositors.

The relation of depositors to the bank, and so far as directors stand liable for the doings of the bank, the relation of the depositors to the directors, while that of debtor and creditor, is something more than the mere relation of debtor and creditor. The contract of deposit is a loan; but not a loan pure and simple. On the acceptance of the deposit, a promise is raised that the bank will repay it on demand, or at the time stipulated; and to that extent the transaction is a loan. But when this much is said, the whole contract is not stated.

The parties deal with each other on a basis, not merely that of borrower and lender, but on the basis, that the party receiving the money is a bank, organized under the laws of the United States, and subject to the provisions of law, present and future, relating to the custody and disposition of the money deposited; and that the party loaning the money is a depositor, leaving his money with the bank on the faith that such provisions respecting the custody and disposition of the deposit, will be observed.

In legal effect, the depositor says, Here is my money; in consideration of its reception, and such interest as you pay, you can have its use; but only on this condition, that the use conform to the safeguards provided by the law. The acceptance of money thus tendered, implies that the bank and its directors, so far as they are responsible for the doings of the bank, agree to conform to the conditions named. The law governing the custody and disposition of deposits thus enters into and forms a part of, the relation created between the parties (Walker v. Whitehead, 16 Wall. 314, 21 L.

Ed. 357); thereby creating direct privity of relation between the directors and the depositors. The bill clearly shows that the deposits in the custody of the National Bank of Illinois, as an entirety, were used and disposed of contrary to the provisions of law relating to custody and disposition. The deposits were disposed of in sums, and to persons forbidden by law; and were used to pay dividends when no dividends had been earned.

The bill shows also, that the directors had knowledge of some of these violations of law, such as the payment of dividends out of the capital stock, and the increase of loans in large amounts to the Calumet Company, after notice from the comptroller that such loans were contrary to law.; and also, that of other violations of law they would have been advised, had reasonable diligence on their part been exercised.

It seems clear to us that on such a state of facts, the directors are answerable in some kind of action, directly to the persons to whom their duty ran; and that, to the extent that the depositors suffered losses therefrom, the right of action, whatever it may be, runs directly to the depositors as a class.

The question is not determined by whether the amount thus recovered might not become an asset of the bank; but whether, aside from that, the depositors may not enforce the liability as a right special to them— a right growing out of the contract of deposit, and not common therefore, to stockholders and other creditors not depositors. Unless the national banking act cuts deep enough to cut out these individual rights of action, the depositors have, in some form, a right to bring action on the claims set forth.

The national banking act provides a system for the collection of the assets of an insolvent bank, and their distribution among creditors. The legal machinery for this is a receiver appointed by the comptroller of the currency, and removable by him, in whom is vested all rights of receivership, to the exclusion of all other receivers or assignees; assessments leviable by the comptroller against the stockholders; and procedure for the allowance of claims, the payment of dividends, and the distribution of money thus collected. All this, however, is in the nature of administration.

Barring the matter of assessment, it puts into the hands of receiver and comptroller only such powers as the bank itself had before becoming insolvent. It substitutes for the bank solvent, the machinery provided for the bank insolvent. Now the bank solvent, may sue and be sued, complain or defend in any court of law or equity, as fully as natural persons. We see in the act no reason to say that the bank insolvent, does not possess the same status; only it is exercisable through the receivership provided by law. There is no provision that exempts the insolvent bank or its directors, from suit (Kennedy v.

Gibson, 8 Wall, 498, 19 L. Ed. 476); no provision that evinces an intention on the part of congress that persons having direct legal relations with insolvent banks, or their directors, may not have such relations interpreted and enforced through the judicial department of the government. The cases called to our attention by the appellees do not bear upon this point. These cases hold that national banks cannot, at the suit of creditors, be thrown into bankruptcy, or their affairs wound up in accordance with the statutes of states providing for the winding up of corporations.

But proceedings to wind up, and bankruptcy proceedings, are essentially administrative. No one doubts the power of congress to provide the machinery for such administration, and no one doubts the intention of congress, in the enactment of the national banking act, that to the extent national banks were concerned, such machinery should be embodied in the powers conferred upon the comptroller.

But it is one thing to make provision for the administration of the affairs of an insolvent or dead bank — provision that will exclude all other forms of administration; and quite another thing to deny to parties their constitutional right to appeal to the courts for the enforcement of contract or other legal obligations. So distinct are these matters in their legal nature, that we cannot conclude from the presence, in a statute like the national banking statute, of the one, an intention to include also the other.

On the whole matter our conclusion is, that considering arguendo that the receiver might have brought the action stated in the bill, his right to bring such action is not exclusive; and that, to the extent the directors are responsible specially to the depositors, the depositors have a right of action — an action, adequate to the fulfillment of the obligation due the depositors by the directors. The remaining question is, whether the remedy should have been in the form of actions at law, or a suit in equity such as this. The case, as already stated, appears to us to be one clearly of equitable cognizance.

The rule relating to equitable jurisdiction applicable to this case is laid down by Pomeroy as follows: Where a number of persons have separate or individual claims and rights of action against the same party, all arising from some common cause, governed by the same rule, and involving similar facts, so that the whole matter might be settled in a single suit brought by all the persons uniting as co-plaintiffs, or one of the persons suing on behalf of himself and others; or, where one party has a common right against a number of persons, the establishment of which would regularly require a separate action brought by him against each of these persons, instead whereof he might procure the whole to be determined in one suit, a bill in equity will lie on the ground that it prevents a multiplicity of suits.

Pomeroy, Equity Juris. (2d Ed.) vol. 1, § 245. The case stated in the bill goes — in the matter of equitable cognizance —even beyond the rules thus laid down. It is a case not alone of a number of persons having separate and individual claims against one party, arising from a common cause; or one person having rights against a number of persons, arising from a common cause; but the case of a number of persons having each a right against a number of persons, all arising from a common cause.

To this, too, must be added the further consideration, that neither of the depositors could, by separate suits at law, recover that to which he is entitled; for the defendants to such suits, being directors who served varying terms, and subject, therefore, to varying obligations, could not be called to complete accounting and apportionment in a suit at law. Our conclusion is that the bill filed is the proper way to obtain an enforcement of whatever rights the depositors individually, or as a class, may have against the directors individually, and as a class.

Indeed, both our conclusion on this point of jurisdiction, and on the right of depositors to bring the action directly, without the intervention of the receiver, seems to be sustained, indirectly at least, in Briggs v. Spaulding, 141 U. S. 132, 11 Sup. Ct. 924, 35 L. Ed. 662. There the suit was in equity by a depositor — the First National Bank of Buffalo through its receiver— against the directors, and no question seems to have been made that the suit in that form would not lie.

While but four of the Justices were for sustaining the depositor’s claim, the other five denied it, not on the ground that the suit would not lie, but that the claim was not made out by the proofs. In view of what has already been said, the other points made in support of the decree below lose their point. The bill is not multifarious, because it does not proceed on distinct theories of recovery. The bill may have some surplusage, but it sets forth the obligations of the directors and their breach, with sufficient certainty.

And the suit survives against the representatives of deceased directors, because it is a suit on contract, and not in tort. We think, too, under all the circumstances, that .appellants ought to have leave to amend with respect to the time when their deposits were made. The special demurrers taken on the part of certain defendants, that they were not shown to have been directors at the time certain acts complained of were done, cannot be sustained.

The bill shows, that during the whole period covered bjr the complaint, dividends were being paid out of capital stock; and to that extent, at least, all of the defendants named, are answerable to the depositors. The decree of the Circuit Court will be reversed, and the case remanded with instructions to give appellees leave to file the amendment proposed, and thereupon to overrule the demurrers to the bill. In re Manufacturers’ National Bank, 5 Biss. 499, Fed. Cas. No. 9.051; Washington National Bank v, Eckels (C. C.) 57 Fed. 870; Kennedy v. Gibson, 8 Wall. 498, 19 L. Ed. 470; Pahquioque Bank v.

Bethel Bank, 30 Conn. 325, 4 Am. Rep. 80.