If one of the plaintiffs in error does not furnish a cost bond,
appear by counsel, or file any brief in this Court, he will be
presumed to have abandoned the prosecution of the writ and it will
be dismissed as to him.
Where, in the trial and appellate courts, an immunity was
claimed under 5239, Rev.Stat., as to the rule of liability to be
applied to directors of a national bank and such immunity was
denied, this Court has jurisdiction to review the judgment under
section 709, Rev.Stat., even if in other respects it might not have
jurisdiction.
Where a statute creates a duty and prescribes a penalty for its
nonperformance, the rule prescribed by the statute is the exclusive
test of liability.
The National Banking Act, as embodied in 5239, Rev.Stat.,
affords the exclusive rule by which to measure the right to recover
damages from directors based upon a loss resulting solely from
their violation of a duty expressly imposed upon them by a
provision of the act, and that liability cannot be measured by a
higher standard than that imposed by the act.
Where, by a statute, a responsibility is made to arise from its
violation knowingly, proof of something more than negligence is
required, and that the violation was in effect intentional.
105 N.W. Rep. 287, reversed.
The facts are stated in the opinion.
Page 206 U. S. 162
MR. JUSTICE WHITE delivered the opinion of the Court.
This writ of error is prosecuted to secure the reversal of a
judgment of the Supreme Court of the State of Nebraska
Page 206 U. S. 163
affirming one entered by a court of Seward County, in that
state, upon a verdict of a jury awarding damages against the
defendants below, plaintiffs in error here, because of certain acts
charged to have been done by them as officers and directors of the
Capital National Bank of Lincoln, Nebraska.
We briefly summarize a statement contained in the opinion of the
court below concerning a prior action between the same parties.
That action, and three others of like character, brought by
different plaintiffs, were begun in a county different from that in
which the present one was commenced, and recovery was sought, with
one exception, from those who were defendants below in this case,
of the sum of a loss occasioned by the insolvency and suspension of
the Capital National Bank, a corporation organized under the
National Bank Act. The actions referred to were removed into a
circuit court of the United States, and in each a motion to remand
was overruled, and in one of the cases (brought by Thomas Bailey),
the circuit court sustained a demurrer to the petition and
dismissed the cause, and the judgment so doing was affirmed by the
circuit court of appeals. 63 F. 488. The plaintiffs in the other
cases thereupon dismissed their actions and commenced new ones, as
also did Bailey, in Seward County, of which the case before us is
one. The same persons who were impleaded in the prior actions were
made defendants, and in two of the actions one Thompson, a director
of the bank, who had not been previously sued, was joined as a
defendant. The defendants were sought to be made liable for acts
done as officers and directors of the Capital National Bank,
although it was not expressly alleged that the bank was organized
under the National Bank Act. Reliance in each action was placed
upon alleged untrue written and oral statements and representations
of the financial condition of the bank, alleged to have been made
and published by the defendants, which were fully set out in
various forms of expression, but in none of the averments was it
specifically asserted that the acts in question were done in
consequence of and in compliance
Page 206 U. S. 164
with the provisions of the National Bank Act, although the
exhibits attached to the petition disclosed the character of the
written reports, which were in part relied upon. The state court
overruled an application to remove, and, a transcript of the record
having been filed in the circuit court, on motion the action was by
that court remanded to the state court upon the ground that the
petition was "clearly based not upon the provisions of the National
Banking Act, but upon the liability claimed to arise under the
principles of the common law."
See Bailey v. Mosher, 74 F.
15.
An amended petition was filed changing somewhat the averments
originally made and supplementing the same by new allegations.
After a considerable lapse of time, a second amended petition was
filed. This latter enumerated many acts of negligence and
mismanagement in the conduct of the affairs of the failed bank
charged to have caused its insolvency, in addition to the averments
which had been made in the original petition. The defendants
demurred on the ground of want of jurisdiction, because the result
of the pleading as amended was to demonstrate that the whole cause
of action relied upon was based upon the violation by the
defendants of provisions of the National Bank Act, and because,
under that act, no cause of action in favor of the plaintiff was
stated. The day the demurrer was filed, the action was removed by
the defendants to the circuit court of the United States. That
court overruled a motion to remand (
see Bailey v. Mosher,
95 F. 223), and subsequently the court sustained the demurrer and
dismissed the action. Reviewing the action of the circuit court,
however, the circuit court of appeals held that, in any event, the
removal had been made too late, "and that the judgment of the lower
court dismissing the plaintiff's case was rendered without lawful
jurisdiction over the case." 107 F. 561. As a result, the case went
back to the state court, and in that court the demurrer to the
second amended petition was argued and overruled.
There was judgment against Stuart, one of the defendants,
Page 206 U. S. 165
for failure to answer the original petition, and this judgment
was affirmed by the Supreme Court of Nebraska.
Stuart v. Bank
of Staplehurst, 57 Neb. 570. A separate answer to the second
amended petition was filed on behalf of the defendant Thompson, and
a joint answer on behalf of the defendants Yates and Hamer. In the
answer of Thompson, it was averred that, while a stockholder, he
was not a director of the Capital National Bank at the time the
plaintiff made its various deposits; it was denied that any of the
reports set out and referred to in the petition were signed or
attested by Thompson, and specifically for himself he denied
"all alleged misconduct and mismanagement of said bank on his
part, and all of the alleged neglect of duty and the causing of the
insolvency of said bank, as charged in the said amended
petition."
The following paragraph was also set up in the answer:
"This defendant further says that the cause of action set out in
the plaintiff's amended petition, if it have any, is founded upon
alleged facts which, if true, constitute a violation by this
defendant, as a director or stockholder, of his duties as such
director or stockholder, as laid down and defined in the national
banking laws of the United States above referred to, concerning the
government and management of national banks. And this defendant
alleges that, if any liability attaches to him as a director or
stockholder of said bank for any act done or duty neglected as set
forth in said amended petition or otherwise, that such liability is
determined and controlled by the National Banking Act, concerning
the management of national banks, and that, in determining the
liability of this defendant, there is necessarily involved the
construction of said National Banking Act relating to the duties of
directors and stockholders of national banks. That a federal
question is involved in determining the liability of this defendant
by reason of the alleged mismanagement of said bank and the alleged
neglect of duty on the part of this defendant."
Matter alleged to constitute an estoppel against the further
prosecution of the action and to operate as a bar to recovery
Page 206 U. S. 166
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.
Page 206 U. S. 167
A motion to dismiss first requires attention. The asserted want
of jurisdiction in this Court in 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 section
5239 of the Revised Statutes, 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;
Tullock v. Mulvane, 184 U. S. 497;
Metropolitan National Bank v. Claggett, 141 U.
S. 520;
Logan County National Bank v. Townsend,
139 U. S. 67.
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 section 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
Page 206 U. S. 168
of the cause of action as required by section 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 of 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 substantially 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."
"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 presumed 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 evidence. "
Page 206 U. S. 169
"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 officers, 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 mismanagement 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
defendants made and published false and misleading 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 practiced 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
Page 206 U. S. 170
action does not rest on the federal statutes, but the common
law, is no longer an open question."
"
* * * *"
"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 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. As to the first
proposition, the evidence shows that none of the statements was
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
Page 206 U. S. 171
also certain, even if it be conceded
arguendo that
there was some evidence 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, which involved the liability of the
directors of the very same national bank with whose failure this
record is concerned. The court said:
"The defendants in the present suit, who, as directors, attested
the reports made by the Capital National Bank to the Comptroller 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."
"
* * * *"
Page 206 U. S. 172
"In our view, whether the attesting directors possessed
knowledge of the falsity of their reports is wholly immaterial.
They were in fact false and untrue, and those who deposited money
with the bank, or who purchased stock of the corporation, in
reliance upon the truthfulness of the contents of those reports,
were as much deceived and damaged thereby as though the directors,
when they signed the reports, knew them to be false. That they were
innocent of the true situation or condition of the affairs of the
bank is wholly an unimportant consideration, 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 out 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.
By section 24 of the National Bank Act of February 25, 1863, ch.
58, 12 Stat. 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 willful 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 separated
report of each association" was required to be published, at the
expense of the association, in a newspaper
Page 206 U. S. 173
published in the place where such association was established.
Associations located in a number of the leading cities were 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 section 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, ch. 106, 13 Stat. 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 after 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.
By an Act approved March 3, 1869, ch. 130, 15 Stat. 326, 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 report was authorized
to be retained by the Treasurer of the United States out of
interest due the association.
Page 206 U. S. 174
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
section 5211, and is copied in the margin. [
Footnote 1]
By section 39 of the act of 1863, as well as by section 9 of the
act of 1864, a director of a national bank was required,
inter
alia, as he is now required by section 5147, Rev.Stat., 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. 679, 680, were
practically identical, and sections 53 and 55 of the act of 1864,
13 Stat. 116, 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
Page 206 U. S. 175
and section 55 of the act of 1864 -- as supplemented by the Act
of April 6, 1869, ch. 11, 16 Stat. 7, construed in the Act of July
8, 1870, ch. 226, 16 Stat.195, making it an offense to aid or abet
an officer or agent of any association in doing the acts prohibited
in section 55 of the act 1864, with intent to defraud or deceive --
became section 5209 of the Revised Statutes. It is copied in the
margin. [
Footnote 2]
Section 50 of the act of 1863 and section 53 of the act of 1864
became section 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 to violate, any of the
provisions of this title, all the rights, privileges, and
franchises of the association shall be thereby forfeited. Such
violation shall, however, be determined and adjudged by a proper
circuit, district, or territorial court of the United States, in a
suit brought for that purpose by the Comptroller of the Currency,
in his own name, before the association shall be declared
dissolved. And in cases of such violation, 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. "
Page 206 U. S. 176
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 section
5137, Rev.Stat., (formerly section 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 section 5200, Rev.Stat. (formerly section 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 section 5201 (formerly section 35 of the act of 1864), banking
associations are forbidden to loan or purchase their own stock; by
section 5202, Rev.Stat. (formerly section 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 section 5203, Rev.Stat. (formerly
section 37 of the act of 1864), a restriction is imposed upon the
use of circulating notes; by section 5204, Rev.Stat. (formerly
section 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 section 5206, Rev.Stat.
(formerly section 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, and
that among such duties is the furnishing to the Comptroller of the
Currency reports concerning the condition of the bank and the
publication thereof. Although the statutory provisions subsequent
to the act of 1863, relating to the making and publishing of such
reports, do not, as did
Page 206 U. S. 177
the act of 1863, expressly require that the report, when made,
should contain a "true" statement of the condition of the
association, yet, by necessary implication, such is the character
of the statement required to be made, and by the like implication
the making and publishing of a false report is prohibited.
Considering the text of the National Bank Act, as now embodied
in the Revised Statutes, including section 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 results that liability cannot be entailed upon 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 section 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
Page 206 U. S. 178
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 violated, any of
the provisions of this title."
Mark the contrast between the general common law duty to
"diligently and honestly administer the affairs of the association"
and the distinct emphasis embodied in the promise not to "knowingly
violate, or willingly permit to be violated, any of the provisions
of this title." In other words, as the statute does not relieve the
directors from the common law duty to be honest and diligent, the
oath exacted responds to such requirements. But as, on the other
hand, the statute imposes certain express duties and makes a
knowing violation of such commands the test of civil liability, and
oath in this regard also conforms to the requirements of the
statute by the promise not to "knowingly violate, or willingly
permit to be violated, any of the provisions of this title."
And general considerations as to the spirit and intent of the
National Bank Act (
Easton v. Iowa, 188 U.
S. 220;
Davis v. Elmira Savings Bank,
161 U. S. 275)
also render necessary the conclusion that the measure of
responsibility concerning the violation by directors of express
commands of the National Bank Act is, in the nature of things,
exclusively governed by the specific provisions on the subject
contained in that act. Thus, a contrary conclusion would lead to a
varying measure of responsibility in the several states in which
the question of liability might arise, depending upon the
conceptions of the state courts of last resort as to the meaning of
the act of Congress imposing the duty. Hence, it would follow that
the same provision of the statute might mean one thing in one state
and a different thing in another. The confusion which would result
is aptly illustrated by a review made by the Supreme Court of Ohio
in the recent case of
Mason v. Moore, 73 Ohio St. 275, of
the conflicting state adjudications as to the
Page 206 U. S. 179
proper rule to be applied to fix the liability of bank directors
to third persons in an action of deceit at common law. The
frustration of the public policy embodied in the national bank
system by the crippling of the usefulness of such institutions
which would result from holding that directors, in performing the
duties imposed upon them by the National Bank Act, might be held
liable civilly not by the standard of conduct which the act
provides for a violation of its express commands, but by another
and different one is apparent. Under such a conception, it might
well be that prudent and responsible persons would decline to
assume the discharge of the duties imposed by the statute because
of the hazard of an uncertain pecuniary liability which the statute
imposing the duty did not contemplate.
The civil liability of national bank directors, then, in respect
to the making and publishing of the official reports of the
condition of the bank, a duty solely enjoined by the statute, being
governed by the National Bank Act, it is self-evident that the rule
expressed by the statute is exclusive because of the elementary
principles that, where a statute creates a duty and prescribes a
penalty for nonperformance, the rule prescribed in the statute is
the exclusive test of liability.
Farmers' & M. Nat. Bank v.
Dearing, 91 U. S. 29,
91 U. S. 35, and
cases cited. The error in the decision below becomes at once
apparent when its correctness is tested by the rule that the
statute is applicable and prescribes the exclusive test of
liability. The doctrine, as we have seen, upon which the court
below rested its judgment was that directors of a national bank who
merely negligently participated in or assented to the making and
publishing of an untrue official report of the condition of the
bank were civilly liable to anyone deceived to his injury by such
report. Indeed, in one aspect, the ruling below went further than
this, since it was, in substance, decided that, despite the
exercise of diligence by the director, if he attested an untrue
report, he was civilly liable, because he did so at his risk, since
it was his duty to know or to refrain from acting. That this
imposed a
Page 206 U. S. 180
higher standard of conduct than was required by the statute is
obvious, but is clearly also established by previous decisions of
this Court pointing out that, where by law a responsibility is made
to arise from the violation of a statute knowingly, proof of
something more than negligence is required -- that is, that the
violation must in effect be intentional.
McDonald v.
Williams, 174 U. S. 397;
Potter v. United States, 155 U. S. 438,
155 U. S. 446,
and cases cited.
See also Utley v. Hill, 155 Mo. 232, 264
et seq., and cases cited.
Of course, in what has been said we have confined ourselves to
the precise question arising for decision, and therefore must not
be understood as expressing an opinion as to whether and to what
extent directors of national banks may be civilly liable by the
principles of the common law for purely voluntary statements made
to individuals or the public embodying false representations as to
the financial condition of the bank by which one who has rightfully
relied upon such representation has been damaged. And because we
have applied in this case to the duty expressly imposed by the
statute the standard of conduct established therein, we must not be
considered as expressing an opinion upon the correctness of the
views enunciated by the court below concerning the standard which
should be applied solely under the principles of the common law to
fix the civil liabilities of directors in an action of deceit.
See Briggs v. Spaulding, 141 U. S. 132.
There is a suggestion that the subject matter of this
controversy is so inherently federal that, although the judgments
of the circuit court and of the circuit court of appeals remanding
the cause to the state court may not be reexamined (25 Stat. 435),
nevertheless it should now be decided that the state court was
wholly devoid of jurisdiction. This claim is predicated upon the
provision of section 5239, Rev.Stat., conferring exclusive
jurisdiction on courts of the United States to declare a forfeiture
of the charter of a national bank as the result of wrongs committed
by the directors, and the contention that a declaration of such
forfeiture is a prerequisite to
Page 206 U. S. 181
an action to enforce the civil liability of directors, and that
such action could only be brought in the court of the United States
after a forfeiture has been adjudged. We content ourselves with
saying that we think these contentions are without merit.
It follows from what has been said that, as to Mosher and
Outcalt, two of the persons named as plaintiffs in error in the
writ and citation, the writ of error is dismissed for want of
prosecution; as to the other plaintiffs in error, the judgment
below is reversed and the case is remanded for further proceedings
not inconsistent with this opinion.
[
Footnote 1]
"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 president or cashier of such association and
attested by the signature of at least three of the directors. Each
such report shall exhibit, in detail, and under appropriate heads,
the resources and liabilities of the [associations] [association]
at the close of business on any past day by him specified, and
shall be transmitted to the Comptroller within five days after the
receipt of a request or requisition therefor from him, and, in the
same form in which it is made to the Comptroller, 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."
[
Footnote 2]
"SEC. 5209. Every president, director, cashier, teller, clerk,
or agent of any association, who embezzles, abstracts, or willfully
misapplies any of the moneys, funds, or credits of the association,
or who, without authority from the directors, issues or puts in
circulation any of the notes of the association; or who, without
such authority, issues or puts forth any certificate of deposit,
draws any order or bill of exchange, makes any acceptance, assigns
any note, bond, draft, bill of exchange, mortgage, judgment, or
decree; or who makes any false entry 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."