Tate v. Bates, 118 N.C. 287 (1896)

Feb. 1896 · Supreme Court of North Carolina

118 N.C. 287

S. McD. TATE, STATE TREASURER, v. ISAAC BATES, et al.

Pleading — Parties—Joinder of Causes of Action — Banks —Directors, Liability for Negligence and Mismanagement — Depositors in Banks, Remedies.

1. A cause of action by a depositor against bank directors for the loss of a deposit caused by their negligence and misman■agement, lies in tort and not ex contractu, since the deposit- or’s contract was with the corporation and not with the directors.

2. A cause of action against directors of a bank for the loss of a deposit resulting from their neglect and mismanagement, even if it be ex contraetzo, might he joined with the causes of action for fraud and deceit, since all the causes of action “ arose out of the same subject matter.”

3. A single depositor may maintain an action, in his own name, against the directors of a bank for the loss of a deposit resulting from their fraud, neglect or mismanagement.

4. In an action against bank directors for the loss of a deposit caused by their fraud, neglect and mismanagement, in which the complaint charged that the defendants wilfully and fraudulently made false and misleading statements of the condition of the bank, and declared and paid dividends when the earnings did not justify it, with the purpose to conceal the true condition of the bank and induce deposits, the complaint is not demurrable on the ground that it does not state, in terms, that the defendants knew or believed the bank to be insolvent.

5. The directors of a bank are conclusively presumed to know its condition ; if they.do not know it, it is their duty to know it, and it is fraudulent on their part to put forth official statements of the solvency of an insolvent bank when they do not know it to be solvent.

6. Bank directors who, by false and fraudulent statements to the State Treasurer as to the condition of the bank, in order to conceal its insolvency, induce him not only to make new deposits of the public funds, but also to permit a part of the funds deposited by his predecessor in office to remain, are liable to such State Treasurer for the loss of any part of the old or new deposits.

7. In an action against the directors of an insolvent bank for the loss of a deposit resulting from their fraud, neglect or mismanagement, neither the bank or its receiver is a necessary party, and hence it is not necessary for the complaint to allege that the bank or receiver had been requested and refused to bring the action.

8. The complaint in an action against directors of an insolvent bank for loss of deposits resulting from the fraud, negligence and mismanagement of the bank, alleged that the viee-pres- . ■ ident permitted the president and cashier to borrow large sums “upon inadequate security,’’.and fraudulently suppressed sueh loans in making up the official reports of the condition of the bank, and that the directors knew of such conduct; Held, that the complaint, by such allegation, did not state a cause of action in that it was not averred that the loans were lost or cannot be collected.

Civil actioN, beard before Starbuek, J., on complaint and demurrer, at April Term, Í895, of Yake Superior Court.

The complaint was as follows :

The plaintiff above-named, complaining of the defendants above-named, says:

For a first cause of action—

“I. That the plaintiff, S. McD. Tate, was on November 20, 1892, and continually since has been, and still is, Treasurer of the State of North Carolina, and as such Treasurer is, under the Constitution and laws of said State, charged with the trust and duty of siting for and collecting all money due to the State ; and the said Tate is successor in office of one Donald W. Bain-ynow deceased, who for many years prior to November 10, 1892, was Treasurer of the said State, charged with all the duties of said office.

“ II. That the Bank of New Hanover, hereinafter called £ the Bank,’ was on January 1, 1888, and for many years before that time had been, and thence continually up to June 19, 1893, was a banking corporation duly organized under its charter of corporation, as contained in private laws, 1871-’72, Chapter 31, and as sueh banking corporation was authorized to carry on-in'all its branches, and did at sueh times carry on, the business of banking in the city of Wilmington, North Carolina, and elsewhere, by branches, in said State. And that the stockholders of said corporation were, by its charter, authorized to elect a board of directors, and that the directors so elected were authorized and required to choose a president and vice-president to serve during the continuance in office of said directors.

“ III. That as plaintiff is informed and believes, the defendants, Isaac Bates, G-eorge W. Williams, John Wilder Atkinson, W. I. Gore, F. Rlieinstein and Ii. Yollers, were on the 1st day of January, 1889, and thence continually up to June 19, 1893, directors of the Bank of New Hanover, duly elected from time to time by the stockholders, and charged by law with all the powers and authority necessary to govern the affairs of corporation, and charged with the duty of carefully, honestly and faithfully administering its affairs, and of carrying out the by-laws of said bank, framed to insure an honest administration of its affairs, and with the further duty of protecting the depositors in said bank from any danger of loss, as is hereinafter more particularly set forth.

“ IY. That as plaintiff is informed and believes, the defendant, Isaac Bates, was, at the times above-mentioned, president of the said bank, and George W. Wi liams, at -said times, was vice-president of the said bank, charged with the duty of carefully and faithfully supervising the affairs and protecting the interest of said bank and its ■stockholders and depositors, and of carefully investing and protecting the moneys' in the custody of the said bank, and charged with the other duties as set forth in the by-laws of the said bank, as is hereinafter more particularly set forth.

“V. That under the by-laws of the said bank, duly adonted by its stockholders and directors, amongst other duties it became the duty of the directors actively to manage and superintend tbe business affairs of the said bank, and to meet each Tuesday and examine the discount book of said bank, containing a statement of all loans made, with the names of the parties to whom made, the amount of the loans, the securities given, and the time when due; to appoint, each three months, a committee of two from the board of directors to examine the books of the said bank, its valuable effects and other matters; to count the money on hand, to compare with the books and to report to the board of directors.

“VI. That the defendants, in violation of their duty as directors, as plaintiff is informed and believes, failed and neglected +-o appoint such committee each three months to examine into the condition of the said bank and to require said committee to report to the said board ; aud failed and neglected to meet each Tuesday and to' examine the discount book or to enquire into the solvency of the loans made by the said bank, as they were in duty bound to do.

“ VII.' That by reason of the failure of the defendants to perform such duty, loans of large sums of money were made from time to time by the said bank to insolvent persons upon inadequate security ; the assets of the bank were wasted and the said bank became insolvent about the year 1889, or earlier, and such insolvency continued to grow worse and worse from year to year until the bank closed its doors, on June 19, 1898.

“ VIII. That there was a meeting of the stockholders of the said bank required to be held, and actually held, every year, and that at each of said meetings, after the said bank became insolvent in 1889, or before, the defendants as directors wilfully and fraudulently made statements of the condition of the said bank, showing that the bank was solvent, that its capital stock was unimpaired .and that there was a surplus on hand ; and each year an annual dividend was declared and paid, amounting to between $20,000 and $25,000. That such false and misleading statement, and the fact that the dividend had been declared, were published in the newspapers of "Wilmington, with the knowledge and consent of the defendants, all of whom were at the time mentioned and s‘ill are citizens and residents of "Wilmington.

“IX. That since the year 1889, the said defendants as directors wilfully and fraudulently caused semi-annual statements to be published in the Newspapers of "Wilmington, sworn to by the president or cashier of the said bank and attested and verified by three of the said directors, showing in substance that the said bank was solvent, its capital stock unimpaired and that it had a surplus on hand, and that all the defendants acquiesced in, or participated in, making such statements.

“ X. That the said statements were made and published by the defendants, as plaintiff is informed and believes, for the purpose of establishing the credit of the said bank,' and in order to conceal its real insolvent condition, and to induce the public to deal therewith and to deposit money therein.

“XI. That at the times the dividends were declared and paid since the year 1889, and at the times said statements were published and made, as plaintiff is informed and believes, the said bank was utterly insolvent, and that the said statements were untrue; and that all the defendants knew the same to be untrue, or negligently failed to acquaint themselves with the facts and the true financial condition of the said bank, as by law they were required to do, and permitted such false statements to be made and published as a true statement of the exact financial condition of the said bank.

“ XII. That, as plaintiff is informed and believes, the plaintiff’s p edecessor in office, D. W. Bain, knew that the said dividends were declared, and saw, or was informed, i of said statements published in said newspapers, and the said D. W. Bain as Treasurer, believing the same to be true and relying thereon, and upon' the statements made ¡ directly to him as treasurer, as herein set forth, from time f to time deposited in the said bank to his credit as Treas- |j urer, large sums of money. And the plaintiff also knowing of the declaration of the said dividends, and seeing i and hearing the said statements published as aforesaid, ,1 permitted a large part of the sums then deposited, and i other sums deposited by sheriffs to the credit of the plaint- ; iff from time to time, to remain in the said bank, except such parts as were drawn from the said bank from time to time; and on June 19, 1893, there remained a balance ' due to the plaintiff, as Treasurer, in said bank of fifteen thousand ($15,000) dollars.

“XIII. That on the 19th of June, 1893, the insolvency of the said bank became notorious, and on that day it closed its doors and ceased to do business; that it was shortly thereafter placed in the hands of a receiver, and is wholly insolvent, and that plaintiff has demanded payment of the said sum due by the said bank, of the receiver, which has been refused.

“XIV. That by reasons of the negligence and the fraudulent acts of the defendants, the plaintiff, as Treasurer, has been damaged and suffered loss to the amount of fifteen thousand dollars, with interest from June 19, 1893.”

And for a second cause of action—

“XV. Repeat paragraphs I. and-IL.of the first cause of action.

“XVI. That as plaintiff is informed and believes, the defendants Isaac Bates, George W. Williams, John Wilder Atkinson, W. I. Gore, Clayton Giles, F. Rheinstein and H. Toilers, were on July 1, 1892, and thence continually up to June 19, 1893, directors of the bank of New Hanover, duly elected and qualified, and charged by law with all the powers necessary to administer the affairs of said bank, and charged with the duty of honestly, carefully and faithfully administering its affairs, and of obeying and carrying into effect the by-laws of said bank and the statute laws of North Carolina.

“ XTII. That, as plaintiff is informed and believes, the defendant Isaac Bates was, at the time above mentioned, president of the said bank, and George W. Williams at said time was vice-president of the said bank, charged with the duty of carefully and faithfully supervising the affairs and protecting the interest of said bank and its stockholders and depositors, and of carefully investigating and protecting the moneys in the custody or the said bank, and charged with the other duties, as set forth in the by-laws of the said bank, as is hereinafter more particularly set forth.

“ NTIII. That, under the law of North Carolina, it became the duty of.the defendants to make a statement to the State Treasurer of the financial condition of the said bank on the 30th September, 1892, within ten days from such 30th September, 1892, and to have such statement published in a newspaper printed in Wilmington, which statement was required to be verified by the oath of 'the president or cashier, and attested by at least three directors of the said bank.

“ XIX. 'That on the 10th day of October, 1892, the said bank through its .proper officers, the defendants, all of whom were members of the board of directors, made t.o the Treasurer of North Carolina a report of the condition of the said bank, as required by law, which report was filed in the office of said Treasurer on October 13, 1892, a copy of which is hereto appended ; and a statement was also printed in a daily newspaper published in the town of Wilmington, N. 0. The said report was made upon a blank furnished by the State Treasurer, and was verified by the oath of W. L. Smith, cashier, and attested by the defendants, I. Bates, W., I. Gore and Clayton Giles. All of the other defendants acquiesced in said report, as plaintiff is informed and believes, and not one of the defendants protested or objected to any item in said report.

“ NX. That, as plaintiff is informed and believes, the statements in said report were untrue and fraudulent; that the resources were unduly magnified; that there was stated to be a surplus fund of $109,167.11, while in truth there was no surplus; that the.loans and discounts, not upon real estate, were stated to be $1,381,319.01, while in truth and fact this statement included several hundred thousands of dollars of loans and discounts which were utterly valueless ; that the uncollectable or questionable debts were stated to be “ $10 ” — meaning $10,000, when in truth there were not less.than $500,000 to $700,000 of questionable debts; that the individual liabilities of directors as'payers was stated to be $20,000, when it was in fact several times that sum, and in many other respects this statement was untrue, fraudulent and misleadnig.

“ XXI. That all the defendants knew that this statement was not true, as plaintiff is informed and believes, or by the reasonable diligence required of them as officers of the bank would have known, and it was their duty to know, that the said statement was utterly untrue and fraudulent.

“XXII. That plaintiff’s predecessor, relying upon the truth of said verified, and attested statement, made from time to time deposits in said bank, and plaintiff'also made deposits, and allowed them to be made by sheriffs and others, and permitted a portion of the deposits to remain, so that on June 19, 1893, there was on deposit in said bank to the credit of the plaintiff as Treasurer the sum of fifteen thousand ($15,000) dollars.

“ XXIII. That on the 19th day of June, 1893, the insolvency of the said bank became notorious, and on that day it closed its doors and ceased to do business; that it was shortly thereafter placed in the hands of a- receiver, and is wholly insolvent, and that plaintiff has demanded payment of the said sum due him by the said bank, of the receiver, which has been refused.

“ XXIV. That by reason of the negligent and the fraudulent acts of the defendants, the plaintiff, as Treasurer, has been damaged and suffered loss to the amount of fifteen thousand dollars, with interest from June 19, 1893.”

And for a third cause of action :

“ XXV. Repeating paragraphs I., II., XVI., XVII., XVIII.

“XXVI. That the defendant, I. Bates, was not only a director of said bank, but was at all the times above mentioned, its chief executive officer, to-wit, its president, and as such president was charged with all the duties set forth in paragraph XVII., and especially charged with the duty of protecting the stockholders of, the depositors in, and all the creditors of said bank from loss, or danger of loss, by a watchful care over the loans and investments made by said bank; to see that the same were made only to solvent persons upon satisfactory security.

“ XXVII. That the defendant, George W. Williams, was at, all the times above mentioned the vice-president of said bank, charged with the duties set forth in paragraph XVII. and paragraph XXVI., and charged, besides, with the duty of protecting the bank from any loss through any loan made to its president. The said George W. Williams was the custodian of the evidence of debt, executed by, or due to, the bank from President Bates. That notwithstanding such duty, said George W. Williams, as vice-president, permitted said Bates, and also certain corporations controlled and practically owned by said Bates and W. L. Smith, the cashier of said bauk, to borrow large sums of money from the said bank upon inadequate security, and that such loans were never reported to the Treasurer of North Carolina, as they were required to be, but remained concealed. That said George W. Williams, as plaintiff is informed and believes, knowing the condition of said bank to be insolvent, and that the reports made of its condition were untrue, fraudulent and misleading, did not himself sign such reports as vice-president or director, but knowingly permitted the reports to be made by other officers of the bank and attested by directors, without protest or objection, whereby the plaintiff was deceived and defrauded, as hereinafter set forth.

“ XXYIII. That the defendants, other than said Bates and Williams, as directors, knew, or ought, by due diligence to have known, of the neglect of duty of the president, Bates, and vice-president, Williams, as set forth above, and yet none of them objected or protested, or took any steps to protect the creditors or credit of said bank ; and plaintiff is advised and avers that thereby all became liable to him for any loss sustained by him on account of the default of the president and vice-president, as well as of.the directors.

“ XXIX. That the plaintiff, relying upon the representations and statements made, as hereinbefore set forth, and upon the proper discharge of their duties by the president, vice-president and directors of said bank, permitted, as stated in paragraph XXII., fifteen thousand dollars, deposited to bis credit, to remain in said bank, which was lost by the failure of said bank in June, 1893, as set forth in paragraph XXIII.

“XXX. That plaintiff, through his attorney, requested the receiver of said bank to bring an action in behalf of the creditors against the directors, the defendants above named, but the receiver has failed to do so.

“ XXXI. That by reason of the neglect and fraudulent acts of the defendants, as set forth above, the plaintiff has been endamaged fifteen thousand dollars.

“ Wherefore, plaintiff demands judgment for fifteen thousand dollars, and interest, from June 19, 1893, and for such other and further relief, &c., and for costs.

The demurrer was as follows:

“The defendants, Isaac Bates, G. W. Williams, John Wilder Atkinson, W. I. Gore, H. Toilers, and Clayton Giles, demur to the complaint herein, and for cause of demurrer assign that it appears upon the face of the complaint :

“ 1. That there is a misjoinder of causes of action, in that a cause of action of tori, as for deceit by said defendants, is united with a cause of action for failure to do their duty and mismanagement as directors of the Bank of New Hanover.

“ 2. That there is a misjoinder of the causes of action, in that the causes of action against the defendants, other than Clayton Giles, are united with causes of action against him, although the causes of action against him are distinct from the causes of action against them, it appearing by the complaint that the defendant Giles did not participate in any of the acts of omission or commission of the other defendants, which constitute • the first cause of action against them.

“ 3. That there is a misjoinder of causes of action, in that the alleged rets of omission and commission by the defendant G. V, Williams, as vice-president of the said bank, which constitute the third canse of action against him, are united with the first and second causes of action against the other defendants, although they are distinct and separate from the alleged acts of deceit and negligence of the other defendants, which constitute the first and second causes of action against the said other directors.”

“The said defendants demur to the first cause of action of the complaint herein, for. the ground that it appears upon the face of the complaint:

“4. That there is a misjoinder of causes of action, in that a cause of action for tort as for deceit by said defendants is united with a cause of action for failure to do their duty, and for mismanagement as directors of the Bank'of New Hanover.

“ 5. That there is a misjoinder of causes of action, in that the causes of action against the defendants, other than Clayton Giles, are united with causes of action against him, though the causes of action against him are distinct from the causes of action against them, it appearing by 'the complaint that the defendant Giles did not participate in any of the acts of omission or commission of the other defendants, which constitute the' first cause of action against them.

“ 6. That there is a misjoinder of causes of action, in that .the alleged acts of omission and commission by the defendant G. W. Williams, as vice-president of said bank, ,;which constitute the third cause of action against him, are united with the first and second causes of action against the other defendants, although they are distinct and separate from the alleged acts of deceit and negligence of the other defendants, which constitute the first and second causes of action against the said other directors.

“ 7. That there is a defect of parties in the omission of the Bank of New Hanover, the said bank being a necessary party to the action, in so far as it is based upon the ■alleged negligence or mismanagement of the said defendants as directors.

“ 8. That there is a defect of parties in the omission of the receiver of said bank, he being a necessary party, in ■so far as it is based upon the alleged negligence or mismanagement of the said defendants as directors.

“ 9. That the plaintiff has not legal capacity to sue, in so far as this action is based upon the alleged negligence, •dereliction of duty, or mismanagement of defendants, or .as directors. That the action ca- not be maintained by the plaintiff exclusively in his own behalf, but must be ■commenced and conducted, if at all, in the name and for the benefit of all the creditors of the said bank.

“ 10. That the complaint, in its first cause of action, does not state facts sufficient to constitute a cause of action, in that it does not allege that the bank or the receiver has been requested to institute this action, and that it, or he, has refused or failed to do so.

“ 11. That the said complaint, in the first cause of action, does not state facts sufficient to constitute a cause of action, in that, upon the facts stated no trust or contractual relation or privity is shown to exist between the plaintiffs and (these) defendants, and, so far as the acts of negligence and mismanagement are alleged, these defendants ar§ not answerable to this plaintiff.

“ 12. That the said complaint, in its first cause of action, does not state facts sufficient to constitute a cause of action, in that, if the said cause of action be construed to be a declaration in tort as for deceit, no actionable case is stated ; because there is no allegation that defendants knew, or believed, the bank to be insolvent when the plaintiff' deposited his funds therein, or when the representations or statements were made.

“ 13. That the said complaint, in its first cause of action,, does not state fa'cts sufficient to constitute a cause of action,, in "that it does not allege that the statements therein set forth, as made by these defendants, were known by them to be false, or that they made the statement to the plaintiff, or that (they) made said statement with a fraudulent intent, or that the loss of the plaintiff was caused by the-negligent acts, as distinguished from the omission of the defendants.”

“ The said defendants demur to the second cause of' action of said complaint, and for cause of demurrer assign 'r

“14. That there is a misjoinder of causes of action, in that, a cause of action of tort as for deceit by said defendant is united with a cause of action for failure to do their duty, and for mismanagement as directors of the bank of New Hanover.

“ 15. That there is a misjoinder of causes of action, in-that the causes of action against the defendants, other than Clayton Giles, are united with causes of action against him, although the causes of action against him are distinct from the causes of action against them, it appearing by the-complaint that the defendant Giles did not participate in any of the acts of omission or commission of the other defendants which constitute the second cause of action against them.

“16. That there is a misjoinder of cause of action, in that the alleged acts of omission and commission by the-defendant, G. W. Williams, as vice-president of-said bank, which constitute the third cause of action against him, are united with the first and second causes of action against the other defendants, although they are distinct- and separate from the alleged acts of deceit and negligence of the other defendants, which constitute the first and second causes of action against the said other directors.

“ 17. That the said complaint in its second cause of action does not state facts sufficient to constitute a cause of action, in that if the said cause of action be construed to be a declaration in tort as for deceit, no actionable cause is stated, because there is no allegation that defendants knew, or believed, the bank to be insolvent when the plaintiff deposited his funds therein, or when the representations or statements were made.

“ 18. That the said complaint, in its second cause of action, does not state facts sufficient to constitute a cause of action, in that it does not allege that the statements therein set forth as made by these defendants were known by them to be false, or that they made the statements to the plaintiffs, or that they made said statements with a fraudulent intent, or that the loss of the plaintiff was caused by the negligent acts, as distinguished from the .omission, of the defendants.”

“ The said defendants demur to the third cause of action of said complaint, and for cause of demurrer assigu :

“ 19. That there is a misjoinder of causes of action, in that a cause of action of tort, as for deceit by said defendants, is united with a cause of action for failure to do their duty, and for mismanagement as directors of the Bank of New Hanover.

“ 20. That there is a misjoinder of the causes of action, in that the causes of action against the defendants, other than Clayton Giles, are united with causes of action against him, although the causes of action against him are distinct from the causes of action against them, it appearing by the ■complaint that the defendant Giles did not participate in any of the acts of omission or commission of the other defendants, which constitute the first cause of action against them.

“ 21. That there is a misjoinder of causes of action, in that the alleged acts of omission and commission by the defendant, G. W. Williams, as vice-president of said bank, which constitute the third cause of action against him, are united with the first and second causes of action against the other defendants, although they are distinct and separate from the alleged acts of deceit and negligence of the other defendants, which constitute the first and second causes of action against the said other directors.

“ 22. That there is a defect of parties in the omission of the Bank of New Hanover, the said bank being a necessary party to the action, in so far as it is based upon the alleged negligence or mismanagement of the said defendants as directors.

“ 23. That there is a defect of parties in the omission of the receiver of said bank, he being a necessary party in so far as it is based upon the alleged negligence or mismanagement of the said defendants-as directors.

“ 24. That the plaintiff has not legal capacity to sue, in so far as this action is based upon the alleged negligence, dereliction of duty or mismanagement as directors. That this action cannot be maintained by the plaintiff, exclusively in hi's own behalf, but must be commenced and conducted, if at all, in the name of and for the benefit of all of the creditors of the said bank.

“ 25. That the complaint in the third cause of action does not state facts sufficient to constitute a cause of action, in that it does not allege that the bank or the receiver has been requested to institute this action, or that it or he has refused or failed to do so.

“26. That the said complaint in the third cause of action does not state facts sufficient to constitute a cause of action, in that, upon the facts stated, no trust or contractual relation or privity is shown to exist between the plaintiff and these defendants, and in so far as the acts of negligence and mismanagement are alleged these defendants are not answerable to this plaintiff.

“ 27. That the said complaint in the third cause of action does not state facts sufficient to constitute a cause of action, in that, if the said cause of action be construed tobe a declaration in tort as for deceit, no actionable case is stated ; because there is no allegation that the defendants knew, or believed, the'bank to be insolvent when the plaintiff deposited his funds therein, or when the representations or statements were made.

“ 28. That the said complaint in the third cause of action does not state facts sufficient to constitute a cause of action, in that it does not allege that the statements therein set forth as made by these defendants were known by them to be false, or that they made the statements to the plaintiff, or that they made said statements with a fraudulent intent, or that the loss of the plaintiff was caused by the negligent acts, as distinguished from the omission, of the defendants.

“ 29. That the said complaint in its third cause of action does not state facts sufficient to constitute a cause of action, in that it does not allege that the plaintiff or his predecessor deposited any money in the Bank of New Hanover, in consequence of the statements or representations or conduct of the defendants; but that the plaintiff permitted money, which had been previously deposited, to remain in said bank.”

“ That the defendants, John Wilder Atkinson, W. I Gore, H. Toilers and Clayton Giles, demur to the third cause of action in the complaint, and for cause of demurrer assign :

“ 30. That if the said declarations can be treated as a declaration in tort, there is no allegation that they knew, or believed, the said bank to be insolvent when the said statements and representations were made, or when the plaintiff deposited his money therein.”

Upon motion of plaintiff, W. H. Worth, Treasurer of North Carolina, was made party plaintiff.

A non pros, was entered as to Clayton Giles, and Junius Davis, Receiver of the Bank of New Hanover, and the Bank of New Hanover were ordered to be made parties defendant. Plaintiff, under leave, filed amended complaint as follows :

“ The jfiain tiffs above named, complaining of the defendants above named, by way of amended complaint, and in addition to the complaint heretofore filed, say :

“ 1. That since the last term of this Court, Samuel McD. Tate has ceased to be Treasurer of the State ofNorth Carolina by reason of the expiration of the term of ofñce, and W. H. Worth, as his successor, is the Treasurer of the State of North Carolina, and has succeeded to all the rights, powers and privileges of the said Samuel McD. Tate, former Treasurer. That said W. H. Worth has been made, by order of the’ Court, and is a party plaintiff in this action. :

“2. That Junius Davis, the Receiver of the Bank of New Hanover, as set forth in the complaint, has failed and neglected to bring any action against the defendants above named, former directors of the Bank of New Hanover, for the causes set forth in the complaint. That the said Jun-ius Davis, receiver, was, as plaintiff is informed and believes, expressly requested by the agent and attorney of large depositors in, and creditors of, the said bank, to bring such action for the benefit of all the creditors, and the said Davis, receive!-, declined and refused so to do, and that the said Davis, receiver as aforesaid, lias been made, by order of this Court, a party defendant in this action.”

The defendant, Junius Davis, answering so much of the complaint and amended complaint as touches him, said :

“ 1. That he has had brought and is now prosecuting an action in the superior court of the County of New Hanover against the directors of the Bank of New Hanover, to recover of them damages for their negligence and mismanagement of the affairs of said bank ; and that said action was instituted by him for the general benefit of all the creditors of said bank, and was brought before the summons in this action was served upon him, and before he was apprised that any action would be taken to make him a party thereto.

“ 2. That no request was ever made of him by plaintiffs, or either of them, to bring a similar action to this or any action against said directors.

“3. That he does not intend by this answer to controvert the right of the plaintiffs to sustain this action, but simply to answer the allegations of the complaint touching him and his actions.”

On the hearing his Honor ordered and adjudged that the demurrer as to the first and second causes of actiou be overruled.

It was adjudged that the demurrer, to the third cause of action, be sustained, upon the ground that the complaint did not state a sufficient cause of action as to the third cause of action.

To this order both plaintiffs and defendants excepted and appealed.

Messrs. F. II. Busbee and W. JR. Allen, for plaintiff.

Mr. J. W. Hinsdale, for defendants (appellants).

Clark, J.:

The grounds of demurrer which were not cured by the amendments allowed to the complaint, and which were overruled by his Honor, are in substance:

(1.) “ That a cause of action for the negligence and mismanagement of the defendants is ex contractu and cannot be joined in an action against them for fraud and deceit.”

The same point was raised in Solomon v. Bates and Caldwell v. Bates, at this Term, and it was there held that the plaintiff’s contract of deposit was with the corporation, not with the defendant directors, and hence the cause of action'against the directors for the'loss of the deposit caused by their neglect and mismanagement was necessarily in tort, not in contract, but if it had been in contract it could have been joined with the causes of action for fraud and deceit because all the causes of action “ arose out of the same subject matter.”

(2.) “ That the plaintiff, a single depositor, cannot maintain the action in his own name, but must bring a .creditor’s bill.”

The directors being trustees for creditors and stockholders, as well as for the corporation, any creditor or stockholder who has been misled to his hurt by their fraud and deceit, or injured by their misconduct and gross neglect in discharge of the trust, can miintain an action for such injury against them, personally in his own behalf. If this were a proceeding to wind up the affairs of the corporation and apply its assets to the debts, then a creditor’s bill would have been eminently proper, but such is not the object of this action. There is no fund to be taken in hand to be administered and disbursed.

4 (3.) “ That the allegation of a cause of action for fraud and deceit is not sufficient unless it is specifically charged that the defendants knew or believed the bank to be insolvent. The allegation of th > complaint is that the defendants wilfully and fraudulently made false and misleading statements- of the condition of the bank, and declared and paid annual dividends of over $20,000, when there were no net earnings out of which they could be declared, and that such statements of the condition of the bank and of the declaration of the dividends were published in the press with the knowledge and consent of the directors, and that they also wilfully and fraudulently caused to be published semi-annual statements, sworn to by the president or cashier, and verified by three directors, showing in substance that the bank was solvent, its capital unimpaired, and that it had a surplus on hand ; that this was done to conceal the true condition of the bank, which •was utterly insolvent, and to induce the public to make deposits therein, and that the plaintiff’s predecessor in the office of State Treasurer was misled thereby and made this deposit, and that the plaintiff, succeeding to the office, also relying upon such official statements, allowed such part of the fund as was not drawn out for incidental purposes to remain and permitted further sums tobe deposited therein to his credit by sheriffs. This is a brief summary of the allegation, which is stated more fully in the complaint. It would seem that this was a quite explicit charge that the defendants ‘ knew or believed that the bank was insolvent.’ Put if it were not, the directors are conclusively presumed to know the condition of the bank. Hauser v. Tate, 85 N. C., 81; Morse on Banks, Sec. 131; Finn v. Brown, 142 U. S.; United Society v. Underwood, 9 Bush., (Ky.,) 609, and other eases cited in Solomon v. Bates, at this Term. If the directors did not know the s bank was insolvent it was their duty to have known it. It jwas fraudulent in them to put forth official statements that jthe bank was solvent, when they did not know it to be true, and they are liable to those who were deceived f) thereby into having dealings with the bank, or making deposits therein, for any losses sustained. If this were not ! so, the dire tors of a bank would be privileged to be negli- | gent, and the more ignorant they could manage to be about b its condition the more secure they would be from any liabil- l itv.

(4.) “ That the defendants were not liable for money ■which the plaintiff’s predecessor deposited in bank and which the plaintiff permitted to remain.” The complaint avers that the plaintiff, misled by the false and fraudulent statements put forth by the directors as to the condition of the bank in order to conceal its insolvent condition, and relying thereon and upon similar statements made to him as Treasurer, as required by law, not only made new deposits but permitted a part of the deposit already in said bank to remain. If the defendants are liable as to one, they are as to the other. To hold otherwise would be to make “ a distinction without a difference.”

(5.) “ That it is not alleged that the bank or the receiver had been requested to bring this action and had refused.” This was not requisite, nor was the bank or receiver nec-\, essary parties to this action against the directors (Solomon v. Bates, at this Term) but if it were otherwise, all these objections were removed by the amendment making the bank and the receiver parties to this action. All the grounds of demurrer, based 'upon Clayton Giles being a party, are also removed from consideration by the non joros. which was entered as to him.

No Error.

Plaintiff’s appeal in same case.

Clark, J.:

That the vice-president permitted the president and cashier to borrow large sums of money for themselves, or for corporations practically owned by them, upon inadequate security and fraudulently suppressed such loans in making up the official reports of the condition of the bank, and that the directors knew or by due diligence ought to have known of such conduct, is admitted to be true by the demurrer. A cause of action on this ground, if otherwise sufficiently stated, is not a misjoinder, for it is simply an allegation of one of the many acts of negligence, recklessness and failure of duty which go to make up the’liability of the defendants as set forth in the first and second causes of action, nor was there a failure to state a cause of action for any <>f the reasons set out in the demurrer, i. e., that the bank or receiver had not been requested to bring the action, (which in point of fact is alleged,) nor because there was no privity between the plaintiff and defendants, nor because the deceit was not sufficiently charged, nor because the plaintiff is not averred to have made any new deposit, but had merely permitted the deposit already in the bank to remain there after his succession to office. All these grounds are disposed of by tin- opinion in the defendant’s appeal in this case. It seems to us, however, that there was a failure to state a cause of action in the third cause of action, in that, though it is averred in the complaint that the loans recited in that cause of action were made “ upon inadequate security” and were suppressed and not included in the official reports, it is not averred that’ they were lost or earr ot now be collected, or that their loss caused the insolvency of the bank or in anywise affected the plaintiff injnri rasly. His Honor therefore correctly held that a cause of action was not stated in this third cause of action, for a defect of that kind can be taken ex mero motu by the court below, or here, though not specifically assigned by demurrer.

No Error.