Voluntary Liquidation

In case of the voluntary liquidation of the association, no express provision was originally made by the National Bank Act for the enforcement of the liabilities of the shareholders. This omission was supplied by the act of June 30, 1876, which provides that the liabilities of the shareholders may be enforced by any creditor by bill in equity in the nature of a creditors' bill, brought by him on behalf of himself and all other creditors against the shareholders, in any court of the United States having original jurisdiction in equity for the district in which the association may have been located or established.117 It has been held, however, that the remedy of a creditors' suit, provided by this act, is cumulative, and not exclusive.118 Un

117 Rev. St. U. S. § 5220 (U. S. Comp. St. 1901, p. 3503); Act June 30, 1876, c. 156, § 2, 19 Stat. 63 (U. S. Comp. St. 1901, p. 3509); post, p. 411.

For the history of the legislation, see Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. 788, 30 L. Ed. 864.

Act June 30, 1876, was not repealed by Act July 12, 1882, c. 290, § 4, 22 Stat. 163 (U. S. Comp. St. 1901, p. 3458), providing that the jurisdiction for suits by or against any national bank, except suits between them and the United States, shall be the same as the jurisdiction for suits by or against state banks, nor by Act Aug. 13, 1888, c. 866, § 4, 25 Stat. 436 (U. S. Comp. St. 1901, p. 514), declaring that all national banks, for the purpose of actions by or against them, shall be deemed citizens of the states in which they are respectively located, etc., as such latter sections relate exclusively to suits by or against banking associations themselves. George v. Wallace, 135 Fed. 286, 68 C. C. A. 40, affirmed Wyman v. Wallace, 201 U. S. 230, 26 Sup. Ct. 495, 50 L. Ed. 738.

Valid obligations of a national bank may, after voluntary liquidation, be enforced against a stockholder who voted against the resolutions looking towards such liquidation, where the requisite amount of stock was voted in favor of that course. Poppleton v. Wallace, 201 U. S. 245, 26 Sup. Ct. 298, 50 L. Ed. 743. See, also, Wyman v. Wallace, 201 U. S. 230, 26 Sup. Ct. 495, 50 L. Ed. 738. See “Banks and Banking," Dec. Dig. (Key No.) § 250; Cent. Dig. $§§ 932-939.

118 King v. Pomeroy, 121 Fed. 287, 58 C. C. A. 209. See, also, Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. 788, 30 L. Ed. 864.

The contrary is declared in Williamson v. American Bank, 115 Fed.

der the original act, a federal court sitting in equity had jurisdiction in a proper case to appoint a receiver to enforce the liabilities of stockholders of banks in voluntary liquidation. Where a court of equity appoints a receiver to liquidate the debts of the bank in voluntary liquidation, no action of the comptroller is required to empower the receiver to enforce the liability of the shareholders, and the court has plenary power to ascertain the necessity of enforcing the liability, and to direct its receiver to collect it.119 The officers of a bank which has gone into liquidation have no authority to bind the stockholders by the transaction of any business except that necessarily involved in winding up its affairs.120

OFFICERS-IN GENERAL

103. The affairs of a national bank are managed by the directors, who appoint the president, cashier, and other officers.

A national banking association has power to elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such

793, 52 C. C. A. 1. See "Banks and Banking," Dec. Dig. (Key No.) § 250; Cent. Dig. §§ 932-939.

119 King v. Pomeroy, 121 Fed. 287, 58 C. C. A. 209.

The statute of limitations does not run while proper liquidation proceedings are pending in a court of equity. The liability does not mature until the court ascertains the necessity of enforcement, determines the amount which the shareholders must pay, and fixes the time of payment; and the receiver's cause of action does not accrue until the liability thus matures. King v. Pomeroy, supra. See "Banks and Banking,” Dec. Dig. (Key No.) § 250; Cent. Dig. §§ 932-939.

120 Schrader v. Manufacturers' Nat. Bank, 133 U. S. 67, 10 Sup. Ct. 238, 33 L. Ed. 564. See "Banks and Banking," Dec. Dig. (Key No.) § 250; Cent. Dig. §§ 932-939.

officers at pleasure, and appoint others to fill their places.121 The affairs of the association are to be managed by not less than five directors, elected at the shareholders' meetings, who hold office for one year and until their successors are elected and have qualified. 122 Certain qualifications as to citizenship and residence are prescribed, and each director must own a certain number of shares of the capital stock,123 and must take a prescribed oath.124 Vacancies are filled by appointment of the remaining directors.125 The president must be a director.126

CIVIL LIABILITY OF OFFICERS

104. AT COMMON LAW-The directors and other offi cers of the association are liable to it at common law for losses sustained by misapplication of the bank's funds, or by reason of negligence or inat

121 Rev. St. U. S. § 5136 (U. S. Comp. St. 1901, p. 3455). Directors have discretion whether or not to require bonds. Robinson v. Hall (C. C.) 59 Fed. 648.

The office of cashier is not an annual office, but the term continues till resignation, removal, or appointment of a successor, and a by-law providing that the term shall be for one year is nugatory. Westervelt v. Mohrenstecher, 76 Fed. 118, 22 C. C. A. 93, 34 L. R. A. 477. See "Banks and Banking," Dec. Dig. (Key No.) § 251; Cent. Dig. §§ 940-943, 947.

122 Rev. St. U. S. § 5145 (U. S. Comp. St. 1901, p. 3463).

A director may resign within the year. Briggs v. Spaulding, 141 U. S. 132, 11 Sup. Ct. 924, 35 L. Ed. 662. See "Bdnks and Banking," Dec. Dig. (Key No.) § 251; Cent. Dig. §§ 940-943. 123 Rev. St. U. S. § 5146, amended by Act Feb. 28, 1905, c. 1163, 33 Stat. 818 (U. S. Comp. St. Supp. 1909, p. 1318).

A transferee of stock, after expiration of the term of the charter, is not a stockholder, and is ineligible as director. Richards v. Attleborough Nat. Bank, 148 Mass. 187, 19 N. E. 353, 1 L. R. A. 781. See "Banks and Banking," Dec. Dig. (Key No.) § 251; Cent. Dig. §§ 940-943.

124 Rev. St. U. S. § 5147 (U. S. Comp. St. 1901, p. 3464). 125 Rev. St. U. S. § 5148 (U. S. Comp. St. 1901, p. 3464). 126 Rev. St. U. S. § 5150 (U. S. Comp. St. 1901, p. 3465).

tention to their duties, as in the case of other banking corporations; and such liability to the association may be enforced in the same manner, by the association or by a receiver, and, in proper cases, by the shareholders, as well as by creditors, when the association is insolvent.

105. STATUTORY LIABILITY-If the directors knowingly violate, or knowingly permit any of the officers, servants, or agents of the association to violate, any of the provisions of the National Bank Act, every director who participated in or assented to such violation is liable for all damages which the association, its shareholders, or any other person sustains in consequence thereof. Such liability may be enforced by the association, or by a receiver, and, it seems, in proper cases, by the shareholders, as well as by creditors, when the association is insolvent.

Common-Law Liability

As we have seen, the directors and other officers of a national bank are liable to it at common law for losses sustained by reason of misapplication of the bank's funds, or by reason of negligence and inattention to the duties.127

Statutory Liability

The National Bank Act provides that if the directors shall knowingly violate or knowingly permit any of the officers, servants, or agents of the association to violate any of the provisions of the title, all the rights, privileges, and franchises of the association shall thereby be forfeited, the violation to 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 that, in 127 Ante, p. 296.

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.128 Thus, by reason of the statute, the directors may be held when they knowingly violate or permit the violation of the provisions of the act in respect to excessive loans,129 the increase of the capital,130 the making of reports of the bank's financial condition,181 and the like.

This statutory liability of the directors is not exclusive of the common-law liability. But the act imposes upon directors duties which would not rest upon them at common law, and the section which makes them liable for losses resulting from the violation of duties expressly imposed, and which thus com

128 Rev. St. U. S. § 5239 (U. S. Comp. St. 1901, p. 3515).

129 Witters v. Sowles (C. C.) 43 Fed. 405; City Nat. Bank of Mangum v. Crow, 27 Okl. 107, 111 Pac. 210. Cf. Emerson v. Gaither, 103 Md. 564, 64 Atl. 26, 8 L. R. A. (N. S.) 738. See "Banks and Banking," Dec. Dig. (Key No.) §§ 253, 254; Cent. Dig. §§ 944-949.

130 Cockrill v. Abeles, 86 Fed. 505, 30 C. C. A. 223. See "Banks and Banking," Dec. Dig. (Key No.) § 253; Cent. Dig. §§ 944-949.

131 Yates v. Jones Nat. Bank, 206 U. S. 158, 27 Sup. Ct. 638, 51 L. Ed. 1002.

Directors may be liable to a common-law action of deceit for false representations. Prescott v. Haughey (C. C.) 65 Fed. 653. Cf. Yates v. Jones Nat. Bank, supra; Merchants' Nat. Bank v. Armstrong (C. C.) 65 Fed. 932.

Directors who have attested to be correct an official report of the bank's condition, which included, at their full face, as part of the bank's resources, assets which they had been informed by the comptroller were doubtful, and for the collection, or removal from the bank, of which immediate steps should be taken, are liable to one who, on the strength of the report, bought stock of the bank, for the depreciation thereof by reason of the shrinkage in the value of the specific assets, but not for its depreciation from impairment, then unknown to the directors, of other assets. Taylor v. Thomas, 124 App. Div. 53, 108 N. Y. Supp. 454, affirmed 195 N. Y. 590, 89 N. E. 1113. See "Banks and Banking," Dec. Dig. (Key No.) § 253; Cent. Dig. 88 944-949.