Fletcher v. Eagle

Hill, C. J., (after stating the facts.) The bank had been wrecked by C. W. England, whose ventures went down in the financial disasters of 1893. Prior to the failure of the bank, the evidence shows he was a man of the highest standing in every way, and regarded as a very capable business man. Whether the failure was due to dishonesty or unwise investment and speculation, naturally there are two opinions, and these variant phases are represented in the two instructions quoted. The vice running through each is that any circumstances justify directors in abdicating their official functions.' The circumstances mentioned in the sixth instruction, and they are sustained by the evidence, fully authorized the directors to have implicit confidence in England, and justified their selection of him as president; but no circumstances justify directors in committing the management of the bank to the president, further than the duties of that office require. No matter how honest .and capable the president is, the directors have their duties to perform, and cannot fail to perform them because their confidence in the president renders them unnecessary in their opinion. It was their duty as directors to perform the functions required of them by statute, common usage and the by-laws of the corporation, and any committal of management to the president, which meant a non-fulfillment of their duties as directors, was negligence for which they are liable, provided other facts fixing liability were present. The seventh instruction carries the error mentioned and further error. The jury is told that if the directors believed England honest and faithful, and by mismanagement, unwise speculations or investments he squandered the assets, then the plaintiff could not recover on that ground. Even if this instruction be construed as a continuation of the sixth, carrying the qualifying clause that the directors had good and sufficient reasons for their faith in England, still it is misleading. While this is qualified .with the statement that the directors would not be liable on the ground mentioned, yet it ignores wholly the duty .of watchfulness and care imposed upon them, and turns the consideration of the jury wholly to the good faith of the directors in having confidence in England and in the failure being due to England alone. ■ The rule is invoked that the instructions must all be read together, and that the other instructions properly defining the care required of the directors, taken in connection with these, present the law fully, and these two but present phases of the same separately. The application of this well-established rule does not extend to instructions inherently erroneous and misleading. The jury is correctly instructed on the duty" resting upon these directors, and when they become liable to creditors, and then they are directed not to find against them if they renounced their duties as directors, and committed the management of the bank to a man in whose integrity and capacity they had the utmost confidence, owing to his high 'standing rendering that confidence justified. In other words, the jury were authorized to turn from the application of the law resting upon them by virtue of the duties imposed, and follow this will-o’-the-wisp — the good faith of the directors in committing the entire control of the bank to the president. In any event, such instructions are misleading; but they are especially so in this case when the instructions consist of twenty-four different propositions submitted to the jury as abstract statements’ of law, without any effort to harmonize them and to bring sharply to the attention of the jury the issues which they are to determine. Had the issues been so defined that it would have been clear to the jury just what they were to determine, and these instructions given as justifying the-directors in having confidence, in the president, and thereby having no reasonable ground for believing he was misappropriating the funds, they would not be liable for such misappropriation unless they could have prevented the same by ordinary attention to their duties, then these instructions might not have been harmful. Such was the thought of counsel in presenting them to the lower court and in defending them in this court, but the qualifications that such reasonable belief would not excuse them unless- they could not have prevented the dissipation of the assets by the attention to their duties required by law is conspicuous by its absence, and other instructions dealing with that question are so disconnected from them as to prevent them being read into these. For the error in giving instructions 6 and 7 the cause is reversed and remanded.