Buist v. Melchers

The opinion of the court was delivered by Me. Justice Gaey. This is an action brought by George Lamb Buist, as receiver of the Assistance Building and Loan Association, against the above named defendants, to recover judgment for the sum of $58,000, damages alleged to have been sustained by said association, on account of negligence on the part of said defendants in the discharge of their duties as president and directors of said association. The case was placed for trial on Calendar 1, but, on motion of defendant’s attorneys, was ordered by the presiding judge to be transferred to Calender 2, on the ground that the case was one in equity, and not at law.' When the case was called for trial on Calendar 2, the defendants demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. The demurrer was overruled. The defendants have appealed to this court on exceptions assigning error on the part of the Circuit Judge in overruling the demurrer; and the plaintiff has appealed because his honor, the presiding judge, ruled that this is an equity case, and ordered it transferred from Calendar 1 to Calendar 2. For a proper understanding of the questions in this case, it will be necessary to incorporate in the report of it, the complaint, the answer, the order transferring the case from Calendar 1 to Calendar 2, the order overruling the demurrer, the exceptions of the plaintiff, and the exceptions of the defendants. 1 We will first consider the plaintiff’s exceptions, which complain of error on the part of the Circuit Judge in deciding that this is a case in equity, and not an action at law. At the time of the organization of the association, Alexander Melchers was elected president, and was, from year to year, re-elected to that office, and was president at the time of the appointment of the receiver mentioned in the complaint. Daniel Ravenel was a director of the company from its organization until September, 1890. J. Orrin Lea, from its organization until September 1890. Lee Loeb, from September, 1890, until the appointment of the receiver. J. Alwyn Ball, from its organization until September,, 1885. Robert Martin, from July, 1891, until the appointment of the receiver. F. [62] W. Cappelmann, from January, 1891, to the appointment of the receiver. B. Feldmann, from September, 1889, to the appointment of the receiver. Jacob Kruse, A. F. C. Cramer, Patrick Darcy, and W. H. Welch, from its organization until the appointment of a receiver. Therefore, taking the period of service by years, it stands thus: 1888, Alexander Melchers, president. Board of directors — -Daniel Eavenel, Jacob Kruse, Patrick Darcy, A. F. C. Cramer, W. H. Welch, and J. Alwyn Ball. 1881h the same. 1885, the same, until September. 1886, Alexander Melchers, president. Board of directors — Daniel Eavenel, Patrick Darcy, Jacob Kruse, A. F. C. Cramer, W. H. Welch. 1887, the same. 1888, the same. 1889, the same. 1890, up to September, the same, except that B. Feldman became a member of the board in September, 1889. 1891, Alexander Melchers, president. Board of directors — Patrick Darcy, Jacob Kruse, A. F. C. Cramer, W. H. Welch, Eobert Martin, F. W. Cappelmann. 1892, Alexander Melchers, president. Board of directors — Lee Loeb, Eobert Martin, F. W. Cappelmann, B. Feldman, Patrick Darcy, Jacob Kruse, A. F. C. Cramer, and W. H. Welch. The ninth paragraph of the complaint sets forth the particular acts of negligence alleged to have been committed by the defendants, and are as follows: That the defendants failed to meet monthly, as required by the by-laws of the association, in order to dispose of funds; failed to'hold the stated meeting to pass on loans; to inspect the books and accounts of the association; to have annual statements properly audited; to see that drafts on the treasury were properly signed; to require a proper bond from the treasurer; allowed the funds to accumulate in the hands of the treasurer instead of lending them out; put forth yearly incorrect and untrue statements, and misrepresented the condition of the association; did not verify by vouchers the faulty and incorrect statement of the treasurer; certified and misrepresented that $67,272 had been spent in buying and retiring shares of the association, when this was false; failed to verify the alleged purchases of stock, and calling for the production of ttye scrip so alleged to have been bought, and having them cancelled; and did not enforce the penalties [63] for non-payment of instalments when due. It appears upon the face of the complaint: that the alleged liability on the part of the defendants is not one and the same, by reason of thefact, that some of the alleged acts of negligence were committed by some of the defendants at a time when others of the defendants were not members of the board of directors of the association; that the alleged liability of the defendants is not for a definite and fixed amount; that as thejliability of the defendants is founded upon their alleged negligent discharge of official duties, and some of the defendants did not. hold office as directors from the organization of the association until the appointment of a receiver, they are not equally guilty nor equally liable for damages ¿by reason of each and every of said alleged act of negligence. The defendants are, therefore, only liable for their proportionate parts of the damages alleged to have been sustained by t.heir negligent acts committed at different times, and in order to ascertain the proportionate amount for which each was liable, it was necessary to resort to a court of equity. The proportions in which the defendants are liable can only be determined by an accounting of their acts and doings as officers of the association, and to make such an accounting is peculiarly the province of a court of equity. Having reached the conclusion that the defendants are only liable for their proportionate parts of the loss sustained by reason of their alleged acts of negligence, and that the proportions in which they are liable can only be determined by an accounting as to their official acts, it would seem'to be unnecessary to cite authorities to show that a court of equity is the proper forum for such accounting and adjustment of proportions iniwhieh they are liable. The distinction in eases-where the liability of the directors is for a fixed and definite^amount, and where they are only liable for & proportionate part, which can be determined only by an accounting, is pointed out in a number of cases, amongst which we may mention: Hornor v. Henning, 93 U. S., 228; Pollard v. Bailey, 20 Wall., 520; Terry v. Tubman, 92 U. S., 156; Stone v. Chisolm, 113 Id., 302—all cited with approval in Hall & Co. v. Klinck, 25 S. C., 348. In support of our view, that this is a case in [64] equity, the following authorities are also cited: 3 Pom. Eq. Jur., §§ 1088, 1089, 1090, 1091, 1094; 1 Cook on Stock & Stockholders, &c., § 701; Brinckerhoff v. Bostwick, 105 N. Y., 567; Latimer v. Railroad Company, 39 S. C., 51. The plaintiff’s exceptions are overruled. 2 We come now to a consideration of the defendant’s exceptions. The first exception of the defendants complains that whilst acts of negligence are alleged and damages flowing therefrom are charged, and all parties who were ever directors from first to last are named, the failure to state the time or times of the alleged acts of negligence, and who were the directors when such acts of negligence occurred, makes it impossible for any proper judgment to be rendered against the directors, who would be liable for such acts of negligence, if any; but in fact charges that every director named from the beginning to the last is jointly and severally liable, and demands judgment against all, although one or more of them at the time may not have been a director of the association. Section 181 of the Code provides that “when the allegations of a pleading are so indefinite or uncertain that the precise nature of the charge or defence is not apparent, the court may require the pleading to be made more definite and certain by amendment.” The remedy in such cases is not by demurrer, but by motion to make more definite. Mobley v. Cureton, 6 S. C., 49; Childers v. Verner, 12 Id., 6; Hellams v. Switzer, 24 Id., 39; Dowie v. Joyner, 25 Id., 153; Holland v. Kemp, 27 Id., 623; Chapman v. City, 28 Id., 373; McCown v. McSween, 29 Id., 130; Westlake v. Farrow, 34 Id., 270; Cartin v. South Bound R. R. Co., 43 Id., 221. The first exception is overruled. 3 The second exception raises the objection to the complaint that the action is based on the primary liability of the defendants, whereas their liability, if any, is secondary. This objection may be interposed as a ground of defence in the answer, but does not subject the complaint to demurrer. It is simply an equity, which the defendant may assert if he sees proper. Moss v. Bratton, 5 Rich. Eq., 1. The second exception is overruled. [64] The third, fourth, and fifth exceptions will be considered to [65] gether. Whether we regard these exceptions as raising objection to the complaint because it shows upon the face that th-e association was guilty of contributory negligence, or as stating facts constituting an estoppel, in neither case can it be sustained. Whether certain facts constitute contributory negligence, depends upon the inference drawn from such facts, which is not within the province of this court when the case comes up on an appeal from an order overruling a demurrer; nor can this court, under such circumstances, determine whether the facts alleged in the complaint make out an estoppel. For this court, under these circumstances, to determine whether .the facts stated in the complaint constitute contributory negligence or an estoppel, would be to pass upon the facts of the case 'in the first instance, thus usurping the powers of the court below. The distinction must be kept in mind between the cases where there is the admission of a fact and the cases where facts are alleged, from which the admission is sought to be inferred. These exceptions are overruled. It is the judgment of this court, that the orders appealed from be affirmed.