Summary
rejecting doctrine of continuing domination; lack of knowledge or concealment not sufficient to toll the statute
Summary of this case from Hecht v. Resolution TrustOpinion
No. 20317
Decided January 18, 1947.
Banks and banking — Directors — Misconduct in office — Oath of directors not contract in writing — Relation to insolvent bank — Neglect or negligence in performance of duties — Nature of liability — Violation of banking act — Limitation of actions — Failure to undo effect of wrongful act — Not a new tort — Pleading — Petition — Facts alleged govern nature of action and relief granted — Construction on demurrer — Nature of action determined, how — Action equitable, when — Action at law, when — Action against bank directors — By Superintendent of Banks — Not necessary to invoke equitable jurisdiction, when — Petition alleging several causes of action in tort — Charge that combined torts were in furtherance of conspiracy — New cause of action not stated — Petition fails to state cause of action in tort, when — No loss to bank alleged — Demurrer to petition — Refusing right to file supplemental petition — Not abuse of discretion, when — Demurrer to entire cause of action — Error to sustain in part and overrule in part — Parties — Superintendent of Banks may maintain action, when — Representative capacity — Misjoinder of parties — Joinder of causes of action — Class suit by depositors — Limitation of actions — Begins to run, when — Statute commences to run upon commission of tort — Statute not tolled, when — Concealment of violation of duty — Not tolled by retaining jurisdiction over bank — Not tolled on theory of "continuing wrongs," when.
1. The facts alleged in a petition govern the relief to which a plaintiff may be entitled and the nature of the action, whether in equity or law.
2. In construing a petition upon demurrer, the plaintiff is entitled to consideration of not only the proper and well pleaded factual allegations, but also to the fair, reasonable and favorable intendments and inferences arising therefrom.
3. The nature of an action, whether in law or equity, is determined by the character of the principal relief justified by the facts alleged in the petition.
4. It is an equitable action if it is necessary to determine first whether the plaintiff is entitled to equitable relief before legal redress can be granted.
5. Where the relief of accounting is merely ancillary to the principal relief of obtaining money, the action is one at law and not in equity.
6. The statutes of Ohio permit the Superintendent of Banks to maintain an action against directors of a bank who have violated their obligations to the bank and in such action to represent the interests of shareholders, depositors, other creditors and the bank.
7. If a cause of action in favor of such shareholders, depositors, or other creditors is barred by the statute of limitations, it is barred when presented by the Superintendent of Banks.
8. It is not necessary for the Superintendent of Banks in maintaining such action to invoke equity jurisdiction, although upon his refusal to act, actions maintained by shareholders, depositors, or other creditors for the benefit of the bank would involve jurisdiction in equity.
9. When the Superintendent of Banks in such action represents the interests of shareholders, depositors, other creditors and the bank, there is no misjoinder of parties plaintiff.
10. The oath of the director of a bank though reduced to writing and signed by him does not constitute a contract in writing upon which an action ex contractu may be maintained for misfeasance or nonfeasance in office.
11. The weight of authority places the liability of directors of a bank for misconduct in office either upon tort liability recognized at common law or upon liability created by statute.
12. The relation of directors to a solvent bank is not that created by the obligations imposed upon the fiduciary of an express trust.
13. Where directors are charged with neglect or negligence in the administration of the affairs of a bank, and there are no allegations in the petition from which actual fraud can be reasonably inferred, Section 11224, General Code, providing a four-year limitation of action, is applicable.
14. Where such directors of a bank are charged with specific violations of the banking act, Section 11222, General Code, providing a limitation upon actions of six years, applies.
15. The statute of limitation commences to run from the time a wrongful act is committed by a director, either involving a violation of his common-law duty to the bank or a violation of a statutory obligation.
16. Mere concealment by a director of a violation of his duty to the bank, not amounting to actual fraud on the bank, is not sufficient to toll the applicable statute of limitation.
17. Neither the state banking act nor the general statutes of limitation contain any provision tolling the operation of the statutes of limitation merely because the directors charged with violation of their duty to the bank have retained jurisdiction over the assets and administration of the bank, where such misconduct falls short of actual fraud against such bank.
18. In the absence of such provision the holding of a court that such continued dominion will toll the statute is tantamount to judicial legislation.
19. The statute of limitation applicable to such violations of directors' duty to the bank is not tolled upon the theory of "continuing wrongs" even though such directors remain in office until control thereof is assumed by the conservator, where such violations of duty do not amount to actual fraud upon the bank.
20. The statute of limitation applicable to torts of directors against the bank, not amounting to actual fraud, is not delayed in its operation by reason of the fact that damage and loss to the bank, due to such tort, may not be apparent until a date after the commission of such tort. The injury due to such tort is immediate, the cause of action is created and the statute of limitation commences to run immediately upon the commission of such wrongful act.
21. The policy of the law is against the assertion of stale claims.
22. In an action maintained by the Superintendent of Banks against directors of such bank for loss to the bank, due to wrongful acts of such directors, not amounting to fraud upon the bank, the superintendent represents depositors who, upon his refusal to act, could have maintained such action, but such action by depositors would have been for the benefit of the bank, and their action in such representative suit would have been subject to any statute of limitations applicable to the right of action of the bank. Such depositors as a class have no right of action independent of that of the bank for such wrongful acts and loss.
23. Where directors of a bank are guilty of wrongful acts causing loss to such bank, the mere fact that such directors do not take steps to undo the effects of such wrongful acts does not constitute a new tort for which they may be held liable.
24. Where plaintiff alleges in several causes of action the commission of certain torts by directors of a bank, no new cause of action is stated where the operative facts charging specific torts alleged in such several causes of action are combined and assembled in an additional cause of action coupled with a charge that such individual specific torts were committed in conformity to a plan, scheme, policy or conspiracy.
25. Where plaintiff is unable to and does not allege in his petition that loss has been suffered by a bank due to the commission of a wrongful act of a director, such petition fails to state a cause of action and it may be assumed that such plaintiff has prematurely asserted his right against such director.
26. Where a plaintiff, after the opinion of the trial court upon a demurrer to the petition has been announced, presents to such trial court a supplemental petition, containing allegations of incidents which it is alleged have occurred since the filing of the original petition, and such allegation of new and additional facts requires an involved and complicated comparison of the supplemental petition with the original petition in order that the application of such additional facts to the causes of action originally stated may become apparent, the trial court commits no abuse of discretion in refusing plaintiff the right to file such supplemental petition.
27. Where a section of a petition is entitled "cause of action" but such section contains more than one cause of action, a demurrer addressed to the entire composite section must be overruled if a valid cause of action is stated in such section.
28. Causes of action against several defendants may not be joined in the same petition unless all of such causes of action affect all of such defendants.
APPEAL: Court of Appeals for Cuyahoga county.
Mr. Hugh S. Jenkins, attorney general, Messrs. Davis Young and Messrs. Krueger, Gorman Davis, for appellant.
Messrs. Thompson, Hine Flory, for appellees R.H. Bishop, Jr., O.W. Prescott, A.L. Stone and G.G. Wade.
Messrs. Jones, Day, Cockley Reavis, for appellee William G. Mather.
Messrs. Squire, Sanders Dempsey, for appellees Dean, Gill, McIntosh, Patterson, Petrequin, Rossiter and Whelan.
Messrs. Baker, Hostetler Patterson and Messrs. Dorn Merry, for appellee Edward S. Rogers.
Messrs. Garfield, Baldwin, Jamison, Hope Ulrich, for appellee Tillotson. Messrs. Grossman, Carter, Hamilton Rosenman, for appellee Marc J. Grossman, executor of estate of Louis J. Grossman, deceased.
Mr. Clinton DeWitt, for appellee Brooks.
Mr. Roscoe M. Ewing, for appellees Robinson and Edgar D. Rogers.
Mr. Frank H. Pelton, for appellees House Monks.
Messrs. Andrews, Hadden Putnam, for appellee Hanna.
Messrs. Boyd, Brooks Wickham, for appellee Daley.
Messrs. McKeehan, Merrick, Arter Stewart, for appellee Eide.
Mr. W. Edmund Peters, for appellee Bowman.
Mr. Henry H. Pleasant, for appellee Kline.
This is an appeal on questions of law from a judgment of the Common Pleas Court of Cuyahoga county, in which demurrers to certain causes of action in the fourth amended petition were sustained, and those causes of action dismissed, the plaintiff not desiring to plead further thereon.
The fourth amended petition contains 97 causes of action. In the brief of the plaintiff, appellant herein, it is stated:
"I. The Court of Common Pleas sustained the demurrers to causes of action Nos. 1 to 19 inclusive, 21 to 32 inclusive, 35, 37 to 49 inclusive, 51, and part of cause of action No. 50 (47 in all) on the ground that the causes were barred by the statute of limitations. Since the superintendent did not desire to amend, the Court of Common Pleas rendered judgment in favor of defendants on these causes of action. The first issue before this court, therefore, pertains to the statute of limitations.
"II. The Court of Common Pleas also sustained the demurrers to causes of action Nos. 20, 33, 34 and 59 to 97, inclusive (42 in all) on the ground that the superintendent had not alleged facts sufficient to state a cause of action. The plaintiff did not desire to amend causes of action Nos. 20, 33, 34 and 97, and the Court of Common Pleas rendered judgment in favor of defendants on these four causes of action. The second issue, therefore, concerns the sufficiency of the allegations set forth in causes of action Nos. 20, 33, 34 and 97.
"III. The Court of Common Pleas in its opinion stated that causes of action Nos. 59 to 96 inclusive (38 in all), relating to the plans and policies for the administration of trust estates, were prematurely brought because no damage was alleged to have occurred. To remedy this objection, plaintiff made application for leave to file a supplemental petition setting forth facts pertaining to damage which occurred after the commencement of the action. This application was overruled, and, after the superintendent had stated that he did not wish to amend any of these 38 causes of action, judgment was rendered in favor of defendants on causes of action Nos. 59 to 96 inclusive. This refusal to permit the filing of the supplemental petition constitutes the basis of the third issue.
"IV. The Court of Common Pleas, as we have said, sustained demurrers to part only of cause of action No. 50, and overruled them as to the balance of that cause of action. The right to sustain demurrers to a part only of a cause of action raises the fourth issue.
"V. A fifth and minor issue arises because the Court of Common Pleas granted a demurrer of defendant, Mather, on the ground that all of the causes of action did not affect him."
It is probably unnecessary to state that the task presented to the trial court and now to this court assumes herculean proportions. The points raised in the briefs and arguments are legion. Any attempt to tender in this opinion any detailed discussion of the several contentions of the parties, or even to mention all of them, would be of little benefit to anyone and unduly extend this opinion beyond the scope permitted by considerations of propriety, or the necessity for a fair statement of the premises upon which the conclusions reached herein are based.
Justification is found also in the able and extended consideration given the problems presented by the trial court.
For these reasons, such conclusions will be stated in a more or less categorical manner. In the main, the outline adopted by the plaintiff will be followed in passing upon the assignments of error advanced by him.
I.
Directing attention to the causes of action included in division No. I, as set out supra, the trial court sustained demurrers to the causes of action therein included, upon the ground that it appears from the face of the petition they are barred by the statute of limitations.
The plaintiff places his claim of error in such ruling upon a number of premises. These premises in turn involve a number of questions which will be first considered.
Is more than one statute of limitations involved?
Without at this point passing upon the validity of the several causes of action, it may be considered that the plaintiff in his allegations has relied for relief both upon remedies provided by the common law and the statutes of Ohio. In the consideration of his pleading certain general rules applicable to demurrers are considered.
(1) The plaintiff is not bound by any theory for relief he may assert. He is bound only by the facts he alleges in his petition and if those facts state any action in law or equity, the court is compelled to extend such relief, regardless even of his prayer for same. Schaefer v. First Natl. Bank, 134 Ohio St. 511, 520, 18 N.E.2d 263; Triff, Admx., v. Natl. Bronze Aluminum Foundry Co., 135 Ohio St. 191, 205, 20 N.E.2d 232, 121 A.L.R., 1131; State, ex rel. Masters, v. Beamer, 109 Ohio St. 133, 150, 141 N.E. 851.
When in doubt, a plaintiff may state his cause of action in the alternative. Sicard v. Kremer, 133 Ohio St. 291, 296, 13 N.E.2d 250.
So, even if the plaintiff mistakenly disclaims charges of fraud or negligence, if the facts alleged state a cause of action in fraud, negligence or equity, or a cause of action created by statute, the court must disregard his "theory" and even his prayer, and upon demurrer give his petition any proper construction sustained by the facts.
(2) In construing such petition upon demurrer the plaintiff is entitled to consideration of not only the proper and well-pleaded factual allegations, but also to the fair, reasonable, and favorable intendments and inferences arising therefrom, except when jurisdictional factual allegations are involved. Guardian Life Ins. Co. v. Veser, 128 Ohio St. 200, 190 N.E. 405; Parletto v. Indus. Comm., 140 Ohio St. 12, 42 N.E.2d 153; Humphries v. Wheeling Steel Corp., 132 Ohio St. 263, 7 N.E.2d 230; Ohio Elec. Ry. Co. v. U.S. Express Co., 105 Ohio St. 331, 137 N.E. 1.
(3) The nature of the action, whether in law or equity, is determined by the character of the principal relief, justified by the facts alleged in the petition. Nordin v. Coulton, 142 Ohio St. 277, 51 N.E.2d 717; Borton v. Earhart, 144 Ohio St. 334, 59 N.E.2d 37.
(4) It is an equitable action if it is necessary to determine first whether the plaintiff is entitled to equitable relief before legal redress can be granted. (Id.)
These general principles, it may appear, will be more applicable when considering the causes of action in the light of a demurrer predicated upon the claim that no cause of action is stated. However, they are at this point pertinent, in view of the several claims of plaintiff as to the nature of these causes of action, and the several theories advanced by plaintiff which he asserts are sustained by his several allegations of fact.
Bearing these general principles of pleading in mind, a solution of the questions presented is undertaken.
The facts alleged in the causes of action justify only a claim for money. That is the relief sought and the only principal relief warranted by the allegations of the petition.
(5) It is not necessary to resort to equity to obtain payment of the damages caused by the violation of rights alleged. Accounting is ancillary to the main relief.
(6) These causes of action are not representative causes of action by either shareholders, depositors, or other creditors. They are causes of action specifically provided for by statute.
This is an action by the Superintendent of Banks. He is the only plaintiff. That capacity is given him by the statutes of this state.
"The office of Superintendent of Banks is of statutory creation and the powers and duties of the incumbent thereof must likewise be statutory or they do not exist." National City Bank v. Guardian Trust Co., 137 Ohio St. 279, 282, 28 N.E.2d 763; State, ex rel. Stanley, v. Cook, Supt. of Banks, 146 Ohio St. 348, 66 N.E.2d 207. At page 376 of the latter case, it is stated:
"The duties of the Superintendent of Banks in the liquidation of a bank are similar to the duties of the Superintendent of Building and Loan Associations in liquidating such associations.
"In the case of State, ex rel. Merion, Supt. of Bldg. Loan Assns., v. Unemployment Compensation Bd. of Review et al., 142 Ohio St. 628, 53 N.E.2d 818, Judge Zimmerman said at page 630: `The superintendent, in liquidating the Columbian Building Loan Company, was not acting in a sovereign or governmental capacity. His status as liquidator was similar to that of an ordinary receiver or trustee, and his acts were for the benefit, and in the interests, of creditors, depositors and shareholders of the company and other affected persons, and not for the benefit of the state of Ohio in any direct sense.'
"In the case of State, ex rel. Fulton, Supt. of Banks, v. Bremer, Admx., 130 Ohio St. 227, 198 N.E. 874, this court held:
"`The state of Ohio, while a nominal party in an action brought by the Superintendent of Banks against the stockholders of a bank to enforce the super-added liability imposed by Section 3 of Article XIII of the Constitution of Ohio, has no proprietary or pecuniary interest in the result of the action, and in such action is not suing in its sovereign capacity.'"
See, also, State, ex rel. Fulton, v. Coburn, 133 Ohio St. 192, 12 N.E.2d 471.
The Superintendent of Banks in this action asserts the rights of the bank, shareholders, depositors, and other creditors existing at the time he assumed control. Section 710-95 and Section 710-67, General Code; State, ex rel. Stanley, v. Cook, Supt. of Banks, supra; State, ex rel. Fulton, Supt. of Banks, v. Bremer, Admx., supra; Warner, Supt., v. Mutual Bldg. Invest. Co., 128 Ohio St. 37, 43, 190 N.E. 143.
(7) If a cause of action of the bank, a shareholder, depositor, or other creditor is barred, then such cause of action is barred when now asserted by the Superintendent of Banks. State, ex rel. Fulton, v. Bremer, supra; State, ex rel. Fulton, v. Coburn, supra.
Section 710-95, paragraph (7), General Code, provides:
"The Superintendent of Banks, upon taking possession of the business and property of any bank, shall have, exercise and discharge the following powers, authority and duties, without notice or approval of court, but subject to the provisions of this chapter, to wit: * * *
"7. To institute and maintain against the directors, officers or employees of such bank, or any of them, any suit or action which such bank, its shareholders or creditors might institute and maintain."
Section 710-67, General Code, provides:
"Any director of a bank who shall knowingly violate, or who shall knowingly permit any of the officers, agents or employees of a bank to violate any of the provisions of this act (Sections 710-1 to 710-189, General Code) shall be held liable in his personal and individual capacity for all damages which the bank, its stockholders, or any other person shall have sustained in consequence of such violation."
(8) No personal, individual action of any shareholder, depositor, or creditor is here sought to be alleged. The general rights of these classes, which might, upon refusal of the Superintendent of Banks to act, be asserted in representative actions, through the intervention of equity, may now, by statute, be asserted through the Superintendent of Banks, and are so asserted under the provisions of the statute.
(9) The claim of the defendants, appellees herein — incidentally, that there is a misjoinder either of parties plaintiff or causes of action — is negatived by the joinder permitted by the statute. (Section 710-95, paragraph 7, General Code.)
So, it not being necessary to resort to equity to obtain relief, the principal object of all the causes of action as developed by the facts alleged being to obtain a sum of money, and the relief of accounting being only ancillary, the causes of action stated are all actions at law.
(10) Are these causes of action ex delicto, ex contractu, or statutory?
First, in order to bring the limitation within the 15-year statute applicable to contracts in writing, it is asserted by the plaintiff that, the oath taken by directors being reduced to writing, such statute applies. There is some authority sustaining the claim of liability based upon an implied promise (see 39 Columbia Law Review, 851) but that a contractual status is created by a contract in writing merely because of the directors' oath as far as has been ascertained has no support. Neither the express written contract theory nor the implied promise theory presents a logical appeal or are warranted by the nature of and circumstances attending the taking of such oath.
(11) On the other hand, the weight of authority places the liability of directors upon two general grounds — Common-law liability for negligence or fraudulent misapplication of funds, and liability created by statute. Inglis v. Pontius, Supt. of Banks, 102 Ohio St. 140, 146, 131 N.E. 509; 39 Columbia Law Review, 851, supra; 77 A.L.R., 543 et seq.; 9 Corpus Juris Secundum, 231, 234, 235, 259.
(12) In State, ex rel. Lien, v. House, 144 Ohio St. 238, 58 N.E.2d 675, it is held in the second paragraph of the syllabus:
"An action against trustees of an express trust for loss of funds arising from a breach of trust involving tortious conduct such as bad faith, negligence and double-dealing, is one at law, the cause of action accrues, in the absence of undiscovered fraud, when the trusteeship as to such trustees is terminated, and the action is barred in four years by virtue of the provisions of Section 11224, General Code."
(13) Where facts alleged fall short of establishing an express trust and the defendants have failed to exercise skill and prudence in caring for and investing the bank's funds, a fortiori, such defendants are liable in tort for such dereliction, and Section 11224, General Code, stating a four-year limitation would apply to neglect of duty. There being no allegation of facts from which actual fraud could be inferred, the exception to the operation of such limitation, mentioned in the last paragraph of the section, has no application.
(14) In those cases where acts of directors are alleged constituting violation of the statutes applicable to the operation of banks, the six-year statute of limitations (Section 11222, General Code) would apply.
So that as to all causes of action in which facts are alleged charging either a violation of such common-law duties or violation of the banking act, or both, the four-year or six-year statute would apply. See State, ex rel. Lien, v. House, supra ( 144 Ohio St. 238), at page 245.
(15) It is the general rule that the statute of limitations commences to run at the time the cause of action accrues. 25 Ohio Jurisprudence, 532. The cause of action accrues, in the case of torts, when the wrongful act is committed, and in case of statutory actions, when the violation of the statute occurs. 1 American Jurisprudence, 451, 452; Minster Loan Sav. Co. v. Laufersweiler, 67 Ohio App. 375, 379, 36 N.E.2d 895; 83 A.L.R., 1204; 9 Corpus Juris Secundum, 245, Section 122.
The plaintiff advances several theories under which he asserts, first, a delay in the creation of the cause of action, and, second, that even though the cause of action has been created the statute of limitations is tolled.
These various reasons advanced by plaintiff for delaying the operation of the statute of limitations will be considered approximately in the order advanced.
(16) As a first reason, plaintiff claims "the statute does not run while the cause of action is concealed."
There is some authority for that position outside Ohio and the original case in Ohio (Fee's Admr. v. Fee, 10 Ohio, 469, 36 Am.Dec., 103) holding otherwise may be subject to some criticism. However, the Fee case has been followed and no sound reason now appears for changing a policy fixed in our jurisprudence. Howk v. Minnick, 19 Ohio St. 462, 466, 2 Am. Rep., 413; Williams v. Pomeroy Coal Co., 37 Ohio St. 583, 589; Minster Loan Sav. Co. v. Laufersweiler, supra, at pages 378, 379; State, ex rel. Lien, v. House, supra, at pages 244, 245; 25 Ohio Jurisprudence, 597.
In some states applicable statutes of limitations are by express provision therein tolled until the discovery of the wrong. See Michelsen v. Penney, 135 F.2d 409 (N.Y.); Smith v. Lyle, 59 S.D. 534, 241 N.W. 512. In our own state, the statute is tolled in like manner in case of fraud and certain trespasses. (Section 11224, General Code.)
If the Legislature had deemed it expedient it could have so provided, either generally as to cases of concealed torts, or in the banking act as to wrongful acts of officers and directors. It has not done so, and the relief if it is extended should be furnished by legislative act, not by judicial legislation.
In State, ex rel. Lien, v. House, supra, at page 247 of the opinion it is stated:
"It is the policy of the law, as disclosed by our scheme of statutes of limitation of actions, to require actions which involve the alleged tortious conduct of a defendant to be asserted and prosecuted promptly unless concealment or undiscovered fraud on the part of the defendant is found to exist, for which exceptions are usually made in the general plan for limitation of actions." (Emphasis added.)
No exception has been provided covering mere concealment as distinguished from direct and specific allegations of fact showing fraud.
In State, ex rel. Papadopoulos, v. Indus. Comm., 130 Ohio St. 77, at page 80 of the opinion, 196 N.E. 780, it is stated:
"`Though a person may not discover his injury until too late to take advantage of the appropriate remedy yet this is said to be one of the occasional hardships necessarily incident to a law arbitrarily making legal remedies contingent on mere lapse of time.' 17 Ruling Case Law, 832, Section 193.
"`The fact that a person entitled to an action has no knowledge of his right to sue, or of the facts out of which his right arises, does not, as a general rule, prevent the running of the statute, or postpone the commencement of the period of limitation, until he discovers the facts or learns of his rights thereunder.' 17 Ruling Case Law, 831, Section 193.
"`The operation of the statute of limitations is not suspended or postponed * * * unless such an exception is a rule of the statute.' 37 Corpus Juris, 986, Section 37. Courts can not engraft exceptions thereon."
Facts alleged showing mere concealment are not sufficient, therefore, to toll the statute.
(17) As a second reason it is contended by plaintiff that "the statute does not commence to run as long as directors are in control of the res." That principle has been applied in some jurisdictions outside Ohio. 7 American Jurisprudence, 236; Michelsen v. Penney, supra, fourth paragraph of the headnotes; 83 A.L.R., 1206; 39 Columbia Law Review, 856. It has no support in Ohio, either by statute or judicial decision.
(18) Finding no controlling Ohio authority, no valid reason appears for here resorting to what in effect would be judicial legislation. The Ohio Legislature has enacted an extensive law governing the administration of banks. It has provided liability for directors for violation of the provisions of the act. It has provided for the powers and duties of the conservator upon assuming control over an insolvent bank. It seems clear that if the Legislature had considered it wise or expedient, it could have created responsibility in directors for wrongful acts which would continue during their dominion over the bank and could have, as is done in other states, permitted the Superintendent of Banks, in enforcing statutory or tort liability, to maintain an action based upon the theory of continuing liability.
In 39 Columbia Law Review, supra, at page 857, it is stated:
"However, some courts hold that the limitation runs only from the time when the wrongdoing directors relinquish their control. Two theories are advanced: one is that control per se amounts to a disability to sue, whether or not all the directors were directly involved; the other is that, although directors are not ordinarily trustees, the fact of control puts the corporation in the position of a cestui of a trust, disabled from making an adverse claim. Assuming that an independent director can effectively protect the corporation, it would seem that more than mere majority control should be required to delay the running of the statute."
Certainly, shareholders on behalf of the bank could have maintained any action now available to the Superintendent of Banks. As has been heretofore stated, mere concealment is not sufficient in itself to toll the statute. See Hughes v. Reed, 46 F.2d 435, 441. In the absence of statute or controlling authority, the doctrine of continuing dominion will be rejected as a basis for tolling the statute of limitations. The same conclusion is well expressed in 25 Ohio Jurisprudence, 596. See, also, Powell v. Koehler, 52 Ohio St. 103, 39 N.E. 195, 49 Am. St. Rep., 705, 26 L.R.A., 480; Townsend v. Eichelberger, 51 Ohio St. 213, 38 N.E. 207.
(19) As a third reason the plaintiff claims that "the statute does not run for continuing wrongs until the directors leave office." If the facts alleged showed "continuing wrongs," then there is no need to toll the statute for the cause of action would be a continuing cause of action. There was undoubtedly a "continuous fiduciary duty" but the violations of that continuing duty were specific acts of wrongdoing, each of which gave rise to a cause of action in the bank, if the other necessary elements of a cause of action existed. Manifestly, a series of independent tortious acts may not be so merged as to constitute a continuous tort giving rise to an independent cause of action, cumulative to such separate torts. Such is not the theory of tort liability. It is difficult to distinguish the rationale of this conception from that of continued dominion. That there is a difference may possibly be found, but the factors which control this conception would seem to be little different in effect from those involved in the continued dominion theory.
The only facts which could justify the claim that a continuing wrong is alleged would be those applying to concealment of individual wrongful acts, under allegations of conspiracy, scheme, plan, or policy.
No cause of action is or probably could be stated (short of allegations of absolute fraud) based entirely upon concealment. Nor are we here concerned with a series of associated acts constituting a program of fraud. No support for this theory is found and the statutes are not tolled for "continuing wrongs."
(20) There is another theory for tolling the statute which is included in the last claim of the plaintiff, but seems to be somewhat different in principle from the principal claim and that is the "delayed damage" conception of a tort cause of action.
That theory is set out in Gillette v. Tucker, 67 Ohio St. 106, at page 132 of the opinion, 65 N.E. 865, 93 Am. St. Rep., 639. In effect, the theory is that if a wrongful act produces no immediate harmful result amounting to damage, but later if it can be alleged and proved that such wrongful act is the proximate cause of later loss, injury or damage to the plaintiff, his cause of action does not accrue until such loss, injury, or damage is actually suffered by plaintiff. While there are allegations in some of the causes of action in which the ultimate insolvency of the corporation is charged to be the proximate result of certain specific wrongful acts, the allegation of other facts, coupled with conditions, of which the court may take judicial notice, requires the conclusion that any direct, causal connection between such wrongful acts and the ultimate insolvency of the corporation can be developed only by the use of speculation and conjecture, far extending beyond the realm of reasonable inference.
While the case of Gillette v. Tucker, supra, has had a stormy career (see McArthur v. Bowers, 72 Ohio St. 656, 76 N.E. 1128, which was affirmed on the "doctrine of the dissenting opinion") it, in the main, has been followed, but not to the extent of the full scope of the opinion noted. In Palmer v. Humiston, 87 Ohio St. 401, at page 407, 101 N.E. 283, 45 L.R.A. (N.S.), 640, it is apparent that it was the duty of the surgeon to remove the sponge and that the continued failure to perform that duty created a continuing contractual violation, which could easily furnish a proximate cause for the damage caused by its continued presence in the wounds. The theory of recovery was later clarified in Bowers v. Santee, 99 Ohio St. 361, 124 N.E. 238. In that case the court held in the syllabus:
"1. The relation of surgeon and patient is one arising out of contract, express or implied. The surgeon is not an insurer or guarantor, but does agree to exercise the average degree of skill, care and diligence exercised by members of the same profession in the given situation.
"2. In an action for a breach of the contract in such case, the statute of limitations does not begin to run until the contract relation is terminated. (Gillette v. Tucker, 67 Ohio St. 106, approved and followed; McArthur v. Bowers, 72 Ohio St. 656, disapproved.)"
At page 366 of the opinion the interesting history of Gillette v. Tucker is reviewed. It may be considered, however, that the syllabus just quoted states the principle of liability finally adopted, which manifestly has no application to the instant considerations at least as heretofore construed.
(21) The more logical rule, and the one consistent with general policy adverse to stale claims, is stated in United States v. Oregon Lumber Co., 260 U.S. 290, 299, 67 L. Ed., 261, 43 S. Ct., 100.
In Corsicana Natl. Bank v. Johnson, 251 U.S. 68, 64 L. Ed., 141, 40 S. Ct., 82, it is stated in the syllabus:
"The liability imposed upon the director under Rev. Stats., Section 5239, is direct, not contingent or collateral; the cause of action and the damages are complete when the money is loaned, and, while the damages may be diminished by what the bank collects from the borrowers, it is not obliged to proceed primarily against them."
With a violation of the National Banking Act, no valid reason appears for applying a different rule where the damage is due to other misconduct of a director.
Delayed damage is ineffective to delay the accrual of a cause of action predicated upon a wrongful act. The damage resulting therefrom is immediate. That its effect may not be apparent is unavailing to delay the operation of the statute of limitations. This consideration has received attention hereinbefore, where it is determined that the law of Ohio does not recognize mere concealment of dereliction, not amounting to actual fraud, sufficient to toll the running of the statute of limitations. Nor can the contention that the directors failing to negative the effects of the original tort thereby created a new cause of action based upon such alleged tort be sustained. If such were the case, each wrongful act would result in a double tort, one for the commission of the tort, one for omission to eliminate the effects of the first. If such were the case, the rule would apply to every tort. The limitation of such rule has just been considered.
(22) As his fourth and final attempt to avoid the operation of the statute of limitations, the plaintiff claims that "the statute does not commence to run before insolvency, because it is brought on behalf of creditors whose remedy did not accrue prior to that time."
That theory completely ignores the fact that, as heretofore stated, these causes of action are advanced by the Superintendent of Banks under the provisions of the statutes for the benefit of shareholders, depositors, other creditors and the bank, and that if the depositors or other creditors had instituted such action in a representative capacity (no personal, individual claim being asserted, as distinguished from claims of all other depositors) such action would have been for the benefit of the bank. See 50 A.L.R., 463, (note) Section 1.
The relation of a depositor to the bank is that of debtor and creditor. 5 Ohio Jurisprudence, 382.
"The contract between the bank and a general depositor is purely a legal one, and has nothing of the nature of a trust in it." 5 Ohio Jurisprudence, 384; Squire, Supt. of Banks, v. Nally, 130 Ohio St. 582, 585, 200 N.E. 840; Union Properties, Inc., v. Baldwin Brothers Co., 141 Ohio St. 303, 47 N.E.2d 983; Busher, Clerk of Courts, v. Fulton, Supt. of Banks, 128 Ohio St. 485, 191 N.E. 752.
So that the representative action of a depositor, like that of any other creditor, is for the benefit of all other depositors and creditors, and ultimately shareholders, and, hence, for the benefit of the bank, and when the bank is barred by the statute of limitations, the creditors and depositors are barred. The depositors asserting general liability to them have no cause of action independent of that of the bank.
For these reasons, the ruling of the trial court upon the demurrer based upon the statute of limitations was correct, and its judgment upon the application of the statute of limitations to the causes of action set out in Division I is sustained.
The trial court, as will later herein appear, sustained demurrers to other causes of action based upon the predicate that such causes of action were invalid or ineffective in that facts were not alleged therein stating a cause of action. Insofar as the demurrers to such causes of action also included a demurrer upon the ground of the statute of limitations, the conclusions heretofore stated will apply as a ground for affirming the conclusions of the trial court upon the demurrer, although by it placed upon other grounds.
II.
The causes of action listed in Division II (Nos. 20, 33, 34, 59 to 97 inclusive) were held insufficient as not containing allegations showing the existence of causes of action. What has been said hereinbefore concerning the presumptions and rules applicable to a petition attacked by demurrer is probably more applicable in the consideration of this phase of the controversy.
It is sufficient to say that such rules and guides are again considered in approaching a decision upon the adverse contentions of the parties as to the demurrers.
The causes of action here considered and the ruling of the trial court on the several causes of action will be considered in the order mentioned in Division II, as quoted from the plaintiff's brief, supra.
(23) As to the 20th cause of action, the reasoning and conclusion of the trial court are approved. As has hereinbefore been stated (in connection with the delayed damage theory), a double tort cannot be created by simply charging failure to eliminate the effects of the wrongful act. The demurrer to the cause of action was properly sustained.
(24) As to the 33rd and 97th causes of action, they are in effect mere recapitulations of alleged torts involved in other causes of action, coupled with charges of conspiracy, or devising of a plan, or maintaining a policy, or the perpetration of a scheme, the purpose and object of such conspiracy, plan, policy, or scheme being to do certain unlawful acts previously or later alleged as specific violations of the obligations of the defendant directors.
Would the allegation that a certain act was done in conformity to a conspiracy, plan, policy, or scheme make that act tortious, if such act did not, independently of such conspiracy, plan, policy, or scheme, constitute a tort? No sound basis appears for such a claim in a civil action under the Code of Civil Procedure. If the torts alleged in the several causes of action caused damage to the bank, they did not cause any greater damage because they were the outcome of any conspiracy, plan, policy, or scheme.
No valid causes of action independent of those otherwise stated are contained in the 33rd and 97th causes of action and the demurrers thereto were properly sustained.
Obviously, also, insofar as the separate causes of action are inoperative by reason of the statute of limitations, insofar as such causes of action are included in these causes of action, Nos. 33 and 97, they would be similarly affected. The same result would apply where such included causes are held subject to attack by reason of insufficiency of allegation.
The ruling and conclusions of the trial court are approved as to the 34th cause of action. It is a composite of causes of action No. 35 and No. 36, just as causes of action No. 33 and No. 97 are composites of previous causes of action.
Although causes of action Nos. 59 to 96, inclusive, are also included in plaintiff's Division II, they are considered in plaintiff's Division III, and will be treated under that heading herein.
III.
Causes of action Nos. 59 to 96, inclusive, mentioned in Division III, supra, were held by the trial court to be premature and a supplemental petition, incorporating the same causes of action, but alleging direct, immediate damage was tendered, after the opinion of the trial court upon the demurrers was filed, and refused. It would seem that the plaintiff acquiesces in the conclusion of the trial court that these original causes of action are premature, in view of the absence of the allegation of facts, showing proximate damage from the wrongful acts alleged.
In any event, the action of the trial court upon the demurrers to these causes of action is sustained. No immediate losses are alleged therein.
(25) As to the right of the plaintiff to file a supplemental petition, other problems are presented. These have been considered fully by the trial court in its supplemental opinion, filed on January 9, 1946, in which the application to file the supplemental petition, and the supplemental petition itself were considered at length.
It is apparent, as stated by the trial court, that "it is impossible, without the infinite labor of detailed comparison and analysis of the basic pleading and its supplement to classify and relate the claims allowed to the appropriate causes of action in the fourth amended petition."
There seems to be no attempt in the supplemental petition to isolate losses paid by the Superintendent of Banks to appropriate causes of action.
No valid ground appears for holding that the trial court abused its discretion in refusing plaintiff the right to file such supplemental petition.
The reasons assigned by the trial court for such refusal appear sound and its refusal is a valid exercise of judicial discretion.
The action of the trial court upon such supplemental petition is approved and affirmed. In addition, what has been said as to the "delayed damage" theory may also be here applicable.
IV.
As to cause of action No. 50, mentioned in the IVth Division of "Issues," the trial court sustained a demurrer to part of such cause of action and overruled it as to part upon the premise that such "cause of action" contained in fact a number of causes of action, some of which were subject to demurrer and others not.
(26) It is well recognized that a demurrer to a petition which contains more than one cause of action must be overruled if such petition contains a valid cause of action. 31 Ohio Jurisprudence, 669.
Manifestly, a demurrer to a cause of action must be overruled if facts are alleged therein stating a valid cause of action, although other facts may be alleged in such cause of action which may be considered as stating a cause of action to which a demurrer would lie.
In sustaining in part the demurrer to cause of action No. 50, the trial court committed error prejudicial to the plaintiff. The effect of the action of the trial court was to separately state and number the causes of action alleged in cause of action No. 50, strike out part of them and overrule the demurrer as to the remainder.
V.
The causes of action included in Division V, supra, are in fact cause of action No. 36 and causes of action Nos. 52 to 58, inclusive.
(27) The trial court overruled the demurrers of all defendants except that of William G. Mather to these causes of action and sustained the demurrer of Mather thereto, upon the ground of misjoinder of parties defendant.
It appears that the defendant Mather is not involved in causes of action Nos. 52 to 58, inclusive. He, therefore, relies upon Section 11309, General Code, as a basis for affirming the action of the trial court in sustaining his demurrer upon the ground of misjoinder.
On the other hand, the plaintiff relies upon the provisions of Section 11306, General Code, as authority for the joinder of Mather in the fourth amended petition, although he is not charged in causes of action Nos. 52 to 58, inclusive.
That section, Mather claims, is modified and limited by Section 11307, General Code, which provides:
"The causes of action so united must not require different places of trial, and, except as otherwise provided, must affect all the parties to the action."
The plaintiff claims that Section 11307, General Code, is inoperative to support the contention of Mather, because Section 11306, General Code, does "otherwise" provide for joinder.
The pertinent parts of Section 11306, General Code, are:
"The plaintiff may unite several causes of action in the same petition, whether they are legal or equitable, or both, when they are included in any of the following classes:
"1. The same transaction;
"2. Transactions connected with the same subject for action; * * *."
Section 11255, General Code, provides:
"Any person may be made a defendant who has or claims an interest in the controversy adverse to the plaintiff, or who is a necessary party to a complete determination or settlement of a question involved therein."
Really, two types of joinder are here involved — joinder of causes of action and joinder of defendants in the same petition.
It is apparent the defendant Mather has no concern with the "subject for action" in causes of action Nos. 52 to 58, inclusive, but is concerned with other causes of action considered, and if the conclusions of the trial court and those expressed herein are correct, this will still leave cause of action No. 36, in which Mather is still included. The ruling of the trial court upon the Mather demurrer is, therefore, still a question for consideration.
Reference to Volumes 51 and 94 Ohio Laws shows that Section 11306 and Section 11307, General Code, were consecutive sections in the respective acts. (51 Ohio Laws, 70; 94 Ohio Laws, 279.)
It is obvious, therefore, that Section 11307, General Code (Section 81 of the Act of 1853, 51 Ohio Laws), a part of the original Code of Civil Procedure, could not refer to the section immediately preceding it. The same situation is present in the act of 1900 (94 Ohio Laws) involving Section 5058 and Section 5059 of that act.
The trial court properly sustained the demurrer of Mather and its judgment in that respect is affirmed.
For the reasons given, therefore, the judgment of the Common Pleas Court is reversed as to cause of action No. 50, and otherwise affirmed, except that causes of action Nos. 36 and 52 to 58 are not involved in this appeal, since the ruling of the trial court was not adverse to the plaintiff. Such causes of action Nos. 36 and 52 to 58 are, therefore, not considered herein, except in connection with the demurrer of Mather.
The court is advised that the defendants, Edward S. Rogers, Arthur L. Stone and The National City Bank of Cleveland, as executor of the estate of Arthur L. Stone, have been dismissed from this action, and the judgment of this court will be framed accordingly.
Judgment accordingly.
HILDEBRANT, P.J., MATTHEWS and ROSS, JJ., concur in the syllabus, opinion and judgment.
HILDEBRANT, P.J., MATTHEWS and ROSS, JJ., of the First Appellate District, sitting by designation in the Eighth Appellate District.