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business or occupation, or in his peace and security of charge its workmen and employ themselves, and to
life. Every attempt by force, threat or intimidation use all proper argument in support of their request;
to deter or control an employer in the determination but they had no right to say, 'You shall do this or we
of whom he will employ or what wages he will pay is will ruin your business.' Much less had they a right
an act of wrong and oppression; and any and erery to ruin its business. The fact that it is designed as a
combination for such a purpose is an unlawful con means to an end, and that end, in itself considered, is
spiracy. The law will protect the victim and punish a lawful oue, does not divest the transaction of its
the movers of any such combination. In law the of criminality.”
fense is the combination for the purpose, and no overt The defendant lays great stress upon the case of
act is necessary to constitute it. State v. Wilson, 30 State v. Hunt, 4 Metc. 111, as authority to sustain the
Conn. 507; State v. Donaldson, supra; Walker v. Cro legality of boycotting; but there is an obvious dis-
nin, 107 Mass. 564; Carow v. Rutherford, 106 id. 10-15; tinction between that case and that of this defendant.
Master Stevedores' Ass'n v. Walsh, 2 Daly, 12; Walsby That was a club or combination of journeymen boot-
V. Auley, 3 L. T. Rep. (N. S. 666; Reg. v. Duffield, 5 makers simply to better their own condition, and it
Cox C. C. 432; Parker v. Griswold, 17 Conn. 302; had no aim or means of aggression upon the business
Springhead Spinning Co. v. Riley, L. R., 6 Eq. Cas. 551; or rights of others; they simply had regulations for
Gilbert v. Mickle, 4 Sand. 381.

themselves, and did not combine or operate for a reA wanton, unprovoked interference by a combina sult mischievous, meddlesome and oppressive toward tion of many with the business of another, for the others. But even in that case the court, after suppurpose of constraining that other to discharge faith posing the case of a combination for the ultimate and ful and long-tried servants, or to employ whom he laudible object of reducing by mere competition the does not wish or will to employ-an interference in price of bread to themselves and their neighbors, said: tended to produce, and likely to produce, annoyance “The legality of such an association will therefore deand loss to that business-will be restrained and pun pend upon the means to be used for its accomplishished by the criminal law, as oppressive to the indi ment. If it is to be carried into effect by fair and vidual, injurious to the prosperity of the community, honorable means it is, to say the least, innocent; if and subversive of the peace and good order of society. by falsehood or force, it may be stamped with the

The recent case of State v. Glidden, already referred character of comspiracy." Force may be operated to, decided by the Supreme Court of Connecticut, is either physically or mechanically, or it may be coerboth in principle and features, ide:itical with the case cion by fear, threat or intimation of loss, injury, oblounder review. The Carrington Publishing Company quy or suffering. had in their employ a number of printers known as The evidence in this case shows that while Baugh“non-union men” or “rats." The Typographical man Brothers were engaged in their 'lawful business Union, the Knights of Labor, the Trades' Council, the as stationers and printers, the plaintiff in error and Cigarmakers' Union, and other affiliated secret or the other member of the Richmond Typographical ganizations, waited upon the company and demanded Union No. 90, conspired to compel Baughmau Broththat their office be made a union office within twenty ers to make their office a union office, and to compel four hours. Upon the refusal of the company to make them not to employ any printer who did not belong their office a union office a boycott was instituted to the said union. That upon the refusal of Baughagainst them, which though not openly published, as man Brothers to make their office (for business) a in this case, was fully proved. The court, in its opin. union office, the plaintiff in error and others, composjon, said: “If the defendants have the right which ing the said Richmond Typographical Union No. 90, they claim, then all business enterprises are alike sub- | conspired and determined to boycott the said firm of ject to their dictation. No one is safe in engaging in Baughman Brothers as they had threatened to do; business, for no one knows whether is business affairs and sent circulars to a great many of the customers of are to be directed by intelligence or ignorance; the said firm, informing them that they had, “ with whether law and justice will protect the business, or the aid of the Knights of Labor and all the trades orbrute force, regardless of law, will control it; for it ganizations in this city (Richmond), boycotted the esmust be remembered that the exercise of the power, tablishment of Messrs. Baughman Brothers;" and if conceded, will by no means be confiued to the mat- | formally notifying the said customers that the names ter of employing help. Upon the samo principle, and of all persons who should persist in trading, patronizfor the same reasons, the right to determine what ing or dealing with Baughman Brothers, after being business others shall engage in, when and where it | notified of the boycott, would be published weekly in shall be carried on, etc., will be demanded, and must the Labor Herald as a black-list, who in their turn be conceded. The principle, if it once obtains a foot-|

would be boycotted until they agreed to withdraw hold, is aggressive, and is not easily checked. It | their patronage from Baughman Brothers: and acthrives on what it feeds on, and is insatiate in its de. cordingly the employees of Baughman Brothers were mands. More requires more. If a large body of ir. mercilessly hounded, by publication after publication, respousible men demand and receive power outside of for months, in the Labor Herald (which was the law, over and above law, it is not to be expected that boasted engine of the boycotting conspirators), they will be satisfied with a moderate and reasonable whereby it was attempted to excite public feeling use of it. All history proves that abuses and excesses against them, and prevent them from obtaining even are inevitable. The exercise of irresponsible power by board and shelter; and the names of the customers men, like the taste of human blood by tigers, creates and patrons of the said firm were published in the said an unappeasable appetite for more.” “Confidence is

sheet under the standing head of “Black-List.”. the corner-stone of all business-confidence that the

| The length of this opinion will preclude the mengovernment, through its courts, will be able to pro

tion of even a tithe of these incendiary publications, tect their rights; but if their rights (of business men) week after week, for months; but not only Baughman are such ouly as a secret, irresponsible organization is Brothers and their employees and their customers, willing to give, where is that confidence which is es

but the hotels, boarding-houses, public schools, railsential to the prosperity of the country?" "The end

roads and steamboats conducting the business travel would be anarchy, pure and simple, and the subver- i and transportation of the city, were listed and pubgion not only of all business, but also of law and the lished under the obloquy and denunciation of the government itself.” “They (defendants) had a right “ Black-List." One or two specimens will suffice: to request the Carrington Publishing Company to dig. “Boycott Baughman Brothers and all who patron

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ize them." "Watch out for Baughman Brothers' ACKER, J. The court below sustained general de.

rats,' and find out where they board. It is dangerous murrers to the petition and dismissed the guit, froin for honest men to board in the same house with these which judgment this appeal is taken. It now decreatures. They are so mean that the air becomes volves on us to determine whether or not, on the case contaminated in which they breathe."

stated in the petition, appellant is entitled to recover. "Boycott Baughman Brothers every day in the It is alleged in the petition that on the 19th day of week.” “Boycott Baughman Brothers because they December, 1885, and for one year preceding that date, are enemies of honest labor." "Boycott Baughman appellees were directors of the banking corporation Brothers' customers wherever you meet them. "The “The City Bank of Houston," actively directing and Lynchburg boys will begin to play their hand on Messrs. controlling its affairs and the conduct of its said busiBaughman's boycotted goods in a short time. The bat ness, and represented themselves and were generally tle will not be fought in Richmond only, but in all and publicly known as such, and well knew and ougbt Virginia and North Carolina will be raised the cry, to have known, and by the use of ordinary care, such *Away with the goods of this tyrannical firm.'” “Let as it was their duty to bave exercised, might have our friends remember it is the patronage of the Chesa. kuown all and singular the particulars and condition peake & Ohio, Richmond, Fredericksburg & Potomac, of said corporation in respect to the matters hereinRichmond & Danville, and Richmond & Alleghens after mentioned, at the time when they severally railroads that is keeping Baughman Brothers up." transpired and took place. That during the period "We are sorry to see the Exchange Hotel on the black aforesaid the said defendants, who were all well and list. There will be two thousand straugers in this publicly known as possessed of remarkable business city in October, none of whom will patronize a hotel capacity, carried on the business of said bank, and or boarding house whose name appears on that list." held it out to the public as of undoubted financial "The boycott on Baughman Brothers is working so ability and deserving of public confidence, and daily good that a man cannot buy a single bristol-board and continuously caused to be published, by their aufrom the 'rat' firm without having his name put upon thority and direction, in the interest and behalf of the black-list.” “The old 'rat' establishment is said bank, advertisements in the Houston Daily Post, about to cave in. Let it fall with a crash that will be a daily newspaper and journal of general and wide a warning to all enemies of labor in the future.”

circulation throughout the State of Texas and else. It was proved that the conspirators declared their where, published in said city of Houston; and in the

where, published in said city of Houston; a set purpose and persistent effort to crush Baughman

city directory of the city of Houston, a printed book Brothers; that the minions of the boycott committee of reference in general public use; and upon conspicudogged the firm in all their transactions; followed

ous sign-boards kept and exposed to the public at and their delivery wagon; secured the names of their pa

near the door of the place of business of said bank; trons, and used every means short of actual physical

and upon printed letter-heads, upon and with which force to compel them to cease dealing with Baughman

the business correspondence of anid bank was conBrothers, thereby causing them to lose from 150 to 200 ducted, and so generally circulated among all persons. customers and $10,000 of net profit. The acts alleged

including this plaintiff, having any transactions or corand proved in this case are unlawful, and incompati respondence with said bank, advertisements, stateble with the prosperity, peace and civilization of the ments and representations to the effect and in subcountry; and if they can be perpetrated with inipuli

stance that the said bank had a capital of $500,000, ity by combinations of irresponsible cabals or cliques,

was in sound financial conditioni, fully solvent, and there will be the end of government and of society

wholly reliable and well deserving of public trust and itself. Freedom, individual and associated, is the

confidence. That in truth and in fact the said adrerboon and the boasted policy and peculium of our

tisements, statements and representations, so caused country; but it is liberty regulated by law; and the

to be published by said defendants, were, at the time motto of the law is, “Sicutere tuo, ut alienum non

they were severally 80 published, wholly false and unladas."

true, and the said bank at the same time did not hare The plaintiff in error was properly convicted, and

a capital of $500,000, and was vot in sound financial the judgment of the Hustings Court consplained of is

condition, nor solvent, nor reliable, nor in any mauaffirmed.

ner or wise deserving of public trust and confidence: but on the contrary, had long before lost all of its

capital and a greater portion of its funds and assets FRAUD) FALSE REPRESENTATIONS - LIA

which had come into its hands from its creditors, deBILITY OF DIRECTORS.

positors and customers, and was and long had been

hopelessly and irretrievably insolvent; for several TEXAS SUPREME COURT, MARCH 20, 1888.

ears its current expenses had exceeded its earnings:

it affairs had been and continued thereafter growing SEALE V. BAKER.

daily worse ; it had been and then was and thereafter The directors of a bank are personally liable, at the suit of a

continued doing business upon a wholly fictitious depositor juduced to place money in an insolvent bank

credit; and from and after September 20, 1885, if not solely by the false representations of its solvency, made

before that time, all reasonable hope and prospect of by them, whether such representations are made with

retrieving its solvency was utterly gone, and it was a the intent to defraud or not, where the directors, by

mere question of a very short time when the true collthe use of ordinary care, might have kuown that such

dition of said bank would necessarily become notorirepresentations were false.

ous, and it would be compelled to suspend business, NOMMISSIONERS' decision.

to the great loss of its crcditors and customers, and in the exercise of good faith and justice to the public its

business should have been suspended and wound up Scott & Levi, for appellant.

long before the 8th day of December, 1885. That plainHutchinson, Carrington & Sears, for appellees B. F. tiff read and believed said advertisements, statements Weems, R. Brewster and 8. K. McIlhenny.

and representations; and relying thereon and induced

thereby, and not otherwise, he did, on the 8th day of Baker, Botts & Baker, for appellees F. A. Rice and

December, 1885, place in said bank for collection, and W. B. Botts.

to be placed to his credit, a draft for $2,500, which was Goldthwaite & Ewing, for appellee W. R. Baker. collected by said bank, and the proceeds placed to his

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credit therein as a customer of said bauk. That ou the circumstances stated in the second and third of these
19th day of December said bank closed its doors, and questions.
suspended business in a wholly insolvent condition, Directors of banking corporations occupy one of the
whereby plaintiff has sustained damage. It is also most important and responsible of all business rela-
alleged that said “false advertisements, statements tions to the general public. By aocepting the posi-
and representations were caused to be published by tion, aud holding themselves out to the public as such,
Baid defendants with intent to deceive, and they did they assume that they will supervise and give direc-
deceive the public and plaintiff as to the true condition to the affairs of the corporation, and impliedly
tion of said bank, and to iuduce the public and plain contract with those who deal with it that its affairs
tiff to confide in and exteud credit to and make de shall be condueted with prudeuce and good faith.
posits in said bauk." It is further alleged that said They have important duties to perform toward its
advertisemouts, statements and representations were creditors, customers and stockholders, all of whom
published as aforesaid in pursuance of a common de- have the right to expect that these duties will be per-
Bigu on the part of said defendants, in which they all formed with diligence and fidelity, and that the capi-
joined, to give said bauk a fictitious credit, wholly uu tal of the corporatiou will thus be protected against
warranted in fact, and to induce thereby the public misappropriation and diversion from the legitimate
and this plaintiff to extend credit to aud to make and purposes of the corporation. Customers are invited
to keep deposits in vaid bank, and that from and after to business relations, and are induced to accept and
the 20th day of September, 1885, the said defendants act upou such invitation by the representatious that
had no hope, in reason or fact, of restoring said bank | the institution is solvent and owns a certain amount
to solvency, or of iu any wise improving its couditiou; of capital, and that this capital is under the supervis-
aud its further continuance in business was by them ion and control of certain directors. It is the duty of
desigued and effected merely for the purpose of on- | directors to know the coudition of the corporation
abling certain of said directors to save themselves in whose affairs they voluntarily assume to control, and
respect of transactions with said bauk upon which they are presumed to know that which it is their duty
they claimed said bauk was liable, directly or india | to know, and which they have the means of knowing.
directly, to them, and this at the expense and sacrifice | If the representations are false, but relied and acted
of such persons as migat happen to have funds in said on by a customer to his damage, to hold that iu such
bank when such design should be accomplished; and case the directors who made such false representations
all the deposits received and credits contracted by said are uot liable because they were ignorant of the falsity
bank from the said 20th day of September, 1885, until of the representations would be to award a premium
its suspension, were received and coutracted without for negligence in the performance of important and
any prospect of making good or paying such liabilities, almost sacred duties voluntarily assumed, and to
except partially only, and in so far as they might hap license fraud and deception of the most flagrant and
pen to be withdrawn and demanded in ourrent trans- pernicious character. It is a familiar principle of law
actions before the purpose aforesaid of continuing that an action for damages lies against a party for
said business should be accomplished. That the trans making false and fraudulent representations whereby
actions aforesaid, which were designed to be protected another is induced to do an act from which he sus-
and secured by the further coutinuance of the busi- tains damage. If the representations are untrue, it is
ness of said bank, consisted of pretended loans of immaterial that they may have been made without
money and accommodation paper by the said William fraudulent intent, and it is sufficient that they were
R. Baker and Robert Brewster and S. K. McIlhenny, made to the general public if the appellant was in-
and by the Mollheuny Company, a corporation | dnced thereby to deposit money in the bank. We
whereof the said S. K. McIlhenny was and still is the think it can make no difference as to the liability of
president, manager and principal stockholder.

appellees that they made the representations as direc-
For the purpose of promoting conciseness and sim- tors of the corporation.
plicity we formulate the questions involved in this We proceed now to notice some of the authorities
appeal as follows: (1) Are the directors of a banking which we think support our conclusions.
corporation personally liable, at the suit of an india | Bigelow, in his work on Estoppel, 538, after review-
vidual depositor, for damages sustained by reason of ing many authorities, states the rule as follows: “In
the insolvency of the corporation, when the depositor accordance with the principles in these cases, it is
is induced to place money in the bands of the corpora held that directors of corporatious, being bound to
tiou solely by represeutations of solvency made to the know the proceedings of the body, cannot escape the
general public by the directors, who ought to have effect of representations made by them concerning the
kuowii, aud by the use of ordinary care, such as it was acts of the corporation, by the allegation of igno-
their duty to havo exercised, might have knowu that rance."
such representations were false? (2) Are such direc In Field Corp., $$ 170-174, inclusive, it is said:
tors so liable to such depositor wheu such false repre- “Where the directors of an insurance company had
gentations are knowingly made with intent to defraud fraudulently caused false statements to be officially
the publio generally? (3) Are such directors so liable made as to the condition of the company, it was held
when such false representations are made in pursu that they were personally liable to a party who had
ance of a fraudulent combination and commou design suffered damage thereby, The directors are generally
upou their part to give to the corporation a fictitious only bound in the management of the affairs of the
credit, that the business might be coutinued for the corporation to use reasonable diligence and prudenco
purpose of enabling such directors to collect certain --that is, to such diligence and prudence as men usu-
pretended loans claimed to have been made by them ally exercise in the management of their own affairs
to the corporation? If either of these questions is au of a similar nature; and if they act in good faith, they
swered in the affirmative, it follows that the court are not personally responsible to stockholders for a
erred in sustaining the demurrers, and the judgment loss that may be sustained thereby. But a director
must be reversed. After a more than ordinarily care. may be liable in damages for his fraudulent act. And
ful investigation, we 'conclude that each and all of it has been held that a director is persoually responsi-
them must be answered affirmatively, which dispeuses ble, not only for fraud and willful neglect, but also for
with the necessity for a separate discussion of each; his negligence, especially gross negligence. It will be
for, if the appellees are liable under the circumstances apparent from what has been said that the relation
stated in the first, a fortiori they are liable under the not only of principal and ageut exists between the

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corporation and the directors, but also the relation of himself of what would appear by an inspection of the trustee and cestui que trust exists between them and books of the institution of which he was one of the the stockholders and creditors. Accordingly they | ostensible managers; and he cannot urge a want of have no right to enter into or participate in any com- | notice arising from a neglect of duty." bination, the object of which is to divest the company The case of Morse v. Swits, decided by the Supreme of its property and obtain it for themselves to the Court of New York, and reported in 19 How. Pr. 286, prejudice of members or creditors. Nor are they en- | was an action by a stockholder against the directors titled to any share of capital stock or any dividends of of a bank to recover of them personally damages for a profits, until its creditors are paid. This doctrine false statement published concerning the affairs of would of course be applicable in all cases of fraudu- the bank, by which the plaintiff was induced to purlent or wrongful disposition of the corporate funds or chase stock of the bank. Gould, J., delivering the property by directors; for as agents and trustees of the opinion of the court, says: "I think the tendency of corporation, as well as the stockholders and creditors, all the later decisions in this country and in England they would be bound to perform their duties and ad- | is in favor of extending the liability of every one who minister the trust in good faith. The fiduciary char makes a public representation which he knows to be acter of directors referred to is such that the law will | false, and upon faith in which any one has been led not permit them to manage the affairs of the corpora into a business transaction whereby ho suffers dantion for their personal and private advantage when age. I do not understand that it is at all necessary to their duty would require them to work for and use the right of action that the representation should have reasonable efforts for the general interest for the cor been intended for the party sustaining the loss, or in poration and its stockholders and creditors. The con- | any way addressed to him. If it be made openly and fidence thus reposed in them cannot be thus abused 1 publicly, so that it might well come to bis ears, and with impunity, and they cannot use their position to be acts upon it, the party making it shall answer to promote their own interest, in respect to any thivg bim for his damages. He shall not be at liberty to sow thus intrusted to them to the prejudice of creditors or falsebood broadcast without being responsible for the other members."

loss it causes. The falsehood may have been made In Morse Banks, 131, et seq., it is said: “ Whatever for one purpose and published for that; but being knowledge a director has or ought to have officially, publisbed, the public, or any individual of the public, he has or will be conclusively presumed at law to have has the right to believe it. It must have been the inas a private individual. Thus a director is affected tention of the persons publishing it that it should be with notice of the condition and transactions of the believed. And if believing it, any one of the public bank. If the bank is insolvent, or if it offers him for | acts on that belief, the makers and publishers of the parcbase notes which could only be legally sold by au- | falsehoods are to be held liable for the consequences thority of a directorial vote which has not been given, they have caused." See authorities cited in note at he is affected with knowledge of the insolvency and of | end of this decis the illegality of the notes." Lyman v. Bank, 12 How. 1 The case of Society v. Underwood, 9 Bush, 617, was 225. The same author, p. 133, says: “It bank direc- an action against the directors of a bank to recover to tors do not manage the affairs and business of the them personally damages for loss of deposits wrongbauk according to the directions of the charter and in fully converted, and it was there said: “The question good faith, they will be liable to make good all losses here presented is whether the directors, who had which their misconduct may inflict upon either stock knowledge of these alleged wrongful sales, can be held holders or creditors, or both. They may be held to to answer personally for the deposits so converted. account to an injured party in a court of chancery, or Appellees insist that they cannot be so beld because they or any one of their number who shared in the of want of privity between the depositors and themwrong doing may be sued at law for damages."

selves. They concede that for gross negligence or mislo 3 Suth. Dam.587, 588, it is said: "If the person mak management upon their part, resulting in loss to the ing the representations which are material, and which bank, they may be held to account to it; but urge that he intends should influence another, knows them to | inasmuch as their undertaking was to the corporabe false, the case is clear. Some question has been tion, they can be proceeded against by it alone, and raised whether positive representations, made without that appellants must look to the bank, and not to knowledge, and believed to be true by the party mak them. This position is plausible, but it cannot, in our ing them, will sustain an action for damages in the opinion, be maintained. Bank directors are not mere nature of deceit. But the doctrine which seems sup agents, like casbiers, tellers and clerks. They are ported by the great weight of authority is, that it a trustees for the stockholders, and as to their dealings person states as of his own knowledge material facts with the bank, they not only act for it and in its name. which are susceptible of knowledge to one who relies but in a qualified sense are the bank itself. It is the and acts upon them as true, it is po defense to an ac- duty of the board to exercise a general supervision tion for deceit that the person making them believed over the affairs of the bank, and to direct and control them to be true. The falsity and fraud consist in rep. the action of its subordinate officers in all important resenting that be knows the facts to be true of his own transactions. The community have a right to assume knowledge when he bas not such knowledge. It is that the directory does its duty, and to hold them vot necessary that the false representations be made perkopally liable for neglecting it. Their contract is to deceive the plaintiff in particular.”

not alone with the bank. They invite the public to In 3 Wait Act. & Def. 436, it is said: “It has been deal with the corporation, and when any one accepta laid down as settled law that if a party makes repre

their invitation, he has the right to expect reasonable Bentations in such a manner as to import a knowledge diligence and good faith at their bands; and if they in him of facts, while in fact he has no knowledge of fail in either, they violate a duty they owe, not only the facts, and the representations are made with tbe to the stockbolders, but to the creditors and patrons intent that another sball rely on them, and these rep 1 of the corporation." resentations turn out to be false, it is as much a fraud The case of Bartholomeio v. Bentley, 15 Ohio, 666, as if the party making them knew them to be untrue.”

was a suit by an individual creditor of an insolvent See also Kerr Fraud & M. 111, 324, 325.

bank against the officers of the bank to make them In Gillet v. Phillips, 13 N. Y. 117, it is said : “By personally liable for losses sustained by the plaintiff accepting the office of director be assumed a duty to

by reason of his relying and acting upon false reprethe stockholders and creditors of the bank to inform sentations made by the defendants. It is there said:

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“It may be regarded as a well-settled principle that separate and distinct from that sustained by the others,
for every fraud or deceit which results in consequen- and that the action was well brought against tbe de-
tial damage to a party he may maintain a special ac- fendants.
tion in the case. The principle is one of natural jus- The case of Morgan y. Skiddy, 62 N. Y. 325, was an
tice long recognized in the law. And it matters not, action brought by a purchaser of stock of a corpora-
80 far as the right of action is concerned, whether the tiou against the diriсtors personally to recover the
means of accomplishing the deception be complex or money paid for the stock, upon the ground that plain-
simple, a deep-laid scheme to swindle or a direct false tiff had been induced to purchase the stock by false
hood, a combined effort of a number of associates, or statements made in a prospectus issued by the defend-
the sole effort of a solitary individual, provided the ants. It was said: “If the plaintiff purchased the
deception be effected, and the damage complained of stock relying upon the truth of the prospectus, he has
be the consequence of the deception. A valid act of a right of action for deceit against the persons, who
incorporation, or an invalid or pretended right to ex with knowledge of the fraud and with intent to de-
ercise corporate franchises, is alike powerless to se- ceive, put it in circulation. The representation was
cure the guilty from the consequences of their fraudu made to each person comprehended within the class
lent conduct, when it has been knowingly resorted to of persons who were designed to be injured by the
as the mere means of chicane and imposition, and prospectus, and when a prospectus of this character
used to facilitate the work of deception and injury. has been issued, no other relation between the parties
Were it otherwise, it would be a reproach to the law. veed be shown except that created by the fraudu-
If the defendants, with design to defraud the public lent and wrongful act of defendants in issuing or cir-
generally, have knowingly combined together, and culating the prospectus, and the resulting injury to
held forth false and deceptive colors, and done acts the plaintiff. It is hardly necessary to say that a di-
which were wrong, and have thereby injured the rector of a company who knowingly issues or sanc.
plaintiff, they must make him whole by responding to tions the circulation of a false prospectus, containing
the full extent of that injury, and they cannot place untrue statements of material facts, the natural teni.
between him and justice, with any success, the char dency of which is to mislead and deceive the commu-
ter of the bank, whether it be valid or void, forfeited, nity, and to induce the public to purchase its stock, is
or in case. * * * Nor is it material that there responsible to those who are injured thereby. Mere
should have been an intention to defraud the plaintiff exaggerated statements of the prospects of a new en-
in particular. If there was a general design to defraud terprise will not subject those who make them to lia-
all such as could be defrauded by taking their paper bility; but no material misstatement or concealment
issues, it is sufficient, and the plaintiff may maintain of any material fact ought to be permitted. The di.
his suit if he has taken the paper and suffers from the rectors of a company are supposed to know the facts
fraud. It is first said that to allow billholders who touching its condition and property, and their state-
have been defrauded to sue the members of the com- | ments in respect to its officers naturally attract pub-
pany individually at law will produce endless litiga lic confidence. If they fraudulently unite in an at-
tion; and when applied, the remedy cannot do equal tempt to deceive the public, and by false statements
justice to all the creditors or to the members of the of facts to give credit and currency to its stock, it is
company. It may be that numerous suits will be but simply justice that they shall answer to those
prosecuted. * * * And yet the doctrine that be- who have been deluded into giving confidence to
cause they have cheated many they are safer than they them.”
would be if only one man had suffered, does not at The case of Shea v. Mabry, 1 Lea, 319, was an action
tain in courts of justice. Again it is said the fund by a judgment creditor of a corporation against the
sought is a trust fund, and a bill in chancery is the directors to recover the amount of the judgment,
proper remedy. There would be much propriety in upon the ground that the directors had misapplied or
the position were it in point of fact true that a party converted the assets of the company. It was there
who has been defrauded by the act of another who held that “directors of corporations are not mere fig-
has no redress save out of a fund composed solely of ure-heads. They are trustees for the company, for
the proceeds of the imposition. In that case strict the stockholders, and for the creditors. The must not
equity might require that all those whose injuries bad only use good faith, but also care, attention and cir-
been the source of the fund should share equitably incumspection in the affairs of the company, and par-
it. But the rule that a person sustaining damage by ticularly in the safe-keeping and disbursement of
fraudulent acts of another can only look to a particu- | funds committed to their custody and control. They
lar fund of the wrong-does for redress never existed must see that the funds are appropriated, as intended,
any where."

to the purposes of the trust; and if they misappro-
The cases of Cross v. Sackelt and Ward v. Sackelt, 2 priate them, or allow others to divert them froni these
Bosw. 615, were actions brought by purchasers of purposes, they must answer for it individually. Ig-
stock of a corporation to recover a director's money norance will not excuse when they have the means of
paid for the stock, upon the ground of false represen- | knowledge."
tations made by the directors, in a prospectus and The case of Delano v. Case, decided by the appel-
other advertisements, as to the value of the stock. In late court of Illinois, and reported in the Bankers'
these cases it was held that the actions could be main | Maguzine for March, 1886, page 686, was an action by a
tained, and that “there is no wrong or fraud which general depositor against directors of a bank for per-
the directors of a joint-stock company, incorporated mitting it to be held out to the public as solvent when
or otherwise, can commit, which cannot be redressed in fact it was at the time insolvent. It was there
by appropriate and adequate remedies."

held that the directors were individually liable to the The case of Cazeaux v. Mali, 25 Barb. 578, was an depositor. The judgment of the appellate court was action brought by a stockholder of a corporation affirmed by the Supreme Court in June, 1887. 12 N. E. against the officials and directors to recover of them | Rep. 676. personally the loss sustained by plaintiff by deprecia! The case of Edgington v. Fitzmaurice, decided by tion in the value of stock, caused by the fraudulent the Court of Appeal of England in March, 1885, and issue of stock beyond the authorized amount. It was published in the Central Law Journal of January 22, there held that the action was properly brought by the 1886, page 81, was an action by a purchaser of debenplaintiff in his own name, without joining the other tures of a corporation against the directors to recover stockholders; the injury to each stockholder being of them personally damages for false representations

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