National Bank of Auburn v. Lewis. the opposite party. If such was the case, the provision of the statute would be entirely ineffective and useless. So far there was no error in the rulings at the trial. But the answer set up that in the discount of the note that was sued upon the plaintiff usuriously reserved a sum larger than at the rate of seven per cent per annum, to-wit: the sum of $160. On the trial the defendant sought to prove this fact, but the testimony was rejected and an exception thereto taken. The Federal statute (supra) provides that the reserving of usury upon a note shall be held a forfeiture of the entire interest which the note carrries with it. Now when a note is discounted, the amount reserved for the discount is the interest reserved. In most cases it is not then paid. The borrower receives the sum called for by the note, less the amount reserved for the discount. That is not paid until the note is paid. It is interest, and it is interest which the note carries with it. If it be a discount at a usurious rate, it is forfeited by reason of the Federal statute. In a suit on the note, it may not be recovered. It is to be held and adjudged forfeited. The trial court should have allowed the defendant to have put in his evidence, and have found whether the allegation of the answer was true, that the plaintiff reserved, on the making of the loan upon the note in suit, more than at the rate of seven per cent per annum, and whether the note carried that interest with it. The complaint admits that $114 has been paid upon the note. It does not appear as yet how this was applied. As a rule, it would apply to pay interest first. But if it should appear on a new trial that the $114 was paid, and was in fact or by operation of law applied upon the discount reserved, there would still be a balance of interest reserved and carried with the note. These facts will be brought out on a new trial, and the proper applica tion of them made. The judgment should be reversed and a new trial granted, with costs to abide event. All concur. Brinckerhoff v. Bostwick. BRINCKERHOFF v. BOSTWICK. (88 N. Y. 52.) Directors — negligence—action for — parties — leave to sue—jurisdiction. An action may be brought by a receiver of a National bank against its directors to recover damages sustained by their gross negligence. If the receiver is one of the directors, such action may be maintained by the stockholders, or when they are numerous, by one or more in behalf of all. It is not necessary to allege in the complaint a direction from the Comptrol. ler, or a demand upon him and a refusal to direct the receiver to bring the action, or a refusal of the receiver to sue. Such an action may be brought in a State court. The bank, and the receiver, as such, are necessary parties defendant to such an action. A PPEAL from judgment in favor of defendants, upon an order sustaining a demurrer to plaintiff's complaint. Reported below, 23 Hun, 237. The opinion shows the case. E. A. Brewster, for appellant. John Thompson, for respondents. RAPALLO, J. The complaint charges, among other things, that the defendants Bostwick and others, who were directors of the National Bank of Fishkill, neglected to perform their official duties as such directors, and negligently permitted the money, property and effects of the bank to be stolen, wasted and squandered. That they negligently permitted various persons and corporations who were insolvent and irresponsible to overdraw their accounts to a large amount without security, and negligently permitted the money of the bank to be loaned to irresponsible persons and corporations, without adequate security, whereby said money was lost; that they employed a cashier who was dishonest, unfaithful and incompetent, all of which was known to them; that they neglected to take and keep good and sufficient security for the performance of the duties of said cashier, and of the president and other officers of the bank, and that they so negligently and carelessly conducted its affairs that its entire capital, surplus, property Brinckerhoff v. Bostwick. and effects were lost and the stock rendered worthless, and the stockholders were rendered liable for a large sum of money on account of the unpaid debts of the bank. The plaintiff avers that he was the holder of sixteen shares of the capital stock, and that by reason of the negligence and misconduct of said directors, he has sustained damage to the amount of $3,200, and each of the stockholders has sustained damages to the amount of double the par value of the stock held by him. The complaint then sets out the default of the bank in not redeeming its circulating notes, and the appointment by the Comp troller in January, 1877, of the defendant Bostwick as receiver of the bank pursuant to the provisions of the National Banking Act. That such receiver duly qualified and has ever since acted and still continues to act as such receiver, and that before the commencement of this action the plaintiff requested said receiver to bring an action against the said directors for the damages which the bank or its stockholders had sustained by the negligence and official misconduct of said directors, but that he neglected and refused to bring any action against them, or any of them, and that he himself is one of said directors who are charged with misconduct. The action is brought by the plaintiff in his own behalf, and on behalf of all the other stockholders of the bank, and the judg ment demanded is that the damages which the bank and its stockholders have sustained may be ascertained, and that the defendants who were directors of the bank may be adjudged to pay such damages, and that the receiver may collect them for the benefit of the creditors and stockholders, or that the plaintiff may recover his damages and costs, and that the other stockholders who may come in may have such judgment as they are entitled to, etc. The receiver, the bank and the directors are joined as defend ants. The respondents demurred to the complaint on the ground of want of jurisdiction, improper joinder of parties, want of legal capacity to sue, and failure to show a cause of action. The Supreme Court at General Term held in favor of the plaintiff on the question of jurisdiction, and the sufficiency of the statement of the cause of action, but sustained the demurrer on Brinckerhoff v. Bostwick. the ground that the demand upon the receiver, and his refusal to bring an action against the delinquent directors, was insufficient to authorize the plaintiff to sue as a stockholder; that the receiver had no authority to prosecute except under the direction of the Comptroller of the Currency, and that in refusing to bring an action he acted in accordance with his duty, the court at the same time expressing the opinion that an improper refusal of the Comptroller of the Currency to prosecute and to direct the receiver to prosecute would entitle the stockholders to sue in their own behalf, making the corporation a party defendant. The defendants contend that the Comptroller of the Currency and not the receiver was the proper party to bring the action. It seems to us that the case must turn upon this question. If the defendants are right in their position that the right of action is in the Comptroller of the Currency, the stockholders, as a matter of course, could not sue except in case of his refusal. But if the receiver represents the bank, and is the proper party to prosecute, then we think enough is shown to justify the stockholders in applying directly to the court for relief. The causes of action set forth in the complaint are losses and misapplication of the funds of the bank through the negligence and misconduct of its directors. For these losses the bank, if still exercising its corporate functions, would have a claim upon the guilty directors which it could enforce by action; but if it refused to prosecute, or if it still remained under the control of the very directors against whom the action should be brought, the stockholders would have a standing in a court of equity to sue in their own names, making the corporation a party defendant. Robinson v. Smith, 3 Paige, 222, 233; 24 Am. Dec. 212; Greaves v. Gouge, 69 N. Y. 154; Ang. & Ames Corp., § 310. See review of cases in Heath v. Erie Ry. Co., 8 Blatchf. 347, 393. Section 5234 of the United States Revised Statutes provides that upon the appointment of a receiver by the Comptroller, such receiver shall, under the direction of the Comptroller, take pos session of the books, etc., of the association, and collect all debts, dues and claims belonging to it, and pay the money collected by him to the Treasurer of the United States. The receiver is the only person authorized by the act to collect dues and claims beVOL. III-75. Brinckerhoff v. Bostwick. longing to the bank. Whether special instructions from the Comptroller to the receiver are necessary to enable the receiver to collect or sue for each particular claim, it is not very material, in our view of the case, to inquire. It is sufficient for all present purposes to show that no person but the receiver is empowered by the act, or can be directed by the Comptroller to collect claims belonging to the bank. That the claims set out in the complaint belonged to the bank and could have been enforced by it but for the receivership is too plain to require argument. The claim that the right of action was vested in the Comptroller rests wholly upon the provisions of section 5239 of the Revised. Statutes of the United States, whereby it is enacted that "If the directors of any National banking association shall knowingly violate, or knowingly permit any of the officers, agents or servants of the association to violate any of the provisions of this title, all the property, privileges and franchises of the association shall be thereby forfeited. Such violation shall however be determined and adjudged by a proper circuit, district or territorial court of the United States, in a suit brought for that purpose by the Comptroller of the Currency in his own name, before the association shall be declared dissolved. "And in cases of such violation, every director who participated in, or assented to the same, shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person shall have sustained in consequence of such violation." These provisions are evidently intended to apply to violations by these corporations of the law under which they are organized, and to subject them to the forfeiture of their corporate franchises upon such violations being established by the judgment of a court of the United States. Being organized under an act of Congress, the jurisdiction to declare a forfeiture of their franchises is very appropriately vested exclusively in the courts of the United States, and the Comptroller of the Currency is designated as the officer who shall prosecute for the purpose of having such forfeiture adjudged. It would of course be very inappropriate that such a proceeding should be instituted by a receiver who has only to deal with the assets of the bank, and the requirement that the violation should be adjudged by a court of the United States, at the suit of the Comptroller, is, by the terms of the section, made essential "before the association shall be declared dissolved," but there is nothing in the act which renders it essential for any other |