Winchester v. Mabury

McFARLAND, J. This is an action at law brought by the plaintiff as assignee of some of the creditors of the Savings Bank of San Diego County against Mabury, Howard, and Witherby, directors of said bank, for certain sums of money alleged to have been misappropriated by the defendant Bryant Howard, who was president, treasurer, et cetera, of the bank, for which it is alleged Mabury and Witherby were liable under the latter clause of section 3, article XII, of the constitution of the state. That clause reads as follows:

“The directors or trustees of corporations and joint stock associations shall be jointly and severally liable to the creditors and stockholders for all moneys embezzled or misappropriated' by the officers of such corporation or joint stock association during the term of office of such director or trustee.”

The defendant Mabury demurred to the complaint upon various grounds; the demurrer was sustained by the court below, and judgment was rendered for defendants, and from this judgment the plaintiff appeals.

It is conceded that the alleged liability of the respondent rests entirely upon the clause of the constitution above quoted. There has never been any legislation with respect to said constitutional provision. Ho legislative act has been passed touching any character of action that may be brought under the provision, or defining its meaning, or referring to it in any manner whatever. Conceding, therefore, for the purposes of this-case, that the clause of the constitution in question is self-exe[524]eating, and requires no legislative aid in carrying it into effect, its meaning, the parties who may take advantage of it, and the form of action by which its provisions may be enforced, are all matters of judicial construction. Whether or not the averments in the complaint constitute “misappropriations” within the meaning of the constitution, and as construed in Fox v. Hale etc. Co., 108 Cal. 422, et seq., need not, under our view of the case, be here determined. There are also some other questions raised by the demurrer which are not necessary to be here discussed. It is stated in the brief of appellant that the court below sustained the demurrer upon the ground that the action should be one in equity and for. the benefit of all the cred-' itors; and we think that the demurrer was properly sustained on that ground. The clause in question provides that in case of embezzlement or misappropriation the directors shall be liable “to the creditors and stockholders” for moneys embezzled or misappropriated; and the phrase “the creditors” evidently means all the creditors. For the purposes of this case we need not consider the other phrase “and stockholders”; the moneys embezzled or misappropriated constitute a fund for the benefit of, at least, all the creditors who have been injured by the wrongful acts, and the only proper remedy in such a case is a .bill in equity where all the creditors are parties, or are represented, and in which there can be an accounting and equities adjusted, after all the facts have been ascertained.