Argument for Plaintiffs in Error.

206 U.S.

Bank v. United States, 107 U. S. 448; Leisy v. Hardin, 135 U. S. 100; Bank v. Dearing, 91 U. S. 29.

If the judgment can be sustained on account of fraud and deceit in the making and publishing of the reports, the directors who attested the reports cannot be deprived of the protection given to them as directors of a national bank by § 5239 of the national banking act, which grounds their liability upon guilty knowledge of acts done in violation of said law.

The reports were made and attested as required by § 5211, Rev. Stat., being a part of the act governing national banks for the purpose of showing the condition of the bank. It was made the duty of the managing officers of the bank who prepared the reports to verify the same by their oaths, and the law required that when thus made and verified, they should then be attested by three directors.

These actions are personal actions against the individual directors for damages growing out of their alleged violation of their duties under the law and the by-laws of a national bank.

By 5239, the directors were made personally liable for damages sustained by the bank, or any other person where they "knowingly violated, or knowingly permitted" the officers to violate any of the provisions of the national banking act.

The protection of the law governing the liability of the defendants for acts done in their official capacity is a substantial right, and the courts should be astute not to permit devices to become successful which are used for the very purpose of destroying that right. Arapahoe Co. v. Railroad Co., 4 Dill. 277.

The state courts are as firmly bound by the laws of Congress as are the Federal courts.

The Constitution and laws of the United States are as much a part of the law of each State and as binding upon its authorities and people, as its own local constitution and laws. Farmer's National Bank v. Dearing, 91 U. S. 29.

206 U. S.

Argument for Defendants in Error.

Mr. Lionel C. Burr and Mr. John J. Thomas, with whom Mr. Charles L. Burr, Mr. Richard S. Norval and Mr. William B. C. Brown were on the brief, for defendants in error in this case and in Nos. 231, 232 and 233 argued simultaneously herewith:1

An action for deceit may be maintained against the directors of a bank by depositors induced to become such by false representations or statements of the bank's condition made by such directors.

The directors of a bank who publish false statements of its condition thereby represent that the matters of fact therein stated are within their personal knowledge, and, if they have no such knowledge, the statement is knowingly false.

While there must be scienter, this does not mean actual knowledge, and where the representation is of a fact, made by one in position to know, whose duty it is to know, or where it would constitute gross negligence not to know, such knowledge will be conclusively presumed. Prescott v. Haughey, 65 Fed. Rep. 653; Gerner v. Thompson, 74 Fed. Rep. 125; Bank of Hillsboro v. Thomas, 28 W. L. B. (Ohio) 164; Solomon v. Bates, 118 N. Car. 312; Bartholomew v. Bentley, 15 Ohio, 659; 45 Am. Dec. 596, 598.

As to the duty of the directors to know, see: Auten v. Bank, 174 U. S. 147; Briggs v. Spaulding, 141 U. S. 141; McClure v. People, 27 Colorado, 371; Hall v. Henderson, 126 Alabama, 495.

Section 5239, Rev. Stat. U. S., neither abrogates nor modifies the common law action of deceit.

Sutherland on Stat. Const., § 399, 1st ed., or § 572, 2d ed. Sedgwick on Construction of Stat. and Constl. Law, 323.

Where the statute creates the right and the remedy, the statutory remedy must be followed, but, where the right existed at common law and an additional statutory remedy is given, the latter is regarded as cumulative. People v. Craycroft, 2 California, 243.

1 See p. 181, post.

VOL. CCVI-11

Remedies are cumulative where the statute gives a remedy with a penalty, a previous common law remedy existing. Dygert v. Schenck, 23 Wend. 445; Swarthout v. N. J. Steamboat Co., 48 N. Y. 209.

Where the legislature fails to provide a remedy for an injury occasioned by public use, the injured party will be remitted to his common law remedy. Hooker v. New Haven, &c. Co., 14 Connecticut, 146.

Where a statute gives a right and provides no remedy, the party may pursue any remedy of the common law adapted to the nature of the wrong or injury. Maple v. John, 42 W. Va. 30.

Although the petitions should state matters which would constitute a cause of action under the national banking act (which we deny) they clearly state a common law action of deceit, which, being supported by the evidence, is sufficient to sustain the judgments.

Assuming that the petitions do contain a cause of action for negligence, they then contain two causes of action, of one of which the state court has exclusive jurisdiction; the other raises a Federal question. If defendants desired to have these causes separately stated and numbered they should have filed a motion to that effect, and having failed to do so they will be deemed to have waived it. Exeter National Bank v. Orchard, 43 Nebraska, 581.

If a petition states facts sufficient to constitute an action. for deceit, and is therein sustained by the evidence, the judgment will be sustained, although the petition also contains a Federal question. Hammond et al. v. Johnston et al., 142 U. S. 73; Nav. Co. v. Raybold, 142 U. S. 636; Cook County v. Calumet, &c. Co., 138 U. S. 157; De Saussure v. Gaillard, 127 U. S. 216; Johnson v. Risk, 137 U. S. 300.

MR. JUSTICE WHITE delivered the opinion of the court.

This writ of error is prosecuted to secure the reversal of a judgment of the Supreme Court of the State of Nebraska

affirming one entered by a court of Seward County, in that State, upon a verdict of a jury awarding damages against the defendants below, plaintiffs in error here, because of certain acts charged to have been done by them as officers and directors of the Capital National Bank of Lincoln, Nebraska. We briefly summarize a statement contained in the opinion of the court below concerning a prior action between the same parties. That action, and three others of like character, brought by different plaintiffs, were begun in a county different from that in which the present one was commenced, and recovery was sought, with one exception, from those who were defendants below in this case, of the sum of a loss occasioned by the insolvency and suspension of the Capital National Bank, a corporation organized under the national bank act. The actions referred to were removed into a Circuit Court of the United States, and in each a motion to remand was overruled, and in one of the cases (brought by Thomas Bailey) the Circuit Court sustained a demurrer to the petition and dismissed the cause, and the judgment so doing was affirmed by the Circuit Court of Appeals. 63 Fed. Rep. 488. The plaintiffs in the other cases thereupon dismissed their actions and commenced new ones, as also did Bailey, in Seward County, of which the case before us is one. The same persons, who were impleaded in the prior actions, were made defendants, and in two of the actions one Thompson, a director of the bank, who had not been previously sued, was joined as a defendant. The defendants were sought to be made liable for acts done as officers and directors of the Capital National Bank, although it was not expressly alleged that the bank was organized under the national bank act. Reliance in each action was placed upon alleged untrue written and oral statements and representations of the financial condition of the bank alleged to have been made and published by the defendants, which were fully set out in various forms of expression, but in none of the averments was it specifically asserted that the acts in question were done in consequence of and in com

pliance with the provisions of the national bank act, although the exhibits attached to the petition disclosed the character of the written reports, which were in part relied upon. The state court overruled an application to remove, and a transcript of the record having been filed in the Circuit Court, on motion the action was, by that court, remanded to the state court, upon the ground that the petition was "clearly based, not upon the provisions of the national banking act, but upon the liability claimed to arise under the principles of the common law." See Bailey v. Mosher, 74 Fed. Rep. 15.

An amended petition was filed, changing somewhat the averments originally made, and supplementing the same by new allegations. After a considerable lapse of time a second amended petition was filed. This latter enumerated many acts of negligence and mismanagement in the conduct of the affairs of the failed bank charged to have caused its insolvency, in addition to the averments which had been made in the original petition. The defendants demurred on the ground of want of jurisdiction, because the result of the pleading as amended was to demonstrate that the whole cause of action relied upon was based upon the violation by the defendants of provisions of the national bank act, and because under that act no cause of action in favor of the plaintiff was stated. The day the demurrer was filed the action was removed by the defendants into the Circuit Court of the United States. That court overruled a motion to remand, (see Bailey v. Mosher, 95 Fed. Rep. 223,) and subsequently the court sustained the demurrer and dismissed the action. Reviewing the action of the Circuit Court, however, the Circuit Court of Appeals held that in any event the removal had been made too late, "and that the judgment of the lower court dismissing the plaintiff's case was rendered without lawful jurisdiction over the case." 107 Fed. Rep. 561. As a result the case went back to the state court, and in that court the demurrer to the second amended petition was argued and overruled.

There was judgment against Stuart, one of the defendants,