The'opinion of tbe court was delivered, January 3d 1870, by
Read, J.The decision of this case depends upon a fair construction of tbe Act of tbe 16th April 1850, "regulating banks. This act, with its kindred legislation, has been practically swept away by tbe establishment of national banks, and deprives the case of tbe interest which would arise if it were to form a precedent for tbe future.
By tbe42d section, “Tbe term insolvency used in this act shall be construed to apply to tbe said bank, when it is compelled to make an assignment according to tbe provisions of this act;” and by tbe 41st section, “ The insolvency of every bank hereafter incorporated shall bei deemed fraudulent, unless its affairs shall *153appear, upon investigation, to have been fairly and legally administered, and with the same care and diligence that agents receiving a compensation for their services are hound by law to observe.”
By the 40th section, “ If the insolvency of the said hank be occasioned by the fraudulent conduct of the directors of the said bank, the directors by whose acts or omissions the insolvency was in whole or in part occasioned, and whether then in office or not, shall each be liable to the stockholders and creditors of the said bank for his proportional share of the losses, the proportion to be ascertained by dividing the whole loss amongst the whole number of directors liable for its reimbursement.”
Within ten days after the assignment, it is the duty of the directors for the time being to file in the office of the prothonotary, on oath or affirmation, a full statement of its affairs, containing the particulars specifically mentioned in the 42d section.
This statement must be immediately presented to the court by the directors, for examination, and if the court is not in session, then upon the first day of the session of the court thereafter;— “ and it shall thereupon be the duty of the court to appoint three competent auditors, who shall be sworn or affirmed to make a strict investigation of the affairs of such bank, and of the accuracy and fairness of the statement thus presented to the court, and to perform their duties with fidelity.”
By the next section, “ The auditors thus appointed shall have power to compel the production of books and papers, and to subpoena and examine the directors and officers of such bank, and generally to have and exercise all the authority now conferred on auditors by existing laws; and after having performed their duties, they shall report to the court the result of their investigations ;— and in case they report that the insolvency was fraudulent, it shall be their duty also to ascertain and report the amount due from the several directors, according to the liabilities imposed by this act.”
The provisions in the next section clearly contemplate the single case of a report by the auditors of a fraudulent insolvency, with the amount due by the directors. In such case the court proceeds to examine the matters contained in the report, “ and shall determine whether the insolvency of such bank was fraudulent or otherwise,” or they may direct an issue “ to try the fact of fraudulent insolvency;” and if the judgment of the court, upon the report of the auditors, or upon the verdict rendered upon such issue, shall be that the insolvency of such bank was fraudulent,” [it will be observed the sole inquiry here is — was the insolvency fraudulent ?] “ then and in such case the said court shall proceed to decree against the directors the amount due from each, according to their several liabilities.” It is clear that an issue only can determine the question of fraudulent insolvency, and the court *154must resort to the report of the auditors for the amount due by the directors, and their several liabilities, and for this purpose the court is given the same powers as are by law vested in them in cases of trust.
It is clear therefore that this whole section has no application except where the auditors report a fraudulent insolvency, and the amount due by the directors. Where the report is that the insolvency was not fraudulent the whole proceeding is at an end.
The Erie City Bank was organized in August 1853, and continued in active business till in December 1856, when it suspended. It continued in this condition till in April 1858, when other and distinct parties undertook to resuscitate it, and had its name changed to the Bank of Commerce. Under this name it continued to do business until the 20th or 21st of November 1860, when it suspended, and on the 10th of January 1862 made an assignment of its effects to S. A. Davenport, which was approved by the court, and a statement of the bank’s condition, and an inventory and appraisement of its assets, were afterwards filed. They were referred to three auditors, and in September 1863 a detailed and elaborate report was made by two of the auditors, the other one dissenting from its conclusion, in which they say they are called upon to characterize the management from November 1854 to its suspension as extremely prejudicial to its interests and disastrous to its prospects, and also “ that since the time of its resumption in 1858 it appears to have been carefully managed.”
Not one word here as to fraudulent insolvency, and of course not a word as to any amount due by the directors. Here, of course, by the terms of the act, the case really ended.
It rested until September 1864, when without authority of law the court, on the application of the assignee, ordered an issue, in which the assignee and the present named defendants were to be the parties, to try the fraudulent insolvency of the Bank of Commerce.
The. defendants objected to the whole proceeding, but without avail. The docket entry styles it — “ Issue to try the fraudulent insolvency of the Bank of Commerce from the auditors’ report.”
On the trial of the issue, the defendants offered in evidence the report of the auditors, which was rejected by the court, in which we think there was error, and as the issue grew out of the report, it would seem to have been a proper part of the plaintiff’s case, and as he did not choose to produce it, it was the right of the defendants to bring it before the court.
The issue was — was the insolvency fraudulent ? — and not whether any of the defendants were culpable or guilty; and there can be legally no finding implicating all or any of the defendants.
The court certainly erred in supposing an investigation not necessary, in order to ascertain whether the insolvency was fraud*155ulent. The appointment of the auditors shows this, for they are “ to make a strict investigation of the affairs of such bank,” “and they are to report the result of their investigation,” and they are not to assume the insolvency to be fraudulent, but, on the contrary, they are by strong implication forbidden to do so.
So when the court “ proceeds to the investigation of the matters contained in said report,” and shall determine whether the insolvency of such bank was fraudulent or otherwise,” it does not assume it to be so, but to depend upon the unbiassed judgment of. the court. So when an issue is directed, the report is naturally the subject of investigation by the jury, and the question is to be tried without any primá facie imputation of fraud. There is therefore an error running through the answer of the court to the second and third points of the defendants, in asserting an investigation is only to be in rebuttal, when the investigation must be made to show whether it was fraudulent or otherwise.
Upon the whole we think there was error in directing the issue, and that all the proceedings subsequent to the report of the auditors must be reversed. .
Agnew, J., filed a dissenting opinion, in which Williams, J., concurred.