Although the Comptroller of the Currency was empowered by law to close and appoint a receiver for any national bank known to be insolvent, at the time of the failure of this institution a peculiar construction was placed upon the provision in Section 5239 of the Revised Statutes of the United States by the Comptroller's office. This section authorizes the Comptroller to institute a suit to forfeit the charter of any national bank whose directors knowingly violate or knowingly permit to be violated by any of the officers or agents of the association any of the provisions of the national banking laws; and held every director who participated in or assented to such violations liable in his personal or individual capacity for all damages which the association, its shareholders, or any other person may have sustained in consequence thereof. It was then held that the individual liability of the directors could be enforced only after the charter of the association had been declared forfeited by a United States Court. Suit was therefore instituted in the name of the Comptroller to dissolve this corporation after it had been practically dissolved by being placed in the hands of a receiver. A decree was issued by the United States Circuit Court for the Southern District of Ohio, on July 12, 1887, declaring the charter of the association forfeited, and upon the basis of this decree suit was brought by the receiver against every director of the bank implicated in the violations of law complained of.
Since that time the courts have held that the forfeiture of the charter of a bank in a suit brought by the Comptroller of the Currency for that purpose is not a condition precedent to the maintenance of a suit against directors for damages resulting from violations of law. The course pursued by Comptroller Trenholm, therefore, has not since been followed by the Comptroller's office, and the case of the Fidelity National Bank of Cincinnati is one of the rare instances in which forfeiture of charter proceedings were instituted by the Comptroller of the Currency for violations of law.