88

not binding. A cashier does not act as the agent of the bank in answering an inquiry addressed to him by a person as to the business standing of a third person; his act being a mere voluntary statement, and not relating to the business of the bank. 89 Nor does he bind the bank by answering an inquiry by one about to become a surety on the bond of a fellow employé as to the condition of his account, or as to other matters in respect to which it is not a part of his duty to make statements. The bank is not chargeable with representations made by an officer, where he is acting in his own interest and adversely to that of the bank."1

to bind the bank. Walker v. St. Louis Nat. Bank, 5 Mo. App. 214. See "Banks and Banking," Dec. Dig. (Key No.) § 111; Cent. Dig. §§ 269, 270.

88 East River Bank v. Hoyt, 41 Barb. (N. Y.) 441; See "Banks and Banking," Dec. Dig. (Key No.) § 111; 269, 270.

post, p. 341. Cent. Dig. §§

89 First Nat. Bank v. Marshall & Ilsley Bank, 83 Fed. 725, 28 C. C. A. 42; Taylor v. Commercial Bank, 174 N. Y. 181, 66 N. E. 726, 62 L. R. A. 783, 95 Am. St. Rep. 564. See "Banks and Banking," Dec. Dig. (Key No.) § 111; Cent. Dig. §§ 269, 270.

90 United States Fidelity & Guaranty Co. v. Muir, 115 Fed. 264, 53 C. C. A. 56; Lieberman v. First Nat. Bank of Wilmington, 8 Del. Ch. 229, 40 Atl. 382. See, also, Ida County Savings Bank v. Seidensticker (Iowa) 92 N. W. 862.

A president of a national bank has no power, in the ordinary course of business, to certify to the fidelity or integrity of the cashier for the purpose of enabling him to procure a bond insuring his fidelity; and hence the bank cannot be deemed, merely by virtue of the president's relation to it, to have any knowledge of the giving by him of such certificate. American Surety Co. v. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977. Cf. Guarantee Co. of North America v. Mechanics' Savings Bank & Trust Co., 183 U. S. 402, 22 Sup. Ct. 124, 46 L. Ed. 253; Willoughby v. Fidelity & Deposit Co. of Maryland, 16 Okl. 546, 85 Pac. 713, 7 L. R. A. (N. S.) 548, affirmed Cherry v. Fidelity & Deposit Co., 205 U. S. 537, 27 Sup. Ct. 790, 51 L. Ed. 920; Warren Deposit Bank v. Fidelity & Deposit Co. of Maryland, 116 Ky. 38, 75 S. W. 1111. See "Banks and Banking," Dec. Dig. (Key No.) § 111; Cent. Dig. §§ 269, 270. 91 Moores v. Citizens' Nat. Bank, 111 U. S. 156, 4 Sup. Ct. 345,

Torts and Wrongful Acts

92

A private corporation is generally liable for the torts of its servants and agents, committed in the course of their employment, to the same extent as a natural person would be." The questions which are material here relate principally to the torts arising from fraud. In general, it may be said that a bank is liable for fraud of its agent, committed by a false representation for its benefit, when the representation is made as an inducement to a third person in a transaction which is within the scope of the agent's actual or of his apparent authority, unless the person dealing with the agent and injured by the fraud has notice that the transaction or the representation is unauthorized."3 Thus, where a bank, in order to increase deposits or to sell its collateral, through its board of directors makes or causes to be made false statements concerning the financial condition of its customers, to a third person, for the purpose of misleading him, it is liable for deceit if loss results. And where the cashier, in the course of an authorized transaction, makes a false statement of the same character and to the same end, the bank is liable in tort to one injured thereby, although the cashier was not expressly

94

28 L. Ed. 385; State Savings Bank of Ionia v. Montgomery, 126 Mich. 327, 85 N. W. 879; post, p. 339. See "Banks and Banking," Dec. Dig. (Key No.) § 111; Cent. Dig. §§ 269, 270. 92 Clark, Corp. (2d Ed.) 193, 510.

93 Ante, p. 311; Barwick v. English Joint Stock Bank, L. R. 2 Ex. 259. See "Banks and Banking," Dec. Dig. (Key No.) § 112; Cent. Dig. §§ 271, 272.

94 Hindman v. First Nat. Bank, 98 Fed. 562, 39 C. C. A. 1, 48 L. R. A. 210.

The directors of the F. National Bank made four reports to the comptroller of the currency, under the provisions of the National Banking Law, all of which were false. The officers and directors published and distributed to the stockholders of the bank a statement representing that the bank was in a very flourishing condition, whereas in fact it was insolvent, and was known to the officers and directors to be so. The M. Bank, believing these representations to be true, discounted a note for one J., solely upon

95

authorized by the board of directors to make such statement.' So, a bank may be held for conspiracy with others resulting in injury to a third person." While a bank is under no duty to safeguard and supervise a trust account, or to look after the appropriation of the funds when withdrawn,97 if the directors, by failing in their duty to supervise and control, permit the cashier to have complete control over the business, so that he is able for a long time to commit irregularities and misappropriate such funds deposited in his own name personally as trustee, the bank may be held liable for the funds misappropriated; the neglect of directors being responsible for the cashier's opportunity to misappropriate them.98

the security of certain shares of stock of the F. Bank, which ultimately turned out to be worthless. There was no connection or communication between the F. Bank and the M. Bank or J. Held, that the F. Bank could not be held liable to the M. Bank for deceit, since there was no privity between them, and it was not in the power of the officers to bind the bank by representations to a mere stranger to induce him to enter into a transaction in which the bank was not at all interested. Merchants' Nat. Bank v. Armstrong (C. C.) 65 Fed. 932. See "Banks and Banking," Dec. Dig. (Key No.) § 112; Cent. Dig. §§ 271, 272.

95 Hindman v. 57 L. R. A. 108.

First Nat. Bank, 112 Fed. 931, 50 C. C. A. 623, See "Banks and Banking," Dec. Dig. (Key No.) § 112; Cent. Dig. §§ 271, 272.

96 Stewart v. Wright, 147 Fed. 321, 77 C. C. A. 499; Hobbs v. Boatright, 195 Mo. 693, 93 S. W. 934, 5 L. R. A. (N. S.) 906, 113 Am. St. Rep. 709; Johnston Fife Hat Co. v. National Bank of Guthrie, 4 Okl. 17, 44 Pac. 192. See "Banks and Banking," Dec. Dig. (Key No.) § 112; Cent. Dig. §§ 271, 272.

97 Ante, p. 45.

98 Lowndes v. City Nat. Bank of South Norwalk, 82 Conn. 8, 72 Atl. 150, 22 L. R. A. (N. S.) 408. See, also, National Bank of Oshkosh v. Munger, 95 Fed. 95, 36 C. C. A. 659. See "Banks and Banking," Dec. Dig. (Key No.) § 112; Cent. Dig. §§ 271, 272.

NOTICE

85. IN GENERAL-In accordance with the general rule of agency, when, in the course of his employment, an officer or other agent of a bank acquires knowledge or receives notice of any fact material to the business in which he is employed, the bank is deemed, as a rule, to have notice of such fact; and in most jurisdictions knowledge of a fact material to the business in which the agent is employed, if actually present in his mind during the agency and while acting in the bank's behalf, although acquired by him outside of his agency, is deemed, as a rule, notice to the bank.

86. DISCLOSURE AGAINST INTEREST-The knowledge of the agent will not be imputed to the bank, when the agent is engaged in committing an independent fraudulent act upon his own account, and the knowledge sought to be imputed is of facts which relate to that act, and which, if communicated, would prevent the consummation of the fraud, or when the agent is openly acting on his own behalf, or on behalf of another in a transaction with the bank; but when, in any transaction, the agent does an act as the sole representative of the bank, and is not acting openly on behalf of himself or another, although his conduct may be fraudulent, it is generally held that the bank may not avail itself of the act, in order to retain an advantage or to assert a claim founded thereon, without being charged with his knowledge.

Notice-In General

It is a general rule of agency, which is, of course, applicable to the officers and agents of banks, incorporated and unin

corporated, that when, in the course of his employment, the agent receives notice or acquires knowledge of any fact material to the business in which he is employed, the principal is deemed to have notice of that fact. Not only is a notice communicated to any officer authorized to receive it notice to the bank,100 but the bank is charged with knowledge of any fact material to its business acquired by any officer while transacting such business. 101

99

To affect the bank with notice, the matter known to the agent must be something within the scope of his agency; that is, a matter which it is his duty, in the capacity in which he is employed, to communicate to the bank, or in reference to which he has authority to act.102 Knowledge acquired by the officer outside of his agency will not be imputed to the bank. But, although knowledge so acquired is not notice to the bank,

99 Tiffany, Ag. 257.

100 Canadian Bank of Commerce v. Coumbe, 47 Mich. 358, 11 N. W. 196: Second Nat. Bank of St. Paul v. Howe, 40 Minn. 390, 42 N. W. 200, 12 Am. St. Rep. 744.

A bank is charged with notice of letters duly mailed to it and received by the general bookkeeper, whose duty it is to open and distribute mail, though he conceals such letters to hide irregularities in his office, and thereby prevents their coming into the hands of the other bank officers. First Nat. Bank v. Fourth Nat. Bank, 56 Fed. 967, 6 C. C. A. 183. See "Banks and Banking," Dec. Dig. (Key No.) § 116; Cent. Dig. §§ 282-287.

101 Harris v. American Building & Loan Ass'n, 122 Ala. 545, 25 South. 200; Hager v. National German-American Bank, 105 Ga. 116, 31 S. E. 141; Baldwin v. Davis, 118 Iowa, 36, 91 N. W. 778; Orme v. Baker, 74 Ohio St. 337, 78 N. E. 439, 113 Am. St. Rep. 968; Stebbins v. Lardner, 2 S. D. 127, 48 N. W. 847. See "Banks and Banking," Dec. Dig. (Key No.) § 116; Cent. Dig. §§ 282–287. 102 Curtice v. Crawford County Bank (C. C.) 110 Fed. 830; McCalmont v. Lanning, 154 Fed. 353, 84 C. C. A. 138; Morris v. First Nat. Bank of Samson, 162 Ala. 301, 50 South. 137; Marsh, Merwin & Lemon v. Wheeler, 77 Conn. 449, 59 Atl. 410, 107 Am. St. Rep. 40; Organized Charities Ass'n v. Mansfield, 82 Conn. 504, 74 Atl. 781, 135 Am. St. Rep. 285; Washington Nat. Bank v. Pierce, 6