« AnteriorContinuar »
tion, guiltless of fraud or misconduct them bills of the bank for depreciation therein, selves, and innocent successors of those not even where it is caused by their misconguilty of fraud or misconduct, are not bound by the acts or conduct of their predecessors.21 For Excess of Debts Over Limit. SomeNor are they liable for losses sustained by times it is provided by statute that the debts the bank by the dishonesty or carelessness of
of the bank shall not exceed a certain limit, the cashier, or other persons employed by
and that in case of excess, the directors shall them, 22 or for loss resulting from investments
be liable for the same. Where such is the by them made,23 if they have acted in good provision, and the limit has been exceeded, faith and with ordinary care
it will not avail a single director to show that dence. 24
he was absent, or that he dissented. Nor, again, are those not members of the provision is remedial, not penal, and the investment committee, to whose hands the liability is joint, not several.31 Nor will it business of loaning has been committed, exempt the directory to show a judgment of liable, in the absence of cognizance or com
forfeiture, or the expiration of the charter plicity, for irregular or unsafe invest
by its own limitation. 32 ments. 25
Certificates of deposit are debts within the For Exercise of Discretionary Powers.--The
meaning of a statute providing that the directors are not liable for the exercise of
debts shall not exceed a prescribed amount, discretionary powers intrusted to them, nor
"whether by bond, bill, note or other securfor their non-exercise, although loss thereby
ity.” results to the bank. Thus, where they may
In Case of Insolvency.-Sometimes, too, it in their discretion require a bond from the
is provided that the directors shall be liable president, and they see fit not to do so, and
for the bank's debts in case of insolvency. loss is sustained as the result, they cannot be
But, in a Michigan case, it was held that where
the statute authorizing the forming of the held therefor.
bank is unconstitutional, the directors cannot For Ilegal Issuance of Bank Bills.-Regard
be made to respond under such a provision, ing the illegal issuance of bank bills, it has
the bank being illegal. 34 been held that the directors are liable to the
In Missouri the point was made, that holders, if the bank becomes insolvent, for
where the bank operates under a special the issuance of bank bills contrary to their
charter, such an act impairs the contract becharter; as where they issue before the pre
tween it and the State, and is therefore unscribed amount of capital is subscribed and
constitutional; but the court refused to sus
tain this view, saying that no charter can exBut by the expiration of the charter, it has also been held, the personal liability of
empt a bank or its officers from regulations directors for over issues is extinguished.28
properly made in the exercise of the police
power of the State. 35 They are not, however, released from
These provisions are not, however, selfliability by an assignment to which the creditors are not parties, nor consenting. 29
enforcing, but require to be enforced by the
ordinary remedies. 36 For Depreciation in Bank's Bills.- The
Again, it is sometimes provided by statute directors are not liable to a holder of the
that an officer of a bank receiving a deposit
with knowledge of its insolvent condition 21 Schley v. Dixon, 24 Ga. 273.
22 Dunn v. Kyle, 14 Bush. 134; Brannon v. Loving, S. shall be personally liable therefor. In an acC. Ky. Dig. 20 Cent. L. J. 57. But see Paine v. Irwin, tion under such a statute, it is only neces59 How. Pr. 316.
23 Williams v. McDonald, 37 N. J. Eq. 409.
30 Branch v. Roberts, 50 Barb. 435. Bank, 11 Ala. 191; Bank v. St. John, 25 Ala. (N. S.) 31 Banks v. Darden, 18 Ga. 318. But see Sturges 566.
Burton, 8 0. S. 215. 25 Williams v. Halliard, 38 N. J. Eq. 553.
32 Hargroves v. Chambers, 30 Ga. 580. But compare 2 Williams v. Halliard, 38 N. J. Eq. 373.
Moultrie v. Hoge, 21 Ga, 513. 27 Schley v. Dixon, 24 Ga. 273.
33 Hargroves v. Chambers, 30 Ga. 580. 2 Moultrie v. Hoge, 21 Ga. 513. But compare Har 34 Brooks v. Hill, 1 Mich. 118. groves v. Chambers, 30 Ga. 580.
36 Cummings v. Spaunhorst, 5 Mo. App. 21. 29 Schley v. Dixon, 24 Ga. 273.
36 Fusz v. Spaunhorst, 67 Mo. 256.
sary to show that the bank was insolvent. The burden of proof of the want of knowledge of the insolvency is on the officer
May Plead Statute of Limitations.-Directors sought to be made personally liable, may plead the statute of limitations. 44
LIABILITIES OF THE PRESIDENT.
For False Statement in Articles of Associa
The president is usually the officer princition and Former Violations of Law.—The
pally charged with the supervision and propdirectors are not liable to one who becomes a
er conduct of the executive business of the stockholder, for false statements in the ar
bank; and hence it is sometimes said that of ticles of association respecting the amount of
him a higher degree of diligence is required capital actually subscribed and paid in, by
than of a director, or, perhaps, of any other which he was induced to become a stock
officer ;45 but this is not the requirement of the holder.38
courts, according to the generally accepted rule. Nor can one who purchases stock in a
This holds him, with the others, as previously banking association, maintain an action against observed, to the exercise of only ordinary or a director therein, for a violation of law which
reasonable care in the discharge of his duties, occurred before he became a stockholder,
or such as men of ordinary prudence usually although the value of the stock is depreciated
exercise in their own affairs of like charthereby. For Payment of Unearned Dividend De
On Warranty of Legality of Bank.--The clared.—The trustees of a savings bank are
president, however, in a sense, warrants the jointly and severally liable for a payment of
legal organization and existence of the bank; dividends, not earned, under a resolution de
for an ostensible president of a spurious claring dividends, and passed either with
bank is liable for debts contracted by his astheir concurrence or subsequent approval. 40
sistance, and he must respond in damages to For Fraudulent Sale to Bank and Unauthor
the same extent that the bank, if legally conized Purchase of Its Own Stock.--The direc
stituted, would have been liable.
Nor can tors are liable to the bank for loss occasioned
this liability be escaped by showing that he by the fraudulent sale to it of its own stock. 41
supposed himself the president of a legally But they are not liable to one from whom, in
constituted bank, if he has contributed the the name of the bank, they make an unau
influence of his reputation to give undeserved thorized purchase of its stock, which the bank
credit to a spurious corporation.47 repudiates. 12
For Allowing Indehtness to Exceed Limit.For Allowance of Extra Services.--The al
Where the charter provides that the bank lowance by the directors to themselves, or
shall not at any time be indebted in excess of one or more of their number, of more than
a certain amount, as that of its paid-up capithe ordinary or stipulated compensation, is
tal, the president is personally liable for the usually to be regarded with something of
amount of a bill which he indorses when the suspicion, and where it is not done in good
bank is indebted in excess of that amount. faith, it certainly cannot be upheld; but, in Goldbold v. Bank at Mobile, 43 it was held that
For Overdrafts.--So he is liable for over
drafts which he has directed or allowed.49 the giving of compensation to one of the directors, for extra services as an agent of the
For Permitting Securities to be Taken Away. bank, though it may be unlawful, is not such
--And it has been held that he is liable for an act as will expose the directory to liability,
a loss caused by his permitting a customer to if done in good faith, and with the honest in
take securities of the bank away for inspectent of benefitting the bank.
44 Williams v. Halliard, 38 N. J. Eq. 373.
45 Brannin v. Loving, s. C. Ky. Dig. 20 Cent. L. J. 37 Dodge v. Mastin, 17 Fed. Rep. 660. * Mabey v. Adams, 3 Bosw. 346.
46 Dunn v. Kyle, 14 Bush. 134; Hauser v. Tate, 85 Maybey v. Adams, 3 Bosw. 346.
N. C. 81. 40 Van Dyck v. McQuade, 45 N. Y. Super. Ct. 620. 47 Hauser v. Tate, supra. But consult Brooker y. 4 Shultz v. Christman, 6 Mo. App. 338.
Hill, 1 Mich. 118. 42 Abeles v. Cochran, 22 Kan. 405.
$ Brannin v. Loving, s. C. Ky. 20 Cent. L. J. 57. 4 11 Ala. 191.
49 Oakland Savings Bank v. Wilcox, 60 Cal. 126.
tion; and that evidence is inadmissible to For Funds paid to Bank Without Authority. show that such was the usual custom among -If he receives money from an officer of anbanks.50
other bank, knowing that that other has no auCourt will not Interfere by Injunction.—thority to make such payment, he is personBut notwithstanding an alleged malfeasance ally liable for it, and this, though he has paid in office, a court of equity will not, according it over to his principal.5 to one authority, grant an injunction restrain- For Misrepresentation as to Amount of Deing the president or cashier in the exercise of posit.—A cashier is not liable for erroneous his official duties.51
information given in good faith to a party reCourt cannot Declare Officer Trustee, When. specting the amount of money deposited to -Nor can a court where an officer of a bank his credit by a third person, which mistake fraudulently abstracts the funds, and invests causes him loss. 59 them in his own name, declare him a trustee- For not Consulting Other officers.—Nor, and indemnify the bank out of the invest, where the duty is imposed on him of carryment.
ing on the bank's business, can be held reLIABILITIES OF THE CASHIER.
sponsible for a neglect of duty in not conGenerally.—The liabilities of the cashier of sulting other officers of the bank, or commita bank are not different, in any respect, from
tees, whom, by the by-laws, he is required to those stated at the beginning of this article.
consult in making discounts, where such He is bound for ordinary diligence and hon
committees hold no meetings, and the officers esty, and is liable for the results of the want
systematically absent themselves from the of either.63 Nor is it a defense in an action
performance of their duties.co brought by the bank for his wrongful appropriation of moneys, that, at the time of such appropriation, he was the owner of the greater part of the stock of the bank, and has since
Generally. Well and Truly to Perform.that time sold it to other parties who are now
A cashier's bond is commonly "well and the officers and managing authorities. 54
truly'' to perform the duties of the office. For Application of the Notes of the Bank to
Such a bond includes not only honesty, but his own Use. As an example of his liability,
reasonable skill and diligence. If therefore if he applies the notes of the bank to his own
he performs those duties negligently or unuse, he must respond therefor, and to the skillfully, or if he violates them from a want of full nominal amount. He cannot avail him- capacity and care, the condition of his bond self of their depreciation.66
is broken, and his sureties are liable for his But a statute affixing a penalty for the con
misdoings.61 It extends also to all defaults version by a cashier of any “money, bank
in the duties annexed to such office, from bill, or note," does not extend to promissory time to time, by those who are authorized to notes (other than bank notes,) or to other
control the affairs of the bank ; 62 for the surecommercial paper. 56
ties enter into the contract with reference to For Allowing Overdrafts.-A cashier may
the rights and authority of the president and be held liable for negligently or dishonestly
directors under the charter and by-laws. allowing overdrafts by which the bank suf- And it is no defense to show, in an action fers, but he is not liable for permitting it on such a bond, wherein it is alleged that the where the transaction is in reality a loan up- cashier has received money for which he has on sufficient security.57
not accounted, that he had the character of
LIABILITIES OF CASHIER AND SURETIES
80 Citizen's Bank v. Wiegand, 12 Phila. 496.
01 Bayless v. Orne, 1 Freem. Ch. 161. And see Ogden v. Kip, 6 Johns. Ch. 160.
62 Pascoag Bank, v. Hunt, 3 Edw. 583.
B5 Pendleton v. Bank of Kentucky, 1 T. B. Mon. 177.
86 State v. Stimson, 24 N. J. L. 9.
58 American Bank v. Wheelock, 45 N. Y. Super. Ct. 205.
69 Herrin v. Franklin Co. Bank, 32 Vt. 274.
61 Minor v. Mechanics' Bank, 1 Pet. 46; State Bank v. Chetwood, 8 N. J. L. 25; Barrington v. Bank of Washington, 14 Serg. & R. 405; American Bank v. Adams, 12 Pick. 303; Bank of Washington v. Barrington, 2 Pa. 27; Batchelor v. Planters' Bank, 78 Ky. 435; contra, Union Bank v. Clossey, 10 Johns. 271.
62 Minor y. Mechanics' Bank, supra.
an honest, careful, and vigilant officer, and A cashier who receives money for deposit out that similar losses by bank officers are fre- of the bank, and not in banking hours, or requent, and that the directors have expressed ceives its funds at places distant from the their belief that the loss in question was bank, and does not account for them, is liacaused by accidental overpayments, and that ble on his bond.70 they continued to employ him after the loss. For Changing Securities.—So where he exNor is any act or vote of the directors, con- ceeds his power by changing the securities of trary to their duties, and in fraud of the the bank, without the knowledge of the distockholders' rights and interests, an excuse rectors, he thereby makes himself and his or defense.64 Thus the fact that the direc
sureties liable. 71 tors know of overdrafts allowed by the cash
In Case of Robbery, Failure of the Bank, ier, will not release the sureties from liability
etc.—But, on the other hand from the above, for losses caused by such overdrafts.65
the obligors are not responsible for money of
which the cashier is robbed in the discharge However it has been decided, that, where the law requires the removal of a cashier for
of his duty,72 nor, on failure of the bank, for ascertained delinquency, and the managers of
funds deposited in accordance with the by
laws.73 the bank retain him in service after knowing
Nor again can sureties be held, who
become such on the faith of a statement by such cause of removal, and connive at his
the directors of the condition of the bank misconduct, his sureties are not liable for any
which turns out to be false. 74 breach of his bond, subsequent to the discovery of his misdoings.
Notice not Necessary.-It is not necessary,
in order to charge a cashier's sureties, to give Bond Should be Approved.—To render it
them notice, where damages are caused by binding, the bond shoud be approved; but it
bis default.75 may be shown to have been approved by the
Period of Liability. -As to the time up to directors (according to the rules prescribed in the charter of the bank), by presumptive liable, it may be said that it is up to the time
which the sureties on the cashier's bond are evidence; a record, or other written evidence
of his actual discharge, or the expiration of of such approval, not being necessary.67 Indeed it is held that if a cashier be duly ap
the charter, or term of the bond. Beyond pointed, and permitted to act in his office for
this they are not liable.77 And in Grocer's a long time, under the directors' sanction, his
Bank v. Kingman,78 it was held that where bond need not be accepted according to the
the sureties undertake to save the bank terms of the charter, in order to render his
harmless from every loss that may arise from sureties liable for his breach of duty. 68
the cashier's mistakes, as well as from losses In Case of Misnomer.–And although a
arising from bis fraud or negligence in the surety is entitled to have his undertaking
performance of his duties, they are, by an in
crease of the capital stock of the bank after strictly construed, a misnomer of the corpor
the making of the bond, exonerated from ation in the bond, by the omission of the
liability for his acts after the additional capwords "and company,” does not vitiate it.69
ital has been put in. Where Deposit Received away from Bank.
So, no action can be maintained against the
63 American Bank v. Adams, 12 Pick. 303; State Bank v. Chetwood, 8 N. J. L. 28. And see Mussey y. Eagle Bank, Metc. 306; Citizens' Bank v. Wiegand, 12 Phila. 496.
* Minor v. Mechanics' Bank, 1 Pet. 46; Bank of
6 Bank of United States v. Daudridge, supra.
70 Pendleton v. Bank of Kentucky, supra.
71 Barrington v. Bank of Washington, 14 Serg. & R. 405.
72 Huntsville Bank v. Hill, 1 Stew. 201.
76 McGill v. Bank of United States, 12 Wheat. 511. And see Exeter Bank v. Rogers, 7 N. H. 21.
77 Thompson v. Young, 2 0. 331. And see Bank of Washington v. Barrington, 2 Pa. 27. But consult Union Bank of Georgetown v. Forrest, 3 Cranch C. Ct. 218.
78 82 Mass. 473.
sureties for something occuring after a reap
The testator left two sons and two daughters, the pointment, and after the giving and accep
daughters having infant children living, all of tance of a new bond.79 L. K. MIHILLS.
whom were made defendants in this action, and
the infants were represented therein by a guardian Akron, O.
ad litem duly appointed. The action was brought
by William Scholle for the partition of all the real 79 Frankfort Bank v. Johnson, 23 Me. 322. But see estate held in common by him, Jacob, and the Amherst Bank v. Root, 2 Metc. 522.
testator. The action was referred to a referee, who reported that a large portion of the property was incapable of partition and would have to be
sold, and a judgment in accordance with this reTRUST TRUSTEE PURCHASE BY, OF port was entered. Thereupon plaintiff and the
TRUST PROPERTY WHEN VOIDABLE defendant, Jacob Scholle, presented to the court ELECTION OF BENEFICIARY.
their petition, setting forth their individual inter
ests in the property and various other facts, and SCHOLLE v. SCHOLLE.
asking for leave to buy at the sale.
The petition came on for a hearing before the New York Court of Appeals, Jan. 19, 1886.
court on notice to all parties including the guarTRUSTEE-Purchasing Trust Property.
dian ad litem for the infants and all the other bene. eral rule is that the purchase by a trustee, directly or ficiaries under the bill, and the matter was referred indirectly, of any part of a trnst estate which he is to a referee to take testimony and report to the empowered to sell as trustee, whether at public auction
court together with his opinion whether Jacob and or private sale,is voidable at the election of the benefi
William Scholle could with safety be permitted to ciaries of the trust; and this rule will be enforced without regard to the question of good faith or ade
purchase. The referee after hearing the testiquacy of price, and whether the trustee has, or has not mony, and full notice to all parties, reported that a personal interest in the same property.
Jacob and William Scholle should be permitted to But where a trustee has an interest to protect by purchase, provided their bids were made subject bidding at a sale of the trust property, and he makes
to confirmation by the court, both as to their adespecial application to the court for permission to bid,
quacy and fairness, and his report was subsequently which, upon the hearing of all the parties interested, is granted by the court, then he can make a purchase
confirmed by the court on notice to all parties. which is valid and binding upon all the parties inter The property was subsequently exposed for sale ested, and under which he can obtain a perfect title. by the referee appointed for that purpose, and Ja
cob and William Scholle were the highest bidders Appeal from order of general term of the Super
for property amounting in value to about $200,000. ior court of the city of New York, affirming an
In pursuance of the directions contained in the order of the special term requiring the appellant
interlocutory judgment, the same referee sum
moned all the parties before him, and took evito complete the purchase of the lots made by him at the sale in this action. The facts appear in the
dence as to the adequacy of the bids and prices
paid, and after hearing all the parties found that opinion. Alex. B. Johnson, for appellant; Ferdinand R.
they were adequate and so reported to the court,
and his report was confirmed. Subsequently WilMinrax, for respondents.
liam and Jacob Scholle made a petition to the EARL, J., delivered the opinion of the court.
court to be relieved from their purchase on the Prior to March 15, 1880, Abraham Scholle, to
ground that they could not obtain a good title gether with the plaintiff, William Scholle, and
because they were trustees named in the will, and the defendant, Jacob Scholle, were seized of cer
at the same time the referee, appointed under the tain real estate in the city of New York, als equal interlocutory judgment to sell the property, made tenants in common. Abraham Scholle died in
a motion to compel them to complete their purMarch, 1880, leaving a will whereby he appointed chase. Both motions came on before the court at his brothers, Jacob and William Scholle, his
the same time on due notice to all parties interwidow, Barbetta, Julius Ephrmann, and Simon
ested in the property, including all the beneficiarDavidson, executors and trustees, all of whom but
ies, and the court made an order directing WilWilliam Scholle qualified as such. Davidson was liam and Jacob Scholle to complete their purchase subsequently discharged by order of the surro
and denied their application to be relieved theregate's court and the other three acted as sole trus from, and they appealed from that order to the tees and executors of the will. The will was also
general terin, and from affirmance there to this admitted to probate in California, and there Wil
court. liam Scholle qualified as executor. By the pro
The general rule is not disputed that the purvisions of the will, the testator gave his executors chase by a trustee, directly or indirectly, of any power to sell his real estate and be directed them
part of a trust estate, which he is empowered to to sell the same and invest the proceeds as directed, to sell as a trustee, whether at public auction or and pay the income thereof to bis children, during private sale, is voidable at the election of the bentheir lives, and at their deaths, the share of each eficiaries of the trust; and this rule will be enparent was to go to his or her children per stirpes. forced without regard to the question of good