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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.
24 Spering's Appeal, 71 Pa. St. 11; Gobold v. Mobile

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.

paid in.21

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

sued. 87

LIABILITIES OF THE PRESIDENT.

acter. 46

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.

48

57.

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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

ON HIS

BOND.

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.
83 State Bank v. Locke, 4 Dev. L. 529.
84 Fort Scott Bank v. Drake, 29 Kan. 311.

B5 Pendleton v. Bank of Kentucky, 1 T. B. Mon. 177.
But see Barrington v. Bank of Washington, 14 Serg. &
R. 405, as the measure of damages.

86 State v. Stimson, 24 N. J. L. 9.
87 Commercial Bank v. Ten Eyck, 48 N. Y. 305.

58 American Bank v. Wheelock, 45 N. Y. Super. Ct. 205.

69 Herrin v. Franklin Co. Bank, 32 Vt. 274.
60 Oswego Bank v. Burt, 93 N. Y. 233.

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

66

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
Washington v. Barrington, 2 Pa. 27. But see Dedham
Bank v. Chickering, 4 Pick. 314.
* Market Street Bank v. Stumpe, 2 Mo. App. 545.
6* Taylor v. Bank of Kentucky, 2 J. J. Marsh. 568.
67 Bank of United States v. Daudridge, 12 Wheat. 64;
Union Bank v. Ridgely, 1 Har. & G. 413, 429. And see
Dedham Bank v. Chickering, 3 Pick. 335.

6 Bank of United States v. Daudridge, supra.
* Pendleton v. Bank of Kentucky, 1 T. B. Mon.
175.

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.
73 26 N. W. Rep. 282.
74 Graves v. Lebanon Nat. Bank, 10 Bush. 23.
75 State Bank v. Chetwood, 8 N. J. L. 1.

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.

The gen

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

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