In England the rule is now as stated in the Maine case;1 but clear and satisfactory proof is required that the facts were so present in the through the agent rests. The principal is chargeable with this knowledge for the reason that the agent is substituted in his place, and represents him in the particular transaction; and as this relation, strictly speaking, exists only while the agent is acting in the business thus delegated to him, it is proper to limit it to such occasions." North River Bank v. Aymer, 3 Hill (N. Y.), 262, 275. In Fulton Bank v. New York & Sharon Canal Co., 4 Paige (U. S. C. C.), 127, the court said: "There can be no actual loss to a corporation aggregate except through its agents or officers. The directors or trustees, when assembled as a board, are the general agents upon whom a notice may be served, and which will be binding upon their successors and the corporation. But notice to an individual director, who has no duty to perform in relation to such notice, cannot be considered a notice to the corporation. The notice which Brown and Cheeseborough had of what took place at the house of the former, on the evening of the 7th of September, was not of itself legal notice to the bank that the fund was placed under the control of the finance committee; and that Brown, although he left his signature and apparently had the control of the money the next morning, was not in fact authorized to draw it from the bank. But if Cheeseborough had been authorized by the bank, as their president and agent, to agree to receive the money on deposit, the agreement made with him, as such agent, would have been notice to the corporation, although he neglected to communicate the facts to the other officers of the bank, or to the board of directors. It is well settled that notice to an agent of a party, whose duty it is, as such agent, to act upon the notice, or to communicate the information to his principal, in the proper discharge of his trust as such agent, is legal notice to the principal." In La Farge Ins. Co. v. Bell, 22 Barb. (N. Y.) 54, it was held that an insurance company taking mortgages subsequent in date to an unrecorded deed of the same premises, is not chargeable with constructive notice of such deed from the fact that the grantor and mortgagor was at the date of both deed and mortgage a director in the insurance company. The court said: "If his position as a director could make him the agent, or rather identify him entirely with the plaintiffs in such sort as to charge them with constructive notice of all the facts with which he was personally acquainted, as to the title to lands in which they had any interest, in any case, it cannot be so when he did not become concerned as their especial agent or transact business in their behalf. Most clearly it cannot be the case where the facts concerned his own private affairs, and the transaction was one in which he was dealing with the company as a third party on his own behalf, and acting for himself with and against them." In General Ins. Co. v. United States Ins. Co., 10 Md. 517, it was held that notice given to a director of a corporation, privately, or which he acquires from rumor, or through channels open to all alike, and which he does not communicate to his associates at the board, will not bind the corporation. In Farmers and Citizens' Bank v. Payne, 25 Conn. 444, it was held that the knowledge of a bank director, as to the object for which commercial paper was delivered to a party offering it to the bank for discount, the director not being present when it was of fered and discounted, and not having communicated his knowledge to any other director or officer, was not notice to the bank. The court said: "The general rule on this subject is that notice of a fact to an agent is notice to the principal, if the agent has knowledge of it while he is acting for the principal in the course of the transaction which is in question. And this rule is applicable equally to corporations and natural persons. Hence, knowl edge of a material fact, imparted by a director of a bank to the board of directors at a regular meeting of them, is 1 Norwood v. Dresser, 17 C. B. N. s. 466. agent's mind. How is the fact to be established? If by the oath of the agent, and he states that the fact was present in his mind, but obviously notice to the bank. It has also held that if a bank director acts in behalf been decided in some cases, that notice to of the bank in a transaction of which the either of the directors, while engaged in bank takes the benefit, notice to the dithe business of the bank, is notice to the rector at the time of any fact material to bank. Whether, however, the knowledge the transaction is notice to the bank. In of a director who is present at a meeting Houseman v. Girard Mut. B. & L. Assoof a board of directors when paper is dis- ciation, 81 Penn. St. 256, L., desiring a counted, on his application and for his loan from plaintiffs, to be secured by mortbenefit, is, under the rule which has been gage on his property, plaintiffs' conveystated, to be imputed to the bank, is a ancer ordered searches for liens; through question on which there is a diversity L. he procured a certificate from the reof opinion, but one which it is unne- corder that there were no mortgages on the cessary here to determine. Whether such property; on this the loan was made. knowledge should be treated as notice There being prior mortgages given by L., to the bank in that case would prob- not certified, on the sale of L.'s property ably depend on the question whether the by the sheriff the proceeds did not reach director should be deemed to have been to pay the loan. It was held that the acting as a director and in behalf of the recorder was liable to the plaintiffs for the bank when the transaction took place. loss, and the employment of L. to procure And it is upon that point only that the the certificate did not affect the plaintiffs difference of opinion which has been al- with his knowledge. The court said: "It luded to arose. In all of the cases where is urged that by the employment of the the question was whether the principal owner as the agent for this purpose the was to be affected by the knowledge of his defendants are affected with this knowlagent, the latter possessed such knowledge edge of the existence of the mortgage while he was acting for the former. There which was omitted in the certificate. This is none in which it has been held, or in- is a very familiar principle and well setdeed claimed, that such knowledge would tled. But it is equally well settled that have that effect while he was not so en- the principal is only to be affected by gaged, nor can we conceive any good rea- knowledge acquired in the course of the son for the adoption of such a principle." business in which the agent was employed. So, in Farrell Foundry v. Dart, 26 id. 376, This limitation of the rule is perfectly where a defective deed had been recorded, well established by our own cases, and it and a director of a corporation not acting is not necessary to look further. Hood as an agent thereof, and having no man- v. Fahnestock, 8 Watts (Penn.), 489; agement of its business otherwise than as Bracken v. Miller, 4 W. & S. (Penn.) director, went to the town records to as- 110; Martin v. Jackson, 27 Penn. St. certain the situation of the land, and there 508. It is a mistake to suppose that it saw the record of the deed, but did not depends upon the reason that no man can inform the corporation or any of its agents, be supposed to always carry in his mind a it was held that the corporation was not recollection of former occurrences, and by reason of these facts chargeable with that if it be proved that he actually had it knowledge of the deed. Louisiana State in his mind at the time, the rule is difBank v. Senecal, 13 La. 525. In Housa- ferent. It may support the reasonableness tonic Bank v. Martin, 1 Met. (Mass.) 294, of the rule to consider that the memory of it was held that knowledge of facts by a men is fallible in the very best, and varies mere stockholder in an incorporated manuin different men. But the true reason of facturing company or bank is not notice the limitation is a technical one, that it is to the corporation of the existence of those only during the agency that the agent repfacts. In this case the stockholder was resents and stands in the shoes of his the attorney who drew the mortgages and principal. Notice to him is then notice assignment in question. In Smith v. to his principal. Notice to him twentySouth Rovalton Bank 32 Vt. 341. it was four hours before the relation commenced that he did not communicate it to the principal, then the principal is made to suffer for the negligence or fraud of his agent as to matters is no more notice than twenty-four hours after it had ceased would be. Knowledge can be no better than direct actual notice. It was incumbent on the plaintiff to show that the knowledge of the agent, to use the accurate language of one of our cases, 'was gained in the transaction in which he was employed.' There was not only no evidence of this offer by the plaintiff, but it was plain that it had been gained before, and in an entirely different transaction." See also Farrington v. Woodward, 82 id. 259. In Hood v. Fahnestock, supra, the question was of imputed knowledge by an attorney of a former deed drawn by him between other parties, and the court said: "It is now well settled that one, if in the course of his business as agent, attorney, or counsel for another, he obtained knowledge from which a trust would arise and afterward became the agent, attorney or counsel of the subsequent purchaser in an independent and unconnected transaction, his previous knowledge is not notice to such other person for whom he acts. The reason is that no man can be supposed to carry always in his mind a recollection of former occurrences; and moreover in the case of attor ney or counsel, it might be contrary to his duty to reveal the confidential communications of his client." In Willis v. Vallette, 4 Met. (Ky.) 186, it was held that notice to an agent is constructive notice to his principal only when acquired in the course of the. transaction in which he is acting as agent. To the same effect, Howard Ins. Co. v. Halsey, 8 N. Y. 271. In McCormick v. Wheeler, 36 Ill. 114, it was held that a party cannot be charged with notice of facts within the knowledge of his attorney, of which the latter acquired knowledge while acting as attorney for another person. The court said: "The English courts have recently manifested a disposition to depart from this rule, but we deem it a principle just in itself, and founded on wise considerations of policy." In Ford v. French, 72 Mo. 250, it was briefly held that the knowledge acquired by an attorney while acting for one client will not affect another client, for whom he is acting at the same time in a different case. But on the other hand: In Donald v. Beals, 57 Cal. 399, two mortgages, one to D. and one to N., were deposited in a county clerk's office for record, April 15, the one to D. at four o'clock, and the one to N. at five o'clock. By a clerical mistake it was noted on the D. mortgage that it was deposited on April 18. This mistake occurred in the record book and in the certificate annexed to the mortgage. N. sold and assigned her mortgage to C., who employed an attorney to examine as to the character of the security. C. did not examine the record, but his attorney had full knowledge that the mortgage to N. was not prior in record. The attorney acted both for C. and N. It was held that his knowledge was imputable to C. Said the court: "The knowledge of an attorney is the imputed knowledge of his client. It is a well-settled doctrine of English law, that if the agent, at the time of effecting a purchase, have knowledge of any prior lien, trust or fraud affecting the property, no matter when he acquired such knowledge, his principal is affected thereby,” — citing Distilled Spirits, 11 Wall. (U. S.) 367. As to the question of notification to a corpora tion through an agent, the American cases are as follows: In Commercial Bank v. Cunningham, 24 Pick. (Mass.) 270, it was held that the circumstance that the indorser of a discounted note was a director of the discounting bank, is not constructive notice to the bank that the note was made for his accommodation. In Washington Bank v. Lewis, 22 id. 24, a bank director got possession of a note for discount for the owner, and instead he pledged it to the bank for his own debt. It was held that as he did not act in his capacity of direc tor in procuring the discount, the bank was not affected by his knowledge of the circumstances under which he procured it. The court said: "The argument is, that though Thompson was not the agent of the bank, yet as he was a director, his knowledge of the facts under which the note was procured is the knowledge of the bank. If this argument could he maintained, it would follow that if a director should procure a note to be discounted, by occurring before his agency commenced, and when he had no possible reason to apprehend such consequences, and when there is not possible way of evading them. This rule would make it exceedingly dangerous for corporations or individuals, to employ agents at all; and in this country at least, it has no considerable foothold, and in England the contrary rule was held by its ablest judges. 'Where the counsel comes to have notice of the title in another affair," says the Lord Keeper,1 ". . . that shall not be such a notice as to bind the party." "If a counsel or attorney," says Lord HARDWICKE 2" is employed to look over a title, and by some other transaction foreign to the business in hand has notice, this shall not affect the purchaser; for if this was not the rule of the court, it would be of dangerous consequence, as it would be an objection against the most able counsel, because of course they would be more likely than others of less eminence to have notice, as they are engaged in a great number of affairs of this kind."3 In the case previously cited from the United States Supreme court, which seems to be the authority upon which the courts of this country which have adopted this doctrine predicate it, the court did not undertake to support its position by any line of reasoning, but was satisfied to accept it simply because the English courts had adopted it; which is hardly sufficient to commend the doctrine to the better class of our courts. the fraudulent concealment of material facts which he was bound to disclose, or even by false pretences, the bank would have no remedy. If Thompson had been authorized to discount this note, and did discount it, the argument might hold good. Whatever a director or other agent of a bank may do within the scope of his authority, would bind the bank so as to make them responsible to the person dealt with. But in the present case Thompson was the party applying for the discount, and was not acting as director, nor could he with propriety so act. The courts in this country which have adopted the rule that a principal shall be charged with knowledge of facts obtained by an agent before he entered upon his agency, are few, and the reasons given by them for this extraordinary doctrine are not such as will be likely to commend them to other courts." Tagge v. Tennessee National Bank, 9 Heisk. (Tenn.) 479; Hart v. Farmers' Bank, 33 Vt. 252; Fairfield Savings VOL. I. - 30 - Bank v. Chase, 72 Me. 226; The Distilled 1 Preston v. Tubbin, 1 Vern. 287. 8 See also Warrick v. Warrick, 3 Atk. 294; Le Neve v. Le Neve, 3 id. 646; Street v. Whittaker, Barnard, 220; Cross v. Smith, 1 M. & S. 545; Hein v. Mill, 13 Ves. 113; Mountford v. Scott, 3 Madd. 34. But in this case, upon appeal, Lord ELDON made an intimation of a possible exception to this rule, foreshadowing the doctrine we have combated in the text, which has lately been seized upon by the English court as a pretext for adopting the rule so foreshadowed by him. 4 The Distilled Spirits, ante. CHAPTER X. CORPORATE POWERS. SEC. 169. How derived: Limitations upon: | SEC. 188. Guaranty of Bonds of other Ultra Vires. 170. Ultra Vires, continued: Illus trations. 171. Defence of Ultra Vires not Admissible where the Act has been Acquiesced in. 172. Defence not Admitted when the Contract is Executed. 173. Defence not Admitted when it will Operate a legal Wrong. 174. Power to deal in Stocks. 175. Purchase of Rival Road. 176. Authority to aid in other Enterprises. 177. No Authority to issue Irredeemable Bonds. 178. Acts done under two Charters. 179. Power to Contract. 180. Contracts made before Organization. 181. Liable as Lessee. 182. Contract to haul certain Quantity of Freight per Month, or at certain Rates. 183. Contract to build Bridges, Cattle-Passes, &c. 184. Contracts as to Location of Stations. 185. Contracts relating to Refreshment-Rooms. 186. Free Passes, Contract to give. 187. Contract to stop Trains at a certain Place. - SEC. 169. How derived: Limitations upon: Ultra Vires. -We have already stated that a corporation is a mere creature of the law, and derives all of its powers from its charter;1 it possesses none of the 1 Perrine v. Chesapeake, &c. Canal Co., 19 How. (U. S.) 172; New London v. Brainerd, 22 Conn. 522; Com. v. Erie, &c. R. R. Co., 27 Penn. St. 339; Brady v. New York, 20 N. Y. 312; Dartmouth College v. Woodward, 4 Wheat. (U. S.) 518; St. Louis v. Webber, 44 Mo. 547. |