Nor, again, are those not members of the investment committee, to whose hands the business of loaning has been committed, liable, in the absence of cognizance or complicity, for irregular or unsafe investments.25

For Exercise of Discretionary Powers.-The directors are not liable for the exercise of discretionary powers intrusted to them, nor for their non-exercise, although loss thereby results to the bank. Thus, where they may in their discretion require a bond from the president, and they see fit not to do so, and loss is sustained as the result, they cannot be held therefor.26

For Illegal Issuance of Bank Bills.-Regarding the illegal issuance of bank bills, it has been held that the directors are liable to the holders, if the bank becomes insolvent, for the issuance of bank bills contrary to their charter; as where they issue before the prescribed amount of capital is subscribed and paid in. 27

But by the expiration of the charter, it has also been held, the personal liability of directors for over issues is extinguished.28

They are not, however, released from liability by an assignment to which the creditors are not parties, nor consenting.29

For Depreciation in Bank's Bills.-The directors are not liable to a holder of the

21 Schley v. Dixon, 24 Ga. 273.

22 Dunn v. Kyle, 14 Bush. 134; Brannon v. Loving, S. C. Ky. Dig. 20 Cent. L. J. 57. But see Paine v. Irwin, 59 How. Pr. 316.

23 Williams v. McDonald, 37 N. J. Eq. 409.

24 Spering's Appeal, 71 Pa. St. 11; Gobold v. Mobile Bank, 11 Ala. 191; Bank v. St. John, 25 Ala. (N. S.) 566.

25 Williams v. Halliard, 38 N. J. Eq. 553.

26 Williams v. Halliard, 38 N. J. Eq. 373.

27 Schley v. Dixon, 24 Ga. 273.

28 Moultrie v. Hoge, 21 Ga. 513. But compare Har

groves v. Chambers, 30 Ga. 580.

29 Schley v. Dixon, 24 Ga. 273.

bills of the bank for depreciation therein, not even where it is caused by their misconduct. 30

For Excess of Debts Over Limit.-Sometimes it is provided by statute that the debts of the bank shall not exceed a certain limit, and that in case of excess, the directors shall be liable for the same. Where such is the provision, and the limit has been exceeded, it will not avail a single director to show that he was absent, or that he dissented. Such a provision is remedial, not penal, and the liability is joint, not several. 81 Nor will it exempt the directory to show a judgment of forfeiture, or the expiration of the charter by its own limitation.32

Certificates of deposit are debts within the meaning of a statute providing that the debts shall not exceed a prescribed amount, "whether by bond, bill, note or other security.'

33

In Case of Insolvency.-Sometimes, too, it is provided that the directors shall be liable for the bank's debts in case of insolvency. But, in a Michigan case, it was held that where the statute authorizing the forming of the bank is unconstitutional, the directors cannot be made to respond under such a provision, the bank being illegal. 34

In Missouri the point was made, that where the bank operates under a special charter, such an act impairs the contract between it and the State, and is therefore unconstitutional; but the court refused to sustain this view, saying that no charter can exempt a bank or its officers from regulations properly made in the exercise of the police power of the State. 85

These provisions are not, however, selfenforcing, but require to be enforced by the ordinary remedies.36

Again, it is sometimes provided by statute that an officer of a bank receiving a deposit with knowledge of its insolvent condition shall be personally liable therefor. In an ac

tion under such a statute, it is only neces

30 Branch v. Roberts, 50 Barb. 435.

31 Banks v. Darden, 18 Ga. 318. But see Sturges Burton, 8 O. S. 215.

32 Hargroves v. Chambers, 30 Ga. 580. But compare Moultrie v. Hoge, 21 Ga, 513.

33 Hargroves v. Chambers, 30 Ga. 580.

34 Brooks v. Hill, 1 Mich. 118.

35 Cummings v. Spaunhorst, 5 Mo. App. 21.

36 Fusz v. Spaunhorst, 67 Mo. 256.

For Payment of Unearned Dividend Declared.-The trustees of a savings bank are jointly and severally liable for a payment of dividends, not earned, under a resolution declaring dividends, and passed either with their concurrence or subsequent approval. 40 For Fraudulent Sale to Bank and Unauthorized Purchase of Its Own Stock.--The directors are liable to the bank for loss occasioned by the fraudulent sale to it of its own stock.41 But they are not liable to one from whom, in the name of the bank, they make an unauthorized purchase of its stock, which the bank repudiates. 42

For Allowance of Extra Services.--The allowance by the directors to themselves, or one or more of their number, of more than the ordinary or stipulated compensation, is usually to be regarded with something of suspicion, and where it is not done in good faith, it certainly cannot be upheld; but, in Goldbold v. Bank at Mobile,43 it was held that the giving of compensation to one of the directors, for extra services as an agent of the bank, though it may be unlawful, is not such an act as will expose the directory to liability, if done in good faith, and with the honest intent of benefitting the bank.

37 Dodge v. Mastin, 17 Fed. Rep. 660.

38 Mabey v. Adams, 3 Bosw. 346.

Maybey v. Adams, 3 Bosw. 346.

40 Van Dyck v. McQuade, 45 N. Y. Super. Ct. 620. Shultz v. Christman, 6 Mo. App. 338.

42 Abeles v. Cochran, 22 Kan. 405.

43 11 Ala. 191.

May Plead Statute of Limitations.-Directors sought to be made personally liable, may plead the statute of limitations.44

LIABILITIES OF THE PRESIDENT.

The president is usually the officer principally charged with the supervision and proper conduct of the executive business of the bank; and hence it is sometimes said that of him a higher degree of diligence is required than of a director, or, perhaps, of any other officer;45 but this is not the requirement of the courts, according to the generally accepted rule. This holds him, with the others, as previously observed, to the exercise of only ordinary or reasonable care in the discharge of his duties, or such as men of ordinary prudence usually exercise in their own affairs of like character. 46

On Warranty of Legality of Bank.--The president, however, in a sense, warrants the legal organization and existence of the bank; for an ostensible president of a spurious bank is liable for debts contracted by his assistance, and he must respond in damages to the same extent that the bank, if legally constituted, would have been liable. Nor can this liability be escaped by showing that he supposed himself the president of a legally constituted bank, if he has contributed the influence of his reputation to give undeserved credit to a spurious corporation.*

47

For Allowing Indebtness to Exceed Limit.Where the charter provides that the bank shall not at any time be indebted in excess of a certain amount, as that of its paid-up capital, the president is personally liable for the amount of a bill which he indorses when the bank is indebted in excess of that amount.48 For Overdrafts.--So he is liable for overdrafts which he has directed or allowed.49

For Permitting Securities to be Taken Away. -And it has been held that he is liable for a loss caused by his permitting a customer to take securities of the bank away for inspec

44 Williams v. Halliard, 38 N. J. Eq. 373.

45 Brannin v. Loving, S. C. Ky. Dig. 20 Cent. L. J. 57.

46 Dunn v. Kyle, 14 Bush. 134; Hauser v. Tate, 85 N. C. 81.

47 Hauser v. Tate, supra. But consult Brooker y. Hill, 1 Mich. 118.

45 Brannin v. Loving, S. C. Ky. 20 Cent. L. J. 57. 49 Oakland Savings Bank v. Wilcox, 60 Cal. 126.

tion; and that evidence is inadmissible to show that such was the usual custom among banks.5

For Funds paid to Bank Without Authority. -If he receives money from an officer of another bank, knowing that that other has no au

ally liable for it, and this, though he has paid it over to his principal. 58

Court cannot Declare Officer Trustee, When. -Nor can a court where an officer of a bank fraudulently abstracts the funds, and invests them in his own name, declare him a trusteeand indemnify the bank out of the invest, ment. 52

LIABILITIES OF THE CASHIER.

Generally. The liabilities of the cashier of a bank are not different, in any respect, from those stated at the beginning of this article. He is bound for ordinary diligence and honesty, and is liable for the results of the want of either." 53 Nor is it a defense in an action 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 that time sold it to other parties who are now the officers and managing authorities.54

For Application of the Notes of the Bank to his own Use. As an example of his liability, if he applies the notes of the bank to his own use, he must respond therefor, and to the full nominal amount. He cannot avail himself of their depreciation.55

But a statute affixing a penalty for the conversion by a cashier of any "money, bank bill, or note," does not extend to promissory notes (other than bank notes,) or to other commercial paper.56

For Allowing Overdrafts.-A cashier may be held liable for negligently or dishonestly allowing overdrafts by which the bank suffers, but he is not liable for permitting it where the transaction is in reality a loan upon sufficient security.57

50 Citizen's Bank v. Wiegand, 12 Phila. 496.

♫ Bayless v. Orne, 1 Freem. Ch. 161. And see Ogden

v. Kip, 6 Johns. Ch. 160.

52 Pascoag Bank, v. Hunt, 3 Edw. 583. 53 State Bank v. Locke, 4 Dev. L. 529.

54 Fort Scott Bank v. Drake, 29 Kan. 311.

55 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.

56 State v. Stimson, 24 N. J. L. 9.

57 Commercial Bank v. Ten Eyck, 48 N. Y. 305.

For Misrepresentation as to Amount of Deposit.-A cashier is not liable for erroneous information given in good faith to a party respecting the amount of money deposited to his credit by a third person, which mistake causes him loss.59

For not Consulting Other officers.-Nor, where the duty is imposed on him of carrying on the bank's business, can be held responsible for a neglect of duty in not consulting other officers of the bank, or committees, whom, by the by-laws, he is required to consult in making discounts, where such committees hold no meetings, and the officers systematically absent themselves from the performance of their duties.60

LIABILITIES OF CASHIER AND SURETIES ON HIS

BOND.

Generally. Well and Truly to Perform.A cashier's bond is commonly "well and truly" to perform the duties of the office. Such a bond includes not only honesty, but reasonable skill and diligence. If therefore he performs those duties negligently or unskillfully, or if he violates them from a want of capacity and care, the condition of his bond is broken, and his sureties are liable for his misdoings.61 It extends also to all defaults in the duties annexed to such office, from time to time, by those who are authorized to control the affairs of the bank ;62 for the sureties enter into the contract with reference to the rights and authority of the president and directors under the charter and by-laws.

And it is no defense to show, in an action on such a bond, wherein it is alleged that the cashier has received money for which he has not accounted, that he had the character of

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

59 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 v. Mechanics' Bank, supra.

an honest, careful, and vigilant officer, and that similar losses by bank officers are frequent, and that the directors have expressed their belief that the loss in question was caused by accidental overpayments, and that they continued to employ him after the loss. Nor is any act or vote of the directors, contrary to their duties, and in fraud of the stockholders' rights and interests, an excuse or defense.64 Thus the fact that the directors know of overdrafts allowed by the cashier, will not release the sureties from liability for losses caused by such overdrafts.65

However it has been decided, that, where the law requires the removal of a cashier for ascertained delinquency, and the managers of the bank retain him in service after knowing such cause of removal, and connive at his misconduct, his sureties are not liable for any breach of his bond, subsequent to the discovery of his misdoings.66

Bond Should be Approved.-To render it binding, the bond shoud be approved; but it may be shown to have been approved by the directors (according to the rules prescribed in the charter of the bank), by presumptive evidence; a record, or other written evidence of such approval, not being necessary.67 Indeed it is held that if a cashier be duly appointed, and permitted to act in his office for a long time, under the directors' sanction, his bond need not be accepted according to the terms of the charter, in order to render his sureties liable for his breach of duty.6

In Case of Misnomer.-And although a surety is entitled to have his undertaking strictly construed, a misnomer of the corporation in the bond, by the omission of the words "and company," does not vitiate it.6 Where Deposit Received away from Bank.

69

American Bank v. Adams, 12 Pick. 303; State Bank V. Chetwood, 8 N. J. L. 28. And see Mussey v. Eagle Bank, 9 Metc. 306; Citizens' Bank v. Wiegand, 12 Phila. 496.

64 Minor v. Mechanics' Bank, 1 Pet. 46; Bank of Washington v. Barrington, 2 Pa. 27. But see Dedham Bank v. Chickering, 4 Pick. 314.

65 Market Street Bank v. Stumpe, 2 Mo. App. 545. 66 Taylor v. Bank of Kentucky, 2 J. J. Marsh. 568. 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.

A cashier who receives money for deposit out of the bank, and not in banking hours, or receives its funds at places distant from the bank, and does not account for them, is liable on his bond.70

For Changing Securities.-So where he exceeds his power by changing the securities of the bank, without the knowledge of the directors, he thereby makes himself and his sureties liable."1

In Case of Robbery, Failure of the Bank, etc.-But, on the other hand from the above, the obligors are not responsible for money of which the cashier is robbed in the discharge of his duty,72 nor, on failure of the bank, for funds deposited in accordance with the bylaws. 73 Nor again can sureties be held, who become such on the faith of a statement by the directors of the condition of the bank which turns out to be false.74

Notice not Necessary.-It is not necessary, in order to charge a cashier's sureties, to give them notice, where damages are caused by his default.75

Period of Liability.-As to the time up to which the sureties on the cashier's bond are liable, it may be said that it is up to the time of his actual discharge,76 or the expiration of the charter, or term of the bond. Beyond this they are not liable." And in Grocer's Bank v. Kingman, 78 it was held that where the sureties undertake to save the bank harmless from every loss that may arise from the cashier's mistakes, as well as from losses arising from his fraud or negligence in the performance of his duties, they are, by an increase of the capital stock of the bank after the making of the bond, exonerated from liability for his acts after the additional capital has been put in.

So, no action can be maintained against the

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 O. 334. 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.

TRUSTEE-Purchasing Trust Property. -The general rule is that the purchase by a trustee, directly or indirectly, of any part of a trnst estate which he is empowered to sell as trustee, whether at public auction or private sale,is voidable at the election of the beneficiaries of the trust; and this rule will be enforced without regard to the question of good faith or adequacy of price, and whether the trustee has, or has not a personal interest in the same property.

But where a trustee has an interest to protect by bidding at a sale of the trust property, and he makes special application to the court for permission to bid, which, upon the hearing of all the parties interested, is granted by the court, then he can make a purchase which is valid and binding upon all the parties interested, and under which he can obtain a perfect title.

Appeal from order of general term of the Superior court of the city of New York, affirming an order of the special term requiring the appellant to complete the purchase of the lots made by him at the sale in this action. The facts appear in the opinion.

Alex. B. Johnson, for appellant; Ferdinand R. Minrax, for respondents.

EARL, J., delivered the opinion of the court. Prior to March 15, 1880, Abraham Scholle, together with the plaintiff, William Scholle, and the defendant, Jacob Scholle, were seized of certain real estate in the city of New York, as equal tenants in common. Abraham Scholle died in March, 1880, leaving a will whereby he appointed his brothers, Jacob and William Scholle, his widow, Barbetta, Julius Ephrmann, and Simon Davidson, executors and trustees, all of whom but William Scholle qualified as such. Davidson was subsequently discharged by order of the surrogate's court and the other three acted as sole trustees and executors of the will. The will was also admitted to probate in California, and there William Scholle qualified as executor. By the provisions of the will, the testator gave his exccutors power to sell his real estate and he directed them to sell the same and invest the proceeds as directed, and pay the income thereof to his children, during their lives, and at their deaths, the share of each parent was to go to his or her children per stirpes.

The testator left two sons and two daughters, the daughters having infant children living, all of whom were made defendants in this action, and the infants were represented therein by a guardian ad litem duly appointed. The action was brought by William Scholle for the partition of all the real estate held in common by him, Jacob, and the 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 report was entered. Thereupon plaintiff and the defendant, Jacob Scholle, presented to the court their petition, setting forth their individual interests in the property and various other facts, and asking for leave to buy at the sale.

The petition came on for a hearing before the court on notice to all parties including the guardian ad litem for the infants and all the other beneficiaries under the bill, and the matter was referred to a referee to take testimony and report to the court together with his opinion whether Jacob and William Scholle could with safety be permitted to purchase. The referee after hearing the testimony, and full notice to all parties, reported that Jacob and William Scholle should be permitted to purchase, provided their bids were made subject to confirmation by the court, both as to their adequacy and fairness, and his report was subsequently confirmed by the court on notice to all parties. The property was subsequently exposed for sale by the referee appointed for that purpose, and Jacob and William Scholle were the highest bidders for property amounting in value to about $200,000. In pursuance of the directions contained in the interlocutory judgment, the same referee summoned all the parties before him, and took evidence as to the adequacy of the bids and prices paid, and after hearing all the parties found that they were adequate and so reported to the court. and his report was confirmed. Subsequently William and Jacob Scholle made a petition to the court to be relieved from their purchase on the ground that they could not obtain a good title because they were trustees named in the will, and at the same time the referee, appointed under the interlocutory judgment to sell the property, made a motion to compel them to complete their purchase. Both motions came on before the court at the same time on due notice to all parties interested in the property, including all the beneficiaries, and the court made an order directing William and Jacob Scholle to complete their purchase and denied their application to be relieved therefrom, and they appealed from that order to the general term, and from affirmance there to this court.

The general rule is not disputed that the purchase by a trustee, directly or indirectly, of any part of a trust estate, which he is empowered to to sell as a trustee, whether at public auction or private sale, is voidable at the election of the beneficiaries of the trust; and this rule will be enforced without regard to the question of good