quire title to State stocks and bonds and mortgages. Though the power is not conferred in express terms, it is plainly implied. Such securities may be purchased by the association with the capital paid in by the shareholders or other funds of the institution, and there is no objection to shareholders making payment for the stock they receive on subscription in the same manner. The terms on which these securities should be received in payment for stock, so as to make the same equal to cash, and therefore just between the several associates and shareholders, is material and important among themselves, but cannot affect the capacity of the association thus to acquire such property, or the validity of the title conveyed upon such consideration and for such purpose. N. Y. Supreme Ct. 1844, Comstock v. Willoughby, Hill. & D. Supp. 271, 301; S. P. N. Y. V. Chan. Ct. 1843, Leavitt r. Yates, 4 Edw. 134, 164. 116. Incorporated banks, banking associations, and individual bankers, authorized to become owners of any stock of the United States or of the State of New York. N. Y. Laws of 1862, 181, ch. 62, § 1. 117. May not traffic in stocks. Banking associations formed under the New York act of 1838, possess only authority to carry on the business of banking in the manner and with the powers specified in that act. They have no power to purchase State or other stocks, for the purpose of selling them for profit, or as a means of raising money, except when such stocks have been received in good faith, as security for a loan made by, or a debt due to, such association, or when taken in payment, in whole or in part, of such debt. N. Y. Ct. of Appeals, 1852, Talmage v. Pell, 7 N. Y. (3 Seld., 328; Bank Commissioners v. St. Lawrence Bank, 7 N. Y. (3 Seld.), 513; 1856, Tracy v. Talmage, 14 N. Y. (4 Kern.), 162. To the same effect, N. Y. V. Chan. Ct. 1843, Leavitt v. Yates, 4 Edw. 134, 166. 118. Securing the bill holders. That the notes or bills of a bank, which form the common currency or circulating medium of a country, should be protected in preference to every other class of bank debts; and by § 3 of the Georgia act of 1842, for winding up insolvent banks, are expressly directed to be first paid off and redeemed,- —see Robinson v. Bank of Darien, 18 Ga. 65. 119. Collection of the securities. That a bank cannot maintain an action upon a security which it has assigned to the State treas urer, under a State banking law,—see South Royalton Bank v. Downer, 28 Vt. 635. 120. When a mortgage or other security is transferred to the comptroller under the New York act of 1838, the legal title becomes vested in him, and he may on default foreclose it. The right to foreclose a mortgage or collect a security is incident to the ownership. N. Y. Ct. of Appeals, 1854, Flagg v. Munger, 9 N. Y. (5 Seld.), 483. See to the same effect, under the banking law of New Jersey, Townsend v. Smith, 1 Beasl. 350. 121. Transfers of them. A transfer by the comptroller, either directly or indirectly, to any other person than the person or association by whom they were transferred (except by sale on failure to redeem notes), cannot be sustained. Where M. furnished the president of a banking association with its circulating notes, to an amount equal to a certain bond and mortgage held by the comptroller; and the president, acting for M., surrendered them to the comptroller, and received from him an assignment of the bond and mortgage to himself, and delivered them to M., but without assignment from the bank ;--Held, that M. had no title to them, and could not maintain a foreclosure suit. Such a transaction cannot be deemed a sale by the bank to M. N. Y. Ct. of Appeals, 1852, Mitchell v. Cook, 7 N. Y. (3 Seld.), 538. And see Valk v. Crandall, 1 Sandf. Ch. 179. 122. One who has given a security to a private bank, which has in turn deposited the same with the comptroller, to secure the redemption of the notes of the bank, and who thereafter pays an amount due on the security to an officer of the bank, though not the owner of the bank, with intent to have the amount paid credited upon such security, is not entitled to be protected in such payment, as against an innocent assignee of the security from the comptroller. N. Y. Supreme Ct. 1858, Mitchell v. Cook, 17 How. Pr. 110. 123. Though the comptroller cannot transfer a security, deposited with him, to a person other than the depositor, notwithstanding he is paid the amount for which the security was deposited, a third person may afterwards, by virtue of a previous agreement to purchase, on the consideration paid to the comptroller, perfect his title by a reassignment from the owner after the comptroller has assigned to him. Ib. 124. Redemption of them. Where a bank, organized under the Ohio act of March 21, 1851, has done, and continues to do, all the acts necessary to perfect and maintain its organization in pursuance of said act, and has also complied with the provisions thereof to entitle itself to notes of circulation, which the auditor of State refuses to give, a writ of mandamus is the proper remedy. Ohio Supreme Ct. 1856, Citizens' Bank of Steubenville v. Wright, 6 Ohio St. 318. 125. Embezzlement of them. A public officer who holds securities deposited with him by a bank for the redemption of its issues, is not liable to the bank for embezzling them, unless the bank suffers pecuniarily by his act. Ind. Supreme Ct. 1858, State v. Dunn, 10 Ind. 269. and the powers vested in them by their offices. The property of stockholders is not bound by the irregular transactions, or by the declarations or confessions of their offi cers, beyond the legal sphere of their action. Mass. Supreme Ct. 1817, Wyman v. Hallowell & Augusta Bank, 14 Mass. 58; 1820, Salem Bank v. Gloucester Bank, 17 Mass. 1, 29. 131. The officers of a bank have no authority to bind the bank as an indorser for accommodation; and such indorsement is void in the hands of every one who has notice that it is for accommodation. N. Y. Ct. of Appeals, 1855, Bank of Genesee v. Patchin Bank, 13 N. Y. (3 Kern.) 309; S. C. again, 19 N. Y. 312. 132. That the officers of a bank have no 126. That a bank organized under the gen-power to pledge the corporation for their ineral banking laws of Illinois, which has filed dividual engagement,— -see Austin v. Daniels, a certificate of its desire to withdraw its notes 4 Den, 299. from circulation, is nevertheless liable to answer for deposits subsequently received, unless the depositor knew of the filing of the certificate.-see Northern Bank of Illinois v. Zepp, 28 Ill. 180. 129. Their power to bind the bank. That the officers of a bank are held out to the public as having authority to act according to the general usage, practice, and course of their business; and their acts within the scope of such usage &c. will, in general, bind the bank, in favor of third persons possessing no other knowledge,-see Minor v. Mechanics' Bank of Alexandria, 1 Pet. 46. For cases sustaining this and other rules stated under this head, in relation to Officers of corporations generally, see OFFICERS. 130. The authority of officers of banks is restricted to such modes of binding the company as result from the nature of their duty 133. Liability of the bank for their frauds. A bank is a corporation which can only act by agents; all the transactions of the bank, in buying or selling, borrowing and lending, every act by which they can convey property or acquire it, must be done by agents. When any one of these transactions is of such a character, that false representations, practice of fraud, or knowledge of fraud practised by another, would avoid the transaction, if done by an individual, it will equally affect a corporation, if done or had by the agent in the same transaction for a corporation. Mass. Supreme Ct. 1858, Atlantic Bank v. Merchants' Bank, 10 Gray, 532. 134. An action of assumpsit was brought against a bank, to recover the amount of a large special deposit in gold, which had been fraudulently or feloniously taken from the vaults of the bank by the cashier and chief clerk, and converted by them to their own uses. There was no evidence of gross neglect on the part of the bank,—the directors, who represented the company, being wholly ignorant of the nature or amount of the deposit, or of the transactions of the cashier and chief clerk, and these having no right, in the course of their official employment, to intermeddle with the deposit, except to close the doors of the vault upon it when banking hours were over: Held, that the bank was not liable for the loss, inasmuch as it only warranted the skill and faithfulness of its officers in their employments, and not their general honesty and uprightness. Mass. Supreme Ct. 1821, officer to make the agreement. N. H. Superior 135. — or mistakes. A bank is liable for the fraud or mistakes of its cashier or clerk, in the entries in its books, and in the false accounts of deposits. Mass. Supreme Ct. 1820, Salem Bank v. Gloucester Bank, 17 Mass. 1; Gloucester Bank v. Salem Bank, 17 Mass. 33; 1821, Foster v. Essex Bank, 17 Mass. 479. 136. That a bank is liable for the mistakes of its officers,-see Andrews v. President, &c. of Suffolk Bank, 12 Gray, 461. 137. Liability for acts of president and cashier. A president or cashier cannot charge a bank with any special liability for a deposit, contrary to its usage, without the previous authority or subsequent assent of the corporation. Mass. Supreme Ct. 1821, Foster v. Essex Bank, 17 Mass. 479. 138. The president and cashier of a banking corporation have no power virtute officii to make any assignment of the corporate property requiring the use of the corporate seal, without the assent and authority of the board of directors, where the charter creates or provides for such a board and intrusts the management of the affairs of the corporation to such board. N. Y. Ct. of Appeals, 1851, Hoyt . Thompson, 5 N. Y. (1 Seld.) 320. Compare a further decision in this case, sub nom. Hoyt v. Shelden, 3 Bosw. 267, 285. 139. The president and cashier of a bank, and a "finance committee" of the board of directors, as such merely, have no power to execute a mortgage of the lands of the corporation, without the concurrence of the board of directors. N. J. Chancery, 1832, Leggett v. New Jersey Banking Co. 1 Saxt. 541. 142. Where the by-laws of a bank relative to loans made on personal security alone, prescribe that the treasurer shall notify the principal and sureties, personally or in writing, of any dues unattended to, and require prompt payment of the same, an omission of this duty does not discharge the sureties upon a note due to such bank. Ib. 143. of manager. The local manager of a branch bank, while engaged at the bank, suggested to a lady who had a deposit account, that higher interest might be obtained for her money if she purchased two houses for a sum which would pay off a mortgage held by a third person upon them, and also a lien held by the bank. She assented, and gave him her deposit note, for which he gave her a fresh deposit note for the difference between the amount of the former note and the purchase-money, and retained the residue for the purpose of making the investment. This money the local manager appropriated to his own use, and the bank refused to bear the loss. Held, in an action against them, that they were liable; the jury having found that the manager intended and induced the lady to believe that he was acting as the agent of the bank; and, having also found that, as local manager, he had authority from the bank to make an assignment of an equitable mortgage. Exch. 1854, Thompson v. Bell, 26 Eng. Law & Eq. 536; 10 Exch. 10. 145. Redress from unfaithful officer. Bank officers are but agents of the corpora140. Therefore, where such mortgage was tion, and, if they transcend or abuse their executed by such officers of a banking corpo-powers, are as much responsible to their prinration without the authority of the directors, cipal as the agent of an individual is to him. to whom, by the charter, the management of N. Y. Supreme Ct. 1847, Austin v. Daniels, 4 its affairs was committed, the mortgage was Den. 299. And see Franklin Ins. Co. v. Jenkheld to be void, although, in fact, the man-ins, 3 Wend. 130. agement of its affairs was committed, for the most part, to the president and cashier. Ib. 146. That where an officer of a bank fraudulently abstracts the funds, and invests them in his own name, the court can not declare him a trustee, and indemnify the bank out of the investment-see Pascoag Bank v. Hunt, 3 Edw. Ch. 583. As to the proper mode for bank officers to Authenticate contracts to bind the bank, see CONTRACTS. As to Bonds given by bank officers, see is a body recognized by the law; and does SECURITY. 2. Directors. not exercise a delegated authority in the sense of the rule which forbids an agent, without express power so to do, to delegate his au 147. Election. The courts have no pow-thority. By the by-laws of banking corporaer to set aside an election of trustees or directors in a New York banking association. Such officers may be removed at the pleasure of the associates. N. Y. Supreme Ct. 1844, Matter of Bank of Dansville, 6 Hill, 370. 148. Organization of the board. A New York banking association formed under the general law of 1838, may, by its articles of association and by-laws, divide the business it is authorized to transact into several distinct departments, and constitute a separate board of directors for each department; or may intrust to a separate committee of the directors the exclusive charge of each department, clothing that committee with all the powers of a board, in relation to the business which its department embraces. N. Y. Superior Ct. 1849, Palmer v. Yates, 3 Sandf. 137. 149. By articles of association, the directors as a board were authorized to make such by-laws, rules, and regulations for the management of the business of the company, and the government of themselves, their officers, and agents, as they might think expedient, not inconsistent with law and the articles of association. The by-laws which they made declared that the business of the company should be conducted under two divisions: the first to embrace the business relating to bonds, mortgages, and other securities, and the second the business of discount and deposit; and also established two departments corresponding with the divisions, and placed them under distinct committees. Held, 1. That such a system was neither inconsistent with law nor with the articles of association; that this provision was intended to cover the whole business of the company, and that the business of the first department included the transfer and assignment as well as the taking of mortgages and other securities. 2. That under such a division of the business, a resolution of the committee of investments and finance must be deemed a "resolution of the board of directors," within the meaning of 1 N. Y. Rev. Stat. 591, relating to moneyed corporations. Ib. tions, and by a usage so general and uniform as to be regarded as part of the law of that State, bank directors have the general superintendence and active management of all the concerns of the bank, and constitute, to all purposes of dealing with others, the corporation. Accordingly directors of a bank may not only mortgage its real estate to secure a debt due from the bank, but may delegate such an authority to a committee of their own number. Mass. Supreme Ct. 1840, Burrill v. Nahant Bank, 2 Metc. 163. 151. The directors of a bank alone have power to make discounts and fix any conditions which be may proper in loaning money. U. S. Supreme Ct. 1832, Bank of United States v. Dunn, 6 Pet. 51; N. Y. Chancery, 1837, Bank Commissioners v. Bank of Buffalo, 6 Paige, 497. 152. The directors of a bank are its agents, held out to the public as possessing the power, according to the general usage, practice, and course of business in banks, to issue bills, and their fidelity in the discharge of this duty is impliedly warranted. Consequently the bank is bound, notwithstanding an over issue, to redeem the bills thus put into circulation, when in the hands of innocent holders; as are also stockholders, who have guaranteed the ultimate redemption of the bills issued by the bank. Ga. Supreme Ct. 1855, McDougald v. Bellamy, 18 Ga. 411. 153. The authority of banks to borrow money under the general banking laws of New York, must be exercised by the directors, who are mere agents for the shareholders, and are to exercise their powers for the bezefit of the shareholders, within the legitimate business of banking. If this power be improperly exercised, the shareholders and others interested in the bank will not be liable to the lenders of money. N. Y. V. Chan. Ct. 1843, Leavitt v. Yates, 4 Edw. 134. 154. Where a surrender of a bank charter had been accepted by the legislature, but the corporate existence of the bank was continued for a limited time, to enable it to close its affairs, it was held, under the general 150. Powers. A board of bank directors banking law of Maine, that the directors might legally elect a cashier. Me. Supreme Ct. 1849, Cooper v. Curtis, 30 Me. 488. 155. The directors of a bank have power to authorize the president and cashier to borrow money or obtain discounts for the use of the bank. Pa. Supreme Ct. 1825, Ridgway v. Farmers' Bank, 12 Serg. & R. 256. 156. The directors of a bank have authority to make a settlement with the cashier, whose accounts exhibit a deficit in the funds. Me. Supreme Ct. 1844, Frankfort Bank v. Johnson, 24 Me. 490. 157. But their fraudulent conduct, in making a settlement with the cashier, would not annul or make the settlement void, unless the cashier was also guilty of fraud. Ib. 158. That the board of directors of the Bank of the United States have power to assign its property and effects in trust, to pay certain preferred creditors, without the authority of its stockholders,—see Dana v. Bank of United States, 5 Watts & S. 223. 159. That one director cannot bind a bank by contract, without express authority from the board,-see Harper v. Calhoun, 7 How. (Miss.) 203. 160. Liability. The liability of the directors of a bank, under the act of Michigan of Mar. 15, 1837, for debts incurred in violation of the statute-explained. White v. How, 3 McLean, 111. 161. That a proceeding by the bank commissioners under that statute is no bar to an action against the directors to make them personally liable; all that the holders of the notes could claim from such a proceeding, would be a pro rata payment of the assets, -see Ib. his own instead of the corporate seal. N. Y. A. V. Chan. Ct. 1843, Valk v. Crandall, 1 Sandf. Ch. 179. 164. The president of a bank may transfer, by his endorsement, a note made payable to the corporation, if he has a general authority for that purpose from the directors; and the seal of the corporation need not be affixed to the transfer, nor a particular vote therefor be passed. Mass. Supreme Ct. 1814, Spear v. Ladd, 11 Mass. 94; Northampton Bank v. Pepoon, 11 Mass. 288. 165. to sign checks. In the absence of the regular cashier, a person was appointed to discharge the duties of cashier; yet, notwithstanding this, upon proof of a general custom for the president of a bank to sign checks &c. in the absence of the cashier,—Held, that a check which the president had signed was binding upon the bank. Tenn. Supreme Ct. 1858, Neiffer v. Bank of Knoxville, 1 Head, 162. 167. to authorize use of bank funds. The president and the cashier of a bank were engaged in establishing a new banking association, and purchased State stocks for the purpose, on credit, and assumed to give the security of the bank of which they were of As to the Directors in corporations gene- ficers for it. Subsequently the cashier, with rally, see BOARD; DIRECTORS. 3. The President. 162. His power to take an assignment. Under the provisions of the New York general banking law, an assignment to the president, as such, of a banking association is equivalent to an assignment to the association itself by name. N. Y. Superior Ct. 1854, Leavitt v. Fisher, 4 Duer, 1. 163.— to transfer assets. The president of such an association is the person to whom mortgages for shares should be made payable, and he is the proper person to assign the same; and (although his assignment would be good without seal) he may assign under the assent of the president, took money of the bank in order to pay for it. Held, that the cashier was liable to the receiver of the bank for the amount. The assent of the president could afford no protection to him. N. Y. Supreme Ct. 1847, Austin v. Daniels, 4 Den. 299. |