who had taken no active part in the management are not liable for a loss of trust funds..

It will be presumed that directors have made the examinations of a trust company's affairs required by statute.'

8

There is no criminal liability for negligence by trust company directors in New York, where there is no statute making it a crime, and according to the Penal Law of that State, no act or omission is a crime except as prescribed by statute. It was further held that the statutory requirement of taking an oath to diligently and honestly administer the affairs of the corporation "is not the command by the legislature to thus administer them," so that an omission would come under the Penal Law. "The duty of taking an oath was prescribed by statute, but that duty the defendant performed. The duty of honest administration was not prescribed."

§ 144. Authority of Officers. The extent of authority of various trust company officers and liability of the corporation for their acts and omissions rest upon the same principles as those applicable to corporations generally.

Thus a trust company may confer upon its officers or agents powers not ordinarily belonging to them, by habitually permitting them to exercise them, and it will be estopped from setting up the want of authority of offi

62. R. Dominion Trust Co. (1916), 32 D. L. R. 63.

7. Gregory v. Binghampton Trust Co. (1915), N. Y. App. Div. 154, N. Y. Supp. 370.

8. People v. Knapp (1912), 206 N. Y. 373, 99 N. E. 841, affirming 147 N. Y. App. Div. 436, 132 N. Y. Supp. 747. See Carnegie Trust Co. v. Kress (1915), 215 N. Y. 706, 109 N. E. 1068, where a complaint by the superintendent of banks in a civil action against a trust company director for neglect is upheld.

9. Carrington v. Turner (1905), 101 Md. 437, 61 Atl. 324; Muth v. St. Louis Trust Co. (1901), 88 Mo. App. 596.

cers, where it has received a benefit thereunder which it is unable to restore.1

10

That the vice-president of a trust company may be the "chief officer," so as to be authorized to sign papers in that capacity, appears in a Kentucky case.11 The Court said:

11

"By Section 6 of the by-laws of the Fidelity Trust Company the vice-president is made one of the chief officers of the company, who, while second in name, is in fact equal in power and authority with the president of the company, and together with the chairman of the board, who is also one of the chief officers, these two conduct the trust affairs of the corporation, and Section 5 of the by-laws provides that the management of all trusts shall be divided among the three chief officers, the chairman of the board, the president, and vice-president, and that each of said officers shall be primarily responsible for the management of the trusts assigned to him. The record in this case shows that the settlement of the estate in question was in accordance with the express provisions of the by-laws assigned to the vice-president, and therefore he was the only officer of the company who was familiar with the affairs of the trust estate of which he was seeking a settlement, and was the only one qualified to make the affidavit in question, and was, in fact, the chief officer of the company, so far as the settlement of this estate was concerned."

In a case11 holding that the powers of the manager

10. Callender v. Kelly (1899), 190 Pa. St. 455, 42. Atl. 957. 11. Mandel v. Fidelity Trust Co. (1908), Ky. 107 S. W. 775. 11. Union Savings & Trust Co. v. Krumm (1915), 88 Wash. 20, 152 Pac. 681,

of a trust company branch are not limited to those of a cashier, it was said that: "The actual powers of titular officers are so varied even in the same institution, that courts have never laid down any rule as to what invariably constitutes the limits of apparent authority as confined by the inherent powers of a given office."

9912

§ 145. Imputable Knowledge of Officer. In discussing the question of "the meaning of the word 'Trust' in Trust Company," a sharp distinction was noticed as existing between a trust company, in its fiduciary business, and that of an ordinary corporation, so far as acts of its officers are concerned, and there was cited a case," which should here be referred to again. In this case it was held, that the rule of knowledge of an agent acting in a fraudulent transaction in his own behalf would not be imputed to his principal, or of an officer to his corporation, did not obtain as to the beneficiaries of a trust fund in favor of a trust company.

This case concerned the leaving on deposit of a trust fund in a bank of which the president of a trust company defendant was also president and knew its unsafe condition. The other directors were not shown to have such knowledge. Upon the bank becoming insolvent, the trust company was sued and claimed good faith in making the deposit, and the president of the bank acting in a hostile attitude to the trust company of which he also was a president and director, his knowledge should not be imputed to the trust company. The court held, however, that his very knowledge helped to fix, conclusively, liability on the trust company.

The court after observing that there was no contest

12. Ante, Chapter V., Sec. 18.

2. Germania Safe Vault & Trust Co. v. Driskill (1902), 23 Ky. Law Rep. 2050, 66 S. W. 610.

*

between the two corporations and, therefore, no place for the ruling to be invoked, then went on to say that a trust company, in its fiduciary capacity, acts not so much through its officers, as through its official boards, and "whatever knowledge they may have, wherever or whenever obtained will be used * * exactly as if they were acting personally as ** trustees." Therefore it was thought, that the trust company knew the unsafe condition of the bank, because one of its board of directors who placed the deposit therein allowed it to stay there, the trust company being held to contract that those managing its fiduciary affairs are "men of prudence, judgment, honesty and reasonable skill." Possibly an ordinary bank engages the same way, but this does not take away all affectation of the rule above alluded to. I make no criticism, however, of the ruling in this case, but regard it as well drawn as otherwise there would be a very serious difference between individual and corporate trustees, largely in favor of the former.

3

Where a trust company acts outside of its trust capacity, as in discounting a note offered to it, what one of its board of directors knows of its invalidity is not imputed to the trust company. And, because of the varied powers exercised by a trust company, not in a trust capacity, it may be bound for the acts of its officers as to matters in which a bank would not be held bound.* This case shows, as the Court says, "the corporation to have been engaged, as modern trust companies often are, in promoting the creation and establishment of other corporations. The testimony strongly indicates that it

210.

3. Jacobus v. Jamestown Mantel Co. (1914), 211 N. Y. 154, 105 N. E.

4. Carington v. Turner (1905), 101 Md. 437, 61 Atl. 324.

launched the Security Fire Insurance Company upon the community and assisted in floating its stock."

§ 146. Distinction in Rule of Notice and Guarantee of Fidelity. But the principle announced in the Jacobus case supra is also declared in a New Jersey case." There it was sought to bind the trust company, as an ordinary money lending corporation, by knowledge of its president and cashier in the fraudulent purpose of an executor mortgaging trust property and its being used in a partnership venture by the three. The court said: "The president and cashier of the trust company, as members of the copartnership, were dealing with the institution of which they were the managing officers. In their own interest they were contracting with themselves, as representatives of the trust company, to advance money on a mortgage made by the trustee (executor) to the trust company which they intended to misapply, or aid in so doing, and their interest in the matter was so opposed to the interest of their principal, that knowledge of the wrong cannot equitably be imputed to their principal."

When this case is compared with the Driskill case supra an essential difference is seen to exist as to the binding force of acts by officers of a trust company so far as its ordinary business department is concerned and where its fiduciary relation is involved. Under the former aspect it would seem necessary to show that besides knowledge an officer would have to have an interest in a fraud for the presumption to arise that his principal was not informed. Under the latter aspect it would make no difference whether he had such interest or not,

5. Camden Safe Deposit & Trust Co. (1904), 67 N. J. Eq. 489, 58 Atl. 607.