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to proceed against the officers is the right to reach equitable assets of the corporation and to apply them to the satisfaction of their claims. The officers being liable to the corporation for losses caused by their fraud, gross negligence, or willful breach of duty, this liability may be enforced by or for the benefit of the creditors when the corporation becomes insolvent. The above considerations apply to depositors, as well as other creditors, of a bank; the directors, as agents of the corporation, being liable only to it for their breach of duty,145 and liable to the depositors only indirectly through the corporation when it becomes insolvent. That the officers are thus liable to creditors, when by reason of their negligence or dishonesty in the performance of their duties the bank has been subjected to loss, and in consequence the assets of the bank are insufficient to pay its debts, is well established,146

It follows that the remedy of the creditor is not by action at law against the guilty officers,147 although there are cases

662; ante, p. 301. See Clark, Corp. (2d Ed.) 526, 594. See "Banks and Banking," Dec. Dig. (Key No.) § 57; Cent. Dig. §§ 108-110. 145 Ante, p. 304.

146 Foster v. Bank of Abington (C. C.) 88 Fed. 604; Trustees of Mutual Building Fund & Dollar Savings Bank v. Bossieux (D. C.) 3 Fed. 817; Bank of St. Mary's v. St. John, 25 Ala. 566; Campbell v. Watson, 62 N. J. Eq. 396, 50 Atl. 120; Marshall v. Farmers' & Mechanics' Sav. Bank of Alexander, 85 Va. 676, 8 S. E. 586, 2 L. R. A. 534, 17 Am. St. Rep. 84; Gores v. Day, 99 Wis. 276, 74 N. W. 787. See "Banks and Banking," Dec. Dig. (Key No.) § 57; Cent. Dig. 8 108-110.

147 Union Nat. Bank v. Hill, 148 Mo. 380, 49 S. W. 1012, 71 Am. St. Rep. 615; Hart v. Hanson, 14 N. D. 570, 105 Wis. 942, 3 L. R. A. (N. S.) 438. See, also, Killen v. State Bank, 106 Wis. 546, 82 N. W. 536.

Cases of receiving deposits with knowledge of the bank's insolvency are to be distinguished. This is a fraud, and a director or other officer who takes part therein is liable directly to the depositors for losses suffered thereby. Cassidy v. Uhlmann, 170 N. Y. 505, 63 N. E. 554. See, also, Delano v. Case, 121 Ill. 247, 12 N. E. 676, 2 Am. St. Rep. 81. Cf. Baxter v. Coughlin, 70 Minn. 1, 72 N. TIFF.BKS.& B.-20

to the contrary. 148 The remedy is by bill in equity, in which the corporation itself should be made a party, in order to protect the directors from being called to account a second time, and in which all the creditors should be made parties, or the bill be filed on behalf of the complainant and all others standing in the same situation, so as to enable them to come in under the decree.149 Unlike a stockholder, a creditor, before he can maintain a suit to assert rights properly enforceable by the corporation itself, is not required first to seek to procure action by the corporation.150 Of course, where the corporation is in the hands of a receiver or assignee, as the representative of all concerned, he is the proper party to maintain an action.151 But, if he declines to sue, the suit may be maintained by the creditors. 152

Statutory Liability

In many states it is provided by statute that the directors or other officers of banking corporations shall be liable for its debts, when they are guilty of certain acts of official miscon

W. 797. See "Banks and Banking," Dec. Dig. (Key No.) § 57; Cent. Dig. 8 108-110.

148 Solomon v. Bates, 118 N. C. 311, 24 S. E. 478, 54 Am. St. Rep. 725; Tate v. Bates, 118 N. C. 287, 24 S. E. 482, 54 Am. St. Rep. 719. See "Banks and Banking," Dec. Dig. (Key No.) § 58; Cent. Dig. § 111.

149 Chester v. Halliard, 36 N. J. Eq. 313; Cunningham v. Pell, 5 Paige (N. Y.) 607. See, also, Marshall v. Farmers' & Merchants' Sav. Bank of Alexander, 85 Va. 676, 8 S. E. 586, 2 L. R. A. 534, 17 Am. St. Rep. 84. Cf. Deaderick v. Bank of Commerce, 100 Tenn. 457, 45 S. W. 786. See "Banks and Banking," Dec. Dig. (Key No.) § 58; Cent. Dig. § 116.

150 Foster v. Bank of Abingdon (C. C.) 88 Fed. 604. See "Banks and Banking," Dec. Dig. (Key No.) §§ 58, 154.

151 Stone v. Rottman, 183 Mo. 552, 82 S. W. 76; Campbell v. Watson, 62 N. J. Eq. 396, 50 Atl. 120; Warner v. McMullin, 131 Pa. 370, 18 Atl. 1056. See "Banks and Banking," Dec. Dig. (Key No.) §§ 54, 58; Cent. Dig. §§ 111-120.

152 Gores v. Murphy, 109 Wis. 408, 84 N. W. 867, 85 N. W. 411. See "Banks and Banking," Dec. Dig. (Key No.) § 55; Cent. Dig. §§ 99-104.

duct; 15 while certain other acts on their part are denounced as crimes. A consideration of the statutory liability of bank officers, civil or criminal, is beyond the scope of this book. The provisions of the National Bank Act imposing such liabilities upon national banks will be considered."

153 See Clark, Corp. (2d Ed.) 597.

154

154 Post. p. 39S.

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79. A bank, whether incorporated or unincorporated, is bound by the acts and contracts of its officers, under the rules of agency applicable to other persons and corporations.

Banks, whether incorporated or unincorporated, necessarily act through agents, and certain of these agents by usage are invested with more or less well-defined powers. The matters to be considered in this chapter relate largely to the law of agency. Most of these matters, indeed, relate especially to the representation of banking corporations by their officers; but the powers of the officers of a corporation over its business and property are strictly powers of agents-powers, either conferred by charter, or delegated to them by the directors, in whom, as representatives of the corporation, the control of its business and property is vested. Like agents of natural persons, they can bind their principal, the corporation, only within the scope of their authority, actual or apparent, except where the corporation may be estopped to deny that the agent so acted.1

1 Clark, Corp. (2d Ed.) 480.

DIRECTORS

80. The general management of a banking corporation is ordinarily by the charter intrusted to a board of directors, which has the power to bind the bank by any act or contract within the powers conferred upon the corporation. The board may ordinarily appoint the other officers and agents of the bank and define their duties, and may delegate an authority, not involving the exercise of a discretion vested in it, to one of their own number, or to a third person, to do acts for the bank.

In General

Usually the management of a banking corporation is vested in a board of directors, elected by the stockholders, and the directors appoint other officers and agents. Generally the directors are required to be stockholders, and sometimes the directors, or some of them, are required to be residents of the state. When the directors are given the management and control of the corporation, and there are no express limitations on their powers, they may make any contracts and perform any acts which may be necessary or proper to enable the corporation to accomplish the purposes of its creation. Thus, they may borrow money when necessary, pledge the bank's faith in the execution of their trust, assign over its securities, 2 Post, p. 397.

3

3 Clark, Corp. (2d Ed.) 471.

4 Western Nat. Bank v. Armstrong, 152 U. S. 346, 14 Sup. Ct. 572, 38 L. Ed. 470; Leavitt v. Yates, 4 Edw. Ch. (N. Y.) 134; ante, p. 282. See "Banks and Banking," Dec. Dig. (Key No.) § 102; Cent. Dig. $ 240.

State v. Bank of Louisiana, 5 Mart. N. S. (La.) 327.

They may not pledge future earnings without authority of stockholders. Brown v. Bradford, 103 Iowa, 378, 72 N. W. 648. See "Banks and Banking," Dec. Dig. (Key No.) § 105; Cent. Dig. §§ 249252.

• Stevens v. Hill, 29 Me. 133; President, etc., of Northampton Bank v. Pepoon, 11 Mass. 288; Cross v. Rowe, 22 N. H. 77. See

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