Imágenes de páginas
PDF
EPUB

bank is not legally required to notify the offerers.81 But it cannot retain the paper as collateral for other indebtedness,82 or discount it and apply the proceeds to extinguish another debt of the offerer.8 83

35. Damage on Promised, but Not Executed, Loan.

Should a bank not fulfil its agreement to loan money to an individual, the borrower is not entitled in the way of damages to the difference in interest between the agreed rate and that actually paid elsewhere without showing he could borrow for no less from any other source.s

36. Interest.

84

The same law applies to both corporate banks and individuals in agreeing to a rate for the use of money, unless a different rule is prescribed by charter.s When it is, a bank's

81 Parry v. Highley, 8 Pa. Co. Ct. 584.

85

82 Bank v. White, 154 U. S. 660; Continental Nat. Bank v. Weems, 69 Tex. 489, 501; Lucas v. Dorrien, 7 Taunt. (Eng.) 278. A bank cannot set off a note left by a depositor for discount, after refusing to comply with his request, in an action subsequently brought by the assignee of the depositor on a debt due from the bank to him before his insolvency. Stetson v. Exchange Bank, 7 Gray (Mass.) 425. The refusal of the bank to deliver the note was a conversion for which a proper action would lie. Ibid. 83 Parry v. Highley, 8 Pa. Co. Ct. 584; Petrie v. Myers, 54 How. Pr. (N. Y.) 513. A promissory note was delivered by the maker to the payee to be discounted for the maker's benefit. The bank refused to discount it at the time of its presentation, but did so afterwards, and permitted the payee to draw against it, which he did. The maker was liable for the amount drawn. Platt v. Beebe, 57 N. Y. 339. The cashier of a bank negotiated a loan for a stockholder, who requested the proceeds to be remitted. Instead of doing so, the cashier deposited the proceeds in the bank, which appropriated them to pay an indebtedness due from the borrower. The cashier's act was a fraud of which the bank could not take advantage and therefore could not return the money. Winslow v. Harriman Iron Co., 42 S. W. (Tenn. Ch. App.) 698.

84 Blue v. Capital Nat. Bank, 145 Ind. 518.

85 Bank v. Mandeville, 1 Cranch C. C. (U. S.) 552; Durkee v. City Bank, 13 Wis. 216; Farmers' Bank v. Burchard, 33 Vt. 346, 378; Lumberman's Bank v. Bearce, 41 Me. 505; Billingsley v. State Bank, 3 Ind. 375; Chafin v. Lincoln Sav. Bank, 7 Heisk. (Tenn.) 499; Stribbling v. Bank, 5 Rand. (Va.) 132.

A statute authorizing banking corporations with power to lend "at a rate

own special rule must be observed 86 in all contracts, regardless of state boundaries.87

In lending to a person outside the state, the contract may be regarded from two points of view; by the state where the bank is located, and by the other state. Four different principles have been applied to foreign contracts by the home state whenever a bank's charter has not stood in the way of applying them. First, that the rate of interest must not exceed that of the home state even though the contract be made and payable in a state permitting a higher rate.88 Second, the higher rate of interest in the state where the contract is made and the money is payable if the parties thus agree may be taken.89 This rule is of wide application. Third, the parties may agree to the rate existing in the state where either contracting party lives if the contract has been made and is to be executed in either or both of them.90 This rule cuts all difficulties and

of interest not to exceed ten per cent. per annum" does not invalidate a note for a loan taken at a higher rate of interest. Farmers & Traders' Bank v. Harrison, 57 Mo. 503.

86 Bank v. Sterling, 2 La. 60; Clinton R. v. Kernan, 10 Rob. (La.) 174; Grand Gulf Bank v. Archer, 8 Sm. & M. (Miss.) 151; Stribbling v. Bank, 5 Rand. (Va.) 132; Rock River Bank v. Sherwood, 10 Wis. 230; Farmers' Bank v. Burchard, 33 Vt. 346, 380. "The rule of comity does not extend so far as to legalize a contract in excess of its chartered privileges made by a foreign corporation in another state, although such contract be authorized in the state where made as a legitimate exercise of power by its own citizens, whether natural or incorporated." McIlvaine, Ch. J., Ewing v. Toledo Sav. Bank, 43 Ohio St. 31, 37.

87 Ewing v. Toledo Sav. Bank, 43 Ohio St. 31; Farmers' Bank ▼ Burchard, 33 Vt. 346, 395, 396.

88 Ewing v. Toledo Sav. Bank, 43 Ohio St. 31; Farmers' Bank v. Burchard, 33 Vt. 346, 395, 396. See Bank of Augusta v. Earle, 13 Pet. (U. S.) 519.

89 Hitchcock v. United States Bank, 7 Ala. 386; Frazier v. Willcox, 4 Rob. (La.) 517; Erwin v. Lowry, 6 Rob. (La.) 28; Depau v. Humphreys, 8 Martin (La. N. S.) 1; Knox v. Bank, 27 Miss. 65; Waverly Nat. Bank v. Hall, 150 Pa. 466; Buchanan v. Drovers' Nat. Bank, 5 C. C. A. 83; Cockle v. Flack, 93 U. S. 344; Bard v. Poole, 12 N. Y. 495.

90 Peck v. Mayo, 14 Vt. 33, 38; McAllister v. Smith, 17 Ill. 328; Kilgore v. Dempsey, 25 Ohio St. 413, 418; Chapman v. Robertson, 6 Paige (N. Y.) 627; British Am. Mortgage Co. v. Bates, 58 S. C. 551; Townsend v.

ought to be universal. Fourth, as the logical result of this rule the parties may make a valid contract for the payment or performance of the contract in any other state than that where either of them resides.91

The rights and duties of a surety are determined by the law of the state that determines the rights and duties of the principal debtor. Says Justice Green: "The right of a surety to discharge his obligation by notice to the creditor to pursue the debtor is an incident of the contract of suretyship. It is a part of the law of that contract and is therefore a part of the contract itself.'

192

37. Loans by Foreign Bank.

The authority of a state to lend outside the state of its creation has been considered in another chapter.93 And a foreign bank whose charter imposes no restriction upon the security for its loans may take and hold a mortgage on land in another state and enforce collection through the instrumentality of its courts like any other creditor.94

Riley, 46 N. H. 300; Richards v. Globe Bank, 12 Wis. 692; Newman v. Kershaw, 10 Wis. 333, 340; Kennedy v. Knight, 21 Wis. 340; Dugan v. Lewis, 79 Tex. 246; Cromwell v. County of Sac, 96 U. S. 51.

91 Thornton v. Dean, 19 S. C. 583; Wayne Co. Sav. Bank v. Low, 81 N. Y. 566; Bigelow v. Burnham, 83 Iowa 120; Scott v. Perlee, 39 Ohio St. 63; Tilden v. Blair, 21 Wall. (U. S.) 241; Junction Railroad Co. v. Bank of Ashland, 12 Wall. 226; Cromwell v. County of Sac, 96 U. S. 51; Cockle v. Flack, 93 U. S. 344. See note, 46 Am. St. Rep. 201.

Contra.-Martin v. Johnson, 84 Ga. 481; Falls v. United States Sav. & Loan Co., 97 Ala. 417.

92 Tenant v. Tenant, 110 Pa. 478, 485.

93 Chap. I, §27.

94 Lebanon Sav. Bank v. Hollenbeck, 29 Minn. 322.

CHAPTER VIII.

AUTHORITY, DUTY AND LIABILITY OF DIRECTORS.

1. Classification of officers.

2. Directors are not the bank. 3. Who is a de facto director. 4. Election of directors. Qualifications.

5. How restrained from acting.

6. Duration of authority.

7. Can act only as a board.

8. Meetings.

9. Unanimity of action.

10. Authority of committee.

11. Records of action.

12. Compensation.

13. General authority.

14. Authority to contract with their bank.

15. Authority to employ and discharge officers.

16. Duty to notify bank of important matters.

17. Duty to make dividends.

18. Duty to make examinations and reports.

a. Examinations. b. Reports.

19. Restrictions on their authority. 20. Their liability at common law. 21. Difficulty in prescribing rule of duty and liability.

22. Minimum rule. Ordinary care. 23. Maximum rule. Prudence. 24. These rules regard their liability from different points of view.

[blocks in formation]

30. Only cases of real negligence left for consideration.

31. Application of the two rules of duty to them.

32. Narrowing of directors' responsibility.

33. Duty of non-resident and absent directors.

34. Effect of resigning and of immediate re-election.

35. Director is liable only for his own negligence. Minority. 36. Action by solvent bank, or if insolvent, its representative, against them.

37. Action of stockholders of solvent bank against them. 38. Nature of remedy.

257

[blocks in formation]

Having described the authority of banking corporations, the inquiry follows by whom may this authority be exercised? It is divided between three well-defined classes. The directors; the managing officers, who may be the president, or vice-president, or cashier, or several of these officers; and minor officers. or subordinates and special agents. The functions of directors will be first considered.

2. Directors Are Not the Bank.

Directors of a corporate bank are not the bank itself, though they "constitute," says Chief Justice Shaw, "to all purposes. of dealing with others, the corporation."1 Their authority is limited and consequently all who deal with them must know how much authority they possess.2 Nor do they exercise a delegated authority in the same sense that the term is applied to those who are constantly or specially employed by a corporation. A director may be delegated to act for his bank in a special transaction and when thus acting is an agent in the usual sense of the term.4

3. Who is a de Facto Director.

A director who has been elected by legal form is an officer de facto if not de jure and may transact the ordinary duties of

I Burrill v. Nahant Bank, 2 Met. (Mass.) 163, 167.

2 Village of Port Jervis v. First Nat. Bank, 96 N. Y. 550, 559; Bedford R. Co. v. Bowser, 48 Pa. 29, 37.

3 Burrill v. Nahant Bank, 2 Met. (Mass.) 163, 167.

4 Village of Port Jervis v. First Nat. Bank, 96 N. Y. 550, 559; Branch of Bank of Ala. v. Collins, 7 Ala. 95.

« AnteriorContinuar »