570 NEW HAMPSHIRE SUPREME COURT, 1882. Norton v. Derby National Bank. by their agents or servants is confined to cases where the acts complained of, or relied on, are done in the employment of the principal as a part of the ordinary business of that employment, or are authorized or directed by the principal, or in some way ratified and adopted by him. Acts, though done by an agent or servant, unauthorized and unratified, and not being within the scope of the employment, nor a part of the ordinary business of the principal, cannot bind him nor make him liable; and the doctrine applies with special force to corporations, the business of which can be carried on only through the medium of agents. Ang. & Ames Corp., §§ 310, 311; Add. Torts, § 1197; Martin v. Great Falls Mfg. Co., 9 N. H. 51, 54; Salem Bank v. Gloucester Bank, 17 Mass. 1; 9 Am. Dec. 111; Foster v. Essex Bank, 17 Mass. 479, 508; 9 Am. Dec. 168; Mechanics' Bank v. Bank of Columbia, 5 Wheat. 326; Bank v. Dunn, 6 Pet. 51; Bank v. Jones, 8 id. 16; United States v. City Bank of Columbus, 21 How. 356. The defendants' cashier had no authority to make the guaranty, nor was his act in making it ever ratified by the defendants. The directors in fact repudiated it as soon as it came to their knowledge. It was no part of the duty of the cashier to make the guaranty, nor was its making any part of the ordinary business of the bank. Nothing of the kind was shown to have ever been done before, either with or without express direction. It was not within the legalized powers of the defendants. The fact that it was a part of the duty of the cashier to record the acts and votes of the directors does not make his false record and certificate binding upon the bank. The cashier is not a public officer within the meaning of the term, appointed by the public to make and certify records, and whose duties are defined by law. If he was held out by the defendants as their agent to record and show the acts of their officers, the plaintiff was not relieved of the duty of making inquiry into the legality and want of authority of the acts. The doctrine, that of two innocent persons defrauded by a third, he shall suffer who has enabled a delinquent to commit the fraud, has no application here, where the act constituting the fraud was no part of the cashier's duty nor the defendants, legitimate business, and where the plaintiff neglected to make the necessary inquiry for ascertaining the validity of the act. Conway v. Halsey. The doctrine of ultra vires is not usually applied where the party setting it up has received a benefit from the unempowered and unlawful act relied on as a defense. Rich v. Errol, 51 N. H. 350, 354; West v. Errol, 58 id. 233; United States v. State Bank, 96 U. S. 33; Gold Mining Co. v. National Bank, id. 640; 1 Nat. Bank Cas. 151; National Bank v. Matthews, 98 U. S. 621; 2 Nat. Bank Cas. 12; Bank v. Whitney, 103 U. S. 99; ante 5. The defendants received a tract of land which the plaintiff conveyed, relying for payment of the consideration on the guaranty of the defendants. The guaranty, the conveyance and the pledge of the note and mortgage were parts of the same transaction, and though the land was not received directly from the plaintiff, it was the false guaranty which induced and made possible the conveyance, and which enabled the bank to collect the overdraft of Lamprey. It was a benefit received from the guaranty, and the defendants cannot be permitted to repudiate the unauthorized contract and retain the fruits of it. If the guaranty is denied, the benefit must be restored. The plaintiff cannot recover upon the guaranty. If he desires, he may amend his declaration by adding an appropriate count for the recovery of the land, or its value if sold. All concur except SMITH and CARPENTER, JJ., who did not sit. Case discharged. CONWAY V. HALSEY. (44 N. J. L. 462.) Stockholder — action against directors for negligence. A stockholder in a National bank cannot maintain an action against the president and directors for their neglect and mismanagement of the affairs of the bank, whereby insolvency ensued and the stock became worthless. N Supreme Court, before BEASLEY, C. J., and DIXON, MAGIE and PARKER, JJ. The declaration was to the effect that the defendants, directors of the Mechanics' National Bank of Newark, had permitted the cashier of said bank to control and manage the Conway v. Halsey. business of the bank and to apply the money and property of the bank as suited his inclination, and without reasonable supervision of the defendants, whereby the said cashier was enabled and did make away with the entire capital of said bank and it became largely insolvent, to the damage of plaintiff, a stockholder. C. Borcherling, for plaintiff. John W. Taylor, for defendants. BEASLEY, C. J. Since the decision in the case of Smith v. Hurd, reported in 12 Metc. 371; 46 Am. Dec. 690, and which occurred in the year 1847, I do not find that it has anywhere been doubted that an action will not lie in behalf of a stockholder in a corporation against its directors for their negligence in so conducting its affairs that its capital had been impaired or lost and the shares of its stock in that manner rendered worthless. That judgment, with respect to its constituent facts, was identical with the transaction described in the present declaration, for the complaint in that instance was that the directors of a corporate company had by their malfeasance in delegating the whole control of its business to its president and cashier, occasioned the waste and loss of its entire capital. The adjudication was rested on general principles which lie at the basis of all corporate existence. These were in substance the following, viz.: That there is no legal privity between the holders of shares in a corporation, in their individual capacity, on the one side, and the directors of such company on the other; that the directors are not the bailees, agents or trustees of such several stockholders; that the corporation is a distinct person in law, in whom all the corporate property is vested, and to whom all its agents and officers are responsible for all torts and injuries diminishing or impairing its property; that the individual members of the company have no right or power to intermeddle with the property or concerns of such company, or to call any agent or officer to account, or to discharge them from any liability; that the injury done to the capital by wasting it, is not in the first instance nor necessarily a damage to the stockholders; that all sums which could in any form be recovered on that ground would be assets of the corporation, to be Conway v. Halsey. applied in the first instance to the payment of debts, the surplus only being distributable among the stockholders, and that it is therefore only an indirect, contingent and subordinate interest in damages so to be recovered that is vested in shareholders. These are the main grounds leading to the decision in the case referred to, and such grounds are so plainly just and reasonable that they appear to have been adopted in each of that series of authorities on the subject that are to be found by a reference to any of the text-books. Thomp. Liability of Directors, 351; Field Corp., $328. The legal effect of the doctrine thus established is that those acts of the officers and agents of the corporation which diminish or destroy the capital of the company are direct injuries to the corporate body, and that it only can seek reparation for such wrongs. And in such cases, if the directors or other principal officers are the wrong-doers, or if not, being thus implicated, they refuse to promote the requisite suit, a stockholder, acting for himself and the other stockholders and for the company, may call such delinquent officials to account in a court of equity. The theory is that under the given conditions the corporation is entitled to indemnification, and that when this is effected the stockholder ceases to be a loser. As to the right of the shareholder to become the actor in equity to repair a corporate injury, when the directors refuse to perform such function, see the case of Trenton Bridge v. Trenton City Bridge, 2 Beas. 46. To the extent of the legal rules established by the train of cases to which reference has been thus made, I did not understand upon the argument that any contention was raised, the plaintiff's case being placed exclusively on the basis of the force of the five thousand two hundred and thirty-ninth section of the National Banking Act. The section thus relied on is in these words: "If the directors of any National banking association shall knowingly violate, or knowingly permit any of the officers, agents or servants of the association to violate any of the provisions of this title, all the rights, privileges and franchises of the association shall be thereby forfeited. Such violation shall however be determined and adjudged by a proper circuit, district or territorial court of the United States, in a suit brought for that Conway v. Halsey. purpose by the Comptroller of the Currency in his own name, before the association shall be declared dissolved. And in cases of such violations, every director who participated in or assented to the same shall be held liable, in his personal and individual capacity, for damages which the association, its shareholders, or any other person shall have sustained in consequence of such violation." It is insisted that the clause of the above-recited provision which relates to the violations of this law by the officers of a National bank applies to the circumstances stated in this declaration, and renders the defendants liable to this action. The posi tion is not tenable. The act declares that the charter of any of these banks shall be forfeitable if the directors knowingly violate certain provisions of the statute, and it is for a violation of such provision that a personal responsibility is imposed on such officers. When the act of the officers has been such that its effect will be to put the institution out of existence, then, and then only, are they made liable to the private suit of the stockholder or other person injured by their willful disobedience of the requirements of the law. As it is entirely unreasonable therefore to infer that it was the legislative intention that the charters of these valuable institutions should be liable to be lost by reason of any negligence and want of care of their directors, it necessarily follows that such negligence and want of care will not lay the basis of a suit of a shareholder against them. The Banking Act organizes these financial institutions, and establishes various fundamental regulations to which they are required strictly to conform; and it is quite in keeping with the purpose and spirit of this law to find in it a declaration that if the directors should willfully disobey any of such fundamental objections, the penal consequence should be that they should make good not only the loss thence resulting to the corporation, but also that occasioned to individuals by their malfeasance. The plaintiff's case is not brought within the scope of this remedial clause of this section, inasmuch as it does not show a willful violation of any one of such fundamental regulations. There is also another objection to the application of this section of this act to the plaintiff's case. When the clause in question gives a private remedy, derived from the misconduct of |