of the fact that the bank had not enough of the drawer's funds on hand to meet the check at the time of certification, will be presumed to know that the act was unauthorized and void, and will not be allowed to hold the bank liable upon it. But any outside party is authorized in accepting the representation of the officer as to the sufficiency of the drawer's credit, or in assuming without special inquiry that all is right solely on the strength of the undertaking itself. Knowledge that the agent cannot certify without funds is not knowledge that there are no funds. This is an extrinsic matter. A certification accepted on the faith of the cashier's or teller's statement that he was authorized to certify would not bind the bank if he was not so authorized. But his statement that there are the requisite funds in the bank is of a different nature, and will bind the bank. In general terms it may be said that where one dealing with an agent ascertains that the agent's act corresponds exactly with the terms of the power, he may take the agent's representation as to any extrinsic fact, peculiarly within the agent's knowledge, and not ascertainable by a comparison of the power with the act done under it.1

An officer, though authorized to certify generally, yet cannot legally certify his own checks. Apparently the rule covers equally cases where he has and where he has not money to the designated amount standing to his credit in the bank. The principles laid down, ante, p. 186, seem sufficiently to sustain this position. But if his certification is false, we have the authority of a thoroughly-considered case for saying that it is utterly void as against the bank. The cause of Claflin v. The Farmers' and Citizens' Bank turned upon the validity of the president's false certification of his own check, in the hands of a bona fide holder for value. In the Supreme Court it was not denied that the act was wrongful and unauthorized as between the bank and the president. But it was said that the mere identity of name between the president and the drawer was 1 Farmers' & Mechanics' Bank, &c. v. Butchers' & Drovers' Bank, supra.

not alone sufficient to charge the holder with notice that they were one and the same person; and there being no other proof of such notice, the bank was declared liable. But in the Court of Appeals this ingenious evasion of the wholesome rule was rejected. The notice of the president's attempt to use his official character for his private benefit was regarded as sufficient to put every one to whom it came upon inquiry; and indeed it may be suggested that there was not alone identity in name, but the similarity of handwriting in the two signatures ought also to have been taken into consideration. In a final and very satisfactory decision the bank was declared not to be bound by the acceptance.1

1 Claflin v. Farmers' & Citizens' Bank, 36 Barb. 540 (Supreme Court), overruled in 25 N. Y. 293 (Court of Appeals).

CHAPTER IV.

OFFICIAL BONDS.

THE custom of requiring bonds from the various officers may probably be considered as universal among banking institutions. Usually they are taken only from the executive officers; most frequently from the cashier and tellers, sometimes from the book-keepers; and, there are instances, though these are comparatively rare, in which they have been taken even from the president and directors. The questions which have arisen in litigation upon these bonds may be divided into three classes, to wit: —

I. Where it is denied that the particular act, which constituted the default of the officer, was of such a description as to be covered by the language of the bond setting forth the peculiar species of misconduct insured against.

II. Where it is doubted how long the liability of the sureties should be construed to continue, and therefore whether the default fell within the period of their liability.

III. Whether the bond can be avoided on the ground that it did not conform to the requirements of the charter or of the general organic law, under which the institution came into existence.

A very few cases remain to be added, which cannot properly find a place in any system of classification; sporadic cases, as it were, in which fraud or other illegality, charged to have been attendant upon the execution of the bond, are adduced as cause for invalidating it.

Phraseology of the Bond.

Of course considerable variety is found to exist in the form and language of the bonds used by different corporations, and especially in those portions wherein is described the species of good and satisfactory conduct which is insured. Very commonly only general phraseology is used. It is stipulated simply that the officer shall "well and faithfully," or "faithfully," or "well and truly," discharge and perform his duties. Practically it may be considered that these phrases are equivalent each to either of the others. For though a finical linguist might seek to draw some delicate distinction between the signification of the word "well" on the one side, and the words. "faithfully" and "truly" on the other, and to assert that "well" means something other than is intended by either "faithfully" or "truly," yet such over-nicety is not encouraged by the law which has been laid down in the premises; and it is safe to say that these three adverbs, or their corresponding adjectives, may be used interchangeably. The better rule of construction, which is to be applied to all alike, seems to be that they are designed not only to guaranty honesty and obedience, but also reasonable skill, competence, and diligence. The reason for taking the bond is by no means limited to the narrow object of protecting the banking-house only against loss arising from embezzlement or other species of criminal conversion and misappropriation, but also against the equally probable and equally mischievous danger of carelessness, thoughtlessness, and ignorance. The security for the "faithful discharge" of duties would be rendered " utterly illusory,” if its import were to be narrowed to a guaranty against personal frauds only. Duties performed negligently and unskilfully, or violated from want of capacity or want of care, can never be said to be "well and truly" executed.2 In Massachusetts a

1 Rogers v. Kelly, 2 Camp. 123.

66

2 Minor v. Mechanics' Bank, 1 Pet. 46.

bond calling only for "faithful" performance was declared to bind the obligors not only for the honesty of the officer but also for his "faithful execution of the duties of his office, which embraces competent skill and due diligence." It must be considered certainly that these two cases, one of which was decided in the highest tribunal in the land, establish the correct rule of law. Yet in New York there is a well-known cause in which precisely the opposite doctrine was laid down. The bond of a teller was conditioned that he should "well and faithfully perform the duties," &c. The court declared that this was security solely for his honesty in his trust and not for his competency.2 Yet it is very curious to note that though the conflict between the abstract statement of law in New York and in Massachusetts could not well be more direct and apparently irreconcilable, nevertheless both courts, having substantially like facts to deal with, might not improbably come to very nearly the same practical results. In New York it was said that an over-payment by mistake, honestly made, was a matter of incompetency, and was not insured against in the bond. In Massachusetts it was an obvious inference from the language of the court that if the fact was that the deficiency was caused by an over-payment made honestly and through a simple mistake, then evidence that experienced and able tellers were liable occasionally to make such mistakes, would have been admitted for the purpose of showing that at least this fact did not of itself suffice to prove incompetence. It is not to be supposed that ample evidence of this description could ever be found inaccessible. Whence it might not improbably occur that upon diametrically opposite doctrinal bases, the same conclusion of acquitting the sureties might be arrived at.

If the two above-cited decisions are the only ones which directly and in terms run counter to the New York decision, there is yet a decision in the Pennsylvanian Reports which fails

1 American Bank v. Adams, 12 Pick. 303.

2 Union Bank v. Clossey, 10 Johns. 271; 11 id. 182.