a bank could legally become interested in its own stock, and that the propriety of removing the restriction even in cases of this nature was not wholly free from question. But in Vermont banks have a general right to purchase shares in their own stock. If the shares are transferred to the president, or other proper officer, in trust to hold for security of the debt, and to sell if the debt should not be paid, and hold any surplus proceeds of the sale after discharging the debt and expenses for the benefit of the debtor, the debtor will still be regarded as a shareholder in the corporation so long as the shares remain unsold. The arrangement will not be deemed absolutely to divest him of all title to and interest in his property until the trustee has actually parted with it under the power. But if, while the shares are still in the hands of the trustee an instalment is demanded which the transferror neglects to pay, and dividends are declared, which however are only payable to shareholders who have duly paid their instalments, he will not be allowed afterward, upon paying the debt and obtaining a retransfer of the shares, to recover the dividends from the company. The bank is under no obligation from the nature of the trust to advance money to pay the instalments on behalf of the debtor. On the contrary, unless it felt bound to do so, for the purpose of ultimately saving itself from loss by preventing the security from deteriorating in value, it would, strictly speaking, have no right to use the funds of the bank in this manner. It would be a misappropriation of them.*

Shareholders' Right of Action against Directors.

The right to sue directors for malfeasance in office, whereby loss accrues to the shareholders, is often expressly given to the shareholders by statutory enactment; though, without doubt,

1 State of Ohio v. Franklin Bank of Columbus, 10 Ohio, 91; Taylor v. Miami Exporting Co., 6 Hamm. 176, also, by implication, the two cases cited next below. 2 Farmers' & Mechanics' Bank v. Champlain Transportation Co., 18 Vt. 131; 23 id. 180.

3 Merchants' Bank v. Cook, 4 Pick. 405. 4 Marine Bank v. Biays, 4 Har. & J. 338.

it exists at common law in the absence of any legislative intervention. Errors of judgment, unless so gross as to resemble fraud, or to render the acceptance of office practically a fraud by reason of entire incapacity and unfitness for it, give no right of action. But any fraudulent act, or any breach or neglect of statutory or charter provisions, whereby loss is entailed upon the corporation, and the value of the shareholders' property is as a necessary consequence depreciated, gives a right of action at law to each one of them to recover the damage or loss which he individually has sustained. The suit need not join all the directors, nor even all who participated in the wrongful act, as defendants; but any one of them may be sued singly.1 In this case, however, the declaration is insufficient if it alleges simply that this sole defendant did an act which could in fact be done only by several directors. The allegation must be that he, together with others, did the act, neither is it sufficient simply to allege that he has done wrongful acts. The nature of the acts should be set forth in general terms; though an accurate description of each part or element going to make up the entire act complained of must often be impossible and may be dispensed with. Thus if the fault lay in discounting a number of notes in excess of the amount allowed by law, it is sufficient to declare generally that such excessive discounting has been performed, without describing the precise notes and loans through which it was done. An allegation that by reason of the act the plaintiff's shares depreciated in value, is a sufficient allegation of loss. That the directors declared a dividend out of the capital stock of the bank instead of out of earnings is a good cause of action. Nor is it a defence that the shareholder who brings the suit has himself received the dividend upon his own shares, provided that he did not know at that time the improper basis upon which it had been declared.2 It

1 Conant v. Seneca County Bank, 1 Ohio St. 298; Buell v. Warner, 33 Vt. 570; Foster v. Essex Bank, 17 Mass. 479. Per Pickering and Webster arguendo, and by implication in the judgment of the court.

2 Gaffney v. Colvill, 6 Hill, 567.

has been held in Massachusetts that the suit must be brought in contract, and that an action sounding in tort will not lie. The portion of the opinion which lays down this rule is clear and conclusive, though it was gratuitously advanced by the court, the point not being strictly necessary to the decision of the cause.1

But the right of action of the shareholder, and the claim on which it is founded, though good as against every member composing the board of directors, yet run against them as individuals and not in their official capacity. It is their private indebtedness which must be discharged by them from their private property. The corporation is in no sense liable for it, though the act out of which it arose was that of the corporate government acting officially. The suit could not be brought against the corporation, and corporate funds could not be used to compound or discharge it. Hence it follows that a shareholder cannot avail himself of a claim of this nature by way of set-off against a debt due from himself to the bank.2

1 Vose v. Grant, 15 Mass. 505.

2 Whittington v. Farmers' Bank, 5 Har. & J. 489.

CHAPTER X.

RIGHTS OF ACTION AGAINST BANKS.

Customer's Right of Action for refusal to honor his Check.

WE have already stated that a bank is under obligation to pay the checks, drafts, and orders of a depositor so long as it has in its possession funds of his sufficient to do so, and which are not encumbered by the attaching of any earlier lien in favor of the bank. The duty of the bank to make such payments, and the reciprocal right of the depositor to have them made, arise from the contract to that effect which, though probably never definitely expressed, will always be considered to be implied from the usual course of the banking business.1 This duty and this right are so far substantial that if the bank refuses, without sufficient justification, to pay the check of the customer, the customer has his action for damages against the bank.2 It has been said that if in such action the customer does not show that he has suffered a tangible or measurable loss or injury from the refusal, he shall recover only nominal damages. But the better authority seems to be that even if such actual loss or injury is not shown, yet more than nominal damages shall be given. It can hardly be possible that a customer's check can be wrongfully refused payment without some

1 Ante, pp. 29, 247, and authorities there cited; Byles on Bills, Sharswood's Ed. p. 18; Downes v. Phoenix Bank, 6 Hill, 297.

2 Grant on Bankers and Banking, p. 45; Whitaker v. Bank of England, 6 Car. & P. 700; 1 C. M. & R. 744; Marzetti v. Williams, 1 Barn. & Ad. 415; Watts v. Christie, 11 Beav. 546; Rollin v. Steward, 14 C. B. 594.

3 Watts v. Christie, supra; Marzetti v. Williams, supra.

impeachment of his credit which must in fact be an actual injury, though he cannot from the nature of the case furnish independent distinct proof thereof. It is as in cases of libel and slander, which description of suit, indeed, it closely resembles, inasmuch as it is a practical slur upon the plaintiff's credit and business repute. Special damage may be shown, if the plaintiff be able; but, if he be not able, the jury may nevertheless give such temperate damages as they conceive to be a reasonable compensation for that indefinite mischief which such an act must be assumed to have inflicted according to the ordinary course of human events.1

The precedents from which an idea of the due and proper amount of damages which may be awarded where no special damage has been shown, are rare. In the case last cited the check drawn was only for £87 78. 6d., but the court seemed to regard the very smallness of the check as rather constituting grounds for greater damages than otherwise. For Lord Tenterden remarked, that it was a discredit to any person, and peculiarly to one in trade, to have a "draft for so small a sum refused." The jury had at first found for the plaintiff with only nominal damages; but the case having been given to them again, under the instructions to find substantial damages coupled with the remark above quoted, they next returned a verdict for £500 damages. This seemed an equal error in the opposite direction. The court intimated that it was a very large sum, and the case was finally disposed of by arrangement of the parties between themselves that £200 should be paid as damages.

To the customer's suit for damages the bank may answer in defence that it had not unpledged funds enough belonging to the customer to pay the check or draft in full at the time of presentment and demand. For a bank is never held to make a partial payment upon a check.2 So if the bank has accepted, or in any manner pledged itself or made itself liable to pay 2 In the Matter of Brown, 2 Story, 512.

1 Rollin v. Steward, supra.