Marshall County Democrat. (Plymouth, Ind.) 1855-1859, 1857-02-05
The Banks ard the State

The following is the opinion of Attorney
General Mcdonald in relation to the liability o.
the State for the issues OF the Gramercv anu
Shawnee Bs1ks:
To the House Of Representatives Of The Genera
Assembly,;
In reply to Your resolution of inquiry in rela
ton to the liability Of the State for the redenp
ton of the circulation of the Gramercy Bank a
Lafayette, and the Shawnee Bank at -Attica, re
tuln YOU the following opinion:
The bonds filed rs collateral security for the
circulation o. the banks, were filed under tic
General Banking Law of 1872; and remained
with the Auditor of State, as neither of the bank
had complied with the act OF $3.50, amcndator,
OF the act OF lsa2 and the question arising unicl
YOUR resolution will have to be determined by the
ioTmcr act.
The 9th section Of the act of 1852, provides
that ~ heneVer any person or association Of per
sons. formed Tor the purpose OF banking under this
act, shall legally transfer to the Auditor any por-
ton Of the stocks or bonds hercni fter specihed
such persons or associations OF persons shall be
ontit.ed to receive from the Auditor az equal
amount o. circulating notes, &c.''
The legal title to the bonds filed under this sec
ton ct the act becomes vestedin the Auditor, and
they are held as collateral security for the re-
denpton of the notes circulated. And sections
and III provide the mode AM manner in Mlcl.
tho Auditor (in default OF the bank to redeem the
c:rculatlon.) shall frecced TO sell said bonds and
apply the proceeds to tie redemption Of the not
Taking these provisions of the law together, and
they constitute the Auditor Of State trustee for
the benefit OF the banker Oh the one hand and the
bill holder the other: the State has 10 in ere
in the matter. Indeed by the term, OF the Con-
stltution, she is expressly prohibited from ticking
or holding any such interest. And the question Is
simply this: Can THE State be held Liable to either
OF the parties in interest for the misconduct of the
Trustee in misspplicaton OF the trust funds in
manner unauthorized by las.
Bu; It is contended that the I2th Sec. Of the
aetoi lca2 is recognition of the States liabil-
t. lor the misconduct Of the officer.
10 nos so regard II. The language of that
section, so far rs it relates to the question, IS,
''that nothing in the act contained shall be con
sifued as implying any pledge on the part of tie
State Tor the payment of said bills, beyond the
proper application OF the securities pledged with
the Auditor Tor their sodempt;on.''
The simple guaranty contained in this clause of
section IL is, that the State will not authorize the
application OF the securities pledged to any other
purpose than that specified in the act viz: the re-
compton of the circulltion. And further than
That she would hot be bound: but 1t cannot be
construed into pledge to make good any loss
accrungt to the parties n interest arising from the
unauthorized acts of the Auditor or trustee. for
this would make the State bond>man of the trus
tee-a position she clearly did not mean to as
sumo.
The position that, as 'ecnt Of the State. the
acts OF the Auditor are binding upon her. has no
application to this question; for the following rca
..eons:
lst The Auditor is not So much the Agent Of
the State in these transactions as he is Of the par
ties in interest The State merely Nominated a Us,
tee, defined his duties, AMI required bona FOR the
performance OF these duties. The duties 10 he
performed are not connected with the general ad
ministration of the government: but Of pc
culisr character Cor the benefit Of particular per-
Sors.
I'd. Under the rules OF law governing the acts
of prin cipal and agent, the State cannot be held
liable, for the act complained of was not within
the proper authority of the agent. The State did
not authorize the act to be done, bat it was in vio-
lation OF authority Yet the agent only bind
his principal where the act done Is within the
general scope OF the agent authority, Or is cx
pressly authorized 10y the principal.
For these reasons | hold that the State Is not
bound to redeem the currency OF these banks.
j. T.. MCDONALD.