The daily dispatch. [volume] (Richmond [Va.]) 1850-1884, 1873-11-17
Tmnortant to Bank Directors.


case which came up on appeal, that Court
of Appeals reversed the decision oil the court
below. and decided the directors to be re-
sponsble in tort as stated below. Tue coul-
plainants had made special deposit Oh
bonds with tho bank, and these bonds were
sold bv the officers Of the bank. and the pro-
cccds used in the regular course of business,
mart Of the proceeds being employed, so 1t
was charged, in paying dividends to the
stockholders, Of whom the directors who
were defendants in this suit were among
the largest. The Court Of Appeals said:
especial deposits are mere naked ball
mcnts, and neither this bank nor its dlrec-
tory undertake to exercise any greater care
in their preservation than the dcposltor nay
the right TO suppose is exercised IN keeping
the banks property Of like description. II,
however. the deposit is lost by reason OF INC
gross negligence or the wilful inaltcntloh VI
the directors, the bank is responsible tnere-
for. the directory being The corporate gov
ornment ef the bank. But il Is charged
Thai The dcpos!ts were sold by the bank oill-
cor. and the proceeds converted to its use
with the knowledge Of the directors. which
was a conversion by the bacc OF the bailoi'S
,.nods for which the bailors could nj COM
mon law maintain trover. The question
here is whether the directors, who had know
ledge of these alleged wrongful sales are per-
sonally liable for the value OF the deposits so
converted"
The court then considered the points raised
by the defendants. II said:
1.-The objection that these actions cannot
be maintained for want OF privity between
the dcpo,itors and the directors is plausible.
but cannot be supported. Bank directors
arc not mere agents, like cashiers, tcliers,
and clerks. They are i'll certain sense
trustees for the stockholders, and rs to those
dealing with the bank, they not only repre-
sent it, but for all cgal.consideratiOns are ID
fact the bank itself. Moore on Banking,
16.l This contract Is not alone with inc
bank. They invite the public TO deal with
the corporation, and when any one accepts
their invitation he has the right to expect
reasonable diligence and good faith at their
hands; and ii they fail in either, they
violate duty they owe not only to the
stockholders, but TO the creditors and
patrons Of the corporation. Hodge Is.
\. Engl. Screw Co., | K. |. 3l2 An
honest admiration of the affairs OF the bank,
and slight diligence at least in preventing
special deposits from being Wrongtully con-
yertcd to its use. were legal duties which
the directors We're under obligations to the
special depu>itor5 TO perform, amt us these
OBLIGATIONS grew out of their implied con-
tract that thcy would perform such duties,
| there j, legal prlvily between the parties.
This doctrine vas recognized by this court
in the case Of the Lexington and ONO Rall-
road Company Is. Bridges. B. Monroe,
55G.1 Whenever there exists legal duty TO
perform or omit 10 do an act, the law will
imply promise by the person upon whom
the duty rests that he will discharge it, and
between him and all persons having the legal
right to demand lis performance prlvllE OF
contract exists. [Chitty on Cont. l; Par
Suns OH Con.
The court went on to say. that The plain
tits had. however. elected to waive their
right of action upon these contracts and SUE
f,rthc Joint tort of the bank and the defend
ants, committed by the wrongful and TN
authorized conversion of their deposits. As
TO this the court said:
"Trcating the bank rs the baiIce. and the
directors Us is mere agents, it is clear that II
they permitted the subordinate officers to
sell the special deposits, and then, acting for
The bank, aSscnted to the money arising
thereirom being used for the PURPOSES OF the
bank, they are parties to the tort. r Hill
lard on Tors. Isl; Bacon's Arrangement,
trover (B); ! J. J. Marshall, GIG; Dana,
110.l Appellants allcge that their bonds
We're sold by the officers of the bank, and the
proceeds paid out in the satisfaction of
claims against it, and in the payment of
dividends to its stockholders, and that
Of all this the appeliees had notice. Hay
ino such notice, it was their duty, and
they bad full power either TO prevent
the sale Of the deposits or to hold
the proceeds for the benefit Of their owners.
Their failure to discharge this duty must &c
regarded Us wlllul, and the conclusion cannot
br escaped that by permitting the sales to be
made aud the proceed TO be paid out rs al
legged, they nude themselves parties TO the
unauthorized acts constituting the CONVEX
sion. This conclusion is strengthened BY the
avermcnt that they declared dividends when
the condition OF the bank did not justify it,
and thus distributed TO themselves portions
of the moneys arising from the conversion
Of appellants deposits"
AS to the duties Of bank directors the
court said And what follows concerns all
bank directors:
sit is certainly the duty of bank directors
to Use ordinary dil.eucc to acquaint them
selves with the business Of the corporation,
and whatever information might be acquired
by ordinary attention to their duties, they |
ought in controversies with persons |
doing business with the bank to be |
presumed to haze. Public policy de-
mands that they shall not be heard to say |
that by reason Of their gross negligence and |
Wiiul inaltcntlop, they were not apprised |
of that which the ledgers, books, accounts.
reconuilcmcnts and state |
ments of the bank showed to be true. 1t is
not Necessary in actions like these to bring |
home TO the directors actual knowledge of
the fact that the special deposits held 10y the |
bank were being sold and converted TO its |
use by the officers having them in custody.
II must suffice to show that the evidences OF
the practice were such that 1t must have
been brought TO their knowledge, unless
they were grossly or wiIfuliy careless in the
performance of their duties"
Of course, with such views the Court OF
Appeals could not do otherwise than hold
the directors responsible, and so, rs we have
said. the decision of the court below was
reversed.
BUILDING FUND AsSoCIATIoSS.-Jud PINK.
sty. of the Circuit Court of Baltimore, has
lust rendered q decision which has no doubt
unsettled every building fund association in
Baltimore, and created great CONSERVATION