The Wheeling daily intelligencer. [volume] (Wheeling, W. Va.) 1865-1903, 1873-11-14
AN IMPORTANT DECISION.
The Liability Of Bank Directors for
Gross Negligence In the Discharge
of their Duties.


Of their Duties. =,
Published byrequestl
| Kentucky Court Of Appeals-United
Society Of Shakers o.. Underwood and
others. From Franklin. Lindsay, Judge,
This and the case Of Davenport u Un-
Iderwood &C., from Warren, involve simi.
lar questions, and were heard together.
A general demurrer to each OF the peti.
ltions was sustained, and the parties fail
ing to plead further, Judgments were rem
dered dismissing them, and the question
on appeal is whether the petitions set
forth facts constituting causes OF action.
From them It appears that In the year
1885 the Bank Of Bowling Green went
| into operation, under charter approved
June 9, 1855, and that during the time It
continued In business, the defendants were
members Of Its Board Of Directors, and
that this bank, upon the petition OF the
defendants, or some Of them, had, before
the institution OF these actions, been de-
clared q bankrupt by proper legal pro-
ceedings, and was insolvent The Society
Of Shakers allege that Its agent In 1859
deposited with the bank, on special de-
posit, $72, 2,450 in bonds, fully described in
memorandum made part OF this petit
ton, and that the bank had failed, upon
demand, to refund $55 $50 thereof, and to
account for $9,702 collected on interest
cupons attached thereto; that the $780,
600 in bonds "were wropgfully taken
from the package Of plaintiffs special
deposit by the officers Of the Bank
Of Bowling Green, and by them con-
verted 10 the use and emolument oil
said bank by sale, without right or
authority from the plaintiffs, or any
of them; and OF euch wrongful con-
version and appropriation the defendants,
and each of them, had, or could have had
by the most ordinary diligence and inyes.
tigation, ample notice" - .l.ri
Davenport alleges that In 1856 he
placed In the bank, on special deposit,
nine Warren County bonds, Of $1,000
each, OF the market value OF $ll 500,
which the bank had failed upon demand,
TO return; that said bonds had been
"wrongiully appropriated by said Bank Of
Bowling Green, and converted 10 the use
and emolument oil said bank, forwarded
| to It's regular correspondent, and by them
sold, and the proceeds credited to the
Bank oil Bowling Green, and paid on
checks or drafts Of said bank, of all oil
which defendants and each Of them had
notice, as well from the ledgers, books,
and accounts oil said bank, as from his
corresponds reconcilements, and state.
ments: and "that said bonds were wrong
fully appropriated as aforesaid TO the use
and benefit Of said bank, and without
authority from this plaintiff, and that Of
such wrongful conversation and appropri.
alton, defendant, and each Of them, had
or could have had, by the most ordinary
diligence, ample notice" Both petitions
charge that the defendants, acting as Di-
rectors, did on various occasions declare
dividends when the condition of the bank
did not Justify 1t, and so appropriated TO
themselves, they being the largest stock
holders, large sums Of money actually re.
allied from the conversation Of the plain
tiffs' property.
Special deposits are mere naked bail
ments, and neither this bank nor its di-
rectory undertake 10 exercise any greater
care in their preservation than the depos-
,,or has the right 10 suppose Is exercised
in keeping the banks property oi like des.
cription. II, however, the deposit Is lost
by reason OF the gross negligence or the
wilIul inattention Of the Directors, the
bank is responsible therefor, the directory
being the corporate government of the
bank. But It Is charged that the deposits
were sold by the bank officers and the
proceeds converted TO Its use with the
knowledge Of the Directors, which was
conversion by the bailee oil the bailor's
goods, for which the bailors could at com.
mon law maintain trover. The question
here Ia whether the Directors, who had
knowledge Of there alleged wrongful sales
are personally liable for the value oi the
deposits 30 converted.
The objection that these actions can
not be maintained, for want OF privity be.
tween the depositors and the Directors,
10 plausible, but can not be. supported.
Bank directors are not mere agents, like
cashiers, tellers and clerks. They are, In
A certain sense, trustees for the stockhold.
ers, and as to those dealing with the bank,
they not only representa-, but for all le-
cal considerations are In fact the bank
itseli. Moore on Banking, 70 This
contract Ia not alone with the bank. They
invite the public to deal with the corpora.
t!on, and when any one accepts their inVi.
tation, he has the right to expect reason
able diligence and good faith at their
hands; and II they fall in either, they
violate duty they owe not only to the
the stockholders, but 10 the creditors and
natrons Of the CORPORATION. Hodge o..
N. Enel, Screw Co., l r. /. 3l2:] An
honest administration Of the affairs ol the
bank: and slight diligence at least In pre-
ventipgspecial deposits from being wrong
FULLY converted to It's use, were legal du-
ties which the Directors were under obli-
cations to the special depositors TO per-
form, and as these obligations grew out
of their implied contract that they would
perlorm such duties, there Ia legal priv.
ity between the parties. This doctrine
was recognized by this court In the case
OF the Lexington and Ohio Railroad Co.
d. Bridges. T7 B. Monroe, $50 When.
ever there exists q legal duty 70 perform
or omit to do an act, the lawwil imply .
promise by the person upon whom the
| duty rests that he will discharge II, and
between him and oil persons having the
legal right 10 demand Its performance o
ptiyity OF contract exists! Chitty ION
Cont, /; Parsons on Cont
These actions, however, are not based
upon the contract OF bailment TO the bank,
nor upon the implied contract Of the ap-
pellantsithat they would not BY gross neg.
| iect or tacit acquaintance permit the de-
posits to be converted to the bank's use
The plaintiffs had the right 70 elect
whether they would avail themselves oi
the remedies prescribed BY law for the
breach Of contract either upon the part oi
ihe bank or the defendants, and they have