Mexico weekly ledger., 1892-02-11
An Interesting and important De.
efsf0n

btilhe vi Wiz StatI HlkAAiiA YIN ptH's
year, it may be important to know
that the Supreme Court of this State
has recently decided that the direc-
tors of bank may be held person.
ally liable for losses oecasioned by
their neglect or violation of duty.
She Statute prohibits a Savings
Bank from lending to any person,
firm, or corporation more than twen-
ty-five per cent. of its capital stock,
but imposes no penalty for so do
ing
"The Providence Savings Bank. "
of st. Louis, failed and it was
charged that one cause of failure
was owing to the fact that it had
loaned largely in excess of one-fourth
of its capital stock to the "Anchor
Milling Company" which also fail
ed.
In suit by the receiver of the
insolvent bank against some of its
directors for their negligent man.
agement of the affairs of the bank,
division No. 2 of the Supreme
Court held that they would be re-
sponsible thoug gh the statutes pre-
scribed no penalty.
The Court speaking through
Judge Macfarlane, who delivered the
opinion, says:
The petition contains no charge
of bad faith or negligence on the
| part of defendants while acting as
directors. 1t simply charges that
defendants willfully and knowingly
violated this statute, specifying the
acts committed by which loss to the
bank resulted. 1t is true, the statute
imposes no penalty Or liability on
either the corporation or its direc-
tors for the violation of its provis-
ions, and an action, therefore, must
be at common law for breach OF
duty.
1t has been seen that the directors
are responsible to the corporation
they undertake to manage for all
losses occasioned by any fragrant
breach of their duty. Whether that
duty required good faith and honesty
in the administration of the affairs
and business of the corporation as
is imposed at common law, OF
whether it was a duty enjoyed or an
act prohibited by statute, could
make no difference SO far as the do
ing or emitting them might effect
their liability. The liability rests
upon the common-law rule which
''renders every agent liable who
violates his authority to the damage
of his principal" Morse, Banks
ip. 556. The statute fixed the author.
| ity of the directors in respect to the
amount in which any person, firm
or corporation might become indebt
ed to the bank, and, if they willfully
and knowingly permitted the Anchor
Milling Company to become indebt
ed to it to a greater amount thar
was authorized by the statute, and
loss to the bank resulted there-from
they are, and, in right, should be,
liable for such losses. The amount
of care and attention directors are
required to exercise depends upon
the character of the business in
which the company is engaged, and
whether such care was given in 8
peculiar case would depend upon
the proof. The business of savings
banks effect the interest of the
whole community, and, in order
that no doubt might exist in regard
to its duty in the important particu
lar under consideration, this statute
was evidently designed. The willfu.
: violation of this statute, and conse
quent loss there-from, furnish suffi
cient proof of liability.
| 1t is evident that this Legislative
prohibition was designed for the
protection of the community at large
as well as the stockholders of The
corporation, and such application
and construction should be given i
as will most effectually protect the
public against loss occasioned by it.
willful violation"