The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-11-06
DUTY OF DIRECTORS
SUPREME COURT DEFINES THE
DUTY OF THESE OFFICERS
OF BANKS.
HELD PERSONALLY LIABLE
If THEY PERMIT THE RECEIPT OF
DEPOSITS AFTER THEIR
INSOLVENCY.
IN THE RUSH CASE.
Order of the Lower Court in {
Street Railway Damage Suit
Is Overturned.

There can be no doubt hereafter as
to the position of the supreme court
with regard to the liability Of bank
directors for deposits made after such
time as they know the bank to be in
solvent. The decision handed down
by Chief Justice Start yesterday in
the Minneapolis case of W. G. Baxter
against M. w. Nash and others of the
board of directors of the insolvent
Irish-Americans bank explicitly states
the position of the court.
Baxter. who. Is a. prominent stone
contractor, and one of the bidders on
the new capitol job, incidentally, was
credited with a balance of $4,000, ac-
cording to his claim, on sum of $780,
600 or upwards deposited during
specified term of months, in which it
was shown that the bank was insol-
vent.
The defendant directors tried to have
the case thrown out Of court on the
ground that the complaint did not re-
cite sufficient facts to constitute a.
cause of action against them as indi-
viduals. The court, however, says in
it's syllabus:
William c. Baxter, respondent, VS.. Jerry
Coughlan, ct. al, defendants, Michael W.
Nash, appellant.
L. Where a statute prohibits the doing of
an act, or Imposes a duty upon one for pro-
lection and benefit Of individuals if he dis
obeyss the prohibition or neg;ects to perform
the duty he is liable to those for whose pro-
lection the statute was enacted for any dam
ages resulting proXimately from such dis
obedience or neglect
2. Held, constituting chapter 219, Laws 1895
relating to receiving deposits in insolvent
banks. that within the rule stated, the COM
plant herein, which alleges that the defen-
dants are directors of an insovent bank re-
celVed from the Plaintiff a deposit of money
| therein, knowing the bank to be then insol-
vent Of which he was ignorant whereby he
i I tae deposit, states cause of action. Or
uer anrned Start, C. ].
In the full opinion accompanving Justice
Start says:
The purpose of this statute is to protect
oeposltorS IN banks by Furnishing its officers
for receiving deposits when the bank is in
solvent. By necessary implication it makes
1t the duty of the directors or other officers
n no rera ben 1f4 iha accepting or receiving de
solvent. The solvency or insolvency of a
bank is matter peculiarly within the knowi-
edge or Its directors; on the other hand de-
pos1tors have no means Of accurately inform
ing themselves on the subject They must
act upon the presumption that the directors
are rot violating the law by keeping their
uoAh OpCi IOI ISCtiNllS Q6pOSltS Wnen 1t is
1nsolVent. This case falls within the rule
that where the statute prohibits the doing
OF an act or imposes a duty on ono for the
benefit and protection of individuals, If he
dlsoDeys the prohibition or neglects to per-
form the duty, ne is liable to those for whose
protection the statute was inacted for any
damages resulting proximately from such dis
obedience or neglect.
THE contention of the defendant is briefly
this: When the plaintiff made the deposit no
contract was created between him and the di-
hIrf had
corporation, hence the person or officer who
actually accepted and received the money is
alone criminally liable 1t is true that there
was no contract between the directors and
the Plaintiff as to the deposit and that the
contract was between the plaintiff and the
corporation, but the latter is an entangible
legal entity and could only contract through
It's duly authorized officers, of whom the
directors were chief and had supreme control
when the receiving teller of a bank &C
cepts deposit for a bank, 1t is an act per-
formed for the corporation by the direction
and authority of the directors. 1t is they
who, through him, receive the money for the
bank To construe the statute as applicable
to him only, would nullify it, for the receiv-
ing teller as rule has no opportunity to
know, and in fact, does not know the finan-
cial condition OF the bank. If then the di-
rectors knowing the bank to be insolvent
can make use of such teller to receive the
deposits for the bank without mourning on
their part any civil or criminal liability, the
statute is a farce. Such is not the case for
Tie manu- VI the IeiieT is the nanQ OF the d.
rectors, SO far as he acts by their authority
and direction.
A case semi-alled to this in character was
also decided yesterday. The syllabus is:
William C.. Baxter, appellant, vs.. Michael
w. Nash respondent.
Section $3.50, G. S. 1894, does not authorize
the issuing of an attachment, on the sole
ground "that the plaintiffs debt was fraudu-
lently contracted" in an action where the
plaintiffs alleged cause Of action is based up
on tort committed by the. defendants as
directors of a bank, in receiving deposit
therein from the plaintiff knowing the bank
to be insolvent. Order affirmed
Start C. J.