The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1901-10-12
RESPONSIBILITY OF BANK
DIRECTORS.

The decision of the Supreme Court in the
case of the receiver Of the defunct Citi-
zens' Bank of Union City against the
former directors of the bank declares a
principle of general interest. The bank
was organized under the State law which
makes the directors of a bank its agents
with full control OF its affairs and liable to
account for all of its property intrusted to
their management. The failure Of the
Union City bank was found to be due to
bad management by its officers, which
might nave been prevented by the direct
ors, and the receiver brought suit against
the latter to recover the amount due to de-
p%Ositors. On the trial IN the lower court
more than a hundred specific charges of
neglect Of duty were made against the d.
rectors. They were charged with permit
ting the bank. or it's officers, to accept sew
eral thousand dollars worth OF worthless
paper at its face value from another bank
to whose business il succeeded; with
taking a large amount OF real estate at an
excessive valuation; with permitting over
drafts that were never paid; with permit
ting the president and cashier Of the bank
to waste its funds and to appropriate them
illegally to their own use, etc. On this
state of facts judgment was given against
the directors in the lower court for $50, 900,
and on appeal the Supreme Court affirmed
the judgment. Following is an extract
from the opinion of the court:
Under the statutes # this State the d.
g. LA.I ,-A ~ - A.
corporation. having the general custody,
control and management of its property
and affairs. and. as such agents. they are
liable to account for all of the property of
the corporation which has been intrusted
TO their control and management. For
mere errors of Judgment they are not re-
sponsible, but for losses and waste Of
money and property. occurring through
their gross i~nattention 10 the bushes Of
the bank. or their willful violation of their
duties they are liable. " " . IL should be
plainly understood by gentlemen occupying
the position of directors in a bank that
they are not mere la~y-hgures, but that
they have actual and responsible duties TO
perform, and that by gross inattention to
those duties. resulting I'm the waste or loss
of the capital of the bank, they render
themselves liable TO the corporation. A pri-
mary duty is that they should understand
the financial condition OF the bank. They
owe this duty TO the shareholders. the de-
positors and other creditors and TO the
public.
Ignorance OF the important TRANSACTIONS
Of the corporation. and OF the general state
Of its affairs, unless eXcusable for some
special reason which IL is incumbent on
them TO establish. constitutes no defense to
an action for damages for losses occa-
stoned by or traceable 10 their failure to
perform their official duties.
The principle here declared is not new,
but 1t cannot be too strongly emphasized.
Under the national banking law il applies
to all national banks, and the State law
makes it applicable to State banks. The
latter says that the stockholders in any
State bank shall be individually response
bic to an amount over and above their
stock, equal to the par value OF their re-
spective shares Of stock. for all debts or
liabilities of the association. and which
may be collectible by suit" The law also
says. ''The general business of the a~ssocia-
tion shall be under the control and man
agement Of the board of directors" This
implies that the directors are expected 10
control and manage the affairs OF the bank
in the interest OF its other stockholders. OF
its depositors and OF the public, and that
falling or negieeting to do so they shall be
individually liable for the results. The pro-