Court Opinion

ID: 6503443
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:15:56.174184+00
Date Added: 2024-06-11T15:54:40.316422
License: Public Domain

COLLIER, C. J.
In Lucas v. The Bank of Darien, 2 Stewart’s Rep. 321, after the dissolution of a partnership, one of the late partners offered for discount to the directory of a bank, of which he was one of the board, a note made in the firm name. The court said, it was unreasonable to suppose the partner offering the note made any disclosure to the directory, which would have rendered his application for a discount unavailing. Besides, to give the argument any plausibility, it must be supposed that as a director, he passed up- . on his own application — natural justice, sustained by that; delicacy, common to all men, forbids such an idea. In re- Í spec't to paper discounted for his benefit, his attitude in relation to the bank Was changed — he then became a borrower,, not a lender; and as he was passive, the directors who gave him an accommodation should not be affected by a constructive notice of any fact, which he individually possessed.
It was also said, that if an agent acquire knowledge of a fact while not in the discharge of his duties as such ; but when engaged in other business, his principal cannot be presumed to have that knowledge. [See 2 Atk. Rep. 242; 3 Id. 294-650; 13 Ves. Rep. 120; 3 Mad. Rep. 280; Story on Ag. § 140, and citations in notes 1 and 2; 7 Greenl. R. 195 ; 10 Watts’ Rep. 397.]
In the case first cited, the court inclined to think that presumptive notice should not be allowed, where the agent who had actual notice had no right to act in the matter to which it related ; and that a notice to any number of the directors less than a majority of those acting, would not affect the bank; because a minority could not control its operations. [See 1 B. & C. Rep. 473; 3 B. & B. Rep. 147.]
The question'whether, and under what circumstances notice to a director of a bank will charge the corporation, was largely considered in The Bank of the United States v. Davis, 2 Hill’s (N. Y.) Rep. 451, and these points were determined, viz; That as a general rule, the principal is deemed to have notice of whatever is communicated to his agent, while acting as such in the transaction to which the communication relates. He is responsible for the fraud of his agent, if committed while transacting his business; and this whe*506ther he be sole agent, or one of several possessing joint authority. But notice to a director, or knowledge obtained by him while not engaged officially in the business of the bank, will be inoperative as notice to the corporation. In case of a joint agency, notice to either one of several, while engaged in the business of his agency, is notice to the principal. And the bank was held chargeable with knowledge of the fraud of one of its directors, and could not therefore recover upon a bill which was sent to him to be discounted for the benefit of the drawer, the former, who was at the time a member of the board which ordered the discount to be made, having received the avails, alledging the discount to be for his benefit.
In the Washington Bank v. Lewis, 22 Pick. Rep. 24, one of the directors of a bank who was authorized when money was abundant, to solicit and procure notes for discount, obtained possession of a note under the pretence of getting - it discounted for the maker, at a time when money was scarce, and pledged it to the bank, for a loan made to himself and a prior debt due by him — the maker knowing that the director was authorized by the bank to procure notes for discount, only when money was abundant. It was held, that the director had exceeded his authority in the transaction, and the bank was not bound by his fraudulent conduct; and that, as. he did not act in his capacity of a director, the note was recoverable of the maker. The court said, if the knowledge of a director could under all circumstances be regarded as the knowledge of the bank, it would follow, that if a director should procure a note to be discounted by the fraudulent concealment of material facts, which he was bound to disclose, or eveu by false pretences, the bank would have no remedy. If the director had been authorized to discount this note, and did discount it, the argument might hold good. It was conceded that whatever a director or other agent of a bank may do within the scope of his authority, would bind the bank so as to make it responsible to the person dealt with, But in the case before the court, the director was the party applying for the discount, and was not acting as director, nor could he with any propriety so act. “ He was the party with whom the bank contracted in discounting the note, and to whom the money was paid; and it is perfectly clear that *507this ground of defence cannot be maintained.” In this case, as well as The Fulton Bank v. Benedict, 1 Hall’s Rep. 480, 557, it seems to be supposed that directors are not necessarily agents of the bank, so as to charge the corporation with a knowledge of the facts they possess in respect to matters which interest, or might influence the action of the directory sitting as a board. See also Ang. & A. on Corp. 247, and citations in notes.
We have thus placed in juxta.position the case of Lucas v. The Bank of Darien, and the decisions upon the same point in two of our sister States. It may be, that the case in 2d Hill, is opposed to the opinion of our predecessors; but however this maybe, we will' not stop to inquire. We have revised the reasoning by which they are each supported, and are perfectly satisfied that our own decision rests upon a sound basis; and in addition to this, is strongly confirmed by the supreme court of Massachusetts by an argument which runs all-fours with that employed by us.
It cannot be admitted that in receiving the blank of the defendant to be used for his benefit, Scott acted as the agent of the bank; and certainly he did not thus act in abusing the authority conferred on him by the defendant. But in filling up the blank for a larger amount than his authority required, and then offering the note for discount, he was in reality the representative of his own interest. Pro re nata, his powers as a director were suspended — he was contracting with the bank through his associates in the directory — he was borrowing, not lending its money — though a member of the board and present too, it cannot be supposed that he co-operated with them in purchasing paper of which he was the avowed proprietor; and whether he did or not, it cannot be presumed that he made any disclosure which would prejudice his application for a loan. The facts of the present case are in every respect quite as unfavorable to the intendment of the bank’s knowledge of the circumstances under which the note was made, as they were in the case cited from 2d Stewart; and that case we think sufficiently vindicates the ruling of the circuit court.
This is confessedly a hard case, but such cases must con*508tinue to present themselves, until all men shall act upon the maxim:, “ Do- what you ought, happen what may.” The judgment .must be affirmed'.