their legitimate business, and to make negotiable paper in payment of such debts and to pledge their securities as a means of borrowing.10 Where a contract beyond the powers of the bank has been made, it cannot be enforced by either party, so long as it is executory.11 Nor can it be enforced if it is against public policy or immoral.12 But otherwise, if the contract has been executed, the defense of ultra vires, according to the prevailing rule, is not open to the bank,13 nor to the other party in an action by the bank. So statutes prohibiting certain transactions for the protection of the depositors are not available in defense in an action by the bank, where contracts have been entered into not in conformity therewith:15 A law making it 10 See Sistare v. Root, 88 N. Y. 527, affirming 24 Hun, 384; Fifth Ward Sav. Bank v. First Nat. Bank, 48 N. J. Law, 513, 7 Atl. 318; Hieronimus v. Sweeney, 83 Md. 146, 34 Atl. 823, 33 L. R. A. 99, 55 Am. St. Rep. 333. See "Banks and Banking," Dec. Dig. (Key No.) §§ 295, 302; Cent. Dig. §§ 1150–1153, 1189–1191. 11 Jemison v. Citizens' Sav. Bank of Jefferson, 122 N. Y. 135, 25 N. E. 264, 9 L. R. A. 708, 19 Am. St. Rep. 482. See "Banks and Banking," Dec. Dig. (Key No.) § 295; Cent. Dig. §§ 1150–1153. 12 Jemison v. Citizens' Sav. Bank of Jefferson, 122 N. Y. 135, 25 N. E. 264, 9 L. R. A. 708, 19 Am. St. Rep. 482. See "Banks and BankCent. Dig. §§ 1150–1153. ing," Dec. Dig. (Key No.) § 295; 13 Laidlaw v. Bank (Cal.) 67 Pac. 897; Cogswell v. Rockingham Ten Cents Sav. Bank, 59 N. H. 53. See "Banks and Banking," Dec. Dig. (Key No.) § 295; Cent. Dig. §§ 1150–1153. 14 United German Bank of Baltimore City v. Katz, 57 Md. 128; Hieronimus v. Sweeney, 83 Md. 146, 34 Atl. 823, 33 L. R. A. 99, 55 Am. St. Rep. 333; Hurd v. Green, 17 Hun (N. Y.) 327, affirmed 78 N. Y. 588, 34 Am. Rep. 567. See, also, Pratt v. Short, 79 N. Y. 437, 35 Am. Rep. 531. See "Banks and Banking," Dec. Dig. (Key No.) § 295; Cent. Dig. §§ 1150-1153. 15 Brittan v. Oakland Bank of Savings, 124 Cal. 282, 57 Pac. 84, 71 Am. St. Rep. 58; Farmington Sav. Bank v. Fall, 71 Me. 49; Auburn Sav. Bank v. Brinkerhoff, 44 Hun (N. Y.) 142. Code Iowa, § 1855, prohibiting savings banks from contracting any debt except for deposits and expenses, etc., was, for the benefit of depositors, creditors, etc., and, when such a bank becomes insolvent, creditors, whose loans were prohibited thereby, should not be al unlawful for a bank to receive from any person a deposit in excess of a certain amount does not prevent a recovery of the excess.16 MANAGEMENT AND OFFICERS 115. Savings banks of the normal type are managed by a board of trustees, who are named in the charter, who fill vacancies in the board, and who appoint the executive officers. Savings banks of the normal type are managed by a board of trustees, or directors, or managers, who are named in the charter or certificate of incorporation, who themselves fill vacancies in the board and who appoint the treasurer and other executive officers.17 The powers of the various officers must be sought in the charter and by-laws. The treasurer is an officer who has, by virtue of his office, much more limited powers than the cashier of a commercial bank, and his duties, it has been said, more nearly resemble those of the paying and receiving tellers of such banks.18 Greater authority may, of course, be conferred upon him by the board of trustees, expressly or impliedly.19 State v. Corning State Sav. lowed to share with lawful creditors. 16 Taylor v. Empire State Sav. Bank, 66 Hun, 538, 21 N. Y. Supp. 643. See "Banks and Banking," Dec. Dig. (Key No.) § 305; Cent. Dig. § 1179. 17 See Williams v. McKay, 46 N. J. Eq. 25, 18 Atl. 824. See "Banks and Banking," Dec. Dig. (Key No.) § 294; Cent. Dig. §§ 1136–1149. 18 Fifth Ward Sav. Bank v. First Nat. Bank, 47 N. J. Law, 357, 7 Atl. 318. See, also, Bradlee v. Warren Five Cents Sav. Bank, 127 19 North Brookfield Sav. Bank v. Flanders, 161 Mass. 335, 37 N. E. 307. See “Banks and Banking," Dec. Dig. (Key No.) § 297; Cent. Dig. § 1155. The trustees occupy a fiduciary relation to the depositors.20 It is their duty to exercise in the discharge of their trust the same good faith and substantially the same degree of diligence and care that is demanded of the directors of other banks.21 They should exercise the care and diligence which a reasonably prudent business man would exercise in similar business. of his own.22 For losses which result from their dishonesty, disregard of charter requirements or culpable negligence they are personally liable.23 The liability of the other officers is similar. In addition to their common-law liability, the trustees are often made liable for certain derelictions of duty by statute.25 An action to enforce the liability of the officers may be brought by the bank or by its receiver.2 And it may be brought by the depositors upon refusal of the bank to bring suit; the bank, or the receiver, if one has been appointed, be 24 Mass. 107, 34 Am. Rep. 351; Com. v. Reading Sav. Bank, 133 Mass. 16, 43 Am. Rep. 495; Holden v. Upton, 134 Mass. 177; Holden v. Phelps, 135 Mass. 61; Slattery v. North End Sav. Bank, 175 Mass. 380, 56 N. E. 606. Cf. Bangor Sav. Bank v. Wallace, 87 Me. 28, 32 Atl. 716. See "Banks and Banking," Dec. Dig. (Key No.) § 297; Cent. Dig. § 1155. 20 See cases cited ante, note 7. 21 Ante, p. 296. 22 Williams v. McKay, 40 N. J. Eq. 189, 53 Am. Rep. 775; Id., 46 N. J. Eq. 25, 18 Atl. 824. See "Banks and Banking," Dec. Dig. (Key No.) §§ 294, 297; Cent. Dig. §§ 1141-1149, 1154–1156. 23 Thompson v. Greeley, 107 Mo. 577, 17 S. W. 962; Williams v. McDonald, 42 N. J. Eq. 392, 7 Atl. 866; Hun v. Cary, 82 N. Y. 65, 37 Am. Rep. 546. See, also, Dunn's Adm'r v. Kyle's Ex'r, 14 Bush (Ky.) 134. See "Banks and Banking," Dec. Dig. (Key No.) § 294; Cent. Dig. §§ 1141-1149. 24 Williams v. Riley, 34 N. J. Eq. 398; Williams v. McKay, 46 N. J. Eq. 25, 18 Atl. 824. See "Banks and Banking," Dec. Dig. (Key No.) 294; Cent. Dig. §§ 1141-1149. 25 See Ryan v. Ray, 105 Ind. 101, 4 N. E. 214; Van Dyck v. McQuade, 86 N. Y. 38. See "Banks and Banking," Dec. Dig. (Key No.) § 294; Cent. Dig. §§ 1141-1149. 26 Dodd v. Wilkinson, 41 N. J. Eq. 566, 7 Atl. 337. See "Banks and Banking," Dec. Dig. (Key No.) § 294; Cent. Dig. § 1149. 27 ing a necessary party. In some cases the procedure is governed by statute.28 RELATION BETWEEN BANK AND DEPOSITOR 116. The relation between the bank and the depositor is in effect that of debtor and creditor; but, while the depositor is entitled to be repaid in full if the assets are sufficient, in case of a deficiency all must share alike in the losses as well as in the profits. Upon insolvency the debts of the bank are to be first paid, and a depositor cannot set off the amount of his deposit against his debt to the bank. In General The relation between the bank and the depositor necessarily contemplates that the money of the depositors shall be mingled, and that out of the general fund the investments shall be made and the expenses of administration shall be paid. It follows that the bank has title to the moneys deposited as well as to the securities in which they are invested.29 It is often said, therefore, that the relation between the bank and the depositor is that of debtor and creditor.30 Nevertheless See, also, Winchester 27 Chester v. Hilliard, 34 N. J. Eq. 341. v. Howard, 136 Cal. 432, 64 Pac. 692, 69 Pac. 77, 89 Am. St. Rep. 153; Niccolls v. Rice, 147 Cal. 633, 82 Pac. 321; Maisch v. Saving Fund, 5 Phila. (Pa.) 30; Leffman v. Flanigan, 5 Phila. (Pa.) 155. See "Banks and Banking," Dec. Dig. (Key No.) § 294; Cent. Dig. § 1149. 28 Ryan v. Ray, 105 Ind. 101, 4 N. E. 214. See "Banks and Banking," Dec. Dig. (Key No.) § 294; Cent. Dig. § 1148. 29 Ward v. Johnson, 5 Ill. App. 30; Zinn v. Mendel, 9 W. Va. 580. See "Banks and Banking," Dec. Dig. (Key No.) §§ 129-131, 301; Cent. Dig. §§ 312-338, 1162–1176. 30 Ladd v. Androscoggin County Sav. Bank, 96 Me. 520, 52 Atl. 1016; Reed v. Home Sav. Bank, 130 Mass. 443, 39 Am. Rep. 468; Schippers v. Kempkes (N. J.) 67 Atl. 1042. See, also, Robinson v. it must be remembered that, while the bank may combine the deposits, it is a mere agency for investing the money of the depositors, and that, while a depositor is entitled to be repaid in full if the assets are sufficient, one depositor can have no greater rights than any other, and in case of a deficiency all must share alike in the losses as well as in the profits, and consequently there can be no promise to pay in full at all events.31 "The corporation is a mere agency for managing the moneys of the depositors. To others to third personsthe corporation can incur liabilities, in contract or in tort, for which the funds in its hands will be responsible. But to the depositors themselves the undertaking of the corporation is that it will receive and combine the deposits, and manage and use them to the best practicable advantage, according to the judgment of the trustees, and give to the depositors in just proportion among themselves the benefit of the result of such management. There is no absolute promise to repay to any depositor the full amount of his deposit at all events. Such a promise to one depositor would imply that, in case of loss, he should be repaid out of the deposits of others. But the promise or undertaking of the corporation is the same to all. There is no promise to pay one at the expense of others. The promise is, in effect, to pay each depositor in full, with his dividends, provided the assets are sufficient, and, if they are not sufficient, then to pay to each one his proportionate share." 32 It follows that if the bank had suffered losses, so Aird, 43 Fla. 30, 29 South. 633. See "Banks and Banking," Dec. Dig. (Key No.) §§ 119, 289; Cent. Dig. §§ 289–292, 1128. 31 Lewis v. Lynn Inst. for Savings, 148 Mass. 235, 19 N. E. 365, 1 L. R. A. 785, 12 Am. St. Rep. 535. See, also, Bunnell v. Collinsville Savings Soc., 38 Conn. 203, 9 Am. Rep. 380; Abbott v. Wolfeborough Sav. Bank, 68 N. H. 290, 38 Atl. 1050; Mann v. Carter, 74 N. H. 345, 68 Atl. 130, 15 L. R. A. (N. S.) 150. See "Banks and Banking," Dec. Dig. (Key No.) §§ 133, 305; Cent. Dig. §§ 339–352, 1177-1182. 32 Lewis v. Lynn Inst. for Savings, 148 Mass. 235, 19 N. E. 365, 1 L. R. A. 785, 12 Am. St. Rep. 535. See "Banks and Banking," Dec. Dig. (Key No.) §§ 133, 305; Cent. Dig. §§ 339–352, 1177-1182. TIFF.BKS.& B.-29 |