by them from their own body, and has no more authority from the charter to bind the company by any of his acts than any other director has; his powers are such only as the board of directors, either by their by-laws or otherwise, think proper to confer upon him." This rule of law is the rule now in force in the State of New York. It is the general rule and is upheld by the courts of all the States. The rule, as laid down in one of the later cases, and stated by District Judge Riner, in the case of National Bank of Commerce v. Atkinson, 55 Fed. Rep. 465, is substantially the same rule as laid down by the court in New York in 1831. The court, in the latter case, states the rule to be that "the president of a national bank has no power inherent in his office to bind the bank by the execution of a note in its name, but power to do so may be conferred on him by the board of directors, either expressly, by resolution to that effect, or by subsequent ratification, or by acquiescence in transactions of a similar nature of which the directors have notice." There is a strong tendency upon the part of the court and authors of text works treating upon this subject at the present time to establish a more liberal rule. One which may be stated as follows: "The extent of the powers of agents of a well defined class, such as presidents, directors or cashiers, is determined largely by general custom, of which the courts will take judicial notice, and parties dealing with such agents are entitled to assume that they possess all the powers which are usually accorded to agents of the class to which they belong." 10 Mr. Morawetz holds that the authority of officers of banks is fixed by general custom, of which the courts will take judicial notice, and that they are not held to the strict rule which applies to officers of other corporations. Banks are not incorporated for the purpose of borrowing money. It is their business to receive money on deposit and reloan the same together with such portion of the capital, and reserve fund, as the law will permit. There should but few occasions arise presenting the necessity of a banking cor 10 Morawetz, Priv. Corp., vol. 1 (2 ed.), § 509; Hyde v. Larkin, 35 Mo. App. 365, and cases cited in respondent's brief. poration to borrow money. The general rule which has been conceded to be the law for so many years should not be weakened upon the theory that a more liberal one, would be of special benefit to the public or banking corporation. At least the borrowing of money by the president of a bank without direct authority, should not be sanctioned by the law as justifiable, and lawful upon the theory that it is or has been a practice or custom of the bank. The president has the implied power to indorse negotiable paper in the ordinary transaction of the bank's business; and authority for this purpose need not be conferred upon him by the board of directors.11 It is laid down in the case of Simons v. Fisher, 55 Fed. Rep. 905, that where the president exercises the function of cashier, and is the managing officer of the bank, the bank will be bound by such acts of his as belong virtute offici to the office of cashier. § 120. President's powers derived from statute. Where a statute of a State confers a power upon an officer of a corporation, there can be no necessity of a by-law or resolution of the board of directors authorizing him to execute the power. In some of the States special statutes have been enacted providing that many matters may be conducted in the president's name. In the case, Delafield v. Kinney, 24 Wend. (N. Y.) 345, a suit against a banking association formed under the general banking laws of the State, it is held, may be brought against it either in the name of the association or in that name with the addition of the name of the president thereof. § 121. Limited and prohibited power of president. The president of a bank, like the cashier, cannot certify his own check. Such certification appears on its face and is notice of fraud to all.12 The president has no inherent power to transfer or indorse negotiable paper, but through a custom or habit of performing 11 United States Nat. Bank v. First Nat. Bank of Little Rock, 79 Fed. Rep. 296. 12 Chrystie v. Foster, 61 Fed. Rep. 551. such acts which are well known to the board of directors, they become lawful acts and cannot be denied by the bank. 13 As president of the bank he has no authority by virtue of his office to receive the claims of a bank as against a debtor. That power rests alone with the board of directors; and in order to bind the bank, the consent of the board, either directly or by implication, must be first obtained.14 Neither has he authority by virtue of his office to use any portion of the assets of the bank to settle with the bank's creditors. He may, however, do so, if the power is conferred upon him by the board of directors. Neither has he the authority to mortgage the property of the bank, but when authorized to do so, may execute a mortgage upon the bank's property. Neither has he inherent power to stay the collection of an execution against the property of a judgment debtor. The board of directors alone are endowed with this power.' 15 Nor has he authority inherent in his office to enter into agreements or contracts on behalf of the corporation, but it is held that this power may be conferred upon him by the board of directors. As an officer of the bank he has no implied authority to give away any portion of the corporate property, or to create a gratuitous corporate obligation binding on the corporation.' 16 If as president of the bank he holds out to the public that certain powers have been delegated to him, and it is believed by parties dealing with him that he is acting within the scope of his power, his acts are binding upon the bank." 17 A commercial banking corporation doing a banking business and refusing to pay interest on deposits, advertising that it does not pay interest, its president has no power or authority to enter into an agreement with a customer to pay interest, and if such a contract is entered into in violation of the rule, and advertisement of the bank, it cannot be held responsible for the interest. An agreement to pay interest on deposits of money deposited in a commercial bank is no part of the ordinary busi v. 13 United States Nat. Bank First Nat. Bank, 79 Fed. Rep. 296. 14 Olney v. Chadsey, 7 R. I. 224. 15 Spyker v. Spence, 8 Ala. 333. 16 Robertson v. Buffalo County Nat. Bank, 58 N. W. 715. 17 Farmers' Bank v. McKee, 2 Pa. St. 318. ness of the bank, and the president has no power to bind the bank to pay interest in such cases.18 Where a bank is entitled to and makes it a part of its business to take special deposits, the president cannot charge the bank with any extraordinary liability in regard to such deposits. He has no power or authority by virtue of his office to compromise a debt. This duty belongs to the board of directors." The president of a bank is without authority to release a judgment which has been entered in a court of record, in favor of the bank, unless duly authorized by the board of directors. The satisfaction or release should set out that it was ordered by the board of directors, and it should have the seal of the bank attached. Where the president performs acts which are not implied or inherent in his office, but which are afterwards ratified by the board of directors, they become the legal acts of the bank, and where a bank retains the proceeds derived from the sale of property, and guaranty of notes owned by the bank, the fact that the bank retains the proceeds, operates as a ratification of the president's acts in the selling of the property, whether he was authorized or not.20 An agreement by the president and cashier of a bank, that an endorser shall not be liable on his indorsement is not binding on the bank. It is not within the scope of their duties, and they cannot bind the principal except in the discharge of their ordinary duties.21 § 122. Representations and admissions, effect of. The general rule is that the president of a bank, by admissions and representations, may bind the same, if such admissions or representations relate to matters within the scope of his agency, and, like other agents, he must act within the scope of his authority to bind the principal.22 18 Fulton Bank r. New York & Sharon Canal Co., 4 Paige (N. Y.) 127. 19 Ryan r. Manufacturers' & Merchants' Bank, Daly, 308. 20 Thomas r. City National Bank, 59 N. W. 943. 21 First National Bank of Sturgess r. Bennett, 33 Mich. 520; Angel Ames on Corporations, §§ 298, 301, 309; Story on Agency, § 115; Parsons Merd. Law, 140 note 1; 22 Panhandle National Bank v. Emery, 78 Tex. 498, 15 S. W. 23. The president of a national bank has no inherent authority to make such admissions as will release the maker of a note from his liability.2 23 Neither can the president of a bank by admissions charge the same with a debt.2 24 In the case of Washington National Bank v. Pierce, 6 Wash. 491 (33 Pac. 972), it is held that where the president of a bank is informed by the maker of a promissory note that the same was procured by fraud, and that he (the maker) would not pay it, the remark not being made to the president in his official capacity, nor at the bank, does not bind the bank. Such knowledge does not estop the bank from subsequently discounting the note. § 123. President liable to bank for acts which amount to breach of trust. Where the law forbids overdrafts, and the president or cashier permit the overdrawing of the account of a customer, and through such overdraft a loss occurs to the bank, the president authorizing the same becomes personally liable.25 In a review of the opinion in the case of the Oakland Bank of Savings v. Wilcox, it was found that the president was subject to the by-laws and direction of the board of directors. There is no provision found in these by-laws permitting a customer to overdraw his account. It was the duty of the auditing committee to supervise and direct the mode in which the business was to be conducted. It was their duty to count the cash and examine, or cause to be examined, the books, vouchers, documents, papers and other assets of the corporation. The duties as they here appear, devolved upon various persons; but this was held not to discharge the president in the failure to perform his duty. The lower court in the trial of the cause, in giving his instructions, granted the following instruction to the jury: "It has been said to you, gentlemen, during the argument 23 Farmers' National Bank Templeton, 40 S. W. 412. v. 24 Henry . Northern Bank of Alabama, 63 Ala. 527. 25 Oakland Bank of Savings v. Wilcox, 60 Cal. 126. |