36 Mich. 263 | Mich. | 1877
In a suit brought by Eeed against the bank to recover
Reed was sworn on his own behalf, and his attention being called to the sums drawn out by Bennett, he denied having told the cashier he was interested with Bennett, and also denied having agreed to see the amounts repaid. He was then asked this question: “ Did you ever regard yourself as liable?” and was allowed against objection, to reply:
The judge, in submitting the cause to the jury, was requested to instruct them that “if the jury find from the evidence that the plaintiff at the time he was president of the defendant, took and delivered or caused to be taken and delivered to Bennett, without the knowledge of the defendant, in the months of December, 1869, and January, 187.0, the three several sums- of money testified about in this cause, he, the plaintiff, knowing or having- good reason to know that the said Bennett was insolvent, then the defendant should be allowed the amount of the moneys as a set off.’’ This request was refused, and in stead thereof the judge-instructed the jury that “if the money paid on Bennett’s, check and telegram was on Bennett’s account, if the credit, was given to him originally, and not to Keed, then and in that case it cannot be made- a charge against Keed by reason or because of any interest which Keed may or may not have-had in the potato business with Bennett.’’
The instruction refused and that which was given must, be considered in the light of the- evidence which showed that the original transaction- with Bennett was one in which no one participated but Keed himself; that it was in effect a loan to a person supposed at the time to be irresponsible, without taking any security, and that it was charged to Bennett only on Keed’s- authority. We do not think such a charge would necessarily determine the transaction as a loan from the bank to. Bennett;, on the- contrary, we think
Taking the statement of the cashier as true, the act of Reed in allowing Bennett to draw moneys from the bank was wholly irregular and unwarranted. It was without the knowledge of the proper financial officer of the bank, — the ■cashier, — and without taking security. These facts, in connection with the supposed insolvency of Bennett, made it a gross breach of trust. It is not to be suggested that the directors had in law notice of the transaction, for it is shown that no one knew of it but the president himself. We therefore regard the case as within the decision in Austin v. Daniels, 4 Denio, 299, in which it was held that bank officers who abuse their powers must personally account to the bank for what it shall suffer thereby. See also, Commercial Bank v. Ten Eyck, 48 N. Y., 305. This is fundamental law, and only applies to officers of corporations the same rules which are applicable to the agents of individuals. A loan by the president under the circumstances indicated would be a fraud on the bank; and the president, if he persuaded the cashier not to make known the facts to the directors, could claim nothing because of the cashier’s knowledge; that officer’s silence might make him accessory to the fraud, but could not tend to excuse the principal.
We cannot undertake on this record to determine what effect should be given to the long silence of the bank directors after the Bennett account was entered on the books. As before stated, the question is one of ratification, and should be submitted to the jury as such.
The judgment must be reversed, with costs, and a new trial ordered.