11. Bank's Liability For The Conduct Of Its President

Questions occasionally arise when a president has done wrong whether the bank is responsible for his act. The general answer to this question is, if the act was done within the general course of the bank's business, it can not escape the consequences, and clearly not when it has received a benefit which it retains. Thus the president of a bank to which an insolvent corporation was indebted took its notes for a part of the amount due, and, after indorsing them, inclosed them in a letter to a trust company, requesting it to discount them and place the proceeds to the credit of the sending bank with its correspondent bank in New York. The letter was written on the letter head of the bank and was signed "A., President." In the letter he stated that the maker of the note was solvent and owned property, and that the note was good, for the reason that his bank held warehouse receipts therefor. These statements were false, and the maker was insolvent. The trust company discounted the notes and deposited the proceeds to its correspondent's credit in the New York bank, and the first bank credited the maker with the amount on its indebtedness. In an action by the trust company against the bank, the court decided that the president was acting for the bank, and though he was not authorized by the board of directors to make the false representation, it was not relieved of liability.1

12. Liability Of A President For Violating The Law

A president, as well as the other directors, may render himself liable for acts that are clearly contrary to law. In one of the recent cases a president loaned more than the law permitted and on insufficient security. He made the loan without consulting the directors, and when he told them what he had done they ratified his conduct. The court held that he did not exercise reasonable care in determining the value of the securities; in truth, they were worth about $6,000 on which he had loaned $40,000. He was, therefore, held liable. Nor could he use the action of the directors as a shield. For, as the act was clearly wrong, the directors could not ratify it and thus save him from the legal and just consequences of an open disregard of a positive law.1

1 See Kling v. Irving National Bank, 21 N. Y. App. 373.

13. Duties Of A Vice President

A word may be added concerning the vice president. It is generally said that he serves during the absence of the president; it is not quite true though that he has the same authority. It has been declared that a deed signed by a national bank vice president, and sealed with the bank's seal, is prima facie valid, but nothing more. That is, it is presumed to be valid, but its invalidity may be proved if this be the fact. And if the by-laws of a bank provide that he can act as president during the hitter's absence only by order of the board, he can not execute a deed, when the president is away, without the board's express authority.

1 Seventeenth Ward Bank v. Smith, 64 N. Y. Supp. 888.