Leaving out of view for the present directors, we may say that the rule governing the responsibility of the officer or agent to the bank is simply an application of the law of principal and agent. If the officer in any way misappropriates the funds of the bank he is liable to the bank therefor.1 In whatever form the misapplication of the funds is made, the bank may hold the officer liable,2 and may follow the funds or the property obtained thereby until they reach a bona fide holder.3 The officer being an agent, if the agent has diverted the moneys of his principal, they may be pursued at law in an action for money had and received until the funds come into the hands of a honafide holder,4 or the remedy may be pursued in equity as for a breach of trust.5 Thus, where the president of a bank issues to a firm of brokers with whom he is doing business the drafts of the bank, which show upon their face that they were issued by himself, and are received by those who know that they are being received upon the president's private business, the funds may be reclaimed by the bank or by its receiver.6 The president himself would also be liable, just as he is held liable to the bank, for causing an unenforceable loan to be made to a minor.7 So where a bank president sold his stock in a bank when it was embarrassed, and took the purchaser's check upon the bank for the price, and caused the bank to cash the check by permitting the purchaser an overdraft, he was held liable to the bank for the amount of the check.8 All cases of misappropriation of the bank's funds are properly cases of fraud, although the officer himself may gain no benefit. This rule applies to every officer and agent of the bank whatever his grade may be. The persons liable may also include those not agents who knowingly assisted the fraud. The various classes of persons liable may be classed as follows: Those who were concerned in the unlawful, improvident or culpably negligent transaction and profited by it; those who were concerned in it but did not profit by it; these two classes may include both agents and those who are not agents; then those who negligently failed to perform their duty in preventing the transaction, although they knew of it; those who, though not cognizant of the transaction, yet negligently failed to perform a duty, the performance of which would have prevented the transaction; those who failed to exercise a reasonable inspection, though charged with that duty, and thus contributed to the loss. These distinctions are taken from Williams v. McKay, 46 N. J. Eq. 25, a valuable opinion. Sometimes the statute gives a right of action,9 but the statute is needless. Where negligence is charged which is a case of failure to act, the test to be applied to any officer other than an unpaid director is the care which a man of ordinary prudence would apply to his own affairs.10 Thus, if* the cashier fails to properly notify the maker of a note, whereby the bank suffers loss through the escape of an indorser, the cashier is responsible to his bank to the extent of the loss suffered.11 If the president of the bank allows a customer to take a security away from the bank, and the bank suffers loss, the officer must respond, although there was a banking custom permitting the act.12 And where an officer negligently permits an overdraft he is responsible to the bank for the loss,13 but not where he takes sufficient security.11 But if the bank be not injured by the act no liability results, and the same is the case where the bank ratifies the act.15 An officer is liable for the acts of his subordinates only where he has been guilty of negligence in employing or retaining them.16 Finally, if an officer disobeys positive instructions, or does acts contrary to the authority given him, he is liable, regardless of his own care, where the acts result in loss to the bank.17 The case of the liability for negligence of bank directors who act gratuitously needs separate consideration from that of other officers. They are, of course, liable for fraud. Three different tests have been offered as to their responsibility to the bank for negligence. The first is that they are liable for gross negligence.18 The second is that they are held to the same care that a man of ordinary prudence would exercise in regard to his own affairs.19 The third is they are held to the care that a man of ordinary prudence would exercise under the same circumstances.20 The third test is preferable: the first is unmeaning, the second is too harsh. The remedy for the bank is at law where the directors sued are all liable.21

4 Edgerly v. Emerson, 23 N. H. 555. But if the law requires the record to be in writing, can the writing be supplemented or varied by parol, or can it be supplied by parol? As between persons who are bound by the record the answer would be no, but as to third persons not bound thereby the answer would be yes.

5 Nat. Bank of Commerce v. Shumway, 49 Kan. 224.

6 Nat. Security Bank v. Cush-man, 121 Mass. 490.

7 Bank of Maryland v. Ruff, 7 Gill & J. 44S.

8 Baird v. Bank of Washington, 11 S. & R. 411.

9 Briggs v. Spalding, 141 U. S. 132; Movius v. Lee, 30 Fed. R, 298.

1 First Nat. Bank v. Drake, 29 Kan. 311; Austin v. Daniels, 4 Denio, 299; Knapp v. Roche, 62 N. Y. 014; In re Boker, 7 Phila. 479.

2 See cases cited in preceding note.

3 Farmers' Bank v. Kimball Milling Co., 1 S. D. 388; Anderson v.

Kissam, 35 Fed. R 699; Lamson v. Beard, 94 Fed. R 30, and cases cited. See also Atlantic Bank v. Merchants' Bank, 10 Gray, 532; Skinner v. Merchants' Bank, 4 Allen, 290. The following cases, Pascoag Bank v. Hunt, 3 Edw. Ch. 583, and Bank of Charleston v. State Bank, 13 Rich. Law, 291, are wrong. 4 Keener on Quasi-Contract, 183-

188; Thompson v. Hynds, 15 Utah, 389. 5 See cases cited in note 3.

6 Lamson v. Beard, 94 Fed. R. 30.

7 Brown v. Farmers' Bank, 88 Tex. 265. Or worthless overdrafts. First Nat. Bank v. Reed, 36 Mich. 263.

8 Germania Sav. Bank v. Wulfe-kuhler, 19 Kan. 60.

9 Buell v. Warner, 33 Vt. 570. Because there was a remedy by statute, a court mistaking the law in the case below, held that there was no other liability. It was in a creditor's suit, but it was wholly wrong. Dedrick v. Bank of Commerce, 45 S. W. R. 786 (Tenn.).

10 Pryse v. Farmers' Bank, 33 S. W. R 532. See also Second Nat. Bank v. Burt, 93 N. Y. 233, which was a case of worthless indorsement.

11 Bid well v. Madison, 10 Minn. 13. In no such case is the bank required to proceed against the worthless borrower or the party liable on the contract before proceeding against the officer liable. Paine v. Barnum, 50 How. Pr. 303.

12 Citizens' Bank v. Wiegand, 5 Wkly. Notes Cas. 12. Or if he makes a worthless purchase, he is liable for the loss, including the expenses of a suit caused by it. Stearns v. Lawrence, 83 Fed. R. 738.

13 Bank of St. Mary's v. Calder, 3 Strob. 403.

14 Commercial Bank v. Ten Eyck, 48 N. Y. 305.

15 Where no injury. Commercial Bank v. Ten Eyck, 50 Barb. 9; Wallace v. Savings Bank, 89 Tenn. 630. Ratification. First Nat Bank v.

Reed, 36 Mich. 263; Jones v. Johnson, 86 Ky. 530. See also Clews v. Bardon, 36 Fed. R 617.

16 Briggs v. Spalding, 141 U. S. 132; Batchelor v. Planters' Nat. Bank, 78 Ky. 435. Compare Pepper v. Planters' Nat. Bank, 5 Ky. Law R 85. So directors for cashier. Robinson v. Hall, 63 Fed. R 222; s. c, 25 U. S. App. 48.

17 San Joaquin Valley Bank v. Bowers, 65 Cal. 247.

18 Dunn v. Kyle, 14 Bush, 134; Swentzel v. Penn Bank, 147 Pa 140; Bank v. Boisseux, 4 Hughes, 387.

19 Hun v. Cary, 82 N. Y. 65; Briggs v. Spalding, 141 U. S 132.

20 Delano v. Case, 121 I11. 247; Jones v. Johnson, 86 Ky. 530. The first test does not differ from the third except in the mere splitting of hairs. When does a man show gross negligence? The standard of the law as to negligence is the care of an average prudent man. Is gross negligence the failure to observe the care of a man less than reasonably prudent ? Is it anything from such a failure to the want of care shown by a man with no prudence at all, i. e., the maniac? The very inquiry ends in absurdity. The futility of this attempted distinction has been pointed out by very great judges; by Justice Curtis, in Steamboat v. King, 16 How. 474; by Justice Bradley, in New York R R Co. v. Lockwood, 17 Wall. 382; by Justice Willes, in Lord v. Midland Co., L R 2 C. P. 339; by Baron Rolfe, in Wilson v. Brett, 11 M. & W. 113; and by Lord Denman, in Hinton v. Dibbin, 2 Q. B. 646.

21 Stephens v. Overstolz, 43 FecL R 771. Contra, Wells v. Graves, 41 Fed. R 459, which is wrong. A suit in equity lies on the theory of a breach of trust (Merchants' Bank v. Jeffries, 21 W. Va. 504), or of account.

But of course a suit at law would not lie against certain officers for one act and certain other officers for another act. These suits would necessarily be separate suits22 where the suit was at law but not in equity. The cause of action against officers is held to survive against the personal representative in Wilkinson v. Dodd, 41 N. J. Eq. 566.