the company. He then drew a check "to the order of Dft. N. Y.," again signing the company's name and his own as treasThe amount of the check was charged to the company on the bank books, and in payment of the check he drew two drafts on New York to his own order and signed them as vicepresident of the bank and endorsed them personally. He received the money and used it himself. The bank sued the company for the amount of the notes; and the court held that as these were made by the treasurer, and also the check drawn for the proceeds, and that both acts were within his authority as treasurer, the company was liable therefor. Says Justice Mitchell: "Both might by mere inference be charged with knowledge, as the fraud was committed by an agent with authority to act for both; but in fact neither had, or in the nature of things could have had, any knowledge at all. Both acts were within his authority as treasurer and would have been lawful if they had been honest, but he drew the money on drafts which were the money of the company, and when he embezzled the money it was the money of the company. The bank had no part in his act and gained nothing by it. The fraud had its inception and its consummation in acts done in his capacity of treasurer of the defendant company, and it should bear the loss."37

In not imputing the knowledge of the agent to his principal in transactions between them, the application of the rule is justly withheld to protect the principal. But when the agent represents another principal beside the bank, it is often needful in the interest of justice to impute his knowledge to the bank to protect the other principal, who, as between the two principals, merits prior consideration.

9. Pre-acquired Knowledge. Reorganization.

Concerning knowledge acquired before establishing an official relation with a bank, the judicial world is divided between two opinions. One opinion is founded on the answer to a ques

37 Gunster v. Scranton Heat & Power Co., 181 Pa. 327.

tion of fact, was the knowledge thus acquired retained after the learner established his official relation with the bank? If it was, then the bank is bound by the information,38 otherwise it is not.39 The other opinion, not regarding with favor this preliminary, declares that in no case of this kind is the bank bound.

40

Ordinarily, knowledge acquired in advance of establishing an official relation is not likely to be remembered, for there is no object in retaining it; on the other hand, the knowledge may have been gained so shortly before, or may have made such a strong impression on the hearer, that in truth it was remembered. When inquiry yields this fact, why should not imputation follow?

41

How far is knowledge imputed to a reorganized corporation having the same officers? One of these reorganizations, which continued the same individuals in office, had notes discounted for the purpose of raising money to pay its indebtedness. It was held that the bank which discounted them, whose president was also a director of the old and new corporations, knew what had been done.42

38 Red River Investment Co. v. Smith, 7 N. Dak. 236; National Security Bank v. Cushman, 121 Mass. 490; Fairfield Sav. Bank v. Chase, 72 Me. 226; Hart v. Farmers' & Mech. Bank, 33 Vt. 252, 270; Smith v. South Royalton Bank, 32 Vt. 341; Hayward v. National Ins. Co., 52 Mo. 181; Bank v. Craig, 6 Leigh (Va.) 399; Campbell v. First Nat. Bank, 22 Colo. 177; Distilled Spirits, 11 Wall. (U. S.) 356.

39 Ibid.

40 Houseman v. Girard B. & L. Assn., 81 Pa. 256.

41 A bank is bound by knowledge of an officer acquired so near the time of the transaction that he must have recollected it. Louisville Trust Co. v. Louisville R., 22 C. C. A. 378. The wilful character of the misapplication of a fund is not imputed to the bank by the subsequent knowledge of the other officers. Rieger v. United States, 47 C. C. A. 61. Whether the knowledge of a prior transaction by a bank officer of the same nature as the second was so near that it must have been present in his mind and thus imputable to the bank depends "upon the lapse of time and other cir cumstances." Christie v. Sherwood, 113 Cal. 526; Yerger v. Barz, 56 Iowa 77; Distilled Spirits, 11 Wall. (U. S.) 356, 366.

42 Union Bank. v. Wando Mining Co., 17 S. C. 339, 345.

10. Incidental as Distinguished from Official Knowledge Acquired by Officers.

Another line is drawn between knowledge acquired by an officer in an incidental and official way. Incidental knowledge cannot be imputed to the bank. Says Justice Gray, speaking for the New York Court of Appeals:43 "An officer's knowledge, derived as an individual, and not while acting officially for the bank, cannot operate to the prejudice of the latter." On many occasions directors hear something not favorable to the credit or character of persons whose names appear on paper which is presented to the bank for discount. Such knowledge is not imputed to the bank, especially when the director was not present at the time of discounting the paper; nor would the bank be bound ordinarily if he were present. To bind the bank by such knowledge the director must be especially charged therewith; but when he is, the knowledge is imputed to his bank whether it is actually given or not. The effect of withholding it is the same whether through design or forgetfulness.**

11. Modern Rule Concerning Imputation.

The following rule may stand as a modern statement of the law. When a director or other officer has knowledge of material facts respecting a proposed transaction, which as the representative of the bank it is his official duty to communicate to the directors, trustees or other officers, he will be presumed to have done so, and his bank will be thereby bound.45 In a well

43 Casco Nat. Bank v. Clark, 139 N. Y. 307, 313; Westfield Bank v. Cornen, 37 N. Y. 320; Bank v. Davis, 2 Hill (N. Y.) 451; North River Bank v. Aymar, 3 Hill 262; Fulton Bank v. New York & Sharon Canal Co., 4 Paige (N. Y.) 127; Farmers & Citizens' Bank v. Payne, 25 Conn. 444; Farrel Foundry v. Dart, 26 Conn. 376; Louisiana State Bank v. Senecal, 13 La. 525; Housatonic Bank v. Martin, 1 Met. (Mass.) 294; Mechanics' Bank v. Schaumburg, 38 Mo. 228, 244; Benton v. German American Nat. Bank, 122 Mo. 332, 144 Mo. 519; Kearney Bank v. Froman, 129 Mo. 427.

44 National Bank v. Norton, 1 Hill (N. Y.) 572, 575; Fulton Bank v. New York & Sharon Canal Co., 4 Paige (N. Y.) 127; U. S. Ins. Co. v. Shriver, 3 Md. Ch. Dec. 381, 384. But see Custer v. Tompkins Co. Bank, 9 Pa. 27, and Bank v. Whitehead, 10 Watts (Pa.) 397.

45 Casco Nat. Bank v. Clark, 139 N. Y. 307, 313; Smith v. South Royalton Bank, 32 Vt. 341; Mechanics' Bank v. Schaumburg, 38 Mo. 228.

considered case Justice Holmes thus stated the rule. "The knowledge acquired by the president, directors, cashier and tellers whilst engaged in the business of the bank in their official capacities, will be notice to the bank. So far as either has authority to act for the bank, his acts are the acts of the bank; but mere private information obtained beyond the range of his official functions will not be deemed notice to the bank."46

12. The Sphere is Narrowing.

The sphere of imputed knowledge is narrowing. We have seen that it excludes personal and double agency transactions, knowledge actually acquired before, and incidentally after, assuming office; the only clear field left is knowledge acquired in the course of official work, which it is his plain duty to communicate.

A bank that has been once charged with knowledge continues to be whatever changes may occur in the personnel of its working force.47

13. Imputation of Knowledge of Stockholder.

Generally, and for most purposes, a corporation is a legal entity distinct from the body of its stockholders; and, in any event, to render the knowledge of the individual incorporators, the knowledge of the incorporation, it must be the knowledge of all the corporators.48 Therefore the knowledge acquired by a single stockholder cannot be imputed to the bank.49

46 Mechanics' Bank v. Schaumburg, 38 Mo. 228, 244; Bank v. Davis, 2 Hill (N. Y.) 451; Campbell v. First Nat. Bank, 22 Colo. 177. See Red River Investment Co. v. Smith, 7 N. Dak. 236. In a recent case the Supreme Court of Missouri said: "The law is well settled in this state that knowledge which comes to an officer of a corporation through his private transactions, and beyond the range of his official duties, is not notice to the corporation. This is the rule though the officer obtaining the knowledge was, at the time, the managing agent of the corporation." Kearney Bank v. Froman, 129 Mo. 427, 430, citing Benton v. German-American Nat. Bank, 122 Mo. 332, 339; Johnston v. Shortridge, 93 Mo. 227; Merchants' Nat. Bank v. Lovitt, 114 Mo. 519.

47 U. S. Nat. Bank v. Forstedt, 64 Neb. 855.

48 Mercantile Nat. Bank v. Parsons, 54 Minn. 56, 65.

49 Housatonic Bank v. Martin, 1 Met. (Mass.) 294.

CHAPTER XII.

PERSONAL AND DOUBLE AGENCY TRANSACTIONS.