law outside the State of New York, it is properly open to analysis and discussion. Historically, as I have pointed out, it seems to be growing up by an application of obiter dicta to situations which they seem to fit, but for which they were not intended. Theoretically, it seems to rest upon no recognized legal reasoning. Practically, while doubtless meant to cast a loss upon that one of two innocent parties who is the more responsible for the situation which the agent has created, it seems more commonly to have had the effect of doing comparative injustice. For the question more commonly arises upon an unauthorized draft signed by an embezzling bank cashier. The person who sues upon such a draft, basing his claim upon a prior course of action of which he had had no knowledge or information when he gave credit to the cashier, is really trying to establish a liability of a penal nature. There is nothing contractual about it. It is not even in the nature of an action for negligence, since his own greater negligence in taking, without inquiry, paper presumptively illegal, has contributed to the injury. He is seeking to penalize the bank because it was laggard in discovering the cashier's course of irregularities, and thus failed to discharge him before he committed the particular irregularity in question. The omission so penalized, however, was an omission of the directors or of their auditing committee, while the case generally comes into court after the bank has failed, so that the persons actually penalized are the unfortunate creditors or depositors, who are asked to contribute margins for the cashier's broker or compensation for those who encouraged his extravagance. Penal actions are not encouraged by the law. Whether this new kind of penal action should be established is at best doubtful. In one of the most recent cases Judge Lacombe, while expressing the opinion that the doctrine is now established as an exception to the general principle that one dealing with a cashier outside of the usual limits of a cashier's authority is put upon inquiry, says: "It would have been a most wholesome thing if that principle had never been qualified at all"; and again that "the courts seem rather to have overlooked the circumstance that in the one case the unfortunate stockholders and creditors had 1 New York Iron Mine v. Negaunee Bank (1878) 39 Mich. 644, 656. no means of knowing that their officers were dishonest or their directors negligent, until the trouble had occurred; whereas the creditors who received the consideration would always be advised by mere inspection of the face of the draft that something crooked was to be anticipated, that something was not right."1 Still another question arises when the agent is a bank cashier or other corporate officer, when the negligence is the negligence of his directors, and when the act under consideration was the use of the corporate funds to pay his own debt. Let it be assumed that the plaintiff in the action against the bank or its receiver had been a creditor of the cashier, who had taken in payment of the indebtedness a draft signed by the cashier with his official signature, drawn upon a correspondent bank, with the plaintiff as payee. He relies upon a long series of previous drafts of a similar nature, as constituting a "course of business." For present purposes it may be assumed that he knew of these previous drafts, and that they had been honored by the bank, before he took the draft in suit, and relied upon them in giving credit; even that the previous drafts, although illegal, had been known also to the directors of the bank, and that they had merely reprimanded the cashier or, in view of his replacement of the money, overlooked his offence. Thus all the elements of an estoppel and all the elements of a ratification are present, provided the directors had authority to ratify. Had they such authority? That is one of the questions recently much argued and still unsettled. There can be no estoppel unless the plaintiff had the right to infer, as he did infer, that the directors had ratified the "course of business" and bound the bank by that ratification. There can be no ratification of a "course of business" by a man who could not previously have authorized it. The maxim is omnis ratihabitio retrotrahitur, et priori mandato equiparatur.2 "A ratification can have no greater force than a previous authority."3 Can the directors of a bank adopt a by-law giving the cashier general power to issue bank paper for his own benefit? New York impliedly so holds in the 1Campbell v. National Broadway Bank, October, 1902, unreported. cases above referred to, but I venture to think that the weight of argument is to the contrary. Directors have not unlimited powers, and in particular, being themselves trustees or agents, they cannot delegate unlimited powers to one of their own number or to any other officer of the corporation. A general power to the cashier to sign bank drafts to his own order or that of his creditors and use them for his private purposes cannot possibly be for the benefit of the bank (since it is perfectly feasible for some other officer to be given the necessary authority when signatures for the for the cashier's individual purposes are desired), while such authority leads to temptation and often to crime. It was held in Anderson v. Kissam, that a general usage of all the banks of New York City, recognizing a general authority in bank cashiers to sign bank paper for their individual purposes, was contrary to public policy and illegal. If this general usage is illegal, certainly a corresponding special usage of a single bank, even if established by a vote of the directors, is equally illegal. "There cannot be a course of dealing in reference to illegal acts." A rule of public policy cannot be evaded by any mere form. Hence if, as has been often said, the rule prohibiting an agent from contracting on behalf of his principal when he is individually interested on the other side, is a rule of public policy, it cannot be evaded under cover of a prior authority or subsequent ratification given by any other agent of the same principal. Of course, the directors can by special action ratify prior illegal acts upon restitution, or because they turn out to benefit the company; but the existence of this power can not entitle any one to infer 1 Mr. Justice Strong in Bedford R. R. Co. v. Bowser (1864) 48 Pa. St. 29, 37. 2 (1888) 35 Fed. 699, 701, 703, reversed on another point in 145 U. S. 435, and then compromised. 3 Mercantile Insurance Co. v. Hope Insurance Co. (1880) 8 Mo. App. 408, 411; see also Lee v. Smith (1884) 84 Mo. 304, 310; Iowa Bank v. Black (1894) 91 Iowa 490, 496. 4 Wardell v. Union Pacific R. R. Co. (1877) 4 Dill. 330, 335, (aff. 103 U. S. 651); West v. Camden (1890) 135 U. S. 507, 521; Lamson v. Beard (1899) 94 Fed. 30, 43–4. 5 This view was taken by one of the New Jersey Judges in Campbell v. Manufacturers' Natl. Bank, supra. The point has been recently at least three times argued in the United States Supreme Court, but left undecided. that they have given authority to repeat the acts in future. Whether the prior illegal transactions of the agents are offered in evidence for the purpose of affording a presumption that his principal had ratified them, or for the broader purpose of penalizing the principal for his negligence in not discovering these acts, interesting questions have arisen as to the number and kinds of prior instances which would be sufficient to take the case to the jury. If the draft in the suit is for $10,000, of course, neither one prior draft for that amount nor a dozen prior drafts for $1 would be sufficient to constitute the necessary course of business." A Federal Court of Appeals, in a recent case, reversed a judgment on the ground that a few checks for a few hundred dollars each were not sufficient to sustain presumptively a subsequent check for several thousand dollars.1 The New York Court of Appeals on the other hand has permitted a jury to find a verdict against a corporation upon a warehouse certificate unlawfully signed by its president for his own benefit, based upon two similar receipts signed by him ten years previously, and three similar receipts signed by him five years previously, while holding a different office in the same corporation, 2 1 Gale v. Chase Natl. Bank, supra. E. B. WHITNEY. 2 Hanover Bank v. American Dock & Trust Co., supra; but see Farmers' Bank v. Noxon (1871) 45 N. Y. 762, 765; James Reynolds Co. v. Merchants' Natl. Bank (1900) 55 App. Div. 1. COLUMBIA LAW REVIEW. Published monthly during the Academic Year by Columbia Law Students. THE NORTHERN SECURITIES DECISION.-By the unanimous judgment of four United States Circuit Court judges, the acquisition by the Northern Securities Company of a majority of the stock of the Northern Pacific and Great Northern railways, in pursuance of an agreement between their warring stockholders, has been held to conflict with the Anti-Trust Act of 1890. United States v. Northern Securities Co. et al. (C. C., D. Minn. 1903) 120 Fed. 721. The first section of that Act provides that "Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations is hereby declared to be illegal." The United States Supreme Court has decided definitely that the Act of 1890 prohibits all combinations in restraint of trade whether reasonable or unreasonable, U. S. v. Trans-Missouri Freight Ass'n (1897) 166 U. S. 290; and that as so interpreted the Act is constitutional, U. S. v. Joint Traffic Ass'n (1898) 171 U. S. 505. The only question is, therefore, whether we have here a contract or combination in restraint of trade. In the first place it is clear that the present case is easily distinguishable from any of the preceding cases decided by the Supreme Court. In U. S. v. Trans-Missouri Freight Ass'n, supra, the agreement entered into by the defendants recited that it was "for the purpose of mutual protection by establishing and maintaining reasonable rates, rules and regulations." The agreement in U. S. v. Joint Traffic Assn. supra, was almost identical in terms. In Addyston Pipe & Steel Co. v. U. S. (1899) 175 U. S. 211, the petition charged that defendants entered into a combination and conspiracy among themselves by which they agreed that there should be no competition between them in any of the States or territories mentioned in the agreement. In each of these cases, therefore, there was an agreement between corporations engaged in interstate commerce under which rates were to be fixed. In the Northern Securities |