tendent of banks and the premiums paid therefor may be paid by and shall be allowed to said corporation as a necessary disbursement. (Former section 111; R. S., 1565; L. 1882, ch. 409, § 254.)

1. In reply to an inquiry made by the superintendent of the banking department, the following opinion was rendered by the attorney-general, December 8, 1886:

"Your letter of the 30th ult. has been duly received, from which it appears that 'a proposition has been introduced in the board of trustees of a savings bank that individual bondsmen as sureties for the fidelity of officers and employees should not hereafter be accepted, but that the bonds of the corporations which make a business of insuring or guaranteeing the fidelity of employees should be required; and that the institution should pay as a regular expense the premiums on such bonds or policies.'

"My opinion is requested whether such payment of premium would be an allowable and necessary expense under the law, assuming that the board believes such corporate suretyship to be for the greater protection of the funds of the depositors.'

"In reply thereto I beg leave to state that section 254 (former number) of the Banking Act (page 262, Paine's Banking Laws, first edition), authorizes the trustees of savings banks to require from the officers security for the faithful performance of their duties, but nowhere do I find in the act any provision authorizing the trustees to pay out bank funds for the purpose of getting guaranty corporations to guarantee the fidelity of the officers and employees."

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§ 142. Dividends, compensation and loans to trustees prohibited. — No trustee of any such corporation shall have any interest, direct or indirect, in the gains or profits thereof, nor as such, directly or indirectly, receive any pay or emolument for his services, except as hereinafter provided; and no trustee or officer of any such corporation shall directly or indirectly, for himself or as an agent or partner of others, borrow any of its funds or deposits, or in any manner use the same except to make such current and necessary payments as are authorized by the board of trustees; nor shall any trustee or officer of any such corporation become an indorser or surety, or become in any manner an obligor, for moneys loaned by or borrowed of such corporation.

(Former section 112; R. S., 1566; L. 1882, ch. 409, § 255.)

See Penal Law, §§ 294, 297.

1. A mortgage made by a trustee to a third party, and assigned by him to bank to make good a deficiency of assets, is not void; a mortgagor is estopped from claiming that there was no consideration therefor, since he authorized it to be reported as part of assets of bank, and on strength of it bank was allowed to continue business. Best v. Thiel et al., 79 N. Y. 16.

2. Neither the foregoing defense, nor an allegation that obligor was deceived by the other trustees as to the real condition of the bank, is a defense to action on a bond given to be used as an asset of bank. Hurd v. Kelly, 78 N. Y. 588, 34 Am. Rep. 567.

3. Vice-president Bowling Green Savings Bank took checks signed by president and secretary, and used them in individual stock speculations. These checks were paid by other checks upon bank of discount where savings bank kept its deposit. It was claimed that there was no conversion, since no money was taken. Held, it amounted to unlawful taking and misappropriation. Knapp, Receiver, v. Roche, 62 N. Y. 614, memorandum.

4. An action was brought by the receiver of the People's Savings Bank, to recover from the trustees thereof money lost by the bank by reason of the illegal purchase of North Carolina bonds, which, except under certain circumstances not existing when the purchase was made, the trustees were prohibited from buying. After the purchase of the bonds, the superintendent of the banking department having caused the bank to be examined, and having found its financial condition to be unsatisfactory, required the trustees of the bank, as a condition precedent to not closing it, to give to it their bonds and other securities to make good any and all deficiencies in its assets to meet its liabilities. Upon he trial the court below found that the entire loss resulting from the illegal purchase had been reimbursed, principal and interest, by the obligors mentioned in the bond. Held, that the defendants were released from liability by the payment of the damages sustained by reason of their illegal acts, although such payment was made by other persons, and that this action could not be maintained. Hun, Receiver, v. Van Dyck et al., 26 Hun, 567, aff'd 92 N. Y. 660.

5. The relation between a savings bank and its trustees or directors is that of principal and agent, and that between the trustees and depositors, is similar to that of trustee and cestui que trust. If such trustees transcend the limits placed upon their powers in the charter of the bank, and cause damage to the bank or its depositors, they are liable. They are also bound to exercise care and prudence in the execution of their trust, in the same degree that men of common prudence ordinarily exercise in their own affairs. When loss is occasioned by the failure of a trustee to exercise ordinary care and judgment, he cannot excuse himself by claiming that he did not possess them; by voluntarily taking the position, he undertakes that he does possess and will execute them, and it is immaterial that the services are rendered gratuitously.

Defendants were trustees of C. P. Savings Bank. When the deposits were only $70,000, the trustees bought a lot for $29,500 and erected a building thereon costing $27,000, and gave a mortgage on it for $30,500. At time of purchase, bank's expense exceeded its income, and had for some years, as trustees knew. Held, the facts justified a finding that it was a case of reckless improvidence and mismanagement, and that trustees were liable. Hun, Receiver, v. Cary et al., 82 N. Y. 65, 37 Am. Rep. 546.

6. Where a savings bank in the city of New York purchased from a trustee of such bank bonds and mortgages owned by him aggregating $32,000, made by one person upon unproductive property in the city of Brooklyn of uncertain value, not worth twice the value of the mortgages, such trancation is ultra vires. Paine, Receiver, v. Erwin et al., 59 How. Pr. 316.

7. The cases of Hurd v. Green, 17 Hun, 327, and Hurd v. Kelly, id. note, aff'd in 78 N. Y. 588, 34 Am. Rep. 567, holding savings bank trustees liable on a bond conditioned to make good any deficieny in assets, in consideration of its continuance in business, followed. Hun v. Salter, 14 Weekly Dig. 413.

8. A trustee, who sanctioned the use of money by a co-trustee, equally with him violates a prohibition of the charter against any trustee directly or indirectly borrowing its funds, and the prohibition cannot be avoided by resorting to a purchase from a trustee of mortgages, instead of loaning to him thereon. Id. 9. A transaction made by the bank officers and entered on the books may, for the purpose of sustaining an action against the trustees for a negligent and illegal transaction, be presumed to have been done with the knowledge and consent of the trustees. Paine, Receiver, v. Mead, 59 How. Pr. 318.

10. In reply to an inquiry from the superintendent of the banking department, as to whether a person who directly or indirectly sustains the relation of debtor to a savings bank, either as owner of real estate upon which a mortgage is held by the bank, or as obligor upon any kind of instrument securing a loan by a bank, or one who has interests with a borrower from, or a debtor to, a bank which might conflict with strict and paramount fidelity to the bank, is eligible to the office of trustee under the provisions of the savings bank statutes of this State, the attorney-general, in an opinion filed in the banking department April 4, 1879, says:

'The object of the statute is to secure disinterested management of savings institutions solely in the interest of depositors, and to this end no circumstance should exist inconsistent with the fiduciary relation of the trustee to his trust. "The policy of the statute is to exclude absolutely from the management of the savings bank trusts all persons who have any pecuniary relations with a bank, or with a borrower from a bank, which might induce a lack of vigilance as trustee, or antagonize duty by private interest. This is equally a rule of reason; and experience has too frequently shown that, where official duty and personal interests come in conflict, the former is likely to suffer.

"The only rule of safety, therefore, for all classes in the different forms in which they may arise, is to adhere rigidly to the policy indicated by the statute, to deem as ineligible for the position of trustee or officer of a savings bank all persons who have any pecuniary interest, whether as owner of property subject to mortgage held by the bank, or as borrower, guarantor or partner of a debtor to a bank, which may influence in any degree the performance of official duty. "Strict enforcement of this rule may occasionally exclude a good man from such trust, but like results are incident to all general rules of public policy, and the number of improper men excluded will be much greater. The statute applies practically the principle that no man can faithfully serve two masters."

11. The superintendent of the banking department in February, 1887, submitted the following series of questions to the attorney-general:

"First. Is it illegal for the trustees of a savings bank to accept a guaranty of title of property upon which the bank loans money, from a title guaranty company in which one or more of the trustees of the savings bank are stockholders?

"Second. Is it illegal for savings banks to accept policies of fire insurance, when one or more of the trustees of the bank are directors or stockholders of

the fire insurance company, which contracts to pay loss occasioned by fire to the bank as mortgagee?

"Third. Is it illegal for a savings bank to deposit money with a discount bank or trust company where one or more of the trustees of the savings bank are directors or stockholders of such discount bank or trust company?

"Fourth. Is it illegal for trustee of savings bank who acts as counsel to issue a certificate as to the validity of the title of borrowers to real estate upon which the bank loans money?"

...

In an opinion filed February 16, 1887, the attorney-general held as follows: "Said section 255 of the law in reference to savings banks (Paine's Banking Laws, page 262) provides as follows:

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"No trustee of any such corporation shall have any interest whatever, direct or indirect, in the gains or profits thereof, nor as such, directly or indirectly, receive any pay or emolument for his services, except as hereinafter provided; and no trustee or officer of any such corporation shall directly or indirectly, for himself or as the agent or partner of others, borrow any of its funds or deposits, or in any manner use the same, except to make such current and necessary payments as are authorized by the board of trustees; nor shall any trustee or officer of such corporation hereafter become an indorser or surety, or become in any manner an obligor for moneys loaned by or borrowed of such corporation." "This is the only section of the law which appears to prescribe the powers and duties of the trustees in respect to the matters to which the questions relate. "It is the duty of the trustees to satisfy themselves as to the validity of titles to real estate upon which he money of the institution is loaned. The manner in which they shall proceed to ascertain the validity of such titles rests in the discretion of such trustees; and if in the sound use of such discretion they deem it advisable to have a title investigated and guaranteed by a corporation engaged in such business, I do not think there is anything in section 255 (supra) which can be construed into a prohibition from such services being performed by a corporation in which one of the trustees of the bank owns stock.

"This would not give such a trustee any interest, direct or indirect, in the gains or profits' of the bank, nor would the services rendered by the corporation in searching and guaranteeing the title, strictly speaking, be considered services rendered by a trustee. Even were it so construed the act does not prohibit the rendition of such services by the trustees, but simply forbids such trustees receiving compensation therefor. It is not borrowing money from the bank, nor is it becoming indorser or surety by a trustee, or an obligor for moneys loaned by or borrowed of such bank.

"Second question. A person owning real estate is at liberty to insure it against fire in a fire insurance company, irrespective of who or what the directors in such company are. The fact that the property is subsequently or previously mortgaged to a savings bank cannot abridge this right. The title to the property is not in the savings bank. The loss, if any, may be made payable to the bank as mortgagee. This does not affect the right of the insured to choose his own company. A trustee of the savings bank, who may be a stockholder in the company in which the property is insured upon which the bank has a mortgage, receives no benefit, direct or indirect, from the bank. The contract is not with the bank, and is not necessarily made with a corporation designated by the bank.

The profits derived by the insurance company do not come from the bank, but from the owner of the property by whom the premiums are paid.

"Third question. The section under consideration forbids a trustee of a savings bank, either for himself or as agent or partner of others, from borrowing any of its funds or deposits. Is a deposit in a discount bank or trust company of which one of the trustees is a director or stockholder, such a borrowing as is meant by the statute? There is a well-recognized legal distinction between a loan or borrowing' and a deposit; and the rights and responsibilties of parties under these different species of contract are quite different.

"Receiving deposits,' said the vice-chancellor, in Leavitt v. Yates (4 Edw. Ch. 165), as understood in the practice of banking, is different from borrowing money in the ordinary acceptation of that term, and agreeing to allow interest on moneys deposited with a bank, and giving notes or certificates or any other evidence of debt therefor does not constitute the doing so an act of borrowing.' See, also, to same effect, Payne v. Gardiner, 29 N. Y. 146.

"I think the word 'borrowing,' as used in the section, was intended to be employed in its ordinary legal signification, and does not include deposits of money with banks of discount, and that when a savings bank deposits its funds with said discount bank the latter cannot be said to be a borrower; and the fact of one of the directors being a trustee does not, therefore, bring it within the prohibition of section 255.

"Fourth question. A trustee may act as counsel in investigating and certifying the validity of titles to real property upon which the bank desires to loan money, subject to the prohibition from receiving any pay or emoluments from the bank for his services.

"In my opinion, therefore, the above questions should all be answered in the negative, subject to the qualifications above stated."

12. September 29, 1905, the attorney-general was informed that one of the sav ings banks had recently elected as trustee a gentleman who had borrowed a large sum of money from that institution upon real estate security, and he was asked as to the eligibility of the trustee mentioned. He replied:

"The claim of counsel for the institution is, as I understand, that because the trustee was an obligor for moneys borrowed of the corporation at the time of his election, he did not become an obligor within the meaning of the statute above referred to, and is, therefore, eligible and entitled to hold the position.

"6 In

my opinion the trustee referred to is not eligible as trustee of the savings bank to which he is obligated. .

"The intent of the law clearly was to prevent such a relationship between a trustee and a savings bank corporation in relation to which he has such important duties to perform.

"I, therefore, advise you that the person referred to is not eligible as trustee."

§ 143. Repayment of deposits; regulations; limitation. The sums deposited with any savings bank, together with any dividends or interest credited thereto, shall be repaid to such depositors respectively, or to their legal representatives, after demand, in such manner and at such times, and after such previous notice, and under