Merchants' Bank v. State Bank/Opinion of the Court

by Noah Haynes Swayne

United States Supreme Court

77 U.S. 604

Merchants' Bank  v.  State Bank

The contest turns, it is submitted, upon the following propositions, which, if successfully maintained by the plaintiff, are decisive on the question whether the case was properly withdrawn from the jury:

1. If in the absence of regulation by charter, by-law, or vote, and with no evidence as to the powers actually exercised by the cashier, and acquiesced in by the bank, nor of the powers usually intrusted to cashiers of banks established in the same community, the court can judicially know what the powers and duties of such cashiers are; yet it is a principle perfectly well settled, that under the foregoing circumstances (and even when by-laws and votes on this subject exist), evidence of the powers habitually or usually exercised by the cashier, with the knowledge and acquiescence of the bank, defines and establishes as to the public these powers, provided that the powers thus exercised may, without violation of the charter, be by the directors or corporation conferred on such cashier.

2. The evidence offered by the plaintiffs at the trial of the cause was competent and sufficient to have been submitted to the jury, on which they might lawfully find that the powers habitually or usually exercised by the defendants' cashier, with their knowledge, embraced the power to make for the defendants, the contracts declared on or some one or more of them, and that such powers might, without violation of the charter or law, be confided to such cashier.

1. The soundness of the first of the above propositions is obvious. To hold that the public may not safely confide in the existence of powers which by charter can be lawfully delegated, and which are openly exercised, but must investigate and find if those powers have been the subject of by-law or vote, and act accordingly, would not only suspend the business of commerce, but tend to make transactions with corporations a snare and a cheat. ^[1] So far as the public are concerned it is immaterial whether the powers thus exercised are in disregard of the by-laws of the corporation or not, provided they are within the corporate powers conferred by the charter. ^[2]

2. Then was the evidence offered by the plaintiffs competent and sufficient to be submitted to a jury in support of the claims made by the declaration?

The main original contract (laying aside for the present the question of certified checks), and of which evidence (sufficient at least to be submitted to the jury) was offered by the plaintiffs, was a contract for the purchase and delivery of gold by the plaintiffs to the defendants. The charters of both banks in terms authorized them to carry on the business of banking, by 'buying and selling exchange, coin and bullion,' so that the contract set up by plaintiffs was within the corporate powers of both parties. The transaction then being legitimate, and in its character forming part of the business of both banks, the principal question is, have the plaintiffs lost this large sum of money by improperly trusting in the assumed powers of the defendants' cashier. The buying and selling of gold must of course be intrusted, under general powers, to some officer of the bank. A vote of directors authorizing each daily or hourly transaction would be impracticable. In this attitude of the case, we ask attention to the evidence offered by us as to the powers habitually exercised with the knowledge of the defendants by their cashier, to the end that the correctness of the ruling withdrawing the case from the jury may be determined; and attention also to the evidence of the officers of numerous other National banks established at Boston, as to the powers and duties usually exercised by their cashiers in dealing with the public and with other banks. The competency of this evidence has been thus declared by this court. ^[3]

'Considering that all insurance companies in Boston have similar charters, and the same kind of officers to conduct their business, we think that there is competent evidence that presidents of insurance companies in that city are generally held out to the public as having authority to act in this matter, viz., to make oral insurance.'

The legal principles that are to govern the application of the testimony in the case we submit, are these:

Where the authority of an agent is left to be inferred by the public from powers usually exercised by the agent, it is sufficient if the transaction in question involves precisely the same general powers though applied to a new subject-matter. Were this otherwise, the general authority to make purchases in the usual course of the business of the principal, could never be relied on, unless upon proof of previous purchase of the identical article, the authority to purchase which is in controversy.

Thus if it be shown that the defendants' cashier had habitually, with the knowledge of the bank, dealt with the public as authorized to buy and sell exchange, and still more if that power is shown to have been habitually exercised by the cashiers of all other banks established in the same community and 'having similar charters,' then the power to buy and sell gold (the right to do both which is conferred by the same clause of the charter) may be inferred by the jury.

Again, if a cashier is shown to have usually or frequently pledged in writing the credit of the bank in the usual course of business, with the knowledge of the bank, and such is shown to be the usage of other banks, as before stated, it is evidence from which the jury may infer that he is authorized to pledge that credit in all transactions authorized by the charter, and which could lawfully be intrusted to a cashier.

It is not contended by the plaintiffs that a power to buy may be inferred from an exercise of a power to sell, however frequent that exercise may have been, nor that a power to indorse may be shown from numerous instances of signature as promissor. The contracts in such cases are wholly dissimilar; acts distinct in their nature. But when the powers exercised are shown to be of the same character, involving both in form and substance the same identical obligation, and the same consequence to the principal, and in the course of his business, it cannot be necessary to show that in their previous exercise they have been applied to contracts for the same article. ^[4]

'With regard to the limits of the general agency, which is created by a series of acts or course of dealing, the language of Lord Eldon's, in Davison v. Robertson, ^[5] has generally been considered as defining the principle with accuracy. In that case the position had been stated that an indorsement per procuration required a special mandate, but Lord Eldon's opinion was, that no such thing was absolutely necessary: 'for if from the general nature of the acts permitted to be done, the law would infer an authority; the law would say that such an authority might exist without a special mandate."

'This is illustrated in Commercial Bank of Erie v. Norton.' ^[6]

In the case thus cited, Cowen, J., states the exact principles thus:

'It is not necessary, in order to constitute a general agent, that he should have done before an act the same in specie with that in question. If he has usually done things of the same general character and effect with the assent of his principals, that will be enough.'

The doctrine thus stated was in that case applied where the agent of a firm, who with their knowledge and assent, was in the habit of drawing bills and making notes and indorsements for them, had made an acceptance, but no proof was offered that he had ever previously made an acceptance. The principal was charged. The case is cited as sound, in Parson's Mercantile Law, ^[7] and Paley's Agency. ^[8] In Watkins v. Vince, ^[9] Lord Ellenborough carried the doctrine so far as to hold that a son who had signed for his father in three or four instances and had accepted bills, could bind the father by a guarantee. In Prescott v. Flinn, ^[10] C. J. Tindall says:

'It may be admitted that an authority to draw does not impart in itself an authority to indorse bills, but still the evidence of such authority to draw is not to be withheld from the jury, who are to determine on the whole evidence, whether such authority to indorse exists or not.'

The evidence to which these principles are to be applied, appears in the statement of the case. ^[11] It shows that the cashier of the defendants was intrusted by them with powers the largest and most comprehensive in dealing with the funds of the bank, giving its checks, pledging its credit, and making its contracts and purchases. Similar powers were openly and habitually exercised by the cashiers of banks in Boston, in the dealings of such banks with each other.

In view of such proofs, we ask if it ought to be determined that there was no legal competent evidence proper to be submitted to a jury, from which they might infer that, as among the wide powers openly exercised by Smith, the defendants' cashier, in numerous instances and for large amounts, was the authority to purchase exchange, he had or not also intrusted to him the power to purchase gold, and thus to find their verdict for the plaintiffs upon the counts framed upon such purchase?

We next submit, that upon the evidence the question, whether the defendants' cashier, clothed as he was with the powers stated in the proofs, had or not the incidental power to certify the checks declared on, was fit to be submitted to the jury.

In discussing this point we assume that there was evidence competent to be submitted to the jury to show the large powers intrusted to the cashier to pledge the credit of the bank-that the jury might well find that he had power to make the purchase of gold from the plaintiffs, and that he might have given a cashier's check on his own bank, a certificate of deposit, or a credit for the purchase-money.

Now, the form of pledging the credit of the bank at the moment the gold was received, viz., by certifying the checks of the parties for whom the arrangement was made, is of the same character and nature as a cashier's certificate of deposit, checks, or memorandums of credit, referred to in the history as to usage. Like these, it is an absolute and not a contingent promise to pay, and in view of the wide powers exercised by the defendants' cashier, the jury had a legal right to infer that this mode of pledging the credit of the bank, suited as it was to the circumstances (the cashier having full authority to make the purchase), was within his delegated powers.

The view of the court below rests on the doctrine, that if a charter prescribes the mode in which the officers of the bank must act or contract, that mode must be strictly pursued, and the power cannot be delegated. But this doctrine has no application in this cause, since the National Currency Act prescribes neither the mode nor the officers by whom the acts or contracts necessary to the course of business shall be made, but merely confines the general oversight and management to a board of directors.

This precise question as to power of the directors to authorize other officers of a bank, by a general vote, to exercise in the name of the bank, at all times, the power to borrow money and give notes, has been raised and carefully discussed in a case where the charter, in terms, provided 'the affairs of the company shall be conducted by the directors,' and the careful judgment of Chief Justice Tilghman, displaying, as it does, the practical difficulties which would arise from a denial of the power, seems conclusive. ^[12]

If the power to borrow money, at all times, for the purposes of the bank, and give notes therefor, can be delegated by the directors to the cashier, the power to purchase exchange and gold, in pursuance of the charter, can be so delegated. Whether the power to delegate to a cashier authority to certify checks exist, has nowhere been settled. As to conferring such authority on tellers by usage, the power is negatived in Massachusetts, ^[13] while in New York it is settled that such power may be conferred, ^[14] and a statute of the United States recognizes certified checks, and makes them in common with the circulation subject of taxation.

Whether the control of the great leading business for which a bank is created, viz., loans and discounts, can be delegated, may be doubted. The prevailing practice known and acted upon by the public, is to apply to a board of directors for discounts. But it does not follow that the whole of the other functions of a bank can only be performed by a vote of directors, upon each hourly transaction. The authorities cited above are repugnant to any such doctrine.

But if the power to certify was not under the evidence fit to have been submitted to the jury, still the right to recover the purchase-money for the gold, stands unaffected by the giving of the checks. They were received in the faith that, in dealings of bank with bank, the defendants' cashier had authority to certify them. If they were void, no payment has been made. It is equivalent to a payment in forged bills. The debt remains.

No proof was offered by defendants that the gold purchased of the plaintiffs was not carried to the defendants' bank and placed with their funds; although if it was not so, the onus is on the defendants.

Proof that the gold was so carried and placed is found in the occurrences on the occasion of the demand made at defendants' bank of its cashier and of its directors. The cashier of the defendants admitted that he had had the gold certificates in their bank; and that the State Bank was held. So at the interview of Mr. Haven with the defendants' directors, when he stated to them that their cashier had certified checks, and those checks were given to the cashier of the Merchants' Bank for gold delivered to him, the property of the Merchants' Bank, and that he wanted payment for that gold, there was no denial that the gold had been received by the State Bank, but merely a statement that the directors had not authorized their cashier to certify checks.

Messrs. B. R. Curtis, C. B. Goodrich, and B. F. Thomas, contra, and in support of the ruling below:

The main question is, whether the cashier had authority to bind the defendants in the contracts declared on.

I. Had he authority to certify the checks?

It is clear that no express authority had been given to him to do so. Certainly no such power was conferred upon him by the act of Congress, from which the corporation derives all its powers and functions; for by it the entire control and management of the bank are vested in the directors, and with this view, both as to qualifications and responsibility, their office and trust is most carefully guarded.

If, then, the cashier was authorized in any way to certify the checks, he must have been so through the action of the directors. But no such power was conferred upon him by any by-law; nor by any vote of the directors; no ratification or sanction by the directors as a board, or separately, of the use of such power by him; no evidence that he ever in a single instance, before or since the acts in question, made any certificate upon any check of depositor or stranger.

How then, if at all, have the directors clothed him with the power to make the contracts declared on? They had the power to appoint a cashier and to 'define his duties.' But they had no power to transfer or make over to him the duties and powers of the directors. They had power only to point out, and define what he was to do, not trenching upon but in just subordination to their own powers and duties.

Though the power to define the duties of the cashier is vested by the act of Congress with the directors, we concede that the appointment of a cashier devolves upon him various powers and duties. The inquiry then is as to their nature and extent.

Speaking in general terms, they are executive and ministerial, not discretionary or quasi judicial. His function is to carry into effect the contracts made by the directors, and to execute their orders. If in carrying into execution the contracts and orders of the directors, his acts sometimes assume the form of contracts, they are ancillary and accessory, and not substantive and independent agreements.

It is plain that the appointment of cashier does not confer upon the appointee any power, duty, or function which the courts of law, and especially this court, have said do not appertain to the office.

What, then, has been determined by this court on this subject?

In Fleckner v. Bank of the United States, ^[15] the earliest case, the obligation of a bank for the acts of its cashier is limited to those done in the ordinary course of business intrusted to him.

In Minor v. The Mechanics' Bank of Alexandria, ^[16] it was held that no usage, even under the sanction of the board of directors, would justify a cashier in allowing customers to overdraw. The case at bar is not merely a case of overdrawing by a depositor, but a case of drawing to the amount of $500,000 by a firm who were not, so far as appears, depositors, and who had not and never had had funds in the bank.

In Bank of the United States v. Dunn, ^[17] this court held, that the president and cashier of a bank, acting together, had no power to bind the bank by a representation to an indorser where there was collateral security, that he would not be bound by his indorsement.

The United States v. The Bank of Columbus, ^[18] recognizes and affirms as settled law, that the making of a contract involving the payment of money, or the purchase or sale of property, is not within the ordinary business of a cashier, and that if a party relies upon such contract by a cashier, he must show (at the least) a special delegation of power from the directors. The court say:

'The term, ordinary business, with direct reference to the duties of cashiers of banks, occurs frequently in English cases, and in the reports of the decisions of our State courts, and in no one of them has it been judicially allowed to comprehend a contract made by a cashier without an express delegation of power from a board of directors to do so, which involves the payment of money, unless it be such as has been loaned in the usual and customary way. Nor has it ever been decided that a cashier could purchase or sell the property, or create an agency of any kind for a bank which he had not been authorized to make by those to whom has been confided the power to manage its business, both ordinary and extraordinary.'

It is vain to say that the contract in that case was ultra vires. The case was neither argued nor decided on that ground, but was argued and decided on the power of a cashier to make the contract. The principles involved in the decision are therefore authority in the case at bar.

The leading case in Massachusetts, where the contracts sued on purport to have been made, is Mussey v. The Eagle Bank. ^[19] The case, though arising as to a check certified by a teller, in its reasonings and the principles affirmed, applies as well to those by a cashier. The argument made here,-that this certificate of 'good,' on the check, is but another form of the exercise of a usage, so common in banks, of granting a certificate of deposit of money to the credit of a third person, was made there. What say the court?

'We are of opinion, that usage of the one will not support the practice of the other. The two practices, while having the appearance of resemblance, and although one may be used for the same purpose as the other, in the form of a remittance, are, in their character, essentially distinct.'

And the court show wherein they are so.

The cases decided in New York do not really touch the question of authority. The have no tendency to show that the power to certify checks was inherent in the cashiers of banks in Massachusetts, existing under the laws of the State, or of the United States.

It is true that the 17th article of the by-laws of the State Bank provides that 'all contracts, checks, drafts, receipts, &c., shall be signed either by the cashier or by the president.' But the duty of signing contracts is ministerial and executive, not discretionary. The power to sign, without more, excludes the idea of a power to make. The contracts and the checks to be signed are the checks of the bank and not of third persons. ^[20] The drawer of the check is the debtor to the payee. It is his contract, he standing to the payee as the maker of a promissory note or acceptor of a bill of exchange. The check does not contemplate or require acceptance, and, in the usual course, is not accepted. Smith here put his name upon contracts, which had their existence as contracts when signed by Mellen, Ward & Co. They were in no sense contracts made by the directors, or which had been prepared by them for signature by the cashier.

Nor does the production of a contract signed by the cashier furnish prim a facie evidence that the contract was made by the proper authority. Though such presumption may attach to payments made or received by the cashier over the counter of the bank, or other acts within the scope of his ordinary business and duties, it is limited to them. No rule of law is better settled than that a party contracting with a corporation of limited and defined powers, or the servant or agent of such corporation of limited agency, is always put upon his inquiry as to the extent of the power of both principal and agent. ^[21]

The distinction between natural and political persons in this regard is obvious. A natural person may appoint an agent to do what he may do himself. Not so with corporations. They can exercise no powers not delegated, and must use them in the mode prescribed by their charter. He who relies upon a contract as binding upon a corporation, when such contract can be made only by its directors, must show affirmatively not only that the directors made it, but that it is within the scope of their powers and duties. ^[22]

But a like rule of agency applies even to natural persons. Under certain circumstances an authority arises to an agent to do a certain act, but you must show the occurrence of the circumstances before you can count upon his act. Familiar illustrations occur. Ex. gr., the master of a ship may give a bottomry bond under certain circumstances; the lender must show the circumstances. The master may sell in case of necessity; the purchaser must show the necessity. The master may give a bill of lading for goods put on board; the holder must show that the goods were on board. So a power to draw and indorse bills for and in the name of the principal will not authorize a drawing or indorsing in his name for the accommodation of thrid persons. ^[23]

The plaintiffs argue that the defendants, by putting a cashier into the bank, and not defining or restricting his powers, held him out to the world as the organ of the bank for doing the business of banking, and that, therefore, any acts done by him in carrying on the business of banking, as receiving deposits or buying and selling gold, are at least prim a facie valid. But the directors have done no such thing; they put the cashier into their bank as cashier, they held him out as cashier, and nothing more. The appointment to the office of cashier was a limitation of his powers. Whosoever dealt with the bank was bound to know the law, and especially a bank organized under the same laws, and doing business at its side. The defendants neither did nor could hold themselves out except as a banking association organized under the act of Congress, with the powers given by and to be exercised in the manner prescribed by that act.

That the putting a cashier behind the counter of a bank gives him no power to bind the bank, by representing that he has power to do what he cannot lawfully do, is plain. There could be no effectual definition or restriction of the powers of an agent if his representation of what he is authorized to do is to bind the principal. Though as to statements of facts on matters falling clearly within the agent's sphere of power and duty, he may bind the principal; that is the outside limit. Something more then was necessary to be shown than putting Smith into the bank as cashier, and a failure to define all his duties.

If the power to make these contracts was not inherent in the office of cashier, and the directors have not defined or pointed it out as one of his functions, it could not spring out of their silence. It was not necessary for the directors to negative its existence, because there was neither law nor usage to require them.

Then, have the directors so conducted themselves as to their cashier and third persons, as to warrant them in believing that the cashier had been so authorized? They have not acquiesced in the use of the specific power, for there is no evidence that the cashier ever certified a check before or since he certified those in suit.

The plaintiffs' evidence is offered to show that defendants' cashier had been permitted to make contracts pledging the credit of the bank, and that it was the usage or course of business for cashiers in Boston to make such contracts. From the existence of a power to make the class of contracts testified of, they would infer a power to make the contracts sued upon. So far as the evidence concerns the conduct of the State Bank and its relations with its cashier, it tends to show that the cashier had, before these transactions, been accustomed to borrow money of other banks to make up deficiencies at the clearing-house and give his check therefor; to lend money for the same purpose, and receive a cashier's check therefor; to sell exchange on New York, and to draw on the bank's correspondent for the same; to buy exchange on New York, and give a cashier's check for the same, and (when discounts had been made) to give checks in lieu of bills to customers of the bank. But none of these acts, if proved to have been done by the cashier of his own motion, would have any tendency to show or warrant the jury in finding, that Smith had authority to go to the Merchants' Bank and certify checks of Mellen, Ward & Co., given to it in payment of a previous loan to them, or in payment for gold which the Merchants' Bank was under contract to sell to them. The calling of the cashiers of twenty-two banks to prove the borrowing of other banks and giving checks therefor, and the purchase and sale of New York exchange, and the absence of evidence of the certifying of a single check by a cashier, is the most forcible of negatives pregnant. It shows not merely that there is no evidence in the case, but that none was to be had.

So far as the evidence tends to show a usage or course of business, it clearly marks and defines it, and the line of demarcation falls outside of the class of acts counted upon by the plaintiff.

But it is asserted that the classes of acts shown to have been done by the defendants' cashier, and the acts sued upon, though not alike in form, are alike in principle in this regard, that they both pledge the credit of the principal.

Seemingly there are few agencies, general or limited, which do not more or less concern and involve the credit of the principal; but a power to pledge the credit of the principal for one purpose has no tendency to show the power to pledge it for another and distinct purpose. If A. authorizes B. to buy cotton on time, and he buys wool, or even real estate, all these acts assume to pledge the credit of A., but only the first does pledge it. The law does not extend or expand the powers of agents by analogy. On no subject are its rules of limitation more rigid.

Moreover we object to what constitutes the principal part of the evidence of the plaintiffs, the testimony of the cashiers of banks in Boston, as to the powers exercised by those cashiers, as incompetent and immaterial. The plaintiff cannot show that the defendant bank had conferred a substantive power upon their cashier, by showing that cashiers of other banks used such power; a fortiori not by showing that cashiers of other banks used powers entirely distinct from the one relied upon.

In appointing a cashier, the directors charged him with the powers and duties which the law had declared to be inherent in the office of cashier. As to modes and forms of business, they authorized him to follow the usage and custom of the city of the bank's location, so far as they did not conflict with positive law. But these were the outside limits. To say because cashiers of debtor banks borrow money of creditor banks at the clearing-house to make up their balances, or buy or sell exchange on New York, that therefore the cashier of the defendant bank could by certifying checks pledge the credit of the bank without limit, for persons who were not depositors at the bank, who had no funds there, lending in effect not merely more than a tenth, but nearly one-third of the bank's capital, contrary to the 29th section of the National Currency Act, by acts done outside of the banking-house or office where its business was by law to be transacted, without the knowledge of the directors or any one of them, or of any other officer of the bank, without any consideration to the bank for the responsibility assumed, paid or promised-is not merely to make the cashier the bank, but to take the bottom out of the bank itself.

Mellen, Ward & Co. not being depositors, having no account with the State Bank, had no right to draw a check upon that bank, and its cashier had no power to receive or recognize it. Paying the check of a depositor to the extent of his deposit is but paying as the bank has agreed to pay. Paying the check of a non-depositor, or guaranteeing its payment, is doing just what the bank had never agreed to do. Nor does it follow because the cashier might pay or guaranty the payment of a check where there were funds, he could do it where there were not. ^[24] There is no evidence of any agreement of Mellen, Ward & Co. and the defendants' cashier to place the gold coin or gold certificates in the defendant bank. Mr. Haven, indeed, the president of the Merchants' Bank, testifies that at noon on the 1st of March, in the State Bank, he asked Smith, its cashier, 'if he did not have the money? if the gold certificates were not delivered to him?' and that Smith said: 'Yes, I had them here, but they are not here now.' Giving full force to this testimony, it is, that Smith had the certificates with him in the bank edifice, not that they were ever mingled with the funds of the bank. As the cashier had no authority to buy the gold for the State Bank, or contract for its deposit there, that bank could not be responsible for it, until with the knowledge and assent of the directors it had been mingled with the bank's own funds. ^[25] And as the cashier had no authority to deal with the gold, either by purchase or receiving it on deposit for Mellen, Ward & Co. to draw upon it, he clearly has not the power to bind the bank by any declarations concerning the transaction. In addition to which, when Smith made this declaration he was not acting as agent of the bank.

If it be said that the certificate of the cashier is prim a facie evidence that the drawers were depositors, and had funds to meet the checks, it comes to the same thing, as asserting that a cashier has power to certify where the drawers were not depositors, or had no credit at the bank.

The relation created by depositing money in a bank is that of debtor and creditor,-the depositor, the creditor; the bank, the debtor. The money deposited becomes the money of the bank. The depositor has for it the promise of the bank to pay him so much money on his orders or checks. The relation is the result, then, of contract. When a cashier or teller pays the check of a depositor having credit at the bank, he pays as the bank has promised; every dollar that is thus paid out discharges so much of the debt due the depositor from the bank. The cashier is but executing the contract of the bank. When the cashier accepts the draft or check of a non-depositor, a new and different contract is entered into. The bank agrees to advance or lend so much money to the drawer. The bank becomes the creditor, and the drawer of the check the debtor. It is not enough to say the two things differ; there is no resemblance between them. The bank may be very willing to have A. its creditor, and very unwilling to have him its debtor.

A specific objection to the giving to the cashier the power to accept these drafts, or the exercise of it by the directors themselves, is, that it clearly contravenes the provisions of the 29th section of the Banking Act. It would create a liability of Mellen, Ward & Co. to the defendant bank, exceeding one-tenth part of the capital of the bank; to the extent, indeed, of nearly a third of the capital.

II. Then, as to the sale of gold certificates and coin to the State Bank through its agent and cashier, Smith. The considerations, as to the power of the cashier to enter into contracts by certifying the checks, already suggested, apply with equal force here. The cashier had no authority to make the purchase; none under the act of Congress, none under the by-laws, none under any vote of the directors, none under the oral consent of the directors, or any one of them, none under any practice or any one precedent of his own. There is no evidence that the State Bank ever engaged in the business of buying and selling gold, or so held themselves out to the public. Though the statute permits it does not require the bank to deal in gold. It is for the directors to decide whether they will enter upon this business or not; without their consent, express or implied, the cashier could not do it.

If the cashier had made the most formal purchase of the plaintiffs' gold, the defendants could not be holden. If the directors had received the gold coin or certificates, and had not within a reasonable time, or on reasonable request, returned them, the bank might be charged with their value. But the putting them into the hands of Smith (if proved) is nothing; for if Smith had no authority to make the contract for the gold, he certainly was not the defendants' agent to receive the gold. Nor would the delivery to, and receipt of the gold or gold certificates by the defendants' cashier, when absent from the bank, create a deposit for Mellen, Ward & Co., or render the bank liable on any implied assumpsit to the owner. If one delivers money to the cashier of a bank when absent from the bank, to deposit, or to pay a note in the bank, he makes the cashier his agent to deposit or pay; and if the money be lost or stolen before it reaches the bank, the bank is not liable. ^[26]

This rule, applicable to banks generally, has peculiar force to one organized under the United States Banking Act, which requires that 'its usual business shall be transacted at an office or banking-house located in the place specified in its organization certificate.'

If the cashier of the State Bank had the power to purchase, the Merchants' Bank had no right to sell. Mellen, Ward & Co. had a right to the gold at any time by paying the advance. The Merchants' Bank had the right at any time to demand the payment of the money. Interest was to be paid on the sum advanced. No matter what name the parties give to the transaction, these essential features remain and show conclusively a loan. But whether a loan or conditional sale is not important. Mellen, Ward & Co., it is certain, had a right to receive the gold upon payment of the amount advanced, with interest. Neither the bank nor Smith had such right. If Smith was not an agent to contract, he was not to receive. At the time of the delivery, Carter and Smith were present. Carter said he had come in for his gold; it was delivered. The delivery in contemplation of law was to Carter, the only person present competent to receive. Whether the manual caption was by Carter or Smith is immaterial. ^[27]

The payment, if any was made, was made by Mellen, Ward & Co. The checks were their checks, none the less after the certificates than before. If the word 'good' can be treated as a guaranty by the bank, Mellen, Ward & Co. were the principals. If the checks, when certified, were acceptances of the bank, yet in contemplation of law they were drafts on and to be paid from their funds in the hands of the bank, charged to account of Mellen, Ward & Co., and of course their property.

Other objections, somewhat more technical, may be suggested.

(a) The certificates having been made by the cashier when absent from the banking-house, were in violation of the 8th section of the act of Congress requiring its business to be done at its office or banking-house. None of the presumptions which would attach to payments made, or other acts done over the bank's counter, apply to these.

(b) Certified checks are against the policy of the Banking Act, which prohibits the issue of bills exceeding 90 per cent. of the bonds deposited. It is familiar history that certified checks have been used chiefly, if not wholly, to eke out a currency larger than the act allows.

They are equally illegal and void, as within the prohibition of the 23d section of the Banking Act, which forbids any banking association to issue post notes, or any other notes, to circulate as money than such as are authorized by the act. It is sufficient to bring the certified checks within the provision that they are capable of being so used, and that the general purpose for which they had been used was a substitute for bills.

(c) The written contracts relied upon could not be offered in evidence, because not duly stamped. If the certificates were valid, and to bind the bank, they engrafted upon the checks new and distinct contracts, to wit, acceptances of bills, and must be stamped as such.

Reply: The defendant's view is, that in the absence of definition by charter, by-law, or vote, the law prescribes the extent and limit of the powers of a cashier. But this view is not supported either by principle or authority.

Doubtless there exist classes of commercial agencies, whose powers and duties are so fixed and defined by the common law, after ages of judicial proof and investigation, that they are not only no longer the subject of inquiry but cannot be varied and controlled as against the public by proof of special contract limiting those powers. Such are partners, shipmasters, brokers, factors, &c. The powers and duties of such agents are fixed by the law, not in the absence of powers prescribed by writing or contract (as is claimed for cashiers), but in utter disregard of such prescription. But a cashier, the offspring of modern commerce, is, as stated by Baron Parke of bill brokers, 'not a character known to the law with certain prescribed duties, but his employment is one that depends entirely on the course of dealing. It may differ in different parts of the country. The nature of these powers and duties in any instance, is a question of fact, and is to be determined by the usage and course of dealing in the particular place.' ^[28]

That this is the precise doctrine applicable to cashiers is obvious, since even the defendants must admit that, in the absence of regulations by charter, by-law, or vote, the powers and duties of a cashier may be shown by the course of dealing lawfully committed to his charge by the bank. Now if this be so, defendants' proposition must be, that in the absence of all regulation by charter or vote, and of all evidence of the powers actually exercised by a cashier with the knowledge and ratification of the bank, the law prescribes the powers of a cashier. The value of which doctrine, if true, will appear, whensoever such a state of facts shall (if ever) occur.

But in no one of the cases decided by this court and relied on by the defendants, has the court attempted to rest its decision upon an assumed judicial knowledge of the common law powers and duties of a cashier, where the acts in question were within the pale of the charter. There are in several of the cases recitals of what the court suppose are the ordinary powers of cashiers, but no judicial decision has turned upon those recitals.

In Fleckner v. Bank of United States, ^[29] an early case, the question was, whether a cashier had a right to indorse the note in suit. In the course of the judgment it is said: 'We are very much inclined to think' that the indorsement falls within the ordinary duties and rights of a cashier, at least if his office be like that of similar institutions. 'The cashier is usually,' &c. 'It does not seem too much to infer.' 'But waiving this consideration.' The case is decided on another ground.

Minor v. Bank of Alexandria, ^[30] was debt on a cashier's bond; the defence set up a usage sanctioned by directors, to allow parties to overdraw, and the case was decided on the ground that it was 'a usage to misapply the funds of the bank and connive at their withdrawal, and could not be supported by any vote of the directors, however formal.' The case states with great fulness the rights of the public in dealing with the officers of banks. 'The ordinary usage and practice of a bank, in the absence of counter proof, must be supposed to result from regulations prescribed by the board of directors, &c. It would be not only inconvenient, but perilous, for the customers or any other persons dealing with the bank, to transact their business with the officers upon any other presumption. The officers of a bank are held out to the public as having authority to act according to the general usage, practice, and course of their business, and their acts within the scope of such usage, would bind the bank in favor of third persons having no other knowledge.'

Then follows next the case of Bank of the United States v. Dunn, ^[31] in which the defence was set up by an indorser that prior to the discount of the note, both the president and cashier represented to him that the note was secured and his liability nominal. The evidence was held as inadmissible, both as contradicting the note and upon the ground that 'all discounts are made under the authority of directors, and it is for them to fix any conditions.' 'The agreement was not made by persons who have power to bind the bank in such cases, nor have they power to bind the bank except in discharge of the ordinary duties.' There is no other or further remark in the case as to powers of cashiers.

The last case is the United States v. Bank of Columbus. ^[32] The question at issue was the authority of the cashier to contract with the United States in the name of the bank for the gratuitous transfer of $100,000 from New York to New Orleans. The important feature of the case as showing that it really decided a question of corporate powers is, that there was no offer of evidence to show the extent and character of the functions actually intrusted in the course of its business by this bank to its cashier, from which the inference might be drawn whether the bank had or had not intrusted him with powers involving the same principle.

It has been determined by the same judge who delivered the opinion of this court in United States Bank v. Dunn, relied on by defendants, that 'the cashier of a bank authorized by its charter to deal in bills of exchange, may accept such bills as the agent of the bank. This is in the scope of his agency, and is sanctioned by universal usage.' ^[33]

(a) That in view of the testimony as to the transaction by which the gold was delivered to the defendants' cashier, it was not and could not be intended or legally held to be a sale or delivery of the gold by the plaintiffs to the defendants.

(b) That as a matter of law the transaction by which the plaintiffs originally received the gold, under the arrangement with Mellen, Ward & Co., must be held to be a loan by the plaintiffs on a pledge of the gold, and that, considered as a loan, it violated the provisions of section twenty-nine of the National Currency Act, and by reason thereof the plaintiffs cannot by law maintain a suit for the price of the gold under the sale to defendants.

1st. The ground on which the defendants assert that the question whether there was a sale of gold to defendants, is not to be submitted to the jury, is that there was in legal contemplation no evidence of such sale, but that the court must rule, as matter of law, that it was a sale and delivery to Mellen, Ward & Co.

This view assumes, for the purposes of the argument, that the contract of plaintiffs with Mellen, Ward & Co. was a contract to purchase the gold, with an agreement as to the right of Mellen, Ward & Co. to repurchase it. Now this right to repurchase was capable of being transferred to the defendants. Indeed the testimony shows that at the outset, it was agreed or contemplated that it would be so transferred 'in the course of a few days, and that the gold, when taken away, would go through, probably, some other bank, mentioning, perhaps, the State Bank.' The transfer of this right to the State Bank (within two days) was, in fact accomplished. There was a transfer to the State Bank of Mellen, Ward & Co.'s right to repurchase the gold, and an exercise of that right by their cashier. Nor does the fact that the attempted payment was by checks of Mellen, Ward & Co. certified by the defendants' cashier negative the view that the State Bank were purchasers. The inference, without further evidence, would be strong that they made the same arrangement with Mellen, Ward & Co. as had been previously made with them by the plaintiffs (perhaps upon easier terms), as they agreed to pay the plaintiffs precisely what the plaintiffs had paid, viz., 125 per cent. The moment that the defendants got the gold, they had funds in their hands, and the certified checks could be drawn against those funds, and were drawn for the identical amount which the plaintiffs had agreed originally with Mellen, Ward & Co. to pay.

But however all this might have appeared to a jury, it was a question to be submitted to them.

2d. As to the defendants' other proposition, that the arrangement between the plaintiffs and Mellen, Ward & Co. must in law be held to be a loan, with a pledge of the gold as security, it is submitted, that if there be any evidence of the amount of their capital stock upon which to rest the averments that if it were a loan, it exceeded the quantum permitted by the 29th section of the National Currency Act, such evidence was for a jury and not for a court.

Certain features of the transaction are relied on by the defendants which, if there were no direct evidence of what the exact contract was, and that it was intended by both parties to be a purchase and not a loan, might support, with more or less strength, the position that in law such features would constitute a loan. But the direct evidence of the terms of the contract negatives any inference which the jury might otherwise draw from these detached features. In such a conflict the question is for the jury, with instructions as to what facts, if found by them, would in law constitute a loan, and what a purchase.

But assume that the court or a jury should arrive at the conclusion that the transaction was a loan accompanied by a pledge, can the State Bank avoid their contract to pay the agreed price of their purchase of the pledge from us (an agreement made with the assent of the pledgor) on the ground that we received the pledge under a contract with the pledgor, which is illegal? Or can a party, who has accepted the draft of a pledgor given in settlement of a transaction which is an infraction of a statute, set up the illegality of that transaction to avoid his acceptance?

The minor objections are of small weight.

(a) The requirement that the 'usual business' of the bank is to be transacted at its banking-house, means that the bank shall not carry on banking in distant places. Under the construction of the other side, how could two banks ever conclude any business between themselves? It would have to be done at the banking-house of one, and so out of the banking-house of the other. This business was done at the banking-house of the Merchants' Bank.

(b) 'Certified checks' are indirectly authorized by Congress, by being taxed. If they contravene the National Banking Act they do so by leave of the legislature.

(c) Being specifically taxed they do not require a stamp as acceptances.

Mr. Justice SWAYNE delivered the opinion of the court.

This is a writ of error to the Circuit Court of the United States for the District of Massachusetts. The plaintiff in error was the plaintiff in the court below. It appears, by the bill of exceptions, that upon the evidence in behalf of the plaintiff being closed, the defendant's counsel moved the court to instruct the jury that it was not sufficient to warrant them to find a verdict for the plaintiff upon either of the counts in the declaration. This instruction was given. The jury found for the defendant. The plaintiff excepted, and has brought that instruction here for review. This renders it necessary to examine the entire case as presented in the record. According to the settled practice in the courts of the United States, it was proper to give the instruction if it were clear the plaintiff could not recover. It would have been idle to proceed further when such must be the inevitable result. The practice is a wise one. It saves time and costs; it gives the certainty of applied science to the results of judicial investigation; it draws clearly the line which separates the provinces of the judge and the jury, and fixes where it belongs the responsibility which should be assumed by the court. The facts disclosed in the bill of exceptions are neither numerous nor complicated. The defendant called no witnesses. There is no conflict in the testimony. The questions which it is our duty to examine are questions of law. None are made upon the pleadings, and it is unnecessary to consider them. It is sufficient to remark, that the declaration is so framed as to meet the case in every legal aspect which it can assume.

On the 26th of February, 1867, Fuller, the plaintiff's cashier, received from the Second National Bank of Boston $200,000 of gold certificates, and paid the bank, upon their delivery, the amount of their face and a premium of 25 per cent. Payment was made in currency and legal tender notes. The next day he received from the same bank $200,000 more of like certificates, and paid for them at the same rate in currency and a ticket of credit by the Merchants' Bank in favor of the National Bank for $175,000. Both transaction were pursuant to an arrangement with Mellen, Ward & Co., brokers, in Boston. The market premium upon gold at that time was 40 per cent. It was understood between Fuller, the cashier, and Mellen, Ward & Co., that the latter might receive the same amount of gold from the Merchants' Bank, at any time thereafter, by paying the amount advanced, compensation for the trouble the bank had incurred, and interest at the rate of six per cent. There had been like transactions upon those terms between the parties prior to that time. The president of the bank was consulted in advance as to both the purchases from the Second National Bank, and approved them. The following testimony is taken from the record:

'George H. Davis testified as follows: I am the paying teller of the Merchants' Bank. From about the 1st of January, 1867, and previous to the 23d of February, the bank several times received gold, or gold certificates from Mellen, Ward & Co., for which it paid currency at the rate of $125 for $100 in gold. At that time they had deposited in the bank about $90,000 in gold. No note, memorandum, or check was taken connected with it in any way. The gold was added to the gold of the bank; on my cash book it was added to the item of gold, and the gold was mixed with the gold of the bank in the vault. If it consisted of certificates, they were put in a pocket-book kept in my trunk with other certificates and bills. (The paying teller's book was put in, and from the entries in it on the 26th, 27th, and 28th of February, 1867, it appeared that the gold received from Mellen, Ward & Co. was added to the gold of the bank.)'

On the 28th day of February, Carter, of the firm of Mellen, Ward & Co., and Smith, the cashier of the State Bank, called together at the Merchants' Bank. Carter said to Fuller, 'We have come in for gold.' Smith, the cashier, said, 'We have come to get an amount of gold,' and that he would 'pay for it by certifying these checks,' referring to two papers which Carter held in his hand. The teller handed Fuller 84 gold certificates of $5000 each, making the sum of $420,000. Fuller announced the amount. Smith said that was the amount wanted, and the amount covered by the checks. He received the certificates, certified the checks, and handed them over to the plaintiff's cashier. They were drawn by Mellen, Ward & Co. upon the State National Bank in favor of Fuller, the plaintiff's cashier, or order, and were certified 'Good; C. H. Smith, cashier.' One was for $250,000, and the other for $275,000. Smith thereupon left the bank with the certificates in his possession. Nothing was said by Fuller to Carter, or by Carter to Fuller, in relation to the checks, and Fuller did not know what checks Smith referred to until they were delivered to him. Smith did not certify or deliver the checks until he had got possession and control of the funds upon which his certificates were apparently founded, and this was known to the plaintiff's agent when he received the checks. Later, on the same day, Smith and Carter called again at the Merchants' Bank. Fuller was absent. Smith received $60,000 more of gold and gold certificates from the teller, and gave in return a check for $75,000, drawn by Mellen, Ward & Co. on the State Bank, payable to 'gold or bearer.' Like the two previous checks, it was certified 'Good; C. H. Smith, cashier.' This arrangement was in pursuance of the same agreement as that under which the gold certificates were delivered in the earlier part of the day. Both transactions were alike within its scope.

On the 1st of March, Havens, the president of the Merchants' Bank, called at the State Bank and complained that Smith had not paid the checks. Smith said he was going out to get the money. Havens inquired, 'Didn't you have the money-the gold? Were not gold certificates delivered to you?' He answered, 'Yes; I had them here, but they are not here now. I am going out to get it, and will come in and attend to it.' Subsequently, in the same conversation, he said, 'You hold the State Bank.' Later in the day Havens called upon Stetson, the president of the State Bank. Stetson denied that Smith was authorized to certify the checks, and appealed to a director who was present. The director was silent. In an account which Fuller rendered to Mellen, Ward & Co. after their failure, showing the disposition of various collaterals which Mellen, Ward & Co. had deposited from time to time with the Merchants' Bank, the amount paid for gold was put down as a loan, and interest was charged, but in his testimony before the jury he denied that the money was loaned, and insisted that the gold was bought by the Merchants' Bank. The agreement between Mellen, Ward & Co. and the Merchants' Bank rested wholly in parol. No written voucher was given or received on either side touching any of the transactions between the parties. The record discloses nothing else in this connection which it is material to consider.

The State Bank was organized under the act of Congress 'to provide a national currency,' &c., of the 3d of June, 1864. ^[34] The eighth section of that act authorizes such associations, by their directors, to appoint a cashier and other officers, and to exercise, 'under this act, all such incidental powers as shall be necessary to carry on the business of banking by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; by obtaining, issuing, and circulating notes, according to the provisions of this act,' &c. It is further provided that the directors may, by by-laws, regulate the manner in which its business shall be conducted and its franchises enjoyed; and that its general business shall be transacted at an office 'located in the place specified in its organization certificate.'

The 5th of the articles of association authorizes the board of directors to appoint a cashier and such other officers as may be necessary, and to define their duties. The 7th by-law declares that the cashier 'shall be responsible for the moneys, funds, and other valuables of the bank, and shall give bond,' & c. The 17th by-law requires that all 'contracts, checks, drafts, receipts, &c., shall be signed by the cashier or by the president, and that all indorsements necessary to be made by the bank shall be under the hand of the cashier or president,' unless absent.

The by-laws contain nothing further upon this subject. The directors failed to define more specifically the powers and duties of the cashier.

Smith, the defendant's cashier, exercised habitually very large powers without any special delegation of authority. An account was kept on the books of the bank with him as cashier, which represented these transactions, and printed blank checks were kept in the bank to facilitate them. The checks given by him for the proceeds of bills discounted and for the purchase of exchange during the five months preceding the 23d of February, 1867, amounted in the aggregate to two and a half millions of dollars. This was exclusive of his clearing-house checks. His checks for money borrowed of other banks, during the six months preceding the same 23d of February, amounted to one million five hundred and forty-seven thousand dollars. A large number of the cashiers of other banks in Boston were examined, and testified that they exercised the same powers under like circumstances. There is no proof that either they or Smith ever certified checks. It is not shown what became of the gold. Perhaps some light is thrown on the subject by the remark of the president of the Merchants' Bank to the president of the State Bank, 'that the latter had better go to the sub-treasury, and that he would perhaps find his gold there.' We find no reason to doubt that both banks, as represented by their cashiers, acted in entire good faith throughout the transactions, until they were closed by the delivery of the last of the certified checks. Neither could then have anticipated the difficulties and the conflict which subsequently arose.

The first question presented for our consideration is, what was the title of the plaintiff, and what were the rights of Mellen, Ward & Co., in respect to the gold certificates delivered by the Second National Bank to the Merchants' Bank? No very searching analysis of the facts disclosed is necessary to enable us to find a satisfactory answer to this inquiry. It does not appear that Mellen, Ward & Co. had any connection with the certificates received from the Second National Bank until after the plaintiff took the action which they invoked, and came into possession of the property.

The Merchants' Bank applied for them, bought them, paid for them, received them, and deposited them with its other assets of like character. It does not appear that any special mark was put upon them, or that anything was done to distinguish them from the other effects of the bank with which they were mingled. Upon the face of the transaction it was a simple sale by the Second National Bank, whereby the entire title and property became vested in the plaintiff. But gold was then at a premium of 40 per cent. in currency. The Merchants' Bank paid but 25, according to the contract between the bank and Mellen, Ward & Co. The latter were to pay, and it is to be presumed did pay, the additional 15 per cent. This was a part of the consideration upon which the Merchants' Bank entered into the contract. It is evident that the bank did not agree to deliver to Mellen, Ward & Co. the identical gold certificates which were purchased, but gold, or its equivalent in certificates to the same amount, and any gold, or any certificates would have satisfied the contract. The bank cannot, therefore, be regarded as holding the certificates in pledge. The want of the element, that the identical certificates were to be delivered, is conclusive against that view of the subject. If Mellen, Ward & Co. had tendered performance and called for gold, and the bank had failed to respond, Mellen, Ward & Co. could have sustained an action for the breach of the contract. But they could not have maintained detinue, trover, or replevin against the bank. The real character of the transaction was, that the bank took the title and entire property, but Mellen, Ward & Co. had the right to purchase from the bank the like amount of gold, or its equivalent in certificates, according to the terms of the contract, which were, that they should pay what the bank paid, compensation for its trouble, and interest from the time the purchase by the bank was made.

In respect to the $60,000 of gold and gold certificates delivered by the teller in the absence of the cashier, and the excess of gold certificates over $400,000 delivered by the cashier, the facts are substantially the same as those in regard to the $400,000, except that the excess of certificates, and what was delivered by the teller, had reference to gold and gold certificates deposited in the bank by Mellen, Ward & Co. This difference is not material. With this qualification the same remarks apply which have been made touching the $400,000 of certificates, and we are led to the same legal conclusions.

The transactions between the State Bank and the Merchants' Bank were apparently of the same character as that between the Merchants' Bank and the Second National Bank. What the understanding between Mellen, Ward & Co. and the defendant was is not disclosed in the evidence. But it is fairly to be inferred that it was the same as that between them and the Merchants' Bank. When the arrangement was proposed by Carter to Fuller, on the 22d of February, Carter said that 'when the gold was taken from the Merchants' Bank he thought it would go through some other bank or banks.' The assent of Mellon, Ward & Co. to the sale to the State Bank by the Merchants' Bank extinguished their claim upon the latter. The Merchants' Bank certainly had a title of some kind, and whatever it was it passed to the State Bank, unless the contract was void, because the State Bank had no corporate power, or its cashier had no authority to make the purchase. The act of Congress expressly authorizes the banks created under it to buy and sell coin. No question of ultra vires is therefore involved.

If the Merchants' Bank held the certificates as a pledge it had a special property which might be sold and assigned. The assignee in such cases becomes invested with all the legal rights which belonged to the assignor. Such is the rule of the common law, and it has subsisted from an early period. ^[35]

But we are entirely satisfied with the other view we have expressed upon the subject. Modus et conventio vincunt legem.

It is insisted by the defendant's counsel that the transaction was a loan to Mellen, Ward & Co. As the bank parted with its title, if there were a loan in the eye of the law, it would not in any wise affect the conclusions at which we have arrived.

Recurring to the subject of the authority of the cashier of the State Bank to make the purchase, and excluding from consideration for the present the certified checks, three views, we think, may be properly taken of the case in this aspect.

1. If the certificates and the gold actually went into the State Bank, as was admitted by Smith to Havens, then the bank was liable for money had and received, whatever may have been the defect in the authority of the cashier to make the purchase, and this question should have been submitted to the jury.

2. It should have been left to the jury to determine whether, from the evidence as to the powers exercised by the cashier, with the knowledge and acquiescence of the directors, and the usage of other banks in the same city, it might not be fairly inferred that Smith had authority to bind the defendant by the contract which he made with the Merchants' Bank.

3. Where a party deals with a corporation in good faith-the transaction is not ultra vires-and he is unaware of any defect of authority or other irregularity on the part of those acting for the corporation, and there is nothing to excite suspicion of such defect or irregularity, the corporation is bound by the contract, although such defect or irregularity in fact exists.

If the contract can be valid under any circumstances, an innocent party in such a case has a right to presume their existence, and the corporation is estopped to deny them.

The jury should have been instructed to apply this rule to the evidence before them.

The principle has become axiomatic in the law of corporations, and by no tribunal has it been applied with more firmness and vigor than by this court. ^[36]

Corporations are liable for every wrong of which they are guilty, and in such cases the doctrine of ultra vires has no application. ^[37]

Corporations are liable for the acts of their servants while engaged in the business of their employment in the same manner and to the same extent that individuals are liable under like circumstances. ^[38]

Estoppel in pais presupposes an error or a fault and implies an act in itself invalid. The rule proceeds upon the consideration that the author of the misfortune shall not himself escape the consequences and cast the burden upon another. ^[39] Smith was the cashier of the State Bank. As such he approached the Merchants' Bank. The bank did not approach him. Upon the faith of his acts and declarations it parted with its property. The misfortune occurred through him, and as the case appears in the record, upon the plainest principles of justice the loss should fall upon the defendant. The ethics and the law of the case alike require this result. ^[40]

Those who created the trust, appointed the trustee and clothed him with the powers that enabled him to mislead, if there were any misleading, ought to suffer rather than the other party. ^[41]

In the Bank of the United States v. Davis, ^[42] Nelson, Chief Justice, said: 'The plaintiffs appointed the director and held him out to their customers and the public as entitled to confidence. They placed him in a position where he has been enabled to commit this fraud.'

The director had fraudulently appropriated the proceeds of a bill discounted for the drawer. It was held the drawer was not liable.

The reasoning of Justice Selden in the Farmers' and Mechanics' Bank of Kent Co. v. The Butchers' and Drovers' Bank ^[43] is also strikingly apposite in the case before us. He said: 'The bank selects its teller and places him in a position of great responsibility. Persons having no voice in his selection are obliged to deal with the bank through him. If, therefore, while acting in the business of the bank and within the scope of his employment, so far as is known or can be seen by the party dealing with him, he is guilty of misrepresentation, ought not the bank to be responsible?'

The same principle was applied in the New York and New Haven Railroad Co. v. Schuyler. ^[44]

It was explicitly laid down by Lord Holt, in Hern v. Nichols. ^[45] He there said: 'For seeing somebody must be a loser by this deceit, it is more reason that he that employs and puts trust and confidence in the deceiver should be a loser than a stranger,' 'and upon this the plaintiff had a verdict.' Smith, by his conduct, if not by his declarations, avowed his authority to buy the certificates and gold in question from the Merchants' Bank, and the bank, under the circumstances, had a right to believe him.

We have thus far examined the controversy as if the certified checks were void or had not been given. It remains to consider that branch of the case. Bank checks are not inland bills of exchange, but have many of the properties of such commercial paper; and many of the rules of the law merchant are alike applicable to both. Each is for a specific sum payable in money. In both cases there is a drawer, a drawee, and a payee. Without acceptance, no action can be maintained by the holder upon either against the drawer. The chief points of difference are that a check is always drawn on a bank or banker. No days of grace are allowed. The drawer is not discharged by the laches of the holder in presentment for payment, unless he can show that he has sustained some injury by the default. It is not due until payment is demanded, and the statute of limitations runs only from that time. It is by its face the appropriation of so much money of the drawer in the hands of the drawee to the payment of an admitted liability of the drawer. It is not necessary that the drawer of a bill should have funds in the hands of the drawee. A check in such case would be a fraud. ^[46]

All the authorities, both English and American, hold that a check may be accepted, though acceptance is not usual. ^[47]

By the law merchant of this country the certificate of the bank that a check is good is equivalent to acceptance. It implies that the check is drawn upon sufficient funds in the hands of the drawee, that they have been set apart for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an undertaking that the check is good them and shall continue good, and this agreement is as binding on the bank as its notes of circulation, a certificate of deposit payable to the order of the depositor, or any other obligation it can assume. The object of certifying a check, as regards both parties, is to enable the holder to use it as money. The transferee takes it with the same readiness and sense of security that he would take the notes of the bank. It is available also to him for all the purposes of money. Thus it continues to perform its important functions until in the course of business it goes back to the bank for redemption and is extinguished by payment.

It cannot be doubted that the certifying bank intended these consequences, and it is liable accordingly. To hold otherwise would render these important securities only a snare and delusion.

A bank incurs no greater risk in certifying a check than in giving a certificate of deposit. In well-regulated banks the practice is at once to charge the check to the account of the drawer, to credit it in 'a certified check account,' and when the check is paid to debit that account with the amount. Nothing can be simpler or safer than this process.

The practice of certifying checks has grown out of the business needs of the country. They enable the holder to keep or convey the amount specified with safety. They enable persons not well acquainted to deal promptly with each other, and they avoid the delay and risks of receiving, counting, and passing from hand to hand large sums of money.

It is computed by a competent authority that the average daily amount of such checks in use in the city of New York, throughout the year, is not less than one hundred millions of dollars.

We could hardly inflict a severer blow upon the commerce and business of the country than by throwing a doubt upon their validity.

Our conclusions as to their legal effect are supported by authorities of great weight. ^[48]

Congress has made them the subject of taxation by name. ^[49]

But it is strenuously denied that the cashier had authority to certify the checks in question. To this there are two answers:

1. In considering the question of his authority to buy the gold, the evidence that he had given his checks for loans to his bank, and for the proceeds of discounts, was fully considered. Our reasoning and the authorities cited upon that subject apply here with equal force. We need not go over the same ground again. The questions whether the requisite authority was not inferable, and whether the principle of estoppel in pais did not apply, should in this connection also have been left to the jury.

2. As before remarked, the organic law expressly allowed the bank to buy coin and bullion. We have also adverted to the provisions of the by-laws, that the cashier shall be responsible 'for the moneys, funds, and all other valuables of the bank;' and that 'all contracts, checks, drafts, receipts, &c., shall be signed either by the cashier or president.' The power of the bank to certify checks has also been sufficiently examined. The question we are now considering is the authority of the cashier. It is his duty to receive all the funds which come into the bank, and to enter them upon its books. The authority to receive implies and carries with it authority to give certificates of deposit and other proper vouchers. Where the money is in the bank he has the same authority to certify a check to be good, charge the amount to the drawer, appropriate it to the payment of the check, and make the proper entry on the books of the bank. This he is authorized to do virtute officii. The power is inherent in the office. ^[50]

The cashier is the executive officer, through whom the whole financial operations of the bank are conducted. He receives and pays out its moneys, collects and pays its debts, and receives and transfers its commercial securities. Tellers and other subordinate officers may be appointed, but they are under his direction, and are, as it were, the arms by which designated portions of his various functions are discharged. A teller may be clothed with the power to certify checks, but this in itself would not affect the right of the cashier to do the same thing. The directors may limit his authority as they deem proper, but this would not affect those to whom the limitation was unknown. ^[51]

The foundation upon which this liability rests was considered in an earlier part of this opinion. Those dealing with a bank in good faith have a right to presume integrity on the part of its officers, when acting within the apparent sphere of their duties, and the bank is bound accordingly.

In Barnes v. The Ontario Bank, ^[52] the cashier had issued a false certificate of deposit. In the Farmers' and Mechanics' Bank v. The Butchers' and Drovers' Bank, ^[53] and in Mead v. The Merchants' Bank of Albany, ^[54] the teller had fraudulently certified a check to be good. In each case the bank was held liable to an innocent holder.

It is objected that the checks were not certified by the cashier at his banking-house. The provision of the act of Congress as to the place of business of the banks created under it must be construed reasonably. The business of every bank, away from its office-frequently large and important-is unavoidably done at the proper place by the cashier in person, or by correspondents or other agents. In the case before us, the gold must necessarily have been bought, if at all, at the buying or the selling bank, or at some third locality. The power to pay was vital to the power to buy, and inseparable from it. There is no force in this objection. ^[55]

It is also objected that each of the checks, after being certified, required an additional stamp. The act of Congress relating to the subject directs certified checks to be included in the circulation of the bank for the purpose of taxation. ^[56] This is a conclusive answer to the objection.

In Brown v. London, ^[57] judgment in a suit upon two accepted bills of exchange was arrested after verdict because 'entire damages' were given, and the count, upon one of the bills, failed to aver that by the custom of merchants and others trading in England the acceptor was obliged to pay. This was in 1671. Other decisions in this class of cases, not less remarkable, are familiar to those versed in the learning of the elder reports. The law merchant was not made. It grew. Time and experience, if slower, are wiser law makers than legislative bodies. Customs have sprung from the necessities and the convenience of business and prevailed in duration and extent until they acquired the force of law. This mass of our jurisprudence has thus grown, and will continue to grow, by successive accretions.

We have disposed of this case as it is before us.

How far it may be changed in its essential character, if at all, by a full development of the evidence on both sides in the further trial, which will doubtless take place, it is not for us to anticipate.

The judgment below is REVERSED, AND A VENIRE DE NOVO AWARDED.

Mr. Justice MILLER was not present at the argument of this case, and did not participate in its decision.

Notes

1. Bank of the United States v. Dandridge, 12 Wheaton, 64-70; Minor v. Bank of Alexandria, 1 Peters, 46-70; Wild v. Bank of Passamaquoddy, 3 Mason, 505; Nicoll v. American Insurance Company, 3 Woodbury & Minot, 530; (Maule, J.) in Smith v. Hull Glass Company, 8 C. B., 668, S.C.. 11 Id. 897.
2. Agar v. Athenaeum Insurance Company, 3 C. B. (N. S.) 725; Royal Bank, &c. v. Turquand, 6 Ellis & Blackburn, 327; Prince of Wales Insurance Company v. Athenaeum Insurance Company, 3 C. B. (N. S.) 757, note.
3. Commercial Insurance Company v. Union Insurance Company, 19 Howard, 318.
4. Tripp v. Swanzey Manufacturing Company, 13 Pickering, 291.
5. 3 Dow, 219, 229.
6. 1 Hill, 502.
7. Page 135, note.
8. Edition of 1856, p. 169, note.
9. 2 Starkie, 324.
10. 9 Bingham, 22.
11. See it supra, p. 607.
12. Ridgway v. Farmers' Bank, 12 Sergeant & Rawle, 256-261. As to the incidental powers of banks to borrow money, see Beers v. Phoenix Glass Company, 14 Barbour, 358.
13. Mussey v. Eagle Bank, 9 Met. 306.
14. Farmers' and Mechanics' Bank of Kent County, Maryland v. The Butchers' and Drovers' Bank, 4 Duer, 219; affirmed on appeal, 16 New York, 125; Willets v. Phoenix Bank, 2 Duer, 121.
15. 8 Wheaton, 338.
16. 1 Peters, 46.
17. 6 Id. 51, and see United States v. The Bank of Columbus, 21 Howard, 356.
18. 21 Howard, 356.
19. supra, 608.
20. Fearn v. Filica, 7 Manning & Granger, 513.
21. See, among other cases, Lowell Savings Bank v. Winchester, 8 Allen, 109; Zabriskie v. Cleveland, 23 Howard, 398; Pearce v. Madison, 21 Id. 443; Salem Bank, v. Gloucester Bank, 17 Massachusetts, 1.
22. Burnes v. Pennell, 2 House of Lords' Cases, 520, 521, 522.
23. See the distinctions set forth in 1 American Leading Cases, 4th ed., 549, Batty v. Carswell, Peck v. Harriott, and note.
24. Farmers' and Mechanics' Bank v. Butchers' and Drovers' Bank, 16 New York, 125; Schooner Freeman v. Buckingham, 18 Howard, 182; Lowell Savings Bank v. Winchester, 8 Allen, 109; Grant v. Norway, 10 Common Bench, 665.
25. Atlantic Bank v. Merchants' Bank, 10 Gray, 532; Skinner v. Merchants' Bank, 4 Allen, 290.
26. Manhattan Company v. Lydig, 4 Johnson, 377; Bullard v. Randall, 1 Gray, 605; Thatcher v. Bank of State of New York, 5 Sandford, 121.
27. Frost v. Cloutman et ux., 7 New Hampshire, 15.
28. Foster v. Pearson, 1 Crompton, Meeson & Roscoe, 858.
29. 8 Wheaton, 360-1-2.
30. 1 Peters, 72.
31. 6 Peters, 51.
32. 21 Howard, 356.
33. Lafayette Bank v. State Bank of Illinois, 4 McLean, 208. See also Sturges v. Bank of Circleville, 11 Ohio State, 153.
34. 13 Stat. at Large, 99.
35. Mores v. Conham, Owen, 123; Anon., 2d Salkeld, 522; Coggs v. Bernard, 3d Id. 268; Whitaker v. Sumner, 20 Pickering, 399, 405; Thompson v. Patrick, 4 Watts, 415; Story on Bailments, § 324.
36. Supervisors v. Schenck, 5 Wallace, 784; Knox Co. v. Aspinwall, 21 Howard, 539; Bissell v. Jeffersonville, 24 Id. 288; Moran v. Commissioners, 2 Black, 722; Gelpcke v. Dubuque, 1 Wallace, 203; Mercer Co. v. Hacket, Id. 93; Mayor v. Lord, 9 Id. 414; Royal British Bank v. Turquand, 6 Ellis & Blackburn, Q. B. & Ex. 327; The Farmers' Loan and Trust Co. v. Curtis, 3 Selden, 466; Stoney v. American Life Ins. Co., 11 Paige, 635; Society for Savings v. New London, 29 Connecticut, 174; Commonwealth v. The City of Pittsburg, 34 Pennsylvania State, 497; Commonwealth v. Allegheny County, 37 Id. 287.
37. Philadelphia and Raltimore Railroad Co. v. Quigley, 21 Howard, 209; Green v. London Omnibus Co., 7 C. B. N. S. 290; Life and Fire Ins. Co. v. Mechanic Fire Ins. Co., 7 Wendell, 31.
38. Ranger v. The Great Western Railway Co., 5 House of Lords Cases, 86; Thayer v. Boston, 19 Pickering, 511; Frankfort Bank v. Johnson, 24 Maine, 490; Angel and Ames on Corporations, §§ 382, 388.
39. Swan v. The British North Australasian Company, 7 Hurlstone & Norman, 603; Hern v. Nichols, 1 Salkeld, 289.
40. Dezell v. Odell, 3 Hill, 216.
41. Farmers' and Mechanics' Bank of Kent Co. v. Butchers' and Drovers Bank, 16 New York, 133; Welland Canal Co. v. Hathaway, 8 Wendell, 480
42. 2 Hill, 465.
43. Supra.
44. 38 Barbour Supreme Court, 536; S.C.., affirmed, 34 New York, 30.
45. 1 Salkeld, 289.
46. Grant on Banking, 89, 90; Keene v. Beard, 8 C. B. N. S. 373; Serle v. Norton, 2 Moody & Robinson, 404, n.; Boehm v. Sterling, 7 Term, 430; Alexander v. Burchfield, 7 Manning & Granger, 1067.
47. Robson v. Bennett, 2 Taunton, 395; Grant on Banking, 89; Ch. on Bills, 10 ed. 261; Boyd v. Emmerson, 2 Adolphus & Ellis, 184; Kilsby v. Williams, 5 Barnewall & Alderson, 816; Story on Promissory Notes, §§ 489, 490.
48. Bickford v. First National Bank, 42 Illinois, 238; Willets v. Phoenix Bank, 2 Duer, 121; Barnet v. Smith, 10 Foster, New Hamsphire, 256; Meads v. Merchants' Bank, 25 New York, 146; Farmers' and Mechanics' Bank v. Butchers' and Drovers' Bank, 4 Duer, 219; affirmed, 14 New York, 624; Brown v. Leckie et al., 43 Illinois, 497; Girard Bank v. Bank of Penn Township, 39 Pennsylvania State, 92.
49. 13 Stat. at Large, 278.
50. Wild v. The Bank of Passamaquoddy, 3 Mason, 506; Burnham v. Webster, 19 Maine, 234; Elliot v. Abbot, 12 New Hampshire, 556; Bank of Vergennes v. Warren, 7 Hill, 91; Lloyd v. The West Branch Bank, 15 Pennsylvania State, 172; Badger v. The Bank of Cumberland, 26 Maine, 428; Bank of Kentucky v. The Schuylkill Bank, 1 Parsons' Select Cases, 182; Fleckner v. Bank of the United States, 8 Wheaton, 360.
51. Commercial Bank of Lake Erie v. Norton et al., 1 Hill, 501; Bank of Vergennes v. Warren, 7 Id. 94; Beers v. The Phoenix Glass Company, 14 Barbour, 358; Farmers' and Mechanics' Bank v. Butchers' and Drovers' Bank, 14 New York, 624; North River Bank v. Aymar, 3 Hill, 262, 268; Barnes v. Ontario Bank, 19 New York, 156, 166.
52. 19 New York, 156.
53. 14 New York, 624; S.C.., 16 New York, 133.
54. 25 New York, 146.
55. Bank of Augusta v. Earle, 13 Peters, 519; Pendleton v. Bank of Kentucky, 1 T. B. Munroe, 182.
56. 13 Stat. at Large, 278, ch. 173, § 110.
57. 1 Levinz, 298.