Page:Federal Reporter, 1st Series, Volume 8.djvu/25

WATNBSVILLE MAT. BANE t. IBONB. Il �involved in the foregoing case is exceedingly impoitsint. tt is a matter pf common business experience that the same person is frequently a director and prominent executive offlcer in several corporations at the same time. Vfi is president of the A. and B. Cos. As president of the former, or as a mem- ber of a firm, or individually, he becomes informed of certata facts; he never coœmunicates them to the ofHcers of the B. Co., and takes no part in a trans- action between the two corporations, or between the B. Co. and the flrm of which he is a member; or, in such transactions, or in one between himself and the B. Co., acts adversely to the B. Co. In any of these cases, is the B. Co. to be eharged with constructive notice of the facts known to W.? To hold the corporation eharged with notice, under such circumstances, would unsettle and endanger every business transaction between corporations and persons so situated. �It is submitted that the learned judge, in the foregoing opinion, h as stated the true rule governing the question of notice in such cases. In order to charge the corporation with notice of facts of which a director or other offlcer had knowledge, he must have acted in the transaction on lehalf of the corpo- ration. N �A couple of leading cases will well illustrate the rule. In First N'ai. Bank of Hightstown v. Chrtstopher, 40 N. J. L. 435, decided by the supreme court of Xew Jersey in 1878, the facts were as follows : P. was a member of the flrm of M. & J. S. P., and also a director of the bank of H. He obtained at the bank the discount of a note belonging to the firm, which had been got of the maker by fraud. Ile had notice as a member of the firm of thc fraud before the note was oliered for discount, but did not communicate his knowl- edge to any of the ofFicers of the bank. The court held that the knowledge of P. was not constructively notice to the bank. The syllabus is: "A bank dis- counting a note before its maturity is not chargeable with the knowledge of illegality or want of consideration acquired by one of its directors in other than his officiai capacity, such director not having acted with the board in making the discount. A director offering a note, of which he is owner, to the bank of which he is a director, for discount, is regarded in the transaction as a stranger, and the bank is not chargeable with the knowledge of such director of an inflrmity or defeet in the consideration of the note." The court discusses and negatives the idea that the corporation can be eharged in all caees when it is the director's duty to communicate his knowledge to the corporation; and considers in that connection the case of Fulton Bank v. N. Y. & Sharon Canal Co. 4 Paige, 127. �In the caae of the Bank of U. 8. v. Bavis,2 Sill, (N. T.) 451, a bill of exchange was sent to one of the directors of the bank to be discounted for the Oeneflt of the drawer, but the former, who was a member of the board which ordered the discount to be made, and who took part in its decision thereon, presented it for discount for his own beneflt, and received the avails ; and the court held that the bank was chargeable with knowledge of the fraud, and cou Id not recover upon the bill. Nelson, G. J.: "I agree that notice to a director, or knowledge derived by him, while not engagea ofiacially in the business of the bank, cannot and should not operate to the prejudice of the latter. * * * But in this case, as has already been observed, Williams ��� �