to answer inquiries made by defendant relative to persons residing in Winston-Salem, or its vicinity, in whose notes or other obligations defendant was interested as a prospective purchaser. Some arrangement had been made by defendant with Colonel Blair for this service. There is no evidence, however, that Colonel Blair, in rendering this service to defendant, was acting, or undertaking to act, for plaintiff. Plaintiff had no interest in these persons or in the notes which defendant proposed to purchase. Colonel Blair was not serving or undertaking to serve the bank in answering defendant's inquiries. inquiries. There is no evidence that, at the time of the inquiry by defendant relative to Mackie, plaintiff had any interest in the note which Mackie had executed, payable to the order of defendant. In answering the inquiry relative to Mackie, Colonel Blair was serving defendant, and not the plaintiff. It was held in Taylor v. Commercial Bank, 174 N. Y. 181, 62 L.R.A. 783, 95 Am. St. Rep. 564, 66 N. E. 726, that a bank cashier is not acting within the scope of his authority in giving information as to the value of notes executed by customers of the bank so as to render it liable in case the statements prove to be untrue. See Farmers' & M. Nat. Bank v. Smith, 23 C. C. A. 80, 40 U. S. App. 690, 77 Fed. 129.

The distinction between the acts of Colonel Blair when acting for defendant and when acting for plaintiff is made clear by the testimony of Mr. Cherry, secretary and treasurer of defendant. When asked to secure information as to Mackie, Colonel Blair proceeded to act at once. When asked if the bank would purchase the note he replied: "Well, I will have to look further into that phase of the matter." There is evidence that, before giving a reply to the latter inquiry, he submitted the matter to the finance committee of the plaintiff, and re

nel Blair may have made with respect to J. H. Mackie or by reason of his failure to disclose to defendant any facts within his knowledge with respect to Mackie. Defendant, having failed to sustain its allegation in this respect, must fail in its defense involved in the first and second issues.

There is no evidence to sustain an affirmative answer to the third issue, which involves the allegation that plaintiff agreed to hold the certificates of stock issued to Mackie as collateral security for his note, transferred by the indorsement of defendant to plaintiff. These certificates were delivered to J. H. Mackie, and not to the plaintiff, by S. F. Penry, agent of defendant. The note was not in the form of a collateral note. The certificates were not delivered to plaintiff by defendant, and defendant's letter to J. H. Mackie, signed by its president, is evidence contradicting the contention of defendant with respect to the third issue.

I. Introduction, 528.

IV. Ultra vires, 544.

I. Introduction.

Generally, as to powers of bank president or vice president, see annotations in 1 A.L.R. 693, and 9 A.L.R. 1146 [Banks, § 32], particularly subd. VI.

As to the authority of an officer of a bank to bind the bank by false representations as to the credit of a third person, as affected by the Statute of Frauds, see subd. VI. of the annotation in 9 A.L.R. on p. 548 [Contracts, § 116]; also Banbury v. Bank of Montreal [1917] 1 K. B. (Eng.) 409, which is set out on p. 544 of the same annotation. The latter decision is reversed on this point in [1918] A. C. 626. Among possibly other recent cases bearing on this question, attention is called to Sedgwick v. National Bank (1922) 295 Mo. 230, 243 S. W. 893, in which it was held that the Statute of Frauds applied, and precluded recovery from a national bank for fraud and deceit on the part of its president in making misrepresentations as to the solvency of a third party, unless the same were in writing.

As to liability of corporation for fraud of officer for his own benefit, but within his apparent authority, see annotation in 43 A.L.R. 615 [Corporations, § 107].

As indicated in the title, the annotation does not cover cases involving merely the question of personal liability of the bank officers for erroneous credit information given by them regarding a third person; nor does it

include cases like Fisher v. United States Nat. Bank (1894) 12 C. C. A. 413, 26 U. S. App. 448, 64 Fed. 710, where the alleged misrepresentation was of the solvency or financial responsibility of the bank whose officer made the representations. In this connection, attention is called to Farmers' State Guaranty Bank v. Cromwell (1918) 70 Okla. 199, ↑ A.L.R. 684, 173 Pac. 826, where the purchaser of stock in a state bank sought to avoid liability for the purchase price on the ground of misrepresentations of the bank's cashier and president in regard to the value of the stock, it being held that, in the absence of a showing of specific authority to make the representations, the bank could not be held liable for the reason that the officers were acting without the scope of their authority in giving the information.

Cases involving fidelity bonds of bank officers and employees are of a somewhat distinct class which is not covered in the annotation. (The question of concealment and misrepresentation by officer or employee of corporation as to previous embezzlement, as affecting liability on fidelity bond, is discussed in annotation in 40 A.L.R. 1036 [Bonds, § 50]). Attention is called to several of these cases merely by way of illustration. Thus, the question sometimes presented has been as to the authority of a bank officer to make representations as to the integrity, etc., of an employee or other officer of the bank, to enable the latter to

obtain a bond. See, for example, American Surety Co. v. Pauly (1898) 170 U. S. 133, 42 L. ed. 977, 18 Sup. Ct. Rep. 552, affirming (1896) 18 C. C. A. 644, 38 U. S. App. 254, 72 Fed. 470; United States Fidelity & G. Co. v. Muir (1902) 53 C. C. A. 56, 115 Fed. 264, petition for writ of certiorari denied in (1902) 187 U. S. 648, 47 L. ed. 348, 23 Sup. Ct. Rep. 847; Guarantee Co. of N. A. v. Mechanics' Sav. Bank & T. Co. (1902) 183 U. S. 402, 46 L. ed. 253, 22 Sup. Ct. Rep. 124, which are cited in the annotation in 1 A.L.R., on p. 700. As to authority of a bank cashier to bind the bank by statements made to a surety company as to the integrity and faithful performance of duties by the president of the bank, the statements being made in connection with contemplated renewal of the latter's guaranty bond, see also Fidelity & D. Co. v. Courtney (1900) 43 C. C. A. 331, 103 Fed. 599, affirmed in (1902) 186 U. S. 342, 46 L. ed. 1193, 22 Sup. Ct. Rep. 833. The lower court took the position that the certificate executed by the cashier containing the alleged misrepresentations was inadmissible, as there was no showing that the bank authorized the cashier to fill out and return the certificate, and this was not within his inherent duties, in the absence of special authority. The Federal Supreme Court, however, held that the making of the certificate was an act done in the course of business of the bankin other words, an official act performed on behalf of the bank, and not a mere personal representation of the officer making it; that exclusion of the certificate was erroneous, but that the error under the particular circumstances was not prejudicial.

Attention is called also to Lieberman v. First Nat. Bank (1898) 8 Del. Ch. 229, 40 Atl. 382, where the surety on the bond of the teller of a national bank sought to restrain it from proceeding at law to collect from the surety for defalcations of the teller; and the court held that the surety's responsibility was not affected by assurances at the time the contract was made, given by the bank cashier, that the teller's accounts were all straight and that the surety could go on the 48 A.L.R.-34.

N. W. 862, an action on the bond of a bank cashier, it was held not a defense that the surety had been induced to sign the bond by alleged false and fraudulent representations, made by the president of the bank before the bond was signed, relative to the personal character and ability of the cashier, the court saying that nothing appeared to indicate that the president had reason to believe otherwise, but that, if the contrary were true, this fact would not be controlling, since the president was but a fellow officer of the bank, and was not authorized to speak for it, or to bind it by any statements made by him, except as the statute and by-laws of the bank invested him with the necessary authority, and that under the statute and by-laws the president had nothing to do with the cashier's bond, but the duty and authority in respect thereto rested wholly with the board of directors.

Fraud has been the usual ground on which it has been sought to hold a bank liable for erroneous credit information furnished by its officer or employee, but no distinctions on the present subject have apparently been made between fraud and negligence as a possible ground for recovery. See III. infra, as to bank's liability for fraud.

II. Authority to represent bank, in general.

It may be stated as a general rule that when, as a matter of custom or of courtesy, a bank officer or employee replies to an inquiry for credit information regarding a customer or other third party, he is not acting within the scope of his ordinary or implied duties, and, in the absence of express authority, does not represent the bank, so as to render it liable for erroneous information furnished to one who acts thereon to his injury.

United States.-First Nat. Bank v. Marshall & I. Bank (1897) 28 C. C. A. 42, 54 U. S. App. 570, 83 Fed. 725; Citi

zens' Trust & Sav. Bank v. Falligan (1925; C. C. A. 9th) 4 F. (2d) 481; Citizens' Trust & Sav. Bank v. Herr (1925; C. C. A. 9th) 4 F. (2d) 483. See also Hadden v. Dooley (1899) 34 C. C. A. 338, 63 U. S. App. 173, 92 Fed. 274, affirmed on rehearing in (1899) 35 C. C. A. 554, 93 Fed. 728, and reversed on other grounds in (1901) 179 U. S. 646, 45 L. ed. 357, 21 Sup. Ct. Rep. 259; Earle v. Munce (1904; C. C.) 133 Fed. 1008.

Georgia. Haymans v. Bennett (1922) 29 Ga. App. 265, 114 S. E. 923. Kentucky.-People's State Bank v. Hill (1925) 210 Ky. 222, 275 S. W. 694. Missouri. Sedgwick v. City Nat. Bank (1922) 295 Mo. 230, 243 S. W. 893; Crawford v. Boston Store Mercantile Co. (1896) 67 Mo. App. 39. New York. Taylor v. Commercial Bank (1903) 174 N. Y. 181, 62 L.R.A. 783, 95 Am. St. Rep. 564, 66 N. E. 726. North Carolina. PEOPLE'S NAT. BANK V. SOUTHERN STATES FINANCE Co. (reported herewith) ante, 519.

Washington. Simons v. Cissna (1909) 52 Wash. 115, 100 Pac. 200.

Wisconsin. De Swarte v. First Nat. Bank (1926) 188 Wis. 455, 206 N. W. 887.

England. Swift v. Jewsbury (1874) L. R. 9 Q. B. 301; Banbury v. Bank of Montreal [1918] A. C. 626; Hosegood v. Bull (1876) 36 L. T. N. S. 617.

In holding that the cashier of a national bank should not be regarded as acting for or as the agent of the bank in replying to a letter addressed to the cashier from another bank, in which information was sought with regard to the character and financial standing of a certain party, the cashier in his reply recommending such party as a person of good character and financial responsibility, the court in First Nat. Bank v. Marshall & I. Bank (1897) 28 C. C. A. 42, 54 U. S. App.

570, 83 Fed. 725, said: "It is not insisted that there was any express authority conferred upon Dunham, cashier, to make voluntary answers of this kind to other banks, or the customers of other banks, although the practice of doing so is very common in the nature of the case. It is well understood to be a mere favor or courtesy, such as one banking institution extends to another. It was no part of the duty of Dunham, as cashier, to furnish such an answer as he did; and, not being a duty belonging to his position, there was no implied authority from the bank to do so. To require that the bank shall make good statements of this kind would be to impose on banks extraordinary liability for the acts of their agents, such as belongs to the relation of principal and agent in regard to no other line of business. To hold the bank liable for a mere voluntary statement made by its cashier, without consideration, and having no relation to any business transaction with the bank, would be to subject the property of the bank to such risk as would tend to prevent the investment of capital in such an institution. We regard this question as now well settled by the adjudged cases." Fraudulent intent was not shown in this instance. Distinguishing this case, see Hindman v. First Nat. Bank (Fed.) under IV., infra.

And the rule is laid down in Citizens' Trust & Sav. Bank v. Falligan (1925; C. C. A. 9th) 4 F. (2d) 481, that, in the absence of evidence that he is authorized to do so, the cashier of a bank has no authority, by virtue of his position as such, to make any representation on behalf of the bank as to the standing or solvency of a third person. And it was held that a bank was not liable for fraud of its cashier, who, there was evidence tending to show, made misrepresentations concerning the standing of certain parties calculated to justify the belief that they were reputable and trustworthy persons, whereas he was a party actively participating in their swindling operations, there being, however, no evidence that the bank had knowledge of the cashier's dishonesty, or by

the exercise of care could have known thereof.

To the same effect is Citizens' Trust & Sav. Bank v. Herr (1925; C. C. A. 9th) 4 F. (2d) 483, in which it was held that the bank was not liable for a loss sustained by swindling operations in which the cashier of the bank was involved, on account of the recommendation of one of the wrongdoers by the cashier, if the bank did not have knowledge of the cashier's dishonesty, or might not by due care and diligence have ascertained the same.

And it is held in Horrigan v. First Nat. Bank (1877) 9 Baxt. (Tenn.) 137, that ordinarily it is no part of the business of the cashier of a national bank to give credit information, so as to render the bank liable for misstatements in this regard. The action was against the bank for deceit on the ground that the plaintiff had applied to the bank cashier for information as to the solvency of a certain firm, that the cashier had replied assuring the plaintiff that he was advised and informed as to the condition of the firm, that it was solvent and prosperous, and that the plaintiff's proposed purchases would be a prudent and safe investment, which statements it was alleged were false; and it was held that the bank could not be held liable, as the scope of the cashier's duties did not include the giving of information regarding the solvency of third parties, and in giving his opinion he did not represent the bank.

So, in Goodbar v. City Nat. Bank (1890) 78 Tex. 461, 14 S. W. 851, it was held that unless evidence was introduced tending to show that, by virtue of his official position or otherwise, it was the duty of the cashier of a national bank to make statements as to the financial standing of a third party, such statements of the cashier could not affect the bank.

It has been pointed out that if banks were to be held liable for the advice or even the unauthorized false statements of their cashiers or other agents concerning investments, a new and serious peril would be added to the banking business; that such a policy would tend to increase the number

of bank failures and losses to depositors and other customers, to the detriment of the general public. De Swarte v. First Nat. Bank (1926) 188 Wis. 455, 206 N. W. 887.

In Banbury v. Bank of Montreal [1918] A. C. (Eng.) 626, it was admitted that the manager of a Canadian bank had no general authority to advise customers on business investments, so as to make the bank responsible for negligence or breach of duty of its officer in giving such advice. And it was held that the special circumstances of the case were not such as to raise a question for the jury as to whether the manager of a branch bank had such authority as would render the bank liable. The action was not for fraud, but for negligence and breach of duty. And the special circumstances relied on, unsuccessfully, as justifying an inference that the branch manager was acting within the scope of his authority and in the course of his employment in recommending the customer to make a loan to a lumber company on the security of a second mortgage on certain of the company's property, were that the bank had at that time, to the knowledge of the branch manager, a large pecuniary interest in the company, the bank being a creditor and holding a first mortgage on its property, that the manager was at that time taking part in certain negotiations in relation to the company, and that in these negotiations he made the recommendation in question. These facts, showing the bank's interest in the company recommended, were regarded as tending to negative, rather than affirmatively show, any authority on the part of the bank's officers to make recommendations of investment in the concern,, as the bank's interest in obtaining financial assistance for the company placed it in a position where its interests were in conflict with its duty, if any, to give disinterested advice. It was said that it might be that the interest which the bank had in the company's financial stability made it part of its business to assist the company in obtaining a loan, but that this same interest made it improper for the