corporation is also to be imputed to one of the directors who was the president so as to affect him as an individual,97 the better rule seems to be that the knowledge of a corporation derived by virtue of the relationship between itself and an officer or agent thereof is not imputed to another officer or agent as an individual.98 § 2259. Want of notice to particular officer as sufficient to show want of notice to corporation. Looking at the question under consideration from another viewpoint, it is held that proof of want of knowledge of or notice to the officer or agent of the corporation to whom notice would regularly be given, is sufficient to show that the corporation had no notice, at least where there is no evidence that there was notice to or knowledge of other officers or agents. Thus, want of notice to the president of a bank of infirmity of a note purchased by it, he being the officer to whom such notice should and would probably be given because he was the officer authorized to represent the bank in the purchase of the note, has been held sufficient to show that the bank had no notice.99 § 2260. Question as one of law or of fact. Whether the corporate officer or agent was possessed of actual knowledge of facts is ordinarily one of fact for the jury. Whether the knowledge of, or notice to, an officer or agent of a corporation is to be imputed to the corporation is a question of law for the court.1 97 McCarty v. Kepreta, 24 N. D. 395, 48 L. R. A. (N. S.) 65, Ann. Cas. 1915 A 834, 139 N. W. 992, applying rule to purchase of note by president of bank from the bank, where cashier had knowledge of defects in the paper. In a note in 48 L. R. A. (N. S.) 65, it is stated that this case, so far as a sale of bank paper to its president is concerned, "may be regarded as the pioneer case upon that question." See also note in Ann. Cas. 1915 A 855. It is necessary to keep in mind that the question as to what a director is bound to know, from his office, in regard to the corporate property or business, in purchasing property from the corporation, is governed by entirely different principles, i. e., his duties as a fiduciary to keep him self informed as to the corporate business. 98 Washburn v. Inter-Mountain Min. Co., 56 Ore. 578, 586, Ann. Cas. 1912 C 357, 109 Pac. 382, explaining statement in Holly Mfg. Co. v. New Chester Water Co., 48 Fed. 879, 889, that actual knowledge of some of the directors was to be imputed to all the directors as meaning "all as constituting the corporation and is not authority for holding that, in an individual matter, a director is charged with notice because the corporation is presumed to have notice on account of notice to another director." 99 Citizens' Bank v. Stewart, 22 Cal. App. 91, 133 Pac. 337. 1 Mutual Inv. Co. v. Wildman, 182 Ill. App. 137. XXIV. OFFICERS CONSIDERED AS TRUSTEES OR FIDUCIARIES A. General Rules § 2261. Directors and other officers as trustees or agents-General rule. In order to determine the rights, duties and liabilities of corporate directors, the courts often predicate their holding upon the statement that the directors or other officers are agents or are trustees, or both. Sometimes directors or other officers are stated to be, or are considered as, agents.3 On the other hand, it is sometimes said that the directors, trustees and other officers of a corporation are trustees for the corporation, or for the stockholders collectively, and in a certain sense this is true. They are not "trustees," however, in 2 Whether directors are trustees or agents, see also articles by Charles Kerr in 47 Am. L. Rev. 561 and by W. P. Rogers in 47 Chicago Leg. News 382. 3 United States. Briggs v. Spaulding, 141 U. S. 132, 35 L. Ed. 662. Alabama. O'Conner Min. & Mfg. Co. v. Coosa Furnace Co., 95 Ala. 614, 36 Am. St. Rep. 251, 18 So. 290. Connecticut. New Haven Trust Co. v. Doherty, 75 Conn. 555, 96 Am. St. Rep. 239, 54 Atl. 209. Indiana. Wayne Pike Co. v. Hammons, 129 Ind. 368, 27 N. E. 487. Michigan. Ten Eyck v. Pontiac, O. & P. A. R. Co., 74 Mich. 226, 3 L. R. A. 378, 16 Am. St. Rep. 633, 41 N. W. 905. New York. Hun v. Cary, 82 N. Y. 65, 37 Am. Rep. 546. Oregon. Davis v. Hofer, 38 Ore. 150, 63 Pac. 56. 4 United States. Koehler v. Black River Falls Iron Co., 2 Black 715, 721, 17 L. Ed. 339; McCourt v, SingersBigger, 145 Fed. 103, 7 Ann. Cas. 287. Alabama. Montgomery Light Co. v. Lahey, 121 Ala. 131, 25 So. 1006. Arizona. Steinfield v. Nielsen, 15 Ariz. 424, 139 Pac. 879. See also Zeckendorf v. Steinfield, 12 Ariz. 245, 100 Pac. 784. California. Poor v. Yarnell, 28 Cal. App. 714, 153 Pac. 976. Georgia. Oliver v. Oliver, 118 Ga. 362, 45 S. E. 232. Idaho. Riley v. Callahan Min. Co., 28 Idaho 525, 155 Pac. 665. Illinois. Voorhees v. Mason, 245 Ill. 256, 91 N. E. 1056, rev'g on other grounds 148 Ill. App. 647; Ellis v. Ward, 137 Ill. 509, 25 N. E. 530; Kelly v. Fahrney, 145 Ill. App. 80, aff'd 242 Ill. 240, 89 N. E. 984. Iowa. Dawson v. National Life Ins. Co. of America, 176 Iowa 362, L. R. A. 1916 E 878, 157 N. W. 929; Hinkley v. Sac Oil & Pipe Line Co., 132 Iowa 396, 119 Am. St. Rep. 564, 107 N. W. 629. Kansas. Stewart v. Harris, 69 Kan. 498, 504, 66 L. R. A. 261, 105 Am. St. Rep. 178, 2 Ann. Cas. 873, 77 Pac. 277. Michigan. Pikes Peak Co. v. Pfuntner, 158 Mich. 412, 123 N. W. 19, 16 Det. L. N. 689. Minnesota. Shearer v. Barnes, 118 Minn. 179, 136 N. W. 861. Nebraska. Jacquith v. Mason, 99 Neb. 509, 156 N. W. 1041; Nebraska Power Co. v. Koenig, 93 Neb. 68, 139 N. W. 839; Barber v. Martin, 67 Neb. 445, 93 N. W. 722. New Hampshire. Pearson v. Concord R. Corporation, 62 N. H. 537, 13 Am. St. Rep. 590. New Jersey. Williams v. McKay, 40 N. J. Eq. 189, 53 Am. Rep. 775. IV Priv. Corp.-10 the strict sense of the term.5 Directors, said Justice Lurton when a member of the Supreme Court of Tennessee, "are not express trustees. The language of Special Judge Ingersoll in Shea v. Mabry, 1 Lea, 319, that 'directors are trustees,' etc., is rhetorically sound, but technically inexact. It is a statement often found in opinions, but is true only to a limited extent. They are mandataries. They are agents. They are trustees in the sense that every agent is a trus New York. Bosworth v. Allen, 168 N. Y. 157, 55 L. R. A. 751, 85 Am. St. Rep. 667, 61 N. E. 163; Bloom v. National United Ben. Savings & Loan Co., 152 N. Y. 114, 46 N. E. 166; In re Watertown Gaslight Co., 127 App. Div. 462, 111 N. Y. Supp. 486; Continental Securities Co. v. Belmont, 83 Misc. 340, 144 N. Y. Supp. 801; Robinson v. Smith, 3 Paige 222, 24 Am. Dec. 212, where it was said: "The directors are the trustees or managing partners, and the stockholders are the cestui que trusts, and have a joint interest in all the property and effects of the corporation.” Ohio. Larwill v. Burke, 19 Ohio Cir. Ct. 449, 513, 10 Ohio Cir. Dec. 605. Pennsylvania. Bird Coal & Iron Co. v. Humes, 157 Pa. St. 278, 37 Am. St. Rep. 727, 27 Atl. 750. Tennessee. Shea v. Mabry, 1 Lea 319. West Virginia. Elliott v. Farmers' Bank of Philippi, 61 W. Va. 641, 57 S. E. 242. Wisconsin. North Hudson Mut. Building & Loan Ass'n v. Childs, 82 Wis. 460, 33 Am. St. Rep. 57, 52 N. W. 600. "There are doubtless many cases in which directors are spoken of as trustees, and in a general sense they are trustees; but they are to be more accurately described as agents without compensation." Winston v. Gordon, 115 Va. 899, 912, 80 S. E. 756. "A director's duties are trust duties, or, more accurately speaking, are so nearly of the nature of the duties of a trustee to his cestui que trust that a fiduciary relationship with its attendant responsibilities is appropriately said to exist between the director and the corporation." Stephany v. Marsden, 75 N. J. Eq. 90, 71 Atl. 598. "Directors of a corporation are 'trustees' and subject to the requirements and obligations of persons occupying that relation as defined in the Civ. Code, § 2230 et seq." Highland Park Inv. Co. v. List, 27 Cal. App. 761, 151 Pac. 162. In Wisconsin, the Supreme Court, on rehearing, reversed itself by holding that directors are not trustees of an "express" trust. Boyd v. Mutual Fire Ass'n of Eau Claire, 116 Wis. 155, 61 L. R. A. 918, 96 Am. St. Rep. 948, 94 N. W. 171, 90 N. W. 1086. A director acting as a member of an investment committee is just as much a trustee as when acting as a director. Toledo Sav. Bank v. Johnston, 94 Iowa 212, 217, 62 N. W. 748. 5 Colorado. Mackey v. Burns, 16 Colo. App. 6, 64 Pac. 485. Connecticut. Allen v. Curtis, 26 Conn. 456. Indiana. Board Com'rs of Tippecanoe County v. Reynolds, 44 Ind. 509, 15 Am. Rep. 245. Kansas. Ryan v. Leavenworth, A. & N. Ry. Co., 21 Kan. 365. New Jersey. Marr v. Marr, 72 N. J. Eq. 797, 66 Atl. 182. New York. Bosworth v. Allen, 168 N. Y. 157, 55 L. R. A. 751, 85 Am. St. Rep. 667, 61 N. E. 163. Wisconsin. Boyd v. Mutual Fire tee for his principal, and bound to exercise diligence and good faith. They do not hold the legal title, and more often than otherwise are not the officers of the corporation having possession of the corporate property. They are equally interested with those they represent. They more nearly represent the managing partners in a business firm than a technical trustee. At most, they are implied trustees, in whose favor the statutes of limitation do run.” 6 Still other decisions refer to directors as agents "and" trustees. In other cases, instead of being considered either trustees or agents, they have been regarded merely as mandatories, i. e., persons who have gratuitiously undertaken to perform certain duties. An officer receiving no compensation is sometimes considered as a mere gratuitous bailee, so far as liability for loss of funds in his hands are concerned.8 But whether or not directors and other corporate officers are strictly trustees, there can be no doubt that their character is that of a fiduciary so far as the corporation and the stockholders as a body Ass'n of Eau Claire, 116 Wis. 155, 61 England. Ferguson v. Wilson, 2 Ch. 55 In In re Spering's Appeal, 71 Pa. St. 11, 10 Am. Rep. 684, it was said by Judge Sharswood: "It is by no means a well-settled point what is the precise relation which directors sustain to stockholders. They are, undoubtedly, said in many authorities to be trustees, but that, as I apprehend, is only in a general sense, as undoubtedly a relation of trust and confidence." King v. Livingston Mfg. Co., 192 Ala. 269, 68 So. 897. 6 Wallace v. Lincoln Sav. Bank, 89 Tenn. 630, 24 Am. St. Rep. 625, 15 S. W. 448. 7 In re Spering's Appeal, 71 Pa. St. 11, 20, 10 Am. Rep. 684. 8 Hibernia Bldg. Ass'n v. McGrath, 154 Pa. St. 296, 35 Am. St. Rep. 828, 26 Atl. 377. are concerned. In other words, it is unquestionably true that, as agents intrusted with the management of the corporation, for the benefit of the stockholders collectively, they occupy a fiduciary relation, and in this sense the relation is one of trust.10 It has been stated that the relation of directors to the stockholders is essentially that of trustee and cestui que trust; 11 but what is meant by this statement is merely that such is the relation to the stockholders collectively which is only another way of stating that they are trustees for the corporation. Sometimes, managing officers are expressly called trustees instead of directors by the statute or incorporation papers, which, however, of course, does not affect their relation to the corporation. § 2262. Difference between directors and agents. Directors differ from agents of a mere individual in that the powers of directors are, in an important sense, original and undelegated in that the stockholders do not confer and cannot revoke the powers, and that they are derivative only in the sense of being received from the state in the act of incorporation, while in the strict relation of principal and agent all the authority of the latter is derived by delegation from the former.12 So directors, in so far as they receive no salary, differ from agents who receive compensation. § 2263. Statutes governing trustees in general as applicable. In some of the Western states, especially in those states where the law relating to trusts has been codified, as in California and other states 9 Colorado. Morgan v. King, 27 Colo. 539, 63 Pac. 416. Florida. Jacksonville Cigar Co. v. Dozier, 43 So. 523. Illinois. Cratty v. Peoria Law Library Ass'n, 219 Ill. 516, 76 N. E. 707, rev'g 120 Ill. App. 596. Montana. Coombs v. Barker, 31 Mont. 526, 79 Pac. 1. New York. Hoyle v. Plattsburgh & M. R. Co., 54 N. Y. 314, 13 Am. Rep. 595; Hinds v. Fishkill & M. Equitable Gas Co., 96 App. Div. 14, 88 N. Y. Supp. 954. When it is said that a director occupies a fiduciary relation, this refers principally to his duties rather than his powers. 10 Koehler v. Black River Falls Iron Co., 2 Black (U. S.) 715, 17 L. Ed. 339; Pearson v. Concord R. Corporation, 62 N. H. 537, 13 Am. St. Rep. 590; Duncomb v. New York, H. & N. R. Co., 84 N. Y. 190; Hoyle v. Plattsburgh & M. R. Co., 54 N. Y. 314, 13 Am. Rep. 595; Imperial Mercantile Credit Ass'n v. Coleman, L. R. 6 H. L. 189. 11 People v. Powell, 201 N. Y. 194, 94 N. E. 634, aff 'g 140 N. Y. App. Div. 912, 125 N. Y. Supp. 1139. 12 Hoyt v. Thompson's Ex'r, 19 N. Y. 207, writ of error dismissed 1 Black (U. S.) 518, 17 L. Ed. 65, and see §§ 1961-1963, supra. |