Pitney, when on the New Jersey bench, "the insufficiency of the assets of the bank to pay its debts gives the creditors a direct interest in its affairs, and they become the cestuis que trustent of the receiver, entitled to enforce all the rights of the corporation, and to collect its assets of every nature, included in which is the right to claim damages for the negligence of its directors." 81 In Mississippi, it is held that "the relation of the depositors to the bank, growing out of their placing their money with that institution for safe-keeping, and to be at their convenience drawn out for their use, is such that the directors, as the officers charged with the management of the bank, are required to be diligent and careful in conducting the bank's business, and are liable to the depositors for losses sustained by the bank from negligence in performing the duties of their office." 82 In New York, in one case, the Court of Appeals said that "those who deal with a bank have the right to expect reasonable diligence and good faith at the hands of its directors. If the latter fail in either, they violate a duty which they owe to both stockholders and depositors."' 83 In North Carolina, it seems to be well settled that a single creditor may sue at law to recover damages resulting from negligence of the directors or other officers.84 In Texas, in one App. Div. 80, 50 N. Y. Supp. 318. Virginia. Marshall v. Farmers' & West Virginia. Elliott v. Farmers' Bank of Philippi, 61 W. Va. 641, 57 S. E. 242. 82 Ellis v. H. P. Gates Mercantile Co., 103 Miss. 560, 43 L. R. A. (N. S.) 982, Ann. Cas. 1915 B 526, 60 So. 649. In this case the suit was in equity by some of the depositors and stockholders on behalf of all depositors and stockholders, after the receiver had refused to sue. 83 Cassidy v. Uhlmann, 170 N. Y. 505, 517, 63 N. E. 554, which, however, was decided on the ground of constructive fraud in receiving deposits when insolvent. 84 Anthony v. Jeffress, 172 N. C. 378, 90 S. E. 414. See also Caldwell v. Bates, 118 N. C. 323, 24 'S. E. 481; Solomon v. Bates, 118 N. C. 311, 54 Am. St. Rep. 725, 24 S. E. 478; Tate v. Bates, 118 N. C. 287, 54 Am. St. Rep. 719, 24 S. E. 482. The negligence of directors cannot be imputed to one selling goods to the company merely because he was a cepartner in business with one of the directors; but the bad faith or negli case, although the decision was based on liability of officers for false representations, statements are made in accordance with the majority rule.85 Some of the courts hold that creditors may sue on the ground that there is a trust relation between the officers and creditors, or a quasi trust relation; but there certainly is no "trust relation," in the proper sense of the term.86 The proper view is that the officers become liable to the corporation for the loss sustained by it, and that this liability upon the part of the officers is a part of its assets, which may be enforced in equity, as other equitable assets may be collected, for the purpose of satisfying the claims of creditors. In some cases, where a suit in equity has been brought by a creditor for himself and on behalf of other creditors, liability of directors for negligence has been held to exist without any consideration of whether such liability can be enforced by creditors rather than the corporation.8 § 2577.Theory that creditors may sue in equity on behalf of corporation. Even in those jurisdictions where the right of a creditor of a corporation to recover damages or his debt from officers of the company who have been guilty of nonfeasance or negligence, is denied, it is sometimes admitted that, independently of statute, a creditor may sue in such a case as the representative of all the creditors and of the corporation, to recover damages sustained by the company because of the nonfeasance or negligence, provided, if the corporation is in the hands of a receiver or assignee, the right to sue gence of plaintiff's partner throws on plaintiff the burden of showing that he acted in good faith. Anthony v. Jeffress, 172 N. C. 378, 90 S. E. 414. 85The relation of trustee and cestui que trust exists between them [directors] and the stockholders and creditors." Seale v. Baker, 70 Tex. 283, 291, 8 Am. St. Rep. 592, 7 S. W. 742. 86 The cases holding that there is no liability for mere nonfeasance, or for negligence as some of the courts put it, are mostly based upon the theory that directors are merely agents of the corporation, owing no duty to the public, and hence not liable to creditors for any omission or negli gence, however gross. As to banks, the Illinois Court answered this by saying that "we can not concede that directors of banks are no more than mere servants and agents. They are this it is true, but they are more. They are trustees for the bank, the stockholders and the depositors, and to each they owe duties, for a violation of which, the law will hold them liable." Delano v. Case, 17 Ill. App. 531, 536, aff'd 121 Ill. 247, 2 Am. St. Rep. 81, 12 N. E. 676. in the place of such representative is admitted. This distinction was commented on at length in a Wisconsin case by Justice Marshall, and while stating that "a creditor may maintain an action to enforce such liabilities in the right of the corporation or of the person in whom such right is vested, if the necessities of the case so require," he refuted the idea that officers are trustees for the creditors so as to be liable directly to a creditor for their nonfeasance or negligence.88 In Missouri, it has been said that "doubtless in a proper case the creditors might bring a suit in equity to subject to the payment of their demand claims of the corporation against directors for nonfeasance. But such a suit would be like any other suit to reach other older assets of the bank. Such a suit would be really prosecuted in the right of the bank. In this sense the receiver represents the creditors, as well as the bank and stockholders." 89 In Mississippi, a suit in equity by some of the depositors and stockholders, on behalf of all, to recover for the negligence of the bank officers alleged to have resulted in the bank becoming insolvent, was held to lie; but it would seem from the language of the decision that the court recognized the right of a single depositor to sue at law in case of negligence.90 § 2578. Rule as applied to depositors in bank. Depositors in a bank are creditors of the bank, but the courts are more inclined to assist them to recover for negligence of the bank officers, it would seem, than in case of creditors of other corporations, although generally the same rules applicable to creditors of corporations in general are applied to depositors in a bank. However, depositors in savings banks, as distinguished from ordinary banks, are held to be in 88 Killen v. Barnes, 106 Wis. 546, 82 N. W. 536. On the theory that the creditor was suing for the benefit of all other creditors, as a substitute for the corporation, directors were held liable in Gores v. Field, 109 Wis. 408, 85 N. W. 411, 84 N. W. 867, and in Gores v. Day, 99 Wis. 276, 74 N. W. 787. In the former case the court said: "It is not an action to recover property of the plaintiff, but an action to enforce rights of the banking corporation against its officers, and allowed to be brought by the plaintiff simply because the proper officers of the corporation either actually or virtually refuse to bring it. The recovery, if any, becomes part of the assets of the corporation, and goes to the assignee. Gores v. Field, 109 Wis. 408, 415, 85 N. W. 411, 84 N. W. 867. 89 Stone v. Rottman, 183 Mo. 552, 82 S. W. 76. 90 Ellis v. H. P. Gates Mercantile Co., 103 Miss. 560, 43 L. R. A. (N. S.) 982, Ann. Cas. 1915 B 526, 60 So. 649. the position of stockholders rather than creditors, so as not to be within a rule forbidding actions by creditors for nonfeasance.91 In case of banks in general, it is often held that directors are trustees for depositors, 92 and are liable to depositors for mismanagement.93 Thus, it is held in Illinois that directors thereof "are trustees for depositors as well as for stockholders," and that "they are bound to the observance of ordinary care and diligence, and are hence liable for injuries resulting from their nonobservance." 94 So it is held in Virginia that they "are not trustees for the stockholders alone, but they owe an even earlier duty to the depositors. The law is, as it ought to be, very zealous in exacting the strict and thorough performance of these duties, and it is in the scrutiny . of possible breaches of them that the rigid rules which govern trustees have been applied." 95 In New York, directors or trustees of banks are held to occupy a relation to depositors "similar to that of trustee and cestui que trust" so as make the former 91 Chester v. Halliard, 36 N. J. Eq. 313; Stockton v. Mechanics' and Laborers' Sav. Bank, 32 N. J. Eq. 163, as explained in Landis v. Sea Isle City Hotel Co., 53 N. J. Eq. 654, 33 Atl. 964. See also Fisher v. Andrews, 37 Hun (N. Y.) 176, 180. In any event, so far as savings banks are concerned, it seems that directors or trustees thereof are liable for mere nonfeasance. Greenfield Sav. Bank v. Abercrombie, 211 Mass. 252, 39 L. R. A. (N. S.) 173, Ann. Cas. 1913 B 420, 97 N. E. 897. 92 Hun v. Cary, 82 N. Y. 65, 37 Am. Rep. 546; Marshall v. Farmers' & Mechanics' Sav. Bank of Alexander, 85 Va. 676, 2 L. R. A. 534, 17 Am. St. Rep. 84, 8 S. E. 586. "The directors of a bank are not trustees for the stockholders alone, but they owe an even earlier duty to the depositors." Marshall v. Farmers' & Mechanics' Sav. Bank of Alexander, 85 Va. 676, 2 L. R. A. 534, 17 Am. St. Rep. 84, 8 S. E. 586, followed in Camden v. Virginia Safe Deposit & Trust Corporation, 115 Va. 20, 78 S. E. 596. 93 United States. Foster v. Bank of Abingdon, 88 Fed. 604, 607. Illinois. Delano v. Case, 121 Ill. 247, 2 Am. St. Rep. 81, 12 N. E. 676. Kentucky. Caldwell v. Ryan, 173 Ky. 233, 190 S. W. 1078. Mississippi. Ellis v. H. P. Gates Mercantile Co., 103 Miss. 560, 43 L. R. A. (N. S.) 982, Ann. Cas. 1915 B 526, 60 So. 649. Virginia. Marshall v. Farmers' & Mechanics' Sav. Bank of Alexander, 85 Va. 676, 2 L. R. A. 534, 17 Am. St. Rep. 84, 8 S. E. 586. 94 Delano v. Case, 121 Ill. 247, 2 Am. St. Rep. 81, 12 N. E. 676, aff'g 17 Ill. App. 531. In this case, according to appellant's brief, it was contended that there was no liability for mere nonfeasance, but inasmuch as the negligence involved was holding out the bank as solvent when in fact it was insolvent it would seem that there was misfeasance. 95 Marshall v. Farmers' & Mechanies' Sav. Bank of Alexander, 85 Va. 676, 2 L. R. A. 534, 17 Am. St. Rep. 84, 8 S. E. 586, followed in Camden v. Virginia Safe Deposit & Trust Corporation, 115 Va. 20, 78 S. E. 596. liable to the latter, it would seem, for their negligence.96 In Kentucky, it is held that a depositor of bonds as a special deposit in a bank may sue the directors for negligence in regard thereto.97 But in Nebraska, on the theory of nonliability for nonfeasance, it was held that officers of a bank were not liable to a depositor for refusal to pay back money on deposit.98 § 2579. Misappropriation, conversion and diversion of corporate assets-General rule. Whether a creditor may sue directors or other officers for misappropriation or diversion of corporate property is not altogether clear. Some of the decisions apparently warrant such a recovery,99 and it would seem to be true beyond argument 96 See Hun v. Cary, 82 N. Y. 65, 37 Am. Rep. 546, in which case, however, the action was by a receiver and it was held that he could maintain any action the bank could have maintained. 97 United Society v. Underwood, 9 Bush (Ky.) 609, 15 Am. Rep. 731. But in this case the injury was directly to the depositor rather than to the bank. 98 For failure to perform a duty which his corporation owes to a third person, it is held that an officer or agent of a corporation cannot be held personally liable; the rule is otherwise where the wrong on the part of the officer or agent is affirmative in its character. The corporation may be liable but the officer is liable also. Penney v. Bryant, 70 Neb. 127, 96 N. W. 1033. 99 Connecticut. Lewisohn v. Stoddard, 78 Conn. 575, 63 Atl. 621. Maine. In re Brockway Mfg. Co., 89 Me. 121, 56 Am. St. Rep. 401, 35 Atl. 1012. Maryland. See Carrington v. Thomas C. Basshor Co., 118 Md. 419, 84 Atl. 746. Texas. National Bank of Jefferson v. Texas Inv. Co., 74 Tex. 421, 12 S. W. 101. Thus, where directors apply corporate funds to the discharge of their own debts or wrongfully pay out moneys as salaries to other officers, creditors may recover from them the amount of the funds thus misapplied. Ellis v. Ward, 137 Ill. 509, 25 N. E. 530. This applies to misappropriations of money deposited for safe-keeping with a corporation not engaged in a banking business. Vujacich v. Southern Commercial Co., 21 Cal. App. 439, 132 Pac. 80. Misconduct of officers may be such a palpable breach of duty as to render them personally liable to creditors for amounts which the officers permitted to be diverted. Bank of St. Marys v. St. John, 25 Ala. 566. Thus, a cashier may be held liable for misappropriation of the assets of the bank. United Securities Co. v. Ostenberg, 60 Colo. 249, 152 Pac. 1163. An individual creditor may sue in equity to hold corporate officers liable for diversion of corporate assets. Shea v. Mabry, 1 Lea (Tenn.) 319, 344, holding officers who had misappropriated corporate funds individually liable to the suing creditor for the amount of his debt where less than the sum converted, without re |