
    
      Nov. 2d.
    
      The President &c. of Dedham Bank versus Jabez Chickering et al.
    
    The provision in St. 1816, c. 91, that no bank shall issue any bill &c. payable at any other place than the bank, &c., for any sum not .exceeding 100 dollars, is not unconstitutional as applied to banks incorporated before the passing of the statute.
    Where such bills, which were not proved to have been issued after the statute, had been paid at ,a bank in another State and been transmitted to the cashier of the .bank here, who, instead of depositing them in the bank, put them again into circulation for his own use, it was held to be a breach of the bond given for the faithful performance of his duties, for which his surety was liable.
    And even if it had appeared that they were issued after the statute, it seems that the surety would still have .been answerable.
    But where, by the consent of the directors, new bills were engraved and signed after the statute, though dated before, which were not intended to make part of the ostensible funds of the bank, and were not entered on their books, an.d were never noticed in the semiannual returns to the governor and council, but were to b.e kept privately by the cashier and issued surreptitiously, in direct violation of the statute, it was held, that as between the bank and the surety, this illegal conduct of die directors wa? binding on the bank ; that the traffic in such bills was not within the duty of the cashier ; and that his surety was not responsible for his embezzlement of the bills.
    
      Held, also, that the surety was not responsible for money collected by the cashier as an attorney at law, and not accounted for to the bank.
    Where the cashier, having pledged his shares in the capital stock of the bank, as security for the payment of his notes to the bank, afterwards, by means of blank certificates of shares signed by the president and deposited with the cashier, surreptitiously conveyed the shares to a third person, jt was held that this misconduct was not covered by the bond.
    
      Held, also, that tile bank had a right to apply towards the payment of such notes, a balance standing on their books in favor of the cashier, instead of applying it in reduction of damages for the breach of his bond.
    Debt on a bond executed by Chickering as principal, and one Dean (since deceased) and Jeremiah S. Boies as sureties, for 20,000 dollars, dated the 15th of April, 1814, conditioned that Chickering <£ shall well and faithfully execute and perform all the duties of cashier of said Dedham bank, to which office he has been duly appointed, without fraud, covin, concealment, neglect or delay, so long as he shall continue in said office, and when a successor shall be duly appointed, shall deliver up to him, on request by the proper authority, all books, papers and moneys, and every article and thing belonging to said bank under his care.” The penalty of the bond having been previously adjudged to be for-felted (see 3 Pick. 335) and an auditor having been appointed, the parties were now heard in chancery upon the auditor’s report.
    By that report it appeared, that the first item of damages claimed by the plaintiffs, was the sum of 12,746 dollars, said to have been received by Chickering for account of the plaintiffs, but which he converted to his own use.
    In regard to this charge, John A. Coffin deposed, that on the last Wednesday of May 1823, he was sent by Chicker ing to Connecticut, to bring a package of bank bills, either from the bank at Middletown or the bank at Hartford. He found the package at the bank at Hartford, and he there received it and brought it to Boston, where he delivered it to Chickering on the following Saturday. He understood that the package contained bank bills, and he judged from its size that the bills amounted to about 30,000 dollars. Chickering, when engaging him to undertake this business, told him that it was confidential, and that nothing must be said about it. The deponent further testified, that between the year 1819 and the latter part of 1823, Chickering frequently brought his trunk, containing bank bills, from his house to his office, (occupied by him as an attorney and counsellor at law,) which bills the deponent helped him to count. The greater part were bills of the Dedham bank, payable in Middletown. The trunk contained sometimes 14,000 dollars, sometimes 5000 or 6000, and sometimes less. Chickering always took the trunk from his office at night, and the deponent sometimes saw him carry it to his house. He has seen Chickering pay the amount of small notes in bills of the Dedham bank payable at Middletown, but he did not know whether those notes were discounted by the bank, or by Cbickering himself. He has also seen him exchange such bills for other bills in his office. During the last six months of Chickering’s residence in Dedham, he was very seldom at the bank.
    Ebenezer Fisher junior testified, that he had been a clerk in the Dedham bank from the time when it was established, until the absconding of Chickering in November 1823 ; after which he was appointed cashier. He was appointed clerk by the directors, and gave bond with sureties in the penalty oí 10,000 dollars. In the spring of 1823, Chickering told him that he had ordered the cashier of the Middletown bank to forward, as soon as he had opportunity, such bills of the Dedham bank payable at Middletown as he had redeemed. The witness, on the 27th of June, asked Chickering whether he had received those bills, and Chickering replied that he had, and that he ought to have brought them in ; adding, that he would bring them into the bank. Soon after the hank was opened on that day, Chickering brought in some bills and put them in a trunk, and then directed the witness to credit the Middletown bank with the sum of 27,746 dollars, saying, “here are 15,000 of it,” and adding, that he would count and do up the others and bring them into the bank. The witness accordingly credited 27,746 dollars to the Middletown bank, and put into the money drawer a memorandum that Chickering had 12,746 dollars. On the 25th of July following, the witness observed to Chickering, that he had not brought in that sum, and that he had better give some memo - randum of it. Chickering thereupon wrote a check and put it into the drawer, or delivered it to the witness. The check was as follows: — “July 25, 1823. Pay to Middletown bills or bearer 12,746 dollars ; ” signed by Chickering. The witness then charged Chickering with that sum, as cash. Before that time the books of the hank represented that there was on hand 12,746 dollars more than there was in fact; the memorandum made by the witness, that Chickering had that sum, being considered as representing so much cash in the drawer.
    The witness produced a copy of the whole account of Chickering with the bank, as it stands in their books. All the entries relating to this transaction were made by the witness, and the whole was conducted in the usual manner, without any injunction of secrecy. The books were always open to the inspection of the directors, some of whom were frequently in the bank. The books were also regularly examined by a committee of the directors twice in every year, previously to the returns made in January and June to the governor and council. The directors did not know of the above-mentioned check, nor of the other circumstances relating to the 12,746 dollars, until Chickering’s departure. The witness also supposed that they did not know of the charge of that sum to Chickering, until that time, because he never heard them speak of it, and they expressed surprise when after-wards informed of it. Being then interrogated as to divers other large sums charged to Chickering from time to time, particularly in June and July 1818, he said he did not remember the directors ever noticing any of those entries ; nor did he remember any vote of theirs authorizing such pay ments to Chickering on his checks, nor of their ever objecting to such payments, or saying any thing about them ; and he did not know that they were acquainted with the facts, although they were always apparent on the books. The witness said he should himself have spoken to the directors on this subject, if he had had any suspicion that there was any thing fraudulent in the doings of Chickering.
    Other parts of the testimony of this witness having a bearing on this first item of charge, will be stated with the evi dence on the next item.
    The second item was the sum of 16,833 dollars, stated to be the difference between all the bills, moneys and effects intrusted by the plaintiffs to Chickering as cashier, and the bills, moneys and effects accounted for by him.
    On the subject of this charge Fisher testified, that in 1816 the Dedham bank began to issue certain bills, drafts or checks, signed by the president and cashier, addressed to the cashier of the Middletown bank, and payable to bearer; and that they made provision from time to time, by previous deposits and otherwise, to redeem those drafts when paid by the Middletown bank, and afterwards re-issued the same drafts, using them as they did their common bank bills. In 1818, Chickering, who was one of the directors, proposed to the board to procure a new impression of blank drafts of this kind, to replace such of the first emission as should be worn out or defaced. This was agreed to, and a number of such drafts were accordingly ordered, to be made from the old plate by the engravers in Philadelphia. They were made and sent to the bank, and the witness supposed they were signed by the president and cashier, but he did not see either of those officers sign them. They bore date of a time anterior to the passing of St. 1816, c. 91. From the letter and bill of the engravers, the -witness inferred that they amounted to 19,305 dollars. Those drafts were deposited in an iron chest or trunk, which was kept in the vault of the bank, and of which dickering kept the key. The witness never saw those drafts in the trunk, but Chickering was accustomed to go down to the vault, for the purpose of taking out some oi those drafts, as the witness understood, and on coming up, with parcels of bills in his hands, he would order the witness to credit him with such a sum, being, as the witness supposed, the amount that'he had so taken. The witness used to enter the amount accordingly as cash received of Chickering. He always supposed that Chickering, before every semiannual return to the governor and council, restored to the trunk a sum in bills of the Dedham bank equal to what he had so withdrawn. Chickering always went into the vault on such occasions professedly for that purpose. The reason for keeping that amount in the trunk was, that those bills of the new emission were not entered, on the plaintiffs’ books as bills executed, nor did they appear in the semiannual returns of the bank, nor in any way enter into the accounts or transactions of the bank as stated in their books. So long as a sum equal to the original deposit in the trunk was kept in it, the books would represent truly the amount in circulation ; and the only effect of the operation, if conducted as the witness supposed it was, would be to substitute old and defaced bills in the place of the new ones taken from the trunk. This practice was continued by Chickering from 1818 till 1823. The witness always supposed that it was known to the directors, that Chickering thus took out of the trunk and put in circulation those bills of the new emission, but that they understood that he, at the same time, in every instance, replaced the sum so taken out, by an equal amount in old and defaced bills. The witness himself knew that Chickering did not always replace the amount at the time of withdrawing the new bills, but he supposed it was replaced as before stated, at least twice in year, and that in the mean time Chickering was employing the money in negotiations for the benefit of the bank. The directors often spoke of those bills of the new emission, and said to Chickering, that they ought to be entered on the books, in the manner in which other bills were entered when duly signed ; but Chickering always objected to it, saying that if so entered, a committee of the general court, if one should be appointed, would, on inspecting the books, discover that such bills had been made and issued after the passing of St. 1816, c. 91. The directors never ordered the bills to be so entered on the books, and they never were. The witness formerly supposed, and still believed, that it was intended to be kept secret, that any such bills were made and issued after the statute of 1816, and that this was the reason why they were not entered on the books of the bank.
    After the departure of Chickering, he wrote a letter to the defendant Boies, in which he says that Gay, the president of the bank, had taken of him, Chickering, in his office, thousands of dollars of those new bills, and rumpled them to make them appear old, and passed them at Brighton for cattle. The witness was reading this letter to Gay, who appeared hurt and indignant at this assertion ; and the witness proceed ing to read, that Chickering did not mean to charge Gay with having taken any such bills without leaving a full equivalent in other bills or his own notes, Gay then said that he had taken such bills of Chickering at his office, and might have rumpled them as above stated.
    Some time after Chickering’s departure, the witness found the iron trunk in the vault, and the key near it. The trunk contained only two bills, of ten and five dollars, which probably from accident had not been signed by Gay.
    The witness further testified, that Chickering conducted almost all the business of the bank, that was transacted out of the bank, and that he was very active in it until about a year before his departure. He then became engaged in a manufactory, and attended much less to the business of the bank, not being there one hour a day on the average. This must have been known to the directors or some of them. For five or six years Chickering’s principal transactions for the bank consisted of the negotiations in Boston, conducted as follows. He went to Boston once or twice a week, taking with him bills of the Dedham bank to any amount that he chose. These bills were not then charged to him, but a memorandum was made by the witness, that he had taken such a sum, and this memorandum was put into the money drawer. Upon his return in the evening, he used to state to the witness how he had disposed of the money, and entries were then made accordingly in the books ; and the memorandum in the drawer was cancelled. The purpose for which he took the money to Boston was, to provide for the redemption of the Dedham bank bills in Middletown, by purchasing drafts on Connecticut, or bank bills that would be received there, and these he used to send directly from Boston, without first carrying them to Dedham. Another purpose was, to take up any Dedham bank bills that might have been collected at the banks in Boston, or by the brokers ; and also to deposit funds in the Boston banks to meet such bills. Chickering also sometimes discounted notes in Boston, or met there persons whose notes the directors had agreed to discount, and paid them the money for their notes. He also sometimes exchanged Dedham bills for others, in order to get the former into circulation. From the year 1816, as the witness thought, till the time of Chickering’s departure, a great proportion of the bills of the Dedham bank in circulation were those made payable in Middletown, and they were con stantly received at the bank and re-issued indiscriminately with others ; and this was with the knowledge of the directors. A large part of the profits of the bank arose out of their negotiations in those bills.
    It often happened, when Chickering was taking bills to Boston as before mentioned, that he took some of them out of the iron trunk in the vault; in which case they were first credited to him as above stated, and then included, with such others as he took from the money drawer, in the memorandum made on such occasions by the witness.
    The 19,290 dollars of the new emission, payable in Middletown, were never included in any return made by the bank to the governor and council, until that of January 1824. They were then first entered in the books of the banx as having been intrusted to Chickering, and supposed to have been unlawfully put in circulation by him.
    Chickering was not accustomed to pay into the bank large sums at once, on account of his own personal transactions; unless occasionally, when the bank discounted a note for him, the amount of which would be passed to his credit. The witness therefore thought that the directors, if they had seen those entries of large sums to Chickering’s credit, might have been led to infer from whence the money came, or at least to make inquiries about it; but they never did make such inquiries ; and the witness never spoke of it to them, because he believed it was all right, and supposed that the directors understood it. The mode of examining the books by the committee, as preparatory to the semiannual returns, was to look at the foot of each account in the book, but not to go over the particular entries.
    Chickering sometimes borrowed specie on his own credit, and deposited it in the bank just before the semiannual returns, in order to make the returns appear better, and withdrew the money a few days afterwards.
    Just before the passing of St. 1816, c. 91, which was on the 13th of December, 1816, and when it was foreseen that such an act would probably be passed, Chickering proposed to the president that they should sign as many as they could of those bills payable in Middletown, and have them entered on the books before such an act should be passed. There were accordingly entered on the books in December, and before the 13th day, bills of that description to the amount of 26,000 dollars. A large number of these bills were not issued, and not cut and trimmed until after the passing of the law.
    At fee semiannual examinations the directors used to ascertain the amount of pills on hand, by taking the amount as made up in parcels and labelled by the witness, and selecting different parcels promiscuously, which they counted, until they were satisfied that they were all correctly stated. They were formerly accustomed, on the same occasions, to come to a settlement with the cashier ; but the witness bad not seen any such settlement on the books, of a later date than January 7th, 1830.
    Chickering was clerk of the directors, and kept a book in which he recorded their votes until June 1816 ; but none oi a later date. After June 1816, there are votes occasionally entered at the bottom of the page of the book of applications for discounts, which was laid before the directors at their meetings. Chickering also kept regular records of the proceedings of the proprietors, until the annual meeting in 1822 inclusive.
    The books do not show how many directors were present at any meeting. Sometimes the cashier, or any other single director, would make loans. The witness, since his appointment as cashier, has made loans, by virtue of a vote of the directors authorizing him to do so, to the amount of 3000 dollars. He did not know of any such vote authorizing Chickering to make loans. The loans so made by Chickering were all entered in the discount book of the bank ; which book was many times read to the directors at their meetings, but the witness could not say that it was usually read. Chickering often discounted to the amount of more than 3000 dollars in a week. There was no change in the board of directors from 1818 to 1823, both inclusive.
    In all the semiannual returns before that of 1824, the bills payable at Middletown were omitted, unless they were in circulation, that is, out of the Dedham bank. All that were in circulation were included in the item of “ bills and notes in circulation;” to which was generally added, “including checks and drafts on the Middletown bank,” or words to that effect.
    The plaintiffs also produced James Richardson as a witness ; who testified that he had been a director of the Dedham bank for many years, until the 2d of October, 1826. As to the second item, he testified that the amount of the new impression of bills payable at Middletown, according to Mr Fairman’s bill, was 19,305 dollars ; and this was the amount signed according to Chickering’s statements. The witness was frequently of the committee on the semiannual examinations, on which occasions the iron trunk was always examined with more or less strictness, and was always represented by Chickering as containing 19,305 dollars. There were occasional changes of the kind of bills in that trunk; and once Chickering told the witness that he had occasion to take out of it some of the new bills ; and the witness supposed he had replaced them with old bills, according to the original design. The witness never but once actually counted all the bills in the trunk ; but he supposed the same amount was always there. Chickering had the custody of the trunk, and none of the directors had, to the knowledge of the witness, any thing to do with it. The committees, though they did not count all the bills, always counted different parcels, until they were satisfied that the 19,305 dollars were in the trunk. In those semiannual examinations the course was to examine the leger, and not the day book.
    The witness had a perfect confidence in the integrity oí Chickering and of the clerk, Fisher; he did not know precisely how they conducted the business of the bills payable at Middletown, or of Chickering’s negotiations at Boston. He knew that such business was done in Boston, and had no doubt that it was done properly. Chickering’s salary was at first 500 dollars ; was afterwards raised to 800 ; and the last year or two reduced to 500 ; Chickering then giving less attention to the business of the bank. Fisher did the principal business of the bank within doors. This was known to the directors, who had no objection to it. The witness did not know of any vote or other proceeding of the directors for giving to Chickering any authority, beyond what he possessed as cashier and one of the directors.
    Being cross-examined, the witness said that he did not know that he ever examined the book of records of the proceedings of the directors, and that he did not know that they were deficient until after the departure of Chickering. There were votes occasionally passed by the directors, and Chickering often entered them on the discount book ; but the witness could nou say that they were all so entered.
    The witness believed that the greater part of the new impression of bills payable at Middletown were put in circulation before Chickering’s departure ; but he always supposed that they were replaced by old bills. He has seen Chickering rumpling some of those new bills to make them look old, or has heard Chickering say that he did so. He never put any of those bills in circulation, and did not know that any of the directors ever did.
    The witness knew nothing concerning the sum of 12,746 dollars, the first item of charge, until after Chickering’s de parture, when he first heard of it from Fisher
    The third item of charge was the sum of 500 dollars, said to have been collected by Chickering on a note of one Butterfield, belonging to the bank ; which sum Chickering never paid to the bank nor applied to their use.
    As to this, it appeared that the note, which was dated in August 1822, and was payable in three months, not being paid when it fell due, Chickering took it to his office to collect, and wrote to Butterfield and to one Cox, who was a surety on the note, to demand payment. They saw Chickering together, when Butterfield gave him a draft on E. Hale for 500 dollars. Chickering thereupon told Cox, that he considered the note as paid. The draft was paid at the New England Bank in Boston, and on the 17th of October was credited to the plaintiffs. Fisher asked Chickering to what account he should place that sum of 500 dollars, and Chicker ing told him to put it to his credit for the present. It was accordingly entered to Chickering’s credit on the 17th of October, and so remained until his departure. The note of Butter-field also remained entered on the books of the bank in the account of “ debts due.” After Chickering’s departure, on the statements of Cox and Fisher, the note was given up to Cox on his paying 21 dollars for the interest due upon it. In Chickering’s docket was an entry of a writ as sued out on this note.
    The fourth item was the sum of 214 dollars and 50 cents, collected by Chickering to the use of the bank, on a note oj one Coste ; which sum he never paid or applied to their use
    The fifth item was the sum of 4,145 dollars and 43 cents, being the balance due on divers notes' given by Chickering to the bank, for which he had given security by the pledge oi shares in the capital stock of the bank, which shares he had afterwards withdrawn and sold.
    
      On this point Fisher testified, that Chickering held seventy-seven shares in the capital stock. He gave to the bank three notes for the sums respectively of 1,800, 6,000, and 3,500 dollars, and pledged his seventy-seven shares for the payment of those notes. Between June 1819, and June 1830, he sold and transferred forty-seven of those shares to different persons. There were always blank certificates of shares, signed by the president, and left in the bank to be used when necessary, after being countersigned by the cashier. Chickering used some of these blanks in the transfers above mentioned. Since his departure the bank has recovered judgment against him for the balance due on those three notes, amounting to 4,145 dollars and 43 cents. On being cross-examined, the witness testified that the forty-seven shares were sold at from one to eight per cent, above par, as he believed ; and that at or about the time of each sale, a sum equal to the par value of the shares sold was paid by Chickering and indorsed on the notes. The witness did not know of any attempt at secrecy in those transfers. It appeared on the dividend and other books, that the number of the shares in question was from time to time reduced ; but the witness did not remember that the subject was ever mentioned among the directors. In making the dividends, the directors do not order a specific sum to be paid to each individual, but pass a general order for the payment of a certain rate to all the stockholders.
    The defendant Boies produced as a witness, Benjamin Huntington, a broker in Boston, who testified that he used to deal with Chickering in collecting and exchanging bills for him, until his departure. Their dealings were to the amount of from 500 to 1000 dollars a week; and Chickering used to leave deposits in the witness’s hands to the amount of from . 500 to 1500 dollars. Chickering had dealings with all, or nearly all the brokers in Boston, and kept deposits in their hands. He did much of his business that was done in Boston, in the witness’s office. When he brought his trunk, he would leave it there, and go round to the other brokers’ offices to settle with them He used often to meet persons in the witness’s office and discount notes for them, and when the Dedham bank had money to lend, he used to employ it to a considerable amount in discounting notes in the witness’s office. The witness himself often sold notes to Chickering, who paid for them sometimes in Boston bills, and sometimes in Dedham bills payable in Middletown.
    Nov. 1st.
    
    The St. 1816, c. 91, enacts, that no bank incorporated in this commonwealth shall issue any bill, note, check or draft, payable at any other place than the bank, unless the same shall also on the face of it be payable at the bank, and that every such bank, which has issued or shall issue any such bill, &c., shall be liable to pay the same at the bank, without a previous demand elsewhere ; and that if the bank shall refuse to pay the same on demand, it shall be liable to pay the holder after the rate of two per cent, a month as additional damages ; but these provisions are not to extend to checks or drafts for any sum exceeding 100 dollars.
    
      L. Shaw, for the plaintiffs,
    anticipating the objection of
    illegality in respect to the bills payable at the Middletown bank, contended that the statute above cited had no application to the bills composing the first item of 12,746 dollars. It does not appear that any of them were issued after the passing of the statute, and there is no prohibition against making and keeping such bills. They had been taken up by the Middletown bank, and nothing remained to be done with them, except to bring them back to the bank in Dedham, to be kept or destroyed as the plaintiffs should see fit. They were the property of the bank and were intrusted to Chickering, and by his bond he was obliged to deliver them over to his successor. He cannot be considered as merely a debtor to the bank, in consequence of his fraudulently drawing a check for this sum and being charged with it by the clerk; he had no power in that way to make a contract between himself and the bank; the directors were the only persons authorized to make loans.
    To the next charge, of 16,833 dollars, the supposed illegal acts of the plaintiffs furnish no answer.
    The statute of 1816, .inasmuch as it impairs the rights o the plaintiffs, in the exercise of their franchise, is unconstitutional and void. It allows the issuing of such bills for sums over 100 dollars, which shows there is nothing contrary to banking principles in the course pursued by the plaintiffs, and before the passing of the statute they certainly had a right to issue such bills for smaller sums. This was a valuable franchise, and whether it is viewed with reference to the constitution of the United States or to the nature of a grant, it could not be revoked. If the legislature may take away part by part, they may destroy the whole franchise; but what they cannot do directly, they cannot indirectly.
    Supposing the prohibition to be void, there is then an end to the question of illegality. But it is quite immaterial, whether the statute is or is not unconstitutional. The rule, that the law will not aid in carrying into effect an illegal contract, or one founded on an illegal consideration, is not controverted by the plaintiffs ; but where the obligation is entirely collateral to the illegal act, it does not apply. If the plaintiffs had requested Chickering to issue these bills, and they now sued him for a breach of his bond in refusing to do so, it would be an answer, to say that the act was prohibited. But the bank had a right to keep these bills in their drawer, and it was contrary to the duty of the cashier to put them in circulation. Suppose that the plaintiffs, thinking the statute to be unconstitutional, should order an emission of these bills; and the cashier should embezzle them; their right to call on him for the bills certainly would not be answered by saying that the plaintiffs intended to use them illegally. So of a note discounted by the bank for usurious interest. This action does not seek the performance of a prohibited act, nor damages for its non-performance ; but it is brought for a violation of duties collateral to, and independent of the prohibited act; it is brought on an express obligation to keep safely the property of the bank. These bills were valuable funds ; the plaintiffs have been compelled to pay them; and the statute of 1816, so far from making them void, gives them an efficacy beyond that of the contract on the face of the bill. 11 Wheat. 258; 1 Holt’s N. P. R. 107, note; Gallini v. Laborie, 5 T. R. 242; Ex parte Bulmer, 13 Ves. 313; Wheeler v. Russell, 17 Mass. R. 258.
    The directors are statute officers and bound by by-laws. Supposing them to have ordered an emission of prohibited bills, it was an unauthorized act, and not binding on the corporation. It is true that in regard to the public, the corporation may be bound by the illegal act of the directors ; but here the question is between the corporation and its officers.
    But in fact, here was_ no authority given by the directors. Such an authority can be proved by a vote only, and none is offered in evidence. If it is said that it lies on us to produce the votes, the answer is, that either there was a vote which Chickering did not record, and so was guilty of a breach of duty, or there was no vote ; and in either case it is not for the defendants to insist on our producing one. It was not known to the directors that more bills were in circulation than appeared from their books; for they always supposed, that when any bills were taken from the iron trunk, they were replaced by old bills. Putting in circulation the bills constituting the second item, was therefore never sanctioned by the directors, but-was a gross violation of duty in the cashier.
    The item of 500 dollars paid on Hale’s draft, will be said to have been received by Chickering as an attorney at law. The answer is, first, that it was paid to the bank once, and then without authority withdrawn by him as cashier ; and further, that as he acted in a double capacity, so soon as he received the money as an attorney, he was accountable for it as cashier ; he cannot say the attorney has not paid it over to the cashier : as where a person, being administrator and guardian, receives in the first capacity money belonging to the ward, the law supposes him to have transferred it immediately to the proper account.' These last remarks apply to the fourth item.
    The plaintiffs contend that they are entitled to recover the fifth item, not that they suppose the surety to be liable for Chickering’s debts to the bank, but because Chickering made a fraudulent use of the blank certificates intrusted to him as cashier. If however this charge is not allowed, they claim at least to have the sum of 947 dollars and 23 cents, the balance in favor of Chickering in his private account with the Sank, applied in reduction of the debt due from him upon his notes.
    
      W. Prescott, B. R. Nichols, and Loving, for the surety.
    The plaintiffs are not entitled to recover any damages, 1. because they are calling upon the surety for the default of Chickering in a contract which was illegal; 2. because the course of proceedirgs at the bank, and the duties imposed upon the cashier, have been essentially changed since the bond was given.
    It is objected, however, that the statute of 1816 is uncon stitutional, as interfering with the franchise of the bank. There seems to be no mote ground for this objection, than for saying that any statute respecting bills of exchange is unconstitutional. This law is made for the good of the community, to regulate the public currency. It is not confined to this bank alone, but applies to all the banks in the commonwealth. It does not impair the plaintiffs’ franchise, for by their charter they were to discount on “ banking principles which implies that their bills should be payable at their own counter. Had their charter granted them power expressly to make bills of this description, we admit the statute of 1816 would be repugnant and void. Portland Bank v. Apthorp, 12 Mass. R. 252; Brown v. Penobscot Bank, 8 Mass. R. 445.
    The first two items stand on the same footing. In each case the bills were intrusted to Chickering, not merely for safe keeping, but in order to be put into circulation. They were to constitute part of the circulating medium of the bank. It is true, no express vote of the directors to this effect is produced, and they would not desire to have such a vote put upon record ; but it was according to the usual course of proceedings of the bank. In letting Chickering have the bills for the purpose above stated, the directors made an illegal contract. He has performed it in part, by putting the bills in circulation, and has broken it in part, by neglecting to account; and the law will not lend its aid in giving the plaintiffs a remedy. The case of Ex parte Bulmer has been referred to, as showing that money lent for an illegal purpose, but not so applied, may be recovered back; but here the illegal purpose was executed. 11 Wheat. 258; Cannan v. Brice, 3 Barn. & Ald. 179; Selw. N. P. 57; Belding v. Pitkin, 2 Caines's R. 147, note; Farmer v. Russell, 1 Bos. & Pul. 296; Aubert v. Maze, 2 Bos. & Pul. 371; Fales et al. v. Mayberry, 2 Gallison, 560.
    The 12,746 dollars were charged to Chickering as a common debt, and so are not covered by the bond. If the charging of that sum, in the manner stated by the clerk, had been the only transaction of the kind, it might not be binding on the plaintiffs; but it was a common practice, for several years, to charge him in the same way with very large sums, as the directors might and ought to have known; and if they did not in fact know of and assent to this transaction, the surety is discharged by their loches.
    It is objected that the stockholders are not bound by the illegal acts of the directors. From the notoriety of the course of proceeding of this bank, and of the fact, that a large part of their profits, which much exceeded those of other country banks, was derived from that source, it must be presumed that the stockholders knew and recognised the acts of the directors. But independently of this, the stockholders a e bound, for the directors were acting within the general scope of their duties. Suppose they should discount a note, taking interest at the rate of ten per cent. ; usury would be a valid defence in an action by the stockholders. Whether an illegal contract made by the directors could be enforced against the stockholders, is a very different question. Springfield Bank v. Merrick, 14 Mass. R. 322; Foster v. Essex Bank, 17 Mass. R. 498; Gray v. Portland Bank, 3 Mass R. 364.
    It is said that the directors can act by vote only. Their semiannual returns to the legislature show that a large amount of these bills were in circulation ; and can they say they did not vote to have them issued ?
    The surety signed the bond on the supposition, that the bank was to continue as it was at the time of giving the bond. By the alteration in the course of their proceedings, the risk of the surety was materially increased; new and unusual duties were imposed on the cashier, and his integrity was exposed to stronger temptations; and the loss has happened in consequence. The surety expected that the plaintiffs would proceed according to common banking principles; that their books would be kept with regularity and correctness, so that he might ascertain whether he could with safety continue surety for the cashier’s future conduct; that the cashier would be in the bank, at regular hours, like other cashiers, transacting there, and not at his office, or at a broker’s office in Boston, the business of the bank, and not making discounts at his pleasure, to any amount; and that every thing would be done openly and legally, and not secretly and in evasion of the laws. Under such a state of things, the surety would not have consented to become bound. A new agency in fact was created, increasing the bondsman’s risk, and thereby absolving him from his obligation. Boston Hat Manufactory v. Messinger, 2 Pick. 223; Fell on Guar. (Amer. ed.) 116, 124, 125, cites 2 Caines’s Cas. 1, and 1 Str. 227; Straton v. Rastall, 2 T. R. 370; Wright v. Russell, 3 Wils. 530.
    At any rate, the directors, in not more frequently making a settlement with Chickering and in suffering him to circulate the funds of the bank in a manner so irregular, were guilty of gross loches, which will discharge a surety. The People v. Jansen, 7 Johns. R. 332; King v. Baldwin, 2 Johns. Ch. R. 562; The People v. Berner, 13 Johns. R. 383; Commonwealth v. Wolbert, 6 Binney, 292; 3 Stark. Ev. 1390, (Metcalf’s note.) The case of The People v. Jansen is overruled by 9 Wheat. 737, only in the point that loches is imputable to the government.
    As to the sums which Chickering collected as an attorney, and also the last item of charge, they are debts due to the bank, for which he alone is responsible.
    
      Webster, in reply. This action is not instituted to enforce an illegal contract, but to compel the defendants to perform the condition of their bond, which is a legal contract in every respect. The declaration counts on the stipulation that Chickering shall deliver up to his successor all moneys and every article and thing belonging to the bank, intrusted to his care. The question then is, whether so delivering any particular thing in his hands would be illegal; if it would not, the surety is held.
    "We are not prepared to acquiesce in the effects supposed to flow from the statute of 1816. It is said that unless there be an express grant of a privilege to issue any particular kind of bills, the legislature have the power to take away the right to issue such bills. If they have that power, the plaintiffs have no franchise ; for it is only by implication that they are authorized to issue any bills.
    
      The defendants contend that the bills must be issued on banking principles. Were these so issued ? If they were not, they are not binding on the bank. For instance, the directors could not bind the bank by a contract to make a canal. But there can be no question of the bank being answerable on these bills. They are bills of exchange, and nothing is more common than for banks to deal in bills of exchange. Drawing these bills on the Middletown bank was then on banking principles. If it was not, how are we to reconcile with' those principles the drawing of such bills for large sums ? which is not prohibited by the statute. It follows, that before the statute, it was legitimate banking to draw these bills ; and the legislature might as well restrain any right expressly granted in the charter, as the right in question The cases of Portland Bank v. Apthorp and Brown v. Penobscot Bank are not parallel to the one at bar. To tax a bank does not interfere with the franchise. Their property is like that of citizens generally, and is subject in common with theirs to public burdens. So, adding penal interest of two per cent, a month, when a bank bill is not paid on demand, is not impairing a contract. It is only giving a new remedy to enforce its fulfilment.
    Admitting the statute of 1816 to be valid, and that the directors issued the bills constituting the first item and intended to issue them again, yet when they were honestly in Chicicering’s possession for safe keeping, being redeemed, could he purloin them and apply them to his own use, and yet be free from responsibility to the owners ? Was it illegal for him to keep them safely ? The case is equally strong in regard to the bills composing the second item. Admitting mat they had been used illegally by the directors and were to be again, it furnishes no defence for Chickering’s purloining them ; which is entirely collateral to the illegal act of the directors.
    
      March term 1827, in Suffolk
    
    The surety contends that he is absolved from his responsibility by a change in the duties of the cashier. He must show that the loss was occasioned by the change. What constitutes a material change which will discharge a bondsman ? It is said that the cashier’s duties were increased. Suppose the legislature to allow the capital stock of a bank to be increased; will the extension of their business discharge the cashier’s bondsman ? Suppose the statute of 1816 to be repealed, would the repeal discharge the bonds of the cashiers of all the banks in the State, which should draw bills payable at the Middletown bank ? Clearly not. The by-laws of this bank provide that the duties of the cashier shall be prescribed by the directors. Whatever they by usage have prescribed, may be considered as his duties. But we deny that the loss was occasioned by any change in Chickering’s employment. We complain of no unfaithful negotiations at Boston or elsewhere, nor of any errors of account; we complain of Chickering’s purloining property intrusted to his care ; which had no connexion with a change in his duties, but was owing entirely to his want of integrity.
    It is said too that the directors have been guilty of loches. We deny the fact. But admit it to be true, it does not release the sureties. The doctrine in the case of The People v. Jansen is, that the government is in a worse situation in respect to loches than an individual. In United States v. Kirkpatrick, 9 Wheat. 737, that case is discussed, and the point that a neglect of duty on the part of agents of government, in examining the accounts of a principal, will discharge a surety, is denied. That however is immaterial, for this bank is an individual, and in The People v. Jansen, the court say that in the case of an individual, mere negligence on his part will not discharge a surety.
   Parker C. J.

delivered the opinion of the Court. A forfeiture of the penalty of the bond having been established by a verdict of the jury, which verdict has been sustained by the Court after argument upon the questions of law presented by the report of the case, a hearing in chancery has been sought for and had, in order to ascertain the damages sustained by the plaintiffs by reason of the breach of the condition ; and judgment is now to be entered up for such sum as shall be found due in equity and good conscience, according to the spirit and intent of the contract, as is required by St. 1785, c. 22.

In such suits the judgment of forfeiture of the penalty is little more than formal, and the plaintiff, to entitle himself to any thing more than nominal damages, must show and prove to -the Court the amount and value of the injury he has sustained by a breach of the contract.

The condition of this bond is, that Jabez Chickering, who had been appointed cashier of the Dedham bank, should faithfully discharge the duties of that office, without fraud, covin, concealment, neglect or delay, so long as he should continue in that office ; and should, when a successor should be duly appointed, deliver up to him, on request by the proper authority, all books, papers, and moneys, and every article and thing belonging to said bank, under his care.

It is obvious that both branches of this condition equally respect the duties of Chickering as cashier of the bank; so that it is necessary for the plaintiffs to prove some unfaithful or negligent conduct in that office, whereby the damages sought to be recovered accrued, or some refusal to deliver up books, papers, money, or some other article or thing, committed to his care as cashier of the bank.

In order to entitle themselves to judgment within this rule, the plaintiffs have specified divers charges against Chickering as cashier, and have endeavoured to prove them by the evidence which is reported by the auditor, before whom a minute and accurate examination of evidence and investigation of facts took place.

The facts contained in that report have been the basis of the inquiry before us, and we proceed to declare our opin on of the effect of those facts upon the several claims of the plaintiffs, as contained in their specification.

The first relates to the sum of 12,746 dollars, the balance of divers bills issued by the Dedham bank, made payable at the Middletown bank, in Connecticut, which were transmitted by the cashier of the Middletown bank to Chickering, by his order, and were duly received by him in May or June 1823. The fact of the transmission of these bills and the delivery of them to Chickering, was proved to the auditor by the testimony of Coffin, who was sent to Connecticut by Chickering for the special purpose of receiving and delivering them. And by the testimony of Fisher, then clerk and since cashier of the Dedham bank, it was proved, that the whole amount of bills thus transmitted was 27,746 dollars, for which sum, by the direction of Chickering, the Middletown bank was credited in the books of the Dedham bank, but only 15,000 thereof were ever delivered into the bank by him, the residue, being the sum claimed in this specification, having been kept back, and never accounted for with the Dedham bank, except by the check of Chickering delivered to Fisher as a memorandum, which was deposited in a drawer in the bank ; upon which Chickering was charged with that amount by Fisher, in the books of the bank. Those bills not being found among Chickering’s effects when he absconded, and there being no evidence that they were ever delivered over to the bank, or cancelled or destroyed, the presumption is violent, that they have been converted by Chickering to his private use, and been put in circulation by him, so as to diminish to that amount the funds of the bank. This undoubtedly was a fraudulent act on the part of Chickering, and in direct violation of his duty as cashier ; for it was in that capacity that he received these bills, and he was officially, as well as morally, bound to deliver them into the bank, as part of the sum for which the Middletown bank had by his order been credited. For this sum therefore his sureties, as well as himself, are chargeable, unless for some of the reasons suggested in the argument, they are legally or equitably discharged.

And first, it is suggested that this delinquency grew out of an illicit transaction on the part of the directors and cashier of the Dedham bank, the issuing and circulating of bills of this description being expressly prohibited and made penal by St. 1816, c. 91. In order to sustain this objection, it ought to be made to appear, that the bills thus embezzled were issued after the passing of that statute, it not having been before unlawful for a bank to issue bills, drafts, or notes, payable at any other place than their own bank. It is true that six or, seven years had elapsed, between the passing of the statute and the return of these bills from Connecticut to Chickering ; but as bank paper is known frequently to circulate a long time in the country without finding its way to the place where it is payable, it is not for the Court, without any evidence, to say that these hills were not issued before the 13th of December, 1816, which is the day of the enactment of the statute.

But if this matter had been made clear by evidence, we do not think it would follow that the plaintiffs’ remedy upon the bond would be defeated. It was unlawful to issue such bills after the passing of the statute, but it was not unlawful to receive them back into the bank after they had been in circulation. It was the proper duty of the cashier so to receive them, and having received them, if he re-issued them without the knowledge of the directors, or in any way converted them to his own use, he committed a breach of official trust.' On these bills, however unlawfully issued, the bank was liable, and without doubt it has since been obliged to redeem them. We think this transaction wholly disconnected from the illegality of issuing the bills, and that such illegality affords no manner of excuse to Chickering for purloining them, or of defence to his sureties. Had the charge against Chickering been, that he had neglected his duty in issuing these bills, or that he had destroyed them because intended to be issued contrary to law, the illegality of the intention to issue might have been a defence. But he is charged with having received them, after they had been in circulation, and been collected in Middletown to be returned to the bank by which they were issued, and, instead of placing them in the vaults, from whence it cannot appear they would ever have been again issued, putting them in circulation himself, or otherwise converting them to his own use. There seems to be nothmg illegal in the transaction, so far as we can see into it, exc cpt in the conduct of Chickering.

In this view of the case, it seems to be unnecessary to go into a consideration of the authorities which have been cited on the question, whether the illegality of issuing the bills would prevent the plaintiffs from maintaining any action against Chickering, for any neglect of duty or any abuse of trust in relation to such transaction. If a person had forged any such bills, would he be acquitted because it was unlawful to issue them ? Or if they had been stolen on their way to Connecticut, would it have been a defence that they were issued contrary to law ? It should be recollected that such bills are not made void by the statute, but on the contrary, have a force given to them beyond the mere terms of the contract. They are made payable at the place from whence they issued, and a refusal to pay on demand entitles the holder to four times the usual amount of interest. It should seem clear, therefore, that when taken up at the bank of Middletown by the funds of the Dedham bank, they became the property of the latter, and that the act of embezzling them by the cashier and putting them in circulation, was an official misdemeanour, for which he is answerable on his bond.

But it is urged, that the directors had the means of knowing of this defalcation before the absconding of Chickering- and in season to have secured themselves without resorting to the sureties ; so that on the ground of loches on their part, the sureties ought to be discharged. We do not think the evidence on this point strong enough to warrant us in adopting that conclusion. The witness Fisher testified his belief, that they did not know of the existence of the check of Chickering. They might have seen this large charge to him in the books, but considering the usual confidence placed in the cashier of the bank, and the frequent occasions for large sums to be in the hands of Chickering, to manage the necessary negotiations for the bank in Boston, it is not surprising they were not led to suspicion of one jn whose integrity all who were concerned in the bank appear to have reposed the highest trust. We are satisfied, therefore, that the plaintiffs have well made out their right to recover the sum claimed in this specification. And this without any deduction of the balance standing to Chickering’s credit in the bank books, for they have a right to retain that against the balance due from him on notes discounted on his stock. That balance arose in the usual course of transactions in the bank, and they always had a right to look to it as a security, in case of non-payment of his notes or failure of other security.

As to the second item in the specification, of 16,833 dollars, the circumstances are different, and require particular consideration. This sum composed a part of an impression of bills struck off in Philadelphia from plates of the old bills, to be used as a substitute for such of the bills of the same denomination as should be returned to the bank injured or defaced. Though made and signed by the president and cashier more than two years after the passing of the statute which prohibited the issuing of such bills, they bore date before the passing of the statute, and were intended to be issued m direct violation of it. They were not to make part of the ostensible funds of the bank, by being entered on their books, but were kept by themselves, in an iron chest wholly under the control of Chickering. They were not to be, and never were, noticed in the returns of the bank to the governor and council, which by law are required to state under oath the whole property and condition of the bank, and this contrivance was adopted by the directors at the suggestion, of Chickering the cashier. The whole of this transaction was fraudulent and illegal. It was intended to evade the law by giving these new bills the appearance, as well as the date, of the old ones which they should replace, and they were dealt with, not openly as the property of the bank, but as a secret fund, by means of which a circulation might be continued of bills which could not be legally issued, because it would be always difficult, if not impossible, to detect the time of issuing them. In this transaction Chickering cannot be considered as acting within his duties as cashier, but as a broker or agent of the directors in an unlawful traffic, for which his sureties could not in any sense be liable.

If the directors imposed upon him this duty, so contrary to the fair management of the business o'f the bank, it is altogether beyond the contract of the sureties, which is only for the faithful performance of those trusts that properly and legally belong to the cashier of a bank. It is true that they are bound that he shall deliver over to his successor all books, papers, money, or other things committed to his care, belonging to the bank; but these bills cannot be considered as committed to him in his official character. They were not entered in the bank book, but were kept secretly by him. It may be doubted whether they were the property of the bank or corporation ; they were struck off with an unlawful purpose, and were never intended to make part of the funds of the bank. This is an affair between the directors and the stockholders. The directors have repeatedly sworn tó returns as containing all their bills in circulation and on hand, and these bills were omitted. It is impossible that sureties on the bond of a cashier, should be responsible for any embezzlement of bills coming into being in this unlawful way, kept apart from the funds of the bank, concealed from the public body to whom an exact account of every thing is required by law to be given, and surreptitiously put into circulation by the consent, if not the order, of the directors.

But it is asked, shall the innocent stockholders suffer for the mismanagement of the directors ? Certainly they must, for the directors are their agents, responsible to them for any breach of trust. They cannot, by requiring duties of a cashier not belonging to his office, throw a burden upon sureties wholly beyond the fair and legal meaning of the terms of their contract- If the directors should consent that the cashier should speculate with the funds of the bank in a way altogether inconsistent with the usual course of banking business, the sureties cannot be holden to make good any loss which may accrue from such irregular transactions. Were it otherwise, suretiship would be too hazardous for any to engage in. Cases need not be cited, to show that sureties cannot be holden beyond the fair scope of their engagement, as intended by the parties when undertaken. We think it very clear that this item of the specification must be rejected. Springfield Bank v. Merrick et al. 14 Mass. R. 322.

The third item respects the note of Butterfield, which was delivered to Chickering as an attorney to collect. It was collected by means of a draft on E. Hale, payable in October 1822, and which was paid when due, at the New Eng-lank bank, where the Dedham bank had credit for it. For this sum Chickering had credit given him by Fisher in the books of the Dedham bank. It seems to have been altogether the fault of the bank that they have lost this sum. Chickering became their debtor for this amount by their consent, and we can see no official misdemeanour in this act.

The other note, making the fourth item, appears to be entirely a transaction of Chickering as attorney of the bank, and not as cashier. The money was received by him on the note committed to him for collection, and he never received it as cashier.

As to the fifth item, there can be no pretence for charging this upon the surety, it being a balance of a debt due to the bank by Chickering, which he had secured as other stockholders did their debts. His transfer of the shares which he had pledged, was certainly not an officia act, but if done surreptitiously, was a mere personal fraud, wholly discon nected from his trust as cashier. The plaintiffs have rightfully treated this as a personal debt, by suing and recovering judgment against Chickering for it. We think however they have a right to avail themselves of the balance standing on the books in favor of Chickering, because in fact he was not their creditor to that amount, but largely their debtor.

The result of the whole is, that the plaintiffs must have "udgment for the sum of 12,746.dollars, with interest ihjreon from the date of the service of the writ. 
      
       Forging an instrument, which on the face of the indictment appears to be void if it were genuine, is not an indictable offence. People v. Shall, 9 Cowen, 778.
      So where the circulation of bank notes for the payment of a certain sum is prohibited by statute, it is held in New York not to be a felony to utter and publish a forged note for that sum, though the note is not wholly void, but might, if genuine, be collected in another State. People v. Wilson, 6 Johns. R. 320; 3 Chitty’s Crim. Law, (3d Amer. ed.) 1038, n. (A), (B).
     
      
       See Hunt v. Bridgham, 2 Pick. (2d ed.) 585, notes; Crane v. Newhall, 2 Pick. (2d ed.) 614, note.
     
      
       See Boston Hat Manufactory v. Messing, 2 Pick. (2d ed.), 235, a 2 Miller v. Stewart, 9 Wheat. 680; Revised Stat. c. 36, § 27.
     