Page:Federal Reporter, 1st Series, Volume 3.djvu/836

 ŒBUSIEES MUT. BUILDING PUND, ETC., ». B08SBIUX. �frauds and losses resulting from gross negligence and inatten- tention to the duties of their trust. See, besides those wMcb , will be produced f urther on in this discussion, the cases cited in the second edition of Green's Brice's Ultra Vires, 478, 484, 485, in text and notes. �The laiW makea them trustees, and holds them responsible as such, from the necessity of the case. And as it boldstbem liable for frauds and embezzlements committed in person, so it is obliged to bold them liable for like delinquenees commit- ted by others, wben permitted by their negligence. It is true that in the latter case, where the breach of faith is only pas- sive and not positive, equity, which looks to the conscience, although holding them liable, will treat them with ail the leniency in its power by requiring those primarily bound to make restitution before calling upon them. �A most lucid and sound writer on the subject — see Q-old- emith's Equity, (6th Ed.) 274 — says : "The rule is that trus- tees will be held accountable to their cestuis que trust for any breach of trust arising from negligence, or gross misapplica- tion of the trust property; but where there bas been no mala Jides on the part of the trustee, the court will not deal severely with him upon slight grounds, and will, therefore, in such case, endeavor to discharge him from any mischief that may arise from a misapplication of the trust money." �It must be borne in mind that, in respect to frauds and misapplications of money committed in consequence of the negligence of directors, and frauds and misapplications com- mitted by directors themselves, the evil and loss are the same to the corporations whose affairs are entrusted to their man- agement. To these corporations it matters little where the moral guilt lies. The resuit is the same, whether that guilt attach to the directors themselves or to the officers to whom they gave a license which was abused. And hence the supreme court of appeals of Virginia very well said, in the case of Jones's Executors v. Clark, 25 Grattan, 655, that there "may be such gross negligence as may be equivalent to fraud ;" a proposition which is quoted approvingly by the United States supreme court in Neal v. Clark, 95 U. S. 707. And I ����