1873; and 31 other halfy early coupons for $40 each, due from January 1, 1858, to January 1, 1873. A summons at the suit of Elijah W. Carpenter and Edwin F. Knowlton was issued on the 29th of March, 1873, and served by the marshal on the second day of April, 1873, upon the city clerk and the city treasurer, and upon Chris. Meyer, an alderman of the city who was elected mayor at the city election, April 1, 1873, but not yet inducted into the office. The court, on motion, declared that the summons was not lawfully served, and made an order authorizing the clerk to return the summons to the marshal to be served on the defendant ac cording to law or for such further action as the plaintiffs might direct.

Nothing more was done until the 9th of January, 1878, when the said Carpenter and Knowlton sued out an alias summons (so called), which was served by the marshal on the 23d of December, 1882, upon Rohr, the last mayor (but not then mayor); Bieber, city clerk; Gardner, city attorney; and Baxter the last (but not then) president or chairman of the board of street commissioners. As Carpenter had died on the first of September, 1881, no further proceedings were had on this last attempt at service; but on the 19th of June, 1883, an order was applied for and made by the court that the cause be revived in favor of Edwin F. Knowlton as executor of Carpenter and said Knowlton individually. Thereupon the new plaintiffs filed their complaint and issued 8 new summons, tested 29th March, 1873, which was served by the marshal on the 26th of June, 1883, upon the city clerk, the city attorney, and the last elected chairman of the board of street commissioners. On the 14th of July, 1883, the defendant's attorneys entered an appearance to the action, and subsequently filed an answer containing a general denial and a plea of the Statute of Limitations. The plaintiff's replied to this latter plea by amending their complaint, and setting up, as in the case of Amy v. Watertown, No. 2 [ante, 953], just decided, a conspiracy on the part of the officials and people of Watertown to prevent a service of process on the city, specifying the conduct of the mayor and aldermen in resigning their offices and meeting in secret for the transaction of business, etc. (See the report of the case referred to.) They added the following aver

ment:

"Said plaintiffs further allege that in the above entitled action said plaintiffs, on the 29th day of March 1873, filed a præcipe for a summons and an undertaking for costs, and a summons was issued in due conformity to law and placed in the hands of the United States Marshal for service, and that on April 2, 1873, the said marshal, after due and diligent search and inquiry, served the said summons on those persons whom, according to the best information he could derive, he had ascertained to be the mayor and city clerk of said City of Watertown, and on the same day returned the said summons as served according to law; that on April 22d, 1873, the said City of Watertown appeared specially in said action for the purpose of moving to set aside the service of said summons on the ground that the persons on whom the said summons had been served were not in fact, the mayor and city clerk of said

city; that on June 19, 1873, the said motion came on to be heard, and this court ordered that the service of said summons be set aside for the reason that the persons so served were not the mayor and city clerk of said city, and ordered that the said summons be returned to the marshal to be served according to law; that since said date the said marshal has not been able to ascertain who were the mayor and city clerk or mayor or city clerk of said city or the persons on whom process could be served.

"Said plaintiffs further allege that, notwithstanding they have exercised due diligence and hired attorneys and agents for the purpose of having process served on said city, they have been unable to this date to serve or have served the summons in this action on the mayor of said city, or on that person who, by law, should exercise the functions of mayor of said city.'

The defendant filed an answer and an amended answer to this amended complaint. The amended answer contains the following special rejoinder to the averment respecting the issuing and service of process in 1873:

"Fourth. And, further answering said amended complaint, this the said defendant alleges, that on or about the 29th day of March, 1873, the Elijah W. Carpenter and Edwin F. Knowlton named in said complaint filed with the clerk of this court a præcipe for a summons, wherein they were named as plaintiffs and this defendant was named defendant, and an undertaking for costs, and a summons, issued pursuant to said præcipe, was then placed in the hands of the United States Marshal for said district for service, and that on or about the 2d day of April, 1873, said marshal returned said summons to this court with the following return of service thereon indorsed, to wit: 'Served on the within-named The City of Watertown by delivering to August Tauck, city clerk, and Fred. Meyer, city treasurer of said city, and Chris. Meyer, an alderman from the first ward of said city and an acting member of the board of aldermen thereof, and mayor elect of said city at the city election held April 1, 1873, each a copy of the within summons this April 2, 1873, there being no other person acting as mayor of said city;' that on or about June 19, 1873, on motion of defendant, appearing specially for that purpose, the said pretended service of said summons was decided and held to be illegal and void by this court, on the ground that said summons had not been served in the manner prescribed by law, and the same was then ordered to be returned to said marshal to be served according to law; and that said summons was not served upon this defendant at any time within sixty days after it was so as aforesaid placed in the hands of the said marshal for service, nor within sixty days after the said pretended service thereof was so decided and held by said court to be illegal and void, and that the said summons was not and never has been at any time served upon said defendant, and no copy thereof has ever been delivered to or left with the mayor of said city, and that no action attempted to be commenced by the said summons or said pretended service thereof was at or before or since the time of the alleged decease of said Carpenter pending or existing in said court; that no other sum

tion, to the sheriff or other proper officer of the county in which plaintiff shall bring his action. But such an attempt must be followed by the first publication of the summons or the service thereof within sixty days. If the action be in a court not of record, the service thereof must be made with due diligence."

Now it is clear from what was said in the case of Amy v. Watertown, No. 1 [ante, 946], that there was never any legal service of process upon the defendant in this case. The summons was never served upon the mayor of the city, or upon any person having or exercising the powers of mayor, and there is no pretense that the directions of section 4240 were followed, or attempted to be. The action was really not commenced within the meaning of the statute until the attorneys of the defendant voluntarily entered a general appearance. This was done on the 14th of July, 1883. At that time more than ten years and a half had elapsed since the last coupon sued on became due.

We have no hesitation, therefore, in saying that the Court below committed no error in overruling the plaintiff's demurrer and giving judgment for the defendant. That judgment is affirmed.

Edwin F. Knowlton, Individually and as Executor, Plff. in Err., v. The City of Watertown (No 199).

charter.

deposit had been authorized by the terms of the 3. The execution of a receipt or certificate by the assistant cashier, for such a deposit, and its transmission by the bank to the depositor creates the relation of bailor and bailee between the latter and the bank, and makes it an act of gross negligence for the bank to deliver, or dispose of, or appropriate the securities, without the depositor's direct authority.

4. The statement in the receipt that the agent for the depositor had placed the securities with the bank on special deposit, is virtually a statement that the depositor, by such agent, had placed the securities with it on special deposit.

5. The appropriation by the bank of such securities so specially deposited, to the payment of a debt due to the bank by a firm in which the agent who made the deposit was a partner, at the request of such agent, but without authority of the depositor, was an unlawful appropriation. 6. Such bank had no right to deliver bonds thus specially deposited to the agent who deposited them, when it knew that he intended to deliver them to another bank as security for a loan to his firm, and also knew that such use of the bonds was an improper disposition of them, and such delivery for such use rendered the bank a party to the misappropriation of the bonds and liable to the depositor for their value. [Nos. 205, 682.]

Argued March 14, 15, 1889. Decided April 8,

1889.

City of Watertown (No. 200).

In errror to the Circuit Court of the United States for the Western District of Wisconsin. These cases are in all essential respects the same as that of No. 198, in which the opinion has just been announced, and the same judg ment of affirmance - is therefore rendered

therein.

[267] THE MANHATTAN BANK OF MEMPHIS, TENNESSEE, Appt.,

V.

ELIZA WALKER.

ELIZA WALKER, Appt.,

v.

THE MANHATTAN BANK OF MEMPHIS, TENNESSEE.

(See S. C. Reporter's ed. 267-280.)

See 8. C. below, 25 Fed. Rep. 247. The facts are stated in the opinion. Messrs. S. P. Walker, C. W. Metcalf and L. and E. Lehman, for Walker:

The defendant bank, as a corporation, assumed the obligations of a bailee, by receiving the complainant's securities on special deposit.

First Nat. Bank v. Graham, 100 U. S. 699 (25:750); Foster v. Essex Bank, 17 Mass. 479.

The execution of the certificate of deposit, and its transmission by mail to the complainant, created the relation of bailor and bailee between complainant and the bank, and the sole question is of the liability of the defendant bank, because of a misdelivery of the securities. The securities not having been lost by fire, theft or otherwise, but having been deliv ered to Judah, or to the Bank of Commerce on his order, the case must turn on the express or implied authority of Judah to withdraw them, or to direct the delivery to the Bank of Commerce, and not on a question of negligence.

Story, Bailm. § 106, 414; Colyar v. Taylor, 1 Coldw. 372; Stewart v. Frazier, 5 Ala. 114; James v. Greenwood, 20 La. Ann. 297; Honig v. Pac. Bank, 73 Cal. 464.

1. A suit, brought to charge the defendant, as a trustee, for a breach of trust in regard to a special deposit, is one of equitable cognizance.

2. If a bank be accustomed to take special deposits of bonds and stocks, and this is known and acquiesced in by the directors, and the property thus deposited is lost by the gross carelessness of the bank, a liability ensues in like manner as if the

Chattahoochee Nat. Bank v. Schley, 58 Ga,

369.

Upon the broadest powers of a trustee, in Judah, to sell the securities, reinvest the proceeds, etc., there would be no implied power to pledge them.

Loring v. Brodie, 134 Mass. 453.

And still less a power to pledge for an antecedent debt of, or for a present loan of money to Walker, Sons & Co. Judah being a partner in that firm, or its general business manager, the bank was bound, at its peril, to see that he had power to convert the securities to its use, and is liable for their value, in the absence of actual power to do that exact thing.

Duncan v. Jaudon, 82 U. S. 15 Wall. 165 (21:142); Smith v. Ayer, 101 U. S. 320 (25:955); Cent. Nat. Bank v. Conn. Mut. L. Ins. Co. 104 U. S. 54 (26: 693); Shaw v. Spencer, 100 Mass. 389.

The Goldsmith note was converted to the use of, and its proceeds are yet held by, the bank, making it liable to account therefor.

Schouler, Bailm. 62; Story, Bailm. § 102; Alexander v. Alderson, 7 Baxt. 403; Osborn v. Bank of U. 8. 22 U. S. 9 Wheat. 738 (6: 204). And it is liable for the $5,200 of bonds, because it not only actively aided and co-operated in an unlawful conversion of them by Judah, with full knowledge of his purposes, but itself received and yet retains a portion of the fruits of that conversion.

Parker v. Gilliam, 10 Yerg. 394. General power to sell, reinvest, etc., would not include a power to pledge.

Loring v. Brodie, 134 Mass. 453; Page v. Cooper, 16 Beav. 396; Perry, Trusts, § 768; Merchants' Nat. Bank v. State Nat. Bank, 77 U. S. 10 Wall. 604 (19:1008).

Judah, a member of the firm of Walker, Sons & Co., would not, on the broadest powers of a trustee, be entitled to lend the fund to himself or to the firm of which he was a member.

Shaw v. Spencer, 100 Mass. 389; Duncan v. Jaudon, 82 U. S. 15 Wall. 165 (21:142); Smith v. Ayer, 101 U. S. 320 (25:955).

Such

Mr. T. B. Turley, for the Bank: The bank is a bailee without reward. a bailee is liable only for gross negligence. Foster v. Essex Bank, 17 Mass. 479; Giblin v. McMullen, L. R. 2 Pr. C. 317; Chattahoochee Nat. Bank v. Schley, 58 Ga. 369; Ray v. Bank of Ky. 10 Bush, 344; Lloyd v. West Branch Bank, 15 Pa. 172; Leeds v. Trenton Bank, Stew. N. J. Law & Eq. Dig. 78: Scott v. Chester Valley Nat. Bank, 72 Pa. 471; First Nat. Bank v. Graham, 79 Pa. 116, 118; Tompkins ▾ Saltmarsh, 14 Serg. & R. 275; Lancaster County Nat. Bank v. Smith, 62 Pa. 47; Wiley V. First Nat. Bank, 47 Vt. 555; Smith v. First Nat. Bank, 99 Mass. 605; Story, Bailm. S 72; First Nat. Bank v. Ocean Nat. Bank, 60 N. Y. 294, 295; Haynie v. Waring, 29 Ala. 265; Lampley v. Scott, 24 Miss. 533; Schouler, Bailm. 2d ed. § 15, pp. 48, 49, 42-45, and notes as applicable to special deposits in bank.

Judah's agency was not only general, it was

universal.

Whart. Agency, § 116, p. 72; § 122, p. 75. The fact that Judah was also the agent of Walker Sons & Co. makes no difference. Jones v. Smith, 1 Fhill. Ch. (19 Eng. Ch.) 244.

The bank acted honestly, fairly, in good faith, and with ordinary circumspection.

Dunham, 2 Johns. Ch. 190; LeNeve v. LeNeve,
2 Lead. Cas. in Eq. fourth Am. ed. pt. 1, 167;
Woodworth v. Paige, 5 Ohio St. 76; Field v.
Schieffelin, 7 Johns. Ch. 150.

Mere notice that the trustee intends to commit a breach of trust is not sufficient to involve the party treating with the trustee in the consequence of the subsequent breach of trust. It requires something more; there must be some participation in the breach of trust.

Potter v. Gardner, 25 U. S. 12 Wheat, 503 (6:706); 1 Story, Eq. § 395; Duncan v. Jaudon, 82 U. S. 15 Wall. 165 (21: 142); Wormley v. Wormley, 21 U. S. 8 Wheat. 447 (5:651); Champlin v. Ilaight, 10 Paige, 275; Nicholls v. Peak, 12 N. J. Eq. 69.

Mr. Justice Blatchford delivered the opin. [268] ion of the court:

This is a suit originally brought in the Chancery Court of Shelby County, Tennessee, by Eliza Walker against the Manhattan Bank of Memphis, a Tennessee banking corporation. The suit was removed by the plaintiff into the Circuit Court of the United States for the Western District of Tennessee. The bill of complaint and the answer were both of them put in before, and the replication was filed after, the removal of the cause.

The bill prays for a decree for the return to the plaintiff of $3,000 of the second mortgage bonds of the Memphis and Charleston Railroad Company and $2,200 of the second mortgage bonds of the Mississippi Central Railroad Company, and a promissory note for $5,000, made by Edward Goldsmith, and of certain shares of the capital stock of the defendant, amounting to $6,000, attached to the said promissory note as security therefor. The bill alleges that the defendant, in the course of its business, and on the 27th of November, 1880, received on special deposit the above named bonds, promissory note, and shares of stock, belonging to the plaintiff, together with a certificate of the stock of the People's Insurance Company, for $1,100, and four promissory notes for $325 in the aggregate; that the said bonds had coupons attached thereto for the interest payable thereon at certain stated periods; that the defendant gave its obligation in writ ing, as evidence of the receipt on special deposit, from the plaintiff, of the said securities, and was bound to deliver them to the plaintiff on demand; and that the stock of the People's Insurance Company, and the $325 of notes, were returned to her, but the bonds and the coupons attached thereto, and the note of Goldsmith, and the bank stock, were never returned to her, although she made demand upon the defendant for them. The bill prays for a decree for the return of the property, and for the amount of the decline in its value from the time when she demanded it until the time when it shall be restored; and, if not restored, then for a personal decree against the defendant for the highest value of it at any time since she first made demand for it to the date of the decree, with interest.

[269]