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Cornell University Library 
 KF 999.869 
 
 The National bank act, and its iudicial 
 
 3 1924 018 877 609 
 
M Cornell University 
 B Library 
 
 The original of tiiis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924018877609 
 
B Y THE SAME A UTHOR. 
 
 Practical Banking. Fourth Edition. $3.00. 
 
 The Financial History of the United States 
 
 from 1774 to 1789. Second Edition. $2.50. 
 
 The Financial History of the United States 
 
 from 1789 to 1860. Second Edition. $3.50; 
 
 The Financial History of the United States 
 from 1860 to 1885. $3.50. 
 
THE 
 
 NATIONAL BANK ACT, 
 
 AND ITS 
 
 JUDICIAL MEANING, 
 
 WITH AN APPENDIX, 
 
 CONTAINING OFFICIAL INSTEUCTIONS AND ETJLES EELATING TO THE FOEMATION AND 
 
 MANAGEMENT QF NATIONAL BANKS, UNITED STATES BONDS, AND THE 
 
 ISSUE AND EEDEMPTION OF COINS AND CUEEENCY. 
 
 ALBEET S/ BOLLBS, 
 
 EDITOR OP "THE BANKER'S MAGAZINE;" AND AITTHOB OF "BANES 
 AND THEIR DEPOSITOBS." 
 
 NEW YORK: 
 HOMANS- PUBLISHING COMPANY, 251 BEOADWAT. 
 
 1888. 
 
Copyright, 
 By ALBERT S. BOLLES, 
 
 1888'. 
 
 Kf 
 
 S6^ 
 
 HABBISBUKO, PA.: 
 imTEBS PRINTING HOUSE. 
 
TO 
 
 GEN. FRANCIS A. WALKER, 
 
 Pbesideht of th£ Massachusetts Iks tit ut k of Teobhologt, 
 WHOSE WIDELY KNOWN ECONOMIC WEITINGS 
 
 AEE AS HIGHLY VALTTED 
 
 FOE THEIE JUDICIAL TEMPEE 
 
 AS FOE 
 
 THEIE EXTENSIVE LEAENING. 
 
PEEFATOET KOTE. 
 
 A few words of explanation may be added concerning the plan of 
 this book. The side notes refer to the statutes ; and the headings in the 
 text to their construction. The punctuation of the statutes has been 
 literally followed as well as their wording. Statutes re- appear in a few 
 subjects of which they form an important part. 
 
 (v) 
 
EERATA. 
 
 Page 11, seventh line from bottom, read into for "with." 
 
 " 38, last line, reai professed for "proposed." 
 
 " 36, tenth line from top, read is for "it." 
 
 " 36, fifth line from bottom, insert it after " but." 
 
 " 76, eighth line from top, read M for " W." 
 
 " 176, eleventh line from bottom, insert " before "word." 
 The other typographical errors are so obvious that they need not be mentioned. 
 
CONTENTS. 
 
 CHAPTER I. 
 
 PAGB. 
 
 Powers of the Compteolleb . ... 1 
 
 CHAPTER II. 
 
 OEGAJSTIZATION, C6NVEKSI0N, AND BEGINNING OP NATIONAL BANKING ASSOCIA- 
 TIONS . . ... 5 
 
 CHAPTER III. 
 Extension op National Banking Associations . .... ... 18 
 
 CHAPTER IV. 
 PowBBS OP National Banking Associations' 22 
 
 CHAPTER V. 
 Election and Powers op Directors, and the Declaring op Dividends . . 55 
 
 CHAPTER VI. 
 Rights AND Liabilities op Shareholders 67 
 
 CHAPTER VII. 
 Duties OP A Bank as a, Public Depositary 102 
 
 CHAPTER VIII. 
 How Capital may be Increased oe Reduced 104 
 
 CHAPTER IX. 
 How Bonds must be Deposited with, and Kept by the Government .... 106 
 
 CHAPTER X. 
 
 Regulations Concerning the Issue op Circulating Notes Ill 
 
 (vii) , 
 
Vlll CONTENTS. 
 
 CHAPTER XI. 
 
 PAOB. 
 
 Ekqulations Conceening the Eeseeve and the Places foe Eedeeming 
 
 clectjlating notes 133 
 
 CHAPTER XII. 
 
 INTEEEST 137 
 
 CHAPTER XIII. 
 Suit by and Against National Bank 154 
 
 ^ CHAPTER XIV. 
 Pleading and Evidence 171 
 
 ;. CHAPTER XV. 
 Ceiminal Opfensis 175, 
 
 • CHAPTER XVI. 
 Peefeeences, Dissolution and Eeceiveeship 190 
 
 CHAPTER XVII. 
 Bank Examinations AND Ebpoets 216 
 
 CHAPTER XVIII. 
 Taxation 220 
 
 CHAPTER XIX. 
 
 CONVEESION OF NATIONAL TO STATE BANKS 276 
 
TABLE OF CASES. 
 
 Abbott V. City of Bangor, 227. 
 
 V. Inhabitants of Bangor, 224. 
 Ackerman v. Halsey, 61, 65. 
 Adams v. Nashville, 223, 251. 
 Adams & Co. v. Daunis, i63. 
 Albany City National Bank v. Maher, 258, 259. 
 Aldrich, Matter of, 270. 
 Allen V. First National Bank, 46, 47, 51. 
 
 V. Scandinavian National Bank, 195. 
 Anderson v. Philadelphia Warehonse Co., 81. 
 Atlantic National Bank v. Harris, 10, 11, 12. 
 
 State Bank v. Savery, 32, 41. 
 Atlas National Bank v. Savery, 32. 
 Austin V. The Aldermen, 254, 257. 
 
 R 
 
 Bagnalla. State, 226. 
 Bailey v. Hollister, 97. 
 
 V. Savifyer, 85, 87. 
 Balch V. Wilson, 200, 206. 
 Baldwin v. Canfield, 48: 
 Bank v. Dnnn, 27. 
 
 ■v. Jones, 27. 
 
 t;. Kennedy, 86, 158, 202, 203. 
 
 V. Lanier, 71, 73, 75, 76. 
 
 V. Mclntire, 12. 
 
 V. M'Kinster, 34. 
 
 V. Slemmons, 145, 149. 
 
 V. Zent, 40. 
 Bank of Bethel v. Pahqnioque Bank, 158, 169, 199, 202, 205, 207. 
 
 Commerce v. New York City, 222. 
 Bank Tax Case, 222. 
 
 Barbour v. National Exchange Bank, 148. 
 Barnes v. Hall, 71. • 
 Barnet v. National Bank, 143,. 148, 149. 
 Barrett v. National Bank, 148. 
 Beers v. Bridgeport Spring Co., 58. 
 Bellows V. Weeks, 71. 
 Bigelow, In re, 74. 
 Birds' executors v. Cockrem, 202. 
 Blair v. First National Bank, 29. 
 Bletz V. Columbia National Bank, 65, 147, 163. 
 Bly V. Second National Bank, 50, 152. 
 
X TABLE OF CASES. 
 
 Board of Comialssioners v. Davis, 226, 234. 
 ■0. Elston, 249. 
 
 County Commissioners v. Citizens' National Bank, 248. 
 Bowdell V. Farmers and Merchants' National Bank, 80, 81. 
 Bowden v. Johnson, 79, 80, 87, 90. 
 
 V. Santos, 79. 
 Bowen v. First National Bank, 194, 195. 
 , Boyer v. Boyer, 225, 235, 239, 241. 
 Bradley u. People, 226, 227. 
 Branch v. United States, 24, 103. 
 Brinckerhoflf v. Bostwick, 60, 64, 65, 163, 210, 213. 
 Brown v. Second National Bank, 143, 144, 149, 150, 151. 
 Buie V. Commissioners, 254. 
 Bullard v. Bank, 74. 
 Bundy v. Jackson, 77. 
 Burton v. Burley, 29. 
 Bushnell v. Chautauqua National Bank, 43. 
 
 Cadle V. Baker, 198, 202. 
 
 V. Tracy, 164, 195, 202. 
 Cake V. First National Bank, 143, 149, 150151. 
 Campbell v. City of Centreville, 251. 
 Canal and Banking Company v. New Orleans 251. 
 Case V. Bank, 207. 
 ■0. Berwin, 202. 
 V. Small, 81, 204. 
 V. Terrell, 2, 198. 
 Casey u Adams, 164, 166. 
 
 V. Galli, 86, 89, 90, 174, 198, 210. 
 Central National Bank v. Pratt, 143. 
 
 V. Eichland National Bank, 195. 
 Chatham National Bank v. Merchants' National Bank, 163, 167. 
 Charleston v. People's National Bank, 104, 260. 
 Chattahoochee National Bank r. Schley, 40. 
 Chemical National Bank v. Bailey, 208, 209. 
 Chesapeake Bank v. First National Bank, 195. 
 Citizens' National Bank v. Leming 143, 152. 
 City National Bank v. Paducah, 237, 266'. 
 u Phelps, 10, 11. 
 of Carthage v. First National Bank, 260. 
 of Evansville v. Bayard, 222. 
 of Pittsburgh v. First National Bank, 224, 226. 
 of Richmond v. Scott, 228, 252. 
 of Springfield v. First National Bank, 226, 228. 
 of Utica V. Churchill, 229. 
 Claflin V. Houseman, 65, 147, 
 Clapp V. City of Burlington, 254. 
 Cleveland v. Shoeman, 37. 
 Coffey V. National Bank, 10, 40. 
 Cole V. Walker, 80. 
 Collins V. Chicago, 226. 
 
 Commercial National Bank v. Simmons, 161, 165. 
 Commonwealth v. Barry, 189. 
 V. Felton, 189. 
 V. First National Bank, 248. 
 V. Girard Bank, 222. 
 V. Ketner, 189, 
 V. Manufacturers and Mechanics' Bank, 260. 
 
^ TABLE OF CASKS. XI 
 
 Commonwealth v. Tenny, 188, 189. , 
 
 Conklin v. Second National Bank, 74. 
 
 Continental National Bank v. Eliot National Bank, 71. 
 
 V. Folsom, 156, 166, 167. 
 Conway v. Halsey, 61, 65. 
 Cooke V. State National Bank, 65, 163. 
 Corn Exchange Bank v. Blye, 192, 198, 201. 
 Corning v. McCullough, 97. ' 
 
 County Commissioners v. Mechanics' National Bank, 227. 
 
 of Lancaster v. Lancaster County National Bank, 248. 
 
 of Lackawanna v. First National Bank, 362, 263. 
 
 of Wilson V. National Bank, 161. 
 CoTington City National Bank v. City of Covington, 248, 253. 
 Craft D. Tuttle, 322, 226. 
 Cragie v. Hadley, 42. 
 Crease v. Bahcock, 90. 
 Crocker v. First National Bank, 143, 148. 
 
 V. Marine National Bank, 164, 195. 
 
 V. Whitney, 44. 
 Cummings v. National Bank, 235, 239, 240, 364, 367. 
 Curtis V. Ward, 336, 254. 
 
 D. 
 
 Davenport National Bank v. Board of Equalization, 236, 237. 
 
 V. Mittlehuscher, 337. 
 Daviess. Marine National Bank, 368. 
 Davis V. Cook, 163. 
 
 V. Essex Baptist Society, 78, 80, 88, 100. 
 
 v. Randall, 143. 
 
 V. Stevens, 80, 81. 
 
 j;.Weed, 87, 97, 99. 
 Delano v. Butler, 90, 104, 206. 
 
 V. Case, 63. 
 Delaware, Lackawanna and Western Railroad Company v. Oxford Iron Company, 74. 
 Deposit Savings Association v. Marks, 268. 
 Dodge V. Woolsey, 71. 
 Dollar Savings Bank.w. United States, 270. 
 Dow V. Irashurg National Bank, 147. 
 Driesback v. National Bank, 149. 
 
 Duncomb v. New York, Hartford & New Haven R. Co., 41. 
 Dunkerson's case, 74. 
 
 E. 
 
 Eans V. Exchange Bank, 39. 
 
 Eastern Township Bank v. Vermont National Bank, 208. 
 
 Eaton V. Pacific National Bank, 91. 
 
 Elder v. First National Bank, 50. 
 
 Ellis V. Little, 197, 199, 203. 
 
 Erskine i>. Hohnhach, 267. 
 
 Evansville Bank v. Britton, 235, 240, 242, 245. 
 
 National Bank v. Metropolitan National Bank, 74. 
 Everitt's Appeal, 351. 
 Exchange National Bank K Miller, 239, 250. 
 
 Farmers' Bank v. Commonwealth, 248. 
 V. Hale, 143. 
 
XH TABLE OF CASES. 
 
 Farmers and Mechanics' Bank v. Hoagland, 142, 149. 
 
 National Bank v. Dearing, 24, 139, 143, 195, 226. 
 Merchants' National Bank v. Wallace, 46. 
 National Bank, matter of, 249. 
 
 Gold Bank v. Stover, 141. 
 Feckheimer v. National Exchange Bank, 74. 
 First National Bank v. Bennett, 27, 28. 
 
 V. Bohne, 162. 
 
 V. Concord, 
 
 V. County of Douglas, 161, 165. 
 
 V. Douglas County, 228, 263, 264. 
 
 V. Drake, 56. 
 
 V. Dunbar, 201. 
 
 V. Duncan, 140. 
 
 V. Elmore, 46. 
 
 V. Exchange Bank, 36. 
 
 V. Fancher, 267. 
 
 V. Garlinghouse, liS, 151. 
 
 V. Gish, 142. 
 
 V. Gruber, 141, 147. 
 
 V. Haire, 44. 
 
 V. Harris, 32. 
 
 V. Hershire, 267. 
 
 V. Hock, 28, 36. 
 
 V. Hubbard, 163. 
 
 V. Hughes, 264. 
 
 V. Lamb, 143. 
 » V. Lucas, 27, 28. 
 
 V. Meredith, 226, 228. 
 
 V. National Exchange Bank, 38, 39, 47. 
 
 V. Peterborough, 252. 
 
 V. Pierson, 31. 
 
 V. Sherburne, 25, 26, 31. 
 
 V. Smith, 254, 
 
 V. Stanffer, 144. 
 
 V. Tisdale, 27. 
 
 V. Town of Bennington, 35. 
 
 V. Township, 241, 242. 
 
 V. Treasurer, 237, 238. 
 
 V. Waters, 230, 234, 267. 
 Flint V. Board of Aldermen, 11, 222, 257. 
 Foil's Appeal, 72. 
 
 Fortier r. New Orleans National Bank, 46. 
 Foss V. First National Bank, 161. 
 Fowler v. Scully, 36, 44. 
 Frazer v. Siebern, 226. 
 
 G. 
 
 Gaar, Scott & Co. v. First National Bank, 46. 
 
 German National Bank i). Meadowcroft, 42. 
 
 Gold Mining Co. v. National Bank, 41, 50. 
 
 Goldsbury v. Inhabitants of Warwick, 256. 
 
 Gorgas' Appeal, 235, 252. 
 
 Goudy V. Gebhart, 145. 
 
 Graham v. National Bank, 45. 
 
 Greaves v. Gouge, 64. ' 
 
 Gray v. Coffin, 98. 
 
 Green v. Walkill National Bank, 199, 200. 
 
 Griswold, In re, 195. 
 
 Gruber v. First National Bank, 141, 147, 148. 
 
TABLE OF CASES. XUl 
 
 Hade v. McVay, 147, 149, 204. 
 Hagar v. Union National Bank, 43. 
 Hambright v. Cleveland National Bankj 148. 
 Hand v. Atlantic National Bank, 64. 
 Hardin v. Boyd, 94. 
 Harrington v. First National Bank, 43. 
 Harrison v. Vines, 225, 226. 
 Harvey v. Allen, 195, 202, 203. 
 
 ■V. Lord, 94, 95. 
 Havens v. National City Bank, 43. 
 Hawthorne «. Calef, 97. 
 Hazard v. National Exchange Bank, 71. 
 Heath v. Second National Bank, 47. 
 Hendeeu. Connecticut and P. E. Co., 157, 159. 
 Henderson, receiver, v. Meyers, 204. 
 Hepburn v. School Directors, 251, 252, 257, 258. 
 Hershire v. First National Bank, 229. 
 Higley v. First National Bank, 142, 146. 
 Hills V. Exchange Bank, 246. 
 Hinds V. Marmolejo, 141. 
 Hintermister v. First National Bank, 143, 146. 
 Hobart v. Gould, 89. 
 
 V. Johnson, 83. 
 Hobbs V. Western National Bank, 70. 
 Hodge V. National Bank, 25, 27. 
 Holmes v. Boyd, 47. 
 Home V. Green, 249. 
 Houghton, Ex parte, 189. 
 Howard National Bank v. Loomis, 46. 
 Howell V. Village of Cassopolis, 227, 255, 256. 
 Hubbard v. Board of Supervisors, 222, 226, 228. 
 Huflfaker v. National Bank, 171, 172. 
 Hungerford National Bank v. Van Nostrand, 173, 174. 
 Hunt, appellant, 122. 
 
 I. 
 
 Irons V. Manufacturers' National Bank, 78, 93, 94, 192, 193, 198. 
 
 J. 
 
 Jackson v. United States, 135, 197, 261. 
 Jenkins v. Natio^al Village Bank, 27. 
 Johnson i;. Laflin, 88. 
 
 V. Commonwealth, 248. 
 Johnston v. Laiiin, 70. 
 Johnston Brothers & Co. u. Charlottesville National Bank, 38. 
 
 Kansas Valley National Bank v. Rowell, 44. 
 
 Kelsey v. National Bank, 10, 11. 
 
 Kennedy v. Gibson, 84, 85, 87, 160. 161, 166, 170, 197, 198, 202, 205, 207. 
 
 Keyser v. Hitz, 12, 13, 14, 15, 89, 100. 
 
 Knight V. Old National Bank, 74. 
 
 Kyle V. Mayor, 256. 
 
XIV TABLE OF CASES. 
 
 L. 
 
 Laing v. Biirley, 78. 
 
 Lancaster County National Bank v. Smith, 40. 
 
 Lazear v. National Union Bank, 31, 151. 
 
 Leach v. Hale, 33. 
 
 Leather Manufacturers'! Bank v. Cooper, 155, 168. 
 
 Lee V. Citizens' National Bank, 76, 164. 
 
 Lesassier v. Binder, 70. 
 
 - v. Kennedy, 80. 
 Leuven v. First National Bank, 33. 
 Libby v. Union National Bank, 47. 
 Lionberger u Eouse, 223, 226, 228, 230, 251, 252. , 
 Lockwood V. Mechanics' National Bank, 14, 30, 57, 74. 
 Logan County National Bank v. Townsend, 36, 37. 
 Louisville and Nashville Railroad v. Commonwealth, 248. 
 Lowry i). luman, 97. 
 Luberg v. Commonwealth, 189. 
 Lucas V. Government National Bank, 144, 149. 
 
 M. 
 
 Magruder v. Colston, 80, 81. 
 
 Maguire v. Board of Revenue, 226, 227, 234, 243, 247, 258. 
 Main v. Second" National Bank, 165, 166. 
 Manufacturers' National Bank, In re, 197. 
 
 D. Baach, 163, 165. 
 Mapes u Scott, 46, 47. 
 
 V. Second National Bank, 50. 
 Market National Bank v. Pacific National Bank, 194. 
 Matthews v. Skinker, 44. 
 Maynard v. Bank, 11. 
 Mayor v. First National Bank, 260. 
 
 V. Thomas, 224. 
 McAden v. Commissioners, 243. 
 
 McCracken v. Covington City National Bank, 164, 192. 
 McIvQr V. Robinson, 244. 
 McLaughlin v. Chad well, 251. 
 McMahon v. Palmer, 231, 255. 
 McVeagh v. City of Chicago, 242, 258, 268. 
 Mercantile Bank v. New York, 231, 232, 233, 242. 
 Merchants' Bank v. Hanson, 31. 
 
 V. Mears, 38, 44. 
 V, Sevier, 33. 
 
 Exchange National Bank, v. Cardozo, 172. 
 
 National Bank v. Glendon Co., 173. 
 
 and Farmers' National Bank w. Myers, 143. 
 
 and Planters' National Bank v. Trustees, 169. 
 Miller v. Heilbron, 244. 
 Mintzer v. County of Montgomery, 224. 
 
 Missouri River Telegraph Co. v. First National Bank, 163, 165. 
 Mitchell V Butler, 162. 
 Mix V. National Bank, 172. 
 
 Montgomery County Bank v. Albany City Bank, 34. 
 Morehouse v. Second National Bank, 150. 
 Morseman v. Younkin, 263. ' 
 
 Moore v. Jones, 80. 
 Moore V. Mayor, 257. 
 
 Mound City Paint Co i'. Commercial National Bank, 33. 
 Movius V. Lee, 56, 61, 63, 64. 
 
' TABLE OB CASES. XV 
 
 N. 
 
 National Bank v. Bruhn, 140. 
 
 V. Burr, 41. ■ 
 
 V. Case, 37, 80, 81, 85. 
 V. City of Elmira, 267. 
 V. Colby, 194, 195, 200. 
 
 V. Commonwealth, 226, 227, 228, 229, 249, 252. 
 1). Da vis,. 138, 143, 148, 149, 150. 
 V. Dushane, 149. 
 V. Eyre, 142, 146, 147. 
 V. Fore, 1G8. 
 V. Graham, 37, 40. 
 V. Insurance Company, 96, 189. 
 V. Johnson, 140. 
 V. Kimball, 265, 266. 
 V. Lamb, 143. 
 
 V. Lewis, 144, 149, 150, 151, 152, 153. 
 V. Matthews, 44. 
 V V. Mayor, 260. 
 
 V. Mechanics' National Bank, 208. 
 V. National Bank, 54. 
 V. Orcutt, 153, 171. 
 •i;. Phoenix Warehousing Co., 25. 
 ■<j. Stewart, 77. 
 ■a. Trimble, 148. 
 V. United States, 269. 
 V. Watsontown Bank, 88. 
 
 V. "Wells, 65. '■' 
 
 V. Whitney, 41, 44, 46. 
 National Commercial Bank v. Mayor,. 227, 264. 
 Exchange Bank v. Moore, 150, 151. 
 Pemberton Bank v. Porter, 32. 
 Security Bank v. Price, 193. 
 
 Shoe and Leather Bank v. Mechanics' National Bank, 194, 195. 
 State Bank v. Boylan, 148. 
 ■V. Pierce, 256. 
 V. Young, 238. 
 Nelson v. Burrows, 96. 
 , Newark Banking Company v. Newark, 233. 
 
 City Bank v. Assessor, 222. » 
 
 Newell V. National Bank, 148. 
 New Orleans National Rank v. Raymond, 49. 
 
 Banking Association v. Adams, 166. 
 New York Grocers' National Bank, v. Clark, 10. 
 Nickerson v. Kimball, 249, 263. 
 
 O. 
 
 Gates V. National Bank, 152. 
 Ocean National Bank v. Carll, 202. 
 O'Hare v. Second National Bank, 50. 
 Oldham v. First National Bank, 46. 
 Orange National Bank v. Traver, 161, 165. 
 Ordway v. Central National Bank, 147, 169. 
 Ornn v. Merchants' National Bank, 46, 47. 
 Overholt v. National Bank, 144, 149. 
 
XVI TABLE OF CASES. 
 
 Pacific Bank v. Mlxter, 204. 
 
 Packard v. City of Lewiston, 224. 
 
 Pangbom v. Westlake, 50. 
 
 Pape V. Capitol Bank, 31. 
 
 Pattison v. Syracuse National Bank, 40. 
 
 Peavey v. Town of Greenfield, 242. 
 
 Pelton V. National Bank, 235, 238, 240, 265. 
 
 Pendergast v. Bank of Stockton, 74. 
 
 Penn v. Bornman, 45. 
 
 People V. Commissioners, 223, 235, 247, 248, 250, 252, 257. 
 
 People V. Dolan, 240. 
 
 People V. Moore, 226, 253. 
 
 People V. Weaver, 235, 236, 239, 240, 251, 265. 
 
 People's Bank v. Mechanics' National Bank, 195. 
 
 V. National Bank, 41. 
 Peters v. Brown & Sons, 38. 
 Pettilon V. Noble, 167. 
 
 Pickett V. Merchants' National Bank, 146, 147, 148, 149. 
 Pittsburgh Locomotive and Car Works v. State National Bank, 37, 38. 
 Piatt V. Beach, 86. 
 ' V. Beebe, 202. 
 
 K.Bentley, 204. 
 
 Matter of petition of, 204. 
 Pollard V. State, 226, 244, 251. 
 Prather v. Kean, 40. 
 Price V. Abbott, 86, 198. 
 
 V. Yates, 84, 204. 
 Provident Institution v. City of Boston, 256. 
 
 R. 
 
 Eaynor v. Pacific National Bank, 191, 194. 
 
 Reynolds v. Crawfordsville First National Bank, 47. 
 
 Rhoner v. First National Bank, 195. 
 
 Rich V. State National Bank, 29. 
 
 Richards v. Incorporated Town of Grand Rapids, 156, 237. 
 
 V. Kountze, 46. 
 Richmond v. Irons, 79, 83, 84, 89, 94, 95, 96, 215. 
 Riddle v. First National Bank, 122. 
 Riplev V. Harris, 44. 
 Roberts V. Hill, 192, 193, 194. 
 Robinson v. National Bank, 65, 166, 194, 195, 198. 
 
 V. Smith, 60, 64. 
 Roebling Sons' Co. v. First National Bank, 48. 
 -Rosenblatt v. Johnson, 198, 261. 
 Rosenburg v. Weekes, 242, 249. 
 Root V. Erdelmeyer, 260. 
 Euggles V. City of Fond du Lac, 243. 
 Ruffin V. Board of Commissioners, 249. 
 
 Salt Lake City National Bank v. Golding, 226. 
 Schmidt v. First National Bank. 130. 
 Scott V. National Bank, 40, 71. 
 Scofield V. State National Bank, 47. 
 Second National Bank. Appeal ot, 144. 
 • V. Burt, 49, 
 
TABLE OP CASES. XVU 
 
 Second National Bank v. National State Bank, 74. 
 
 V. Smoot, 142. 
 Security Bank v. National Bank, 169, 199, 200. 
 Seeley v. New York Natloniil Exchange Bank, 58, 105, 
 Seligman &Co. v. Charlottesville National Bank, 38. 
 Shoemaker v. National Mechanics' Bank, 30, 38, 50, 72. 
 Shunk V. First National Bank, 140, 144. 
 Simmons v. Aldrich, 261. 
 Simons V. First National Bank, 45. 
 Smedes v. Utica Bank, 34. 
 Smith V. Exchange Bank, 31, 151. 
 
 V. First National Bank, 40, 226. 
 
 V. Webb, 227. 
 Southwick V. First National Bank, 195. 
 Spafford v. Firsl^ National Bank, 44, 47. 
 Stanley v. Supervisors, 266. 
 
 Stanton v. Wilkeson, 84, 85, 86, 87, 158, 166, 198, 202, 205. 
 State V. Curtis, 160. 
 
 V. Davis, 27. 
 
 V. Gasting, 186. 
 
 V. Haight, 222, 224. 
 
 V. Hart, 224. 
 
 V. Hartford National Bank, 14. 
 
 V. National Bank, 12. 
 , North "Ward National Bank v. Newark, 254, 255. 
 
 ■0. Phoenix Bank, 14. 
 
 V. Tuller, 187, 188. 
 State National Bank v. Morrison, 275. 
 Steadman v. Redfield, 148. 
 
 Stephens v. Mouongahela National Bank, 50, 149, 163. 
 Stetson V. City of Bangor, 11, 222, 227. 
 Stewart v. National Union Bank, 50, 51. 
 Stilz V. Tutewiler, 228, 252. 
 St. Louis National Bank v. Allen, 164, 164. 
 V. Brinkman, 167. 
 V. -Papin, 226, 265. 
 Straflford National Bank v. Dover, 252. 
 Strong V. O'Donnell, 254. . 
 
 V. Southworth, 87. 
 Sumter County v. National Bank, 227, 229, 244. 
 Supervisors v. Stanley, 236, 240, 244, 246. 
 Swope V. Leffingwell, 162. 
 
 T. 
 
 Talmadge v. Third National Bank, 164, 165, 
 
 Tapley v. Martin, 167. 
 
 Tappan v. Merchants' National Bank, 253. 
 
 Taylor v. Hutton, 30. 
 
 Thatcher v. West River National Bank, 174. 
 
 Third National Bank v. Boyd, 37. 
 
 V. Harrison, 56. 
 In re, 204. 
 
 V. Miller, 145. 
 
 1). Teal, 172. 
 Thomas v. Farmers' Bank, 12. 
 Thornton v. National Exchange Bank, 45, 46. 
 Thorp V. Wegefarth, 10, 11. 
 Tiffany v. National Bank, 140, 148. 
 Tracy v. First National Bank, 195, 203. 
 Trustees v. Deposit Bank, 248. 
 
XVUl TABLE OF CASES. 
 
 Turnbull v. Payson, 83. 
 
 Turner v. First National Bank, 40, 46. 
 
 Tuthill V. Davis, 149. 
 
 Tuttle V. Frelinghuysen, 193. 
 
 U. 
 
 Union Gold Mining Co. v. Rocky Mountain National Bank, 41, 50, 213. 
 National Bank v. City of Chicago, 854, 257. 
 V. Miller, 156. 
 V. Eowan, 31. 
 United States v. Allen, 182, 183. 
 
 V. Bennett, 120, 186. 
 
 V. Britton, 177, 178. 181. 
 
 V. Central National Bank, 275. 
 
 V. Conant, 176. 
 
 V. Cook County National Bank, 206, 210. 
 
 ■u. Curtis, 218. 
 
 V. Fish, 176, 178, 180, 181, 182. 
 
 V. Hade, 177. 
 
 V. Hartwell, 86. 
 
 V. Knox, 84, 87, 90. 
 
 V. Lee, 178, 179. 
 
 V. Mann, 275. 
 
 V. Neale, 57. 
 
 V. Northway, 177, 178, 179. 
 
 V. Patterson, 187. 
 
 V. Ehawn, 275. 
 
 K. State National Bank, 275. 
 
 V. Taintor, 179. 
 
 V. Voorhees, 179. 
 
 v. Warner, 178, 180. 
 
 V. Warrick, 270. 
 Upton V. National Bank, , 47. 
 
 Van Allen v. The Assessors, 223, 225, 226, 227, 229. 
 
 Van Antwerp v. Hulburd, 170, 214. 
 
 Van Campen, In matter of, 176. 
 
 Van Slyke v. State, 226. 
 
 Veazie Bank v. Fenno, 249, 269. 
 
 Venango National Bank v. Taylor, 193, 194. 
 
 W. 
 
 Wagoner v. Loomis, 265. 
 
 Waite V. Dowley, 228. 
 
 Walker v. Bank, 34. 
 
 Warner v. De Witt County National Bank, 46. 
 
 Washington County National Bank v. Lee, 173. 
 
 Weckler v. First National Bank, 36. 
 
 Weld ):. City of Bangor, 256. 
 
 Weston J'. Manchester, 242. 
 
 Weyer )■. Second National Bank, 69. 
 
 Wheeler v. National Bank, 145. 
 
 Wheelock v. Kost, 89, 93, 95, 96. 
 
 V. Lee, 150. 
 Wherry ti. Hale, 46. 
 
TABLE OF CASES. , XOX 
 
 White V. Commoiiwealtli National Bank. 42, 161. 
 
 V. Knox, 207, 210. 
 Whitney v. Butler, 79. 
 
 V. First National Bank, 40. 
 V. Ragsdale, 263. 
 Wild, In re, 141, 151. 
 Wilder v. Union National Bank, 167. 
 Wiley V. First National Bank, 40. 
 
 V. Starbuck, 143. 
 Williams v. Board of Supervisors, 259, 260, 266. 
 Williapason v. Mason, 36. 
 Wilson V. First National Bank, 71. 
 Winton v. Little, 46. 
 Witters v. Foster, 156. 
 
 V. Sowles, 51, 59, 60, 63, 71, 98, 100, 206. 
 Woods V. Peoples' National Bank, 44, 46. 
 Woodworth v. Ellsworth, 261. 
 Worcester National Bank v. Cheeney, 46. 
 Wright V. First National Bank, 148. 
 
 V. Merchants' National Bank, 198. 
 
 V. Stiltz, 226. , ' 
 
 Wroten's Assignee v. Armat, 45. 
 Wylie V. Northampton Bank, 40. 
 Wymau v. National Bank, 50. 
 
 Yerkes v. National Bank, 33. 
 Young V. Vough, 74, 83. 
 
THE 
 
 natio:nal bajstk act 
 
 JUDICIAL MEAI^ING. 
 
 CHAPTEE I. 
 
 POWERS OF THE COMPTROLI.EE. 
 
 1. Bureau of national currency. 
 
 2. Cannot submit to jurisdiction of 
 
 court. 
 
 3. Cannot he sued by assignee. 
 
 4. Appointment and term of ofSce. 
 
 5. Oath and bond. 
 
 6. Deputy Comptroller. 
 
 ? 7. Clerks. 
 
 8. Must not be interested in national 
 
 banks. 
 
 9. Seal. 
 
 10. Rooms, etc., for Bureau. 
 
 11. Annual report. 
 
 12. When it may be printed. 
 
 §1- 
 
 " There shall be in the Department of the Treasury a Bureau of 
 Bureau charged with the execution of all laws passed by Con- currency. 
 gress relating to the issue ^nd regulation, of a national cur- seo.'s24. ' 
 rency secured by United States bonds; the chief officer of 
 which Bureau shall be called the Comptroller of the Currency, 
 and shall perform his duties under the general direction of the 
 Secretary of the Treasury;" ' 
 
 § 2. Cannot submit to jurisdiction of a court. But 
 he can neither submit himself nor the United States to the juris- 
 diction of a court. Says Judge Miller: " It may very well admit 
 
 ' Act 1864, Sec. 1. The original national banking law was approved Feb. 
 25, 1863, and was entitled "An act to provide a national currency, secured 
 by a pledge of United States stocks, and to provide for the circulation and 
 redemption thereof." The next year the act was thoroughly revised, and 
 re-enacted, and was approved on the 3d day of June. This act was embodied 
 
NATIONAL BANK ACT. 
 
 §3 
 
 Appoint- 
 ment and 
 term of 
 office. 
 Bev. Stat. 
 Sec. 32o. 
 
 Oath and 
 bond. 
 Bev. Stat. 
 Sec. sue. 
 
 of doubt whether it is within his competency, to submit himself, 
 in the exercise of duties specially confided to him by acts of Con- 
 gress to the control of the courts, and especially of those which 
 can assert no such jurisdiction by reason of their territorial lim- 
 its. * * We have no hesitation in holding that however he may 
 submit himself to the jurisdiction of those courts, and consent to 
 be governed in his official action by their decrees, so far as they 
 affect rights of parties who may come into court and be impleaded 
 in the same suit, he has no authority to submit the United States 
 to such jurisdiction, and to submit the rights of the government 
 to litigation in any court, without some provision of law author- 
 izing him to do so."^ 
 
 § 3. Cannot be sued by assignee. A private person 
 has no right as assignee of the bonds of a national bank, which 
 have been deposited with the United States Treasurer to secure its 
 circulation, to call him and the Comptroller to account before a 
 federal court for their official conduct concerning them, nor has 
 a court the right to summon either of these persons to answer 
 such an action.'' 
 
 § 4. " The Comptroller of the Currency shall be appointed by 
 the President, on the recommendation of the Secretary of the 
 Treasury, by and with the advice and consent of the Senate, and 
 shall hold his oflBce for the term of five years, unless sooner re- 
 moved" by the President, upon reasons to be communicated by 
 him to the Senate ; and he shall be entitled to a salary of five 
 thousand dollars a year.'" 
 
 § 5. " The Comptroller of Currency shall, within fifteen days 
 from the time of notice of his appointment, take and subscribe 
 the oath of office ; and he shall give to the United States a 
 bond in the penalty of one hundred thousand dollars, with not 
 less than two responsible sureties, to be approved by the Secre- 
 tary of the Treasmy, conditioned for the faithful discharge of the 
 duties of his office."* 
 
 § 6. " There shall be in the Bureau of the Comptroller of 
 
 in the sixty-second Title of the Revised Statutes which contained all the 
 national statutes that were in force on Dec. 1, 1873. On the 20th of June, 
 1874, Congress declared that the act " shall hereafter be known as the ' Na- 
 tional Bank Act,'" 17 Stat, at Large, 43 C. 1 S. Ch. 343, Sec. 1. 
 ' • Case V. Terrell, 11 Wall., 199 p. 202. 
 
 ' Van Antwerp v. Hulburd, 7 BlatcM., 426, and 8 Id., 282. 
 
 » Act, 1864, Sec. 1. ' Id. 
 
^ 7 POWERS OF THE COMPTROLLER. d 
 
 the Currency a Deputy Comptroller of tBe Currency, to be ap- comptooUer 
 pointed by the Secretary, who shall be entitled to a salary of two f|^'g|5*'' 
 thousand five hundred dollars a year, and who shall possess the 
 power and perform the duties attached by law to tke office 
 of Comptroller during a vacancy in the office or during the ab- 
 sence or inability of the Comptroller. The Deputy Comptroller 
 shall also take the oath of office prescribed by the Constitution 
 and laws of the United States, and shall give a like bond in the 
 penalty of fifty thousand dollars." ' 
 
 §j 7. " The Comptroller of the Currency shall employ, from ^'®''*|; ^ 
 time to time, the necessary clerks, to be appointed and classified seo. 328. 
 by the Secretary of the Treasury, to discharge such duties as 
 the Comptroller shall direct."^ 
 
 § 8. " It shall not be lawful for the Comptroller or the ^^'jf^^l*, '" 
 Deputy Comptroller of the Currency, either directly or indi- ^^'^^g . 
 rectly, to be interested in any association issuing national currency s<"=- ^^■ 
 under the laws of the United States."' 
 
 § 9. " The seal devised by the Comptroller of the Cur- ^^^- ^^^^ 
 rency for his office, and approved by the Secretary of the ^'"'- ^^■ 
 Treasury, shall continue to be the seal of office of the Comptroller, . 
 and may be renewed when necessary." * "A description of the 
 seal, with an impression thereof, and a certificate of approval of 
 the Secretary of the Treasury, shall be filed in the office of the 
 .Secretary of State."* 
 
 § 10. " There shall be assigned from time to time, to the Booms. 
 
 "^ - ° Rev. Stat. 
 
 Comptroller of the Currency, by the Secretary of the Treasury, see 83i. 
 suitable rooms in the Treasury building for conducting the busi- 
 ness of the Currency Bureau, containing safe and secure fire- 
 proof vaults, in which the Comptroller shall deposit and safely 
 keep all the plates not necessarily in the possession of engravers 
 or printers, and other valuable things belonging to his Depart- 
 ment ; and the Comptroller shall from time to time furnish the 
 necessary furniture, stationery, fuel, lights, and other proper con- 
 veniences for the transaction of the business of his office."^ 
 
 § 11. " The Comptroller of the Currency shall make an annual 
 report to Congress, [at the commencement of its session, 'jexhibiting : 
 
 • Act 1864, Sec. 1. ' Id. ' Td. * Act 1864, Sec. 2. 
 5 Act Feb.. 18, 1875, 18 Stat, at Large, 43 C. 2 S. Oh. 80. « Act 1864, Sec. 3. 
 ' The bracketed additions are an amendment. Act Feb. 18, 1875, 18 
 Stat, at Large, 43 C. 2 S. Cli. 80. 
 
NATIONAL BANK ACT. 
 
 12 
 
 Annual re- 
 port. 
 Bev. Stat. 
 Sec. 333. 
 
 Printing of 
 
 It. 
 
 Eev. Stat. 
 
 Sec. 3311. 
 
 £Jirst. A summary of the state and condition of every associ- 
 ation from which reports have been received the preceding year, 
 at the several dates to which such reports refer, with an abstract 
 of the whole amount of banking capital returned by them, of the 
 whole amount of their debts and libilities, the amount of circu- 
 lating notes outstanding, and the total amount of means and re- 
 sources, specifying the amount of lawful money held by them at 
 the times of their several returns, and such other information in 
 relation to such associations as, in his judgment, may be useful. 
 
 Second. A statement of the associations whose business has 
 been closed during the year, with the amount of their circulation 
 redeemed and the amount outstanding. 
 
 Third. Any amendment to the laws relative to banking by 
 which the system may be improved, and the security of the hold- 
 ers of its notes and oth^r creditors may be increased. 
 
 Fourth. A statement exhibiting under appropriate heads the 
 resources and liabilities and condition of the banks, banking com- 
 panies, and saving-banks organized under the laws of the several 
 states and territories ; such information to be obtained by the 
 Comptroller from the reports made by such banks, banking com- 
 panies, and savings-banks to the legislatures or officers of the dif- 
 erent states and territories, and, where such reports can not be 
 obtained, the deficiency to be supplied from such other authentic 
 sources as may be available. 
 
 Fifth. The names and compensation of the clerks employed by 
 him, and the whole amount of the expenses of the banking depart- 
 ment during the year."^ 
 
 § 12. " "When the annual report of the [Comptroller of the 
 Currency] upon the national banks [and banks under state and 
 ter;:itorial laws ^] is completed, or while it is in process of com- 
 pletion, if thereby the business may be sooner dispatched, the 
 work of printing shall be commenced, under the superintendence 
 of the Secretary, and the whole shall be printed and ready for de- 
 delivery on or before the first day of December next after the close' 
 of the year to which the report relates."" 
 
 1 Act 1864, Sec. 61 : Act Feb. 19, 1873, 42 C. 3 S. 17, Stat, at Large, 
 Cai. 166. 
 
 ^ The bracketed additions are amendments, Act Feb. 18, 1875. 
 ' Act Jan. 30, 186:5, 12 Stat, at Large, 37 C. 1 S. Ch. 14. 
 
§ 13 
 
 ORGANIZATION OF NATIONAL BANKING ASSOCIATIONS. 
 
 CHAPTER II. 
 
 OKSANIZATION, CONVEESION, AND BBGINNINO OP NATIONAL BANKING ASSOCIATIONS. 
 
 Organization. 
 
 13. Who may form a national bank. 
 
 14. What its certificate shall specify. 
 
 15. How acknowledged. 
 
 16. Minimum capital. 
 
 17. Transfer of shares; rights and liabili- 
 
 ties of shareholders. 
 
 ? 18.- Payment of stock. 
 
 19. Proceedings when shareholder fails 
 
 to pay installment. 
 
 20. Organization of gold note banks. 
 
 Conversion of State Banks. 
 
 31. State bank may become national. 
 
 22. Utility of the statute. 
 
 23. Legal relations not changed by con- 
 
 version. 
 
 24. Its right to sue. ■ 
 
 25. Its liability for debts of state bank. 
 
 26. Bequest of stock in converted bank. 
 
 27. Operation of enabling laws. 
 
 28. Action by two-thirds of stockholders, 
 
 but not all. 
 
 29. New stock book^ 
 
 § 30. Consent of married woman to con- 
 version. 
 
 31. Qualification of directors in converted 
 
 bank. 
 
 32. Regularity of conversion. 
 
 33. Eight to share in surplus of converted 
 
 bank. 
 
 34. Conversion ofstate bank with branch- 
 
 es. 
 
 35. Eights of bank converted under Act 
 
 of 1863. 
 
 36. Conversion by savings bank. 
 
 Preliminary Examination, Beginning, Location, and Payment of Deficiency 
 
 in Stock. 
 
 I 37. Preliminary examination by Comp- 
 troller. 
 
 38. Authority to begin. 
 
 39. Publication of order to begin. 
 
 ? 40. Place of business. 
 41. Enforcement of payment of deficiency 
 in stock. 
 
 § 13. "Associations for carrying on the business of banking whomay 
 under this Title may be formed by any number of natural persons, tioMibtiik. 
 not less in any case than five. They shall enter into articles of seJ^'sIS'' 
 association, which shall specify in general terms the object for 
 which the association is formed, and may contain any other provi- 
 
6 NATIONAL BANK ACT. § 14 
 
 sions, not inconsistent with law, which the association may see fit to 
 adopt for the regulation of its business and the conduct of its 
 aifairs. These articles shall be signed by the persons uniting to 
 form the association, and a copy of them shall be forwarded to the 
 Comptroller of the Currency, to be filed and preserved in his 
 office." ^ 
 What their 8 14. "The persons uniting to form such an association shall, 
 
 certiflcat.) ^ ^ '^ . . j -^ x n • i , i, 
 
 shall specify, under their hands, make an organization certificate, which shall 
 
 Rev. Stat. ' ° ' 
 
 Sec. 5134. specifically state — 
 
 "First. The name assumed by such association ; which name 
 shall be subject to the approval of the Comptroller of the Cur- 
 rency. 
 
 "Second. The place where its operations of discount and deposit 
 are to be carried on, designating the state, territory, or district, 
 and the particular county and city, town, or village. 
 
 "Third'. The amount of capital stock and the number of shares 
 into which the same is to be divided. 
 
 "Fourth. The names and places of residence of the sharehold- 
 ers, and the- number of shares held by each of them. 
 
 "Fifth. The fact that the certificate is made to enable such per- 
 sons to avail themselves of the advantages of this Title." ' 
 How ac- § 15. "The organization certificate shall be acknowledged be- 
 
 Eev. Stat. ' fore a judge of some court of record, or notary public ; and shall 
 
 Sbc 5135 
 
 be, together with the acknowledgment thereof, authenticated by 
 the seal of such court, or notary, transmitted to the Comptroller 
 of the Currency, who shall record and carefully preserve the same 
 in his office." ' 
 Minimum § 16. "No association shall be organized under this Title with 
 
 Rev. Stat, a less capital than one hundred thousand dollars ; except that 
 banks with a capital of not less than fifty thousand dollars may, 
 with the approval of the Secretary of the Treasury, be organized 
 in any place the population of which does not exceed six thou- 
 sand inhabitants. No association shall be organized in a city the 
 population of which exceeds fifty thousand persons with a less 
 capital than two hundred thousand dollars."* 
 Transiersof § 17. "The Capital stock of each association shall be divided 
 
 shares, • i ji 
 
 rights and into shares of one hundred dollars each, and be deemed personal 
 property, and transferable on the books of the association in such 
 
 • Act 1864, Sec. 5 
 
 ^ Act 1864, Sec. 6. ' Id. ♦ Act 1864, Sec. 7. 
 
§ 18 ORGANIZATION OF NATIONAL BANKING ASSOCIATIONS. 7 
 
 manner as may be prescribed in the by-laws or articles of associ- uaMiMesoi! 
 
 Ti 1 ■ Till, 1. Shareholders 
 
 ation. Every person becoming a snareholder by such transfer Rev. stat. 
 shall, in proportion to his shares, succeed to all the rights and li- . 
 abilities of the prior holder of such shares ; and no change shall 
 be made in the articles of association by which the rights, reme- 
 dies, or security of the existing creditors of the association shall 
 be impaired.'" 
 
 § 18. "At least fifty per centum of the capital stock of every payment of 
 association shall be paid in before it shall be authorized to com- Kev. stat 
 mence business; and the remainder of the capital stock of such as- 
 sociation shall be paid in installments of at least ten per centum 
 each, on the whole amount of the capital, as frequently as one in- 
 stallment at the end of each succeeding month from the time it 
 shall be authorized by the Comptroller of the Currency to com- 
 mence business; and the payment of each installment shall be cer- 
 tified to the Comptroller, under oath, by the president or cashier 
 of the association." ^ 
 
 § 19. "Whenever any shareholder, or his assignee, fails to pay proceedings 
 any installment on the stock when the same is required by the pre- hoMer jaUs 
 ceding section to be paid, the directors of guch association may BMiments. 
 sell the stock of such delinquent shareholder at public auction, flJ/s^^i*" 
 having given three weeks' previous notice thereof in a newspaper 
 published and of general circulation in the city or county where 
 the association is located, or if no newspaper is published in said 
 city or county, then in a newspaper published nearest thereto, 
 to any person who will pay the highest price therefor, to be not 
 less than the amount then due thereon, with the expenses of ad- 
 vertisement and sale; and the excess, if any, shall be paid to the 
 delinquent shareholder. If no bidder can be found who will pay 
 for such stock the amount due thereon to the association, and the 
 cost of advertisement and sale, the amount previously paid shall 
 be forfeited to the association, and such stock shall be sold as the 
 directors may order, within six months from the time of such for- 
 feiture, and if not sold it shall be canceled and deducted from the 
 capital stock of the association. If any such cancellation and re- 
 duction shall reduce the capital of the association below the min- 
 imum of capital required by law, the capital stock shall, within 
 
 • Eev. Stat. , Sec. 5139. This subject will be fully considered in the Eighth 
 Chapter. 
 
 2 Act 1864, Sec. 14. 
 
8 NATIONAL BANK ACT. § 20 
 
 thirty days from the date of such cancellation, be increased to the 
 required amount; in default of which a receiver may be appointed, 
 according to the provisions of section fifty- two hundred and thirty- 
 four, to close up the business of the association." 
 Organization § 20. In 1870 the Congress enacted that " associations may be 
 banks. orffanized in the manner prescribed by this Title for the purpose 
 
 Kev. Stat. ^ 7 m 1 ii J -i J! 
 
 Sec. 5185. of issuing notes payable in gold ; and upon the deposit or any 
 United States bonds bearing interest payable in gold with the 
 Treasurer of the United States, in the manner prescribed for other 
 associations, it shall be lawful for the Comptroller of the Cur- 
 rency to issue to the association making the deposit circulating 
 notes of different denominations, but none of them of less than five 
 dollars, and not exceeding in amount eighty per centum of the 
 par value of the bonds deposited, which shall express the prom- 
 ' ise of the association to pay them, upon presentation at the 
 ofi&ce at which they are issued, in gold coin of the United States, 
 and shall be so redeemable. But no such association shall have 
 a circulation of more than one million of dollars."* 
 
 Five years afterward the last sentence of this section was re- 
 pealed.' In 1880 Congress, further enacted " that any national gold 
 bank organized under the provisions of the laws of the United States, 
 may, in the manner and subject to the provisions prescribed by sec- 
 tion fifty-one hundred and fifty- four of the Revised Statutes of the 
 United States, for the conversion of banks incorporated under the 
 laws of any State, cease to be a gold bank, and become such an asso- 
 ciation as is authorized by sectionfifty-one hundred and thirty- three, 
 for carrying on the business of banking, and shall have the same 
 powers and privileges, and shall be subject to the same duties, re- 
 sponsibilities, and rules, in all respects, as are by law prescribed for 
 such associations : Provided, That all certificates of organization 
 which shall be issued under this act shall bear the date of the 
 original organization of each bank respectively as a gold bank." 
 
 1 Aet 1864, Sec. 15. 
 
 " Act July 12, 1870, 16 Stat at Large, 41 C. 2 S. Ch. 252, Sec. 3. 
 
 ^ Jan. 19, 1875, 18 Stat, at Large, 43 C. 2 S.Ch. 19. The language of the re- 
 pealing act was "that so much of section five thousand one hundred and eighty- 
 five of the Eevised Statutes of the United States as limits the circulation of 
 banking associations, organized for the purpose of issuing notes payable in gold, 
 severally to one million dollars, be, and the same is hereby, repealed ; and 
 each of such existing banlcing associations may increase its circulating notes, 
 and new banking associations .may be organized, in accordance with existing 
 >law, without respect to such limitation." 
 
 * Act Feb. 14, Public Laws, 46 C. 2 S. Ch. 25. 
 
§ 21 ORGANIZATION OF NATIONAL BANKING ASSOCIATIONS. 9 
 
 § 21. "Any bank incorporated by special law, or any banking state banks 
 
 .'•II. f t -t i may become 
 
 institution organized under a general law of any state, mav be- national. 
 come a national -association under this Title by the name prescribed sec si54. 
 in its organization certificate; and in such case the articles of as- 
 sociation and the organization certificate may be executed by a 
 majority of the directors of the bank or banking institution; and 
 the certificate shall declare that the owners of two-thirds of the 
 capital stock have authorized the directors to make such cer- 
 tificate, and to change and convert the bank or banking in- 
 stitution into a national association. A majority of the directors, 
 after executing the articles of association and organization certi- 
 ficate, shall have power to execute all other papers, and to do what- 
 ever may be required to make its organization perfect and com- 
 plete as a national association. The shares of any such bank may 
 continue to be for the same atnount each as they were before the 
 conversion, and the directors may continue to be the directors of 
 the association until others are elected or appointed in accordance 
 with the provisions of this chapter; and any stlate bank which is 
 a stockholder in any other bank, by authority of state laws, may 
 continue to hold its stock, although either bank, or both, may be 
 organized under and have accepted the provisions of this Title. 
 When the Comptroller of the Currency has given to such associa- 
 tion a certificate, under his hand and ofiicial seal, that the provi- 
 sions of this Title have been complied with, and that it is author- 
 ized to commence the business of banking, the association shall 
 have the same powers and privileges, and shall be subject to the 
 same duties, responsibilities, and rules, in all respects, as are pre- 
 scribed for other associations originally organized as national 
 banking associations, and shall be held and regarded as such an as- 
 sociation. But no such association shall have a less capital than the 
 amount prescribed for associations organized under this Title." ' 
 
 § 22. Utiiity of the statute. Though most of the state 
 banks which became national associations changed within a short 
 period after the enacting of the law of 1864, the meaning of this 
 section is worth giving partly as legal history and partly to ren- 
 der our work more complete. 
 
 § 23. No legal relations were changed by the con- 
 version. "The transition did not disturb the relation of either the 
 stockholders or officers of the corporation, nor did it enlarge or 
 
 'Act 1864, Sec. 44. 
 
10 NATIONAL BANK ACT. • § 24 
 
 diminish the assets of the institution. These all remained the 
 same under the national, as they were under the state organiza- 
 tion. The bank neither lost any of its assets nor escaped ahy of 
 its liabilities by the change. The change was a transition, and 
 . not a new creation." ' Says Judge Endicott : "On the execution 
 of the necessary papers and on the approval by the proper officers, 
 the directors of the state bank became the directors of the national 
 bank, the capital stock and the stockholders of the old bank be- 
 came the stock and stockholders of the new, together with the 
 right to all the property, not specially excepted, and the obliga- 
 tion to pay all indebtedness not otherwise provided for. No other 
 assignment was necessary to pass the personal property ; the 
 completion of the conversion contemplated by the statutes carried 
 with it the assignment and transfer of all personal property and 
 the rights of action, and the consequent liability to pay debts."^ 
 With greater fullness Judge Eapallo' has described the nature 
 of the conversion. "The general scheme of the National Banking 
 Act is that state banks may avail themselves of its privileges 
 and subject themselves to its liabilities without abandoning their 
 corporate existence, without any change in the organization, 
 of&cers, stockholders or property, and without interruption of 
 their pending business qr contracts. All property and rights 
 which they held before organizing as national banks are continued 
 to be vested in them under their new status. Great inconve- 
 niences might result if this saving of their existing assets did not 
 include pending executory contracts, and pending guarantees, as 
 well as vested rights of property. Although, in form, their prop- 
 erty and rights as state banks, purport to be transferred to them 
 in their new status of national banks, yet in substance there is 
 no actual transfer from one body to another, but a continuation of 
 the same body, under a changed jurisdiction. As between it and 
 those who have contracted with it, it retains its identity, notwith- 
 standing its acceptance of the privilege of organizing under the 
 National Banking Act." ^ 
 
 § 24. Albank can sue to recover loans made before 
 and after conversion. Consequently, a bank which held, as 
 
 ' Currier, J., Coffey v. National Bank, 46 Mo., 140 p. 143; 
 
 ' Atlantic National Bank i'. Harris, 118 Mass., p. 151 ; New York Grocers' 
 National Bank D. Clark, 32 How. Pr., 160 ; Thorp v. "Wegefarth, 56 Pa., 83; 
 Kelseyi). National Bank, 69 Pa., 426. 
 
 2 City National *Bank v. Phelps, 97 N. Y., p. 50. 
 
§ 25 ORGANIZATION OF NATIONAL BANKING ASSOCIATIONS. 11 
 
 a state banking association, a continued guaranty for loans, on 
 the strength of which it made loans both before, and after its con- 
 version into a national banking institution, could maintain an ac- 
 tion as a national bank against the guarantor on all of them.' In 
 another case a state bank paid money to its president on his rep- 
 resentation that he had paid the amount to an agent to whom the 
 bank was indebted. After its conversion the agent sued the bank 
 and recovered. The court held that it could maintain an action 
 in its national name against the president for the money. ^ 
 
 § 25. And is liable for debts of state bank. And if 
 a debtor of the state bank should be a creditor of the national 
 bank by owning its notes of circulation, he could compel the new 
 bank to receive them in payment. Nor would the insolvency of 
 the state bank impair his right to use them in this manner.' But 
 if a national bank should obtain judgment against such a debtor he 
 could not then purchase the notes of the state bank and set them 
 off against the judgment.* So, too, if a state bank should offer a 
 reward for the discovery and recovery of stolen money and change 
 into a national bank, it would be liable therefor. ^ 
 
 § 26. A bequest of bank stock not affected by its 
 conversion. As the conversion was not an annihilation or a 
 dissolution of the state bank, a bequest of the dividends on the 
 stock of a bank to the testator's sister, for example, and in the 
 event of the paying off and refunding of the stock itself " by the 
 expiration of the charter or from any other cause whatsoever," a 
 bequest that the amount should be paid to her, would vest the 
 stock in the residuary legatee after her death, though the bank 
 should have been converted with a national one. Her represen- 
 tative would have no claim to the stock on the ground that after 
 the conversion she was entitled to the amount of it." 
 
 § 27. Operation of enabling la\irs. Many of the states 
 passed enabling acts for those banks which desired to become na- 
 tional associations; though they could be legally established with- 
 out state action.' In Massachusetts the act continued the state 
 
 ' City N'ational Bank v. Phelps, 97 N. ¥., 44, affg. 16 Hun, 158. First 
 trial, 86 N. Y., 484. ^ Atlantic National Bank v. Harris, 118 Mass., 147. 
 » Thorp V. Wegefarth, 56 Pa., 82. * Id. 
 
 = Kelsey v. National Bank, 69 Pa., 426. See §§ 75, 77. 
 ^ Maynard v. Bank, 7 Phila., 6. 
 
 ' Stetson©. City of Bangor, 56Me.,274;FIint«.Boardof Aldermen, 99 Mass., 
 .141. 
 
12 ■ NATIONAL BANK ACT. § 28 
 
 bank as a body corporate for three years after thfe conversion for 
 certain purposes. " By continuing the existence of banks, thus 
 converted, as bodies cjrporate, the commonwealth was enabled to 
 regulate those matters peculiarly within its province to provide 
 for, as appears by the numerous statutes subsequently passed in 
 relation to the redemption, circulation and taxation of bank bills." ' 
 Nor did any conflict arise in consequence of enacting statutes by 
 a state authorizing its banks to become converted, and providing 
 for the termination of their charters, and the continuing of their 
 corporate names for the purpose of protecting and defending suits 
 instituted by or against them, and of enabling them to close their 
 affairs, but not for the purpose of continuing their business un- 
 der the laws of the state.'' In one state banks were required by 
 charter to pay a tax or bonus to the state on their paid capital. 
 A statute authorized them to reorganize as national banks pro- 
 vided the bonus was paid as before. It was decided that a state bank 
 could surrender its charter, and by so doing be discharged from 
 paying the bonus; and if it reorganized as a national bank the 
 state could not re impose the tax. ^ 
 
 § 28. Action by two-thirds, but not all of the stock- 
 holders. Whenever the owners of more than two-thirds of the 
 stock of a bank consented to the conversion, this could be done 
 without the consent of the rest.* And whenever a national bank 
 was organized as the successor of a state bank with the concur- 
 rence of liiore than two-thirds of the stockholders, it could own 
 the assets of its predecessor although in form it was organized 
 as a new bank and the assets were transferred by sale and pur- 
 chase. Thus, the First National Bank of Warren, Ohio, was or- 
 ganized by the stockholders of the Western Reserve Bank of that 
 place, and actually succeeded that bank in its location, business 
 and assets. Among these were judgments and decrees in favor of 
 the bank. It was contended that the new bank had not succeeded 
 to them. But whether a bank becomes the successor in the mode 
 provided by the law, or by organizing anew, judgments and de- 
 crees may be taken and held. ^ 
 
 ' Endicott, J., Atlantic National Bank v. Harris, 118 Mass., p. 151. 
 " Thomas i'. Farmera' Bank, 46 Md., 43. 
 ' State ('. National Bank, 33 Md., 75. 
 ' Keyser i'. Hitz, 2 Mackey, 473. 
 * Bank i\ Mclntire, 40 Ohio, 528. 
 
§29 ORGANIZATION OP NATIONAL BANKING ASSOCIATIONS. 13 
 
 § 29. New stock book better, but not required. 
 
 While it would be more regular when converting a bank into a 
 national banking association to open a new stock bookand jssue new 
 (certificates in the name of the national bank, "there is however," 
 says Cox, J., "nothing in the law prescribing the form of the 
 stock book or of the certificates of stock, and we see nothing to 
 prevent the new bank from treating the old books, and certificates 
 as sufficient evidence of title in the new concern. Neither the 
 rights nor liabilities of the stockholders could be effected by the 
 mere omission to issue a new form of stock certificate to them. 
 To hold otherwise would be to allow all the stockholders to escape 
 liablility by the mere omission of the formality of issuing the 
 shares in a new form.'" 
 
 § 30. Can a married woman consent to the conver- 
 sion. The question has arisen concerning the ability of a mar- 
 ried woman to consent to the conversion. Although the legal 
 metariiorphosis of a bank might be complete, would such a person 
 be a stockholder in the new concern ? If not consenting, it 
 would be difficult, said the court in Keyser v. Hitz,^ to make 
 such a person a member in the new concern. 
 
 § 31. Who are qualified directors in the converted 
 bank. The section provides that the directors in the state 
 bank may continue in that capacity until others are elected. In 
 December, 1864, the American Bank of Providence elected twelve 
 directors, two of whom never served. In May, the next year, the 
 stockholders signed an agreement authorizing their directors, or 
 a majority, to convert the bank into a national one, and appointed 
 twelve directors for the national bank. In June, the bank was 
 converted, and the articles of association which were signed by 
 the ten acting directors provided that the board should consist of 
 twelve and be elected annually in January. The bank was fully 
 organized in August of that year and the first election was held 
 the following January. In the interim between the conversion 
 and the annual election, the. ten acting directors of the state bank 
 took the oath required of directors, but the other two did not. 
 The question that afterward arose was, were the two persons 
 who were elected in December, 1864, directors of the national 
 fiank ? Said Durfee, J. : "The non-acting directors were elected 
 
 • Keyser v. Hitz, 2 Mackey, p. 490. 
 ' 2 Id., p. 491. 
 
14 NATIONAL BANK ACT. § 32 
 
 •with the other directors by the bank when a State bank No sub- 
 sequent qualification was required of them. They never signified 
 their non-.acceptance. The other directors never elected others 
 to fill their places at the board. For anything we can see, they 
 might have acted as directors at any time before the conversion, 
 if they had chosen. Where no qualification is required and there 
 is no usage to control, we think a person who is elected a bank 
 director may be presumed to accept, unless he declines. This 
 presumption may doubtless be rebutted, and perhaps simple non- 
 ' action for five months would be sufficient to rebut it in some cases. 
 But in this case the stockholders who authorized the conversion 
 recognized the non- acting directors as directors at the time of the 
 conversion. They name them, in the instrument authorizing the 
 conversion, with the other ten as those who are now the directors 
 of said American Bank." The instrument maybe invalid in so far 
 as it was intended to operate as a re- appointment, but considered 
 as a recognition of the status of the non-acting directors, it is none 
 , the less significant. We think we ought not to find for the 
 benefit of the bank that there were only ten directors previous to its 
 conversion because of the simple non-action of these two, when 
 the stockholders authorizing the conversion recognized these two 
 with the other ten at the' time they authorized the same." ' 
 
 § 32. Regularity of conversion. With respect to the 
 regularity of the conversion the certificate of the Comptroller is 
 conclusive.^ 
 
 § 33. Right of state bank stockholders to share in 
 the surplus. In many cases some of the stockholders of the 
 state banks did not desire, or were disqualified to be stockholders in 
 the national association. In Connecticut at least two cases of this 
 kind happened. The state itself was a stockholder in the banks. 
 In one of them it had no right to enter the new organization, in 
 the other case its right to enter was at first assumed, but after- 
 ward denied. In both the banks sought to retain the state's 
 share of the surplus capital which had been accumulated by the 
 old organizations, but did not succeed.' 
 state banks § 34 " It shall be lawful for any bank or banking association, 
 
 branches. 
 Bev. Stat. 
 Sec. 5155. 1 Lockwood V. Mechanics' National Bank, 9 E. I. 308 p. 341. 
 
 ' Keyser v. Hitz, 2 Maekey, 473 ; Casey v. Galli, 94 V. S., 673. 
 
 ' Stiitef. Phoenix Bank, 34 Conn., 205 ; States. Hartford National Bank, 
 
 id., 240. 
 
§ 35 ORGANIZATION OF NATIONAL BANKING ASSOCIATIONS. 15 
 
 organized under state laws, and having branches, the capital 
 being joint and assigned to and used by the mother-bank and 
 branches in definite proportions, to become a national banking 
 association in conformity with existing laws, and to retain and 
 keep in operation its branches, or such one or more of them as it 
 may elect to retain ; the amount of the circulation redeemable at 
 the mother -bank, and each branch, to be regulated by the amount 
 of capital assigned to and used by each.' 
 
 § 35. "Nothing in this Title shall affect any appointments made. Eights 
 acts done, or proceedings had or commenced prior to the third associations 
 day of June, eighteen hundred and sixty-four, in or toward the under act of 
 organization of any national bankinff association under the act of Kev. stat. 
 
 ° "^ ^ sec. 5156. 
 
 February twenty- five, eighteen hundred and sixty -three ; but all 
 associations which, on the third day of June, eighteen hundred 
 and sixty four, were organized or commenced to be organized 
 under that act, shall enjoy all the rights and privileges granted, 
 and be subject to all the duties, liabilities, and restrictions impos- 
 ed by this Title, notwithstanding all the steps prescribed by this 
 , Title for the organization of associations were not pursued, if such 
 associations were duly organized under that acf" 
 
 § 36. Conversion by savings bank. In 1876 Con- 
 gress further enacted that " all savings or other banks now or- 
 ganized, or which shall hereafter be organized, in the District of 
 Columbia, under any act of Congress, which shall have capital 
 stock paid up in whole or in part, shall be subject to all the pro- 
 visions of the Eevised Statutes, and of all acts of Congress appli- 
 cable to national banking associations, so far as the same may be 
 applicable to such savings or other banks : Provided, That such sav- 
 ings banks now established shall not be required to have a paid- 
 in capital exceeding one hundred thousand dollars."* By, this 
 act a savings bank organized by the law of that district could 
 be converted into a national banking association.* Before that 
 time only banks incorporated by a special law, or by the general 
 law of a state could be converted. 
 
 § 37. "Whenever a certificate is transmitted to the Comp- Preliminary 
 troller of the Currency, as provided in this Title, and the association tion by 
 
 Comptrol- 
 ler. 
 
 ' Act March 3, 1865, 13 Stat, at Large, 38 C. ,2 S. Ch. 78, Sec. 7. 
 
 ' ' Act 1864, Sec. 62. 
 
 ' June 30, 1876, 19 Stat, at Large, 44 C. 1 S. Ch. 156, Sec. 6. 
 
 ' Keyser v. Hitz, 2 Mackey, 473. 
 
16 NATIONAL BANK ACT. § 38 
 
 bbv. Stat, transmitting the same notices the Comptroller that at least fifty 
 per centum of its capital stock has been duly paid in, and that 
 such association has complied -with all the provisions of this Title 
 required to be complied with before an association shall be author- 
 ized to commence the business of banking, the Comptroller shall 
 examine into the condition of such astociation, ascertain especi- 
 ally the amount of money paid in on account of its capital, the 
 name and place of residence of each of its directors, and the 
 amount of the capital stock of which each is the owner in good 
 faith, and generally whether such association has complied with 
 all the provisions of this Title required to entitle it to engage 
 in the business of banking ; and shall cause to be made and at- 
 tested by the oaths of a majority of the directors, and by the 
 president or cashier of the association, a statement of all the facts 
 necessary to enable the Comptroller to determine whether the 
 association is lawfully entitled to commence the business of bank- 
 ing." ' 
 of authOTUy § ^^- "^^' W°^ ^ careful examination of the facts so reported, 
 mence biiBi- ^^^ °^ ^^J other facts which may come to the knowledge of the 
 Comptroller, whether by means of a special commission appoint- 
 ed by him for the purpose of inquiring into the condition of such 
 association, or otherwise, it appears that such association is law- 
 fully entitled to commence the business of banking, the Comp- 
 troller shall- give to such association a certificate, under his hand 
 and official seal, that such association has complied with all 
 the provisions required to be complied with before commencing 
 the business of banking, and that such association is authorized 
 • to commence such business. But the Comptroller may withhold 
 from an association his certificate authorizing the commencement 
 of business, whenever he has reason to suppose that the sharehold- 
 ers have formed the same for any other than the legitimate ob- 
 jects contemplated by this Title." ^ 
 
 Bev. Stat. 8 39. "The association shall cause the certificate issued under 
 Sec. 5170. j^, ,. ,• , , , T 1 , . . -, . 
 
 the preceding section to be published in some newspaper printed in 
 
 the city or county where the association is located, for at least sixty 
 days next after the issuing thereof ; or, if no newspaper is pub- 
 lished in such city or county, then in the newspaper published 
 nearest thereto." ' 
 
 '■ Act 1864, Sec. 17. 
 
 ' Act 1864, first sentence. Sec. 18; last sentence, Sec. 12. 
 
 Kev. Stat. 
 Sec. S169. 
 
§ 40 OEGANIZATION OF NATIONAL BANKING ASSOCIATIONS. 17 
 
 8 40. "The usual business of each national bankiner associa- Piaoeof 
 
 " business. 
 
 tion shall be transacted at an office or bankinsj house located m Bev. stat. 
 
 ° Sec. 5190. 
 
 the place specified in its organization certificate." 
 
 § 41. " Every association which shall have failed to pay up JeS°oy ' 
 its capital stock, as required by law, and every association whose ^ock^en-^ 
 capital stock shall have become impaired by losses or otherwise, H™stat. 
 shall, within three months after receiving notice thereof from the ^^°- ^'^'''• 
 Comptroller of the Currency, pay the deficiency in the capital 
 stock, by assessment upon the shareholders pro rata for the amount 
 of capital stock held by each; and the Treasurer of the United 
 States shall withhold the interest upon all bonds held by him in 
 trust for any such association, upon notification from the Comp- 
 troller of the Currency, until otherwise notified by him. If any 
 such association shall fail to pay up its capital stock,' and shall re- 
 fuse to go into liquidation, as provided by law, fOr three months 
 after receiving notice from the Comptroller, a receiver may be ap- 
 pointed to close up the business of the association, according to 
 the provisions of section fifty-two hundred and thirty-four:' And 
 provided, That if any shareholder or' shareholders of such bank quent's 
 shall neglect or refuse, after three months' notice, to pay the as- 
 sessment, as provided in this section, it shall be the duty of the 
 board of directors to' cause a sufficient amount of the capital stock 
 of such shareholder or shareholders to be sold at public auction 
 (after thirty days' notice shall be given by posting such notice of 
 sale in the office of the bank, and by publishing such notice in a 
 newspaper of the city or town in which the bank is located, or in 
 a newspaper published nearest thereto,) to make good the defi- 
 ciency, and the balance, if any, shall be returned to such delinquent 
 shareholder or shareholders." * 
 
 1 Act 1864, Sec. 18. 
 
 = Act 1864, Sec. 8. 
 
 « Act March 3, 1873, 17 Stat, at Large, 42 C. 3 S. Ch. 269, Sec. t 
 
 * Act June 30, 1876, 19 Stat, at La,rge, 44 C. 1 S. Gh. 156, Sec. 4. 
 
 2— B. 
 
18 
 
 NATIONAL BANK ACT. 
 
 § 42 
 
 CHAPTEE in. 
 
 EXTENSION OF NATIONAL BANKING ASSOCIATIONS.' 
 
 42. Period of extension. 
 
 43. Mode of effecting it. 
 
 44. Examination and granting of certifi- 
 
 cate. 
 
 45. Suits by and against banks. 
 
 46. Proceedings when shareholder does 
 
 not assent to extension. 
 
 47. Redemption of notes and issue of new 
 
 ones. 
 
 48. Liquidation of expiring banks. 
 
 Extension of 
 charters for 
 twenty 
 years. 
 
 Mode of 
 effecting ex- 
 tension. 
 
 § 42. In 1882 Congress enacted " that any national banking 
 association organized under the acts of February 25, 1863, June 
 3, 1864, and February 14, 1880, or under sections 5133, 5134, 5135, 
 5136, and 5154 of the Revised Statutes of the United States, may, 
 at any time within the two years next previous to the date of the 
 expiration of its corporate existence under present law, and with 
 the approval of the Comptroller of the Currency, to be granted, as 
 hereinafter provided, extend its period of succession by amending 
 its articles of association for a term of not more than twenty years 
 from the expiration of the period of succession named in said ar- 
 ticles of association, and shall have succession for suck extended 
 period, unless sooner dissolved by the act of shareholders owning 
 two-thirds of its stock, or unless its franchise becomes forfeited 
 by some violation of law, or unless hereinafter modified or re- 
 pealed. , 
 
 § 43. " That such amendment of said articles of association 
 shall be authorized by the consent in writing of shareholders own- 
 ing not less than two-thirds of the capital stock of the association; 
 and the board of directors shall cause such consent to be certified 
 under the seal of the association, by its president or cashier, to 
 the Comptroller of the Currency, accompanied by an application 
 made by the president or cashier for the approval of the amended 
 articles of association by the Comptroller; and such amended ar- 
 ticles of association shall not be valid until the Comptroller shall 
 give to such association a certificate under his hand and seal that 
 the association has complied with all the provisions required to 
 
 ' Act July 12, 1882, Public Laws, 47 C. 1 S. Ch. 290. 
 
§ 44 EXTENSION OP NATIONAL BANKING ASSOCIATIONS. 19 
 
 be complied with, and is authorized to have succession for the ex- 
 tended period named in the amended articles of association. 
 
 § 44. " That upon the receipt of the application and certificate Examina- 
 of the association provided for in the preceding section, the Comp- granting ot 
 troller of the Currency shall cause a special examination to be 
 made, at the expense of the association, to determine its condition; 
 and if after such examination or otherwise it appears to him that 
 said association is in a satisfactory condition, he shall grant his 
 certificate of approval provided for in the preceding section, or if 
 it appears that the condition of said association is not satisfactory, 
 he shall withhold such certificate of approval. 
 
 § 45. " That any association so extending the period of its sue- f^^^^^i^ 
 cession shall continue to enjoy all the rights and privileges and ^^^0™^^ 
 immunities granted and shall continue to be subject to all the 
 duties, liabilities, and restrictions imposed by the Eevised Statutes 
 of the United States and other acts having reference to national 
 banking associations, and it shall continue to be in all respects the 
 identical association it was before the extension of its period of 
 succession: Provided, however, That the jurisdiction for suits 
 hereafter brought by or against any association established under 
 any law providing for national banking associations, except suits 
 . between them and the United States, or its ofi&cers and agents, 
 shall be the same as, and not other than, the jurisdiction for suits 
 by or against banks not organized under any law of the United 
 States which do or might do banking business where such national 
 banking associations may be doing business when such suits may 
 be begun : And all laws and parts of laws of the United States 
 inconsistent with this proviso be, and the same are hereby, re- 
 pealed. 
 
 S 46. "That when any national banking association has amended Proceedings 
 
 . .--.,. -^ when share- 
 
 its articles of association as provided in this act, and the- Comp- holder docs 
 
 not assent to 
 
 troller has granted his certificate of approval, any shareholder not extension, 
 assenting to such amendment may give notice in writing to the 
 directors, within thirty days from the date of the certificate of ap- 
 proval, of his desire to withdraw from said association, in which 
 case he shall be entitled to receive from said banking associ- 
 ation the value of the shares so held by him, to be ascer- 
 tained by an appraisal made by a committee of three persons, 
 one to be selected by such shareholder, one by the directors, and 
 the third by the first two; and in case the value so fixed shall not 
 
20 NATIONAL FANK ACT. § 47 
 
 be Batisfactory to any such shareholder, he may appeal to thfe 
 Comptroller of the Currency, who shall cause a reappraisal to be 
 made, which shall be final and binding; and if said reappraisal 
 shall exceed the value fixed by said committee, the bank shall pay 
 the expenses of said reappraisal, and otherwise the appellant shall 
 pay said expenses; and the value so ascertained and determined 
 shall be deemed to be a debt due, and be forthwith paid, to said 
 shareholder, from said bank; and the shares so surrendered and 
 appraised shall, after due notice, be sold at public sale, within ^ 
 thirty days after the final appraisal provided in this section: Pro- 
 vided, That in the organization of any banking association inten- 
 ded to replace any existing banking association, and retaining the 
 name thereof, the holders of stock in the expiring association shall 
 be entitled to preference in the allotment of the shares of the new 
 association in proportion to the number of shares held by them 
 respectively in the expiring association. 
 Eedemption § 47. " That the circulating notes of any association so extend- 
 iB8ueo£iiew ing the period of its succession which shall have been issued to it 
 prior to such extension shall be redeemed at the Treasury of the 
 United States, as provided in section three of the act of June 
 twentieth, eighteen hundred and seventy-four, entitled "An act 
 fixing the amount of United States notes, providing for redistri- 
 bution of national bank currency, and for other purposes," and 
 such notes when redeemed shall be forwarded to the Comptroller 
 of the Currency, and destroyed as now provided by law; and at 
 the end of three years from the date of the extension of the cor- 
 porate existence of each bank the association so extended shall 
 deposit lawful money with the Treasurer of the United States suf- 
 ficient to redeem the remainder of the circulation which was out- 
 standing at the date of its extension, as provided in sections fifty- 
 two hundred and twenty-two, fifty -two hundred and twenty-four, 
 and fifty- two hundred and twenty-five of the Eevised Statutes; and 
 any gain that may arise from the failure to present such circulat- 
 ing notes for redemption shall inure to the benefit of the United 
 States; and from time to time, as such notes are redeemed or 
 lawful money deposited therefor as provided herein, new circulat- 
 ing notes shall be issued as provided by this act, bearing such 
 devices, to be approved by the Secretary of the Treasury, as shall 
 make them readily distinguishable from the circulating notes 
 heretofore issued: Provided however, That each banking asso- 
 
§, 48 EXTENSION OF NATIONAL BANKING ASSOCIATIONS. 21 
 
 ciation which shall obtain the benefit of this act shall reimburse 
 to the Treasury.the cost of preparing the plate or plates for such 
 new circulating notes as shall be issued to it. 
 
 § 48. " That national banking associations whose corporate lex- Liquidation 
 istence has expired or shall hereafter expire, and which do not ba^s^"^*"^ 
 avail themselves of the provisions of this act, shall be required 
 to comply with the provisions of sections fifty-two hundred 
 and twenty-one and fifty-two hundred and twenty-two of the Re- 
 , vised Statutes in the same manner as if the shareholders had 
 voted to go into liquidation, as provided in section fifty-two hun- 
 dred and twenty of the Revised Statutes; and the provisions of 
 sections fifty-two hundred and twenty-four and fifty-two hundred 
 and twenty-five of the Revised Statutes shall also be applicable 
 to such associations, except as modified by this act; and the fran- 
 chise of such association is hereby extended for the sole purpose 
 of liquidating their affairs imtil such affairs are finally closed." 
 
22 
 
 NATIONAL BANK ACT. 
 
 CHAPTER IV. 
 
 POWERS OF NATIONAL BANKING ASSOCIATIONS. 
 
 General Powers, and those of Officers Relating to Personal Property. 
 
 49. Powers. 
 
 50. Are private corporations. 
 
 51. But created to aid the government. 
 
 52. Have not the same rights in all the 
 
 States. 
 
 53. Power of the president. 
 
 54. When his knowledge cannot be im- 
 
 puted to bank. 
 
 55. His only powers incident to his office. 
 
 56. Neither he nor cashier can give up a 
 
 debt. 
 
 57. Nor receive in exchange inferior secu- 
 
 rity. 
 
 58. No^ make an unusual agreement 
 
 58. {a-c) Exceptions to above rule. 
 
 59. President and cashier can borrow from 
 
 their bank. 
 
 60. Who can remove the president. 
 
 61. By-laws. 
 
 62. Five grants of power in seventh clause 
 
 .of 5136th section. 
 
 63. Eight to purchase notes and bills. 
 
 63. (a) Cannot discount note containing 
 
 unusual stipulation. 
 
 64. Can collect notes. 
 
 65. dan buy and sell government bonds. 
 
 65. (a) And coupons on state bonds. 
 
 66. Can it deal in other securities. 
 
 67. Consequence of exceeding its author- 
 
 ity. 
 
 i 68. Can lend on collateral security. 
 
 69. Including warehouse receipt. 
 
 70. But cannot lend its credit. 
 
 71. Can borrow on its own notes. 
 
 72. Can sell or assign its interest in pledg- 
 
 ed coin. 
 
 73. Can compromise a debt. 
 
 74. And pay money to effect a favora- 
 
 ble settlement. 
 
 75. Converted bank is liable for deposits 
 
 of the other. 
 
 76. Liability for special deposits. 
 
 77. Liability of converted bank for special 
 
 deposits. 
 
 78. Power to make agreement to recover 
 
 stolen property. 
 
 79. Cannot indorse a note for compensa- 
 
 tion. 
 
 80. When bank can guarantee note. 
 
 81. Can hold deposit for benefit of other 
 
 contracting parties. 
 
 82. Cannot receive deposits when insol- 
 
 vent. 
 
 83. Cannot deny its liability for wrongfol 
 
 use of another's property. 
 
 84. Can hold cash dividend for share- 
 
 holder's debt. 
 85i Cannot be garnished for deposit. 
 85 (o). Employment of bank officers. 
 
§ 49 
 
 POWERS OF NATIONAL BANKING ASSOCIATIONS. 
 
 23 
 
 Power to Hold Real Estate. 
 
 86. Power to hold real estate. 
 
 87. Meaning of the seciiou. 
 
 88. National Bank v. Whitney. 
 
 89. National interpretation followed by- 
 
 state courts. 
 
 90. Transfer of real estate to secure pre- 
 
 vious debt. 
 
 91. Validity of mortgage to secure usu- 
 
 rious note. 
 
 92. Purchase of additional real estate to 
 
 secure debt. 
 
 93. Also prior mortgage. 
 
 94. Converted bank can take real estate 
 
 of state bank. 
 
 95. Real estate may be taken as security 
 
 in the form of stock. 
 
 96. Eight to cut timber on real estate 
 
 taken for debt. 
 
 97. No restriction on bank's power to sell. 
 
 Restrictions relating to Loans, Dividends, Uncurrent Notes, 
 Certifying, and Title. 
 
 2 98. Loans to any person shall not exceed 
 one-tenth of capital. 
 99. Object and meaning ot section. 
 
 100. Violation of section is no defense to 
 
 borrower. 
 
 101. Eight to transfer securities for such 
 
 a loan. 
 
 102. Note held by converted bank is not 
 
 within the meaning of section. 
 
 103. Director is liable if borrowing beyond 
 
 legal limit. 
 
 104. Loans on its own stock prohibited. 
 
 ^105. Loans on circulation prohibited. 
 
 106. Limitation of bank's indebtedness. 
 
 107. When dividends cannot be declared. 
 
 108. Must not pay uncurrent notes. 
 
 109. Certification of what checks prohibit- 
 
 ed. 
 109 (a). Verbal promise to paycheck when 
 drawer has funds. 
 
 110. What associations are governed by 
 
 Chapters 2, 3, 4 of Title LXII, ol 
 Eevised Statutes. 
 110(a). When "National" is prohibited. 
 
 § 49. "Upon duly making and filing articles of association and Powers, 
 an organization certificate, the association shall become, as from seo.'sise.' 
 the date of the execution of its organization certificate a body cor- 
 porate, and as such, and in the name designated in the organiza- 
 tion certificate, it shall have power — 
 
 "First. To adopt and use a corporate seal. 
 
 "Second. To have succession for the period of twenty years 
 from its organization, unless it is sooner dissolved according to 
 the provisions of its articles of association, or by the act of its 
 shareholders owning two-thirds of its stock, or unless its fran- 
 chise becomes forfeited by some violation of law. 
 
 "third. To make contracts. 
 
 "Fourth. To sue and be sued, complain and defend, in any 
 court of law and [or] equity, as fully as natural persons. 
 
 "Fifth. To elect or appoint directors, and by its board of 
 directors to appoint a president, vice-president, cashier, and other 
 
24 NATIONAL BANK ACT. § 50 
 
 officers, define their duties, require bonds of them and fix the 
 penalty thereof, dismiss such officers or any of them at pleasure, 
 and appoint others to fill their places. 
 
 "Sixth. To prescribe, by its board of directors, by-laws not in- 
 consistent with law, regulating the manner in which its stock 
 shall be transferred, its directors elected or appointed, its officers 
 appointed, its property transferred, its general business con- 
 ducted, and the privileges granted to it by law exercised and 
 enjoyed. 
 
 "Seventh. To exercise by its board of directors, or duly author- 
 ized officers or agents, subject to law, all such incidental powers 
 as shall be necessary to carry on the business of banking ; by 
 discounting and negotiating promissory notes, drafts, bills of ex- 
 change, and other evidences of debt; by receiving deposits; by 
 buying and selling exchange, coin, and bullion; by loaning money 
 on personal security; and by obtaining, issuing, and circulating 
 notes according to the provisions of this Title. 
 
 "But no association shall transact any business except such as 
 is incidental and necessarily preliminary to its organization, until 
 it has been authorized by the Comptroller of the Currency to 
 commence the business of banking." ' 
 
 § 50. Are private corporations. In setting forth more 
 minutely the powers of the national banking associations it may 
 be remarked that they are "private corporations, organized under 
 a general law of Congress by individual stockholders, with their 
 own capital, for private gain, and managed by officers, agents, 
 and employes of their own selection. They constitute no part 
 of any branch of the government of the United States, and what- 
 ever public benefit they contribute to the country in return for 
 grants and privileges conferred upon them by statute is of a gen- 
 eral nature, arising from their business relations to the people 
 through individual citizens, and not as direct representatives of 
 the state as a body politic in exercising its legal and constitu- 
 tional functions."^ 
 
 § 51. But are created to aid the government. Nev- 
 ertheless, so Judge Swayne has remarked,' they "are instru- 
 
 V Act, 1864, 'Sec. 8. 
 
 = Richardson, J., Branch v. The United States, 12 U. S. Ct. of Claims, 281, 
 p. 286. 
 
 ' Farmers & Mechanics' National Bank v. Bearing, 91 II. S., 29 p. 33. 
 
§ 52 POWERS OF NATIONAL BANKING ASSOCIATIONS. 25 
 
 ments designed to be used to aid the government in the adminis- 
 tration of an important branch of the public service. They are 
 means appropriate to that end. Of the degree of the necessity 
 ■which existed for creating them, Congress is the sole judge. Be- 
 ing such means, brought into existence for this purpose, and in- 
 tended to be so employed, the state can exercise no control over 
 them, nor in any wise affect their operation, except in so far as 
 Congress may see proper to permit. Anything beyond this is an 
 abuse, because it is the usurpation of power which a single state 
 cannot give. Against the national will ' the states have no power, 
 by taxation or otherwise, to retard, impede, burthen, or in any 
 manner control, the operation of the constitutional laws enacted 
 by Congress to carry into execution the powers vested in the gen- 
 eral government' The power to create carries with it the power 
 to preserve. The latter is a corollary from the former." 
 
 § 52. They have not the same rights in all the 
 states. Bat " it is far from correct to say that because they are 
 organized under a law of the United States, they possess the 
 same and equal rights in all the states. They must carry on their 
 business of banking at the place named in their organization cer- 
 tificate, and nowhere else. For all practical purposes they exer- 
 cise their functions only within the limits of the state in which 
 they are located, and should one of them attempt to carry on busi- 
 ness outside of those limits, it would find itself completely, with- 
 out authority." ' In New York, consequently, a national bank 
 which is organized and doing business in another state cannot 
 keep an office of discount and deposit there, nor maintain an ac- 
 tion on any note discounted at such an office.^ 
 
 § 53. Po'wer of the president. Leaving this general 
 view of the section we shall iirst inquire into tlie power conferred 
 on the president. He "has very little inherent power," says a 
 good authority.^ "It is his duty to preside at the meetings of the 
 board of directors, and he has charge of the litigation of the 
 bank ; and other than these he has no power inherently over 
 and beyond another director.* We are not advised the vice 
 president of a bank has inherently any other than contingent 
 
 ' McCrary, J., St. Louis National Bank v.. Allen, 2 McCrary p. 95. 
 ^ National Bank v. Phoenix Warehousing Co., 6 Hun, 71. 
 ' Baker, J., First National Bank v. Sherburne, 14 Brad., 566 p. 573 
 * Hodge V. National Bank, 22 Gratt., 51. 
 
26 NATIONAL BANK ACT. § 54 
 
 duties to perform, unless it be he is also a member of the 
 board of directors. As a matter of fact, these officers may fre- 
 quently transact important business for the bank. Sometimes it 
 is done by express authority from the directors, and sometimes, 
 if done with the knowledge and approbation or the tacit sanction 
 of the board, it may be regarded as legalized by the principles of 
 ratification or usage. The powers and duties of a cashier are 
 much more numerous. In all transactions in which the bank may 
 lawfully engage, the cashier is its managing agent. While he is 
 the business officer of the bank, it is in the sense of one who 
 transacts the business, and not of one who regulates and controls 
 it." The banking law, though, does specify that "the president 
 and cashier of every national banking association shall cause to 
 be kept at all times a full and correct list of the names and resi- 
 dences of all the shareholders in the association, and the number 
 of shares held by each, in the office where its business is trans- 
 acted." ' 
 
 § 54 When his knowledge cannot be imputed to the 
 bank. The above remarks were made by the court in a suit by 
 a national bank to recover the amount of a note, which was taken 
 by its cashier before maturity in the-usual course of business, and 
 without notice or knowledge of a contract of warranty relating to 
 a machine sold for which the note was given in payment. Nor 
 did any of the directors know of the warranty except the president 
 of the bank, who was a friend of the maker, and wrote both the note 
 and the contract of warranty. Furthermore, he knew prior to 
 the transfer of the note to the bank that the maker claimed that 
 the machine would not work as warranted, and had demanded the 
 note. The president, though, never informed any of the directors 
 or officers of the bank of these facts, and he did not know that 
 the bank had taken the note until two or three months after the 
 transfer. As he had been clothed with no specific powers, and 
 therefore possessed only those mentioned in the banking law, the 
 court decided that his knowledge regarding the note was not a 
 notice to the bank, and hence the defense of the maker, that there 
 was a failure of consideration for the note, was not good. On the 
 other hand, if the notice had been either to the cashier or to the 
 board of directors, this would have been a notice to the bank.^ 
 
 • Rev. Stat., Sec. 5210. 
 
 ^ First National Bank v. Sherburne, 14 Brad., 566. 
 
§ 55' POWERS OF NATIONAL BANKING ASSOCIATIONS. 27 
 
 § 55. His incidental powers. "There is no specification of 
 powers or duties to be exercised by the president or cashier," says 
 Moncure, President, in Hodge v. First National Bank.^ Other 
 duties may be defined by the board of directors. When not thus 
 defined, "we must regard the president and cashier," said the coUrt 
 in the case above mentioned, "as having only such powers as may be 
 incident to their ofiices respectively in their very nature, in the 
 absence of anything in the act of incorporation to the contrary ; 
 and we must regard all other powers needful to the management 
 of the concerns and business of the bank as residing alone in the 
 directory." 
 
 § 56. Neither he nor cashier can give up a debt. 
 Consequently, neither of theae officers nor both acting together 
 can " give up a debt or liability to the bank," nor make any ad- 
 missions which would release the maker of a note due to the bank 
 from his legal responsibility. ^ 
 
 § 57. Nor receive in exchange an inferior security. 
 Nor has the president power to sell or surrender securities, and 
 receive others of an inferior value.^ In one case,* at the time of 
 organizing a bank an exchange committee was formed consisting 
 of the president, the cashier, Lucas, whose eligibility was after- 
 ward questioned, and a fourth person. " This committee was 
 formed under the by-laws of the corporation, and it was their 
 duty to formulate rules and regulations by which the president 
 and cashier were to be governed in making discounts, and in buy- 
 ing notes." A note owned by the bank, and which was well se- 
 cured, was sold by the president for less than its full value "with- 
 out any direction or. authority from the exchange committee," nor 
 was the sale ever " ratified by them or by the board of directors 
 or the stockholders." He contended that he had authority to sell 
 the note. But the court held otherwise, at least none was shown, 
 said Reese, J. " No rules or regulations had ever been made by > 
 the exchange committee which would authorize it, and it was not 
 authorized by the board of directors. There is nothing in the act 
 
 1 22 Gratt., p. 58. 
 
 ' Hodge V. First National Bank, 22 Gratt., 51; First National Bank v. Tis- 
 dale, 18 Hun, 151. See Bank of the United States v. Dunn, 6 Peters, 51; 
 .Bank of the Metropolis v. Jones, 8 Id., 12; State v. Davis, 50 How. Pr., 
 447. 
 
 •'' First National Bank v. Bennett, 33 Mich., 520. 
 
 ♦ First National Bank v. Lucas, 21 Neb. , 280. 
 
28 NATIONAL BANK ACT. § 58 
 
 concerning the organization of national banks which would au- 
 thorize it, and it is not shown to have been the custom of the 
 bank to permit the president to make such sales to be subsequently- 
 ratified. Ordinarily, the authority of a president of a bank, as 
 such, is very limited. He may bring an action at law and employ 
 counsel for the purpose of protecting the rights of the bank, but 
 he is not its executive officer nor has he charge of its moneyed 
 operations. He has no more power of management, or disposal 
 of the property of the corporation than any other member of the 
 board of directors. It is true that extensive powers may be, and 
 are, quite often, given to presidents of banking organizations by 
 the charter of the bank or by the action of the managing board, 
 and where so conferred, the right tp proceed thereunder will exist; 
 but there is no proof in this case of any such power." ' 
 
 § 58. Nor make an unusual agreement. If an agree- 
 ment embodies a transaction which is " not to be within the usual 
 course of business of the bank, it is not binding on the bank, 
 although signed by the president thereof as such officer. He is 
 the executive agent of the board of directors within the ordinary 
 business of the bank, but cannot bind it by a contract outside thereof 
 without special authority." ^ So, too, a guaranty against loss or 
 liability for signing as sureties, given by a bank president in his 
 own name and without authority from the directors, to persons 
 whom he had solicited thus to sign a note given to the bank, to 
 retire a prior note held by ih against their principal, is the indi- 
 vidual contract of the president, and not binding on the bank.^ 
 
 § 58. (a) Exceptions to above rule. Sometimes, how- 
 ever, his contracts that are not of an ordinary nature will bind the 
 bank. Thus O, the president of a bank, informed E that a bank 
 was to be reorganized, and that if he would act as a director and 
 his firm would give it all their business and use their influence 
 to extend its business, ten shares of its stock would be given to 
 him. K. accepted the proposition and was elected and served as 
 director and his firm transacted their business with the bank. The 
 agredinent was a sufficient consideration to sustain the contract 
 for the stock. The president proposed to act for the bank, which 
 
 ' 21 Neb., 280 p. 285. 
 
 ' First National Bank v. Hock, 89 Pa., 324 p. 327. 
 
 ' First National Bank v. Bennett, 33 Mich., 520. 
 
I 58 (b) POWERS OP NATIONAL BANKING ASSOCIATIONS. 29 
 
 ratified his action by receiving the benefits derfved from the eon- 
 tract. ' 
 
 § 58. (6) So, too, if the president of a national bank should 
 instruct its correspondent bank to charge against the other the 
 amount of a private note which it held against him in payment of 
 the same, and this should be done and an account be rendered 
 showing the transaction which is accepted by the first bank, it 
 would be estopfed from denying the charge; neither could a 
 receiver -subsequently appointed set aside the transaction. Said 
 Drummond, J.: "Where a bank, established under an act of 
 Congress, or in any other way, elects its own officers, the men who 
 are interested in the bank, the stockholders, the depositors, ought 
 to be bound by the authorized acts of the officers, or those which 
 appear to be authorized, whether they are or not, and by the gen- 
 eral mer<;antile usage of banks." ' 
 
 § 58. (c) Can cashier insure return of collateral se- 
 curity. The power of a cashier to insure the return of bonds re- 
 ceived as collateral security for a note discounted by the bank 
 has been questioned. In one case the cashier when receiving the 
 bonds gave a receipt stating among other things that they were 
 to be returned to the pledgor on the payment of his note. Hav- 
 ing been stolen the bank was sued for their value. The court 
 said that the bank was held to the common law liability by the 
 action of the directors in agreeing to accept the bonds as col- 
 lateral security, that the cashier's receipt expressed merely their 
 action and that if the bank " had undertaken to do more, and to 
 charge the bank as insurers, we are by no means ready to say that 
 such a contract would have come within the powers of a cashier."' 
 
 § 59. President and cashier can borrow from their 
 bank. " The president, cashier or director of a national bank 
 may borrow money from the bank, as any other person may, and 
 execute a valid note for the same that will bind them as well as 
 the bank receiving it ; and such note is not void, nor, in the absence 
 of fraud, can such note be repudiated or avoided by the bank by 
 reason of that relation." * • 
 
 ' Eich V. State National Bank, 7 Neb., 201. 
 ' Burton v. Burley, 9 Biss., 253 p. 257. 
 ' Jenkins v. National Village Bank, 58 Me., 275 p. 278. 
 * Welker, J., Blair v. First National -Bank of Mansfield, 2 Flippin, 111 p. ' 
 116. 
 
30 NATIONAL BANK ACT. § 60 
 
 § 60. Who can remove the president. The directors, 
 and not the stockholders have power to remove the president. 
 Nor does it " seem to be at all necessary that any by-laws should 
 be adopted before a president may be chosen or removed, and 
 another appointed in his place. This power is expressly given to 
 the board, irrespective of any by-laws, both by the articles of as- 
 sociation and by the act of Congress. Besides, it is a power that 
 might be required to be exercised, or that it might be expedient 
 to exercise, prior to the adoption of any by-laws." ' 
 
 § 61. By-laws. The sixth sub-division of this section re- 
 lates to the making of by-laws for the regulation of the transfer 
 of stock, election of officers and other matters. It has been de- 
 cided that "a majority, at a regular or legally called meeting, when 
 a quorum is present, is sufficient to enact by-laws. That a by- 
 laws informally adopted, may be subsequently ratified, and with- 
 out any record of adoption, may be proved by the usage and acts 
 of the bank, and parties dealing with it." ^ 
 
 § 62. Grants of power in seventh clause of 5136th 
 section. We have now reached the meaning of the seventh 
 clause which specifies the kind of business which a national bank 
 may transact. It "contains five distinct grants of power, and no 
 one grant is a limitation on any other. By the first, the bank 
 is authorized to discount promissory notes, drafts, bill of ex- 
 change, and other evidences of debt ; second, to receive deposits; 
 third, to buy and sell and exchange coin and bullion; fourth, to 
 loan money on personal security;* fifth, to obtain, issue, and circu- 
 late the national currency." * Consequently a bank has power to 
 to lend money on the note or other personal obligation. of the 
 , borrower secured by a pledge of stock of a corporation as collat- 
 
 eral security.* 
 
 § 63. Right to purchase notes and bills. What limi- 
 tations are to be placed on the first sub-division of this clause re- 
 lating to the discount and negotiation of notes, drafts and other 
 evidences of debts ? Can a bank purchase a promissory note or 
 bill oft exchange ? The right to do this was at first questioned by 
 
 ' Peckham, J., Taylor v. Hutton, 43 Barb., 195 p. 197. 
 ^ Potter, J., Lockwood v. Mechanics' National Bank, 9 R. I., p. 335. 
 ' "I understand by this," said Judge Giles whom we are quoting, "on any 
 any other personal security than is mentioned in the first grant.'' 
 
 * Shoemaker v. National Mechanics' Bank, 2 Abb. U. S., 416 p. .423. 
 
 * Id. 
 
§ 63 POWERS OP NATIONAL BANKING ASSOCIATIONS. 31 
 
 some courts. Said Cornell, J., speaking for the Supreme Court 
 of Minnesota ■? " The incidental power to negotiate notes to 
 the extent necessary to carry on the business of banking simply 
 implies an authority to realize upon such commercial paper as 
 the bank may receive in the lawful conduct of its business by 
 negotiating, selling and transferring it by means a of re-discount 
 obtained, or otherwise. It gives no implied authority to speculate 
 or traffic in p9,per of the character of the note in question, or 
 in financial securities of any description." This view found 
 favor in Maryland, though by a divided court.^ Judge Grason, 
 who spoke fof the majority, qualified his opinion with the re- 
 mark that a national bank might invest its surplus capital in 
 notes. 
 
 The right, however, of a national bank to buy negotiable 
 notes and bills of exchange is no longer questioned.' The Su- 
 preme Court of Ohio has decided that the purchasing and dis- 
 counting of paper is only a mode of loaning money, and a national 
 bank has a right to buy notes and bills which are perfect and avail- 
 able to the borrower, as well as his own notes which are made to 
 the bank.* The same view is maintained in Illinois, though not 
 by the highest court. In the case of the First National Bank v. 
 Sherburne, ^ a note vijas indorsed in blank by the payee, and before 
 maturity was delivered for value to the cashier of the bank. It 
 was held that the fair and reasonable presumption from the taking 
 of the note in "the usual course of business " would be that it was 
 discounted; that although in form and in common parlance it was 
 a purchase of the note, yet in substance it was a loan by way of 
 discount made by the bank to the payee. Judge Baker, in deliv- 
 ering the opinion of the court, said : "The argument made here 
 is based upon the statement of the cashier that he purchased the 
 note from Wise, and that it was bought in the usual course of 
 business as he bought other notes. It may be questionable whether 
 the words used in the statute, ' by negotiating ' are broad enough 
 to include that which was here done by the bank ; and yet 
 
 ' First National Bank v. Pierson, 24 Minn., 140. 
 ' Lazear v. National Union Bank, 52 Md., 78. 
 
 ' Merchants' National Bank v. Hanson, 33 Minn. , 40 ; Union National 
 Bank v. Eowan, 23 S. Car., 339 ; Pape v. Capitol Bank, 20 Kansas, 440. 
 * Smith V. Exchange JBank, 26 Ohio, 141. 
 ,5 14 Brad., 566. 
 
32 NATIONAL BANK ACT. § 63 (fls) 
 
 according to the lexicographers, the word ' negotiate ' means not 
 only ' to transfer,' ' to sell,' 'to pass,' but ' to procure by mutual 
 intercourse and agreement with another.' It appears the note' 
 was taken by a national bank and ' in the usual course of busi- 
 ness.' Admitting the bank had no power to become vested with 
 the legal title to the note otherwise than by ' discounting,' it, the 
 fair and reasonable presumption from the fact it was taken in the 
 usual course of business of a national bank would be that it was 
 discounted. The fact the cashier in stating the transaction uses 
 the words 'purchased ' and 'bought,' we do not deem of much impor- . 
 tance. In Atlantic State Bank v. Savery ' a similar statute was 
 under consideration, and the word ' bought ' was used by the wit- 
 ness, and a written membrandum of the transfer was made and 
 delivered at the time, in which the word ' sold ' was used, and yet it 
 was held it was a discount, and the title to the note was valid. In 
 the present case the paper was procured from Wise, who was both 
 payee and indorser, and was transferred by an indorsement impos- 
 ing the ordinary liability upon the indorser. Although in form 
 and in common parlance it was a purchase of the note, yet in sub- 
 stance it was a loan by way of discount made by the bank to Wise, 
 and the relation of debtor and creditor as between them was 
 created." In Massachusetts, also, it has been»held that a national 
 bank has authority to buy the checks of individuals on other banks 
 whether they are payable to bearer or order. ^ The question 
 under consideration was raised in that state in two other cases, 
 but the court disposed of them in another way. In these, it was 
 held that a national bank which purchases a promissory note from 
 an indorsee may maintain an action thereon in his own name 
 against a prior party thereto without regard to the" question 
 whether the purchase was one which it was authorized by law to 
 make.' These decisions were based on a statute law of the state^ 
 and therefore do not touch the question. They are worth men- 
 tioning, however, in this review of the legal determinations of the 
 question. 
 
 § 68 (a). Cannot discount a conditional note. One lim- 
 itation, though, remains, a national bank cannot discount a prom- 
 
 1 83 N. Y., 291. 
 
 ^ First National Bank v. Harris, 108 Mass. ,514. 
 
 ' National Pemberton Bank u Porter, 125 Mass., 333 ; Atlas National 
 Bank v. Savery, 127 Mass., 75. 
 
§ 64 POWERS OF NATIONAL BANKING ASSOCIATIONS. 33 
 
 isBory note that contains a stipulation for example, to pay an at- 
 torney's fee if the note shall be sued. ' 
 
 § 64. Can collect notes. The collecting of paper is also 
 a part of the regular business of banking and is authorized by 
 the national banking law; consequently it is liable like any other 
 agent for negligence or misconduct in collecting it. " 
 
 § 65. Can deal in national bonds. A national bank 
 has power to purchase and sell the bonds of the government.' 
 "It is the policy of the government," said Beck, J., in Leach v. 
 Hale, * " to encourage the purchase and sale of its bonds and to 
 facilitate transactions in them, for thereby their value will be en- 
 hanced and the credit of the government in a measure promoted. , 
 It is not probable that Congress intended to impose restrictions 
 upon the national banks, the most numerous class of financial 
 agents in the country, which would operate to prohibit dealing in 
 the securities of the government in a manner usual among bank- 
 ers and banking institutions." In Terkes v. National Bank ^this 
 subject was fully considered by Judge Earl. " While the statute 
 specifies the main things a national bank may do, it does not un- 
 dertake to specify all, and it does not prohibit all not specified. 
 There is a large branch of banking business not particularly spec- 
 ified, that of collecting notes, checks, bills of exchange and other 
 evidences of debt, for other persons. This forms a large share of 
 the business of nearly all banks. They have correspondents and 
 business connections which enable them to reach all parts of the 
 country, and they have facilities and arrangements which enable 
 them to do it with economy and dispatch. They take evidences 
 of debt from their customers and other persons and send them to 
 distant places for collection, and pay over the proceeds when re- 
 alized to the persons entitled, retaining or receiving in some form 
 a compensation or benefit for the service. It has never been 
 doubted that they have the right and power to do this kind of 
 business, as forming a legitimate part of banking business. If 
 included under any specification contained in the statute it is 
 
 ' Merchants' National Bank v. f5evier, 27 Alb. L. Jour., 447, 8tli U. S. 
 Circuit. 
 
 ^ Mound City Paint Co. v. Commercial National Bank, Sup. Ct. of Utah, 
 9 Pacific Rep., 709. 
 
 ^ Leuven v. First National Bank, 54 N. Y., 671. 
 
 ' 31 Iowa, 69 p. 74. 
 
 * 69 N. Y., 382. 
 
 3— B. 
 
34 NATIONAL BAN5 ACT. § 65 
 
 under that of ' negotiating promissory notes, drafts, bills of ex- 
 change, and other evidences of debt.' To negotiate means, among 
 other things, 'to transfer, to sell, to pass, to procure by mutual^ 
 intercourse and agreement with another, to arrange for, to settle 
 by dealing and management.' This power is absolutely essential 
 to the business of the country, and, if necessary to uphold it, it 
 may be found in the specification alluded to. A bank in doing 
 this business does not take title to the paper left with it for col- 
 lection. It is a bailee for .hire, and simply undertakes to use or- 
 dinary diligence in making the collection. It receives its com- 
 pensation either by commissions charged or incidental benefits 
 received. But suppose a bank, instead of transmitting a note to 
 be icollected in money, transmits it for the purpose of procuring 
 a renewal note, or for the purpose of getting additional security, 
 or for the purpose of exchanging it for other securities; would the 
 business then be such as it had no power to transact? Can it be 
 claimed that a bank may transmit evidences of debt to be paid in 
 money, while it has no power to transmit them to be renewed, or 
 secured, or exchanged f It certainly cannot be successfully. The 
 power in each case is of the same kind, and must rest upon the 
 same general basis." 
 
 In this case the plaintiff sought to recover the value of some 
 United States bonds which it was alleged the bank agreed to ex- 
 change for registered bonds, but failed to do. " If the plaintiff 
 had delivered her bonds to the bank for collection, and the bank 
 had agreed to collect them, no one would deny that the agreement 
 would have been valid. If, after such an agreement, the bank 
 had kept the bonds for an unreasonable time, until they were 
 stolen, or had lost them, or rendered them worthless by its culpable 
 negligence, it would have become liable to the plaintiff for their 
 value.' Instead of agreeing to collect these bonds, the defendant 
 agreed to send them to the Secretary of the Treasury and exchange 
 them for registered bonds,^ and for reasons above stated it had 
 the same power to do this as it would huve had to collect them. 
 The exchange of the bonds would in a broad sense have been a 
 negotiation of them. It would, as commonly understood, have 
 ( been a legitimate business for a bank to do. We may take judicial 
 
 ' Smedes v. Utica Bank, 20 Johns, 372, S. C, 3 Cow., 662; Bank v. M'Kin- 
 ster, 11 "Wend., 473; Walker v. Bank, 9 N. Y.. 582; Montgomery County Bank 
 V. Albany City Bank, 7 N. Y., 459. ' Rev. Stat., Sec. 3706. 
 
§65(ffl) POWERS OP NATIONAL BANKING ASSOCIATIONS. 35 
 
 notice of the fact that government bonds are usually bought and 
 sold through banks, and that all the transactions in reference to 
 them with the government are usually conducted through banks 
 and persons doing banking business. They are moneyed securities, 
 and the collection or exchange of them is a financial transaction 
 in no sense foreign to the business of banking." 
 
 § 65(a). And also coupons on state bonds. A.bank has 
 the right to own the coupons on state bonds. They are, says 
 Judge Wheeler, "doubtless promissory notes within the statute of 
 3 and 4 Anne, ch. 9, and of the [section under consideration,] 
 both of which use the term in. the same sense unquestionably. 
 They are also evidences of debt. The coupons, and the right to 
 sue upon them, are all that are now in question." The judge 
 added that no intimation of his views concerning the right to 
 take and hold the bonds was intended by this discrimination.' 
 
 § 66. Right to deal in other securities. Can a national 
 bank deal in other securities ? In an instructive case the plain- 
 tiff, who held some shares of stock as trustee, kept an account with 
 the Atlantic National Bank. These shares he placed in the hands 
 of the cashier of the bank with the knowledge and approval of its 
 president, to be sold when he should direct, and the proceeds were 
 to be placed to his credit. It had previously been customary for 
 the officers of the bank to receive stocks and bonds to be sold for 
 him in that way. Subsequently, with the plaintiff's consent, the 
 cashier transferred the shares to his own name, as cashier, on the 
 representation that this act would facilitate their sale. After- 
 ward the cashier hypothecated the shares with a broker to secure 
 a loan for the purposes of his own speculation. The bank was 
 held to be liable to the plaintiff for the cashier's wrongful act. 
 Judge Daniels, who delivered the opinion of the court, said that 
 "the National Banking Act appears to have been framed upon the 
 theory that the institutions formed and existing under it could 
 lawfully exercise the authority necessary for the sale of these 
 stocks. The abstract power of making such sales it is true, was 
 not conferred upon them. * * The ultimate object for which 
 the certificates of stock were delivered by the plaintiff in this 
 instance was the increase of his deposit account with the bank. 
 The holding and sale of the shares were simply to contribute to 
 the promotion of that result. They were incidents for the pur- 
 
 ' First National Bank v. Town of Bennington, 16 Blatcht., 53 p. 56. 
 
36 NATIONAL BANK ACT. § 67_ 
 
 pose -of obtaining that end. And for that reason it was a part of 
 the business of banking, as this institution was allowed to carry 
 it on." ' 
 
 The soundness of this decision may well be questioned 
 Says Mercur, C. J. : "A national bank is not, by its charter, 
 authorized to act as a broker or agent in the purchase of 
 bonds and stocks. Its specified powers given by statute, nor 
 its incidental powers necessary to carry on the business of bank- 
 ing, do not extend to the transaction of such busines." " And 
 Waite, C. J., has remarked that while dealing ' in stocks it not 
 expressly prohibited, such a prohibition is implied from the failure 
 to grant the power. In Maryland the power to engage in such 
 business is strongly denied.* In Kentucky the court incline the 
 same way, Lewis, J., saying that "probably according to a fair 
 construction of the National Bank Act the power is not expressly 
 given to it to purchase and deal in [municipal bonds,] but neither 
 is it expressly prohibited by the act to do so." ^ 
 
 § 67. Consequence of exceeding its authority. If, 
 however, a bank should transcend its authority what would be the 
 consequence ? In the Maryland case, just mentioned, which was an 
 action of deceit to recover damages for the alleged false represen- 
 tations of its teller in the sale to the plaintiff of some railroad 
 bonds, it was held that the selling of railroad bonds on commis- 
 sion was not within the authorized business of a national bank; and 
 consequently it was not responsible for any false representations 
 which its teller might have made to the plaintiff and by which she 
 was induced to purchase the bonds. In Kentucky a much more 
 rational and just' opinion has been expressed. In the Logan 
 County case A agreed with thd bank to sell to it county bonds at a 
 certain price and which were to be resold to him at the same price, 
 but refused to do so in consequence of an advance. The bank 
 defended on the ground that it had no authority to execute such 
 a contract. Said Lewis, J. : "It seems to us that if the proposition 
 be conceded that [that a national bank had no authority to make 
 such a contract this would not avail], for if it had no authority 
 
 1 Williamson v. Mason, 12 Hun, 97 p. 103. 
 
 ''■ Bank of Allentown v. Hoch, 89 Pa., 324 p. 327 ; Fowler v. Scully, 72 
 Pa., 4.')6. ' First National Bank v. Exchange Bank, 92 TJ. S., 122. 
 
 • Weckler v. First National Bank, 42 Md., 581. 
 ^ Logan County Nat. Bank v. Townsend, 3 S. W. Eep., p. 124. 
 
I 68 PCWEKS OF NATIONAL BANKING ASSOCIATIONS. 37 
 
 under its charter to purchase the bonds, it cannot in justice and 
 conscience refuse to abide by the judgment in this case which 
 involves nothing more than the return of the bonds and receipt of 
 what it paid for them. To do less cannot be justified without 
 permitting it to profit by its own wrong in violating the law of 
 Congress under which it exists." ' In harmony with this doctrine 
 is the remark of Swayne, J., that " corporations are liable for 
 every wrong they commit, and in such cases the doctrine of ultra 
 vires has no application." ^ 
 
 § 68. Can lend on collateral security. In making 
 loans and discounts a national bank can take United States bonds 
 as collateral.' It can also loan on the security of the stock of 
 another national bank. And if the stock should be transferred 
 to the creditor bank on the books, it would immediately incur the 
 liability of a stockholder, and be thus held in the event of the 
 failure of the other.* 
 
 § 69. Including warehouse receipt. A national bank 
 has power to lend money on the note or other personal obligation 
 of the borrower, secured by the pledge of a warehouse receipt for 
 merchandise as collateral security. In Cleveland, Brown & Co. 
 V. Shoeman, ^ Judge Dickman says: "A national bank, therefore, 
 empowered to carry on the business of banking ' by loaning money 
 on personal security,' may also exercise all powers incidental 
 thereto. Vested with such authority, we do not think that in 
 making a loan on the personal obligation of the borrower, with 
 a warehouse receipt as a collateral security thereto, the bank ex- 
 ceeds its statutory powers. It is not to be limited in taking se- 
 curity for discounts and loans to the personal undertaking of the 
 borrower, or to the security afforded by the names of indorsers of 
 personal sureties, but may take a pledge of bonds, choses in ac- 
 tion, stock of a corporation, bills of lading, and other personal 
 chattels. The language ' personal security ' would seem to refer 
 to other personal security than is mentioned in the first grant of 
 power in section 5136, authorizing the business of banking ' by 
 discounting and negotiating promissory notes.' Dillon, J., in 
 
 ' Logan County Nat. Bank v. Townsend, 3 S. "W. Eep., 122 p. 124. 
 2 National Bank v. Graham, 100 U. S., p. 702. 
 " Third National Bank v. Boyd, 44 Md., 47. 
 * National Bank v. Case, 99 U. S., 628. 
 ■ * 40 Ohio, 176 p. 181. 
 
38 NATIONAL BANK ACT. § 70 
 
 Pittsburgh Locomotive & Car Works v. State National Bank,' says : 
 ' The words loans on personal security in the Banking Act are used 
 in contradistinction to real estate security,' and in that case it was 
 held that, a national bank might take personal chattels, e. g., a 
 locomotive, as security for discounts and, loans." ^ 
 
 § 70. But cannot lend its credit. But while a "bank 
 is allowed to lend money upon personal security ; * * it 
 must be money that it loans, not its credit." ^ It has no right 
 ■ on receiving a deposit of collateral security to guarantee an obli- 
 gation of the depositor.* And if a person should knowingly take 
 as collateral security the draft of a national bank which had been 
 drawn for the accommodation of a customer, he could not recover 
 the amount from the receiver of the bank in the event of _ its 
 failure.^ 
 
 § 71. Can borrow on its own notes. But a national 
 bank can borrow money on its own notes and pledge its assets for 
 their repayment. " And if a president should give notes without 
 special authority the bank would be liable if the directors acquiesced 
 in his conduct. This may be presumed from long-continued 
 courses of dealing and other facts. ' 
 
 § 72. Can sell or assign its interest in pledged coin. 
 If a national bank should hold coin as a pledge it could sell and 
 assign its special property therein, the assignee acquiring all the 
 rights possessed by the bank. * 
 
 §73. Can compromise a debt. With respectto the right 
 of a national bank to compromise a debt. Chief Justice Waite,' 
 after quoting the section under consideration, has said : "Author- 
 ity is thus given to transact such a banking business as is speci- 
 fied, and all incidental powers necessary to carry it on are granted. 
 
 ' SCent Law J., 692. 
 
 ^ Merchants' National Bank v. Mears, 8 Biss., 158; Shoemaker r. National 
 
 Mechanics' Bank, 1 Hughes, 101 ; Pittsburgh Locomotive & Car Works v. State 
 
 National Bank, 1 N. Y. Weekly Dig., 332. 
 
 , ^ Bond, J., Seligman & Co. v. Charlottesville National Bank, 3 Hughes, 
 647, p. 651. 
 
 * Seligman & Co. v. Charlottesville National Bank, Id., 647. 
 
 * Johnston Brothers & Co. v. Charlottesville National Bank, Id., 657. 
 ^ Peters v. Alexander Brown & Sons, 41 B. Mag., 131. 
 
 ' Id. 
 
 ^ Merchants' Bank v. State Bank, 10 Wall., 604. 
 
 ' First National Bank v. National Exchange Bank, 92 U. S., 122, affg 39 
 Md., 600. 
 
§ 74 POWERS OF NATIONAL BANKING ASSOCIATIONS. 39 
 
 These powers are such as are required to meet all the legitimate 
 demands of the authorized business, and to enable a bank to con- 
 duct its affairs within the general scope of its charter, safely and 
 prudently. This necessarily implies the right of a bank to incur 
 liabilities in the regular course of its business, as well as to be- 
 come the creditor of others. Its own obligations must be met and 
 debts due to it collected or secured. The power to adopt reason- 
 able and appropriate measiires for these purposes is an incident 
 to the power to incur the liability or become the creditor. Obli- 
 gations may be assumed that result unfortunately. Loans or dis 
 counts may be made that cannot be met at maturity. Compro- 
 mises to avoid or reduce losses are oftentimes the necessary re- 
 sults of this condition of things. These compromises come within 
 the general scope of the powers committed to the board of direc- 
 tors and the officers and agents of the bank, and are submitted to 
 their judgment and discretion, except to the extent that they are 
 res,trained by the charter or by-laws. Banks may do, in this be- 
 half, whatever natural persons could do under like circumstances." 
 
 § 74. And pay money and take securities in settle- 
 ment. Hence "a national bank * * may, in a fair and bona fide 
 compromise of a contested claim against it growing out of a legit- 
 imate banking transaction, pay a larger sum than would have 
 been exacted in satisfaction of the demand, so as to obtain by the 
 arrangement a transfer of certain stocks in railroad and other cor- 
 porations; it being honestly believed at the time that by turning 
 the stocks into money under more favorable circumstances than 
 then existed, a loss, which would otherwise accrue from the trans- 
 action, might be averted or diminished." ' 
 
 § 75. Converted bank is liable for deposits of the 
 other. -As a national bank is authorized by the second sub-divi- 
 sion of the seventh clause to receive deposits, consequently if it 
 should receive those of its predecessor — a state bank — it would be 
 liable for them. "Any other doctrine," says Henry, J., "would be 
 monstrous. As well contend that because one has his name 
 changed by legislative enactment he thereby avoids all obligations 
 incurred in his former name." " 
 
 1 First National Bank v National Exchange Bank, 92 TJ. S., 122, afifg 39 
 Md., 600. 
 ' Bans V. Exchange Bank, 79 Mo., 182 p. 186. 
 
40 NATIONAL BANK ACT. § 76 
 
 § 76. Liability for spe.cial deposits. A national bank 
 has authority to receive special deposits and is responsible for tlieir 
 loss if this be occasioned by gross negligence. Says the United 
 States Supreme Court : " It is now well settled that if a bank be 
 accustomed to take [special deposits, for example, government 
 bonds] and this is known and acquiesced in by the directors, and 
 the property deposited is lost by the gross carelessness of the 
 bailee, a liability ensues in like manner as if the deposit had been 
 authorized by the terms of the charter." ' But the burden of prov- 
 ing negligence rests on the plaintiff.^ 
 
 § 77. Liability of converted bank for special de- 
 posit. Moreover a national bank is liable for a special deposit 
 of coin confided to its care when existing as a state bank. The 
 rule of damage in such a case is the value of the coin at the date 
 of the bank's conversion with interest. Its refusal to return the 
 coin after a request to do so would be conclusive evidence of its 
 conversion.' 
 
 § 78. Power to make agreement to recover its 
 own and other stolen property. A bank may resort to 
 legal proceedings to recover its stolen property and also may agree- 
 to take similar action to recover the property of others deposited 
 for safe-keeping and stolen at the same time. And if it should 
 be lacking in proper diligence, skill and care in performing such 
 an undertaking it could be held responsible therefor. Said Mat- 
 thews J., in Wylie v. Northampton Bank:* " It would certainly be 
 competent for a national bank to take measures for the recovery 
 of its own property lost [through burglary]. If the loss, as in 
 the present case, included the property of others, and it was 
 deemed best, having reference to the bank's own interest, that 
 these measures should be taken by the bank alone for itself and 
 
 ' National Bank «. Graham, 100 IT. S., 699, affg 79 Pa., 106; Lancaster 
 County Nat. Bank v. Smith, 62 Id., 47 ; Scott v. National Bank, 72 Id., 471 ; 
 Turner v. First National Bank, 26 Iowa, 562; Smith v. First National Bank, 
 99 Mass., 605 ; Chattahoochee National Bank v. Schley, 58 Ga., 369; Bank v. 
 Zent,39 Ohio,, 105 ; Pattison v. Syracuse National Bank, 80 N. Y., 82, affg 17 
 Hun, 419 ; Prather v. Kean, 29 Fed. R., 498 ; the question was raised but 
 not decided in De Havens. Kensington National Bank, 81 Pa., 95. The con- 
 trary authorities are Wiley u. First National Bank, 47 Vt., 546; Whitney 
 V. First National Bank, 50 Id., 388. 
 
 ^ First National Bank v. Rex., 89 Pa., 308. 
 
 ' Coffey V. National Bank, 46 Mo., 140. 
 
 * 119 U. S., 361 p. 370, affg 15 Fed. R., 428. 
 
I 79 POWERS OF NATIONAL BANKING ASSOCIATIONS. 41 
 
 all concerned, it might lawfully undertake to act for others thus 
 jointly concerned with itself as well as for itself alone, and want 
 of proper diligence, skill, and care in the performance of such an 
 undertaking would be ground of liability, to respond in damages 
 for such failure." 
 
 § 79. Cannot indorse a note for compensation. A 
 bank has no right to indorse a note for compensation, but if it 
 should do so, and afterward become the owner, this act would 
 not impair the title of the bank or prevent it from collecting the 
 note.' Only the government can object to its doing such an un- 
 lawful act. ^ 
 
 § 80. When bank can guarantee note. "To hand 
 over with an indorsement and guaranty is one of the commonest 
 modes of transferring [promissory notes, drafts and bills of ex- 
 change]. Undoubtedly a bank might indorse, 'waiving demand 
 and notice,' and would be bound accordingly. A guaranty is a 
 less onerous and stringent contract than that created by such an 
 indorsement." ^ In People's Bank v. National Bank A made his 
 promissory note payable to his own order, duly indorsed it to 
 the order of B, and delivered it to a national bank, which negoti- 
 ated it to B, and applied the proceeds to discharge a debt due 
 from A. With the knowledge and consent of the president and 
 cashier, who were also directors, but without authority from the 
 board, C, a director and vice-president, contemporaneously guar- 
 anteed the payment of the note at maturity by indorsing the same 
 in the name and on behalf of the bank. A, having failed to pay 
 the note, B sued the bank which defended on the ground that the 
 bank had no authority to do the act. But Judge Swayne said that 
 "we see no reason to doubt that under the circumstances of this 
 case it was competent for the defendant to give the guaranty here 
 in question. It is to be presumed the vice-president had right- 
 fully the power he assumed to exercise and the defendant is 
 estopped to deny it. Where one of two innocent parties must 
 suffer by the wrongful act of a third, he who gave the power to do 
 the wrong must bear the burden of the consequences." * 
 
 1 National Bank v. Burr, 27 Hun, 109. 
 
 '' Id., citing Atlantic State Bank v. Savery, 82 N. Y., 291; Gold Mining 
 Co. V. National Bank, 96 U^ S., 640; Duncomb v. N. Y., H. & N. H. E. Co., 
 84 N. Y., 190; National Bank v. Whitney, 103 U. S., 99. 
 
 ' Swayne, J., People's Bank v. National Bank, 101 U. S., p. 183. 
 
 * Id., p. 183. 
 
12 NATIONAL BANK ACT. § 81 
 
 § 81. Bank can hold deposit for benefit of other 
 contracting' parties. A national bank having received a 
 deposit indorsed on the back of a contract which was made at the 
 same time that S had on that day deposited therein $2,500 "to 
 be held by us as collateral security for the faithful performance 
 of the within contract." It was held that the bank had power to 
 make such a contract.' Even if the contract were ultra vires, yet 
 as it was not illegal the defendant was estopped fi-om setting up 
 that defense as it would be a fraud on the plaintiff to allow the 
 bank to do so he having entered into the contrapt in good faith. ^ 
 
 § 82. Cannot receive deposits when insolvent. As 
 a bank has no right to receive a deposit when hopelessly insolvent 
 and thus defraud the depositor, so he is not precluded by this 
 statute from recovering it. Said Andrews, J., in a case against 
 the receiver of a bank who defended on this ground: The plaintiffs 
 " are not seeking to enforce any right as creditors of the bank, 
 but to reclaim their own property obtained by fraud. * * The 
 right to a restoration in such case may be defeated by the acts or 
 acquiescence of the defrauded party, or because the property has 
 lost its identity and cannot be traced, or other persons have inno- 
 cently acquired interests in ignorance of the fraud. But neither the 
 creditor of an insolvent bank, nor its assignee in bankruptcy, has 
 any equity to have the plaintiff's property applied in payment of 
 the obligations of the bank, and the statute does not sanction so 
 palpable an injustice." ' 
 
 § 83. Cannot deny its liability for wrongful use of 
 another's property. A national bank which has vyrongfully 
 , used the property of another cannot deny its liability therefor on 
 the ground that it had no authority to do so. Says Walker, C. J. : 
 " Shall the bank be heard to say that although it has appellee's 
 property which it Tefuses to surrender to him, and has converted 
 it to the use of the bank, and because it was obtained by the perform- 
 ance of acts not auttiorized by the charter, the bank will hold it and 
 refuse to account for it or its proceeds ? * Such cannot be the law." , 
 
 ^ Bushnell v. Chautauqua County Nat. Bank, 10 Hud, 378. 
 
 » Id. 
 
 = Cragie v. Hadley, 99 N. Y., 131 p. 135. 
 
 * German National Bank v. Meadowcroft, 95 111., 124. An action can be 
 maintained against a bank by a depositor for things deposited with the 
 institution though they belonged to another, White v. Commonwealth 
 National Bank, 4 Brewster, 234. 
 
§ 84 POWERS OF NATIONAL BANKING ASSOCIATIONS. 43 
 
 § 84. Can hold cash dividend for shareholder's 
 debt. "A bank has a right to hold a cash dividend as pledged 
 for the indebtment of the shareholder to the bank." ' So if a bank 
 should attach the shares of a shareholder, who is indebted to it, 
 or sell them on a legal process, such action would not imply a 
 purchase or holding by the bank. If, like a levy on real estate, 
 the title necessarily passed to the bank by such proceedings, it 
 might have no power to undertake them. But the title is not 
 changed, and consequently the bank can have recourse to them.^ 
 
 § 85. Cannot be garnished for deposit of a trust 
 estate. A national bank which has the funds of a bankrupt estate 
 as a depository cannot be garnished or compelled to pay them 
 "except upon a warrant of the assignee in bankruptcy counter- 
 signed by the district judge, or by the register in bankruptcy of 
 the district.^ 
 
 § 85(a). Employment of bank ofl&cers. A national bank 
 cannot hire one of its officers for a specified time. The act author- 
 izes the association "to appoint a cashier and such other officers 
 and agents as their business may require, and to remove them at 
 pleasure and appoint others in their place." Consequently it has 
 been decided in the case of a teller that he could be legally 
 appointed "in no, other way and could only be held by the tenure 
 specified, to wit : the pleasure of the appointing power and the 
 place must be regarded as having been taken and accepted under 
 the provisions of the act." * 
 
 § 86. "A national banking association may purchase, hold, p°™'''° 
 andconveyreal estate for the following purposes, and for no others: tate. 
 
 First. Such as shall be necessary for its immediate accommo- seo. 5137. 
 dation in the transaction of its business. 
 
 Second. Such as shall be mortgaged to it in good faith by way 
 of security fof debts previously contracted. 
 
 Third. Such as shall be conveyed to it in satisfaction of debts 
 previously contracted in the course of its dealings. 
 
 Fourth. Such as it shall purchase at sales under judgments, 
 decrees, or mortgages held by the association, or shall purchase to , 
 secure debts due to it. 
 
 ' Virgin, J., Hagar«). Union National Bank, 63 Maine, 509 p. 511. 
 
 ^ Hagar v. Union National Bank, 63 Me., 509 p. 514. 
 
 ' Havens v. National City Bank, 6 Th. & C, 346. 
 
 * Harrington v. First National Bank, 1 Th. & C, 361 p. 366. 
 
44 NATIONAL BANK ACT. § 87 
 
 But no such association shall hold the possession of any real 
 estate under mortgage, or the title and possession of any real es- 
 tate purchased to secure any debts due to it, for a longer period 
 than five years." ' 
 
 § 87. Meaning of the section. The state courts until 
 1878 uniformly held with one exception ^ that a national bank 
 could not take real estate as security for a present or future debt.' 
 But in that year the United States Supreme Court decided, in the 
 Matthews case,* that the debtor could not raise this objection to^ 
 the bank's enforcement of its obligation against him. If the bank 
 had transcended its powers in taking such a security, the govern- 
 ment alone could deal with the institution for doing so, and with- 
 draw its charter. The effect of the decision is that a bank need 
 fear nothing from the debtor, but only from the government, in 
 taking such a security. 
 
 § 88. In the case of National Bank v. Whitney " the 
 question has been again answered by the same court. The debtor' 
 executed a mortgage to the bank providing for the payment of 
 $5,000 one year from date, and also declaring that it was made as 
 collateral security for the payment of all notes which the bank at 
 that time held against him and for his other indebtedness then due, 
 or which thereafter should become due. The $5,000 loan was 
 paid, but his indebtedness, which accrued subsequently to the 
 mortgage, amounted to a larger sum. It was contended that the 
 fnortgage to the bank, so far as it applied to future advances, was 
 invalid because it was prohibited by the National Banking Law. 
 After reviewing the case of the National Bank v. Matthews, ' 
 Judge Field said that " in conformity with it we must hold that 
 the mortgage to the bank * * is to be regarded as a valid security 
 for the future advances to the mortgagor." 
 
 § 89. National interpretation foUo^wed by state 
 courts. The state tribunals, since the decision in the Matthews 
 
 • Act 1864. Sec. 28. 
 
 ' First National Bank v. Haire, 36 Iowa, 443. 
 
 ' Fowler v. Scully, 72 Pa., 456; "Woods v. Peoples' National Bank, 83 Pa., 
 57; Kansas Valley Nat. Bank v. Rowell, 2 Dill., 371; Crocker i-. Whitney, 
 71 N. Y., 161; Ripley v. Harris, 3 Hiss., 199; Merchants' National Bank v. 
 Mears, 8 Biss., 158; Spafford v. First National Bank, 37 Iowa. 
 
 * 98 U. S., 621, revsg Matthews v. Skinker, 62 Mo., 329. 
 '■ 103 U. S., 99. 
 
 " 98 U. S., 621. 
 
I 89 POWERS OP NATIONAL BANKING ASSOCIATIONS. ) 45 
 
 case, have followed it on several occasions, though plainly intimat- 
 ing that they were not convinced by the reasoning of the court, ' One 
 of the latest decisions is that of Graham v. National Bank by the 
 Supreme Court of New Jersey.' Says Judge Scudder: "It is 
 obvious that these loans were made by the bank on the security of 
 these two separate mortgages, and that the making of the notes, 
 the payment of the money by checks, and the delivery of the 
 mortgages duly executed as security therefor, were concurrent 
 acts. They were not, therefore, given as security for -debts pre- 
 viously contracted, nor were the mortgaged lands conveyed in sat- 
 isfaction of debts previously contracted in the course of the deal- 
 ings of the bank. These cases, therefore, stand without the au- 
 thority of the statute to purchase and hold real estate for such 
 purpose. Each mortgage was given as security for a concurrent 
 loan of money by discounting commercial paper. * * A late deci- 
 sion in the Supreme Court of the United States has given a con- 
 struction of this statute and has authoritatively determined the 
 validity of mortgages like those in controversy." Such a convey- 
 ance " is not void, but only voidable, and the sovereign alone can 
 object. It is valid until assailed in a direct proceeding instituted 
 for that purpose." ' Judge Andrews, also, speaking for the New 
 York Court of Appeals says: "It is now settled that a national 
 bank may lawfully take a mortgage to secure future indebtedness ;" * 
 the highest court in Virginia has also followed the federal con- 
 struction of the law, * and so have the Supreme Courts of Mis- 
 
 1 See Penn v. Bornman, 102 HI., p. 534. 
 
 2 32 N. J. Eq., 804 p. 808. 
 
 ' The Supreme Court of Missouri in reviewi ng the Matthews case said ' 'that 
 while the law authorizing the establishment of national banks prohibits 
 them when established from lending money on real estate security, yet if 
 loans are made on such securities they are not void, but may be enforced. It 
 was also held that a person borrowing money on such security could not in- 
 terpose the statutory prohibition as a defense in a proceeding to enforce it, 
 the court using the following language: 'We cannot believe it was meant 
 that stockholders, and perhaps depositors and other creditors, should be pun- 
 ished and the borrower rewarded by giving success to this defense whenever 
 the offensive act shall occur. The impending danger of a judgment of ouster 
 and dissolution was, we think, the check, and none other contemplated by 
 Congress,' " Thornton v. National Exchange Bank, 71 Mo., 221 p. 228. 
 
 * Simons «. First National Bank, 93 N. Y., 269 p. 272. 
 
 ' Wroten's Assignee v. Armat, 31 Gratt., 228. 
 
46 NATIONAL BANK ACT. § 90 
 
 souri, ' and of other states. ' These decisions clearly settle the 
 question between the banks and borrowers. Eeal estate may be 
 taken as security for present and future indebtedness. But the 
 government may proceed against a bank for taking such security, ' 
 although no case has arisen, or is likely to arise, so long as loans 
 are for a shbrt period and the real estate is taken simply for se- 
 curity, and not for the purpose of acquiring the entire title to the 
 same. The object of this prohibition, so one of the courts has 
 said, is to, prevent the banks from becoming landholders. 
 
 § 90. Transfer of real estate to secure previous 
 debt. Before the rendering of the decision in the Matthews case 
 the courts very generally had sustained assignments of real estate 
 to banks to secure debts not paid at maturity which had 
 been contracted with the banks. * Since then, this has been 
 declared to be a lawful precaution and not contrary to the law. * 
 So, too, if a bank when taking a mortgage to secure pre-existing 
 indebtedness should take a new note for the amount this would 
 not impair the validity of the transaction. The debt is the same, 
 the evidence only is changed by giving a new note for the old 
 one. ^ 
 
 § 91. Validity of mortgage to secure usurious note. 
 And if the mortgage were to secure a note bearing an usurious 
 rate of interest the validity of the security would not be impaired. 
 Thus a national bank which extended the time for paying a debt 
 at a usurious rate of interest, taking notes therefor and mortgage 
 made by the debtor to a third person who indorsed them, did not 
 lose the security notwithstanding the usurious character of the 
 
 ' Thornton v. National Exchange Bank, 71 Mo., 221. 
 
 » Winton *. Little, 94 Pa., 64; Turner v. First National Bank, 78 Ind., 19; 
 Oldham v. First National Bank, 85 N. Car., 240; Wherry ». Hale, 77 Mo., 20; 
 First National Bank v. Elmore, 52 Iowa, 541;Mapes». Scott, 94111., 379; 
 Warner v. DeWitt County Nat. Bank, 4. Brad., 305. 
 
 ' National Bank v. Whitney, 103 XJ. S., 99; Fortier v. New Orleans Nat. 
 Bank, 112 U. S., 439. 
 
 ' Richards v. Kountze, 4 Neb., 200; Woods v. Peoples' National Bank, 83 
 Pa., 57; "V^orcester National Bank v. Cheeney, 87 111., 602; Allen v. First 
 National Bank, 23 Ohio, 97; Ornn v. Merchants' National Bank, 16 Kansas, 
 341. 
 
 * Gaar, Scott & Co. i,. First National Bank, 20 Brad., 611. 
 
 ^ Howard National Bank v. Loomis, 51 Vt., 349; Farmers & Merchants' 
 Nat. Bank v. Wallace, 12 N. E. Eep., 439. 
 
§ 92f POWERS OF NATIONAL BANKING ASSOCIATIONS. 47 
 
 transaction. The interest would be avoided, but so far as the debt 
 was valid the mortgage would remain a bona fide security.' 
 
 § 92. Purchase of additional real estate to secure 
 debt. With respect to purchasing real estate at a judgment 
 sale this may be done by a national bank ' and also other land not 
 covered by its mortgage, in order to secure its debt.^ Judge • 
 Devens, speaking for the Supreme Court of Massachusetts, has 
 remarked : "It cannot be deemed that the only authority given 
 to such associations is to purchase only the exact amount of the 
 debts which may be owing to them, but they are entitled to pur- 
 chase such r'eal estate as may be necessary in order to secure the 
 debts due to them so long as the security of such debts is the real 
 object of the, purchase." * 
 
 § 93. Also a prior mortgage. A prior mortgage may 
 also be purchased, if such be needful, to protect the interests of 
 the bank. Said. Niblack^ J. C, in Holmes u Boyd, cashier:^ "No • 
 restriction 'is imposed upon a banking association in taking a 
 mortgage to secure a debt previously contracted. When, there- 
 fore, a national bank takes a mortgage for such a purpose, it 
 becomes invested with all the rights which usually belong to a 
 mortgagee. Among these is the right to protect itself by all the 
 usual business methods, against the disastrous consequences 
 likely to result from older liens upon the mortgaged property.^ 
 We consequently know of no ground on which the authority of 
 Boyd to purchase the note and mortgage in suit, for the use of the 
 bank represe];ited by him, can be seriously questioned.'" 
 
 § 94. Converted bank can take real estate of state 
 bank. If a-state bank should become a national banking asso- 
 ciation, and among its assets there should be a note secured by a 
 mortgage on real estate, it could take the same and maintain an 
 action of foreclosure thereon.* 
 
 ' Allen V. First National Bank, 23 Ohio, 97. 
 
 2 Heath v. Second National Bank, 70 Ind., 106. 
 
 ' Reynolds v. Crawfordsville First Nat. Bank, 112 TT. S., 405. 
 
 * Upton V. National Bank, 120 Mass., 153 p. 156 ; Mapes v. Scott, 88 111., 
 352 ; Libby v. Union National Bank, 99 Id., 622. 
 
 5 90 Ind., 332 p. 336. 
 
 ^ First National Bank v. National Exchange Bank, 92 U. S., 122. 
 
 ' Citing Upton v. National Bank, 120 Mass., 153,; Ornn «;. Merchants' 
 National Bank, 16 Kansas, 341; Spaflordi). First National Bank, 37 Iowa, 181. 
 • » Scofield V. State National Bank, 9 Neb., 316. 
 
48 NATIONAL BANK ACT. § 95 
 
 § 95. Real estate may be taken as security in the 
 form of stock. If the property of a corporation should con- 
 . sist entirely of real estate, its stock could be taken as collateral 
 security by a national bank for a loan.' 
 
 § 96. Right to cut timber on real estate taken for 
 • debt. Suppose a national bank has legally purchased land to 
 secure its debt can it cut the timber that may be growing thereon 
 and sell it to secure itself against loss ? This question has arisen 
 in West Virginia. "It appears," said Judge Jackson, "that the 
 bank had loaned to the defendant, Donaldson, a large sum of money 
 to engage in the lumber business in West Virginia ; that subse- 
 quently he became embarrassed, and the bank, with a view of 
 saving its debt, secured a deed of trust upon all of his property, 
 which deed was foreclosed, and the bank purchased the property, 
 and was compelled by its agent to conduct the business with a 
 view of reimbursing itself out of the proceeds of the business, the 
 money it had loaned. It may be conceded that there is no 
 express power in the charter of this corporation that would 
 authorize it to conduct a business outside of its legitimate business 
 as a banking institution ; but there is connected with all corpora- 
 tions certain implied powers which are incident to the express 
 powers, and without which no corporation can successfully transact 
 business. In this instance we see but an efPort upon the part of 
 the bank to secure and collect a debt due it. No one will question 
 the right of a bank to lend its money in the manner authorized 
 by its charter ; as a consequence it must have the power to collect 
 it, and, as incident to the exercise of such power, the right to 
 secure and save the debt. We think this view is well sustained 
 by authority." ^ 
 
 § 97. No restriction on bank's power to sell. In sell- 
 ing the real estate of a bank, "there is no restriction," says Judge 
 Spencer, "upon the power ' to convey.' The intent and policy of 
 the law is manifest. It was to discourage, to prevent the accu- 
 mulation of real estate in the hands of these banks. But if such 
 was the intent, it would be strange if the power and right ' to 
 convey,' to sell, were restricted. We would expect the largest 
 liberty in this direction, as being in furtherance of purposes of the 
 lawgiver. It is unreasonable to conclude that because the law gives 
 
 ' Baldwin v. Canfield, 26 Minn., 43. 
 
 ' Eoebling Sons' Co. <;. First National Bank, 30 Fed. R., 744 p. 746. 
 
I 98 POWKRS OF NATIONAL BANKING ASSOCIATIONS. 49 
 
 the power to do business ' by loaning money on personal security,' 
 and restricts the right to purchase real estate, that therefore it 
 forbids the sale of such real estate as may have been lawfully 
 acquired upon the usual and customary terms of the commercial 
 world, and strikes with nullity such vendor's liens and mortgages 
 as may be retained to secure deferred parts of the price. * * 
 We conclude, therefore, that there is nothing in the law preventing 
 a national bank from selling its real estate on terms of credit and 
 reserving a mortgage to secure the price." ' 
 
 § 98. "The total liabilities to any association, of any person. Loans to one 
 or of any company, corporation, or firm for money borrowed, in- not exceed 
 eluding, in the liabilities of a company or firm, the liabilities of ™^tai! 
 the several members thereof, shall at no time exceed one- tenth part sec^'5200.' 
 of the amount of the capital stock of such association actually paid 
 in. But the discount of bills of exchange drawn in good faith 
 against actually existing values, and the discount of commercial 
 or business paper actually owned by the person negotiating the 
 same, shall not be considered as money borrowed." ^ 
 
 § 99. Object and meaning of section. " The object of 
 this provision of the currency act," says Euger, C. J., "was to 
 guard national banks from the hazard of loaning money in im- 
 provident amounts upon speculative and accommodation paper, 
 but it contemplated and permitted, to an unlimited amount, the 
 discount of paper used and required in facilitating the transfer 
 of property and money in the transaction of the legitimate busi- 
 ness of the country." ' Consequently, bills of exchange— whose 
 " drawers and drawees possessed the highest degree of commer- 
 cial credit" at the time they were discounted and which were 
 drawn against lumber, bought, manufactured, or consigned for 
 sale — were not subject to the prohibition contained in this section. 
 Such bills can be taken without limitation. " "We think it entirely 
 immaterial," says Ruger, C. J., "whether such bills are accompanied 
 by a specific bill of lading in each case, or are drawn against prop- 
 erty previously consigned, and existing either in its original f opn or 
 in the shape of proceeds of sales in the hands of the consignees," * 
 
 * New Orleans National Banki;. Raymond, 29 La. Ann., 355 p. 359. 
 = Act 1864, Sec. 29. 
 
 » Second National Bank v. Burt, 93 N. Y., p. 244. 
 
 ♦ Id., p. 243. 
 
 4— B. 
 
50 ' NATIONAL BANK ACT. §100 
 
 § 100. Violation of section is no defense to bor- 
 rower. Although the liabilities of a person to a bank shall at 
 no time exceed one-tenth part of the amount of its capital stock, 
 a loan in excess of this restriction is not void, and may be enforced. 
 It is true that such action by a bank would endanger its franchise, 
 and the ofiSoers who should participate therein would be liable.' 
 But we are not to give to this section, said Hallett, C. J., "a con- 
 struction which will defeat the purpose for which it was enacted, 
 and such will be the effect if we deny the right of the bank to 
 recover money which it has paid out. I am persuaded that this 
 section is to be regarded as a direction respecting the management 
 of the bank, and not as a limitation of its powers." ^ Speaking 
 for the United States Supreme Court in the same case Judge 
 Hunt said : "We do not think that public policy requires or that 
 Congress intended that an excess of loans beyond the proportions 
 specified should enable the borrower to avoid the payment of the 
 money actually recei ved by him. This would be to injure the inter- 
 ests of creditors, stockholders, and all who have an interest in the 
 safety and prosperity of the bank." ' The maker of a note cannot 
 defend on the ground that a bank in loaning to him has violated this 
 section. "The true rule is," says Nelson J., "that if the bank is 
 to be punished for a violation of law, the government must en- 
 force the penalty, and not an individual. The banking law, 
 when fully examined, does not make the contract entered into in 
 violation of Sec. 5200 void, and the stockholders are not to suffer 
 when such a claim is made." * 
 
 § 101. Bight to transfer securities for such a loan. 
 Nor can a national bank be enjoined from transferring to an in- 
 nocent third person securities taken to secure a loan on the ground 
 that it is in excess of one-tenth of its capital stock. ^ 
 
 ' Shoemaker v. National Mechanics' Bank, 2 Abb. U. S., 416 ; Stewart v. 
 National Union Bank, Id., 424; Union Gold Mining Co. v. Rocky Mountain 
 Nat. Bank, 1 Colo., 531; Mills County Nat. Bank v. Perry, 33 N. W. Rep., 341. 
 
 ' Union Gold Mining Co. v. Rocky Mountain Nat. Bank, 1 Colo., p. 543. 
 
 ' Gold Mining Company «. National Bank, 96 U. S., 640 p. 642; O'Hare 
 V. Second National Bank, 77 Pa., 96 ; Bly v. Second National Bank, 79 Id., 
 453; see Pangborn «. Westlake, 36 Iowa, 546; Stephens v. Monongahela Nar 
 tional Bank, 88 Id., 157, Mapes v. Second National Bank, 80 Id., 163. 
 
 " Wyman v. National Bank, 29 Fed. R., 734. 
 
 * Elder v. First National Bank, 12 Kansas, 238; Shoemaker v. National 
 Mechanics' Bank, 31 Md., 396. 
 
§10S POWERS OP NATIONAL BANKING ASSOCIATIONS. 51 
 
 § 102. Note held by converted bank is not witMn 
 the meaning of section. Whenever a national bank is or- 
 ganized from a state bank and takes therefrom a discounted note 
 for a larger amount than the national bank is authorized to loan 
 to a single borrower, such note is not, nor is any note subsequently- 
 given, in renewal within the meaning of this section.' And if a 
 national bank should seek to recover on a note which has been 
 given by way of renewal for a balance due on a previous loan, 
 which has been reduced by renewals and payments below the max- 
 imum sum which it was authorized to loan to a single borrower, 
 the defense that the original loan was for a larger sum than the 
 bank was authorized to make ■will fail.^ Moreover, if a contract 
 of this kind has been executed, which a court would not have en- 
 forced, it will leave the parties where it finds them and no aid or 
 relief will be given to either. ^ 
 
 § 103. Director is liable if borro\<ring beyond legal 
 limits. Though directors are personally and individually liable 
 for violating this statute, yet if a director be a borrower in excess 
 of the sum which can be legally loaned to him, he is liable simply 
 as a debtor to the bank.' 
 
 § 104. " No association shall make any loan or discount on Loans on 
 the security of the shares of its own capital stock, nor be the pur- stock pro- 
 
 / , , „ , , , ' . ^ Ubited. 
 
 chaser or holder of any such shares, unless such security or pur- Kev. stat. 
 chase shall be necessary to prevent loss upon a debt previously 
 contracted in good faith ; and stock so purchased or acquired shall, 
 within six months from the time of its purchase, be sold or dis- 
 posed of at public or private sale ; or, in default thereof, a receiver 
 may be appointed to close up the business of the association, ac- 
 cording to section fifty-two hundred and thirty-four." This sec- 
 tion is one of the most important battle-grounds in the banking 
 law, but can be more perfectly reviewed in the chapter relating to 
 the rights and liabilities of shareholders. 
 
 §105. " No association shall hereafter offer or receive United Loans on 
 national, or 
 
 States notes or national bank notes as security or as collateral banknotes 
 
 •' prohibited. 
 
 security for any loan of money, or for a consideration agree to Bev. stat. 
 withhold the same from use, or offer or receive the custody or 
 
 ' Allen V. First National Bank, 23 Ohio, 97. 
 
 2 Id. 
 
 ' Stewart v. National Union Bank, 2 Abb. TJ. S., 424. 
 
 * Witters v. Sowles, 31 Fed. E., 1. 
 
debtedness, 
 Bev. Stat, 
 Sec. 5203. 
 
 52 NATIONAL BANK ACT. §106 
 
 promise of custody of such notes as security, or as collateral se- 
 curity, or consideration for any loan of money. Any association 
 offending against the pi;ovisions of this section shall be deemed 
 guilty of a misdemeanor and shall be fined not more than one 
 thousand dollars and a further sum equal to one-third of the money 
 so loaned. The officer or officers of any association who shall 
 make any such loan shall be liable for a further sum equal to one- 
 quarter of the money loaned; and any fine or penalty incurred by 
 a violation of this section shall be recoverable for the benefit of 
 the party bringing such suit." ' 
 onban"™!!- § ^^^- " -^^ association shall at any time be indebted, or in 
 any way liable, to an amount exceeding the amount of its capital 
 stock at such time actually paid in and remaining undiminished 
 by losses or otherwise, except on account of demands of the na- 
 ture following: 
 
 First. Notes of circulation. 
 
 Second. Moneys deposited with or collected by the association. 
 Third. Bills of exchange or drafts drawn against money actu- 
 ally on deposit to the credit of the association, or due thereto. 
 
 Fourth. Liabilities to the stockholders of the association for div- 
 idends and reserve profits." " 
 
 § 107. When dividends cannot be declared. No 
 bank shall withdraw in the form of dividends any portion of its 
 capital. And if its losses exceed its profits dividends must not 
 be declared. ' The section and its meaning will be given in the 
 next chapter. 
 Mnstnotpay § 108. " No association shall at any time pay out on loans or 
 notes. discounts, or in purchasing drafts or bills of exchange, or in pay- 
 
 Sec.'5206.' ment of deposits, or in any other mode pay or put in circula- 
 tion, the notes of any bank or banking association which are not, 
 at any such time, receivable, at par, on deposit, and in payment 
 of debts by the association so paying out or circulating such notes; 
 nor shall any association knowingly pay out or put in circulation 
 any notes issued by any bank or banking association which at the 
 time of such paying out or putting in circulation is not redeeming 
 its circulating notes in lawful money of the United States." * 
 orcheS""'' § 109- "It shall be unlawful for'any officer, clerk, or agent of 
 slo.'52M?' ^"^y national banking association to certify any check drawn upon 
 ' Act Feb. 19, 1869, 15 Stat, at Large, 40 C. 3 S. Ch. 32. 
 ' Act 1864, Sec. 36. ' Eev. Stat., Sec. 5204, • Act 1864, Sec.3?. 
 
§109(a) POWERS OP NATIONAL BANKIN6 ASSOCIATIONS. 53 
 
 the asBOoiation unless the person or company drawing the check 
 has on deposit with the association, at the time such check is cer- 
 tiiied, an amount of money equal to the amount specified in such 
 check. Any check so certified by duly authorized officers shall 
 be a good and valid obligation against the association ; but the 
 act of any officer, clerk, or agent of any association, in violation 
 of this section, shall subject such bank to the liabilities and pro- 
 ceedings on the part of the Comptroller as provided for in section 
 fifty-two hundred and thirty-four." ' In the act for extending 
 the life of the national banking associations it was enacted "that 
 any officer, clerk, or agent of any national banking association 
 who shall willfully violate the provisions of an act entitled ' An 
 act in reference to certifying checks by national banks,' approved 
 March 3, 1869, being section 5208 of the Revised Statutes of the 
 United States, or who shall resort to any device, or receive any 
 fictitious obligation, direct or collateral, in order to evade the pro- 
 visions thereof, or who shall certify .checks before the amount 
 thereof shall have been regularly entered to the credit of the dealer 
 upon the books of the banking association, shall be deemed guilty 
 of a misdemeanor, and shall, on conviction thereof in any circuit 
 or district court of the United States, be fined not more than 
 15,000, or shall be imprisoned not more than five years, or both, 
 in the discretion of the court." ^ 
 
 § 109(a). Verbal promise to pay check w^hen dra-wer 
 has funds. The certifying of checks as good which are given 
 in the ordinary course of business is not prohibited by this sec- 
 tion." !^or need the certificate be in writing. In a West Vir- 
 ginia case Paull, J., inquired: "Can itbe successfully maintained, 
 and should it be established as a fixed principle, that because a 
 statute prohibits a bank from certifying a check when the drawee 
 has not in its possession an amount of funds equal to the amount 
 specified in the check, that therefore a verbal acceptance or promise 
 made on its behalf by a proper officer to pay a check when the 
 drawer has an amount of funds in possession of the bank suffi- 
 cient for the purpose is null and void and cannot be enforced ? 
 We assume here, without argument, that it is sufficiently estab- 
 lished, by both English and American authorities, that the condi- 
 
 ' Act March 3, 1869, Stat, at Large, Ch. 135. 
 2 Act July 12, 1882, 47 C. 1 S. Ch. 390, Sec. 13. 
 • ^ Merchants' Bank v. State Bank, 10 Wall., 604. 
 
54 NATIONAL BAXK ACT. §110 
 
 tional acceptance of a check, or the oral promise to pay a check 
 are valid, and can be maintained. * * Because the act of Congress 
 prohibits a bank from certifying a check when the drawer has no 
 funds, why should that invalidate a promise on 'its part to pay a 
 check when the drawer shall have funds for the purpose in its pos- 
 session ? This is but acting in accordance with the spirit of the 
 act itself, refraining from making any promise which is operative 
 until the bank is in the condition contemplated by the act. It is 
 not seen how any interests of the bank are endangered by pursuing 
 this course. Indeed, such a promise seems to be implied in the 
 very existence of the bank, and the nature of the business it trans- 
 acts." ' 
 ABsooiations 8 HO. In the Sixtv- Sccoud Title of the Eevised Statutes which 
 
 governed by " " 
 
 act. relates to the National Banks, it is enacted "the provisions of 
 
 Eev. Stat. ' . ^ 
 
 Sec. 5157. chapters two, three, and four of this Title, which are expressed 
 without restrictive words, as applying to 'national banking asso- 
 ciations,' or to 'associations,' apply to all associations organized 
 to carry on the business of banking under any act of Con- 
 gress." 
 F.^®?* , „ § 110(a). "All banks not organized and transacting business 
 Eev. Stat, under the national- currency laws, or under this Title, and all per- 
 sons or corporations doing the business of bankers, brokers, or sav- 
 ings institutions, except savings banks authorized by Congress to 
 use the word 'national' as a partof their corporate name, are prohib- 
 ited from using the word 'national' as a portion of the name or 
 title of such bank, corporation, firm, or partnership; and any viola- 
 tion of this prohibition committed after the third day of Septem- 
 ber, eighteen hundred and seventy-three, shall subject the party 
 chargeable therewith to a penalty of fifty dollars for each day 
 during which it is committed or repeated." • 
 
 ^ National Bank v. National Bank, 7 W. Va., 544 pp. 548, 549. 
 
 ^ These chapters relate to the (2) "obtaining and issuing circulating notes;" 
 
 (3) "regulationof the banking business," and (4) "dissolution and receiver- 
 ship." 
 
gill 
 
 ELECTION AND POWERS OF. DIRECTOES. 
 
 i>5 
 
 CHAPTER V. 
 
 ELECTION AND POWERS OF DIEEOTORS, AND THE DECLARING OF DIVIDENDS. 
 
 111. Power of directors. 
 
 112. Notice to director is not notice to 
 
 bank. 
 
 113. Number and election. 
 
 114. They can resign. 
 
 115. Votes of shareholders. 
 
 116. Their qualifications. 
 
 117. Their oath. 
 
 118. Meaning of section. 
 
 119. Liability for representations about 
 
 ownership of stock. 
 
 120. How vacancy is filled. 
 
 121. Adjourned election. 
 
 122. How president is chosen. 
 
 123. Declaring of dividends. 
 
 124. When delared must be paid. 
 
 125. Cannot withdraw capital in form of 
 
 dividend. 
 
 126. Not liable for erroneous judgment 
 
 in making dividend. 
 
 127. Liability for unearned dividend. 
 
 128. Penalty for violating Title. 
 
 129. When they must sell stock of delin- 
 
 quent owners. 
 
 130. Not liable for loans made in good 
 
 faith. 
 
 131. For what liable independently of 
 
 statute. 
 
 132. Opinion of New Jersey courts. 
 
 133. Opinion of Wheeler, J. 
 
 134. Liability of absent director. 
 
 135. When not liable after resignation. 
 
 136. Bank may bring the action. 
 
 137. So can receiver. 
 
 138. If he refuse, stockholder can. 
 
 139. Action can be brought in state court. 
 
 140. Other duties and liabilities. 
 
 § 111. 
 
 A national bank has power "to exercise by its board of Their power 
 
 Eev. Stat. 
 
 directors, or duly authorized officers or agents, subject to law, all seo. 6135. 
 such incidental powers as shall be necessary to carry on the busi- enth. 
 ness of banking." "This statute provides for the election of a 
 president of the board, and otherwise assumes that the directors 
 shall act unitedly as an organized body. The election of an indi- 
 vidual as a director does not constitute him an agent of the cor- 
 poration with authority to act separately and independently of his 
 fellow-members. It is the board duly convened and acting as a 
 unit that is made the representative of the company. The assent 
 or determination of the members of the board acting separately 
 and individually, is not the assent of the corporation. The law 
 proceeds upon the theory that the directors shall meet' and counsel 
 with each other, and that any determination affecting the corpo- 
 
56 
 
 NATIONAL 13ANK ACT. 
 
 §112 
 
 Namber and 
 election. 
 Bev. Stat. 
 ' Sec. 514S. 
 
 Votes. 
 Bev. Stat. 
 See. 5144. 
 
 Qualifica- 
 tions of di- 
 rectors. 
 Rev. Stat. 
 Sec. 5146. 
 
 ration shall only be arrived at and expressed after a consultation 
 at a meeting of the board attended by at least a majority of its 
 members." ' As the only powers conferred on directors ^re those 
 which reside in them as a board and when thus acting collectively, 
 the individual consent of a majority of the members acting sep- 
 arately is not enough to ratify the unauthorized appropriation of 
 the money of a bank by its president or cashier.^ 
 
 §112. Notice to director is not to the bank. Nor can 
 a national bank be charged with the knowledge possessed by a 
 director concerning the illegality of the consideration of a note 
 discounted by- the institution.^ 
 
 § 113. " The affairs of each association shall be managed 
 by not less than five directors, who shall be elected by the share- 
 holders at a meeting to be held at any time before the associa- 
 tion is authorized by the Comptroller of the Currency to commence 
 the business of banking; and afterward at meetings to be held on 
 such day in January of each year as is specified therefor in the 
 articles of association. The directors shall hold office for one 
 year, and until their successors are elected and have qualified." * 
 
 § 114 They can resign. It has been contended that 
 if this section prohibits resignation during the year. This is not, 
 however, understood to be its effect. The apparent purpose of 
 the provision in regard to the term of office is to make it conform 
 to the time of the new election, and not to absolutely require every 
 director to serve the full term." ' 
 
 § 115. "In all elections of, directors, and in deciding all ques- 
 tions at meetings of shareholders, each shareholder shall be enti- 
 tled to one vote on each share of stock held by him. Sharehold- 
 ers may vote by proxies duly authorized in writing; but no officer, 
 clerk, teller or bookkeeper of such association shall act as proxy; 
 and no shareholder whose liability is past due and unpaid shall 
 be allowed to vote." " 
 
 § 116. " Every director must, during his whole term of ser- 
 vice, be a citizen of the United States, and at least three-fourths 
 of the directors must have resided in the state, territory, or dis- 
 
 ' Johnston, J., First National Bank v. Drake, 35 Kansas, p. 576. ' 
 
 "" Id,, 564. 
 
 ' Third National Bank v. Harrison, 3 McCrary,. 316. 
 
 * Act 1864, Sees. 9, 10. 
 
 s "Wheeler, J., Movius v. Lee, 30 Fed. K.,p. 301. « Act 1864, Sec. 11. 
 
§117 ELECTION AND VOWEKS OF DlKEO'iOKS. 57 
 
 triot in which the association is located, for at least one year im- 
 mediately preceding their election, and must be residents therein 
 during their continuance in ofiSoe. Every director must own, in' 
 his own right, at least ten shares of the capital stock of the asso- 
 ciation of which he is a director. Any director who ceases to be 
 the owner of ten shares of the gtock, or who becomes in any other 
 manner disqualified, shall thereby vacate his place." ' 
 
 § 117. " Each director, when appointed or elected, shall take ^f^'g^^^ 
 an oath that ho will, so far as the duty devolves on him, diligently ^^"^ ^"''• 
 and honestly administer the affairs of such association, and will 
 not knowingly violate, or willingly permit to be violated, any of 
 the provisions of this Title, and that he is the owner in good faith, 
 and in his own right, of the number of shares of stock required 
 by this Title, subscribed by him, or standing in his name on the 
 books of the association, and that the same is not hypothecated, 
 or in any way pledged, as security for any loan or debt. Such 
 oath, subscribed by the director making it, and certified by the 
 officer before whom it is taken, shall be immediately transmitted 
 to the Comptroller of the Currency, and shall be filed and pre- 
 served in his office." ' 
 
 § 118. Meaning of section. In construing this section 
 with reference to two stockholders and directors of a state bank 
 which became a national banking association, Judge Durfee said: 
 " It adopts the directors of the state bank as the directors of the 
 national bank for the time being. It makes no mention of any 
 oath as being required of them, and it might happen that some 
 of the directors thus adopted, not being owners of the amount of 
 stock required by the act could not take the prescribed oath."^ 
 
 § 119. Liability for misrepresentation about own- 
 ership of stock. If a director states on oath that he is the 
 bona fide owner in his own right of the number of shares of stock 
 then standing in his name on the books of the bank, and that they 
 are not hypothecated or pledged as security for a loan or debt, , 
 and if he makes such a statement willfully and not believing that 
 it is true, it is perjury if in truth he is not the owner of the stock 
 or has pledged the same for a loan or debt. * 
 
 1 Act 1864, Sees. 9, 10. 
 
 ' Act 1864, Sec. 9. 
 
 ' Lockwood «. Mechanics' National Bank, 9 R. I., 308 p. 342. 
 
 * United States v. Neale, 14 Fed. E., 767. See Rev. Stat., vSec. 5392. 
 
58 NATIONAL BANK ACT. §120 
 
 Vacancy, 8 120. "Any vacancv in the board shall be filled by appoint- 
 
 hOWfllled. °, , „ ''..•' ^. ^ , J- J.- ■ X n 
 
 Bev. Stat, ment by the remaining directors, and any director so appointed 
 
 shall hold his place until the next election." ' 
 Proceedings K ]^21. "If, from any cause, an election of directors is not made at 
 
 11 election ia o J j ' 
 
 not on a,ny time appointed, the association shall not for that cause be dis- 
 
 seo' sm" solved, but an election may be held on any subsequent day, thirty 
 days' notice thereof in all cases having been given in a newspaper 
 published in the city, town, or county in which the association is 
 located; and if no newspaper is published in such city, town or 
 county, such notice shall be published in a newspaper published 
 nearest thereto. If the articles of association do not fix the day 
 on which the election shall be held, or if no election is held on the 
 day fixed, the day for the election shall be designated by the 
 board of directors in their by-laws, or otherwise; or if the directors 
 fail to fix the day, sjiareholders representing two-thirds of the 
 shares may do so." ^ 
 
 R'ev!'stat: §122. "One of the directors, to be chosen by the board, shall 
 
 Sec.' 5150. ■ be the president of the board." ' 
 
 Declaring ot § 123. " The directors of any association may, semi-annually, 
 
 Eev. Stat, declare a dividend of so much of the net profits of the association 
 Sec. 6199. . ^ . . 
 
 as they shall judge expedient ; but each association shall, before 
 
 the declaration of a dividend, carry one-tenth part of its net 
 profits of the preceding half-year to its surplus fund until the 
 same shall amount to twenty per centum of its capital stock." * 
 
 § 124. When declared must be paid. " When a divi- 
 dend has once been declared, the directors cannot afterward re- 
 fuse to pay it, because they have determined to establish a sur- 
 plus fund with a view to benefit the corporation and its stockhold- 
 ers. The dividend, when declared, becomes a debt, and cannot 
 thenceforth be disposed of without the consent of him who is en- 
 titled to it." ' 
 of ca'^ftaY*' § 125. " No association, or any member thereof, shall, during 
 Rev'^stat'*' *^® *™® ^* shall Continue its banking operations, withdraw, or per- 
 sec. 5204. jjjjt to be withdrawn, either in the form of dividends or otherwise, 
 
 1 Act 1864, Sec. 10. ' Id. 
 
 ' Act 1864, Sec. 9. 
 
 * Act 1864, Sec. 33. 
 
 ' Beers v. Bridgeport Spring Co., 2 Week. Dig., 8. This statement of the 
 case is by VanHoesen, J., in Seeley v. New York National Exchange Bank, 
 8 Daly, p. 403. 
 
§126 DECLAKING OF DIVIDENDS. 59' 
 
 any portion of its capital. If losses have at any time been sus- 
 tained by any such association, equal to or exceeding its undivided 
 profits then on hand, no dividend shall be made; and no dividend 
 shall ever be made by any association, while it continues its bank- 
 ing operations, to an amount greater than its net profits then on 
 hand, deducting therefrom its losses and bad debts. All debts 
 due to any associations, on which interest is past due and unpaid 
 for a period of six months, unless the same are well secured, and 
 in process of collection, shall be considered bad debts within the 
 meaning of this section. But nothing in this section shall pre- 
 vent the reduction of the capital stock of the association under 
 section fifty-one hundred and forty-three." ' 
 
 § 126. Not liable for erroneous judgment in mak- 
 ing dividend. Bank directors cannot be held personally liable 
 for money paid as dividends "to a greater amount than net profits, 
 after deducting losses and bad debts," because they are in truth 
 bad debts, but were not so regarded when the dividends were de- 
 clared and paid. They are not liable for bad judgment concern- 
 ing the condition of the assets without bad faith. ^ 
 
 § 127. Liability for unearned dividend. Nor is the 
 procuring of directors to declare a dividend when the bank has no 
 net profits to pay the same a wilful misappropriation of its money 
 for which they can be punished.^ Says Judge Woods: "It is an 
 act done by an officer of the association in his official and not in 
 his individual capacity. It is therefore an act of mal-administra- 
 tion and nothing more, which, while it may subject the association 
 to a forfeiture of its charter, and the directors to a personal lia- 
 bility for damages suffered in consequence thereof by the associa- 
 tion or its shareholders, does not render thetn liable to a criminal 
 prosecution. The act belongs to the same class as the purchase 
 by a banking association of its own shares when not necessary to 
 prevent a loss on a debt due it." 
 
 § 128. "If the directors of any national banking association ■^"j^uJ''"' 
 shall knowingly violate, or knowingly permit any of the officers, g^J^ ^^^^ 
 agents, or servants of the association to violate a,ny of the provi- ^"^^ ^^®- 
 sions of this Title, all the rights, privileges, and franchises of the 
 association shall be thereby forefeited. Such violation shall, how- 
 
 1 Act 1864, Sec. 38. 
 
 ' "Witters v. Sowles, 31 Fed. K., 1. 
 
 » United States D. Britton, 108 U. S., 199 p. 206. 
 
60 
 
 NATIONAL BANK ACT. 
 
 §129 
 
 Duty to sell 
 etock ol de- 
 linquent 
 eharehold- 
 ers. 
 
 Act June 80, 
 1876. 
 
 ever, be determined and adjudged by a proper circuit, district, or 
 territorial court of the United States, in a suit brought for that 
 purpose by the Comptroller of the Currency, in his own name, 
 before the association shall be declared dissolved. And in cases 
 of such violation, every director who participated in or assented 
 to the same shall be held liable in his pergonal and individual 
 capacity for all damages which the association, its shareholders, 
 or any other person, shall have sustained in consequence of such 
 violation." ' 
 
 § 129. "If any shareholder or shareholders of such bank shall 
 neglect or refuse, after three months' notice, to pay the assess- 
 ment, as provided in this section, it shall be the duty of the 
 board of directors to cause a sufficient amount of the capital stock 
 of such shareholder or shareholders to be sold at public auction 
 (after thirty days' notice shall be given by posting such notice of 
 sale in the office of the bank, and by pubJishing such notice in a 
 newspaper of the city or town in which the bank is located, or in 
 a newspaper published nearest thereto,) to make good the defi- 
 ciency, and the balance, if any, shall be returned to such delin- 
 quent shareholder or shareholders." ^ 
 
 § 130. Not liable for loans made in good faith. The 
 liability of national bank directors for making bad loans has been 
 considered on several occasions. It may be remarked that they 
 cannot be held personally responsible for losses on loans which 
 were made by them in good faith, and as they thought at the 
 time, prudent, but which were afterward seen to be hazardous.' 
 
 § 131. For what liable independently of statute. 
 Their liability for violations of duty or breaches of trust exist in- 
 dependently of any statute.* In Robinson v. Smith,^ Chancellor 
 Walworth remarked that " the directors of a corporation who will- 
 fully abuse their trust or misapply the funds of the company, by 
 which a loss is sustained, are personallj liable as trustees, to make 
 good that loss, and they are also liable if they suffer the corpo- 
 rate funds to be lost or wasted by gross negligence and inatten- 
 tion to the duties of their trust." 
 
 ' Act 1864, Sec. 53. 
 
 ' 19 Stat, at Large, 44 C. 1 S. Ch. 156, Sec. 4. 
 
 » Witters v. Sowles, 31 Fed. E., 1. 
 
 * Briuckerhoff 1'. Bostwick, 88 N. Y., p. 58. 
 
 ' 3 Paige's Ch., 222. 
 
§132 DECLARING OF DIVIDENDS. 61 
 
 § 132. Opinion of New Jersey courts. "When the act 
 of the ofScers has been such that its effect will be to put the in- 
 stitution out of existence, then, and then only," says Beasley, C. 
 J., " are they made liable to the private suit of the stockholder or 
 other person injured by their willful disobedience of the require- 
 ments of the law. * * The plaintiff's case is not brought 
 within the scope of thia remedial clause of this section, inasmuch 
 as it does not show a willful violation of any one of such funda- 
 mental regulations." ' But in another case against the same di- 
 rectors the Chancellor of New Jersey maintained a different view. 
 " The case, made by the bill," he remarked, " is one of absolute 
 neglect by the defendant directors of all the essential duties of 
 their office. Conceding that the specific violations of duty pointed 
 out might not of themselves, if they stood alone, suffice to fix 
 personal liability, in connection with the general statement and 
 charge of absolute neglect of all essential duties, they obviously 
 assume a different character, for tie allegatipns are to be taken 
 all together, and the specifications are to be considered in the light 
 of the general statement. The allegations of the bill are sufficient 
 to fix personal liability upon the directors. The case made by 
 them is one of the most absolute and unqualified inattention and 
 neglect." ^ 
 
 § 183. Opinion of Wheeler, J. The liability of direc- 
 tors for losses occasioned by their negligence was fully -considered 
 by Wheeler, J., inMovius w. Lee.' The bill in the case was brought - 
 to charge the directors who were living, and the estates of those 
 who were dead, for the losses sustained by a national bank through 
 the misconduct of Lee, a large stockholder, and successively cashier, 
 vice president and president of the institution. " The losses," re- 
 marked the court, " appear to have begun by the discount of the 
 paper of persons engaged with Lee in business and speculations 
 not adequately responsible for the amount of the discounts. The 
 paper was usually indorsed by him, and sometimes secured, to 
 some extent, by collaterals resulting from the avails of the dis- 
 counts. Great losses from the transactions in which he was en- 
 gaged fell upon him, and, through him, upon the bank. As the 
 
 ' Conway v. Halsey, 44 N. J. Law, 462 p. 465. 
 
 2 Ackerman v. Halsey, 37 N. J. Eq., 356 p. 364, afia by Court of Errors, 
 38 N. J. Eq., 501. 
 • 3 30 Fed. E., 298 p. 302. 
 
NATIONAL BANK ACT. §133 
 
 paper fell due it was renewed or replaced by other paper of like 
 character, until a large part of the loans and discounts of the 
 bank consisted in these notes of irresponsible persons indorsed by 
 him. All these discounts, renewals, and substitutions were cor- 
 rectly entered, as in the usual course of business, upon the books 
 of the bank, and appeared there fully with the entries of its other 
 current business. These discounts were in violation of the pro- 
 hibition in the banking law of an excess of one-tenth the amount 
 of capital paid in of any person, company, or firm for money 
 borrowed. Section 5200. They did not, however, appear to be 
 so always or generally, for they might be, so far as they showed, 
 commercial or business paper actually owned by the person ne- 
 gotiating them, within the provisions of the same law allowed to 
 be discounted. On January 18, 1882, he took from the cash of 
 the bank $23,680, and put a slip of paper with his name and the 
 amount upon it, in place of the money in the cash drawer, and 
 on February 15, $16,737.50, in like manner, without giving any 
 other evidence of his indebtedness for these amounts. The former 
 amount was reduced, by replacements of cash, to $12,405, and the 
 latter to $11,435. These transactions were not concealed from 
 the cashier or employes in financial matters of the bank, but did 
 not appear on the books of the bank, except that they were shown 
 on the cash blotter of the teller. These were clear violations of 
 the provisions of the banking law mentioned. As Lee was the 
 president and at the head of the bank, and was supposed by the 
 cashier and subordinates to be a man of integrity and wealth, and 
 these things were done by him and by his direction, they excited no 
 suspicion among these persons that loss to the bank would be 
 occasioned thereby until the very last days of the business of the 
 bank, after all these losses had been incurred. As the suspicions 
 of these persons were not aroused, they said nothing to any of 
 the directors about what was going on, and they had no knowl- 
 edge, supposition, or suspicion but that the business of the bank 
 was proceeding lawfully, regularly and prosperously. In the 
 banking law it is further provided that if the directors of any bank 
 shall knowingly violate, or knowingly permit any of the officers, 
 agents, or servants of it to violate any of the provisions of that ' 
 law, every director who participated in or assented to such viola- 
 tion shall be liable for all damages sustained in consequence of 
 
§134 DECLARING OP DIVIDENDS. 63 
 
 such violation ' It is not claimed that any of these three direc- 
 tors so knowingly permitted or assented to any of these violations 
 of this law as to become liable at all under this provision." 
 
 After carefully reviewing many authorities the court concludes 
 that "no just ground of liability on the part of these directors is 
 perceived — not on the express provisions of the statute on the 
 subject, for they do not, and are not claimedto, come within that; 
 not by the common law, for by that each is liable only for his 
 own miscarriages, and none are shown." 
 
 § 134 Liability of absent directors. When is a direc- 
 tor liable for the misconduct of his co-directors during his ab- 
 sence, or without his knowledge ? If authorized to be away, he 
 is wholly free from blame and liability. In Movius v. Lee ^ the 
 court said that the president who was absent in consequence of 
 ill health and by authority of the board, " did-nothing himself for 
 which it is claimed that he became in any manner chargeable; and 
 it does not appear that he was so responsible for what the others 
 did that their misdoings could make him chargeable." Nor can 
 directors be held on the ground of inattention in not preventing a 
 hazardous, imprudent and disastrous loan which might be made by 
 their associates without their knowledge, connivance or participa- 
 tion.' But they are liable for continuing to do business when the 
 slightest examination of the condition of their bank would show 
 that it was hopelessly insolvent.* 
 
 § 135. When not liable after resignation. If a direc- 
 tor, before the expiration of his term, should sell his stock and 
 receive payment and orally resign his office to the president he 
 would cease to be such an officer, and could not be held for losses 
 arising afterward through the negligence of the directors. Says 
 Judge Wheeler, in a suit against Gushing and others who had been 
 directors of the First National Bank of Buffalo : The purpose of 
 section 5146 "obviously is to require the office of director to be 
 kept in the hands of those who are personally and pecuniarily in- 
 terested in the afPairs of the bank. When Gushing bargained his 
 stpck, he ceased to be so interested. Good faith to the other 
 shareholders, as their interests were guarded by these provisions 
 
 1 Rev. Stat., Sec. 5239. 
 
 ' 30 Fed. E., p. 302. 
 
 3 Witters v. Sowles,-31 Fed. E., 1. 
 
 * Delano v. Case, 17 Brad., 531, affd 121 lU., 247. 
 
64 NATIONAL BANK ACT. §136 
 
 of the law, would seem to require that he should then cease to 
 be a director. He appears to have taken this view, and to have 
 done what he could to carry it out. There was no calamity im- 
 pending or contemplated by .him to be avoided by vacating his 
 office, or which he could prevent by retaining it. There was no 
 reason why he should not resign if ■ he could. He was an officer 
 elected to his place ; it was an office that he was not obliged to 
 accept, and would seem to be one that he was not obliged to hold.' 
 No mode of resignation was provided by law, and an oral one would 
 be as good as any. The president was the head of the board of 
 directors, who alone could fill the vacancy, and a resignation to 
 him would be a resignation to the board." ' 
 
 § 136. Bank may bring the action. Whenever direc- 
 tors are liable the bank itself, if alive, may bring the action; or if 
 under their control, the stockholders may proceed against them.^ 
 In a case of this nature. Judge Kapallo, speaking for the New 
 York Court of Appeals has said : " For these losses the bank, if 
 still exercising its corporate functions, would have a claim upon 
 the guilty directors which it could enforce by action, but if it re- 
 fused to prosecute, or if it still remained under the control of the 
 very directors against whom the action should be brought, the 
 stockholders- would have a standing in a court of equity to sue in 
 their own names making the corporation a party defendant." ^ The 
 receiver, too, should be joined' in order to render the determina- 
 tion complete. But if he were omitted, the bank could not object 
 to the proceeding against the directors on that ground.* 
 
 § 137. So can the receiver. A receiver, also, either in 
 his own, or in the bank's name can enforce an action for the ben- 
 efit of the stockholders, depositors and other creditors of the bank 
 , against the directors based on the non- performance or negligent 
 performance of their duties.^ But if he should happen to be one 
 of the guilty directors, he would not be a proper person to conduct 
 such an action even though he were directed to do so by the 
 Comptroller. The stockholders in such a case should sue in their 
 
 ' Movius V. Lee, 30 Fed. R, 298 p. 301. 
 ^ Hand v. Atlantic National Bank, 55 How. Pr., 231. 
 ' Brinckerhoff v. Bostwick, 88 N. Y., 56, citing Robinson v. Smith, 3 
 Paige's Ch. 222; Greaves v. Gouge, 69 N. Y., 154. 
 * Hand v. Atlantic Nati,onal Bank, 55 How. Pr., 231. 
 5 Movius V. Lee, 30 Fed. E., 298. 
 
§138 DECLARING OF DIVIDENDS. 65 
 
 own names.' If they are numerous the action may be brought 
 in the name of one or more of them in behalf of all, and the bank 
 and receiver should be made defendant.^ And as the action is an 
 equitable one the directors cannot demand a jury trial. ^ 
 
 §138. If receiver refuse stockholder can. Moreover, 
 if a receiver should refuse to' bring such an action, this could be 
 done by a creditor and stockholder for the benefit of himself and 
 of such other creditors and stockholders as might join him. * 
 
 § 139. Action can be brought in state court. Before 
 the enactment of the law of 1882, which greatly enlarged^the 
 sphere of the jurisdiction of the state courts, the question was 
 considered whether such an action could be tried by a state tri- 
 bunal. An affirmative answer was given. " The right of action," 
 says Judge Rapallo, " is not in our opinion derived from the act 
 of Congress, but depends upon general principles of equity; but in 
 any aspect of the case the state courts have concurrent jurisdiction, 
 unless exclusive jurisdiction has been conferred upon the United 
 States courts.' * * There can be no reason why civil actions 
 brought by stockholders in place of the receiver, to enforce 
 claims against delinquent directors or officers, should stand upon 
 any different footing. * * There is nothing in the act which 
 withdraws from the jurisdiction of the state courts civil actions 
 to enforce rights of individuals against national banks or their 
 officers."* 
 
 § 140. Other duties and liabilities. Beside the duties 
 and liabilities' described in this chapter, there are others springing 
 from the office of director which however, may be more, con- 
 veniently treated in other places. They can convert a state bank 
 into a national one ;' sign reports that are made to the Comp- 
 troller of the Currency;' give notice of the bank's liquidation;' 
 may be examined by bank examiners;'" and are liable for embez- 
 
 ' Brinckerhoff v. Bostwick, 88 N. Y., 52. 
 ^ Id. 
 ^ Brinckerliofif 1). Bostwick,. 105 N. Y., 567, third trial. 
 
 * Ackerman v. Halsey, 37 N. J. Eq., 356, affd Court of Errors, 38 N. J. 
 Eq.,' 501; Conway v. Halsey, 44 N. J. Law, 462. 
 
 * Claflin V. Houseman, 93 U. S., 130; Robinson «. National Bank, 81 N. Y., 
 385; National Bank v. Wells, 79 Id., 498. 
 
 ^ Brinckerhoff v. Bostwick, 88 N. Y., 52 p. 60; Gooke v. State National 
 Bank, 52 N. Y., 96; Bletz v. Columbia National Bank, 87 Pa., 87. 
 ' ?'21. ' i 293. ' U 371, 372: '° i 375. 
 
 5— B. 
 
66 NATIONAL BANK ACT. §140 
 
 zling;' or for knowingly violating or permitting any of the 
 ,' officers, agents or servants of the bank to violate the national 
 
 bank act;^ or for countersigning or delivering circulating notes 
 in any other way than the law provides;' or for receiving United 
 States, or national bank notes as security for loans.* , 
 
 ' M 281, 282. 
 
 = ? 285. 
 
 ' i 301. 
 
 * § 262. 
 
RIGHTS AND LIABILITIES OF SHAREHOLDEBS. 
 
 67 
 
 CHAPTER VI. 
 
 EIGHTS AND LIABILITIES OF SHAREHOLDERS. 
 
 How Stock is Transferred, and Rights of Transferee. 
 
 141. How stock is transferred. 
 
 142. Effect of delivering certificate. 
 
 143. Passing of title on shareholder's 
 
 death. 
 
 144. Bank should recognize transfer by 
 
 foreign executor. 
 
 145. Shareholder has absolute right to 
 
 transfer. ' 
 
 146. Effect of unrecorded transfer. 
 
 ? 146 (a). Stock sold by tax collector, bnt 
 not transferred. 
 
 147. Eight to sue bank for misappro- 
 
 priation. 
 
 148. When he can have bank enjoined. 
 
 149. Court will not enforce contract 
 
 whereby one person cair get con- 
 trol. 
 
 Prohibition of Bank Stock as Security for Loans. 
 
 150. Loans on its stock prohibited. 
 
 151. Meaning of the section. 
 
 152. Bank can have no lien on its own 
 . stock. 
 
 153. Feckheimer v. National Exchange 
 
 Bank. . 
 
 154. Eeasons for changing the law. 
 
 155. Bank can purchase to escape loss. 
 
 I 156. Applies to bank as well as indi- 
 vidual. 
 
 157. Eight of bank to take stock for past 
 
 debt.. 
 
 158. If taken as security and sold pledgor 
 
 cannot recover. 
 
 159. Meaning of second clause of section. 
 
 Ldability of Shareholders. 
 
 160. Liability of shareholders. 
 
 161. Liable until transfer is made on 
 
 books. 
 
 162. Shareholder until then. 
 
 163. Whitney v. Butler. 
 
 164. When shareholder cannot escape 
 
 liability by transfer. 
 
 165. Pledgee is usually liable. 
 
 166. Until the re-transfer is made on the 
 
 books. 
 
 ? 167. But not if held in name of irrespon- 
 sible trustee. 
 
 168. Transfer by owner to escape liability 
 
 is^ot valid. 
 
 169. Effect of secret trust. 
 
 170. The owner on stock book is prima 
 
 facie owner. 
 
 171. Married woman is liable. 
 
 172. So are personal representatives. 
 
NATIONAL BANK ACT. 
 
 S141 
 
 s 
 
 173. Liability ceases when bank liqui- 
 
 dates. 
 
 174. Also after Statute of Limitations 
 
 has run. 
 
 175. Liability is several and equal. 
 
 176. Eeceiver is authorized to sue shaje- 
 
 holders. 
 
 177. Federal courts have jurisdiction re- 
 
 gardless of amount. 
 
 178. Mode of proceeding. 
 
 179. How liability is fixed. 
 
 180. Until Comptroller's order assess- 
 
 ment is contingent. 
 
 181. Eeceiver must aver that proceeding 
 
 is necessary. 
 
 182. He cannot maintain suit against 
 * shareholders who sold in good 
 
 faith. 
 
 ' 183. Stock certificates are basis of assess- 
 ments. 1 
 
 184. Shareholder cannot deny validity of 
 
 bank. 
 
 185. He cannot offset claim due from 
 
 bank. 
 
 186. Liability for interest on bank's 
 
 debts. 
 
 187. Interest on assessment. 
 
 188. Insolvency of one shareholder does 
 
 not increase liability of the others. 
 
 189. Receiver's power to ascertain 
 
 whether transfer is valid. 
 
 190. Delano v. Butler. 
 
 191. Eaton v. Pacific National Bank. 
 
 Proceedings by Creditors against Shareholders. 
 
 J 192. How they can proceed by statute. 
 
 193. Meaning of statute. 
 
 194. Proceedings before statute was 
 
 195. Eequirementsofbill. Amendments. 
 
 196. When creditor can fill a bill. 
 
 197. Receiver cannot maintain an action 
 
 at same time. 
 
 198. .Creditor must prove insolvency of 
 
 bank. 
 
 ? 199. Only creditors who have proved 
 claims can recover. 
 
 200. Decree fixing shareholder's liability. 
 
 201. Creditor can also sue bank for 
 
 claim due himself. 
 
 202. Payment of receiver. 
 
 I 203. When shareholders can recover of 
 directors. 
 
 Non-Liability of Tntstees. 
 
 204. 'lYust«es are not personally liable. 
 
 205. Meaning of section. 
 
 206. Liability of deceased shareholder's 
 
 estate. 
 
 207. How long may estate be held. 
 
 208. Witters v. Sowles. 
 
 209. Liability of religious society. 
 
 210. Of ward. 
 
 211. If shareholder is trustee this should 
 
 appear on book. 
 
 212. This cannot be shown by evidence 
 
 contrary to book. 
 
 213. List of shareholders to be kept for 
 
 inspection. 
 
 214. Other rights of shareholders. 
 
 Bbv. Stat, 
 eec. 5139. 
 
 § 141. " The capital stock of each association shall be divided 
 into shares of one hundred dollars each, and be deemed personal 
 property, and transferable on the books of the association in such 
 manner as may be prescribed in the by-laws or articles of associ- 
 ation. Every person becoming a shareholder by such transfer 
 
§142' EIGHTS AND LIABILITIES OF SHAREHOLDERS. 69 
 
 shrtll, in proportion to his shares, succeed to all the rights and 
 liabilities of the prior holder of such shares; and no change shall 
 be made in the articles of association by which the rights, reme- 
 dies, or security of the existing creditors of the association shall 
 be impaired." ' 
 
 § 142. BflFect of delivering certificate. The title to 
 bank shares is acquired by the seller's delivery of his certificate 
 of them to the purchaser. Says Field, J., in Johnston v. Laflin." 
 "Shares in the capital stock of associations, under the National 
 Banking Law, are salable and transferable at the will of the owner. 
 They are, in that respect, like other personal property. The 
 statute recognizes this transferability, although it authorizes every 
 association to prescribe the manner of their transfer. Its power 
 in that respect, however, can only go to the extent of prescribing 
 conditions essential to the protection -of the association against 
 fraudulent transfers, or such as may be designed to evade the just 
 responsibility of the stockholder. It is to be exercised reasonably. 
 Under the pretense of prescribing the manner of the transfer, the 
 association cannot clog the transfei" with useless restrictions, or 
 make it dependent upon the consent of the directors or other 
 stockholders. * * As between Laflin [who sold the stock] 
 and the broker [who bought it for the president of the bank] 
 the transaction was consummated when the certificate was deliv- 
 ered to the latter with the blank power of attorney indorsed, and 
 the money was received from him. As between them, the title to 
 the shares then passed; whether that be deemed a legal or equita- 
 ble one matters not; the right to the shares then vested in the 
 purchaser."' 
 
 § 143. Passing of title on shareholder's death. The 
 stock of a national bank is "the personal property of the stock- 
 holder, having all the ordinary incidents of such, liable to trans- 
 fer by sale, and all other means ordinarily applicable to such 
 property. On the owner's death it parses to his legal represen- 
 
 ' Act 1864, Sec. 12. 
 
 ' 103 V. S., 800 p. 803, affg 5 Dill, 65. 
 
 '" This section was quoted in Weyer v. Second National Bank (57 Ind. 
 198), which case related to the transfer of national bank stock by an admin- 
 istrator, but the decision turned on the validity of the transfer by the com- 
 mon law of the state. • 
 
70 NATIOBTAL BANK ACT. §144 
 
 tatives, and is disposed of under the laws of the state in the usual 
 course of administration, as any other personalty of which he may 
 die possessed." ' 
 
 § 144. Bank should recognize transfer by foreign 
 executor. If a bank does not provide in its by-laws or articles 
 of association how its stock shall be transferred, it should recog- 
 nize a transfer by a foreign executor who is duly appointed in 
 another state. ^ 
 
 § 145. Shareholder has absolute right to transfer. 
 "A shareowner in a national bank, while it is a going concern 
 has the absolute right in the absence of fraud to make a bona fide 
 and actual sale and transfer of his shares at any time to any per- 
 son capable in law of purchasing and holding the same, and of 
 assuming the transferrer's liabilities in respect thereto. * * 
 The seller, for his own protection against creditors of the bank 
 in case of insolvency, may transfer £he same on the books to 
 the vendee * * [and] may file a bill to compel the vendee 
 to record the transfer." ' 
 
 § 146. EflFect of unrecorded transfer. Whether an un- 
 recorded transfer shall hold against a subsequent attachment of 
 the shares by a creditor who was ignorant of the transaction has 
 been decided both ways. In one case A sold some shares of na- 
 tional bank stock to B, December 30, 1875, and assigned them by 
 a transfer written on the back of the certificate. By the by-laws 
 of the bank, stock was transferable only on the books of the bank. 
 December 14, 1878, the shares were attached by a judgment cred- 
 itor of A and sold and transferred by the bank to C. Neither the 
 bank nor the creditor knew of the transfer to B. In January, 
 1880, B presented his certificate and transfer to the officers of the 
 bank and demanded a transfer of the stock which was refused. 
 He then brought a suit against the bank for refusing to make the 
 transfer and recovered damages. In deciding the case Judge 
 Carpenter said that " the question has been much debated and 
 has been differently decided in different jurisdictions. I think it 
 is settled for this court in a case involving the title to shares of 
 
 • Butler, J., Hobbs v. Western National Bank, U. S. Circuit Court, 8 Week. 
 Notes, 131 p. 132. 
 
 ^ Hobbg V. Western National Bank, 8 Week. Notes, 131. 
 
 ' Billon, J., Johnston v. Laflin, 5 Dill., 65 pp. 78, 79, and quoted with ap-/ 
 proval by Manning, J. , in Lesassier & Binder v. Kennedy, 36 La. Ann. , p. 543. 
 
§146(a) EIGHTS AND LIABILITIES OF SHAKEHOLDBKS. 71 
 
 stock in a national bank, by the authority of the decision in Bank 
 V. Lanier.' I decide, therefore, that the defendant corporation 
 is liable in damages for the refusal to transfer the shares." ^ Be- 
 tween the parties to a transfer, if unrecorded, it is valid "when 
 no by-laws on the subject have been passed by the bank whose 
 stock is in controversy." ' 
 
 § 146 (a). Stock sold by tax collector but not re- 
 corded. In 1865 a tax collector assumed to sell fifty shares of 
 national bank stock belonging to B, for taxes, which were bought 
 by S, but never transferred on the books of the bank. S re- 
 ceived the dividends until the tax was declared valid, * and after 
 that B received them. The laws of the state conferred no 
 authority on the collector to sell such property and transfer the 
 title.' It was decided that no legal transfer of them had been 
 made.° 
 
 § 147. Bight to sue bank for misappropriation. 
 "A stockholder certainly has the rights of action against a cor- 
 poration that are possessed by a corporation against any of its 
 stockholders. If, therefore he should deliver money to a national 
 bank to pay the balance due on his stock, for example which it 
 should promise to appropriate in that manner, but, in truth, 
 should appropriate in some other way, he could recover what-' 
 ever damage he had sustained.' 
 
 § 148. Right to have bank enjoined for misapply- 
 ing funds. The circuit court of the United States has juris- 
 diction on a proper bill filed by a stockholder of a bank to 
 enjoin its officers from misapplying its funds by acts which are 
 not warranted by the charter, or which would be a breach of trust. 
 Judge Giles, when declaring this rule, quoted from the opinion 
 of the supreme federal tribunal in the case of Dodge v. Woolsey.' 
 
 ' 11 Wall., 369; see also Continental National Bank v. Eliot National Bank, 
 7Fed. E., 369. 
 
 ' Hazard v. National Exchange Bank, 26 Fed. E., 94; Continental National 
 Bank v. Eliot National Bank, 7 Fed. E., 369; Scott v. Pequonnock National 
 Bank, 15 Fed. E., 494. 
 
 ^ Shipman, J., Scott v. Pequonnock National Bank, 15 Fed. E., p. 500. 
 
 ' Bellows V. Weeks, 41 Vt., 590. 
 
 * Barnes v. Hall, 55 Vt., 420. 
 
 » Witters v. Sowles, 32 Fed. E., 130. 
 
 ' Wilson V. First National Bank, 1 Wyoming, 108. 
 
 « 18 How., p. 341. 
 
72 NATIONAL BANK ACT. §149 
 
 "It is now no longer doubted, either in England or the United 
 States, that courts of equity in both, have a jurisdiction over cor- 
 porations, at the instance of one or more of their members, to 
 apply preventive remedies by injunction to restrain those who 
 administer them from doing acts which would amount to a viola- 
 tion of charters, or to prevent any misapplication of their capitals 
 or profits which might result in lessening the dividends of 
 stockholders, or the value of their shares, as either may be pro- 
 tected by the franchises of a corporation, if the acts intended to be 
 done create what is in the law denominated a breach of trust." ' 
 § 149. Court ■will not enforce contract whereby one 
 person can get control. A court will not enforce a contract 
 for the delivery of national bank shares if the object of the pur- 
 chase b6 to obtain control of the majority of the stock. The en- 
 forcement of such a contract is opposed to public policy. In Foil's 
 Appeal he contracted to sell and Greer to purchase fifteen shares 
 in a national bank, which if executed would have enabled him to 
 control its affairs. He was to pay for the stock with borrowed 
 money. Said the court: " It is difficult to see how the small stock- 
 holders who have their modest earnings invested in it, the depos- 
 itors who use it for the safe-keeping of their moneys, or the busi- 
 ness public who look to it for accommodation in the way of loans, 
 are to be benefited by the concentration of a majority of its stock 
 in the hands of one man, or in such way that one man 'and his 
 friends shall control it. Especially is this so when an attempt is 
 ' made to control it by the use of borrowed capital. The tempta- 
 
 tion to use it for personal ends in such case is very strong. * * 
 This purchase has not even the merit of being an investment on 
 the part of the plaintiff. When a man buys and pays for stock 
 with his own money, it may be regarded as an investment. When 
 he buys it upon credit, or pays for it with borrowed money, it is 
 a mere speculation. Were we to affirm this decree, I see no 
 reason why we may not be called upon to use the extraordinary 
 powers of a court of equity to assist in miscellaneous stock-job- 
 bing operations. A party who is attempting to make a ' corner ' 
 in stock or in any article of merchandise who had made his con- 
 tracts with that end in view, might with equal propriety call upon 
 us to decree specific performance thereof." ^ 
 
 • Shoemaker v. National Mechanics' Bank, 2 Abb. V. S., 416 p. 418. 
 ' 91 Pa!, 434 p. 437. 
 
§150 EIGHTS AND LIABILITIES OF SHAREHOLDERS. 73 
 
 § 150. , " No association shall make any loan or discount on Bank cannot 
 
 . Ill loan or pnr- 
 
 the security of the shares of its own capital stock, nor be the pur- chase its 
 
 SlOCJ£* 
 
 chaser or holder of any such shares, unless such security or pur- Bev. stat. 
 
 •' ' J r ggo_ 5201. 
 
 chase shall be necessary to prevent loss upon a debt previously, 
 contracted in good faith ; and stock so purchased or acquired shall, 
 within six months from the time of its purchase, be sold or dis- 
 posed of at public or private sale; or, in default thereof, a receiver 
 may be appointed to close up the business of the association, ac- 
 cording to section fifty-two hundred and thirty-four." ' 
 
 § 151. Meaning of Section. The 36th section of the act 
 of 1863 provided that " the capital stock of any association * * 
 shall be assignable on the books of the association in such man- 
 ner as its by-laws shall prescribe ; but no shareholder in any asso- 
 ciation under this act shall have power to sell or transfer any share 
 held in his own right so long as he shall be liable, either as prin- 
 cipal, debtor, surety, or otherwise, to the association for any debt 
 which shall have become due and remain unpaid, nor in any case 
 shall such shareholder be entitled to receive any dividend, interest 
 or profit on such shares so long as such liabilities shall continue, 
 but all such dividends, interests, and profits shall be retained by 
 the association, and applied to the discharge of such liabilities." 
 The next year Congress swept away this provision, thus banking 
 associations no longer have any lien on their stock for debts that 
 are due to them. " Congress evidently intended," said Judge 
 Davis, " by leaving out of the law of 1864 the 36th section of the 
 act of 1863, to relieve the holders of bank shares from the restric- 
 tions imposed by that section. The policy on the subject was 
 changed, and the directors of banking associations were in efPect 
 notified that thereafter they must deal with their shareholders as 
 they dealt with other people." ^ Nor could the 36th section of 
 the act of 1863 he perpetuated after the act of the following year 
 by adopting a by-law pertaining to the transfer of stock while the 
 first act was in force. ^ 
 
 § 152. Bank can have no lien on its own stock. ' A 
 bank, therefore, can neither makfe a lien on the security <)f its own 
 stock, nor have a lien on the stock of a debtor to secure itself for 
 
 ' Act 1864, See. 35. 
 
 ^ Bank v. Lanier, 11 Wall., 369 p. 376. 
 
 ' Id. , 
 
74 NATIONAL BANK ACT. §153 
 
 a debt which he may owe to the institution.' And a by-law 
 which should prohibit an indebted stockholder from trans- 
 ferring his stock, though notice thereof should be indorsed on the 
 certificate, would be void.^ 
 
 § 153. In Feckheimer v. National Exchange Bank' 
 L and S owned shares in the bank, and when they were in a fail- 
 ing condition and indebted to it, assigned them to F, as trustee. 
 Their certificates stated that a transfer could be made only on 
 the books of the bank, .and that if indebted to it a transfer with- 
 out the consent of the board of directors would be void. Never- 
 theless, the court decided that the trustee could transfer the 
 shares to another person, and also demand the payment of all 
 dividends that were due thereon. 
 
 § 154 Reasons for change in law. The reasons for 
 changing the law are well stated by Judge Davis, and clearly show 
 that it is an improvement. " The power to transfer their stock is 
 one of the most valuable franchises conferred by Congress on 
 banking associations. Without this power, it can readily be seen 
 the value of the stock would be greatly lessened, and obviously, 
 whatever contributes to make the shares of the stock a safe mode 
 of investment, and easily convertible, tends to enhance their value. 
 It is no less the interest of the shareholder, than the public, that 
 the certificate representing his stock should be in a form to 
 secure public confidence, for without this he could not negotiate • 
 it to any advantage. 
 
 "It is in obedience to this requirement, that stock certificates 
 of all kinds have been constructed in a way to invite the confi- 
 dence of business men, so that they have become the basis of com- 
 mercial transactions in all the large cities of the country, and are 
 
 ' Bullard v. Bank, 18 Wall., 589; Conklin v. Second National Bank, 45 N. 
 Y., 655; Second National Bank v. National State Bank, 10 Bush, 367; Feck- 
 heimer v. National Exchange Bank, 79 Va., 80; Delaware, Lackawanna & 
 West. E. Co. V. Oxford Iron Co., 38 N. J. Eq., 340; see Toung v. Vough, 23 
 Id., 325 ; Evansville National Bank v. Metropolitan National Bank, 2 Biss., 
 527; In re Bigelow, 2 Bened., 469; Lo&wood v. Mechanics' National Bank, 
 9 E. I., 308; Dunkerson's case, 4 Biss., 323; Pendergast «. Bank of Stock- 
 ton, 2 Saw., 108; Knights. Old National Bank, 3 Cliff., 429. The last seven 
 cases mentioned are not in harmony with the others and have been nn- 
 favorahly criticised on several occasions. 
 
 ^ Feckheimer v. National Exchange Bank, 79 Va., 80. 
 
 s Id. 
 
§155 EIGHTS AND LIABILITIES 0)? SHAEEHOLDEES. 75 
 
 sold in open market the same as other securities. Although 
 neither in form or character negotiable paper, they approximate 
 to it as nearly as practicable. If we assume that the certificates 
 in question are not different from those in' general use by corpo- 
 rations, and the assumption is a safe one, it is easy to see why in- 
 vestments of this character are sought after and relied upon. No 
 better form could be adopted to assure the purchaser that he can 
 buy with safety. He is told, under the seal of the corpora- 
 tion, that the shareholder is entitled to so much stock, which 
 can be transferred on the books of the corporation, in person or 
 by attorney, when the certificates are surrendered, but not other- 
 wise. This is a notification to all persons interested to know that 
 whoever in good faith buys the stock, and produces to the cor- 
 poration the certificates, regularly assigned, with power to trans- 
 fer, is entitled to have the stock transferred to him. And the 
 notification goes further, for it assures the holder that the cor- 
 poration will not transfer the stock to any one not in possession 
 of the certificates." ' , 
 
 § 155. Bank can become purchaser to escape loss. 
 In interpreting the first clause "of this statute, prohibiting banks 
 from making loans or discounts on the security of their own stock. 
 Judge Davis has remarked that " so marked is the policy of Con- 
 gress on this subject, that it does not allow a bank to become the 
 purchaser or holder of its shares at all, unless absolutely neces- 
 sary to prevent loss on a debt previously contracted in good faith, 
 and not then for a longer period than six months. It is easy to 
 see, that if the power were given to a bank to loan money on the 
 security of its shares, it would imply also a power to become the 
 owner of those shares, and this Congress intended to guard 
 against." ^ 
 
 § 156. Applies to bank as "nrell as individual. Al- 
 though the section in question forbids loans or discounts by a 
 bank on the security of its own shares of stock, it was contended 
 in the case of an Indiana bank against Lanier that " this inhibi- 
 tion does not extend to the case of deposits made by one bank 
 with another. But a deposit is nothing but a loan of money, and 
 is within both the letter and spirit of the provision. It is well 
 known that country banks keep on deposit in New York, with 
 
 i" Bank v. Lanier, 11 "Wall., p 377. 
 
 ^ Bank v. Lanier, 11 Wall., 369 p. 374. 
 
76 NATIONAL BANK ACT. §157 
 
 bankers and merchants, a considerable amount of money for their 
 own convenience, for which they receive more or less of interest. 
 But whether interest be obtained or not, these deposits are, equally 
 with paper discounted over the counter of the bank, loans of 
 money, and the reason of the rule is equally applicable to them;" ' 
 § 157. Kight to take stock for past debt. The right 
 of a bank to take and hold its shares for a debt was decided in 
 Lee V. Citzens' National Bank.^ W, a director and cashier, was 
 the holder of fifty shares, his certificate therefor containing a 
 blank form of indorsement and power of attorney. In November, 
 1867, he signed his name to this form and delivered the certifi- 
 cate to -a firm, of which he was a member, to be pledged for a 
 loan. It was pledged to B, but as only a portion of the- loan was 
 repaid, B sued the firm, obtained judgment, levied on the stock, 
 and it was sold at a sherifi''s sale for $1,600. W, the purchaser, 
 presented the certificate of stock and bill of sale to the bank and 
 demanded a transfer of the same, which was refused. He sold it 
 to Lee, who then demanded a transfer to himself, but this also the 
 bank refused to make. The reason for the refusal was that M, 
 in January, 1868, had transferred the same stock to D, the presi- 
 dent of the bank, to secure a debt that M owed to the institution. 
 At the time of transferring the stock to D, it stood on the transfer 
 books of the bank in M's name. D continued to hold the stock 
 until July, 186&, when he paid M's indebtedness to the bank and 
 acquired therefrom whatever right it had in the stock. A by-law 
 provided that its stock should be "transferable only upon the books 
 of the bank, and when stock is transferred, the certificates thereof 
 shall be returned to the bank and canceled and new certificates 
 issued.'.' The court decided that D toust pay $1,600 to Lee with 
 interest from the time he bought the stock of W, and that after 
 doing this Lee should surrender the certificate of stock to D which 
 he could thereafter hold. Thus the court decided, first, that B 
 acquired a lien paramount to the rights of the bank by M's trans- 
 fer to him; and again, that, subject to B's rights, the bank did ac- 
 quire a lien to the stock which it could transfer to D. The sound- 
 ness of this decision has been questioned, but it was grounded in 
 the first clause of the section which authorizes a bank to purchase 
 
 1 Bank v. Lanier, 11 "Wall., 469 p. 375. 
 ^ 2 Cin., (Ohio) 298. 
 
§158 RIGHTS AND LIABILITIES OP SHAREHOLDERS. 77 
 
 its shares whenever this may be necessary to prevent a loss on a 
 debt previously contracted in good faith. 
 
 § 158. If taken as security and sold pledgor cannot 
 recover. If a loan is made on the security of the shares of the 
 lending bank, and these are sojd to pay the debt in accordance with 
 the contract, an action cannot be sustained to recover the money 
 received by the bank for the shares. "While this section," says 
 Field, J., "^in terms prohibits a banking association from making 
 a loan upon the security of shares of its own stock, it imposes no 
 penalty, either upon the bank or borrower, if a loan upon such 
 security be made. If, therefore, the prohibition can be urged 
 against the validity of the transaction by any one except the gov 
 ernment, it can only be done before the contract is executed, 
 while the security is still subsisting in the hands of the bank. It 
 can then, if at all, be invoked to restrain or defeat the enforce- 
 ment of the security. When the contract has been executed, the 
 security sold,' and the proceeds applied to the payment of the 
 debt, the courts will not interfere with the matter. Both bank 
 and borrower are in such case equally the subjects of legal cen- < 
 sure, and they will be left by the courts where they have placed 
 themselves." ' 
 
 § 159. Meaning of second clause in section. By the 
 second clause of the statute the sale which the law requires the 
 bank to make of its own stock is a real sale, and not a fictitious 
 one. And when the president and cashier of a national bank, 
 which is the owner of some of its own stock, purchase it and exe- 
 cute their note to the bank for the purchase money, they can- 
 not defend in a suit thereon by the receiver that the purchase 
 was unauthorized, or thftt their action was simply to avoid a 
 forfeiture of the bank's charter, or was for any other deceptive 
 or illegal purpose.' 
 
 §160. "The shareholders of every national banking associa- Liability oi 
 tipn shall be held individually responsible, equally and ratably, ers. 
 and not one for another, for all contraicts, debts, and engagements See sioi. 
 of such association, to the extent of the amount of their stock 
 therein, at the par value thereof, in addition to the amount in- 
 vested in such shares; except that shareholders of any banking 
 association now existing under state laws, having not less than 
 
 1 National Bank of Xenia v. Stewart, 107 U. S., 676. 
 = Blindy v. Jackson, 24 Fed. R., 628. 
 
78 ' NATIONAL BANK ACT. §161 
 
 five millions of dollars of capital actually paid in, and a surplus 
 of twenty per centum on hand, both to be determined by the Comp- 
 troller of the Currency, shall be liable only to the amount invested 
 in their shares ; and such surplus of twenty per centum shall be 
 kept undiminished, and be in addition to the surplus provided for 
 in this Title; and if at any time there is a deficiency in such sur- 
 plus of twenty per centum, such association shall not pay any 
 dividends to its shareholders until the deficiency is made good ; 
 and in case of such deficiency, the Comptroller of the Currency 
 may compel the association to close its business and wind up its 
 affairs under the provisions of chapter four of this Title.'" 
 
 § 161. Liable until transfer is made on books. 
 Though a national bank may not be bound to admit a purchaser 
 of its shares " to all the rights and liabilities of the prior holder 
 of such shares," unless they are transferred to him on the book 
 of the association in the manner prescribed in its by-laws or ar- 
 ticles of association, when a certificate of stock is issued to a sub- 
 sequent purchaser in lieu of the certificate of the prior owner 
 without observing its by-laws relating to the transfer of stock, 
 certainly, so far as creditors are concerned, the holder of the shares 
 will be subject to the liabilities imposed by this section." A sim- 
 ilar view has been expressed by Judge Blodgett, which has been 
 approved by the United States Supreme Court. " Shareholders of 
 a national bank must remain liable until a transfer of their shares 
 is made on the books of the bank; and a transfer of shares after the 
 bank has become insolvent certainly cannot be construed to re- 
 lease the shareholders from liability to the creditors of the bank, 
 for the reason that it would enable the shareholders to wholly 
 escape liability by transferring their stock to irresponsible persons 
 after it became evident that the shares were not only valueless, 
 but that they involved an actual and pending liability for debts 
 of the bank." ' 
 
 § 162. Shareholder until then. No person becomes a 
 shareholder, subject to the liabilities and succeeding to the rights 
 prescribed by the law, unless his name -is thus registered on the 
 
 > Act 1864, Sec. 12. 
 
 ^ Laing v. Burley, 101 111., 591; Davis v. Essex Baptist. Society, 44 Conn., 
 p. 585. 
 ' Blodgett, J., Irons v. Manufacturers' National Bank, 17 Fed. R., p. 315. 
 
§163 RIGHTS AND LIABILITIES OF SHAREHOLDERS. ' 79 
 
 books of the association. " Until such [registry] the prior holder 
 is the stockholder for all the purposes of the law." ' 
 
 § 163. In Whitney v. Butler ^ A was tl^e owner of shares 
 which were sold for him at a public auction. They were bought 
 by B, who paid the auctioneer for them and received the certifi- 
 cate of stock with a power of attorney for their transfer, which 
 was duly executed in blank. The auctioneer paid the purchase 
 money to A. B was employed by the president of the bank to 
 make the purchase for a customer who had made a deposit in the 
 bank to pay for the stock, and B delivered the certificate and the 
 power of attorney to the president, and received from the bank the 
 money for the purchase. No formal transfer of the stock was 
 made on the bank's transfer book. Not long after this the bank 
 became insolvent, and passed into the control of a receiver, and 
 the stockholders were assessed to meet the bank's debts for the 
 full amount authorized by the statute. Until the happening of 
 this event A knew nothing concerning the purchaser, or the neg- 
 lect to transfer formally the stock, and had no reason for suppos- 
 ing the transfer had not been made. In an action against A by 
 the receiver to recover the amount of the assessment on the stock, 
 it was decided that A's responsibility ceased after surrendering 
 his certificate to the bank, and the delivery to its president of the 
 power of attorney authorizing him to transfer the stock. 
 
 § 164 When shareholder cannot escape liability 
 by transfer. If a shareholder has good reason to apprehend 
 the failure of his bank, and transfers his stock to an irresponsible 
 person for the purpose of escaping liability, the transaction is a 
 fraud, and the transferrer may be held as fully as though the 
 transaction had not happened. Says Blatchford, J., in Bowden 
 V. Johnson:' "As such shareholder [the transferrer] became sub- 
 ject to the individual liability prescribed by the statute. This lia- 
 bility attached to him until, without fraud as against the cred- 
 itors of the bank, for whose protection the liability was imposed, 
 he should relieve himself from it. He could do so by a bona fide 
 transfer of the stock. But where the transferrer, possessed of 
 information showing that there is good ground to apprehend the 
 failure of the bank, colludes and combines, as in this case, with 
 
 ^ Richmond v. Irons, 121 V. S., 27 p. 58. 
 
 2 118 U. S., 655. 
 
 M07 II. S., 251 p. 261 ; Bowden v. .Santos, 1 Hughes, 158. 
 
80 NATIONAL BANK ACT. §165 
 
 an irresponsible transferee, with tlie design of substituting the 
 latter in his place, and of thus leaving no one with any ability to 
 respond for the individual liability imposed by the statute, in re- 
 spect of the shares of stock transferred, the transaction will be 
 decreed to be a fraud on the creditors, and he will be held to the 
 same liability to the creditors as before the transfer." But when 
 stock is sold under the terms of a pledge, says Judge Grason,' 
 the sale "is not obnoxious to the charge of having been done in 
 fraud of creditors, although its leading object and purpose might 
 have been, on the part of the pledgee, to avoid liability as a mem- 
 ber of the corporation." ^ 
 
 § 165. Pledgee is usually liable. If a person hold 
 stock in pledge and the certificate stands in his name on the bank- 
 book, he is a stockholder and is responsible to the creditors of the 
 bank.' "Pledgees of stock," says Shipman, J., " who hold the 
 legal title and are stockholders of record are liable, although the 
 pledgor may be the actual owner of the stock. So long as stock- 
 holders permit themselves, to appear upon the record as stock- 
 holders, their personal liability continues. The creditors have a 
 right to rely upon the guarantee of those who continue to hold 
 themselves out as stockholders." * And Grason, J., in speaking 
 for the Supreme Court of Maryland, says that when the stock 
 stands on the books of the bank in the name of the pledgee, "he 
 
 ' Magruder v. Colston, 44 Md., 349 p. 358. 
 
 ' "When a national bank is in a failing.condition, a transfer of its shares, 
 even though real and ' out and out,' but made to a person incapable of re- 
 sponding to liability, and for the purpose of obtaining personal immunity, is 
 void. (National Bank v. Case, 99 U. S. , 628. ) Even though the bank be not 
 then in a failing condition, but the stockholder knows there is good ground 
 to apprehend its failure, and he colludes with an irresponsible person for the 
 purpose of substituting the latter in his stead, and thus leaving no one able 
 to respond to the liability imposed by the statute, such substitution will be 
 void as to the bank, and he will be held liable. (Bowden v. Johnson, 107 
 U. S., 251). The object of the statute is to get at 1;he real owner of the shares, 
 and the courts in construing it uncover all his disguises, so that if his name 
 has never been on the transfer-book, and his stock stands in the name of 
 another by his procurement, he will yet be chargeable as a stockholder with 
 the statutory liabilities" (Davis v. Stevens, 17 Blatchf , 259), Manning, J., 
 Lesassier & Binder r. Kennedy, 36 La. Ann., 539 p. 542. 
 
 ' Magruder v. Colston, 44 Md., 349; Moore & Janney v. Jones, 3 Woods, 
 53; Bowdell i'. Farmers & Merchants' Nat. Bank, 14 B. Mag., 387 ; Cole 
 V. Walker, 31 Iowa, 344. 
 
 * Davis V. Essex Baptist Society, 44 Conn., p. 585. 
 
§166 RIGHTS AND LIABILITIES OF SHAREHOLDERS. , 81 
 
 is thus held out to the public as shareholder, and persons dealijig 
 with the bank, have no means of knowing the nature of the con- 
 tract under which he holds the stock, and have a right to pre- 
 sume, and are led to believe that he is the absolute owner of it, 
 and it is but fair to presume that they deal with the bank upon 
 the faith and credit of parties thus appearing as stockholders.'" 
 
 § 166 Until the re-transfer is made on the books. 
 This liability continues even if the loan be repaid, and the stock 
 certificate is surrendered with an executed power of attorney for 
 transferring- it so long as the record on the books remain un- 
 changed.^ In this case Giles, J., said : "By the 12th section of 
 the Act of 1874 it is provided that every one becoming a share- 
 holder by such transfer shall, in proportion to his shares, succeed 
 to all the rights and liabilities of the prior holder of such shares, 
 and by the said section it is also provided that the shares shall be 
 transferred on the books of the bank. Now, it was the duty of 
 the defendant, which made the loan on the security of twenty 
 shares of another bank that failed, having taken an assignment 
 on the books of the said bank of these twenty shares, where its 
 loan was repaid to it, to have seen that these shares were trans- 
 ferred back to the [borrower] on said books, and having failed to 
 do so before the bank was closed by the Comptroller, the receiver 
 was authorized to regard it as the legal owner of these shares." 
 
 § 167. But not if he puts it in the name of an irre- 
 sponsible trustee. But a pledgee who holds national bank 
 stock as security for a loan in good faith, in the name of an irre- 
 sponsible trustee, for the avowed purpose of avoiding individual lia- 
 bility as a shareholder, and vyho exercises non.e of a shareholder's 
 rights, will not incur liability to the creditors of the bank in the 
 event of its failure.* Said Mr. Chief Justice Waite: "It is well 
 • settled that one who allows himself to appear on the books of a 
 national bank as an owner of its stock is liable to creditors as 
 a shareholder, whether he be the absolute owner or a pledgee 
 only, and that, if a registered owner, acting in bad faith, transfers 
 his stock in a failing bank to an irresponsible person, for the pur- 
 pose of escaping liability, or if his transfer is colorable only, the 
 
 ' Magruder v. Colston, 44 Md., p. 356; Hale v. Walker, 31 Iowa, 344. 
 ^ Bowdell V. Farmers & Merchants' Nat. Bank, 14 Bank. Mag., JS7. 
 ' Anderson v. Philadelphia Warehouse Co., Ill U. S., 479, aflfg 4 Fed. R., 
 130. 
 
 6— B. 
 
82 NATIONAL BANK ACT. §168 
 
 transaction is void as to creditors.' It is also undoubtedly true, 
 that the beneficial owner of stock registered in the name of 
 an irresponsible person may, under some circumstances, be liable 
 to creditors as the real shareholder, but it has never, to our 
 knowledge, been held that a mere pledgee of stock is charge- 
 able where he is not registered as owner." 
 
 § 168. A transfer by owner to escape liability is 
 not valid. A purchaser, though, who should transfer his stock 
 to an irresponsible person to conceal his ownership and escape 
 individual liability would nevertheless remain liable. In Davis 
 \}. Stevens, ^ which was tried by Chief Justice Waite, he said that 
 " the point to be decided now is, whether, in an action at law, by 
 a receiver of the bank, the real owner of stock in a national bank, 
 standing by his procurement, in the name of another, and never 
 having been in his own name on the books, can be charged, as a 
 shareholder, with the statutory liability for debts." Referring to 
 the sections which cover the subject he continued: "Under these 
 provisions of the law it is contended that the registered share- 
 holders alone can be charged with the statutory liability, and that 
 an assignee of stock does not make himself responsible unless he 
 accepts an actual transfer in his own name on the books. As has 
 just been seen, the registered holder is liable. By holding him- 
 self out to the world as owner, as he does when he permits his 
 name to appear to that effect on the books kept for the informa- 
 tion of shareholders and creditors, he estops himself from denying 
 that he is in fact what he represents himself to be. The question 
 still remains, however, whether the person for whom the regis- 
 tered owner holds the stock, if actually the owner, may not also 
 be liable." And the Chief Justice concluded that he could be 
 held.^ 
 
 §169. Effect of secret trust. If A, a national bank share- 
 holder, should place some of his shares in the name of B, to hold 
 for him under a secret declaration of trust, and permit him to be 
 elected a director, and B should take the oath required by the 
 national banking law that he was the bona fide owner of euch 
 stock, and, furthermore, A should declare that one of his objects 
 
 ' National Bank v. Case, 9917. S., 628; Bowden v. Johnson, 107 U. S., 251. 
 
 * 17 Blatohf., 259. 
 
 = Case V. Small, 4 Woods, 78 S. C, 10 Fed. E., 722. 
 
§170 RIGHTS AND LIABILITIES OF SHAREHOLDERS. 83 
 
 in transferring them was to give B credit and aid him in business, 
 B could not deny his ownership to a creditor who might trust 
 him." 
 
 § 170. The owner on stock book is prima facie owner. 
 " Where the name of ah individual appears on the stock book of 
 a corporation as a stockholder, the prima facie presumption is 
 that he is the owner of the stock, in a case where there is nothing 
 to rebut that presumption; and in an action against him as a 
 stockholder the burden of proving that he is not a stockholder, or 
 of rebutting that presumption, is east upon the defendant." " 
 
 §171. Married woman is liable. The liability imposed 
 by this statute may be enforced against a married woman. In 
 Hobart v. Johnson' Judge Blatchford said that " it must be as- 
 sumed either that the defendant had a separate estate, or con- 
 tracted with a view to create, by owning the stock, a separate 
 estate. In either view, the contract was for her benefit as the 
 holder of a separate estate. Under such circumstances, by way 
 of estoppel, she will not be allowed to claim and enjoy, as regards 
 the bank, and creditors, and her co-stockholders, the benefit of 
 her position as a shareholder, and then repudiate the statutory 
 obligation attached to it." In the case of Keyseru. JaneC. Hitz,* 
 her husband transferred to her stock of a savings bank which was 
 converted into a national bank. Having failed, the stockholders 
 were assessed to the full amount of their stock, but she endeav- 
 ored to evade liability on the ground that she was married. The 
 court did not sustain this view. Moreover, as the liability is im- 
 posed by statute, and not by the common law, a suit to recover 
 her assessment may be brought against her without joining her 
 husband in the process. 
 
 § 172. The liability of a shareholder also "survives as against 
 his personal representatives." ^ 
 
 § 173. Liability ceases when bank liquidates. The 
 individual liability " must be restricted in its meaning to such con- 
 tracts, debts and engagements as have been duly contracted in the 
 ordinary course of its business." That ceases when a bank goes 
 
 ' Young V. Vough, 23 N. J. Eq., 325. 
 
 ' Cliflford, J., Tnrnbull v. Payson, 95 U. S., p. 421. 
 
 ^ 19 Blatohf., 359 p. 362. 
 
 ' 2 Mackey, 473. 
 
 5 Eichmond i>. Irons, 121 U. S., 27 p. 56. 
 
84 NATIONAL BANK ACT. §174 
 
 into liquidation; when this happens, there is no authority on the 
 part of the oiScers of a bank to transact any business in its name 
 which will bind its shareholders, " except that which is implied 
 in the duty of liquidation, unless such authority had been ex- 
 pressly conferred by the shareholders." ' 
 
 §174. Also after Statute of Limitations has run. A 
 stockholder's liability for contributions ceases after the Statute of 
 Limitations has run for the full period. Thus, a receiver of a bank 
 was appointed in 1866. Ten years afterward the Comptroller di- 
 rected the enforcement of the individual liability of the stockhold- 
 ers. As this proceeding was ordered more than six years after 
 their liability occurred, they could not be held." 
 
 § 175. Liability is several and equal. The liability 
 of each stockholder is several and equal. Says Judge Blatchford: ' 
 " The stockholder is to be individually liable, to the extent of the 
 amount of his stock at its par value, in addition to amount of 
 the stock. The limit in amount or extent is the par value of his 
 stock. Within this limit each stockholder is to be liable equally 
 and ratably; that is, no one is to be assessed a larger percentage 
 than any other one on the par value of his stock, and, when one 
 is assessed a given percentage, every other one shall be assessed 
 a like percentage. Each is to be liable in respect only of his own 
 stock, and because he is a stockholder, and up to the full par 
 value of his stock; but he is not to be liable in respect of the stock 
 of any other stockholder, or because any other person is a stock- 
 holder, or beyond the full par value of his stock. This is a sev- 
 eral liability. The stockholders are not jointly liable. There is 
 no contribution among them provided for whereby one of them 
 has any right to call any other one directly to account in contri 
 bution in respect of any sum paid in discharge of the statutory 
 liability."* So, too, has Judge Swayne remarked,* that "by the 
 common law, the individual property of the stockholders was not 
 liable for the debts of the corporation under any circumstances. 
 Here the liability exists by virtue of the statute and the assent of 
 the corporators to its provisions, given by the contract which they 
 
 ' Richmond v. Irons', 121 U. S., 27 p. 60. 
 
 ' Price 11. Yates, 7 Week. Notes, 51. 
 
 ' Stanton v. "Wilkeson, 8 Bened., 357 p. 362. 
 
 * Kennedy v. Gibson, 8 Wall., 498 ; Sanger v. Uptan, 91 U. S., 56. 
 
 -" United States v. Knox, 11)2 U. S., 422 p. 424. 
 
§176 EIGHTS AND LIABILITIES 01? SHAKEHOLDERS. 85 
 
 entered into with Congress in accepting the charter. With respect 
 to the character of that liability, it is entirely clear, from the lan- 
 guage employed in creating it, that it is several and cannot be 
 made joint, and that the shareholders were not intended to be put 
 in the relation of guarantors or sureties, ' one for another,' as to 
 the amount which each might be required to pay." ' 
 
 § 176. Receiver on order of Comptroller can sue 
 shareholder. The -receiver is authorized to sue either in his 
 own name or in the name of the bank, to enforce the individual 
 liability of the stockholders. The Comptroller cannot bring the 
 suit.^ ' ' The Comptroller of the Currency, by virtue of the 
 NationalBankingLaw, in winding up an insolvent bank, is vested 
 with authority to determine when a deficiency of assets exists, 
 so that the individual liability of the stockholders may be en- 
 forced. This liability is conditional, but the Comptroller, in the 
 exercise of a judicial discretion, decides upon the data before him, 
 when ' it is necessary' to compel contributions from stockholders 
 to pay the debts of the bank. The law clothes him with this au- 
 thority, and no appeal lies from his decision by a stockholder.^ 
 He appoints a receiver, and resorts to the ultimate remedy when- 
 ever, in his judgment, the condition of the bank requires its en- 
 forcement. A more speedy settlement of the affairs of an insol- 
 vent bank is thus obtained." * The remarks of Judge Swayne* 
 are worth adding: "It is for the Comptroller to decide when it is 
 necessary to institute proceedings against the stockholders to en- 
 force their personal liability, and whether the whole or a part, 
 and if only a part, how much, shall be collected. These ques- 
 tions are referred to his judgment and discretion, and his de- 
 
 ' "This obligation of the stockholder is fixed when he becomes a member 
 of the corporation by taking stock therein, and is several, not joint. There 
 is no necessity for invoking the aid of a court of chancery to determine the 
 sum each stockholder must pay, for that is regulated by the number of shares 
 of stock owned. When the Comptroller declares and orders an assessment, 
 the precise amount each stockholder must contribute is a certain exact sum. 
 A suit at law would seem to be the suitable proceeding to collect the assess- 
 ment." Nelson, J., Bailey v. Sawyer, 4 Dill., 463. 
 
 ^ Stanton v. Wilkeson, 8 Bened., 357; Kennedy v. Gibson, 8 Wall., 498. 
 
 ' The order of the Comptroller prescribing to what extent the individual 
 liability of the stockholders of an insolvent national bank shall be enforced 
 is conclusive, National Bank v. Case, 99 U. S., 628. 
 
 * Nelson, J., Bailey v. Sawyer, 4 Dill., 463. 
 
 5 Kennedys. Gibson, 8 Wall., 498 p. 505. 
 
86 NATIONAL BANK ACT. §177 
 
 termination is conclusive. The stockholders cannot contravert it. 
 It is not to be questioned in the litigation that may ensue. , He 
 may make it at such time as he may deem proper, and upon such 
 data as shall be satisfactory to him. '' ' 
 
 § 177. Federal courts have jurisdiction regardless 
 of ai];iount. A receiver is an agent and officer of the United 
 States, and actions brought by him to recover assessments duly 
 laid on stockholders and necessary to provide for the payment of 
 the debts of the bank are suits at common law, and the circuit 
 court of the United States has concurrent jurisdiction vrith the dis- 
 trict court without regard to the amount sought to be recovered.^ 
 
 § 178. Mode of proceeding. Concerning the mode of 
 proceeding against stockholders by the receiver. Judge Swayne 
 has remarked: "Where the v?hoIe amount is sought to be recov- 
 ered the proceeding must be at law. Where less is required 
 the proceeding may be in equity, and in such case an interloc- 
 utory degree may be taken for contribution, and the case may 
 stand over for the further action of the court — if such action 
 should subsequently prove to be necessary — until the full amount 
 of the liability is exhausted. It would be attended with injurious 
 consequences to forbid action against the stockholders until the 
 precise amount necessary to be collected shall be formally ascer- 
 tained. This would greatly protract the final settlement, and 
 might be attended with large losses by insolvency and otherwise 
 in the intervening time. The amount must depend in part upon 
 the solvency of the debtors and the validity of the claims. Time 
 will be consumed in the application of these tests, and the results 
 in many cases cannot be foreseen. The same remarks apply to 
 the enforced collections from the stockholders. A speedy adjust- 
 ment is necessary to the efficiency and utility of the law; the inter- 
 ests of the creditors require it, and it was the obvious policy and 
 purpose of Congress to give it. If too much be collected, it is 
 provided by the statute that any surplus which may remain after 
 satisfying all demands against the association shall be paid over 
 to the stockholders. It is better they should pay more than may 
 prove to be needed than that the evils of delay should be encoun- 
 
 > Casey V. Galli, 94 U. S., 673. 
 
 ^ Price V. Abbott, n Fed. R., 506; Piatt v. Beach, 2 Bened., 303; Stanton 
 V. "Wilkeson, 8 Bened.\ 357; Bank v. Kennedy, 17 Wall., 19; United States 
 V. Hartwell, 6 Wall., 385. 
 
§179 RIGHTS AND LIABILITIES OP SHAKEHOLDEES. 87 
 
 tered. When contribution only is sought, all the stockholders who 
 can be reached by the process of the court may be joined in the suit. 
 It is no objection that there are others beyond the jurisdiction 
 of the court who cannot for that reason be made co-defendants." ' 
 
 § 179. How liability is fixed. In fixing "the amount of 
 the separate liability of each of the shareholders, it is necessary 
 to ascertain, (1) the whole amount of the par value of all the stock 
 held by all the shareholders; (2) the amount of the deficit tg be 
 paid after exhausting all the assets of the bank; (3) then to 
 apply the rule that each shareholder shall contribute such sum as 
 will bear the same proportion to the whole amount of the deficit 
 as his stock bears to the whole amount of the capital stock of the 
 bank at its par value. There is a limitation of this liability. It 
 cannot in the aggregate exceed the entire amount of the par value 
 of all the stock." ' 
 
 § 180. Until Comptroller's order assessment is con- 
 tingent. Until the order of the Comptroller the shareholders' 
 liability for an assessment is contingent. "He ascertains and 
 decides how much shall be collected, and until his decision the 
 receiver has no power to enforce a liability against the stock- 
 holders arising out of their stock." ^ 
 
 § 181. Receiver must aver that proceeding is nec- 
 essary. The receiver, therefore, must aver in his bill that the 
 Comptroller has decided that such a proceeding is necessary. This 
 action, remarks Judge Swayne, is indispensable whenever the per- 
 sonal liability of the stockholders is sought to be enforced, and 
 must precede the institution of the suit by the receiver. " The 
 fact must be distinctly averred in all such cases, and if put in 
 issue must be proved."* But a letter from the Comptroller ad- 
 dressed to the receiver, directing him to enforce such a suit, is 
 sufficient evidence of the Comptroller's decision in the matter be- 
 fore beginning the same.* 
 
 § 182. He cannot maintain suit against shareholder 
 "who sold in good faith. A receiver cannot maintain a suit 
 
 ' Kennedy v. Gibson, 8 Wall., 498 p. 505. 
 
 " Swayne, J., United States v. Knox, 102 U. S., 423 p. 425. 
 
 ^ Davis V. Weed, 44 Conn., p. 579. 
 
 * Kennedy v. Gibson, 8 Wall., 498 p. 505; Strongs. Southworth, 8 Bened., 
 331 ; Bailey v. Sawyer, 4 Dill., 463; Stanton v. Wilkeson, 8 Bened., 357. 
 
 * Bowden v. Johnson, 107 U. S., 251. 
 
88 NATIONAL BANK ACT. §183 
 
 against a person for contributions who has sold his shares in good 
 faith, and received his pay and transferred his certificate of stock, 
 though the transfer on the stock register of the bank may not have 
 been completed. Thus A, a stockholder, without intending to 
 evade his responsibility, sold his shares to a broker, to whom he 
 delivered his certificate and a power to transfer them, leaving 
 blanks for the names of the attorney and transferee. The broker 
 sold them to B, the president of the bank, who gave his individual 
 check in payment and received the certificate and power. By B's 
 direction, a bookkeeper of the bank inserted his own name as at- 
 torney, and transferred the stock to B as " trustee " on the stock 
 register. The entries in the stock ledger showed, and so did other 
 books of the bank, that B purchased the stock for it and reim- 
 bursed himself with its funds, and the bookkeeper knew these 
 things. In a suit by the receiver to compel B to retransfer the 
 shares, and A to repg,y the price and to be declared a stockholder, 
 it was held that as the bookkeeper was the agent of the bank, his 
 knowledge of the transaction could not be imputed to A, and that 
 the suit could not be maintained.' 
 
 § 183. Stock certificates are basis of assessment. 
 "In ordering an assessment, the stock certificates and the stock 
 ledger are the basis upon which the Comptroller of the Currency,, 
 in the absence of fraud or mistake, must rely. It is impossible for 
 him to ascertain the equities of each stockholder, and if any stock- 
 holder could relieve himself from the consequence of his laches 
 by showing that another unknown person was the owner of the 
 stock, creditors might have payment of their debts indefinitely 
 postponed, and an unjust burden might be imposed upon the ac- 
 knowledged stockholders. Some definite and conclusive means of 
 information as to the ownership of stock for the purposes of as- 
 sessment ought to be furnished to creditors, to the receiver, and 
 to the Comptroller. This information should be found, in the ab- 
 sence of fraud or mistake, in the certificates of stock, and in the 
 stock books of the bank." ' 
 
 § 184. Shareholder cannot deny validity of bank. 
 Nor can a stockholder, when thus sued, deny the existence or val- 
 
 ' Johnson v. Laflin, 103 U. S., 800; see National Bank v. Watsontown 
 Bank, 105 U. S., 217. 
 ' Shipman, J., Davis v. Essex Baptist Society, 44 Conn., p. 585. 
 
§185 RIGHTS AND LIABILITIES OF SHAREHOLDERS. 89 
 
 idity of the eorporation. Says Judge Swayne in Casey v. Galli:' 
 . " Where a shareholder of a corporation is called upon to respond 
 to a liability as such, and where a party has contracted with a cor- 
 poration, and is sued upon the contract, neither is permitted to 
 deny the existence or the legal validity of snch corporation. To 
 hold otherwise would be contrary to the plainest principles of 
 reason and of good faith, and involve a mockery of justice. Par- 
 ties must take the consequences of the position they assume. They 
 are estopped to deny the reality of the state of things which they 
 have, made appear to exist, and upon which others have been led 
 to rely. Sound ethics require that the apparent, in its effects and 
 consequences, should be as if it were real, and the law properly 
 BO regards it.'"* 
 
 § 185. He cannot offset claim due from bank. If a 
 shareholder happen to be a creditor of the bank, he cannot cancel 
 or diminish his assessment by offsetting his individual claim against 
 the institution.' 
 
 § 186. Liability for interest on bank's debts. The 
 shareholder's liabilityfor the debts of his bank is also extended 
 to the interest accruing on them so far as the bank would have 
 been liable, though not beyond the statutory limits. Says Mat- 
 thews, J. : "As the liability of the shareholder is for the contracts, 
 debts, and engagements of the bank, we see no reason to deny to 
 the creditor as against the shareholder the same right to recover 
 interest which, according to the nature of the contract or debt, 
 would exist as against the bank itself ; of course, not in excess of 
 the maximum liability as fixed by the statute. In the case of 
 book accounts in favor of depositors * * interest would begin to 
 accrue as against the bank, from the date of its suspension. The 
 act of going into liquidation dispenses with the necessity of any 
 demand on the part of the creditors, and it follows that interest 
 should be computed upon the amounts then due as against the 
 shareholders to the time of payment." * 
 
 § 187. Interest on assessment. Whenever the Comp- 
 troller demands a contribution from stockholders, the sum is due 
 and payable and bears interest from the date fixed by him. "0th- 
 
 1 94 U. S., 673 p. 680. 
 
 2 Keyser v. Hitz, 2 Mackey, 473; Wheelock v. Kost, 77 111., 296. 
 ' Hobarti). Gould, 8 Fed. R., 57. See ? 348. 
 
 * Eichmond v. Irons, 121 U. S., 27 p. 64. 
 
90 NATIONAL BANK ACT. §188 
 
 erwise there would be no motive to pay promptly, and no equality 
 between those who should pay then and those who should pay at 
 the end of a protracted litigation." ' 
 
 § 188. Insolvency of one shareholder does not in- 
 crease liability of others. " The insolvency of one stock- 
 holder, or his being beyond the jurisdiction of the court, does not 
 in any wise affect the liability of another ; and if the bank itself, 
 in such case, holds any of its stock, it is regarded in all respects 
 as if such stock were in the hands of a natural person, and the 
 extent of the several liability of the other stockholders is computed 
 accordingly." ^ 
 
 § 189. Receiver's power to ascertain whether trans- 
 fer is valid. Not only can the receiver enforce the liability of 
 a shareholder by an action at law, he can also bring a bill in equity 
 against the transferrer and transferee of the shares of the failed 
 bank whenever a discovery of the facts relating to the transaction 
 is sought, as well as relief in the case of a valid transfer, which 
 is only voidable at the election of the receiver.^ 
 
 § 190. Delano v. Butler.* Some very interesting ques- 
 tions concerning the liability of the shareholders of the Pacific 
 National Bank of Boston were settled in a suit by the receiver 
 against them. In September, 1881, A owned thirty shares of stock 
 in the bank, which at that time had a capital of $500,000, but 
 possessed the authority to have as much more. In that month 
 the directors voted to increase the capital to $1,000,000, the share- 
 holders having the right to take the new stock at par. A 
 subscribed for thirty shares, paid for it within three days and re- 
 ceived his certificate. The amount of the increased capital how^ 
 ever was only $461,300, but A did not know of the deficiency until 
 after paying for his shares. In November the bank became in- 
 solvent and was put in charge of a national examiner. The next 
 month the directors cancelled the increase of stock above $461,300, 
 and requested the Comptroller to issue a certificate for the increase, 
 as thus reduced, which he did. No action was taken by the stock- 
 holders either in increasing or decreasing the capital. The Comp- 
 
 ' Casey v. Galli, 94 U. S., 673 p. 677. 
 
 ' United States v. Knox, 102 V. S., 422 p. 425; Crease v. Babcock, 10 
 Met., 525. 
 ' Bowden v. Johnson, 107 U. S., 251. 
 * li8 U. S., 634. 
 
§191 RIGHTS AND LIABILITIES OP SHAREHOLDERS. > 91 
 
 troUer, under the authority conferred by the 5205th section, required 
 the bank to make an assessment of 100 per cent, on its share- 
 holders to pay the deficiency in the capital stock. At the an- 
 nual meeting in January the stockholders voted to levy the as- 
 sessment and the Comptroller accordingly permitted the directors 
 to resume control of the bank. A paid the assessment on sixty 
 shares. Finally on the 20th of May the bank ceased to do business 
 and the stockholders voted to go into liquidation. The Comptrol- 
 ler appointed a receiver and in November, 1882, made an assessment 
 of 100 per cent on the stockholders.' A having declined to pay the 
 assessment on his sixty shares, and having been sued therefor, 
 the court held: 1st, That the increase of the capital stock to $961,- 
 300 was valid; 2d, That this increase was binding on A for his 
 sixty shares; 3d, That the payments made in January, 1882, could 
 not be applied to discharge the assessments made by the Comp- 
 troller on the final liquidation of the bank; and 4th, That the pay- 
 ment was not made by A under such a mistake that equity would 
 relieve him from paying the final assessment. 
 
 § 191. Baton v. Pacific National Bank.^ By the ar 
 tides of association a national bank could increase its capital as 
 provided by section 5142, and each stockholder had the privilege of 
 subscribing for the increase in proportion to the number of shares 
 already held by him. The directors also had the power to pro- 
 vide for an increase of capital and to regulate the manner in which 
 it should be made. A by-law of the bank provided that when an 
 increase of stock should be determined, the board of directors 
 should notify the stockholders and cause a subscription to be 
 opened foV the same; and that if any. stockholder failed to sub- 
 scribe for "his proportion within a reasonable time, which should 
 be stated in the notice, the directors might determine what dispo- 
 sition should be made of the privilege of subscribing for the new 
 stock. While these articles and this by-law were in force, the 
 directors voted to double the capital stock and a notice was sent 
 
 ' Under Sec. 5151. 
 
 ^ 144 Mass., 260. Judge Field said that the questidn decided here was 
 suggested hut not decided in Delano v. Butler, 118 U. S., 634. "When this 
 action was brought the bank was not in the hands of a receiver, and the re- 
 ceiver afterwards appointed has not formally intervened or appeared ; hut it 
 was understood at the argument that the action was defended by him and 
 that he desired that it should be prosecuted for the purpose of determining 
 the liability of the bank." 
 
92 
 
 NATIONAL BANK ACT. 
 
 §192 
 
 How credi- 
 tor can pro- 
 ceed by 
 statute. 
 
 to the stockholders accordingly, which also stated when the sub- 
 scriptions for the new stock were payable. No subscription books 
 were opened, but A, a stockholder, who held forty shares, paid the 
 bank 14,000 and took a receipt which stated that this sum was re- 
 ceived " on account of subscription to new stock." The Comp- 
 troller of the Currency did not certify his approval of this increase 
 of the capital stock, and the whole amount of the increase was not 
 paid. The bank suspended payment and a bank examiner was 
 placed in charge of the bank by the Comptroller and he took pos- 
 session of all its books and assets. While this state of things 
 continued the directors met and passed a vote which, after reciting 
 the former vote, the amount paid in and the amount not paid in, 
 declared that the latter sum be cancelled and be deducted from 
 the capital stock, and that the paid-up capital stock amounted to 
 a certain sum, which was equal to the former capital and the 
 amount paid in under the former vote. The Comptroller, receiv- 
 ing notice of this vote, issued a certificate that the capital stock was 
 increased by the sum which had been thus paid. On the same 
 day the Comptroller notified the bank that as the entire capital 
 . stock was lost, an assessment of one hundred per cent, was re- 
 quired to make good the deficiency. After this the bank made 
 out a certificate for forty shares in the so-called increased capital, 
 and A was registered in the stock register of the bank as the owner , 
 of forty shares. No notice was given to A of the last vote or of 
 the existence of the certificate, and he never assented to any change 
 in the proposed increase of the capital stock, but demanded back 
 the money paid by him. Subsequently, the bank was permitted 
 to resume business. It was held that A could maintain an action 
 against the bank to recover the $4,000 and interest from the time 
 of the demand. 
 
 § 192. In 1876 Congress further enacted "that when any na- 
 tional banking association shall have gone into liquidation under 
 the provisions of section five thousand two hundred and twenty 
 of said statutes, the individual liability of the shareholders pro- 
 vided for by section fifty- one hundred and fifty-one of said stat- 
 utes may be enforced by any creditor of such association, by bill 
 in equity, in the nature of a creditor's bill, brought by such 
 creditor on behalf of himself and of all other creditors of the as- 
 sociation, against the shareholders thereof, in any court of the 
 United States having original jurisdiction in equity for the dis- 
 
§193 RIGHTS AND LIABILITIES OP SHAREHOLDERS. 93 
 
 trict in which such association may have been located or estab- 
 lished." ' 
 
 § 193. Meaning of Statute. This Act did not create any 
 new liability. It is not retroactive, nor creative of rights against 
 shareholders which did not exist before its passage. " If any con- 
 struction is to be given to this Act it is that of limiting the tri- 
 bunal in which proceedings are to be instituted for enforcing the 
 stockholders' liability to a United States court, instead of allowing 
 creditors to resort to any competent tribunal with equity power." ^ 
 
 § 194. Proceedings before Statute was passed. In 
 Wheelock v. Kost, ' such a bill was maintained before the 
 enactment of the Statute of 1876. In that case Wheelock loaned 
 money to a bank and made and delivered to it his promissory 
 note, partly as an accommodation, to beheld among its assets. It 
 was agreed that fifty shares of stock in the bank should be issued 
 to him as collateral security for his loan and as an indemnity 
 against liability on his note that was held by the bank. The 
 shares were, in truth, owed to him, the certificates were received 
 and also semi-annual dividends. "Whatever relation," says the 
 court, "he may have sustained to the corporators of the bank, it 
 seems clear that, as to its creditors, he occupied the position of a 
 stockholder, and must bear all the burdens that relation imposed. 
 The stock had in fact been transferred to him; it stood in his name 
 as owner, and be availed of the dividends it earned. Having 
 voluntarily assumed the relation of stockholder, it makes no dif- 
 ference he may have done it with a view to assist the bank in its 
 credit or otherwise. The legal title to the stock was in [him] by 
 his own procurement, although the equitable title may have been 
 in other parties; but it would be a singular doctrine to hold that 
 the creditor should seek out the equitable owner against whom to 
 enforce his claim. Primarily, he may proceed against the party 
 in whom is the legal title to the stock. Where shares of a stock 
 in a banking incorporation have been hypothecated, and placed 
 in the name of the transferee, he will be subjected to all the liabil- 
 ities of ordinary owners. It is for the reason the property is 
 in his name, and the legal ownership appears to be in him." 
 
 ' Act June 30, 19 Stat, at Large, 44 C. 1 S. Ch. 156, Sec. 2., 
 " Irons D. Manufacturers' National Bank, 17 Fed. R., 308 p. 313. See 6 
 Biss., 301. 
 
 ' 77111., 296 p. 298. 
 
94 NATIONAL BANK ACT. §195 
 
 And we suppose that the liability of the legal holder is the 
 same whatever may be the form of proceeding against him, 
 whether by a bill brought by the creditors or a suit or bill brought 
 by the receiver. 
 
 § 195. Bequirements of bill. Amendments. The 
 bill need not state that the complainants have filed it on behalf of 
 themselves and all other creditors, for the law will give that effect 
 to it.' And if Congress should grant enlarged powers to a court 
 having jurisdiction of such a bill, the party who filed it could amend 
 with the view of getting the benefit of the new legislation.' The 
 amendments, however, must be germane to the original bill. In 
 Richmond v. Irons,^ Judge Matthews quoted with approval the 
 remarks of the court in Hardin v. Boyd: * " Their allowance must, 
 at every stage of the cause, rest in the discretion of the court; and 
 that discretion must depend largely on the special circumstances 
 of each case. It may be said, generally, that in passing upon 
 application to amend, the ends of justice should never be sacri- 
 ficed to mere form, or by too rigid an adherence to technical rules . 
 of practice. Undoubtedly great caution should be exercised where 
 the application comes after the litiga'tion has continued for some 
 time, or when the granting of it would cause serious inconvenience 
 or expense to the opposite side. And an amendment should 
 rarely, if ever, be permitted where it would materially change the 
 very substance of the- case made by the bill, and to which the par- 
 ties have directed their proofs." In the Irons case the amended 
 bill was filed twenty months after the original, and consisted of 
 allegations to enforce the individual liability of shareholders, 
 while the original bill was for ascertaining the assets of the bank 
 and their distribution among the creditors. 
 
 § 196. When creditor can file a bill. With respect to 
 the time when creditors can file a bill, it was decided in Richmond 
 V. Irons,^ that an " amended bill is to be considered from the dat« 
 of its filing as a bill on behalf of all the creditors of the bank who 
 should come in under it and prove their claims. When any cred- 
 itor appeared during the progress of the cause to set up and es- 
 
 ' Irons D. Manufacturers' National Bank, 17 Fed. R., 308. 
 
 ' Harvey v. Lord, 11 Biss., 144; Richmond v. Irons, 121 U. S., 27. 
 
 » 121 U. S., 27. 
 
 * 113 U. S., 756 p. 761. 
 
 ' 121 U. S., p. 52. 
 
§197 MGHTS AND LIABILITIES OF SHAREHOLDERS. 95 
 
 tablish his claim, it was necessary for him to prove that at the 
 time of filing the bill he was a creditor of the bank; any defense 
 which existed at that time to his claim, either to diminish or de- 
 feat it, might be interposed either before the master or on the 
 hearing to the court. The creditor, having established his claim, 
 became entitled to the benefit of the proceeding as virtually a 
 party complainant from the beginning, and the time that had 
 elapsed from the filing of the bill to the proof of his claim would 
 not be counted as a part of the time relied on to bar the creditor's ' 
 
 right to sue the stockholders. In other words, if he proves him- 
 self to be a creditor with a valid claim against the bank, he be- 
 comes a complainant by relation to the time of the filing of the 
 bill." 
 
 § 197. Receiver cannot maintain an action at same 
 time. When a creditor's bill has beerf filed against sharehold- 
 ers to enforce their liability, the receiver cannot maintain an ac- 
 tion against them to enforce the same liability.' " It cannot, I 
 think, be maintained that Congress intended by the Act of June 
 30, 1876, to leave the Comptroller any authority over the. assets 
 of a national bank, which had gone into voluntary liquidation 
 under section 5220, after a court of competent jurisdiction had, 
 under a creditor's bill, appointed a receiver, and taken possession of 
 the assets, and initiated proceedings to enforce the liability of 
 stockholders, because that would bring about a conflict between 
 the ofiicers of the court and those of the Comptroller. The grant 
 of power to enforce the liability of the stockholders is plenary and 
 ample, and I see no need for any function of the Comptroller 
 when the affairs of the bank are once properly in the hands of the 
 court." ' ' 
 
 § 198. Creditor must prove insolvency of bank. 
 Whenever creditors proceed against the stockholders of any insol- 
 vent bank, its insolvency must be proved. A return of nulla 
 bona made by a sheriff on an execation issued against the prop- 
 erty of the bank would be sufficient evidence.' 
 
 § 199. Only creditors who have proved claims can 
 recover. " No person is entitled to recover as a creditor who 
 does not come forward to present his clairn." * 
 
 ' Harvey?). Lord, 11 Biss., 144. 
 
 ^ Blodgett, J., Harvey v. Lord, 11 Biss., 144 p. 147. 
 
 » Wheelock v. Kost, 77 IlL, 296. * Richmond v. Irons, 121 U. S., p. 66. 
 
96 NATIONAL BANK ACT. §200 
 
 § 200. Decree fix;Lng shareholder's liability. The 
 decree fixing the liability of a shareholder should be made oa the 
 basis which his shares bear to the whole stock. Thus the asses- 
 ment in Wheeloek v. Kost ' was made on the basis of the entire stock 
 of the bank which consisted of one thousand shares. Wheeloek 
 was the owner of fifty of them. Consequently he was charged 
 only "with his just proportion of the debts of the bank in 
 proportion to the number of shares of stock standing in his 
 name." 
 
 § 201. Creditor can also sue bank for claims due 
 himself. If the creditor of a bank in voluntary liquidation 
 should file a bill to enforce the individual liability of its share- 
 holders, this would not prevent him from suing the institution 
 for a debt owing to himself. ' 
 
 § 202. Payment of receiver. The expenses of a re- 
 ceiver who is appointed under a creditor's bill, but who is not 
 needed by them to enforce the liability of the shareholders, , 
 / cannot be charged on them as a part of their statutory liability. 
 These must be borne by the creditors at whose instance he was 
 appointed.' 
 
 § 203. When shareholders can recover of directors. 
 Whenever shareholders have been compelled to contribute they 
 may mainfain an action against the directors to recover for their 
 loss occasioned by negligence and misconduct, provided the corpor- 
 ation or its receiver refuses to bring such an action, or the Comp- 
 troller to sanction it.* Moreover, it can be brought in a state 
 court. ^ 
 Trustees are 8 204. "Persons holding stock as executors, administrators, 
 
 not person- in 
 
 aiiyUabie. guardians, or trustees, shall not be personally subject to any lia- 
 seo 5162. bilities as stockholders; but the estates and funds in their hands 
 shall be liable in like manner and to the same extent as the tes- 
 tator, intestate, ward, or person interested in such trust funds 
 would be, if living and competent to act and hold the stock in his 
 
 ' 77 111., 296. 
 
 ' National Baiik v. Insurance Company, 104 TJ. S., 54. 
 
 " Eichmond v. Irons, 121 TJ. S., 27. 
 
 * Nelson v. Burrows, 9 Abb. N. Cases, 280. 
 
 5 Id. 
 
 « Act 1864, Sec. 63. 
 
§205 EIGHTS AND LIABILITIES OF SHAREHOLDERS. 97 
 
 § 205. Meaning of section. The principal object of this 
 section, says Judge Shipman, "was to prevent a personal liability 
 from running against executors, administrators, trustees or guar- 
 ' dians who had purchased as trustees, or to whom had been trans- 
 ferred in their names as trustees national bank stocks for the ben- 
 efit of the trust estates. * * The main object of the section was to 
 prevent f)ersonal judgments being rendered againt such persons 
 in whom the stock stood on the books of the bank as trustees." ' 
 The section was not intended "to affect the liability for assess- 
 ments of estates in process of settlement." ^ 
 . § 206. Liability of deceased shareholder's estate. 
 The liability of a deceased shareholder's estate to an assessment 
 for the debts of a bank has been considered by Shipman, J., in 
 Davis V. Weed.* In this case the stockholder, W, died in Jan- 
 uary, 1871, his estate was duly settled, and a final distribution of 
 his property was made. The bank failed in December of that 
 year, but no receiver was appointed until January, 1877. The 
 Comptroller having made an assessment on those who were stock- 
 holders at the time the bank failed, which W's administrator 
 refused to pay, the receiver sued him in that capacity therefor. 
 It was decided that the estate must pay the assessment. "When 
 the stockholder dies his estate becomes burdened with the same 
 contract or agreement which the dead. man had assumed, and so 
 long as it, through the executor or administrator, holds the stock 
 as the property of the estate, and the stock has not been trans- 
 ferred on the books of the bank, and the liability has not been dis- 
 charged by some act which shows that the new stockholder has 
 taken the place of the old one, the contract liability still adheres 
 to the estate." * 
 
 §207. How long may estate be held. For how long a 
 period may an estate be held regardless of the operation of the 
 Statute of Limitations? In Davis u Weed,^ Judge Shipman said 
 that the liability imposed by this section "rested upon the stock and 
 was a part of the contingent liability of the estate, at least until it 
 was transferred to some other person by a transfer free from fraud. " ° 
 
 ' Davis I). Weed, 44 Conn., p. 581. ^ Id. ' 44 Conn.. 569. 
 
 * Id., p. 581. 5 Id. 
 
 * The court cited Corning!). McCullough, 1 N. Y., 47 ; Bailey v. Hollister, 
 26 Id., 112; Lowry v. Inman, 46 Id., 119 ; Hawthorne v. Calef, 2 Wall., p. 22; 
 Gray v. Coffin, 9 Cush., 192. 
 
 7— B. 
 
98 NATIONAL BANK ACT. §208 
 
 § 208. Witters v. Sowles.' B was the owner of four 
 hundred and fifty shares in a national bank. In his will he made 
 bequests to C, D, and others, and also to his wife, beside making 
 her residuary legatee ; and appointed S executor. He died in 1876. 
 Four years afterward his wife died leaving a will with the same 
 bequests, except that her adopted daughter, Mrs. S, the wife of 
 the executor, was made residuary legatee. S was also executor of 
 her will. On the 12th of March, 1881, four hundred of the shares 
 were transferred by decree of court to Mrs. S, and were credited 
 to her on the stock ledger and charged to the stock account of B. 
 On the 7th of April, 1884, the bank failed, and the receiver sought 
 to charge the assets of the estate of B and Mrs. S as legatee with 
 an assessment on four hundred and thirty shares, no question hav- 
 ing been raised concerning the validity of the transfer of the other 
 twenty that had been owned by B. The receiver claimed that the 
 assets of the estate which had gone to the legatees in satisfaction 
 of their legacies were liable for the assessment; they, on the other 
 hand, claimed that only the assets in the possession of the execu- 
 tor were liable. Judge wheeler, before whom the case was tried, 
 remarked that " the testator did not become liable on account of 
 the stock, except for such debts, contracts, and engagements as 
 the bank became liable for during his lifetime. The ownership 
 of the stock would not of itself create any, not even a contingent 
 liability; but ownership of the stock, and creation of a liability by 
 the bank together would create a liability of the shareholder con- 
 tingent upon the discharge by the bank of its liability. Both are 
 necessary to the creation of a contingent claim against a share- 
 holder or his estate. If such a claim had arisen against the estate, 
 it could be enforced against the legatees and devisees to the ex- 
 tent to which they have received assets; not by bringing the assets 
 back into the hands of the executor, but by proceeding directly 
 against those who have received them. None of the liabilities of 
 the bank to meet which this assessment is made, are shown or 
 claimed to have been incurred during the life of the testator. 
 Therefore this is not a contingent claim for which the assets can 
 be pursued under the laws of the state relating to such claims. 
 The statute of the United States provides that an executor shall 
 not be personally subject to any liability as a stockholder, but 
 that the estate and funds in his hands shall be liable in like man- 
 
 > 32 Fed. E., 130 p. 137. 
 
§208 RIGHTS AND LIABILITIES OF SHAEEHOLDEKS. 99 
 
 ner, and to the same extent, that the testator would be if living. 
 So far as appears or is claimed, all the assets of the estate in the 
 hands of those sought to be charged for them were received before 
 any of the liabilities of the bank now in question were created, 
 and most of them several years before. * * The meaning of 
 this statute seems to be that such estates and funds as an execu- 
 tor or administrator has in his hands, at the time when the liabil- 
 ity attaches, are liable in like manner as the the testator would be 
 if living at that time, and having in his hands the stock and other 
 property. * * This case is very different in this respect from 
 Davis V. Weed.' There the liability attached before letters testa- 
 mentary were granted, if not before the death of the testator, and 
 therefore it was impressed upon all the assets, and would follow 
 them into the hands of the devisees and legatees everywhere. 
 * * The statute appears to contemplate the stockholders as 
 they are at the tiihe of the incurring of the liability, and to hold 
 them responsible equally and ratably, and not one for another, as 
 they stood then. Each stands by himself as he is at that time, 
 solvent or insolvent, and, if he is an executor or administrator, 
 the estate then in his hands, adequate or inadequate, and that 
 only, is holden. When these devisees and legatees received 
 their shares of the estate of the testator, the bank was apparently, 
 and, in fact, so far as is shown or claimed, amply solvent, and there 
 was nothing in that direction then to prevent them from taking a 
 clear title, and the law does not appear to be such as to make 
 what happened afterwards, in which they had no part, disturb 
 their title." The receiver therefore failed to recover of Mrs. S as 
 legatee, but he was not thereby prevented from proceeding against 
 her as owner of the stock like any other owner. 
 
 Mrs. S, however, was liable on shares received in payment of 
 a legacy of 125,000 at agreed prices after the baaak failed. "The 
 statutes of the United States provide," said Judge Wheeler, 
 "that the estates and funds in the hands of an executor shall be 
 holden as the testator would have been holden. This statute 
 fixed the lien upon these assets, and it would follow them, where- 
 ever they should go, in any subsequent division or distribution 
 of them. The delivery of them by the executor subsequent to 
 this did not remove them away from the lien, but left them in the 
 
 ' 44 Conn., 369. 
 
100 NATIONAL BANK ACT. §209 
 
 hands of the trustee of the legatee, or in the hands of the legatee, 
 if they had reached her, subject to the lien as before." ' 
 
 § 209. Liability of religious society, A religious so- 
 ciety purchased and held in its own name shares of a national 
 bank paying money therefor which had been given by a testator. 
 It was held that the society must be regarded an ordinary stock- 
 holder, and not a trustee, and. therefore liable to an assessment 
 for the debts of the bank like any other stockholder.^ 
 
 § 210. Of "ward. It has been remarked that "a young 
 ward, whose guardian invests in national bank stock, without his 
 knowledge or consent, and even where he is incapable of as- 
 senting at all, is liable, in his other estates under the individual 
 liability clause in the statute." ' 
 
 § 211. If shareholder is trustee this should ap- 
 pear on the book. If a shareholder is, in truth, a trustee 
 this should appear on the books of the bank, otherwise he will be 
 liable like any other stockholder. "If a trustee wishes to dis- 
 close his trusteeship there is no difficulty in giving notice upon 
 the books of the bank. If he does not disclose his trusteeship, 
 he is guilty of laches, for which others should not suffer." * 
 
 § 212. This cannot be shown by evidence contrary 
 to book. Nor can a person whose name appears on the stock 
 book as a stockholder introduce evidence to prove that he was 
 holding the stock as trustee. "The settlement of the affairs of an 
 insolvent bank would be rendered a matter of great labor, expense 
 and delay, if persons who appeared upon the books of the bank 
 as individual stockholders were permitted to relieve themselves 
 by proving that they held the Stock as executors, or guardians, or 
 trustees. If A is permitted to prove that he holds his stock as 
 trustee for B, and B is permitted to show that he is trustee for 
 A, litigation would be protracted, individual stockholders would" 
 suffer, and the strength of the personal liability section might be 
 seriously impaired." ' 
 tistof 8 213. "The president and cashier of everv national bankinsr 
 
 shareholders . . , ,, 
 
 open lor in- association shall cause to be kept at all times a full and correct list 
 
 spection. 
 
 Bev. Stat. 
 Sec. 5310. 
 
 1 Witters v. Sowles, 32 Fed. R., 130 p. 139. 
 
 ' Davis V. Essex Baptist Society, 44 Conn., 582. 
 
 * Cox, J., in-Keyser v. Hitz, 2 Mackey, p. 494. 
 
 • Shipman, J., Davis v. Essex Baptist Society, 44 Conn., p. 586. 
 5 Id. 
 
§214 RIGHTS AND LIABILITIES OF SHAKEHOLDERS. 101 
 
 of the names and residences of all the shareholders in the asso- 
 ciation, and the number of shares held by each, in the office 
 where its business is transacted. Such list shall be subject to 
 the inspection of all the shareholders and creditors of the associ- 
 ation, and the officers authorized to assess taxes under state au- 
 thority, during business hours of each day in which business 
 may be legally transacted. A copy of such list, on the first 
 Monday of July of each year, verified by the oath of such presi- 
 dent or cashier, shall be transmitted to the Comptroller of the 
 Currency.'" 
 
 § 214 Other rights of shareholders. Shareholders 
 have additional rights and .liabilities which may be more con- 
 veniently considered in other chapters. These relate especially 
 to their duties in organizing a bank;^ proceedings whenever they 
 fail to pay their installments;' and their right to vote at share- 
 holders' meetings.* 
 
 1 Act 1864, Sec; 40. 
 ^ U3. 
 
 * §17. 
 
102 
 
 NATIONAL BANK ACT. 
 
 §215 
 
 CHAPTEK VII. 
 
 DUTIES or A BANK AS A PUBLIC DEPOSITARY. 
 
 ? 215. Duties of bank. 
 216. Character of bank not changed. 
 
 § 217. Grovernment is not liable if bank 
 fails. 
 218. Identical deposit is not retained. 
 
 Duties. 
 Bev. Stat. 
 Sec. 5153. 
 
 § 215. Duties of a bank as a public depositary. 
 
 "All national banking associations, designated for that purpose by 
 the Secretary of the Treasury, shall be depositaries of public 
 money, except receipts from customs, under such regulations as 
 may be prescribed by the Secretary; and they may also be em- 
 ployed as financial agents of the government; and they shall per- 
 form all such reasonable duties, as depositaries of public moneys 
 and financial agents of the government, as may be required of 
 them,. The Secretary of the Treasury shall require the associa- 
 tions thus designated to give satisfactory security, by the deposit 
 of the United States bonds and otherwise, for the safe-keeping 
 and proflipt payment of the public money deposited with themj 
 and for the faithful performance of their duties as financial agents 
 of the government. And every association so designated as re- 
 ceiver or depositary of the public money shall take and receive at 
 par all of the national currency bills, by whatever association is- 
 sued, which have been paid into the government for internal rev- 
 enue, or for loans or stocks." ' 
 
 § 216. Character of bank is not changed. " Desig- 
 nating a national bank," says Richardson, J., inspeaking for the 
 United States Court of Claims, " as a depositary of public money 
 under this provision does not change the character of its organi- 
 zation, or convert its managers into public officers, or give to the 
 government any additional control over the institution, or render 
 the United States liable for any of the acts, contracts, or obligations 
 
 ' Act 1864, Sec. 45. 
 
§217 '^DUTIES OF A BANK AS A PUBLIC DEPOSITARY. 103 
 
 of the bank. Nor does it constitute the bank a general financial 
 agent of the government, but when after such designation it is 
 required by law or by direction of the Secretary of the Treasury 
 to perform any financial duties for the United States, it then be- 
 comes a special agent for the particular purpose required, with 
 no power to bind the government beyond the special authority 
 conferred upon it. In short, constituting a national bank a de- 
 positary of public money is an employment of the institution for 
 business purposes, as it is employed by individual depositors, and 
 not an assumption of its powers and liabilities by the national 
 government, nor the making of it, as an institution, a part of the 
 United States Treasury." ' 
 
 § 217. Government is not liable if bank fails. Con- 
 sequently the government is not liable in the event of the failure 
 of a bank which is a public depositary, for money deposited therein 
 by the clerk of the federal court pending litigation.^ 
 
 § 218. Deposit is not retained in kind as special 
 property. " When public money," continues Judge Eichard- 
 son, " is deposited with a designated depositary national bank, it 
 is not there retained in kind as the special property of the United 
 States, of which the bank is made the custodian, but it becomes 
 at once the property of the bank, is mingled with its other funds, 
 is loaned or otherwise employed in the ordinary business of the 
 corporation, and the bank, instead of being a custodian of public 
 money, becomes a debtor to the United States precisely as it does 
 to other depositors on receipt of individual deposits. * * The 
 government has the same rights and remedies against the bank as 
 other creditors have." ' 
 
 1 Branch v. United States; 12 U. S. Ct. of Claims, 281 p. 287. 
 
 ' Id. 
 
 ' Id., p. 288. 
 
104 
 
 NATIONAL BANK ACT. 
 
 3219 
 
 CHAPTEE VIII. 
 
 HOW CAPITAL MAT BE INCREASED OE EED0CED. 
 
 ? 223. 
 
 Bonds deposited must correspond 
 with change in capital. 
 224. Withdrawal of capital forbidden. 
 
 Increase of 
 capital. 
 Bev. Stat. 
 Sec. 514^. 
 
 219. Increase of capital. 
 
 220. Meaning of statute. 
 
 221. Reduction. 
 
 222. Capital set free must be returned. 
 
 § 219. "Any association formed under this Title may, by its 
 articles of association, provide for an increase of its capital from 
 time to time, as may be deemed expedient, subject to the limita- 
 tions of this Title. But the maximum of such increase to be 
 provided in the articles of association shall be determined by the 
 Comptroller of the Currency; and no increase of capital shall be 
 valid until the whole amount of such increase is paid in, and no- 
 tice thereof has been transmitted to the Comptroller of the 
 Cnrrency, and his certificate obtained specifying the amount of 
 such increase of capital stock, with his approval thereof, and that 
 it has been duly paid in as part of the capital of such associa- 
 tion." ' 
 
 § 220. Meaning of Statute. "It appears," says Judge 
 Matthews, "that three things must concur to constitute a valid 
 increase of the capital stock of a national banking association: 
 1st, That the association, in the mode pointed out in its articles, 
 and not in excess of the miaximum provided for by them, shall as- 
 sent to an increased amount; 2d, That the whole amount of the 
 proposed increase shall be paid in as part of the capital of such as- 
 sociation; and 3rd, That the Comptroller of the Currency, by his 
 certificate specifying the ainount of such increase of capital stock, 
 shall approve thereof, and certify to the fact of its payment."^ 
 Until the Comptroller has issued his certificate specifying the 
 amount, and approving of the bank's action, there is no increase 
 which the law will recognize for taxation, or for any other pur- 
 pose.^ 
 
 § 221. "Any association formed under this Title may, by the 
 vote of shareholders owning two-thirds of its capital stock, re- 
 duce its capital to any suip not below the amount required by 
 
 ' Act 1864, Sec. 13. " Delano v. Butler, 118 U. S., p. 649 
 
 ' Charleston v. People's National Bank, 5 Eich., (S. Car.) 103. 
 
 Bednctlon 
 of capital. 
 Kev. Stat. 
 Sec. 5143. 
 
§222 HOW CAPITAL MAY BE INCKEASED OK REDUCED. *• 105 
 
 this Title to authorize the formation of asaociations ; but no such 
 reduction shall be allowable which will reduce the capital of the 
 association below the amount required for its outstanding circu- 
 lation, nor shall any such reduction be made until the amount of 
 the proposed reduction has been reported to the Comptroller of 
 the Currency and his approval thereof obtained." ' 
 
 § 222. Capital set free must be returned to share- 
 holders. When a national bank reduces its capital stock the 
 portion, set free by the reduction must be returned to the share- 
 holders. It cannot, be retained as a surplus fund or for other 
 purposes. Its return, says Van Hoesen, J., "is not a subject for 
 the exercise of a director's discretion. If the retired capital be a 
 liability of the corporation in favor of the shareholders who give 
 up the stock that is called in, the payment of that debt cannot 
 lie in any man's discretion. Payment cannot be deferred because 
 the directors believe it for a creditor's advantage, to keep him out 
 of his money." ^ 
 
 8 223. "The deposit of bonds made by each association Bonds de- 
 
 c IT m/ posited mnst 
 
 shall be increased as its capital may be paid up or increased,' ^t^'*^^,^'™'' 
 so that every association shall at all times have on deposit Hg°^Pg'*[' 
 with the Treasurer registered United States bonds to the amount ^^"^ ^"^■ 
 Jot at least one-third of its capital stock actually paid in. And 
 any association that may desire to reduce its capital or to close up 
 its business and dissolve its organization, may take up its bonds 
 upon returning to the Comptroller its circulating notes in the 
 proportion hereinafter required, or may take up any excess of 
 bonds beyond one-third of its capital stock, and upon which no 
 circulating notes have been delivered." ' 
 
 8 224. " No association, or any member thereof, stall, dur- withdrawal 
 
 o J J J . of capital 
 
 ing the time it shall continue its banking operations, withdraw, ^ev's?™' 
 or permit to be withdrawn, either in the form of dividends or ^^- ^''"^■ 
 otherwise, any portion of its capital." * 
 
 > Act 1864, Sec. 13. 
 
 = Seeley v. New York National Ex. Bank, 8 Daly 400 p. 403, S. C, 4 
 Abb. N. Cases, 61, affd 78 N. Y., 608. 
 ' Act 1864, Sec. 16." 
 * Act 1864, Sec. 38. The whole of this section is given in Ch. V. § 125. 
 
106 
 
 NATIONAL BANK ACT. 
 
 §225 
 
 CHAPTBE IX. 
 
 HOW BONDS MUST BE DEPOSITED WITH, AND KEPT BY THE GOVERNMENT. 
 
 225. Meaning of U. S. bonds. 
 
 226. Must be deposited before beginning 
 
 business. 
 
 227. Must be increased or decreased witb 
 
 change in capital. 
 
 228. Exchange of coupon bonds for reg- 
 
 istered. . 
 
 229. Amount that must be deposited and 
 
 withdrawal of circulation. 
 
 230. Mode for retiring part of circulation 
 
 and "bonds. 
 
 ? 231. Monthly restriction on bonds that 
 may be withdrawn and exclusion 
 of called bonds. 
 
 232. Annual examination of bonds. 
 
 233. Bonds to secure circulation are held 
 
 exclusively for that purpose. 
 
 234. Are transferred to Treasurer in trust. 
 
 235. Transfers are recorded. 
 
 236. And advice of transfer is given. 
 
 237. Comptroller to have access to bonds 
 
 and books. 
 
 TJ. S. bondi 
 defined. 
 Eev. Stat. 
 See. 5158. 
 
 Must be de- 
 posited be- 
 fore begin- 
 ning busi- 
 ness. 
 
 Bev. Stat. 
 See. 5159. 
 
 Must be in- 
 creased or 
 decreased 
 with change 
 in capital. 
 Bev. Stat. 
 Sec. 5160. 
 
 § 225. "The term ' United States bonds,' as used through- 
 out this Chapter, shall be construed to mean registered bonds 
 of the United States." ' 
 
 § 226. "Every association, after having complied with the pro- 
 visions of this Title, preliminary to the commencement of the bank- 
 ing business, and before it shall be authorized to commence banking 
 business under this Title, shall transfer and deliver to the Treas- 
 urer of the United States any United States registered bonds 
 bearing interest, to an amount not lessi than thirty thousand dol- 
 lars and not less than one-third of the capital stock paid in. Such 
 bonds shall be received by the Treasurer upon deposit, and shall 
 be by him safely kept in his office, until they shall be otherwise 
 disposed of, in pursuance of the provisions of this Title." ^ 
 
 § 227. " The deposit of bonds made by each association 
 shall be increased as its capital may be paid up or increased, so 
 that every association shall at all times have on deposit with the 
 Treasurer registered United States bonds to the amount of at 
 least one-third of its capital stock actually paid in. And any as- 
 
 ' Act 1864, Sec. 4. 
 ' Act 1864, Sec. 16. 
 
§228 HOW BONDS MUST BE DEPOSITED, ETC. 107 
 
 soeiation that may desire to reduce its capital or to close up its 
 business and dissolve its organization, may take up its bonds 
 upon returning to the Comptroller its circulating notes in the 
 proportion hereinafter required, or may take up any excess of 
 bonds beyond one-third of its capital stock, and upon which no 
 circulating notes have been delivered." ' 
 
 § 228. "To facilitate a compliance with the two preceding Exchange of 
 sections, the Secretary of the Treasury is authorized to receive bonds'for 
 from any association, and cancel, any United States coupon bonds, Eev. stat.' 
 and to issue in lieu thereof registered bonds of like amount, bear- 
 ing a like rate of interest, and having the same time to run." ^ 
 
 § 229. When the Act of 1882 was passed, authorizing the Amount that 
 extension of national banking associations, it provided "that na- posited and 
 tional banks now organized or hereafter organized, having a cap- of oirouia- 
 ital of 1150,000, or less, shall not be required to keep on deposit 
 or deposit with the Treasurer of the United States United States 
 bonds in excess of one-fourth of their capital stock as security for 
 their circulating notes ; but such banks shall keep on deposit or de- 
 posit with the Treasurer of the United States the amount of bonds 
 as herein required. 'And such of those banks having on deposit 
 bonds in excess of that amount are authorized to reduce their cir- 
 culation by the deposit of lawful money as provided by law: 
 Provided That the amount of such circulating notes shall not 
 in any case exceed ninety per centum of the par value of the bonds 
 deposited as herein provided." ^ The section also contained pro- 
 visions for paying the cost of transporting and redeeming their 
 outstanding votes.* 
 
 § 230. In 1874 Congress provided for the withdrawal of por- Mode for re- 
 
 . -, , T 1 J. , tiringpartof 
 
 tions of its notes and bonds, the fourth section declaring " that circulation 
 
 and bonds. 
 
 any association organized under this Act, or any of the acts of 
 which this is an amendment, desiring to withdraw its circulating 
 notes, in whole or in part, may, upon the deposit of lawful money 
 with the Treasurer of the United States in sums of not less than 
 nine thousand dollars, take up the bonds which said association 
 has on deposit with the Treasurer for the security of such circu- 
 lating notes; which bonds shall be assigned to the bank in the 
 
 1 Act 1864, Sec. 16. 
 
 2 Id. 
 
 ' Public Laws, 47 C. 1 S. Ch. 290, part of Sec. 8. 
 * i 271. 
 
108 NATIONAL BANK ACT. §231 
 
 manner specified in the nineteenth section of the National Bank 
 Act [or sections 5162 and 5163 of the Revised Statutes]; and the 
 outstanding notes of said asaociatioij, to an amount equal to the 
 legal tender notes deposited, shall be redeemed at the Treasury of 
 the United States, and destroyed as now provided by law: Pro- 
 vided, That the amoijnt of the bonds on deposit for circulation 
 shall not be reduced below fifty thousand dollars." ' 
 
 § 231. Eight years afterward the above Act was so modified 
 " that any national banking association now organized, or here- 
 after organized, desiriig to withdraw its circulating notes, upon 
 a deposit of lawful money with the Treasurer of the United 
 States, as provided in section four of the Act of June twentieth, 
 1874, entitled 'An act fixing the amount of United States notes, 
 providing for a redistribution of national bank currency, and for 
 other purposes,' or as provided in this Act, is authorized to de- 
 posit lawful money and withdraw a proportionate amount of the 
 bonds held as security for its circulating notes in the order of 
 such deposits; and no national bank which makes any deposit of 
 lawful money in order to withdraw its circulating notes shall be 
 entitled to receive any increase of its circulation for the period of 
 six-months from the time it made such deposit of lawful money 
 for the purpose aforesaid: Provided, That not more than $3,000,- 
 000 of lawful money shall be deposited during any calendar' 
 month for this purpose: And promded further, That the provi- 
 sions of this section shall not apply to bonds called for redemp- 
 tion by the Secretary of the Treasury, nor to the withdrawal of 
 circulating notes in consequence thereof." ^ 
 Annnai ex- S 232. " Every association having bonds deposited in the of - 
 
 amination of ox 
 
 bonds. tice of the Treasurer of the United States shall, once or of tener in 
 
 Rbv. Stat. . 
 
 Sec. 5166. each fiscal year, examine aind compare the bonds pledged by the 
 association with the books of the Comptroller of the Currency and 
 with the accounts of the association, and, if they are found cor- 
 rect, to execute to the Treasurer a certificate setting forth the dif- 
 ferent kinds and the amounts thereof, and that the same are in 
 the possession and custody of the Treasurer at the date of the cer- 
 tificate. Such examination shall be made at such time or times, 
 ' during the ordinary business hours, as the Treasurer and the 
 Comptroller, respectively, may select, and may be made by an of - 
 
 1 18 Stat, at Large, 43 C. 1 S. Ch. 343. 
 
 2 Public Laws, 47 C. 1 S. Ch. 290, Sec. 9. 
 
§233 HOW BONDS MUST BE DEPOSITED, ETC. 109 
 
 fioer or agent of such associktion, duly appointed in writing for 
 that purpose; and his certificate before mentioned shall be of like 
 force and validity as if executed by the president or cashier. A 
 duplicate of such certificate, signed by the Treasurer, shall be re- 
 tained by the association." ' 
 
 § 233. "The bonds transferred to and deposited with the Bonds to se- 
 Treasurer of the United States, by any association, for the security don are held 
 of its circulating notes, shall be held exclusively for that purpose, for that pL- 
 until such notes are redeemed, except as provided in this Title. Eev.'stat. 
 The Comptroller of the Currency shall give to any such associa- 
 tion powers of attorney to receive and appropriate to its own use 
 the interest on the bonds which it has so transferred to the Treas- 
 urer; but such powers shall become inoperative whenever such as- 
 sociation fails to redeem its circulating notes. Whenever the 
 market or cash value of any bonds thus deposited with the Treas- 
 urer is reduced below the amount of the circulation issued for the 
 same, the Comptroller may demand and receive the amount of 
 such depreciation in other United States bonds at cash value, or 
 in money, from the association, to be deposited with the Treasurer 
 as long as such depreciation continues. And the Comptroller, 
 upon the terms prescribed by the Secretary of the Treasury, may 
 permit an exchange to be made of any of the bonds deposited 
 with the Treasurer by any association, for other bonds of the Unit- 
 ed States authorized to be received as security for circulating 
 notes, if he is of opinion that such an exchange can be made with ' 
 
 out prejudice to the United States; and he may direct the return 
 of any bonds to the association which transferred the same, in sums 
 of not less than one thousand dollars, upon the surrender to him 
 and the cancellation of a proportionate amount of such circulat- 
 ing notes: Provided, That the remaining bonds which shall have 
 been transferred by the association offering to surrender circulat- 
 ing notes are equal to the amount required for the circulating 
 notes not surrendered by such association, and that the amount 
 of bonds in the hands of the Treasurer is not diminished below 
 the amount required to be kept on deposit with him, and that there 
 has been no failure by the association to redeem its circulating 
 notes, nor any other violation by it of the provisions of this Title, 
 and that the market or cash value of the remaining bonds is not 
 below the amount required for the circulation issued for the same. " '' 
 
 ' Act 1864, Sec. 25. '^ Act 1864, Sec. 26. 
 
110 
 
 NATIONAL BANK ACT. 
 
 §?34: 
 
 Are trans- 
 ferred in 
 trust to 
 Treasurer. 
 Rev. Stat. 
 Sec. 6162. 
 
 Transfers 
 are record- 
 ed. 
 
 Bev. Stat. 
 Sec. 5163. 
 
 And advice 
 of transfer is 
 given. 
 Eev. Stat. 
 Sec. 5164. 
 
 Oomptroller 
 to have ac- 
 cess to bonds 
 and books. 
 Rev. Stat. 
 Sec. S16S. 
 
 § 234. "All traasfers of United States bonds, made by any 
 association under tke provisions of this Title, shall be made to 
 the Treasurer of the United States in trust for the association, 
 with a memorandum written or printed on each bond, and signed 
 by the cashier, or some other officer of the association making the 
 deposit. A receipt shall be given to the association, by the Comp- 
 troller of the Currency, or by a clerk appointed by him for that 
 purpose, stating that the bond is held in trust for the association 
 on whose behalf the transfer is made, and as security for the re- 
 demption and payment of any circulating notes that have been 
 or may be delivered to such association. No assignment or transf ejr 
 of any such bond by the Treasurer shall be deemed valid unless 
 countersigned by the Comptroller of the Currency." ' 
 
 § 235. "The Comptroller of the Currency shall keep in his 
 office a book in which he shall cause to be entered, immediately 
 upon countersigning it, every transfer or assignment by the Treas- 
 urer, of any bonds belonging to a national banking association, 
 presented for his signature. He shall state in such entry the 
 name of the association from whose accounts the transfer is made, 
 the name of the party to whom it is made, and the par value of 
 the bonds transferred." ^ 
 
 § 236. "The Comptroller of the Currency shall immediately 
 upon countersigning and entering any transfer or assignment by 
 the Treasurer, of any bonds belonging to a national banking as- 
 sociation, advise by mail the association from whose accounts the 
 transfer is made, of the kind and numerical designation of the 
 bonds, and the amount thereof so transferred." ' 
 
 § 237. "The Comptroller of the Currency shall have at all 
 times, during office hours, access to the books of the Treasurer of 
 the United States for the purpose of ascertaining the correctness 
 of any transfer or assignment of the bonds deposited by an as- 
 sociation, presented to the Comptroller to countersign; and the 
 Treasurer shall have the like access to the books mentioned in sec- 
 tion fifty- one hundred and sixty- three, during office hours, to as- 
 certain the correctness of the entries in the same; and the Comp- 
 troller shall also at all times have access to the bonds on deposit 
 with the Treasurer, to ascertain their amount and condition." * 
 
 » Act 1864, Sec. 19. 
 3 Act 1864, Sec. 19. 
 
 2 Act 1864, Sees. 19, 20. 
 * Act 1864, Sec. 20. 
 
CONCERNING THE ISSUE OF CIRCTJLATING NOTES. 
 
 Ml 
 
 CHAPTER X. 
 
 REGULATIONS OONOERNING THE ISSUE OF CIRCULATINa NOTES. 
 
 238. Amountof notes that may be issued. || 239. Reduction of circulation by banks 
 
 I having $150,000 capital or less. 
 
 Former Restrictions on the Amount of Issues. 
 
 240.- Early mode of proportioning notes 
 among banks. 
 
 241. Limitation of a bank's circulation. 
 
 242. Former limit to aggregate amount. 
 
 243. Eepeal of limit. 
 
 244. Limitation in amount of legal-tender 
 
 notes. 
 
 245. How notes were apportioned. 
 
 246. Surplus circulation was withdrawn 
 
 from states having excess. 
 
 2 247. How Comptroller should proceed to 
 get excess. 
 
 248. Later mode of procedure. 
 
 249. Mode of issuing notes thereunder. 
 
 250. Sections of Revised Statutes repealed 
 
 by Resumption Act. 
 
 251. So was section relating to removal 
 
 of banks. 
 
 Engraving, Printing and Destruction of Notes. 
 
 252. Engraving and printing. 
 
 253. Effect of omitting seal. 
 
 254. Charter numbers. 
 
 § 255. Control of plates and dies. 
 256. Examination of plates. 
 
 Denominations, for What Received, Illegal Notes, Worn-out Notes and 
 
 their Destruction. 
 
 257. None to be issued below five dollars. 
 
 258. When a legal-tender. 
 
 259. Shall be received by all except gold 
 
 banks. 
 
 260. Prohibition of other issues. 
 
 261. Certificate of deposit is not a bank 
 
 note. 
 
 262. Shall not be used to create a capital. 
 
 263. Banks must not pay uncurrent notes. 
 
 264. Fraudulent notes to be marked. 
 
 265. Unlawful delivery to banks. 
 
 266. Imitations prohibited. 
 
 267. Penalty for mutilating. 
 
 268. Destruction and replacing of worn- 
 
 out notes. 
 
 Mode of Redeeming Notes of Active Banks. 
 
 269. Selection of reserve agente. 
 
 270. Redemption by U. S. Treasurer and 
 
 ■ expense. 
 
 271. Expense modified by law of 1882. 
 
 272. Regulations concerning reserve and 
 
 places of redemption. 
 
112 
 
 NATIONAL BANK ACT. 
 
 8238 
 
 Mode of Redeeming Notes of Liquidating Banks. 
 
 273. Voluntary liquidation. 
 
 274. How board shall proceed. 
 
 275. Deposit of lawful money to redeem 
 
 notes. 
 
 276. Consolidating banks need not re- 
 
 deem. 
 
 277. Bonds to be assigned to closed banks. 
 
 278. Notes to be destroyed. 
 
 279. Proceedings if bank fail to take up 
 
 bonds. 
 
 280. Mode of protesting notes unpaid on 
 
 demand. 
 
 281. Examination by special agent after 
 
 protest. 
 
 282. 
 
 After protest bank shall not continue 
 
 business. 
 Holders to be notified to present 
 
 notes at treasury for payment. 
 284. Sale of bonds at auction and lien of 
 
 U.S. 
 Government has first lien. 
 Sale of bonds privately. 
 Disposition ot notes redeemed by 
 Treasurer. 
 
 288. Cancellation of notes. 
 
 289. Fees for protesting, examinations 
 
 and receivership. 
 
 283. 
 
 285. 
 286. 
 287. 
 
 ^ 290. How oi^anized. 
 291. Eepeal of limit on amount of their 
 circulation. 
 
 Associations for Issuing Gold Notes. 
 
 292. Reserve on gold-note circulation. 
 
 Amount of 
 notes that 
 may be is- 
 sued. 
 
 Act July IJ, 
 1883. 
 
 Reduction of 
 circulation 
 by banks 
 having 1150- 
 000 or less. 
 Act July 12, 
 1883. 
 
 § 238. The act of 1882 provided " that upoa a deposit of bonds 
 as described by sections 5159 and 5160, except as modified by section 
 four of an Act entitled ' An Act fixing the amount of United States 
 notes, providing for a redistribution of the national bank cur- 
 rency, and for other purposes,' approved June twentieth, 1874, and 
 as modified by section eightof this Act, the association making the 
 same shall be entitled to receive from the Comptroller of the 
 Currency circulating notes of different denominations, in blank, 
 registered and countersigned as provided by law, equal in amount 
 to ninety per centum of the current market value, not exceeding 
 par, of the United States bonds so transferred and delivered, and 
 at no time shall the total amount of such notes issued to any 
 such association exceed ninety per centum of the amount at such 
 time actually paid in of its capital stock ; and the provisions of 
 sections 5171 and 5176 of the Revised Statutes are hereby re- 
 pealed." ' 
 
 § 239. The two sections first mentioned in the above Act re- 
 late to the kind and amount of bonds that must be delivered to 
 the United States Treasurer, and to their increase or reduction, 
 and were given in the previous chapter as well as the fourth sec- 
 
 Public Laws, 47 C. 1 S. Ch. 290, Sec. 10. 
 
§240 CONCERNING THE ISSUE OF CIRCULATING NOTES. 113 
 
 tion of the Act of 1874 which provided a new mode for with- 
 drawing bonds. The eighth section of the Act under consideration 
 which further modified the law with respect to the depositing of 
 bonds to secure circulation declared "that national banks now or- 
 ganized or hereafter organized, having a capital of 1150,000, or 
 less, shall not be required to keep on deposit or deposit with the 
 Treasurer of the United States United States bonds in excess 
 of one-fourth of their capital stock as security for their cir- 
 culating notes; but such banks shall keep on deposit or deposit 
 with the Treasurer of the United States the amount of bonds as 
 herein required. And such of those banks having on deposit bonds 
 in excess of that amount are authorized to reduce their circulation 
 by the deposit of lawful money as provided by law : Provided 
 That the amount of such circulating notes shall not in any case 
 exceed ninety per centum of the par value of the bonds deposit- 
 ed as herein provided." ' 
 
 § 240. The two sections of the Eevised Statutes that were re- Early mode 
 pealed in 1882 in the opening section of this Chapter enacted that tioning notes 
 " upon a deposit of bonds as prescribed by sections fifty-one hun- banks. 
 dred and fifty-nine and fifty-one hundred and sixty, the associa- sec' sm.' 
 tion making the same shall be entitled to receive from the Comp- 
 troller of the Currency circulating notes of different denomina- 
 tions, in blank, registered and countersigned as hereinafter pro- 
 vided, equal in amount to ninety per centum of the current mar- 
 ket value of the United States bonds so transferred and delivered, 
 but not exceeding ninety per centum of the amount of the bonds 
 at the par value thereof, if bearing interest at a rate not less 
 than five per centum per annum: Provided, That the amount of 
 circulating notes to be furnished to each association shall be in 
 proportion to its paid-up capital, as follows, and no more: 
 
 First To each association whose capital does not exceed five 
 hundred thousand dollars, ninety per centum of such capital. 
 
 Second. To each association whose capital exceeds five hundred 
 thousand dollars, but does not exceed one million of dollars, eighty 
 per centum of such capital. 
 
 Third. To each association whose capital exceeds one million 
 of dollars, but does not exceed three million[8]^ of dollars, seventy- 
 five per centum of such capital. 
 
 ' Id., part of Sec. 8. 
 
 ' This is an obvious error in the Revised Statutes. 
 8— B. 
 
114 NATIONAL BANK ACT. §241 
 
 Fourth, To each association whose capital exceeds three mil- 
 lions of dollars, sixty per centum of such capital." 
 of™ban™s § ^^^- '^^^ Other repealed section enacted that " no banking 
 Ee™'stat°' association organized subsequent to the twelfth day of July, 
 Sec. 5176. eighteen hundred and seventy, shall have a circulation in excess 
 
 of five hundred thousand dollars." 
 TOrmer 8 242. With respect to the quality of notes which the national 
 
 limit to ag- " ^ . 
 
 gregate banking associations in the aggregate can issue the Revised Stat- 
 Bev. Stat, utes declared that " the aggregate amount of circulating notes 
 issued under the Act of February twenty -five, eighteen hundred 
 and sixty- three, and under the Act of June three, eighteen hundred 
 and sixty-four, and under section one of the Act of July twelve, 
 eighteen hundred and seventy, and under thisTitle, shall not ex- 
 ceed three hundred and fifty-four millions of dollars." 
 unSr^ °* § 243. But, in the Act for the resuming of specie payments 
 
 u^\mT^^^ Congress enacted " that section . five thousand one hundred and 
 seventy-seven of the Revised Staiutes of the United States 
 limiting the aggregate amount of circulating notes of national 
 banking associations, be, and is hereby, repealed; and each exist- 
 ing banking association may increase its circulating notes in ac- 
 cordance with existing law without respect to said aggregate 
 limit; and new banking associations may be organized in accord- 
 ance with existihg law without respect to said aggregate limit ; 
 and the provisions of law for the withdrawal and redistribution 
 of national bank currency among the several states and territories 
 are hereby repealed. And whenever, and so often, as circulating 
 notes shall be issued to any such banking association, so increas- 
 ing its capital or circulating notes, or so newly organized as afore- 
 said, it shall be the duty of the Secretary, of the Treasury to re- 
 deem the legal-tender United States notes in excess only of three 
 hundred million of dollars, to the amount of eighty per centum 
 ' of the sum of national bank notes so issued to any such banking 
 association as aforesaid, and to continue such redemption as such 
 circulating notes are issued until there shall be outstanding the 
 sum of three hundred million dollars of such legal-tender United 
 States notes, and no more. And on arid after the first day of Jan- 
 uary, Anno Domini, eighteen hundred and seventy-nine, the Sec- 
 retary of the Treasury shall redeem, in coin, the United States 
 legal-tender notes then outstanding on their presentation for re-' 
 demption, at the office of the Assistant Treasurer of the United 
 
§244 CONCEENING THE ISSUE OF CIRCULATINfi NOTES. 115 
 
 States in the city of New York [and the city of San Francisco, 
 California,] ' in sums of not less than fifty dollars. And to ena- 
 ble the Secretary of the Treasury to prepare and provide for the 
 redemption in this Act authorized or required, he is authorized to 
 use any surplus revenues, from time to time, in the treasury not 
 othervyise appropriated, and to issue, sell, and dispose of, at not 
 less than par, in coin, either of the descriptions of bonds of the 
 United States described in the Act of Congress approved July 
 fourteenth, eighteen hundred and seventy, entitled, 'An Act to au- 
 thorize the refunding of the national debt,' vyith like qualities, 
 privileges, and exemptions, to the extent necessary to carry this 
 Act into full effect, and to use the proceeds thereof for the pur- 
 poses aforesaid. And all provisions of law .inconsistent with the 
 provisions of this Act are hereby repealed." ^ , 
 
 § 244. Limitation in amount of legal tender notes. 
 At the time of removing the restriction on bank circulation. The 
 amount of legal tender notes in circulation was $382,000,000, and 
 Congress then declared "that the amount of United States notes 
 outstanding and to be used as a part of the circulating medium, 
 shall not exceed the sum of three hundred and eighty-two mil- 
 lion dollars, which said sum shall appear in each monthly state- 
 ment of the public debt, and no part thereof shall be held or used 
 as a reserve." ^ In the Resumption Act, from which we have 
 quoted, the amount of these notes was to be reduced to $300,- 
 000,000. AVhen, however, in May, 1878, the amount had been 
 reduced to $846,681,016, Congress repealed that feature of the 
 resumption law declaring "that from and after the passage of this 
 Act it shall not be lawful for the Secretary of the Treasury or 
 other officer under him to cancel or retire any more of the 
 United States legal-tender notes. And when any of said notes may 
 be redeemed or be received into the Treasury under any law from 
 any source whatever and shall belong to the, United States, they 
 shall not be retired cancelled or destroyed but they shall be re- 
 issued and paid out again and kept in circulation: Provided, That 
 nothing herein shall prohibit the cancellation and destruction of 
 mutilated notes and the issue of other notes of like denomina- 
 
 ' These bracketed words were added by Act March. 3, 1887, Public Laws, 
 49 C. 2 S. Ch. 378, Sec. 3. 
 '' 18 Stat, at Large, 43 C. 2 S. Ch. 15, Sec. 3. 
 ' Act June 20, 1874, 18 Stat, at Large, 43 C. 1 S. Ch. 343, Sec. 6. 
 
116 NATIONAL BANK ACT. §245 
 
 tion in their stead, as now provided.by law. All acts and parts of 
 acts in conflict herewith are hereby repealed." ' 
 
 The effect of removing the restrictions on bank circulation was 
 to render useless the regulations which had been adopted for ap- 
 portioning the bank note circulation among the states. Yet as 
 these are incorporated in the Revised Statutes perhaps they 
 should be found here. 
 How notes e 245. " One hundred and iifty millions of dollars of the entire 
 
 were appor- o -' 
 
 Eev^stat amount of circulating notes authorized to be issued shall be 
 Sec. 5178. apportioned to associati(3ns in the states, in the territories, and in 
 the District of Columbia, according to representative population. 
 One hundred and fifty millions shell be apportioned by the Sec- 
 retary of the Treasury among associations formed in the several 
 states, in the territories, and in the District of Columbia, having 
 due regard to the existing banking capital, resources, and business 
 of such states, territories, and district. The remaining fifty-four 
 millions shall be apportioned among associations in states and 
 territories having, under the apportionments above prescribed, less 
 than their full proportion of the aggregate amount of notes au- 
 thorized, which made due application for circulating notes prior 
 to the twelfth day of July, eighteen hundred and seventy-one. 
 Any remainder of such fifty-four millions shall be issued to 
 banking associations applying for circulating notes in other states 
 or territories having less than their proportion." 
 Surplus cir- 8 246. "In Order to secure a more equitable distribution of the 
 
 culation was " ^ 
 
 to be with- national banking currency, there may be issued circulating notes 
 
 drawn from _ ° _ . . . 
 
 Btateshav- to banking associations organized instates and territories having 
 
 iug excess. . . . 
 
 Bev. Stat, less than their proportion, and the amount of circulation herein 
 
 Sec. 6179. _ Jr- r ' 
 
 authorized shall, under the direction of the Secretary of the 
 Treasury, as it may be required for this purpose, be withdrawn, 
 as herein provided, from banking associations organized in states 
 having more than their proportion, but the amount so withdrawn 
 shall not exceed twenty-five million dollars: Provided, That no 
 circulation shall be vrithdrawn under the provisions of this sec- 
 tion until after the fifty- four millions granted in the first section 
 of the Act of July twelfth, eighteen hundred and seventy, shall 
 have been taken up." 
 
 ' Act May 31, 1878, 20 Stat, at Large, 45 C. 2 S. Ch. 87. 
 
§247 CONCERNING THE ISSUE OF CIRCULATING NOTES. 117 
 
 § 247. "The Comptroller of the Currency shall, under thenowComp- 
 direction of the Secretary of the Treasury, make a statement should pro- 
 showing the amount of circulation in each state and territory, and excess. ^ 
 the amount necessary to be withdrawn from each association, and seo.'siso." 
 shall forthwith make a requisition for such amount upon such 
 associations, commencing with those having a circulation ex- 
 ceeding one million of dollars, in states having an excess of cir- 
 culation, and withdrawing their circulation in excess of one mil- 
 lion of dollars, and then proceeding proportionately with other as- 
 sociations having a circulation exceeding three hundred thousand 
 dollars, in states having the largest excess of circulation, and re- 
 ducing the circulation of such associations in states having the 
 greatest proportion in excess, leaving undisturbed the associations 
 in states having a smaller proportion, until those in greater ex- 
 cess have been reduced to the same grade, and continuing thus 
 to make such reductions until the full amount of twenty-five mil- 
 lions has been withdrawn; and the circulation so withdrawn shall 
 be distributed among the states and territories having less than 
 their proportion, so as to equalize the same. Upon failure of 
 any association to return the amount of circulating notes so 
 required, within one year, the Comptroller shall sell at public 
 auction, having given twenty days' notice thereof in one daily 
 newspaper printed in Washington and one in New York city, an 
 amount of the bonds deposited by that association as security for 
 its circulation, equal to the circulation required to be withdrawn 
 from the association and not returned in compliance with such 
 requisition; and he shall, with the proceeds, redeem so many of 
 the notes of such association, as they come into the treasury, as 
 will equal the amount required and not returned; and shall pay 
 the balance, if any, to the association." 
 
 § 248. ' The above sections relating to the apportionment of the ^^^^'"°^ 
 national bank circulation were enacted in July, 1870. Soon after J^ot'jonea) 
 their incorporation into the Revised Statutes another Act provided '^'*- 
 "that so much of the Act entitled 'An Act to provide for the redemp- 
 tion of the three-per-centum temporary loan certificates, and for an 
 increase of national-bank notes,' as provides that no circulation 
 shall be withdrawn under the provisions of section six of said Act, 
 until after the fifty-four millions granted in section one of said Act 
 shall have been taken up, is hereby repealed; and it shall be the 
 duty of the Comptroller of the Currency, under the direction of the 
 
118 NATIONAL BANK ACT. §248 
 
 Secretary of the Treasury, to proceed forthwith, and he is hereby 
 authorized and inquired, from time to time, as applications 
 shall be duly made therefor, and until the full amount of fifty-five 
 million dollars shall be withdrawn, to make requisitions upon each 
 of the national banks described in said section, and in the manner 
 therein provided, organized in states having an excess of circula- 
 tion, to withdraw and return so much of their circulation as by 
 said act may be apportioned to be withdrawn from them, or, in 
 lieu thereof, to deposit in the Treasury of the United States 
 lawful money sufficient to redeem such circulation, and upon the 
 return of the circulation required, or'the deposit of lawful money, 
 as herein provided, a proportionate amount of the bonds held to 
 •secure the circulation of such association as shall make such re- 
 turn or deposit shall be surrendered to it. ' 
 
 " That upon the failure of the national banks upon which re- 
 quisition for circulation shall be made, or of any of them, to 
 return the amount required, or to deposit in the treasury lawful 
 money to redeem the circulation required, within thirty days, the 
 Comptroller of the Currency shall at once sell, as provided in 
 section fotty-nine of the National -Currency Act approved June 
 third, eighteen hundred and sixty-four, bonds held to secure the 
 redemption of the circulation of the association or associations 
 ' which shall so fail, to an amount sufficient to redeem the circula- 
 tion required of such association or associations, and with the 
 proceeds, which shall be deposited in the Treasury of the United 
 States, so much of the circulation of such association or associa- 
 tions shall be redeemed as will equal the amount required and not 
 returned and if there be an excess of proceeds over the amount 
 required for such redemption, it shall be returned to the asssoci- 
 ation or associations whose bonds shall have been sold. And it 
 shall be the duty of the Treasurer, Assistant Treasurers, desig- 
 nated depositaries, and national bank depositaries of the United 
 States, who shall be kept informed by tjie Comptroller of the 
 Currency of such associations as shall fail to return circulation 
 as required, to assort and return to the Treasury for redemp- 
 tion the notes of such associations as shall come into their hands 
 until the amount required shall be redeemed, and in like manner 
 to assort and return to the Treasury, for redemption, the notes 
 of such national banks as have failed, or gone into voluntary liqui- 
 
 ' 18 Stat, at Large. 43 C. 1 S.- Ch. 343, Sec. 7. 
 
§249 CONCERNING THK ISSUE OF ClfiCOLATING NOTES. 119 
 
 dation for the purpose of winding up their affairs, and of such as 
 shall hereafter so fail or go into liquidation. ' 
 8 249. "That from and after the passage of this Act it shall be law- Mode of ie- 
 
 " 1 Bulng notes 
 
 ful for the Comptroller of the Currently, and he is hereby required, thereunder, 
 to issue circulating notes without delay, as applications therefor are is74. 
 made, not to exceed the sum of fifty-five million dollars, to associa- 
 tions organized, or to be organiz6d,in those states and territories h av- 
 ingless than their proportion of circulation, under an apportionment 
 made on the basis of population and of wealth, as shown by the 
 returns of the census of eighteen hundred and seventy; and every 
 association hereafter organized shall be subject to, and be gov- 
 erned by, the rules, restrictions, and limitations, and possess the 
 rights, privileges, and franchises, now or hereafter to be prescribed 
 by law as to national banking associations, with the same power 
 to amend, alter, and repeal provided by 'the National Bank Act:' 
 Provided, That the whole amount of circulation withdrawn and re- 
 deenied from banks transacting business shall not exceed fifty- five 
 million dollars, and that such circulation shall be withdrawn and 
 redeemed as it shall be necessary to supply the circulation pre- 
 viously issued to the banks in those states having less than their 
 apportionment: And provided further, That not morb than thirty 
 million dollars shall be withdrawn and redeemed as herein con- 
 templated during the fiscal year ending June thirtieth, eighteen 
 hundred and seventy-five." ^ 
 
 § 250. Sections of Revised Statutes repealed by Re- Aboye sec- 
 sumption Act. All these provisions for restricting and appor- pealed by 
 
 ^ ^ ■*■ o A A Resumption 
 
 tioning the bank circulation were swept away by the Resumption -i"'- 
 Act of January, 1875, as well as the following section of the Re- 
 vised Statutes prescribing for the removal of banks into other 
 states. 
 
 § 251. "Any association located inany state having more than sowasseo- 
 its proportion of circulation may be removed to any state having to removal^ 
 less than its proportion of circulation, under such rules and reg- Bev. stat. 
 ulations as the Comptroller of the Currency, with the approval of 
 the Secretary of the Treasury, shall prescribe: Provided, That 
 the amount of the issue of said banks shall not be deducted from 
 the issue of fifty-four millions mentioned in section five thousand . 
 one hundred and seventy-eight." 
 
 1 18 Stat, at Large, 43 C. 1 S. Ch. 343, Sec. 8. 
 
 2 Id., Sec. 9. 
 
120 
 
 KATIONAL BANK ACT. 
 
 5252 
 
 Engraving 
 and print- 
 ing. 
 
 Rev. Stat. 
 Sec. sra. 
 
 Control of 
 plates and 
 dies. 
 
 Rev. Stat. 
 Sec 5173. 
 
 § 252. " In order to furnish suitable notes for circulation, the 
 Comptroller of the Currency shall, under the direction of the Sec- 
 retary of the Treasury, cause plates and dies to be engraved, in 
 the best manner to guard against counterfeiting and fraudulent 
 alterations, and shall have printed therefrom, and numbered, such 
 quantity of circulating notes, in blank, of the denominations of one 
 dollar, two dollars, three dollars, five dollars, ten dollars, tveenty 
 dollars, fifty dollars, one hundred dollars, five hundred dollars, 
 and one thousand dollars, as may be required to supply the asso- 
 ciations entitled to receive the same. Such notes shall express 
 upon their face that they are secured by United States bonds, de- 
 posited with the Treasurer of the United States, by the written 
 or engraved signatures of the Treasurer/ and Eegister, and by the 
 imprint of the seal of the treasury; and shall also express upon 
 their face the promise of the association receiving the same to pay 
 on denaand, attested by the signatures of the president or vice- 
 president and cashier; and shall bear such devices and such other 
 statements, and shall be in such form, as the Secretary of the 
 Treasury shall, by regulation, direct." ' 
 
 § 253. Effect of omitting seal. If the imprint of the seal 
 of the treasury be omitted the notes will be a valid contract. " The 
 imprint of the seal of the treasury is simply intended to be evi- 
 dence in regard to the security of the contract and forms no part 
 of the contract itself." ' 
 
 § 254. In 1874 Congress further enacted "that the Comptrol- 
 ler of the Currency shall, under such rules and regulations as the 
 Secretary of the Treasury may prescribe, cause the charter num- 
 bers of the association to be printed upon all national bank notes 
 which may be hereafter issued by him." ' 
 
 § 255. " The plates and special dies to be procured by the 
 Comptroller of the Currency for the printing of such circulating 
 notes shall remain under his control and direction, and the ex- 
 penses necessarily incurred in executing the laws respecting the 
 procui'ing of such notes, and all other expenses of the Bureau of 
 the Currency, shall be paid out of the proce,eds of the taxes or 
 duties assessed and collected on the circulation of national bank- 
 ing associations under this Title." * 
 
 1 Act 1864, Sec. 22. 
 
 ^ United States v. Bennett, 17 Blatchf., 357 p. 361. 
 
 ' 18 Stat, at Large, 43 C. 1 S. Ch. 343, Sec. 5. 
 
 * Act 1864, Sec. 41. 
 
§256 CONCERNING THE ISSUE OP CIRCULATING NOTES. 121 
 
 § 256. " The Comptroller of the Currency shall cause to be Examina- 
 examined, each year, the plates, dies, [bed-pieces],' and other plates, etc. 
 material from which the national bank circulation is printed, in seo. 5174.' 
 whole or in part, and file in his office annually a correct list of the 
 same. Such material as shall have been used in the printing of 
 the notes of associations which are in liquidation, or have closed 
 business, shall be destroyed under such regulations as shall be 
 prescribed by the Comptroller of the Currency and approved by 
 the Secretary of the Treasury. The expenses of any such exam- 
 ination or destruction shall be paid out of any appropriation made 
 by Congress for the special examination of national banks and 
 bank note plates." ^ 
 
 S 257. "Not more than one- sixth part of the notes furnished None to be 
 
 ^ ^ ' issued below 
 
 to any association shall be of a less denomination than five dol five dollars. 
 
 ■' . Rev. Stat. 
 
 lars. After specie payments are resumed no association shall be seo. sns. 
 furnished with notes of a less denomination than five dollars." ' 
 
 § 258. "After any association receiving circulating notes under when a legal 
 this Title has caused its promise to pay such notes on demand to Rev. stat. 
 
 S6C. 5182. 
 
 be signed by the president or vice-president and cashier thereof, in 
 such-manner as to make them obligatory promissory notes, payable 
 on demand, at its place of business, such association may issue and 
 circulate the same as money. And the same shall be received at 
 par in all parts of the United States in payment of taxes, excises, 
 public lands, and all other dues to the United States, except duties 
 on imports; and also for all salaries and other debts and demands 
 owing by the United States to individuals, corporations, and as- 
 sociations within the United States, except interest on the public 
 debt, and in redemption of the national currency." * 
 
 S 259. " Every national banking association formed or exist- ^*'.*^'i'?™"„ 
 
 o J C5 ceived by all 
 
 ing under this Title, shall take and receive at par, for any debt ^™|p'8°''* 
 or liability to it, any and all notes or bills issued by any lawfully f®^ ™*' 
 organized national banking association. But this provision shall 
 not apply to any association organized for the purpose of issuing 
 notes payable in gold." ^ 
 
 ' The bracketed words were substituted forbut-pieces by Act Feb. 27, 1877, 
 19 Stat, at Large, 44 C. 2 S. Ch. 69. 
 
 " Act March 3, 1873, 17 Stat, at Large, 42 C, 3 S. Ch. 269, Sec. 4. 
 
 »■ Act 1864, Sec. 32. 
 
 * Act 1864, Seo. 23. 
 
 5 Act 1864, Sec. 32 ; Act July 12, 1870, 16 Stat, at Large, 41 C. 2 S. Ch. 
 252, Sec. 5. 
 
122 
 
 NATIONAL BANK ACT. 
 
 3260 
 
 Issue of 
 other notes 
 prohibited. 
 Bev. Stat, 
 Sec. 5183. 
 
 Shall not use 
 notes to 
 create capi- 
 tal. 
 
 Kev. Stat. 
 Sec. 5203. 
 
 Banks mast 
 not pay un- 
 current 
 not^s. 
 Kev. Stat. 
 Sec. 5206. 
 
 Fraudulent 
 notes to be 
 marked. 
 
 § 260. "No national banking association shall issue [post- 
 notes or]' any other notes to circulate as money than such as are 
 authorized by the provisions of this Title." ^ 
 
 § 261. Certificate of deposit is not a bank note. The 
 issuing of a certificate of deposit stating that the person named 
 therein has deposited in the bank a sum of money payable to the 
 order of himself on return of the certificate properly indorsed, 
 and which it is understood between the bank and depositor is not 
 to be payable until a future specified day, is not a violation of this 
 section.^ 
 
 § 262. "No association shall, either directly or indirectly, 
 pledge or hypothecate any of its notes or circulation, for the pur- 
 pose of procuring money to be paid in on its capital stock, or to 
 be used in its banking operations, or otherwise; nor shall any as- 
 sociation use its circulating notes, or any part thereof, in any man- 
 ner or form, to create or increase its capital stock." * 
 
 § 263. " No association shall at any time pay out on loans or ' 
 discounts, or in purchasing drafts or bills of exchange, or in pay- 
 ment of deposits, or in any other mode pay or put in circulation, 
 the notes of any bank or banking association which are not, at any 
 such time, receivable, at par, on deposit, and in payment of debts 
 by the association so paying out or circulating such notes ; nor 
 shall any association knowingly pay out or put in circulation any 
 notes issued by any bank or banking association which at the time 
 of such paying out or putting in circulation is not redeeming its 
 circulating notes in lawful money of the United States."^ 
 
 § 264. In 1876 it was further enacted " that all United States 
 officers charged with the receipt or disbursement of public mon- 
 eys, and all officers of national banks, shall stamp or write in plain 
 letters the word ' counterfeit' ' altered ' or ' worthless,' upon 
 all fraudulent notes issued in. the form of, and intended to circu- 
 late as money, which shdll be presented at their places of busi- 
 ness ; and if such officers shall wrongfully stamp any genuine note 
 
 ' The bracketed words are an amendment by Act Feb. 18, 187.5, 18 Stat 
 at Large, 43 C. 2 S. Ch. 80. 
 
 2 Act 1864, Sec. 23. 
 
 ' Hunt, appellant, 141 Mass., 515; Riddle v. First National Bank, 27 Fed. 
 E., 503. 
 
 * Act 1864, Sec. 37. 
 
 * Act 1864, Sec. 39. 
 
§265 CONCERNING THE ISSUE OF CIRCULATING NOTES. 123 
 
 of the United States, or of the national banks, they shall, upon 
 presentation, redeem such .notes at the face-value thereof." ' 
 
 S 265. "No officer acting under the provisions of this Title uniawMde- 
 
 . T ,. . . livery to 
 
 shall countersign or deliver to any association, or to any other com- banks. 
 pany or person, any circulating notes contemplated by this Title, see. sisi. 
 except in accordance with the true intent and meaning of its 
 provisions. Every officer who violates this section shall be deemed 
 guity of a high misdemeanor, and shall be fined not more than 
 double the amount so countersigned and .delivered, and impris- 
 oned not less than one year and not more than fifteen years. ^ 
 
 § 266. "It shall not be lawful to design, engrave, print, or in ^™'*JJ'.°°! 
 any manner make or execute, or to utter, issue, distribute, circu- e^y. swt. 
 late, or use, any business or professional card, notice, placard, 
 circular, hand-bill, or advertisement, in the likeness or simil- 
 itude of any circulating note or other obligation or security of 
 any banking association organized or acting under the laws of 
 the United States which has been or may be issued under this 
 Title, or any act of Congress, or to write, print, or otherwise im- 
 press upon any Such note, obligation, or security any business or 
 professional card, notice or advertisement, or any notice or adver- 
 tisement of any matter or thing whatever. Every person who 
 violates this section shall be liable to a penalty of one hundred 
 dollars, recoverable one-half to the use of the informer." ' 
 
 § 267. "Every person who mutilates, cuts, defaces, disfigures, ^'^^'afing'" 
 or perforates with holes, or unites or cements together, or does g^^'g^^'' 
 any other thing to any bank-bill, draft, note, or other evidence of 
 debt, issued by any national banking association, or who causes 
 or procures the same to be done, with intent to render such bank- 
 bill, draft, note, or other evidence of debt unfit to be reissued 
 by said association, ^all be liable .to a penalty of fifty dollars, 
 recoverable by the association." * 
 
 § 268. " It shall be the duty of the Comptroller of the Cur- Destruction 
 rency to receive worn-out or mutilated circulating notes issued i°g °* t^o™- 
 
 ° out or mu- 
 
 by any banking association, and also, on due proof of the destruc- tiiated 
 tion of any such circulating notes, to deliver in place thereof ^ev. stat. 
 
 •' . . !3ec. 51S4. 
 
 to the association other blank circulating notes to an equal amount. 
 
 ' 19 Stat, at Large, 44 C. 1 S. Ch. 156, Sec. 5. 
 "■' Act 1864, Sec. 27. 
 ' Act Feb. 5, 1867. 
 * Act 1864, Sec. 58. 
 
124 NATIONAL BANK ACT. §26^ 
 
 Such worn-out or mutilated notes, after a memorandum has been 
 entered in the proper books, in accordance with such regulations 
 as may be established by the Comptroller, as well as all circulat- 
 ing notes which shall have been paid or surrendered to be can- 
 celed, shall be [destroyed by maceration] ' in presence of four 
 persons, one to be appointed by the Secretary of the Treasury, one 
 by the Comptroller of the Currency, one by the Treasurer of the 
 United States, and one by the association, under such regulations 
 as the Secretary of the Treasury may prescribe. A certificate 
 of such [maceration] ^ signed by the parties so appointed, shall 
 be made in the books of the Comptroller, and a duplicate thereof 
 forwarded to the association whose notes are thus canceled." ' 
 Selection of S 269. For redeeming their circulating' notes the Revised 
 
 reserve " o ■ a , 
 
 agent5. Statutes provided that " each association organized in any of the 
 See. 519S. cities named in section fifty-one hundred and ninety-one [shall 
 ' select, subject to the approval of the Comptroller of the Currency, 
 an association in the city of New York, at which it will redeem 
 its circulating notes at par; and]* may keep one-half of its lawful- 
 money reserve in cash deposits in the city of New York. But the 
 foregoing provision shall not apply to associations organized and 
 located in the city of San FrahcisCo for the purpose of issuing 
 notes payable in gold. Each association not organized within the 
 cities named, shall select, subject to the approval of the Comp- 
 troller, an association in either of the -cities named, at which it 
 will redeem its circulating notes at par. The Comptroller shall 
 give public notice of the names of the associations selected, at 
 which redemptions are to be made by the respective associations, 
 and of any change that may be made of the association at which 
 
 ' The -word.s "destroyed loy maceration" were substituted for "burned to 
 ashes" by Act of June 23, 1874, 18 Stat, at Large, 43 C. 1 S. Ch. 455 p. 206. 
 
 ' The word ''maceration" was substituted for "burning" by Act of June 
 23, 1874. 
 
 ' Act 1864, Sec. 23. "For the maceration of national-bank notes, United 
 States notes, and other obligations of the United States authorized to be de- 
 stroyed, ten thousand dollars; andthatall such issues hereafter destroyed may 
 be destroyed by maceration instead of burning to ashes, as now provided by 
 law; and that so much of sections twenty-four and forty-three of the Na^ 
 tional-Currency Act as requires national-bank notes to be burned to ashes is 
 hereby repealed, 18 Stat, at Large, 43 C. 1 S. Ch. 445 p. 206. 
 
 * The bracketed words were stricken out by Act of June 20, 1874, 18 
 Stat, at Large, 43 C. 1 S, Ch. 343, last clause of Sec. 3. 
 
§270 CONCERNING THE ISSUE OF CIRCULATING NOTES. 125 
 
 ihe notes of any association are redeemed. Whenever any asso- 
 ciation fails either to make the selection or to redeem its notes as 
 aforesaid, the Comptroller of the Currency may, upon receiving 
 satisfactory evidence thereof, appoint a receiver, in the manner 
 provided for in section fifty -two hundred and thirty-four, to wind 
 up its affairs. But this section shall not relieve any association 
 from its liability to redeem its circulating notes at its own coun- 
 ter, at par, in lawful money on demand." ' 
 
 § 270. In 1874 it was enacted " that every association organ- Redemption 
 ized, or to be organized, under the provisions of the said act, and Treasurer. 
 of the several acts amendatory thereof, shall at all times keep and 
 have on deposit in the treasury of the United States, in lawful 
 money of the United States, a sum equal to five per centum of its 
 circulation, to be held and used for the redemption of such cir- 
 culation; which sum shall be counted as a part of its lawful re- 
 serve, as provided in section two of this Act;^ and when the circu- 
 lating notes of any such associations, assorted or unassorted, shall 
 be presented for redemption, in sums of one thousand dollars, or 
 any multiple thereof, to the Treasurer of the United States, the 
 same' shall be redeemed in United States notes. All notes so re- 
 deemed shall be charged by the Treasurer of the United States to 
 the respective associations issuing the same, and he shall notify 
 them severally, on the first day of each month, or oftener, at his 
 discretion, of the amount of such redemptions; and whenever such 
 redemptions for any association shall amount to the sum of five 
 hundred dollars, such association so notified shall forthwith de- 
 posit with the Treasurer of the United States a sum in United 
 States notes equal to the amount of its circulating notes so re- 
 deemed. And all notes of national banks worn, defaced, muti- 
 lated, or otherwise unfit for circulation shall, when received by 
 any Assistant Treasurer, or at any designated depository of the 
 United States, be forwarded to the Treasurer of the United States 
 for redemption as provided herein. And when such redemptions 
 have been so reimbursed, the circulating notes so redeemed shall 
 be forwarded to the respective associations by which they were 
 issued; but if any of such notes are worn, mutilated, defaced, or 
 rendered otherwise unfit for use, they shall be forwarded to the 
 
 > Act June, 1864, Sec. 32. 
 ' Sec. 5191, Revised Statutes. 
 
126 
 
 NATIONAL BANK ACT. 
 
 5271 
 
 Expense for 
 
 redeeming 
 
 notes. 
 
 Voluntary 
 liquidation. 
 Bev. Stat. 
 Sec. S3I20. 
 
 How board 
 shall pro- 
 ceed. 
 Rev. Stat. 
 Sec. 5231. 
 
 Comptroller-of the Currency aad destroyed and replaced as now 
 provided by law: Provided That each of said associations shall 
 reimburse tothe treasury the charges for transportation^ and the 
 costs for assorting such notes'; and the associations hereafter or- 
 ganized shall also severally reimburse to the treasury the cost of 
 engraving such plates as shall be ordered by each association re- 
 spectively; and the amount assessed upon each association shall 
 be in proportion to the circulation redeemed, and be charged to 
 the fund on deposit with the treasurer." ' 
 
 § 271. In 1882 the law was so amended " that the national 
 banks which shall hereafter make deposits of laTvful money for 
 the retirement in full of their circulation shall at the time of their 
 deposit be assessed for the cost of transporting and redeeming 
 their notes then outstanding, a sum equal to the average cost of , 
 the redemption of national bank notes during the preceding year, ■ 
 and shall thereupon pay such assessment. And all national hanks 
 which have heretofore made or shall hereafter make deposit of 
 lawfnl money for the reduction of their circulation shall be as- 
 sessed and shall pay an assessment in the manner specified in 
 section three of the Act approved June twentieth, eighteen" hun- 
 dred and seventy- four, for the cost of -transporting and redeeming 
 their notes redeemed from such deposits subsequently to June 
 thirtieth, eighteen hundred and eighty-one." ^ 
 
 § 272. Eegulations concerning reserve and places 
 of redemption. The regulations concerning the reserve and 
 the places for redeeming the circulating notes will be given in 
 the next Chapter. 
 
 § 273. "Any association may go into liquidation and be closed 
 by the vote of its shareholders owning two-thirds of its stock." ' 
 
 § 274. "Whenever a vote is taken to go into liquidation it 
 shall be the duty of the board of directors to cause notice of this 
 fact to be certified, under the seal of the association, by its 
 president or cashier, to the Comptroller of the Currency, and 
 publication thereof to be made for a period of two months in a 
 newspaper published in the city of New York, and also in a news- 
 paper published in the city or town in which the association is 
 located, or if no newspaper is there published, then in the news- 
 
 18 Stat, at Large, 43 C. 1 S. Ch. 343, Sec. 3. 
 
 Act July 12, 1882, Public Laws, 47 C. 1 S. Ch. 290, part of Sec. 8 
 
 Act 1864, Sec. 42. 
 
§275 CONCERNINS THE ISSUE OP CIRCULATING NOTES. 127 
 
 paper published nearest thereto, that the association is closing 
 i, up its affairs, and notifying^ the holders of its notes and- other 
 creditors to present the notes and other claims against the asso- 
 ciation for payment." ' ' 
 
 § 275. "Within six months from the date of the vote to go Deposit of 
 into liquidation, the association shall deposit with the Treasurer money to 
 of the United States, lawful money of the United States sufficient notos.™ 
 to redeem all its outstanding circulation. The Treasurer shall see.'s'm.' 
 execute duplicate receipts for money thus deposited, and deliver 
 one to the asssociation and the other to the Comptroller of the 
 Currency, stating the amount received by him, and the purpose 
 for which it has been received; and the money shall be paid into 
 the treasury of the United States, and placed to the credit of 
 such association upon redemption account.^ 
 
 § 276. "An association which is in good faith winding up its conaoudat- 
 business for the purpose of consolidating with another associa- need mrt^re- 
 tion-shall not be required to deposit lawful money for its out- Kevf stat. 
 standing circulation; but its assets and liabilities shall be reported ^^"^ ^^^' 
 by the association with which it is in process of consolidation." ' 
 
 § 277. "Whenever a sufficient deposit of lawful money to re- Bonds ehaii 
 deem the outstanding circulation of an association proposing to si^ed to 
 close its business has been made, the bonds deposited by the as- ba^ks. 
 sociation to secure payment of its notes shall be re-assigned to it, seJ.'saM." 
 in the manner prescribed by section fifty-one hundred and sixty- 
 two. And thereafter the association and its shareholders shall 
 stand discharged from all liabilities upon the circulating notes, 
 and those notes shall be redeemed at the treasury of the United 
 States." • 
 
 § 278. "Whenever the Treasurer has redeemed any of the Notes to bo 
 notes of an association which has commenced to close its affairs Revl^stat.' 
 under the [five] ^ preceding sections, he shall cause the notes to be 
 mutilated and charged to the redemption account of the associa- 
 tion; and all notes so redeemed by the treasury shall, every three 
 
 ' Act 1864, Sec. 42. 
 
 " Act 1864, Sees. 42, 43; Act July 14, 1870, 16 Stat, at Large 41 C. 2 S. 
 Ch. 277. 
 ' Id. 
 
 * Act 1864, Sec. 42. 
 
 * The word "five" was substituted for six by Act of February 28, 1877. 
 
128 NATIONAL BANK ACT. P79 
 
 month8, be certified to and [destroyed] ' in the manner pre- 
 scribed in section fifty-one hundred and eighty-four." ^ In 1875, 
 Congress prescribed that the notes should be destroyed by mac- 
 eration instead of burning to ashes.' 
 ProoeedingB R 279. "And if anv such bank shall fail to make the deposit 
 
 if bank shall o ■/ ^ 
 
 ?"boiids^^ and take up its bonds for thirty days after the expiration of the 
 rua/ls" *™^ specified, the Comptroller of the Currency shall have power 
 '8'5. to sell the bonds pledged for the circulation of said bank, at 
 
 public auction in New York city, and, aftei* providing for the re- 
 demption and cancellation of said circulation and the necessary 
 expenses of the sale, to pay over any balance remaining to the 
 bank or its legal representative." * 
 Modeofpro- § 280. " Whenever any national banking association fails to 
 notes. redeem in the lawful money of the United States any of its cir- 
 
 Bev. Stat. "^ 
 
 See. 5226. culating notes, upon demand of payment duly made during the 
 usual hours of business, at the ofBce of such association, or at its 
 designated place of redemption, the holder may cause the same 
 to be protested, in one package, by a notary public, unless the 
 president or cashier of the association whose notes are presented 
 for payment, or the president or cashier of the association at the 
 place at which they are redeemable offers to waive demand and 
 notice of the protest, and, in pursuance of such offer, makes, signs, 
 and delivers to the party making such demand an admission in 
 writing, stating the time of the demand, the amount demanded, 
 and the fact of the non-payment thereof. The notary public, on 
 making such protest, or upon receiving such admission, shall forth 
 with forward such admission or notice of protest to the Comp- 
 troller of the Currency, retaining a copy thereof. If, however, 
 satisfactory proof is produced to the notary public that the pay 
 ment of the notes demanded is restrained by order of any court 
 of competent jurisdiction, he shall not protest the same. When 
 the holder of any notes causes more than one note or package to 
 be protested on the same day, he shall not receive pay for more 
 than one protest." * 
 
 ' The word "destroyed" was substituted for "burned" by act of June 23, 
 1874. 
 "■ Act 1864, Sec. 32. 
 ^ See note to Sec. 268. 
 
 ♦ 18 Stat, at Large, 43 C. 2 S. Ch. 80, p. 320. 
 
 * Act 1864, Sec. 46. 
 
§281 CONCtKNING THE ISSUE OF CIRCULATING NOTES. 129 
 
 § 281. "On receiving notice that any national banking asso- Examina- 
 ciation has failed to redeem any of its circulating notes, asspeci- oiai agent. 
 fied in the preceding section, the Comptroller of the Currency, sec' 5237.' 
 with the concurrence of the Secretary of the Treasury, may ap- 
 point a special agent, of whose appointment immediate notice 
 shall be given to such association, who shall immediately proceed 
 to ascertain whether it has refused to pay its circulating notes in 
 the lawful money of the United States, when demanded, and shall 
 report to the Comptroller the fact so ascertained. If, from such 
 protest, and the report so made, the Comptroller is satisfied that 
 such association has refused to pay its circulating notes and is 
 in default, he shall, within thirty days after he has received no- 
 tice of such failure, declare the bonds deposited by such associa- 
 tion forfeited to the United States, and they shall thereupon be 
 so forfeited." ' 
 
 § 282. " After a default on the part of an association to pay After pro- 
 any of its circulating notes has been ascertained by the Comp- ehaii not 
 troller, and notice [thereof] ^ has been given by him to the asso- business, 
 ciation, it shall not be lawful for the association sufPering the see.' 5228.' 
 same to pay out any of its notes, discount any notes or bills, or 
 otherwise prosecute the business of banking, except to receive 
 and safely keep money belonging to it, and to deliver special 
 deposits." ' 
 
 § 283. "Immediately upon declaring the bonds of an associa- ^o/^e^s'Sf 
 tion forfeited for non-payment of its notes, the Comptroller shall ^a^™|t^i 
 give notice, in-such manner as the Secretary of the Treasury shall, ^^°' ^^'^• 
 by general rules or otherwise, direct to the holders of the circu- 
 lating notes of such association, to present them for payment at 
 the treasury of the United States ; and the same shall be paid as 
 presented in lawful money of the United States; whereupon the 
 Comptroller may, in his discretion, cancel an amount of bonds 
 pledged by such association equal at current market rates, not ex- 
 ceeding par, to the notes paid."' 
 
 § 284. " Whenever the Comptroller has become satisfied, by f^Jf^"'. 
 the protest or the waiver and admission specified in section fifty- ^°°- g^^. 
 two hundred and twenty-six, or by the report provided for in sec- ^"^^ ^'^°- 
 
 ' Act 1864, Sec. 47. 
 
 ^ The word "thereof" was substituted for "forfeiture of the bonds" by 
 act of February, 18, 1875. 
 ' Act 1864, Sec. 46. * Act 1864, Sec. 47, 
 
 9— B. 
 
130 
 
 NATIONAL BANK ACT. 
 
 §285 
 
 Sale of 
 bonds pri- 
 vately. 
 Rev! Stat. 
 Sec. S231. 
 
 DlBpoBition 
 of notes re- 
 deemed. 
 «Bev. Stat. 
 Sec. 5232. 
 
 Oancella- 
 tioiL. 
 
 Kev. Stsit. 
 Sec. 5233. 
 
 tion fifty-two hundred and twenty -seven, that any association has 
 refused to pay its circulating notes, he may, instead of canceling 
 its bonds, cause so much of them as may be necessary to redeem 
 its outstanding notes to be sold at public auction in the city of 
 New York, after giving thirty days' notice of such sale to the as- 
 sociation. For any deficiency in the proceeds of all the bonds of 
 an association, when thus sold, to reimburse to the United States 
 the amount expended in paying the circulating notes of the asso- 
 ciation, the United States shall have a paramount lien upon all 
 its assets; and such deficiency shall be made good out of such as- 
 sets in preference to any and all other claims whatsoever, except. 
 the necessary costs and expenses of administering the same." ' 
 
 §285. Government has first lien. With respect to the 
 lien of the government on the assets of a bank for reimbursement 
 in paying its circulating notes, it is paramount to that of an at- 
 taching creditor especially, when he has notice of the government's 
 claim before making his attachment.^ 
 
 § 286. "The Comptroller may, if he deems it for the interest, of 
 the United States, sell at private sale any of the bonds of an as- 
 sociation shown to have made default in paying its notes, and re 
 ceive therefor either money or the circulating notes of the asso- 
 ciation. But no such bonds shall bo sold by private sale for less 
 than par, nor for less than the market value thereof at the time 
 of sale; and no sales of any such bonds, either public or private, 
 shall be complete until the transfer of the bonds shall have been 
 made with the formalities prescribed by sections fifty-one hun- 
 dred and sixty-two, fifty-one hundred and sixty-three, and fifty- 
 one hundred and sixty-four." ' 
 
 § 287. "The Secretary of the Treasury may, from time to time, 
 make such regulations respecting the disposition to be made of 
 circulating notes after presentation at the Treasury of the United 
 States for payment, and respecting the perpetuation of the evi- 
 dence of the payment thereof, g.3 may seem to him proper." * 
 
 § 288. "All notes of national banking associations presented 
 at the treasury of the United States for payment shall, on being 
 paid, be canceled." ' 
 
 ' Act 1864, Sees. 47, 48. 
 
 ' Sehmidt v. First National Bank, 22 La. Ann., 314. 
 
 •'' Act 1864, Sec. 49. 
 
 * Act 1864, Sec. 47. 
 
 * Act 1864, Sec. 47. 
 
§289 CONCEKNING THE ISSUE OF CIRCULATING NOTES. 131 
 
 § 289. " All fees for protesting the notes issued by any Feesforpro- 
 national banking association shall be paid by the person procur- Rev. stat. 
 
 ° r J r r ggjj_ J23S, 
 
 ing the protest to be made, and such association shall be liable 
 therefor; but no part of the bonds deposited by such association 
 shall be applied to the payment of such fees. All expenses of 
 any preliminary or other examinations into the condition of any 
 association shall be paid by such association. All expenses of any 
 receivership shall be paid out of the assets, of such association 
 before distribution of the proceeds thereof." ' 
 
 8 290. "Associations may be orgranized in the manner pre- Bants for 
 
 . ^ . , . issuing gold 
 
 scribed by this Title for the purpose of issuing notes payable in notes. 
 gold; and upon the deposit of any United States bonds beaa-ing seo.'siss.' 
 interest payable in gold with the Treasurer of the United States, 
 in the manner prescribed for other associations, it shall be lawful 
 for the Comptroller of the Currency to issue to the association 
 making the deposit circulating notes of different denominations, but 
 none of them less than five dollars, and not exceeding in amount 
 eighty per centum of the par value of the bonds deposited, which 
 shall express the promise of the association to pay them, upon 
 presentation at the office at which they are issued, in gold coin 
 of the United States, and shall be so redeemable. But no such 
 association shall have a circulation of more than one million of 
 dollars." ' 
 
 § 291. In 1875 Congress enacted "that so much of section: Bppeai of 
 five thousand one hundred and eighty-five of the Revised Statutes their ciron- 
 of the United States as limits the circulation of banking associa- Act January, 
 tions, organized for the purpose of issuing notes payable in gold, ' 
 severally to one million dollars, be, and the same is hereby, re- 
 pealed; and each of such existing banking associations may in^ 
 crease its circulating notes, and new banking associations may be 
 organized, in accordance with existing law, without respect to 
 such limitation." ^ 
 
 § 292. "Every association organized under the preceding sec- Reserve on 
 tion shall at all times keep on hand not less than twenty-five per circulation, 
 centum of its outstanding circulation, in gold or silver coin of the sec.'sise.' 
 United States; and shall receive at par in the payment of debts 
 the gold- notes of every other such association which at the time 
 
 ' Act 1864, Sec. 50. 
 
 * Act July 12, 1870, 16 Stat, at Large, 41 C. 2 S. Ch. 252, Sec. 3. 
 
 ' 18 Stat, at Large, 43 C. 2 S. Ch. 19. 
 
132 NATIONAL BANK ACT. §292 
 
 of such payment is redeeming its circulating note's in gold coin of 
 the United States, and shall be subject to all the provisions of 
 this Title: Provided, That, in applying the same to associa- 
 tions organized for issuing gold- notes, the terms ' lawful 
 money ' and ' lawful money of the United States ' shall be con- 
 strued to mean gold or silver coin of the United States ; and the 
 circulation of such associations, shall not be within the limitation 
 of circulation mentioned in this Title." 
 
 ' Act July 12, 1870, 16 Stat, at Large, 41 C. 2 S. C!h. 252, Sees. 3,4, 5 
 
5293 
 
 REGULATIONS CONCERNING THE RESERVE. 
 
 133 
 
 CHAPTBB.XI. 
 
 REGULATIONS OONOEKNING THE RESERVE AND THE PLACES FOB REDEEMING THE 
 CIRCULATING NOTES. 
 
 293. Eeserve required. 
 
 294. Eeserve on circulation abolished ex- 
 
 cept of gold-note banks. 
 
 295. Issue of gold certificates. 
 
 296. Eeceivable for taxes and bank re- 
 
 serve. 
 
 297. U. S. Treasury certificates may be 
 
 issued and counted as reserve. 
 
 i 298. Certificates held as special deposit. 
 
 299. Eemarks on the section by Davis, J. 
 
 300. Eedemption cities and proportion of 
 
 reserve allowed in them. 
 
 301. Extension of reserve cities. 
 
 302. Like New York. 
 
 § 298. The Revised Statutes provide that "every national Reserve re- 
 banking association in either of the following cities: Albany, Bal- Rev. sUt. 
 timore, Boston, Cincinnati, Chicago, Cleveland, Detroit, Louis- 
 ville, Milwaukee, New Orleans, New York, Philadelphia, Pitts- 
 burgh, Saint Louis, San Francisco, and Washington, shall at all 
 times have on hand, in lawful money of the United States, an 
 amount equal to at least twenty-five per centum of the aggregate 
 amount of its [notes in circulation and its J deposits; and every 
 other association shall at all times have on hand, in lawful money 
 of the United States, an amount equal to at least fifteen per 
 centum of the aggregate amount of its fnotes in circulation, and of 
 its ] deposits. Whenever the lawful money of any association in 
 any of the cities named shall be below the amount of twenty -five 
 per centum of its [circulation and] deposits, and whenever the 
 lawful money of any other association shall be below fifteen per 
 centiun of its [circulation and] deposits, such association shall not 
 increase its liabilities by making any new loans or discounts 
 otherwise than by discounting or purchasing bills of exchange 
 payable at sight, nor make any dividend of its profits until the 
 required proportion, between the aggregate amount of its [out- 
 standing notes of circulation and] deposits and its lawful money 
 of the United States, has been restored. And the Comptroller of 
 the Currency may notify any association, whose lawful-money re- 
 serve shall be below the amount above required to be kept on 
 hand, to make good such reserve; and if such association shall fail 
 for thirty days thereafter so to make good its reserve of lawful 
 money, the Comptroller may, with the concurrence of the Secre- 
 
134 
 
 NATIONAL BANK ACT. 
 
 §294 
 
 Reserve on 
 circulatiou 
 abolished 
 except of 
 of gold-note 
 
 Act Jane 20, 
 1874. 
 
 Tesae of gold 
 certificates. 
 Act July 12, 
 
 18S2. 
 
 Beceivable 
 for taxes, 
 etc., and 
 bank re- 
 serve. 
 
 tary of the Treasury, appoint a receiver to wind up the business 
 of the association, as provided in section fifty-two hundi ed and 
 thirty-four." ' 
 
 § 294. The above act which was numbered section thirty-one 
 in the act of 1864 was amended in 1874, Congress declaring " that 
 section thirty-one of the 'National Bank Act ' be so amended that 
 the several associations therein provided for shall not hereafter 
 be required to keep on, hand any a^mount of money whatever, by 
 reason of the amount of their respective, circulations; but the 
 moneys required by said section to be kept at all times o&hand 
 shall be determined by the amount pf deposits in all respects, as 
 provided for in the said section." ' 
 
 § 295. In determining what kinds of money may enter into 
 the reserve, the Act of 1882 provides "that the Secretary of the 
 Treasury is authorized and directed to receive deposits of gold 
 coin with the Treasurer or Assistant Treasurers of the United 
 States, in sums not less than |20, and to issue certificates there- 
 for in denominations of not less than $20 each, corresponding 
 with the denominations of United States notes. The coin de 
 posited for or representing the certificates of deposits shall be re- 
 tained in the treasury for the payment of the same on demand." ' 
 
 § 296. " Said certificates shall be receivable for customs, 
 taxes, and all public dues, and when so received may be reissued; 
 and such certificates, as also silver certificates, when held by any 
 national banking asspciation, shall be counted as part of its law- 
 ful reserve; and no national banking association shall be a mem- 
 ber of any clearing house in which such certificates shall not be 
 receivable in the settlement of clearing house balances: Provided, 
 That the Secretary of the Treasury shall suspend the issae of 
 such gold certificates whenever the amount of gold coin and gold 
 bullion in the treasury reserved for the redemption of United 
 States notes falls below $100,000,000; and the provisions of section 
 fifty-two hundred and seven of the Revised Statutes shall be ap 
 plicable to the certificates herein authorized and directed to be 
 issued."* 
 
 ' Act 1864, Sec. 31, March 1, 1872; 17 Stat, at Large, 42 C. 2 S. Ch. 22. 
 2 18 Stat, at Large, 43 IC. S. Ch. 343, Sec. 2. 
 ' Public Laws, 47 C. 1 S. Ch. 290, Sec. 12. 
 • Id., Sec. 13. 
 
§297 KEGULATIONS CONCERNING THE liESEKVE. 135 
 
 § 297. " The Secretary of the Treasury may receive "United tr. s. treae- 
 States notes on deposit, without interest, from any national bank- cates may bo 
 
 . 3 T n issued and 
 
 ing associations, in sums of not less than ten thousand dollars, opunted as 
 
 ° ^ ^ reserve. 
 
 and issue certificates therefor in such form as he may prescribe, Rev. stat. 
 in denominations of not less than fi^ve thousand dollars, and pay- 
 able on demand in United States notes at the place where the de- 
 posits were made. The notes so deposited shall not be counted 
 as part of the lawful money reserve of the association; but the 
 certificates issued therefor may be counted as part of its lawful- 
 money reserve, and may be accepted in the settlement of clearing- 
 house balances at the places where the deposits therefor were 
 made." ' 
 
 § 298. " The power conferred on the Secretary of the Treas- certiflcates 
 
 o i. Ml held as spe- 
 
 ury, by the preceding section, shall not be exercised so as to create eiai de- 
 any expansion or contraction of the currency. And United States ?''''■.?„*• 
 notes for which certificates are issued under that section, or other 
 United States notes of like amount, shall be held as special de- 
 posits in the treasury, and used only for the redemption of such 
 certificates."^ 
 
 § 299. Kemarks on the section by Davis,, J. " By this 
 Act," says Davis, J., "the Treasurer became a trustee charged with 
 the care of the fund, which was to be held for one purpose only — 
 that of redeeming the circulating notes. The bank having failed 
 to redeem its notes passes into the hands of the Comptroller of 
 the Currency, and the five per ceni fund becomes liable for the 
 redemption of these notes, the contingency contemplated by the 
 statute having arisen. But the Treasurer has no power over the 
 fund, for the Comptroller is directed by section 5234 to take pos- 
 session of assets of every description and section 5236 directs that 
 after provision has been made for refunding to the United States 
 any deficiency in redeeming the notes of such association the 
 Comptroller shall make a ratable dividend among the creditors. '' ' 
 
 § 300. "Three-fifths of the reserve of fifteen per centum re- EPd^mpUon 
 quired by the preceding section to be kept, may consist of bal proportion 
 ances due to an asssociation, available for the iredemption of its allowed in 
 
 them. 
 Rev. Stat, 
 ' Act June 8, 1872, 17 Stat, at Large, 2 C. 42 S. Ch. 346, Sees. 1, 2. S™- S''^- 
 
 ^ Id., See. 3. 
 
 ' Jackson v. United States, 20 Ct. of Claims 298 p. 306. The Treasurer 
 sought to direct a portion of this fund to pay a tax which the bank owed 
 the government. This cannot he done. 
 
136 
 
 NATIONAL BANK ACT. 
 
 §301 
 
 ExtensiOD of 
 
 reserve 
 
 cities. 
 
 Like New 
 York. 
 
 circulating notes, from associations approved by the Comptroller 
 of the Currency, organized under the act of June three, eighteen 
 hundred and sixty-four, or under this Title, and doing business 
 in the cities of Albany, Baltimore, Boston, Charleston, Chicago, 
 Cincinnati, Cleveland, Detroit, Louisville, Milwaukee, New Or- 
 leans,New York, Philadelphia, Pittsburgh, Eichmond, Saint Louis, 
 San Francisco, and Washington.^ Clearing-house certificates, rep- 
 senting specie or lawful money specially deposited for the pur- 
 pose, of any clearing-house association, shall also be deemed to 
 be lawful money in the possession of any associatiop belonging 
 to such clearing-house, holding and owning such certificate, 
 within the pseceding section." ' 
 
 § 301. In 1887 Congress further enacted "that whenever 
 three-fourths in number of the national banks located in any city 
 of the United States having a population of fifty thousand people 
 shall make application to the Comptroller of the Currency, in 
 writing, asking that the name of the city in which such banks are 
 located shall be added to the cities named in sections, 5191 and 
 5192 of tie Revised Statutes, the Comptroller shall have au- 
 thority to grant such request, and every bank located in such city 
 shall at all times thereafter have on hand, in lawful money of the 
 United States, an amount equal to at least twenty-five per centum 
 of its deposits, as provided in sections 5191 and 5195 of the Re- 
 vised Statutes." ^ 
 
 § 302. "That whenever three-fourths in number of the national 
 banks located in any city of the United States having a pop- 
 ulation of two hundred thousand people shall make applica- 
 tion to the Comptroller of the Currency, in writing, asking that 
 such city may be a central reserve city, like the city of New York, 
 in which one- half of the lawful money reserve of the national 
 banks located in other reserve cities may be deposited, as pro- 
 vided in section 5195 of the Revised Statutes, the Comptroller 
 shall have authority, with the approval of the Secretary of the 
 Treasury, to grant such request, and every bank located in such 
 city shall at all times thereafter have on hand, in lawful money 
 of the United States, twenty-five per centum of its deposits, as 
 provided in section 5191 of the Revised Statutes." ' ' 
 
 ' Act 1864, Sec. 31. 
 
 2 Public Laws, 49 C. 2 S. Ch. 378, Sec. 1. 
 
 = Id. Sec. 2. 
 
INTEKEST. 
 
 137 
 
 CHAPTER XIL 
 
 INTEREST. 
 
 What is Usury, and Consequences of Taking It. 
 
 303. Eate of interest permitted. 
 
 304. Consequences of taking illegal in- 
 
 terest. 
 
 305. Analysis of statutes. 
 
 306. To what notes do statutes apply. 
 
 307. Individuals but not other banks 
 
 may receive more than national. 
 
 308. Clause uniformly interpreted. 
 
 309. In re Wild. 
 
 310. Opinion of Supreme Court of Cali- 
 
 fornia. 
 
 § 311. Bates of a few chartered banks do 
 not fix rate for all. 
 
 312. Interest on note made in one state 
 
 and discounted in another. 
 
 313. Usurious interest cannot be cured 
 
 by crediting illegal portion. 
 
 314. If partof discount is not to be drawn 
 
 is transaction usurious. 
 
 315. Nature of the two offenses. 
 
 Forfeiture of Interest. 
 
 316. Remarks of court on forfeiture. 
 
 317. Subsequent interest is forfeiture. 
 
 318. Excess must be proved to work for- 
 
 feiture. 
 
 319. Usurious interest on overdraft. 
 
 320. Bank director can plead usury. 
 
 § 321. Forfeiture recovered only in actions 
 for principal. 
 
 322. Borrower may interpose defense in 
 
 state 'court. 
 
 323. Time when defense must be made. 
 
 Recovery of Twice the Amount of Interest Paid. 
 
 324. Can action for twice the amount be 
 
 brought in state court. 
 
 325. Eemarks of Boynton, J. 
 
 326. Contrary opinions. 
 
 2 327. Bight of legal representative to re- 
 cover. 
 328. Action must be brought within two 
 years. 
 
 TJstwry on a Series of Notes. 
 
 329. How usury affects last note of a 
 
 series. 
 
 330. Borrower cannot set-off illegal in- 
 
 terest on former notes. 
 
 J 331. Nor can bank set off principal on 
 last one in action on others. 
 
138 NATIONAL BANK ACT. ^ §303 
 
 Bights of Indorsers. 
 
 i 332. Any party to contract can avail of 
 forfeiture. 
 
 333. Indorser cannot use this defense to 
 
 escape paying. 
 
 334. Nor can antecedent parties. 
 
 g 335. Indorser of valid note used as col- 
 lateral to usurious, cannot inter- 
 pose this defense. 
 
 336. If indorser pay he cannot recover 
 
 only legal sum of borrower. 
 
 337. Nor can he recover twice the amount 
 
 of lender. 
 
 Pleading. 
 
 ^ 338. How usury must be pleaded. |§ 338(a). Remarks of Gierke, J. 
 
 Rate o£m- § 303. "Any association may take, receive, reserve, and charge 
 mitted. on any loan or discount made, or upon any note, bill of exchange. 
 Sec' 5197. ' or other evidences of debt, interest at the rate allowed by the laws 
 of the state, territory, or district where the bank is located, and 
 no more, except that where by the laws of any state a difFerent 
 rate is limited for banks of issue organized under state laws, the 
 rate so limited shall be allowed for associations organized or ex- 
 isting in any such state under this Title. When no rate is fixed 
 by the laws of the state, or territory, or district, the bank may 
 take, receive, reserve, or charge a rate not exceeding seven per 
 centum, and such interest may be taken in advance, reckoning the 
 "days for which the note; bill, or other evidence of debt has to run. 
 And the purchase, discount, or sale of a bona fide bill of exchange, 
 payable at another place than the place of such purchase, dis- 
 count, or sale,' at not more than the current rate of exchange for 
 sight drafts in addition to the interest, shall not be considered as 
 taking or receiving a greater rate of interest." ' 
 consequen- § 304. "The taking, receiving, reserving, or charging arate of in- 
 illegal inter- terest greater than is allowed by the preceding section, when know- 
 Eev. Stat, ingly done, shall be deemed a forfeiture of the entire interest which 
 
 Sec. 5198. ° 
 
 the note, bill, or other evidence of debt carries with it, or which has 
 been agreed to be paid thereon.'' In case thb greater rate of interest 
 has been paid, the person by whom it has been paid, or his legal 
 
 ' Act 1864, Sec. 30. 
 
 '' " Usury forfeited the entire loan or debt under the Banking Act of Feb. 
 25, 1863. This, Congress thought, was too severe, and the. Act of 1864 
 
 * * limits the forfeiture to the interest only." .Gresham, J., National 
 Bank v. Davis, 8 Biss., p. 103. 
 
§305 ^ INTEREST. 139 
 
 representatives, may recover back, in an action in the nature of 
 an action of debt, twice the ainount of the interest thus paid from 
 the asociation taking or receiving the same; provided such action 
 is commenced within two years from the time the usurious transac- 
 tion occurred." ' 
 
 § 305. Analj^sis of statutes. The following analysis of 
 the statutes relating to the subject has been made by Judge 
 Swayne." (1) " The rate of interest chargeable by such bank is to 
 be that allowed by the law of the state or territory where the bank 
 is situated. 
 
 (2) When, by the laws of the state or territory, a different rate 
 is limited for banks of issue organized under the local laws, the 
 rate so limited is allowed for the national banks. 
 
 (3) Where no rate of interest is fixed by the laws of the state 
 or territory, the national banks may charge at a rate not exceed- 
 ing seven per cent, per annum. 
 
 (4) Such interest may be reserved or taken in advance. 
 
 (5) Knowingly reserving, receiving, or charging 'a rate of in- 
 terest greater than aforesaid shall be held and adjudged a forfeit- 
 ure of the interest which the note, bill or other evidence of debt 
 carries with it, or which has been agreed to be paid thereon.' 
 
 (6) If a greater' rate has been paid, twice the amount so paid 
 may be recovered back, provided suit be brought within two years 
 from the time the usurious transaction occurred. 
 
 (7) The purchase, discount, or sale of a bill of exchange, pay- 
 able at another place, at not more than the current rate of ex- 
 change on sight drafts, in addition to the interest, shall not be 
 considered as taking or reserving a greater rate of interest than 
 that permitted. 
 
 These clauses, examined by their own light, seem to us too clear 
 to admit of doubt as to anything to which they relate. They form 
 a system of regulations. All the parts are in harmony with each 
 other, and cover the entire subject." 
 
 § 306. To what notes do statutes apply. In develop- 
 ing the meaning of these statutes, the question may be asked, 
 To what notes or commercial paper do they apply? To this 
 question the supreme tribunal of the land has replied that they 
 
 ' Act 1864, Sec. 30. 
 
 ' Farmers & Mechanics' National Bank v. Bearing, 91 U. S., 29 p. 32. 
 
140 NATIONAL BANK ACT. §307 
 
 apply to discounts of business paper and also of accommodation 
 paper. ' 
 
 § 307. Individuals but not other banks may receive 
 more tban national. The law puts a national bank on as high 
 a plane as a state bank in charging interest, though individuals 
 may receive more.^ Says Strong, J. : " National banks are au- 
 thorized to reserve and take interest onloans made by them at. 
 such rates as are allowed by state law to state banks of issue in 
 the states where the national banks are located. In reserving and 
 taking interest at such rates they act witiin the authority given 
 themj violate no law, and render themselves liable to no penal- 
 ties.'" 
 
 The reason for this regulation is that " it was expected they 
 would come into competition with state banks, and it was intended 
 to give them at least equal advantages in such competition. In 
 order to accomplish this they' were empowered to reserve interest 
 at the same rates, whatever those rates might be, which were al- 
 lowed to similar state institutions." * 
 
 § 308. Clause uniformly interpreted. This interpre- 
 tation of the law has been quite uniform. In National Bank v. 
 Bruhn,* Willie, C. J., said: " The general rule established by this 
 section is that national banks may charge as high a rate of interest 
 as is allowed by the laws of the state or territory where the bank 
 is located. Under this rule no doubt can exist but that the ap- 
 pellant bank was authorized to charge two per cent, per month 
 interest upon the note in suit, as that rate was then allowed by 
 the laws of this state. Was this right restrained by any of the. 
 subsequent provisions of this section ? The only exception to this 
 general rule as announced in the act of Congress is when, by the 
 laws of a state, a different rate is limited for banks of issue or- 
 ganized under the state laws; in that case the rate so limited is 
 to be allowed to national banks located in such state. * * * 
 The only other clause in the section that regulates the rate is that 
 , which provides that where no rate is fixed by the laws of the state 
 
 • National Bank v. Johnson, 104 TJ. S., 271 p. 277, affg 74 N. Y., 329. 
 '' Shunk 11. First National Bank, 22 Ohio, 508. 
 
 ' Strong, J., First National Bank v. Duncan, U. S. Circuit Court, 6 Week. 
 Notes, 159 p. 160; National Banki). Johnson, 104 U. S., 271. 
 » Tiffany v. National Bank, 18 Wall, 408 p. 412. 
 5 74 Texas, 570 p. 576. 
 
§309 INTEREST. 141 
 
 or territory^ or district, the bank may reserve a rate not exceeding 
 seven per centum. This is no exception to the general rule al- 
 ready stated, but provides for a class of cases not included in it." 
 
 § 309. In r^ Wild. A national bank in New York city made 
 a loan there to a corporation which, if it had been made to 
 an individual, would have been usurious under the law of the 
 state, as the loan exceeded the legal rate of seven per cent, per 
 annum. But a statute of that state also forbids a corporation to 
 interpose the defense of usury. The effect of this statute, as in- 
 terpreted by the highest court of the state, is that the rate of in- 
 terest, which a corporation may pay is not fixed or limited. Nev- 
 ertheless, as the rate of interest exceeded seven per cent., the 
 transaction was within the prohibition of the National Banking Law 
 and the entire interest was forfeited.' 
 
 § 310. Opinion of Supreme Court of California. In 
 California, the courts have declared that banks may charge as much 
 interest as is allowed by the local laws to any person whatever. 
 Says Judge Koss;^ "The true interpretation of the Act of Con- 
 gress is, that in those states and territories having no statute upon 
 the subject of interest, the national banks are allowed a rate not 
 exceeding seven per centum, while in those states and territories 
 having a statute on the subject they are authorized to charge and 
 receive interest at the rate allowed other banks and individuals. 
 From this view it follows that inasmuch as we have in California 
 a statute providing ' that parties may agree in writing, for the 
 payment of any rate of interest, and it shall be allowed according 
 to the terms of the agreement until the entry of judgment,' the 
 national banks are also allowed to charge and receive such rates 
 of interest as may be agreed on." 
 
 § 311. Rate of a few chartered banks does not fix 
 rate for all. If the general rate of interest which can be taken 
 by state banks is fixed, the establishing of a few banks by charter 
 to take more than this amount will not justify a national' bank in 
 taking usurious interest under the clause which permits them to 
 charge interest at the same rate as banks of issue organized under 
 the laws of the state where the national bank is situated.' 
 
 ' 11 Blatchf., 24.3. 
 
 ''■ Hinds V. Marmolejo, 60 Cal., 229; Farmer-s' National Gold Bank v. 
 Stover, Id., 387. 
 
 " Gruber v. First National Bank, 87 Pa., 465; First National Bank v. Gru- 
 ber, Id., 468. 
 
142 NATIONAL BANK ACT. §312 
 
 § 312. Interest on note made in one state and dis- 
 counted in another. If a note be discounted in a state where 
 it was not made, the law of the state in which the discounting 
 occurred is to be applied to determine the question of usury. 
 Thus a note was made and signed at Washington, but dated at L, 
 in Kansas, and sent to a bank there to be discounted. It was de- 
 cided to be governed by the law of tkat state.' But the making 
 of such a note must not be a mere device to evade the usury law 
 of the state where the money is to be repaid, and where the rate 
 of interest is lower than was taken. ^ 
 
 § 313. Usurious interest cannot be cured by cred- 
 iting illegal portion. If a note which is given in renewal of 
 a usurious one, and covering the usurious interest, is itself tainted 
 with usury, although bearing only the legal rate of interest, it 
 cannot be purged of the usury by crediting the amount thereon as 
 a payment without the concurrence of the maker.' 
 
 § 314. If part of discount is not to be drawn is trans- 
 action usurious. Is the discounting df a note on condition 
 that a portion of the proceeds shall remain in the bank usurious ? 
 A note for $6,000 was drawn by B in favor of S, and indorsed by 
 him, which was discounted for B on condition that f 1,000 should 
 remaiin to be paid on the note when due, which would be in sixty 
 days. B gave his check for f 1,000 to the cashier, which was not 
 charged to his account. Having assigned and been declared a 
 bankrupt, it was held the check reduced S's liability to $5,000, as 
 though the note had been given for that sum, and that the trans- 
 action was not contrary to the national usury law.* 
 
 § 315. Nature ofthet-wo offenses. The off enses defined 
 and denounced by the law are twofold: First, " where illegal in- 
 terest has been knowingly stipulated for but not paid, there only 
 the sum lent without interest can be recovered;"^ and second, 
 
 ' Second National Bank v. Smoot, 2 MacArthur, 371. 
 '^ Id. 
 
 " National Bank v. Eyre, 52 Iowa, 114; Farmers & Mechanics' Banks. 
 Hoagland, 7 Fed. E., 159. 
 
 * First National Bank v. Gish, 72 Pa., 13. Concerning the validity of a 
 mortgage given to secure a usurious note, see Ch. 4, ? 91. 
 
 * The only forfeiture declared by this section is of the entire interest -which 
 the note, bill, or other evidence of debt, carries v,'ith it, or which has been 
 agreed to be paid thereon, when the rate knowingly received, reservefl, or 
 charged by a national bank is in excess of that allowed by that section : and 
 
§316 INTEREST. 143 
 
 " where such illegal interest has been paid, then twice the amount 
 so paid can be recovered in a penal action of debt or suit in the 
 nature of such action against the offending .bank, brought by the 
 persons paying the same, or their legal representatives." ' More- 
 over, these regulations supersede any state laws relating to the 
 subject.^ 
 
 § 316. Kemarks of court on forfeiture. Concerning 
 the first offense Judge Gresham has remarked: "If a national 
 bank discount a note at a usurious rate of interest, paying the 
 borrower the proceeds less the interest, and suit be brought to re- 
 cover the loan, and the borrower plead the usury, the bank will 
 recover the face of the note less the entire interest taken out, re- 
 ceived or reserved, and no more. It will thus collect the sum of 
 money it actually paid out, being punished for receiving interest 
 in excess of the legal rate by forfeiting all interest." ' The New 
 Tork Court of Appeals has also remarked, that "when a note is 
 discounted, the amount reserved for the discount is the interest 
 reserved. In most cases it is not then paid. The borrower re- 
 
 no loss of the entire debt is incurred by such bank, as a penalty or otherwise, 
 by reason of the provisions of the usury law of a state. Farmers & Mechan- 
 ics' Nat. Bank v. Bearing, 91 XJ. S., 39; Central National Bank «. Pratt, 
 115 Mass., 539; Davis v. Randall, Id., 547; Brown «. Second National Bank, 
 72 Pa. , 209 ; First National Bank v. Garlinghouse, 22 Ohio, 492 ; Wiley v. Star- 
 buck, 44 Ind., 298. "The forfeiture is expressly limited to the interest 
 which the note, bill or other evidence of debt carries with it, or which has 
 been agreed to be paid thereon. In thus limiting the' forfeiture to the in- 
 terest, the right of the bank to the principal is necessarily implied," White, 
 C. J., First National Bank v. Garlinghouse, 22 Ohio, 492 p. 502. 
 
 ' Barnet v. National Bank, 98 U. S., p. 558. In New York the second 
 clause of this section was at first construed as meaning that twice the 
 amount of the interest paid in excess of the legal rate might be recovered^ and 
 not twice the amount of the entire interest, National Bank v. Lamb, 50 N. 
 Y., 95; Farmers' Bank v. Hale, 59 Id. 53; but these decisions were oVterruled 
 in Hintermister v. First National Bank, 64 id., 212, modifying 3 Hun, 345, 
 S. C, 5 Th. & C. , 484; and following the decision in Farmers & Mechanics' 
 Nat. Bank v. Bearing, 91 U. S., 29; Crocker v. First National Bank, 4 Dill., 
 358. 
 
 " Central National Bank v. Pratt, 115 Mass., 539; Davis ?>. Randall, Id., 
 547; Merchants & Farmers' Nat. Bank v. Myers, 74 N. Car., 514; First Nat- 
 ional Bank v. Garlinghouse, 22 Ohio, 492; Higley v. First National Bank, 26 
 Ohio, 75; See First National Bank v. Lamb, 50 N. Y., 95; Citizens National 
 Bank v. Leming, 8 Int. Rev. Record, 132; Hintermister i . First National 
 Bank, 64 N. Y., p. 215-, Cake v. First National Bank, 86 Pa., 303. 
 
 •* National Bank v. Davis, »Biss., 100 p. 102. 
 
144 NATIONAL BANK ACT. §317 
 
 ceives the sum called for by the note less the amount reserved 
 for the discount. This is not paid until the note is paid. It is 
 interest, and it is interest which the note carries with it. If it 
 be a discount at a usurious rate, it is forfeited by reason of the 
 federal statute. In a suit on the note, it may not be recovered. 
 It is to be held and adjudged forfeited." ' Nor is the forfeiture 
 limited to cases in which notes carry interest on their face.^ 
 
 § 317. Subsequent interest is forfeited. Not only is 
 the interest which accrues before maturity forfeited but also the 
 subsequently accruing interest. Says Mcllvaine, J. : " It is 
 made the duty of the court having jurisdiction of an action 
 brought on a note, bill or other evidence of debt, discounted by a 
 national bank at a rate of interest greater than that allowed by 
 law or if an agreement has been made to pay such greater rate 
 of interest thereon, to hold and adjudge the entire interest which 
 the note, bill, or other evidence of debt carries with it or which' 
 has been agreed to be paid thereon, to be forfeited; as well, the 
 interest accruing after maturity and before judgment, as the in- 
 terest which accrued before the maturity thereof." ' 
 
 § 318. Excess must be proved to work forfeiture. 
 A forfeiture will not be declared unless it can be clearly proved 
 
 ' National Bank v. Lewis, 81 N. T., 15 p. 20; Brown v. Second National 
 Bank, 72 Pa., 209; Overholt v. National Bank, 82 id., 490; Lucas v. Govern- 
 ment National Bank, 78 id., 228. "Under the act of Congress no interest 
 can be recovered upon a usurious contract, while by the law of Pennsylvania 
 the legal interest can be recovered, but no more. While the former uses the 
 word ' forfeiture, ' and is penal to the extent of the interest, it does not make 
 the entire contract void or even voidable." The court in Appeal of Second 
 National Bank of Titusville, 6 Week. Notes, 153. 
 
 ' National Bank v. Levris, 75 N. Y., 516. 
 
 ^ Shunk 11. First National Bank, 22 Ohio, 508 p. 512. "When usurious 
 interest has been received for discounting a note which is not paid at matu- 
 rity, the interest on the same is forfeited from time it matured until judg- 
 ment is rendered, in the event of suing to recover the amount of the note." 
 Says McKennan, J. : "The ' entire ' interest which the note ' carries with it' 
 is forfeited; and if this means all the interest which accrues upon it, as I 
 think it clearly does, it is difficult to understand how any part of it is recover- 
 able. By the operation of the act an usurious contract is inherently viciou.s, 
 so that it cannot ' carry' any interest ' with it ' ; hence it would iudequately 
 effectuate, the intent of the act to hold that such a contract is purged of its 
 taint, and is invested with a capacity denied to it before by the failure of the 
 debtor to pay the dejjt, evidenced by it at maturity," First National Bank 
 1). Stauffer, 1 Fed. E., 187. 
 
§319 INTEREST. 145 
 
 that the bank knowingly received or reserved an amount in excess 
 of the statutory rate of interest. In Wheeler v. National Bank, ' 
 an action was brought by the bank on a bill of exchange which 
 had been indorsed by Wheeler. He defended on the ground of 
 usury, but the record furnished no evidence of a distinct agree- 
 ment concerning the amount of interest or exchange to be reserved 
 by the bank when discounting the bill. Said Harlan, J. : ^ " The 
 statute should be liberally construed to effect the ends for which it 
 was passed; but a forfeiture under its piovisions should not be de- 
 clared unless the factj upon which it must rest are clearly estab- 
 lished * * Thereisnoproof of the rate of exchange; and since the 
 courts uniform.ly incline against the declaration of a forfeiture, 
 the party seeking such declaration should be held to make con- 
 vincing proof of every fact essential to forfeiture." 
 
 § 319. Usurious interest on overdraft. If a national 
 bank should charge usurious interest on an overdraft, it could re- 
 cover no interest whatever.' And if a suit should be brought by 
 a bank on a note held as collateral for an overdraft the suit would 
 actually be to recover the overdraft of the makers of the note as 
 sureties.* Consequently, if usurious interest had been charged 
 on the overdraft, this must be deducted from the total amount of 
 the overdraft.^ And if there had been monthly and stated ac- 
 counts between the bank and the one from which the overdraft 
 was due, this fact would not affect the right of the sureties to 
 have the usurious interest deducted." Nor would the fact that 
 the bank owning the overdraft charged its customers usurious in- 
 terest in the same transaction preclude the defense of usury by 
 the sureties.' 
 
 § 320. Bank director can plead usury. In employing 
 usury as defense can a bank director, whose note has been dis- 
 counted in his own bank, interpose this defense like other per- 
 sons ? In Ohio it has been decided that this can be done. Says 
 Okey, J., in Bank v. Slemmons: * "The principal in all the notes 
 was no more estopped from setting up the illegality by reason of 
 his position as director than if he had not been officially con- 
 nected- with the bank." ' 
 
 ' 96U. S., 268. = Id., p. 
 
 ' Third National Bank v. Miller, 7 Week. Notes, 496. 
 
 * Id. " Id. " Id. f Id. 
 
 ' 34 Ohio, 142. ' Goudy v. Gebhart, 1 Id., 262. 
 
 10— B. 
 
146 NATIONAL BANK ACT. §321 
 
 § 321. Forfeiture recovered only in actions for prin- 
 cipal. It may be farther remarked that the forfeiture can be 
 enforced only in actions for the recovery of the principal.' 
 
 § 322. Borrower may interpose, defense in state 
 court. The borrower may interpose this defense in a state court. 
 Says the Supreme Court of Iowa: " We are disposed to think that 
 it would be carrying the doctrine too far to hold that a borrower 
 of money from a national bank at a rate of interest which is usu- 
 rious cannot, where sued by the bank in a state court to recover 
 interest, maintain the plea of usury as a defense in. the same court. 
 No court, so far as we have been able to discover, has so held." ' 
 
 § 323. Time -when defense must be made. Concern- 
 ing the time of interposing this defense two answers have been 
 given by the courts. One answer is that the defense must be 
 made within two'years from the time the loan was made; ' and the 
 other answer is thiit this proviso " relates, exclusively, to actions 
 brought to recover money paid, and not to a defense against a re- 
 covery; because, if intended to apply to the defense against usury, 
 it would give to the party holding a usurious contract the advantage 
 of cutting ofE the defense by postponing his suit until after the 
 tv^o years expired." * This construction of the law, by Judge , 
 Walker, of the Supreme Court of Arkansas, is certainly far more 
 rational than the other. 
 
 § 824. Can action for tw^ice the amount be brought 
 in state court. With respect to recovering twice the amount 
 of the interest paid, the leading question has been whether the 
 action could be brought in a state court. As penal actions gen- 
 erally can be brought only within the jurisdiction whence they 
 spring, and as this action has been regarded as a penal one, on 
 several occasions the state courts have declined to enforce it. But 
 these have been exceptional. In some of the cases, even while 
 admitting that the action was of a penal nature, the state courts 
 have not hesitated to enforce it. In other cases the action has 
 been regarded like any action for the recovery of a debt, and quite 
 free from every punitory feature. One of the best considered cases 
 in which the right of the state to enforce such an action was main- 
 
 ■■ Hintermister v. First National Bank, 64 N. Y., p. 215. 
 
 ' National Bank v. Eyre, 52 Iowa, 114 p. 116. 
 
 * Higley v. First National Bank, 26 Ohio, 75. 
 
 ' Pickett V. Merchants' National Bank, 32 Ark., 346 p. 366. 
 
§325 INTEREST. 147 
 
 tained arose in Pennsylvania. In Bletz v. Columbia National 
 Bank' Agnew, C. J., after quoting the act said: "Here we find 
 no declaration of a forfeiture as such, but a provision to recover 
 back money paid in an action of debt. This vests a right in the 
 borrower of reclamation in a common law form of action, to be 
 brought by himself and inhis own right. It is not a penalty to 
 be adjudged to the United States, or vested in the public, for 
 which any citizen may sue. The form of action is within the jur- 
 isdiction of the state court, and the right claimed in this form is 
 private, belonging to the borrower alone. It is, therefore, imma- 
 terial whether the source of the right is a state or federal law. 
 In either case it is a law binding on the state, which has given 
 ■ birth to the right."' 
 
 § 325. Remarks of Boynton, J. Likewise Boynton, J., 
 in reviewing Claflin v. Houseman,' said: "The statutes of the 
 United States are as much the law of the land in any state as are 
 those of the state, and although exclusive jurisdiction may be 
 given to the federal courts, yet where it is not so given, either ex- 
 pressly or by necessary implication, the state courts, having com- 
 petent jurisdiction in other respects, may be resorted to.'" And 
 again, " Congress has, in many instances, professed in direct terms 
 to invest state tribunals with power to enforce penalties incurred 
 exclusively in the violation of the laws of the United States." ^ 
 
 § 326. Contrary opinions. But some of the state courts 
 have decided that this action to recover twice the amount of in- 
 terest must be brought in a federal court. It is manifest, says 
 the Supreme Court of Iowa, that this provision of the law " is 
 more strictly penal in its character than the provision which 
 simply allows usury to be pleaded as a defense." " So Lindsay, J., 
 speaking for the highest court in Kentucky, declared that the 
 courts of that state had not " undertaken to enforce penalties aris- 
 ing under the laws of the government of the United States," and 
 
 ' 8'7Pa., 87, p. 94. 
 
 ' Gruber v. First National Bank, 87 Pa., 465; First National Bank v. Gru- 
 ber, 87 Id., 468; Ordway v. Central National Bank, 47 Md., 217; Tlowv. Iras- 
 burg National Bank, 50 Vt., 112; Pickett u Merchants' National Bank, 32 
 Ark., 346. 
 
 » 93 U. S., 130. 
 
 * Hade v. McVay, 31 Ohio, 231 p. 236. 
 
 * Id., li. 235. , 
 
 ^ National Bank v. Eyre, 52 Iowa,, p. 117. 
 
148 NATIONAL BANK ACT. §327 
 
 that the forfeitures prescribed in the act were " highly penal in 
 their nature." ' In Tennessee the Supreme Court at first decided 
 that the action could be tried in a state court,^ but afterward 
 changed their opinion/ on the authority of a decision of the 
 United States Supreme Court. * 
 
 § 327. Right of legal representative to recover. 
 The right to recover double the interest paid does not extend to 
 a judgment creditor of the borrower, " as he is in no sense the 
 debtor's legal representative." ° But an assignee in bankruptcy of • 
 the borrower is his " legal representative," and he can recover 
 the usurious interest. The right of action is a " claim" or 
 " debt " which passes to the assignee.^ 
 
 § 328. Action must be brought within two years. 
 The action to recover the usurious interest must be brought 
 within two years from the time of paying it.' " The taking or 
 charging a usurious rate,", says Sedgwick, J,, " is to be held a for- 
 feiture of the entire interest, and if a usurious rate has been paid, 
 twice its amount may be recovered back, provided the action has 
 been begun within two years. An entire scheme of protection, • 
 involving a policy peculiar to it, is thus given to a borrower. 
 In case the interest has been paid, twice the amount of the usu- 
 rious rate may be recovered, and in all other cases the bank for- 
 feits all right to the interest." * In a Pennsylvania case the court 
 said that "it is difficult to imagine a case where the statute does 
 
 ' Newell V. National Bank, 12 Bush, 57 p. 59. 
 
 = Steadman v. Eedfield, 8 Baxt., 337. 
 
 ' Hambright v. Cleveland National Bank, 3 Lea, 40 ; Barrett v. National 
 Bank, 85 Tenn., 426. 
 
 *In Barnet v. National Bank, 98 TJ. S., p. 559, Swayne, J., remarked: 
 "The remedy given hy the statute for the wrong is a penal suit. To that 
 the party aggrieved, or his legal representative, must resort. He can have 
 no redress in no other mode or form of procedure. The statute which gives 
 the right prescribes the redress, and both provisions are alike obligatory upon 
 the parties." 
 
 * Barrett v. National Bank, 85 Tenn., 426. 
 
 ^ "Wright V. First National Bai^, 8 Biss., 243; see Tiffany v. National 
 Bank, 18 Wall., 409; Crocker r. First National B'ank, 4 Dill., 358; Barbour 
 V. National Exchange Bank, 12 N. E. Rep., 51; National Bank v. Trimble, 
 40 Ohio, 629. 
 
 ' Gruber v. First National Bank, 87 Pa., 465; National Bank v. Davis, 8 
 Biss., 100; National State Bank v. Boylan, 2 Abb., N. Cases, 216; Pickett 
 V. Merchants' National Bank, 32 Ark. ,'346. 
 
 ' National State Bank v. Boylan, 2 Abb. N. Cases, p. 220. 
 
§329 • INTEREST. 149 
 
 not begin to run from payment of the usurious money, for the 
 owner almost necessarily has knowledge of the fact from the 
 first." ' 
 
 § 329. How uaury effects last note of a series. 
 Whenever the note sued is the last of a series of renewed notes, 
 and the original was usurious, the taint of usury affects the whole, 
 the forfeiture of the entire interest, therefore, follows and credit 
 must be given for all that has been paid from the beginning on 
 ■ the loan.^ And if usurious interest be carried into a general ac- 
 count, and is made a part of a sum found due on final settlement 
 for which a note is given, it taints the entire contract with usury, 
 and it matters not that the usurious interest was charged with 
 the tacit consent of the debtor in stating monthly accounts, or by 
 a note substituted for the one previously given.' 
 
 § 330. Borrower cannot set off illegal interest on • 
 former notes. The borrower, however, cannot set- off or apply 
 the interest which he has paid on the former notes in payment of 
 the principal of the last of the series. In Driesback v. National 
 'Bank, 'the Chief Justice said: "The c^aim is not for interest 
 stipulated for and included in the notes sued on, but for the ap- 
 plication of what has actually been paid as interest to the discharge 
 of the principal. This we held in Barnet v. National Bank, ' 
 could not be done." In some cases it has been.* But this is not 
 the correct rule.' The remedy for the borrower is an action of 
 debt to recover twice the amount of interest that he has paid, ' 
 
 ' Stephens v. Monongahela National Bank, 7 Week. Notes, 491 p. 496. 
 
 ' National Bank v. Lewis, ,75 N. Y., 516; Overholt v. National Bank, 82 
 Pa., 490; Tuthill v. Davis, 20 Johns E., 286; Cake v. First National Bank, 86 
 Pa., 303; Brown v. Second National Bank, 72 Id., 209; Bank v. Slemmons, 
 34 Ohio, 142; National Bank v. Davis, 8 Biss., 100. 
 
 ' Pickett V. Merchants' National Bank, 32 Ark., 346. 
 
 * 104 U. S., 52. 
 
 * 98 XT. S., 555. 
 
 ° Lucas V. Government National Bank, 78 Pa., 228; Overholt v. National 
 Pank, 82 id., 490; Cake v. First National Bank, 86 Id., 303; Stephens v. Mon- 
 ongahela National Bank, 7 Week. Notes, 491 ; Hade v. McVay, 31 Ohio, 231 ; 
 National Bank v. Davis, 8 Biss., 100. 
 
 ' National Bank v. Lewis, 81 N. Y., 15, second trial; Farmers & Me- 
 chanics' Bank v. Hoagland, 7 Fed. E., 159. 
 
 * Bamet o. National Bank, 98 U. S., 555; National Bank v. Dnshane, 38 
 Leg. Int. 141, 39 Id., 280. 
 
160 NATIONAL BANK 'act. §331 
 
 In National Bank v. Davis,' Judge Gresham said that if a note 
 "discounted be renewed for the same amount, the borrower paying 
 usurious interest out of his pocket in advance, and suit be brought 
 on the renewed note, the defendant may recoup double the amount 
 of the entire interest actually paid on renewal, or in an indepen- 
 dent action of debt he may recover from the bank double the 
 amount of the entire interest thus paid." It is certain that he 
 could recover in an action for the interest, but it is quite as cer- 
 tain that the interest could not be recouped or deducted from the 
 principal in an action to recover it. 
 
 § 381. Nor can bank set off principal on last one in 
 action on others. Neither can a bank set off the principal 
 which may be due on the last of a series of usurious notes in an 
 action to recover twice the amount of interest that has been paid. 
 Thus the receiver of M's property sought to recover the penalties 
 incurred by a national bank by taking unlawful interest of him. 
 For two years preceding the action the bank had discounted M's 
 notes at the rate of thirteen per cent, per annum. They had all been 
 paid except the last one. It was held that usurious interest had 
 been paid to the bank, and that the balance due from M on the 
 last note could not be set-off against the amount due from the 
 bank for the penalties.^ 
 
 § 332. Any party to contract can avail of forfeiture. 
 Any party to a usurious contract, against whom payment is sought 
 to be enforced, can avail himself of this defense.' Hence an ac- 
 commodation indorser has the same right as the maker to the 
 benefit of the forfeiture by way of set-pfP or rebatement when sued 
 alone on his indorsement.* The right of such an indorser with- 
 out consideration to the same benefit as a maker would have by 
 way of set off or rebatement of the interest usuriously taken on a 
 note discounted, is, said Judge Miller, of the New York Court of 
 Appeals, " I think, well settled. * * There appears to be 
 
 y 8 Biss., p. 102. 
 
 ' Morehouse v. Second National Bank, 30 Him, 628. 
 
 ' National Bank v. Lewis, 75 N. Y., revsg 10 Hun, 468. 
 
 * National Bank v. Lewis, 75 N. Y. , 516 ; National Exchange Bank v. Moore, 
 2 Bond, 170; Brown v. Second National Bank, 72 Pa., 209; Cake v. First 
 National Bank, 86 Id., 303. In New York the term borrower includes any 
 person who is a party to the original contract, or in any way liable to pay 
 the loan. National Bank c. Lewis, 75 N. Y., 516; Wheelock «. Lee, 64 
 N. Y., 242. 
 
§333 INTEREST. 151 
 
 no reason, why he is not entitled to the same defenses as the maker 
 may have. Section 5198 declares that there shall be a forfeiture, 
 ■without confining it to the maker, and it is a reasonable presump- 
 tion that it should be for the benefit of any one -who might be 
 compelled to pay the obligation. We think it certainly applies 
 to a party who has been sued upon the note and against whom 
 alone a remedy is> sought by an action to recover the amount of 
 the same." ' 
 
 § 338. ludorser cannot vise this defense to escape 
 paying. But the receiving of usurious interest from an in- 
 dorser on notes discounted by it, whose payment should be guar- 
 anteed in writing would not avoid the contract of guaranty be- 
 tween the guarantor and the bank.^ 
 
 § 334 Nor can antecedent parties. So, too, if a note 
 or bill be an existing security in the hands of the holder, the usury 
 exacted by the bank in taking it cannot be used as a defense by 
 the antecedent parties. Their rights and liabilities are not afiected 
 by the usurious character of a transaction in which they did not 
 participate.* The person with whom the bank had the usurious 
 transaction is the one to whom the forfeiture of interest is to be 
 adjudged.* So usury will not avoid a contract with respect to the 
 surety beyond the point at which the principal is relieved. In 
 the case of First National Bank v. Garlinghouse,' it was decided 
 that in the absence of any intention to practice a fraud on the 
 sureties, they must be held to have trusted to the judgment and 
 discretion of the principal as to the terms on which the note might 
 be discounted. 
 
 § 335. Indorser of valid note used as collateral to 
 usurious, cannot interpose this defense. An indorser 
 on a note taken as collateral security for the payment of another, 
 which is infected with usury, cannot defend against the note thus 
 indorsed by. him that the contract of indorsement is void. Thus 
 M was indebted to a bank on which he paid usurious interest. It 
 
 ' National Bank v. Lewis, 75 N. Y., 516p. 522; see In re "Wild, 11 Elatchf., 
 243; National Exchange Bank v. Moore, 2 Bond., 170; Brown v. Second Na- 
 tional Bank, 72 Pa., 209; Cake v. First National Bank, 86 Id., 303. 
 
 ^ Lazear v. National Union Bank, 52 Md., 78. 
 
 ' Smitli V. Exchange Bank, 26 Ohio, 141. 
 
 * Id. 
 
 ' 22 Ohio, 492, revsg Ct. of Com. Pleas, 3 Am. Law Times, 301. 
 
152 NATIONAL BANK ACT. §336 
 
 ■was extended several times, he paying such interest as in the be- 
 ginning. Finally, at the request of the bank, he gave as collat- 
 eral secilrity the note of O, indorsed by himself. In a suit against 
 O he was declared liable. " If we should declare the contract of 
 indorsement void," said Judge Harlan, " and, consequently, that 
 no right of action passed to the bank on the note transferred as 
 collateral security, an additional penalty would thus be added 
 beyond those imposed by, the law itself." ' 
 
 § 886. If indorser pay lie cannot recover only legal 
 sum of borrower. If an indorser should pay the whole note, 
 including the usurious interest, he could recover of the maker only 
 the original amount. " He mast submit to the same penalty as 
 would the bank for trusting to the honor of the principal to pay 
 loans tinctured with usury." ^ 
 
 § 337. Nor can he recover twice the amount of 
 lender. Although the maker of a note can recover usurious 
 interest that he has paid, the indorser does not have such a right. 
 Neither has the indorser of a note which has been given in set- 
 tlement of former loans tainted with usury, on which he was also 
 an indorser, but not a borrower, nor paid any interest, a cause of 
 action therefor.' 
 ' § 388. How usury must be pleaded. In an action by 
 
 a national bank on a promissory dote, the answer alleged that 
 the note was presented by its makers to the bank for discount for 
 their sole benefit, which the bank knew, that it discounted the 
 note and "then and there knowingly, corruptly and usuriously 
 deducted therefrom and took, received, reserved, or charged 
 by way of .discount and * * for the loan or forbearance 
 of the sum of money secured by said note," a sum of money much 
 greater than seven per cent, for the time the note had to be run, 
 " to wit, the sum of $160 or thereabouts," and asked that the interest 
 paid and that which the note carried should be adjudged to be 
 forfeited. The answer was regarded as setting forth a corrupt 
 and usurious agreement, arid was therefore a good plea of usury.' 
 In this case the court, speaking through Judge Miller said: "It 
 cannot be denied that in interposing the defense of usury, it must 
 
 ' Gates V. National Bank, 100 U. S., 239 p. 250. 
 
 ' Citizens' National Bank v. Leming, 8 Int. Rev. Record, 132. 
 
 ' Bly V. Second National Bank, 79 Pa., 453. 
 
 * National Bank v. Lewis, 75 N. Y., 516. 
 
§338 («) INTEREST. 153 
 
 be pleaded with such precision and certainty as to make out, on 
 the face of the pleading, that a corrupt and usurous contract has 
 been entered into. * * , The facts stated show that the note 
 was offered for discount; that there was a corrupt agreement be- 
 tween the plaintiff and the makers in reference to the interest ; 
 that the amount of interest agreed upon was usurious and greater 
 than seven per cent., and that such agreement was intentionally 
 in violation of the statute, and hence was eqrrupt and usurious; 
 and that the plaintiff received the interest and paid the amount, 
 after deducting the same, to the maker. These in connection 
 with the other allegations stated, show beyond question that this 
 was done by the consent of the borrower, for it is apparent, un- 
 der the circumstiances, that he could not have received it other- 
 wise." ' 
 
 § 388(a). Remarks of Gierke, J. When usury is the de- 
 fense, " the usurious contract should be so pleaded as that it may 
 appear what rate or amount of interest was taken or secured, and 
 on what sum, and for what time; and the answer should show a 
 corrupt intent. When these appear from the terms of the an- 
 swer, nothing further is necessary to make it sufSciently definite." " 
 
 ' National Bank v Lewis, 75 N. f., p. 519. 
 
 ' Gierke, J., National Bank v. Orcutt, 48 Barb., 256, p. 257. 
 
154 
 
 NATIONAL BANK ACT, 
 
 CHAPTER XIII. 
 
 SUIT BY AND AGAINST NATIONAL BANE. 
 
 Jurisdiction Under the Acts of 1882 and 1887. 
 
 239. In what court. 
 
 240. Citizenship of bank. 
 
 241. Suit by government maybe in fed- 
 
 eral court. 
 
 242. Meaning of the two Acts. 
 
 § 242. (a) When foreign bank may be sued 
 in state court. 
 
 243. Tax sujt may be in federal court. 
 
 244. Bill of revivor. 
 
 245. Suit by receiver. 
 
 246. Quo warranto proceeding. 
 
 Jurisdiction Before Act of 1882. 
 
 247. Acts of 1863 and '64. 
 
 248. Provisions of Revised S'tatutes. 
 
 249. Bank's right to sue was by National 
 
 Banking Act. 
 
 250. Suits limited to federal court by Mc- 
 
 Kennan, J. 
 
 251. His construction wrong. 
 
 252. Opinions of N. Y. and 111. courts. 
 
 253. Bank is citizen of state and could be 
 
 sued in state court. 
 
 254. Remarks of Barnard, P. J. 
 
 255. When state court had no jurisdic- 
 
 tion. 
 
 256. Bank could sue in federal court 
 
 within or outside its district. 
 
 § 257. Could not be sued outside its dis- 
 trict. 
 
 258. Receiver's right to sue in federal 
 
 court. 
 
 259. Can other than usury cases be 
 
 brought under section 5198 ? 
 
 260. Cannot sue for Igss than ^500 in fed- 
 
 eral court. Exception.' 
 
 261. Removal of cases from state court. 
 
 262. Chatham" National Bank u. Mer- 
 
 chants' National Bank. 
 
 263. Remarks of Harlan, J. 
 
 264. Removal in case of receiver. 
 
 Suit Against Bank in Voluntary Liquidation. 
 
 265. Right to sue in state court bank in I ? 266. Can be sued though having a re- 
 voluntary liquidation. | ceiver. 
 
 Conduct of Government Suits. 
 
 267. U. S. district attorney to conduct i § 268. Meaning of the statute, 
 them. 
 
S239 SUIT BY AND AGAINST NATIONAL BANK. 155 
 
 § 239. By theNationalBank Act national banks have power "to in what 
 sue and be sued, complain and defend, in any court of law and [or] ActJuiyi2, 
 equity, as fully as natural persons." ' And the proviso of the fourth 
 section of the Act for extending the life of national banks declares 
 " that the jurisdiction for suits hereafter brought by or against 
 any association established under any law providing for national - 
 banking associations, except suits between them and the United 
 States, or its officers and agents, shall be the same as, and not other 
 than, the jurisdiction for suits by or against banks not organ- 
 ized under any law of the United States which do or might do 
 banking business where such national-banking associations may 
 be doing business when such suits may be begun: And all laws 
 and parts of laws of the United States inconsistent with this pro- 
 viso be, and the same are hereby, repealed." " 
 
 § 240 And in 1887 Congress further enacted " that all national citizenship 
 banking associations established under the laws of the United 
 States shall, for the purposes of all actions by or against them, 
 real, personal or mixed, and all suits in equity, be deemed citi- 
 zens of the states in which they are respectively located; and in 
 such cases the circuit and district courts shall not haye jurisdic- 
 tion other than such as they would have in cases between indi- 
 vidual citizens of the same state." 
 
 § 241. " The provisions of this section shall not be held to affect suit by gov- 
 the jurisdiction of the courts of the United States in cases com- mayhem 
 menced by the United States or by direction of any officer thereof, court. 
 or cases for winding up the affairs of any such baak." ' issr. 
 
 § 242. Meaning of the two acts. Until the enacting of 
 the Law of 1882 litigation had been frequent concerning the right 
 of ,a national bank to sue, and liability to a suit in the state and 
 national courts. But that Act " repeals," says Judge Harlan,* " in 
 express terms all 'laws and parts of laws of the United States' in- 
 consistent with its provisions, and enacts that jurisdiction for suits 
 thereafter brought by or against national banks, with few excep- 
 tions, ' shall be the same as, and not other than, the jurisdiction 
 for suits by or against banks not lOrganized under any law of the 
 
 >■ Eev. Stat., See. 5136, clause fourth. 
 ' Public Laws, 47 C. 1 S. Oh. 290, part of Sec. 4. 
 = Public Laws, 49 C. 2 S. Ch. 373, Sec. 4. 
 
 • Leather Manufacturers' Bank v. Cooper, 120 U. S., p. 780, affg 28 Fed. 
 E. 161. 
 
156 NATIONAL BANK ACT. §242^a) 
 
 United States ' doing business where the national ' bank may be 
 doing business when such suits may be begun. ' This was evi- 
 dently intended to put national banks on the same footing as the 
 banks of the state where they were located for all the purposes of 
 the jurisdiction of the courts of the United States." Likewise 
 Judge Baxter has remarked that " the effect of this act is to 
 place national and other banks, in respect to their right to sue in 
 the federal courts, on the same footing. It follows that a national 
 bank cannot in virtue of any corporate right sue in a federal 
 court." ' 
 
 § 242(a). When foreign bank may be sued in state 
 court. In the case of the Continental National Bank v. Polsom,'' 
 the bank had attached the real estate of F, who lived in Georgia. 
 To do this it was needful to give a bond with a surety. This was 
 done. Afterward F sued the bank and the surety in the state 
 court. The bank defended on the ground that it could not be thus 
 sued. But the court said that the Act of 1882 " by its terms 
 made the banking association subject to the jurisdiction of our 
 courts, if a local banking institution of the state and city of New 
 York, where it is located and doing business, would under similar 
 circumstances have been subject to their jurisdiction." 
 
 § 243. Tax suit may be in federal court. But, like other 
 banks and citizens, a national bank may sue in a federal court- 
 whenever the subject-matter of litigation involves an element of 
 federal jurisdiction, of which a federal court may, under the law, 
 take judicial cognizance. Thus a suit by a national bank against 
 a county treasurer to enjoin the collection of an excessive tax on 
 its personal property, alleged to have been in violation of the act 
 of Congress permitting the state to tax national banks, is a case 
 arising under a law of Congress and can therefore be maintained 
 in a federal court.' 
 
 § 244. Bill of revivor. So, too, a bill of revivor may be 
 brought in a federal court. In Witters v. Foster,* an administra- 
 tor, the "bill charged the intestate, in connection with others 
 as directors of the bank, with neglect of duty in not requiring a 
 
 ' Union National Bank v. Miller, 15 Fed. R., 703. 
 2 3 S. E. Eep., 267. 
 
 ' Union National Bank «. Miller, 15 Fed. R., 703; Richards «. Incorporated 
 Town of Grand Rapids, 31 Id., 505. 
 * 26 Fed. R., 737. 
 
§245 SUIT BY AND AGAINST NATIONAL BANK. 157 
 
 bond of the cashier, and in not holding meetings and appointing 
 committees and receiving reports as required by the by-laws; in 
 allowing persons to become indebted to an. amount exceeding one- 
 tenth of the capital; and in reckoning assets as good as a basis of • 
 dividends, when they were in fact worthless, contrary to the pro- 
 visions of the statutes." Judge Wheeler said that " objection is 
 made to reviving the suit' upon the grounds that the court has not 
 jurisdiction since the Act of June 3, 1882, and that the cause of 
 action does not survive. The cause of action rests upon the re- 
 quirements of the laws of the United States, and by-laws made 
 pursuant to such laws, and therefore is one arising under those laws, 
 jurisdiction over which is not taken away by that Act.'' 
 
 § 245. Suit by receiver. A receiver, too, of a national 
 bank can sue in a federal tribunal. H was appointed a receiver of 
 an insolvent national bank in Vermont and obtained an order from 
 the United States Circuit Court for that district to sell some bonds 
 that were pledged to the bank as security for a debt due to the 
 bank by the defendant railroad company in Canada. The com- 
 pany having brought a suit in a Canadian court to recover the 
 bonds, the receiver filed a bill in the United States Circuit Court 
 to enjoin the company against the further prosecution of its suit 
 in Canada. It was decided that the Circuit Court had jurisdic- 
 tions and that the injunction should be granted. Judge Wheeler' 
 said:' "The principal ground urged in opposition to the motion 
 is the want of jurisdiction of this court over any suit between the 
 orator [Hendee] and defendant to try the title to these bonds. 
 No question is or could well be made but that this court had 
 ample jurisdiction for that purpose prior to the Act of Congress of 
 July 12, 1882. By that Act it was provided ' that the jurisdiction 
 for suits hereafter brought by or against any association estab- 
 lished under any law providing for national banking associations' 
 should ' be the same as not other than the jurisdiction for suits by 
 or against banks not organized under any law of the United States, 
 which do or might do banking business where such national 
 banking associations may be doing business when such suits may 
 be begun.' ^ 
 
 "This court would have no jurisdiction of such a suit as this be- 
 tween a state bank, located where this bank was, and the defendant, 
 
 • Hendee v. Connecticut & P. R. Co., 20 Fed. E., 677. 
 ' Public Laws, 47 C. 1 S. Ch. 260, Sec. 4. 
 
158 NATIONAL BANK ACT. §245 
 
 for they would be citizens of the same state, and there would be 
 nothing in the subject-matter conferring jurisdiction; and it would 
 have had no jurisdiction if this bank had continued business in 
 its own right, and had brought this suit. 
 
 " It is argued that the receiver has no greater rights than the 
 bank, and merely represents it, and that, therefore, the jurisdic- 
 tion is the same as and not other than it would have been if the 
 bank, while doing business, had brought the suit. This ar- 
 gument appears well enough founded to the extent that the re- 
 ceiver stands upon and represents merely the rights of the bank 
 as to the matter in controversy.' But this does not determine this 
 full meaning of the Act of 1882. The purpose of that A.ct appears 
 to be to put national banks, as such, in the same situation as state 
 banks, for the purposes of suing and being sued. No state bank, 
 nor other bank not a national bank, could be in the situation in 
 which this bank is. It is wholly in the hands of the orator, as a 
 receiver, for the purpose of having its affairs wound up, and is 
 not doing and cannot do any business, whatever anywhere. It 
 was brought into this condition by proceedings under the laws of 
 the United States. The orator was appointed to his position as 
 receiver by an officer of the United States, and is himself an 
 officer of the United States, and acts as such in bringing 
 this suit.'' A suit in behalf of a corporation created by act of 
 Congress arises under the laws of the United- States, although 
 the cause of action itself is founded on the common law or other 
 statutes. The right of the orator to sue arises in the,same manner. 
 He cannot proceed at all without invoking the aid of the laws of 
 the United States. 
 
 " The Act of 1882 appears to take away the right of the bank 
 as such, but not to afPect the right of the orator as receiver. He 
 is a receiver to collect the assets, and pay over the money raised 
 from them to the Treasurer of the United States, subject to the 
 order of the Comptroller, for distribution among the creditors. 
 In matters concerning the sale of property, concerning bad and 
 doubtful debts, and in some aspects, concerning the appointment 
 of a receiver in the first instance, the courts of the United States 
 have some jurisdiction, in addition to that of the Comptroller. 
 
 1 Bank v. Kennedy, 17 Wall., 19; Bank of Bethel v. Pahquioque Bank, 14 
 Wall., 383. 
 '' Stanton v. Wilkeson, 8 Bened., 357; Price v. Abbott, 17 Fed. E., 506. 
 
§246 SUIT BY AND AGAINST NATIONAL BANK. 159 
 
 "The sale of property, and compounding bad and doubtful 
 debts, is remitted the order of a court of record of competent jur- 
 isdiction. That part of sec. 57 of the Banking Act of 1864 giving 
 jurisdiction to any state, county, or municipal court having juris- , 
 diction in similar cases was not brought into the Revised Stat- 
 utes, but was dropped out when the rest of the section giving juris- 
 diction to the courts of the United States within the district was 
 brought into sections 563 ' and 629. " 
 
 " The state courts appear to be left with the jurisdiction arising 
 out of the ability to sue and be sued, and without power over 
 purely administrative proceedings, for the government of officers 
 of the United States, under the laws of the United States. The re- 
 ceivership is an entire thing, provided for, controlled, and reg- 
 ulated by the laws of the United States through the Comptroller 
 and the courts of the United States within the district. The de- 
 fendant is a citizen of the United States within the district. The 
 suit of the defendant, wholly without the jurisdiction of the re- 
 ceivership, to deprive the receiver of property within, would 
 tend to defeat its object. Such suits are frequently restrain- 
 ed by injunction." ' Since this decision the Act of 1887 has 
 clearly established the receiver's right to sue in the federal 
 tribunals. * In Price v. Abbott,' it was decided that the Act of 
 1882 did not apply to a receiver. 
 
 , § 246. Quo warranto proceeding. Has not a federal 
 court jurisdiction, also, in a quo warranto proceeding, which is pros- 
 ecuted by an officer of the state in behalf of an individual against 
 another to determine his right to an office, for example, a director- 
 ship. In 1868 before the Statute under consideration was passed. 
 Judge Butler said, in a case of this kind: "This is one of that 
 class of cases where jurisdiction in the state court is utterly incom- 
 patible with the necessary jurisdiction of the national government. 
 The corporation in question being the creature and instrument of 
 that government must necessarily be subject to that alone. By 
 the common law, and by our statute, an information of this char- 
 acter lies as well to deprive a corporation of its charter as to de- 
 termine the rights of its competing officers; and if the relator' [or 
 prosecuting officer] is right in this claim, its charter can be taken 
 
 ' Sub-division 15, § 248. ' Sub-division 11, § 248. 
 
 * Hendee v. Connecticut & P. E., 26 Fed. R., 677. 
 
 * Public Laws, 49 C. 2 S. Sec. 3. * 17 Fed. R., 506. 
 
160 NATIONAL BANK ACT. §247 
 
 away and its franchises seized by the courts of the state. Noth- 
 ing could be more repugnant in character than such an una,uthor- 
 ized interference, for such a purpose, or for any purpose." ' 
 
 " Nor do any sections of the Banking Law^ confer jurisdiction, 
 section 5178 authorizes suits against the corporation only. This 
 is not a suit against the corporation, but a proceeding by one in- 
 dividual against another individual competing for the office of di- 
 rector of it; and it is not within the letter or spirit of the act." ^ 
 Acts of 1863 8 247. Before the Statutes of 1882 and 1887 were enacted 
 
 and 1864. " 
 
 there were others that determined the jurisdiction of the federal 
 and state courts in suits by or against national banking associa- 
 tions. The first Banking Law enacted " that suits, actions, and 
 proceedings by and against any association under this Act, may 
 be had in any circuit, district, or territorial court of the United 
 States held within the district in which such association may be 
 established." * The next year the law was amended by adding to 
 the foregoing " or in any state, county, or municipal court in the 
 county or city in which said association is located, having juris- 
 diction in similar cases: Provided, however. That all proceedings 
 to enjoin the) Comptroller under this Act shall be had in a circuit, 
 district, or territorial court of the United States, held in the dis- 
 . trictin which the association is located." * In amending the Act 
 of 1863, the following year. Congress omitted in the main portion 
 to provide that suits by the national banking association might 
 be brought in the national or state courts. This " omission was 
 doubtless accidental," and was restored in the revision of 1875.° 
 i|^'8iona g 248. The Eevised Statutes contained several provisions re- 
 statutes, lating to the subject. " The district courts shall have jurisdic- 
 tion as follows: 
 
 " Fifteenth. Of all suits by or against any association established 
 under any law providing for national banking associations within 
 the district for which the court is held." ' 
 
 " The circuit courts shall have original jurisdiction as follows: 
 Tenth. Of all suits by or against any banking association estab- 
 lished in the district for which the court is held, under any law 
 providing for national banking associations. 
 
 , ' State V. Curtis, 35 Conn., 374 p. 381. ^ Sees. 136, 563, 629, 5178. 
 ' State )). Curtis, 35 Conn., p. 384. 
 ' Act 1863, Sec. 59. ^ ^^^^ i8g4_ gg^ 57 
 
 * Kennedy v. Gibson, 8 Wall., 498. ' Sec. 563. 
 
§249 SUIT BY AND AGAINST NATIONAL BANK. 161 
 
 Eleventh. Of all suits brought by or against any banking 
 association established, in the district for which the court is 
 held, under the provisions of Title ' The National Banks ' to en- 
 join the Comptroller of the Currency, or any receiver acting 
 under his direction, as provided by said Title." ' 
 
 " The jurisdiction vested in the courts of the United States in 
 the cases and proceedings hereinafter mentioned, shall be exclu- 
 sive of the coarts of the several states: 
 
 Second. Of all suits for penalties and forfeitures incurred under 
 the laws of the United States." * 
 
 " Suits, actions, and proceedings against any association under 
 this Title may be had in any circuit, district, or territorial court 
 of the United States held within the district in which such asso- 
 ciation may be established, or in any state, county, or municipal 
 court in the county or city in which said association is located, 
 having jurisdiction in siuiilar cases." ^ 
 
 " No attachment, injunction or execution, shall be issued against 
 such association or its property before final judgment in any suit, 
 action, or proceeding, in any state, county, or municipal court." * 
 
 "All proceedings by any national banking association to enjoin 
 the Comptroller of the Currency, under the provisions of any law 
 relating to national banking associations, shall be had in the dis- 
 trict where such association is located." ^ 
 
 § 249. Bank's right to sue was by National Bank- 
 ing Act. Having given the statutory legislation on the subject 
 the construction of the various provisions will be briefly consid- 
 ered. It may be remarked that a national bank has never sued 
 by any right conferred by the Judiciary Act, but by the National 
 Banking Law ° 
 
 Before the Statute of 1882 the federal courts had jurisdiction 
 in all suits by and against national banking associations,' and with- 
 out regard to the citizenship of the parties.* Moreover, the United 
 
 ' Sec. 629. ' Sec. 711. 
 
 ' Sec. 5198, as corrected by Act Feb. 18, 1875. ♦ Sec. 5242. = Sec. 736. 
 
 " Commercial National Bank v. Simmons, 1 Plippin, 449; Kennedy v. Gib- 
 son, 8 Wall., 498. 
 
 ' Foss V. First National Bank, 3 Fed. E., 185; White j;. Commonwealth 
 National Bank, 4 Brewster, 234 ; Orange National Bank v. Traver, 7 Sawyer, 
 210; First National Bank v. County of Douglas, 3 Dill., 298. 
 
 * County of Wilson v. National Bank, 103 U. S., 770 p. 776; Kennedy v. 
 Gibson, 8 Wall., 498. 
 11— B. 
 
162 NATIONAL BANK ACT. §250 
 
 Stg,te8 Supreme Court could re-examine the judgment of a state 
 court ■which involved the right of a national bank to purchase a 
 note secured by real estate.' Even if having an adequate remedy 
 in a state court a national bank could sue in a federal tribunal.^ 
 
 § 250. Were suits limited to the federal courts. 
 But Judge McKennan went further and sought to maintain 
 that the Banking Law of 1864 was "an unconditional grant of juris- 
 diction of all suits by or against national banks to the circuit courts 
 of the district in which such banks are established, and is limited 
 to these courts. Hence the inore reasonable hypothesis is that it 
 was intended to enable national banks to sue and be sued in the 
 circuit courts of their several districts alone, irrespective of the 
 conditions as to the amount in controversy and the citizenships of 
 the parties. * * The terms of the statute embrace all suits, 
 alike, and their fair import is that of all suits which a national 
 bank may rightfully institute in its own name the circuit, court of 
 the district in which it is established may entertain jurisdiction." ' 
 
 § 251. This construction -wrong. But this was not ten- 
 able ground. In Claflin v. Houseman * Judge Bradley said : " The 
 United States is not a foreign sovereignty as regards the- sev- 
 eral states, but is a concurrent, and within its jurisdiction, par- , 
 amount sovereignty. Every citizen of a state is a subject of two 
 distinct soverignties, having concurrent jurisdiction in the state, 
 — concurrent as to place and persons, though distinct as to sub- 
 ject-matter. Legal or equitable rights, acquired under either system 
 of laws may be enforced in any court of either sovereignty, com- 
 petent to hear and determine such kind of rights and. not re- 
 stsained by its constitution in the exercise of such jurisdiction. 
 Thus, a legal or equitable right acquired under state laws may 
 be prosecuted in the state courts, and also, if the parties reside in 
 different states in the federal courts. So, rights, whether legal or 
 equitable, acquired under the laws of the United States, may be 
 prosecuted in the United States courts, or in the state courts, 
 competent to decide rights of the like character and class; sub- 
 ject, however, to this qualification, that where a right arises under 
 a law of the United States Congress may, if it see fit, give to the 
 federal courts exclusive jurisdiction." 
 
 ' Swope V. Leffingwell, 105 U. S., 3. 
 
 ' First National Bank v. Bohne, 8 Fed. E., 115. 
 
 ' Mitchell V. Butler, 8 Rep. 232. * 93 U. S., 130 p. 136. 
 
§252 SUIT BY AND AGAINST NATIONAL BANK. 163 
 
 § 252. Opinions of New York and Illinois courts. 
 
 "The only cases," said Rapalld, J., "in which exclusive jurisdic- 
 tion is conferred by the Banking Act upon the courts of the United 
 States, so far as we can find, are proceedings to enforce the for- 
 feiture of the franchises of banking associations for violations of 
 the act, and proceedings to enjoin the Comptroller of the Currency 
 from winding up the corporation, through a receiver." ' And this 
 view has prevailed everywhere.^ Indeed, the New York Court of 
 Appeals maintained that the power to bring actions against the 
 national banks conferred by the National Banking Act was "per- 
 missive and not Mandatory." Furthermore, " it was not competent 
 for Congress to deprive the state courts of jurisdiction in all ac- 
 tions against these banking associations." ' 
 
 " Oar courts," said Walker, C. J., of Illinois, " under the powers 
 conferred on them by our constitution have jurisdiction over all 
 persons and things within the borders of the state. And when 
 persons or corporations, without reference to when or where the 
 latter are created, come into this state, they are within the juris- 
 diction of our courts. And it is by virtue of this power thus 
 conferred that our courts exercise their jurisdiction, and not 
 by virtue of congressional action or federal grant of power. If 
 either of these corporations were to sue in our courts for any 
 matters, except such as those in which the court would refuse to 
 exercise its functions in favor of a natural person, our courts 
 would take jurisdiction and proceed to trial and judgment. The 
 law regards such bodies as persons, and extends to them the rights 
 and privileges of natural persons, but no more or greater rights." * 
 
 § 253. Bank is citizen of state and could be sued in 
 state court. For the purpose of jurisdiction a national bank 
 was declared to be a citizen of the state where ii was located,* 
 and could be sued in a state court in a county or city outside its 
 
 ' Brinckerhoff D. Bostwiek, 88 N. Y;, p. 61. 
 
 ^ Adams & Co. v. Baunis, 29 La. Ann.; 315; Bletz u Columbia National 
 Bank, 87 Pa., 87; Stephens v. Monongahela National Bank, 7 Week. Notes, 
 491; First National Bank v. Hubbard, 49 '^t., 1. 
 
 '■> Church, C. J., Cooke v. State National Bank, 52 N. Y., 96 p. 107. 
 
 * Missouri Eiver Tel. Co. v. First National Bank, 74 111., p. 221. 
 
 * St. Louis National Bank v. Allen, 2 MeCrary, 92; Manufacturers' Na- 
 tional Bank v. Baach, 2 Abb. U. S., 232; S. C. 8 Blatchf. 137; Cooke v. State 
 National Bank, 52 N. Y., 96; Davis w. Cook, 9 Nev., 134; Chatham National 
 Bank v. Merchants' National Bank, 4 Th. & C, 196. 
 
164 NATIONAL BANK ACT. . §254 
 
 location. This was denied, ' unless it submitted voluntarily to the 
 jurisdiction of the court." But the United States Supreme Court 
 decided otherwise, ' the Chief Justice remarking that section 5136 
 subjected " the bank to suits at law or in equity as fully as nat- 
 ural persons, and we see nowhere is the Banking Act any evidence 
 of an intention on the part of Congress to exempt banks from the 
 ordinary rules of law affecting the locality of actions founded on 
 local things." The proceeding in that case related to property in 
 the parish of La Fourche which had been seized and sold under 
 process from the district court of that parish. The proceeding 
 " was clearly local in its nature " and was sustained.* Likewise 
 McCrary, J., has said that " a fair construction of this provision 
 would seem to go no further than to place these corporations on 
 an equal footing with natural persons, and to confer upon them 
 the right to sue and be sued in the federal courts only to the same 
 extent as natural persons, and under like circumstances and eon- 
 ditibns." ^ 
 
 § 254. Remarks by Barnard, P. J. In New York a na- 
 tional bank could be sued in any state court having general juris- 
 diction, in which 'an individual could be sued for the same cause. 
 It was not necessary to bring the action in the county where the 
 bank was located. " To restrict the operation of section 5136 
 [granting general power to sue and be sued] the word may, 
 in section 5198 [relating to suits for usury] must be read must. 
 While it is an admitted rule of construction to hold that the word 
 may means must, when so intended, there are grave reasons why 
 such a construction is not proper in this case. It would give a 
 special privilege to a defendant national bank. It would curtail 
 the general right to sue and be sued like a natural person in all 
 courts. If a national bank cannot be sued except in the county 
 where it is located, a national bank having a claim against an- 
 other, and it may be a district national bank in the same state, 
 must go to the place of location of the debtor bank to sue it; and 
 this would be imperative, even if the business was done and all 
 the witnesses lived at the place of the location of the creditor 
 
 ' Cadle V. Tracy, 11 Blatchf., 101; McCracken v. Covington City Nat. 
 Bank, 4 Fed. E., 602 p. 607; Crocker v. Marine National Bank, 101 Mass., 240. 
 ^ Lee V. Citizens' National Bank, 2 Ciu., 298. 
 ' Casey v. Adams, 102 U. S., 66. , 
 
 ♦ Talmadge v. Third National Bank, 27 Hun, 61. 
 ^ St. Louis National Bank v. Allen, 2 McCrary, 92. 
 
§255 SUIT BY AND AGAINST NATIONAL BANK. 165 
 
 bank. There could be no change of the place of trial, because 
 jurisdiction is given- to try only in the place of location of the 
 bank so sued. I do not think this was the design of this section. 
 The intent seems to have been to give the power to sue the banks 
 in the United States or the state courts. While the United States 
 courts are specified, there is no limitation upon the state court, 
 other than they should have jurisdiction in such cases." ' 
 
 § 255. When state court had no jurisdiction. But a 
 state court, that of Illinois for example, had no jurisdiction in 
 a case by a foreign corporation against a national bant located 
 in Iowa. Said Walker, C J. : " By the plain meaning of the lan- 
 guage of [section 57 in the Act of 1864] Congress intended only 
 to confer jurisdiction upon the state courts of Iowa, the county 
 court of Woodbury county, and the municipal court of Sioux City, 
 if they had jurisdiction of similar cases under the laws of that 
 state. The effort to confer jurisdiction was not on such courts 
 generally, but simply upon the courts in the jurisdiction in which 
 the delinquent bank might be located." ^ 
 
 § 256. Bank could sue in federal court within or 
 outside its district. A national bank could sue in a federal 
 court though the defendant was located in the same district,' or 
 could sue, in the Circuit Court of the United States in another 
 state, a citizen who lived there. For the purpose of sustaining 
 the action, it was presumed that the individual members of a na- 
 tional bank were citizens of the state where the bank was located 
 within the meaning of the constitution.* And if the bill alleged 
 for example, that the plaintiff was " a citizen of the state of Illi- 
 nois, and located and residing and doing business in the city of 
 Chicago, in said state," and that the defendant was a citizen of 
 New York, this was sufficient to give the circuit court jurisdiction 
 of the suit.'' . 
 
 §257. Could not be sued outside its district. But a 
 national bank could not be sued in a federal court outside the dis- 
 
 ' Barnard, P. J., Talmadge v. Third National Bank, 27 Hun, 61. 
 ' Missouri Eiver Tel. Co. v. First National Bank, 74 111., 217 p. 219. 
 Bank v. County of Douglas, 3 Dill., note p. 300. 
 ' Commercial National Bank v. Simmons, 1 Flippin, 449; First National 
 
 * Manufacturers' National Bank u Baach, 2 Abb. XJ. S., 232; S.C. SBlatchf., 
 137; Main v. Second National Bank, 6 Biss., 26; Orange National Bank v. 
 Traver, 7 Sawyer, 210. 
 
 * Manufacturers' National Bank v. Baach, 2 Abb. U. S., 232. 
 
166 NATIONAL BANK ACT. §268 
 
 trict where it was located. And the serving of a process on one 
 of its oificers, who happened to be in another district, did not con- 
 fer jurisdiction. A corporation was declared to be not migratory, 
 or not moving around with the person of its officers.' Nor did 
 the Federal Practice Act of June 1, 1872, change the rule in this 
 regard, or enlarge the jurisdiction of the federal courts.^ 
 
 § 258. Receiver's right to sue in federal court. 
 The District Court of the United States has always had jurisdic- 
 tion of suits by receivers to enforce the liability of shareholders.' 
 Moreover, they can sue " without reference to the locality of their 
 personal citizenship." * 
 
 § 259. Can other than usury cases be brought un- 
 der section 5198. With regard to the right to proceed against 
 national banks by section 5198, it was decided in Louisiana that 
 this related only to actions to recover usurious interest and' did 
 not cut off the jurisdiction of state courts in other matters.' Chief 
 Justice Waite remarked in Casey v. Adams,' that the statute re- 
 lated to transitory actions only, and not to those which were local 
 in their character. Nor does the language imply that even all 
 transitory actions are included within its operation. The Supreme 
 Court of Georgia, however, speaking through its late Chief Jus- 
 tice, declared that from the language employed by the supreme 
 federal tribunal the statute " does relate to all transitory actions." ' 
 Whatever interpretation is to be put on the remark of the court 
 in Casey v. Adams, " the evident object of this provision," says 
 Andrews, J., "was to give the federal court jurisdiction 
 without regard to the citizenship of the plaintiff.* * * The 
 provision is permissive merely and not mandatory, and therefore 
 not limiting the general rule which permits civil cases arising 
 under the laws of the United States to be. prosecuted, and deter- 
 mined in the state courts unless exclusive jurisdiction of them has 
 been vested in the federal courts, or unless Congress has prohib- 
 ited the state courts from entertaining jurisdiction in such cases." ' 
 
 ' Main v. Second National Banlc, 6 Biss., 26. ' Id. 
 
 » Stanton v. Wilkeson, 8 Bened., 357. 
 
 * Kennedy v. Gibson, 8 Wall., 498 p. 507. , 
 
 * New Orleans National Banking Association v. Adams, 3 Woods, 21. 
 « 102 U. S., p. 66. 
 
 ' Continental National Bank v. Folsom, 3 S. E. Rep., 267 p. 272. 
 ' Robinson v. National Bank, 81 N. Y., 385 p. 391, 
 
§260 SUIT BY AND AGAINST. NATIONAL BANK. 167 
 
 " There is no conflict between the two sections, but each may 
 have full operation without interfering with the other, except 
 so far as suits for the recovery of interest is concerned." ' 
 
 § 260. Cannot sue for less than $500 in federal 
 courts. Exception. The federal courts have never had 
 ampler jurisdiction over national banks than they have over citi- 
 zens. Consequently as the amount in controversy has always 
 been a needful element to the jurisdiction of the court in the case 
 of natural persons, and must be five hundred dollars or more, 
 as much must have been involved in a national bank suit to gain 
 jurisdiction.^ But this limit has never prevented a receiver from 
 suing in a )federal court. 
 
 § 261. Removal of cases from state court. Con- 
 cerning the right of removing national bank cases from the state 
 to the federal courts the law clearly delared that this conld not 
 be done on the ground that the banks were created by national 
 law.^ When a suit was brought, if both parties were citizens of 
 the same state, one party could not, by becoming a citizen of 
 another, have the suit removed to the United State Circuit Court 
 under the Statute of 1867.* Said the court on one occasion: " We 
 are of opinion that this Statute applies only to cases where, at the 
 time the suit is brought, one of the parties is a citizen of another 
 state than that in which it is brought. Any other construction 
 would enable either party to all suits in the state courts to defeat 
 the jurisdiction of the court, at his own option, by removing into 
 another state." ^ 
 
 § 262. Chatham National Bank v. Merchants' Na- 
 tional Bank.° A national bank in West Virginia which was 
 sued in a state court by a national bank in New York city served 
 a notice of appearance on December 15th, but did not file a 
 petition for the removal of the cause to the federal court until 
 January 7th, the following month, the petition stating that the 
 defendant then entered its appearance, but had not done so before. 
 This was held a valid compliance with the federal statute requir- 
 
 ' Hall, J., Continental National Bank v. Folsom, 3 S. E. Eep., p. 273. 
 ^ St. Louis National Bank v. Brinkman, 1 Fed. E., 45. 
 ^ Wilder v. Union National Bank, 9 Biss., 178; Pettilon v. Noble, 7 Biss., 
 449. * Ch. 196. 
 
 * Tapley v. Martin, 116 Mass., 275 p. 376. 
 « 4 Th. & C, 196, S. C. 1 Hun, 703. 
 
168 NATIONAL BANK ACT. §263 
 
 ing the defendant "at the time of entering his appearance in the 
 state court to file his petition." 
 
 § 263. Remarks of Waite, C. J.' " The removal of this 
 class of cases from a state court to a circuit court [of the United 
 States] was first provided for by the Act of March 3, 1875, in 
 that clause of section two which relates to suits 'arising under 
 the constitution or laws of the United States.' Thus the federal 
 and state courts had concurrent jurisdiction for suits brought by 
 or against national banks, and a suit of that character begun in a 
 state court could be removed by either party to a circuit court of 
 the United States if the value of the matter in dispute exceeded 
 five hundred dollars, because, as a national bank is a federal cor- 
 poration, a suit by or against it is necessarily a suit arising under 
 the laws of the United States." By the Statute of 1882, how- 
 ever, the state courts have exclusive jurisdiction except suits be- 
 tween the national banks and " the United States, or its officers 
 and agents." Consequently a bank can no longer have these suits 
 removed from state into federal courts under the Act of 1875. 
 
 § 264. Removal in ease of receiver. A receiver began 
 an action against another receiver in a state court by summons 
 without any complaint setting forth the cause of action at a time 
 early enough to make it triable at the April term of the court, if 
 the pleading had been promptly filed. The time for filing the 
 complaint was extended to the April term, when the plaintiff made 
 a motion for an order to examine the officers of the bank to enable 
 him to make a complaint and, in support of the motion, filed an 
 affidavit stating that his cause of action arose from the fact that 
 the bank of which he was a receiver had paid to the defendant 
 bank illegal interest, and that by the statutes of the United States 
 the defendant bank had become indebted to the other for twice 
 the amount paid. If the examination had been instantly made, 
 and a complaint had been framed at once, the cause would not have 
 been triable in due course until the May term, and at that term 
 it was removed to the United States court. It was held that the 
 cause was removable and that the application for removal was 
 made in time.^ 
 
 § 265. Right to sue in state court a bank in volun- 
 tary liquidation. The right of a state tribunal to proceed 
 
 ' Leather Manufacturers' Bank v. Cooper, 1?0 U. S., 778; National Bank 
 V. Fore, 25 Fed. R. , 209. ^ Davies v. Marine National Bank, 24 Fed. R. , 194. 
 
§266 SUIT BY AND AGAINST NATIONAL BANK. 169 
 
 against a national bank in voluntary liquidation has been consid- 
 ered by the Supreme Court o£ Georgia. In a bill filed by the 
 trustees of a Masonic institution against a national bank and B, 
 its president, and N, its cashier, it was charged that beside its 
 capital it had a large surplus at the time of taking this step, that 
 it had assets enough to pay all its debts and return to its 
 stockholders their' stock and a premium. B owned a majority 
 of the stock, and managed the bank as though it was wholly his 
 own. B and N appropriated large sums of money to their own 
 use, and paid the stockholders only par for their stock. In the 
 bill it was further alleged that the complainant sought in vain 
 to have a receiver appointed by the Comptroller of the Currency, 
 that B and N would not pay a judgment which he had obtained 
 against the bank, and prayed for appropriate relief. The court, 
 through Hawkins, J., said that " if the allegations in the bill 
 [were] true the creditors of the bank could compel B to ac- 
 count for the assets so far as to pay their debts, for all the assets 
 and property of the bank in the hands of its stockholders or 
 president, or elsewhere, are but a trust fund to pay the debts and 
 liabilities of the corporation; and the bank having gone into vol- 
 untary liquidation, and ceased its connection with the govern- 
 ment of the United States, was subject to like proceedings as do- 
 mestic corporations or natural persons, and if its president had 
 and held a fund liable to the payment of debts a court of equity, 
 at the instance of a creditor, could reach and appropriate such 
 assets in payment of ^ debt of the bank." ' 
 
 § 266 Can be sued, though having a receiver. A 
 bank may be sued though in liquidation, and having a receiver. * 
 Says Alvey, J. : " It is not reasonable to suppose that Congress 
 intended that upon simply resolving to go into liquidation and 
 providing for the redemption of its circulating notes the banking 
 association should be dissolved. If by such acts it were dissolved 
 all actions by or against it would at once abate; and parties 
 might be left utterly without remedy for the enforcement of the 
 plainest right, or recompense for the most grievous wrong." * 
 
 ' Merchants & Planters' Nat. Bank v. Trustees, 65 Ga., 603 p. 608, first 
 trial, 63 Id., 549. 
 
 ' Bank of Bethel u. Pahquioqne Bank, 14 Wall., 383 ; Security Bank v. 
 National Bank, 4 Th. & C, 518 ; Ordway v. Central National Bank, 47 Md., 
 217. ' Ordway t). Central National Bank, 47 Id., p. 239. 
 
170 NATIONAL BANK ACT. §267 
 
 Ti. s. district S 267 " All suits and proeeedings arising out of the provi- 
 
 al^orneyto *' ^ , ° , . . . ,. . , . , 
 
 conduct sions of law governing national banking associations, in which 
 |ev. Stat, the United States or any of its officers or agents shall be parties, 
 shall be conducted by the district attorneys of the several dis- 
 tricts under the direction and supervision of the Solicitor of the 
 Treasury." ' 
 
 § 268 Meaning of the section. In construing this stat- 
 ute Judge Swayne remarked in a suit by the receiver of an in- 
 solvent bank against the stockholders for contributions : " The 
 receiver is the agent of the United States and * * this 
 suit should have been conducted by their attorney. But this 
 provision is merely directory. The question which arises is be- 
 tween the United States and its officers. The rights of the de- 
 fendants are in no wise concerned, and they cannot be heard to 
 make the objection that this duty of the local law officer of the 
 government has been devolved upon another. It is to be pre- 
 sumed there were sufficient reasons to warrant this departure 
 from the letter of the law." ^ And in another case Woodruff, J., 
 said: "The most obvious meaning, intent and effect of this sec- 
 tion' are, to impose upon the district attorneys the duty of con- 
 ducting suits and proceedings which may be necessary to carry 
 into full effect the provisions of the act, whether such suits are 
 brought in the name of the United States or of the Comptroller 
 of the Currency, or in the name of, or by, the receiver of a bank- 
 ing association, and in whatever court such suits may be prose- 
 cuted." = 
 
 1 Act 1864, Sec. 56. 
 
 ^ Kennedy v. Gibson, 8 Wall., 498 p. 504. 
 
 ' Van Antwerp v. Hulburd, 7 Blatchf., p. 434. 
 
3269 
 
 PLEADING AKD EVIDENCE. 
 
 m 
 
 CHAPTEE XIV. 
 
 PLB4.DING AND EVIDENCE. 
 
 269. Certified and sealed copies of Comp- 
 
 troller. 
 
 270. Certified copies of organization. 
 
 271. Who can question validity of or- 
 
 ganization. 
 
 272. How bank's existence may be 
 
 proved. 
 
 273. What must be proved. 
 
 274. How it must describe itself. 
 
 275. Proof of existence in Mix v. Na- 
 
 tional Bank. 
 
 276. Merchants' National Bank v. Glen- 
 
 don Company. 
 
 277. Washington County National Bank 
 
 V. Lee. 
 
 278. Hungerford National Bank v. Van 
 
 Nostrand. 
 
 279. Thatcher v. West Elver National 
 
 Bank. 
 
 280. Effect of doing business before date 
 
 of certificate. 
 
 § 269. " Every certificate, assignment, and conveyance exe- Docimients 
 cuted by the Comptroller of the Currency, in pursuance of law, ^'"»'^'' ''y 
 and sealed with his seal of office, shall be received in evidence in maybe 
 
 evidence. 
 
 all places and courts ; and all copies of papers in his office, cer- l®^-^*^'*- 
 tified by him and authenticated by the said seal, shall in all cases 
 be evidence equally with the originals. An impression of such 
 seal directly on the. paper shall be 3s valid as if made on wax or 
 wafer." ' 
 
 § 270. " Copies of the organization certificate of any national certified 
 banking association, duly certified by the Comptroller of the Cur- f™^^^^""^ 
 rency, and authenticated by his seal of office, shall be evidence in f^J^^^ «"- 
 all courts and places within the jurisdiction of the United States |^^-g|^"'- 
 of the existence of the association, and of every matter which 
 could be proved by the production of the original certificate." ' 
 
 § 271. Who can question validity of organization. 
 The organization of a national bank may be denied or questioned 
 by a person who has not estopped himself.' But if he has accepted, 
 as payee, a promissory note, payable at the bank, and has sold 
 the note to the institution, he cannot raise this queeition by aver- 
 ring a want of knowledge sufficient to form a belief of its corpo- 
 
 1 Act 1864, Sec. 2. ' Id., Sec. 6. 
 
 ' National Bank v. Orcntt, 48 Barb., 256 ; Huflaker v. National Bank, 12 
 Bush., 287. 
 
172 iSTATIONAL BANK ACT. §272 
 
 rate existence. "Whilst he is not estopped to make the defense, 
 he has placed himself in an attitude which makes it his duty to 
 ascertain from an examination of the public records of the treas- 
 ury department of the general government, whether the associa- 
 tion with which he has been voluntarily dealing has authority to 
 do business as a national bank." ' 
 
 § 272. How bank's existence may be proved. In 
 proving a bank's existence a copy of the certificate of organiza- 
 tion, certified by the Comptroller, with his certificate authorizing 
 the bank to begin business, with other facts showing that it has 
 acted as a corporation, is sufficient to prove that the bank is le- 
 gally existing.^ 
 
 § 273. What must' be proved. To maintain an ac- 
 tion a compliance with the statutory requirement concerning 
 publication need not be shown. Says Sedgwick, J. : " The sec- 
 tion does not say that the corporation is not to commence busi- 
 ness, or to be deemed to be organized, until such publication. 
 On the contrary, the certificate must be that the association has 
 complied with all the provisions of the act required to be com- 
 plied with before being entitled to commence the business of 
 banking under the act. " ^ 
 
 § 274. How it must describe itself. If a bank in su- 
 ing should describe itself, for example, as "The Third National 
 Bank of Baltimore," this would not be equivalent to an aver- 
 ment that the plaintiff was a banking asso(Kation, established in 
 the district of Maryland, nor that it was^ established by the law 
 of the United States, providing for national banking associations.* 
 "There are other Baltimorea than the one in Maryland, and there 
 does not appear to be in the National Bank Act anything to pro- 
 hibit an association formed in any other state, from having been 
 the first to take the title of the plaintiff, if they had seen fit, and 
 if the Comptroller of the Currency had approved." ° 
 
 § 275. In Mix v. National Bank,' the objection was 
 made under the issue on the plea of nul tiel corporation to receiv- 
 
 1 Lindsay, C. J., Huflfaker v. National Bank, 12 Bush., 287 p. 292. 
 
 2 Merchants' (Exchange Nat. Bank v. Cardozo, 3 J. & Sp., 162; First 
 National Bank v. Kidd, 20 Minn., 234 ; Tapley v. Martin, 116 Mass., 275. 
 
 = Merchants' Exchange Nat. Bank v. Cardozo, 3 J. & Sp., 162 p. 169. 
 * Third National Bank v. Teal, 5 Fed. R., 503. 
 = Id., p. 505, « 91 111., 20.. 
 
§276 PLEADING AND EVIDENCE. 173 
 
 ing the Comptroller's certificate, provided by tlie above section. 
 The court said, there was, besides, evidence that the bank had 
 been acting as a national bank for eleven years ; and the existence 
 of the bank is acknowledged in the vote required by the defend- 
 ant, it being made payable at the bank. We think the certificate 
 was properly enough received in evidence, and that the evidence 
 was amply sufficient to establish, least prima facie, the exist- 
 ence of the corporation. 
 
 § 276. Merchants' National Bank v. Glendon Co.' 
 In another case a national bank described itself in an action as 
 the Merchants' National Bank of Bangor, "a corporate body or- 
 ganized under the laws of the United States of America, and hav- 
 ing an established place of business at Bangor, in the state of 
 Maine," and, to prove its corporate existence, introduced a certifi- 
 cate of the Comptroller that it had been duly organized, and the 
 testimony of the book-keeper of a ba"nk in Boston that the Mer- 
 chants' National Bank of Bangor did a banking business under 
 that name ; that he had been in their banking house in Bangor ; 
 was well acquainted with the cashier, and that his own bank was 
 in the habit df receiving remittances from that bank. This evi- 
 dence was declared to be competent to show that the bank was a 
 banking corporation in fact, and transacting the business appro- 
 priate to such an institution. 
 
 § 277. "Washington County National Bank v. Lee.^ 
 In another case a national bank described itself as "The Wash- 
 ington County National Bank, a corporation duly established by 
 law and doing business in Greenwich, in the state of New York," 
 and to prove its corporate existence introduced an organization 
 certificate of " The Washington County National Bank of Green- 
 wich," to "be located * * in the town of Greenwich, county 
 of Washington and state of New York," and a certificate of the 
 Comptroller that " The Washington County National Bank of 
 ' Greenwich, in the county of Washington, and state of New York," 
 had been duly organized. It was held that in the absence of evi- 
 dence of the existence at Greenwich of another bank named " The 
 Washington County National Bank of Greenwich," the evideri6e 
 would warrant the inference of the plaintiff's organization. 
 
 § 278. Hungerford National Bank v. Van Nos- 
 trand.^ But a promissory note payable at the Hungerford Na- 
 
 ' 120 Mass., 97. . ' 112 Mass., 521. ,' 10(i Mass., 559. 
 
174 NATIONAL BANK ACT. §279 
 
 * 
 
 tional Bank, for example, " does not necessarily indicate a corpora- 
 tion established under, that name;" this is especially so if the note 
 be made payable to the bank as a party. ' 
 
 § 279. Thatcher v. West River National Bank.^ 
 Documentary evidence of the existence of a corporation under the 
 name of "The West Eiver National Bank of Jamaica," which was 
 described as located in the town of Jamaica, county of Windham, 
 and state of Vermont, was admitted under the general issue to 
 prove the corporate existence of the party plaintifP styled in the 
 declaration, " The West Eiver National Bank of Jamaica, Ver- 
 mont." 
 
 § 280. Eflfect of doing business before date of certi- 
 ficate. Nor was the objection valid that the certilicate of organ- 
 ization introduced in the above case was acknowledged before a 
 notary, who was one of the shareholders of the bank. This is a ques- 
 tion for the Comptroller. " His certificate of compliance VTith the 
 act of Congress removes any objection which might otherwise have 
 been made to the evidence on which he acted." ^ The Comptrol- 
 ler is " clothed with jurisdiction to decide as to the completeness 
 of the organization, and his certificate is conclusive upon the 
 subject for all the purposes of litigation. It has the same effect, 
 and for the same reason, as his determination and order vrith re- 
 spect to the amount to be collected from each stockholder in the 
 event of the failure of the association. No question can be raised 
 in this collateral way as to either." * The fact that a bank may 
 have been doing business before the date of the certificate of its 
 organization does not prove that it is a different body frOm that 
 named in the certificate.^ 
 
 ' Hungerford National Bank v. Van Nostrand, 106 Mass., 559. 
 
 2 19 Mich., 196. 
 
 " Id.; Casey v. Galli, 94 TJ. S., 673. 
 
 ♦ Swayne, J., Casey v. Galli, 94 TJ. S., 673 p. 679. 
 
 * Thatcher v. West Kiver Nat. Bank, 19 Mich,, 196. 
 
1281 
 
 CRIMINAL OFFENSES. 
 
 175 
 
 CHAPTEE XV. 
 
 CRIMINAL OFFENSES. 
 
 Embezzling and False Entries, 
 
 281. Embezzlement. 
 
 282. Meaning of ' ' embezzle. ' ' 
 
 283. Prosecution must be by indictment. 
 
 284. What is a good indictment. • Illus- 
 
 trations. 
 
 285. Essentials in indictment for aiding 
 
 and abetting. 
 
 286. Intention. 
 
 287. United States v. Taintor. 
 287(a). Jurisdiction. 
 
 ? 288, Is a loan a criminal mieapplication. 
 
 289. When overdraft is misapplication. 
 
 290. Liability for exercise of official dis- 
 
 cretion. 
 
 291. Purchase of stock in trust, discount 
 
 of worthless notes, withdrawal of 
 deposits by debtor. 
 
 292. False entries of loans. 
 
 293. False entries in reports to Comp- 
 
 troller. 
 
 Circulating Notes. - 
 
 294. Securities of U. S. defined. 
 
 295. Counterfeiting national .bank notes. 
 
 296. Using plates to print notes without 
 
 authority, orfor having bank-note 
 paper. 
 
 297. Passing, selling, etc., counterfeit 
 
 notes. 
 
 298. Taking impressions of tools, etc. 
 
 299. Having impression of tools, etc. 
 
 300. Buying, selling or dealing in forged 
 
 or altered notes. 
 
 301. Unlawfully circulating notes of 
 
 closed bank. 
 
 302. U. S. currency includes national bank 
 
 notes. 
 
 303. Evidence. 
 
 304. Indictment. 
 
 Sentences and State Prosecutions. 
 
 § 305. Mode of rendering sentence for sev- 
 eral terms. 
 306. State may punish for offenses not 
 prescribed by Congress. 
 
 307. OffenStes mentioned. 
 
 308. Cannot punish for passing counter- 
 
 feit notes, nor accessory to em- 
 bezzlement. 
 
 8 281 Most of the -violatioiiB of the National Bank Act are cov- Embezzie- 
 
 o ■ ment. 
 
 ered by the following section: " Every president, director, cashier, f^-^^*- 
 teller, clerk, or agent of .any association, who embezzles, abstracts, 
 or willfully ^misapplies any of the moneys, funds, or credits of 
 the association; or who, without authority from the directors, is- 
 sues or puts in circulation any of the notes of the association; or 
 who, without such authority, issues or puts forth any certificate 
 
176 NATIONAL BANK ACT. §282 
 
 of deposit, draws any order or bill of exchange, makes any ac- 
 ceptance, assigns any note, bond, draft, bill of exchange, mort- 
 gage, judgment, or decree; or who makes any false entry in any 
 book, report, or statement of the association, with intent, in either 
 case, to ipjure or defraud the association or any other company, 
 body politic or corporate, or any individual person, or to deceive 
 any officer of the association, or any agent appointed to examine 
 the affairs of any. such association ; and every person who with 
 like intent aids or abets any officer, clerk, or agent in any viola- 
 tion of this section, shall be deemed guilty of a misdemeanor, 
 and shall be imprisoned not less than five years nor more than 
 ten." 
 
 § 282. Meaning of embezzle. In construing the words 
 " embezzles, abstracts or willfully misapplies," contained in the 
 first clause of this section. Judge Benedict says that each of them 
 "must be given effect. The word 'misapply' was intended to 
 include acts not covered by the previous words ' embezzle ' or 
 ' abstract.' To give to the word ' misapply ' the same meaning 
 as the word ' embezzle ' is to eliminate a word from the statute. 
 This cannot be done. Nor can the provision that the acts pro- 
 hibited shall be deemed a misdemeanor, be disregarded. By this 
 provision the law in ordinary cases of misdemeanor is made ap- 
 plicable, and by that law the officer who causes or procures the 
 money of the bank to be misapplied is a principal offender, and 
 may be charged as such. Aiders and abettors who are not officers 
 of the bank are covered by the last clause of the section." ' Judge 
 Lowell, also, has remarked that the word appears to mean, whenever 
 -used to distinguish a crime which a person has the opportunity to 
 commit, by reason of some office or employment which may include, 
 in its significations, some breach of confidence or trust, some misuse 
 of an opportunity of that sort. That is about all, I think, that can 
 be found of a general nature in the meaning of the word." '' If, 
 therefore, the president of a bank, who is charged as a trustee in 
 administering its funds, converts them to his own use, he embez- 
 zles and abstracts them, unless he can show adequate authority 
 for so doing. ^ 
 
 §283. Prosecution must be by indictment. The charge 
 
 ^ United States v. Fish, 24 Fed, E., 585 p. 591. 
 ' United States ». Conant, 9 Cent. Law Jour., 129. 
 ' In the matter of Van Campen, 2 Beued., 419. 
 
§284 CEIMINAL OFFENSES. 177 
 
 of misapplying the funds of a national bank by the cashier is the 
 charge of an " infamous crime " which, unjier the federal con- 
 stitution, must be made by the indictment of a grand jury; it 
 cannot be prosecuted by a mere information filed by the district 
 attorney with the consent of the court.' 
 
 § 284. What is a good indictment. Illustrations. If 
 an indietmerit for abstracting the funds of a bank should charge 
 that the accused was president and agent of a national bank, 
 duly organized and established, and then existing and doing 
 business under the laws of the state, and that, as such president 
 and agent, he did then and there "willfully and unlawfully and 
 with intent to injure the said national banking a8socia,tion, and 
 without the knowledge and consent thereof, abstract and convert 
 to his own use certain moneys and funds of the property of the 
 said association of the amount and value, etc., this would suffi- 
 ciently describe and identify the crime created by this sec- 
 tion." ' 
 
 An indictment for willfully misapplying the funds^of a national 
 bank need not charge that the moneys and funds alleged to have 
 been misapplied had been previously intrusted to the accused; 
 since a willful and criminal misapplication of the funds of the as- 
 sociation may be made by its officer or agent without having pre- 
 viously received them into his manual possession.' But an in- 
 dictment which should charge the president of a national bank 
 with willfully misapplying the funds of the association, should 
 aver that he did so for the benefit of himself and with the intent 
 to injure and defraud the association, or some other person or 
 body corporate.* If a count should charge the fraudulent pur- 
 chase by the president of a national bank of its shares, and should 
 allege that they were held by him "in trust for the use of said 
 association, and that said shares were not purchased as aforesaid 
 in order to prevent loss upon any debts theretofore contracted 
 with said association in good faith," the offense would not be de- 
 scribed with sufficient certainty.' Neither would a count be suffi- 
 cient which should charge the president of a national bank with ' 
 the fraudulent purchase of its shares, but should omit to state for 
 
 ' Welker, J., United States v. Hade, 10 Chic. Leg. News, 22. 
 2 United States «. Northway, 120 U. S., 327. ' ' Id. 
 
 * United States v. Britton,. 107 U. S., 655. * Id. 
 
 12— B. 
 
178 NATIONAL BANK ACT. §285 
 
 whose use the purchase was made, or to state that it was not 
 made in order to prevent loss on a previously contracted debt.' 
 
 An indictment which should charge that the accused "as pres- 
 ident and agent" of a national b-ink did the acts forbidden by 
 this section would not be vitiated by such a description of his 
 official character because he could be " both president and agent.^ 
 An indictment which should charge a national bank officer with 
 misapplying $25,000 of the bank "by causing the said sum 
 of $25,000 to be credited to G and W on books of the bank," 
 etc., and the evidence should be a credit by a single entry of 
 $105,000, of which $25,000 was misapplied, would not be a ma- 
 terial variance.' An indictment which should charge that the 
 accused " was then and there president and agent of a certain na- 
 tional banking association, to wit: [naming the association] there- 
 tofore duly organized and established, and then existing and do- 
 ing business at [naming the place] under the laws of the United 
 States," would sufficiently state that the bank was organized under 
 the National Banking Law, or to carry on the business of banking 
 under a law of the United States.* 
 
 § 285. Essentials in indictment for aiding and abet- 
 ing. In charging the president of a bank with aiding and abet- 
 ting its cashier in misapplying its funds, it iS not necessary to 
 aver in the indictment that he then and there knew that the per- 
 son so aided and abetted was the cashier.* But in charging a 
 person who is not connected with a bank with aiding and abet- 
 ting a director in misapplying its funds, the indictment must 
 state facts showing such a misapplication of the money of the 
 association by the director.' 
 
 § 286. Intention. It was the intention of Congress to 
 make criminal the misapplication and conversion of the funds of 
 national banking associations, without regard to the considera- 
 tion, whether or not the person thus misapplying them received 
 any of the funds or other advantage directly or indirectly.' If it 
 appears that the funds of a banking association have been ab- 
 
 ' "United States v. Britton, 107 U. S., 655. 
 
 ' United States v. Northway, 120 TJ. S., 327. 
 
 ' United States v. Fish, 24 Fed. R., 585. 
 
 * United States v. Northway. 120 U. S., 327. ' Id. 
 
 " United States v. Warner, 26 Fed. R., 616. 
 
 ' Charge of Coxe, J., to jury, United States v. Lee, 12 Fed. R., 816. 
 
§287 CRIMINAL OFFENSES. ' 179 
 
 stracted or willfully applied by an accused person, he is precluded 
 from denying that it was done with an unlawful intention.' But 
 the intent to defraud the bank is an essential element of the crime ' 
 in every case. And the words " with intent in either case to in- 
 JTire or defraud," etc., apply as well to embezzlement, etc., of the 
 funds, as to the making of false entries in the books.^ 
 
 § 287. In the case of the United States v. Taintor' 
 it was shown that he took moneys and funds of a bank, of which 
 he was cashier, and used them in stock speculations, which were 
 conducted in his own name, by depositing them with a stock 
 broker as margin. The defendant offered to prove that these acts 
 were known to the president and some of the directors of the 
 bank, and were sanctioned by them, and were intended for the 
 account and benefit of the bank, and were believed by him to have 
 been sanctioned by the president and some of the directors, 
 although there was no resolution of the board of directors author- ' 
 izing or sanctioning them. The evidence was only offered to dis- 
 prove the averments in the indictment that the acts were done 
 "with intent to injure and defraud the bank." The evidence was 
 properly excluded. 
 
 §287 (a). Jurisdiction. If the cashier of a national bank 
 in Ohio should send a draft on its correspondent bank in New 
 York city, directing it to pay the bank's money to a third party 
 who should be engaged in conducting speculations for the cashier, 
 the offense would be committed in New York, and therefore be- 
 yond the jurisdiction of the federal court in Ohio. Says Judge 
 Sage: " While it is true that an officer commits an offense against 
 the law by making and sending forward a draft upon funds of the 
 bank in New York or elsewhere, it is not true that he thereby 
 misapplies or embezzles the funds, or can be convicted of so doing. 
 The misapplication, embezzlement, or abstraction is in New York, 
 but the drawing of the draft without the authority of the board of 
 directors is in Ohio." * 
 
 § 288. Is a loan a criminal application ? What act 
 would be a criminal misapplication of the money of a national 
 bank? Would a loan? Says Benedict, J. : "It is a mistake to 
 
 1 United States v. Lee, 12 Fed. R., 816. 
 
 ' United States v. Voorhees, 9 Fed. R., 143. 
 
 8 11 Blatchf., 374. 
 
 * United States v. Northway, 33 Int. Rev. Record, 384. 
 
180 NATIONAL BANK ACT. §289 
 
 suppose that there cannot be a criminal misapplication of the 
 moneys of a national bank by means of a loan." Said Judge Bene- 
 dict in Fish's case, in which this point was raised : " If the trans- 
 actions in question were loans, the question still would be whether 
 they were such loans as amounted to a misapplication. Under 
 the by-laws of the bank the president had a large discretionary 
 power to make loans. But his authority in this respect was not 
 unlimited. He had no right to make loans which he knew or be- 
 lieved would not be approved by the board of directors if the cir- 
 cumstances were known; much less had he any right to continue 
 a series of transactions as loans wholly peculiar, exceptional, and 
 dangerous in character, without communicating to the board of 
 directors what knowledge he had respecting these transactions, 
 and when he knew that such knowledge by the board of directors 
 would have prevented a repetition of the loans. Such conduct on 
 his part would be a clear abuse of the discretionary power, not 
 the lawful exercise of it contemplated by the by-laws. A known 
 abuse of discretionary power in making a series of loans which 
 it is known the directors would not sanction, will constitute a 
 criminal misapplication, if found to have been done in bad 
 faith, for private gain, and not in the exercise of honest judgment 
 * * So far as the question of guilt or innocence under this 
 statute is concerned, there is no distinction between a loan in bad 
 faith for the purpose of defrauding the bank, and an application 
 of money, with like intent, in a form other than that of a loan. 
 A loan of the moneys of a bank by the president of the bank in 
 bad faith, for the purpose of defrauding the bank, is no loan in 
 the sense of the law. It is simply a fraud." ' 
 
 § 289. When over-draft is misapplication. "A con- 
 version, by a director, of money of the bank of which he has ac- 
 quired the possession or control by means of his overdraft, drawn 
 without right and with intent to defraud, would constitute a mis- 
 application of money of the association within the meaning of the 
 statute. Such act would, moreover, involve a violation of duty 
 on the part of the director." ''■ And if the president of a national 
 bank, with the intention to defraud the institution, should permit 
 a firm of which he was a member to overdi-aw their account, he 
 
 ■ United States v. Fish, 24 Fed. E., pp. 590, 589. 
 
 ' Benedict, J., United States u. Warner, 26 Fed. R., 616. 
 
§290 CKIMINAL OFFENSES. 181 
 
 would be guilty of misapplying its funds.' Nor would the gov- 
 ernment be required to show that the o£&cers personally took 
 money from the bank, or was personally present when any other 
 person took away money to render him criminally liable.^ 
 
 § 290. Liability for exercise of official discretion. 
 "The honest exercise of ofiScial discretion in good faith, without 
 fraud, for the advantage, or supposed advantage, of the associa- 
 tion is not punishable; but if official action be taken, not in the 
 honest exercise of discretion, in bad faith, for personal advantage, 
 and with fraudulent intent, it is punishable."^ 
 
 § 291. Purchase of stock in trust, discount of 
 worthless notes, withdrawal of deposit by debtor. 
 The statute would not be violated if the president and director 
 of a national bank should cause its shares to be purchased with 
 its money and held in trust for its benefit.* Nor would the statute 
 be violated if the president should procure the discount of a note, 
 not well secured, — whose maker and indorser are known to be in- 
 solvent at the time of discounting the same, — and should apply 
 the proceeds to his own use.* Nor would the statute be violated 
 if the president should permit a depositor, who is largely indebted 
 to the bank, to withdraw his deposits instead of applying them 
 on his indebtedness. ° 
 
 § 292 False entries of loans. An indictment against 
 the president of a national banking association for making a false 
 entry on its books requires, says Judge Woods, the following 
 averments: " 1. That the accused was the president or other 
 officer of a national banking association, which was carrying on 
 a banking business. 2. That being such president or other of- 
 ficer, he made in a book, report, or statement of the association, 
 describing it, a false entry, describing it. 3. That such false en- 
 try was made with intent to injure or defraud the association, or 
 to deceive any agent, describing him, appointed to examine the 
 affairs of the association. 4. Averments of time and place." ' 
 
 If a national bank officer should make false credits in favor of 
 a firm of which he was a member, and should permit the money 
 represented by these to be paid to his firm on the check of 
 
 ' Benedict, J.. United States v. Fish, 24 Fed. E., 585. ^ j^ 
 
 = United States v. Fish, 24 Id., 585 p. 588. 
 
 * United States v. Britton, 108 U. S., 192. ^ i^ 6 j^ 
 
 ' Id., 107 U. S., p. 662. 
 
182 NATIONAL BANK ACT. P8i 
 
 his parther, ia pursuance of an understanding with him that the_ 
 money should be thus drawn, he would be guilty of violating the 
 statute. ' 
 
 It is not necessary to show that the particular form of state- 
 ment employed by the clerk in making the entry was directed 
 by the accused. "It is sufficient if he gave directions which he 
 knew would result, and which did result in an entry asserting that 
 the bank had certain bonds as collateral security for certain loans 
 when the fact was otherwise." ^ 
 
 § 293. False entries in reports to Comptroller. Con- 
 cerning false entries by the president of a national bank in his 
 reports to the Comptroller of the Currency, Ju4ge Blodgett ' has 
 remarked that " officers of national banks who assumie to make 
 reports called for under the law, must be held responsible for the 
 statements made in these reports, unless, of course, it is made 
 clearly to appear that these statements are the result of a mis- 
 take. The defendant cannot be heard to say that he did not know 
 what was in reports made and sworn to by him in the due course 
 of his duty under the law. It is his duty to know whether the 
 report is true or not, and more especially when the report in 
 respect to any item in the class of assets or liabilities difPers 
 from the books of the bank. So that ignorance of the contents of 
 the report, or of the actual condition of the bank as to the ainount 
 . of money or other available assets on hand, is no excuse for a 
 false statement made in these reports, because it is from these 
 statements, with the investigations of the bank examiner, that the 
 public and the Comptroller determine as to the credit of the 
 bank. Therefore, a bank officer called upon to make reports un- 
 der the law, cannot avoid the responsibility, either civil or crimi- 
 nal, for statempnts in the report by showing that they were made 
 by a clerk, and that if false he did not know it. The clerk must 
 be presumed to have written the report under the direction of the 
 officers who are required to verify and attest it, except as to actual 
 mistakes shown." 
 
 " The false entries named must have been made with intent to 
 injure or defraud the bank or its stockholders, or any company or 
 
 ' United States v. Fish, 24 Fed. R., 585. 
 
 " Benedict, J., United States v. Fish, 24 Fed R., p. 594. 
 
 " United States v. Allen, 10 5iss., 90 p. 94. 
 
§294 CRIMINAL OFFENSES. 183 
 
 individual person, so that an intent to injure the bank, its stoek- 
 holders, or some other person is the offense under the law." ' 
 
 § 294 The laws prescribing penalties for counterfeiting na- ^^°™'^^^^°' 
 tional bank notes, engraving false plates, and other offenses ^^^-g, . 
 touching these notes will next be considered. " The words 'ob- sec. 5413. 
 ligation or other security of the United States ' shall be held to 
 mean all bonds, certificates of indebtedness, national [bank] ^ cur- 
 rency, coupons, United States notes, treasury notes, fractional 
 notes, certificates of deposit, bills, checks, or drafts for money, 
 drawn by or upon authorized officers of the United States, stamps 
 and other representatives of value, of whatever denomination, 
 which have been or may [be] ° issued under any act of Congress." 
 
 § 295. " Every person who falsely makes, forges, or counter- connterfeit- 
 feits, or causes or procures to be made, forged, or counterfeited, ^^"''g?^?^' 
 or willingly aids or assists in falsely making, forging, or counter- 8eo. 541s. 
 feiting, any note in imitation of, or purporting to be in imitation 
 of, the circulating notes issued by any banking association now 
 or hereafter authorized and acting under the laws of the 
 United States; or who passes, utters, or publishes, or attempts 
 to pass, utter, or publish, any false, forged, or counterfeited 
 note, purporting to be issued by any such association doing 
 a banking business, knowing the same to be falsely made, 
 forged, or counterfeited, or who falsely alters, or causes or 
 procures to be falsely altered, or willingly aids or assists in falsely 
 altering any such circulating notes, or passes, utters, or publishes, 
 or attempts to pass, utter, or publish as true, any falsely altered 
 or spurious circulating note issued, or purporting to have been 
 issued, by any such banking association, knowing the same to be 
 falsely altered or spurious, shall be imprisoned at hard labor not 
 less than five years nor more than fifteen years, and fined not 
 more than one thousand dollars." 
 
 § 296. " Every person having control, custody, or possession of UsiDg plates 
 any plate, or any part thereof, from which has been printed, or n° tS with- 
 which may be prepared by direction of the Secretary of the ty, orfor 
 Treasury for the purpose of printing, any obligation Or other secu- note paper. , 
 rityof the United States, who uses such plate, or knowingly suffers sec' 5430.' 
 the same to be used for the purpose of printing any such or similar 
 obligation, or other security, or any part thereof, except as may be 
 
 ' Blodgett, J., United States v. Allen, 10 Biss., 90 p. 91. 
 
 ' An amendment by Act Feb. 18, 1875. ^ An obvious omission. 
 
184 NATIONAL BANK ACT. §297 
 
 printed for the uae of the United States by order of the proper 
 officer thereof; and every person who engraves, or causes or pro- 
 cures to be engraved, or assists in engraving, any plate in the 
 likeness of any plate designed for the printing of such obligation 
 or other security, or -who sells any such plate, or who brings into 
 the United States from any foreign place any such plate, except 
 under the direction of the Secretary of the Treasury or other 
 proper officer, or with any other intent, in either case, than that 
 such plate be used for the printing of the obligations or other se- 
 curities of the United States ; or who has in his control, custody, 
 or possession any metallic plate engraved after the similitude of 
 any plate from which any such obligation or other security has 
 been printed, with intent to use such plate, or suffer the same to 
 be used in forging or counterfeiting any such obligation or other 
 security, or any part thereof; or who has in his possession or 
 custody, except under authority from the Secretary of the Treasury 
 or other proper officer, any obligation or other security, engraved 
 and printed after the similitude of any obligation or other secu- 
 rity issued under the authority of the United States, with intent 
 to sell or otherwise use the same; and every person who prints, 
 photographs, or in any other manner makes or executes, or causes 
 to be printed, photographed, made, or executed, or aids in 
 printing, photographing, making, or executing any engraving, 
 photograph, print, or impression in the likeness of any such ob- 
 ligation or other security, or any part thereof, or who sells any 
 such engraving, photograph, print, or impression, except to the 
 United States, or who brings into the United States from any for- 
 eign place any such engraving, photograph, print, or impression, 
 except by direction of some proper officer of the United States, 
 or who has or retains in his control or possession, after a dis- 
 tinctive paper has been adopted by the Secretary of the Treasury 
 for the obligations and other securities of the United States, any 
 similar paper adapted to 'the making of any such obligation or 
 other security, except under the authority of the Secretary of the 
 Treasury or some other proper officer of the United States, shall 
 be punished by a fine of not more than five thousand dollars, or by 
 imprisonment at hard labor not more than fifteen years, or by both." 
 Pa'etog,seii- § 297. "Every person who, with intent to defraud, passes, 
 notes*'**" utters, publishes, or sells, or attempts to pass, utter, publish, or 
 ser^'swh' ^^^^' °^ ^^^^ i'lto the the United States with intent to pass, pub- 
 
§298 CRIMINAL OFFENSES. 183 
 
 lish, utter, or sell, or keeps in possession or conceals with like in- 
 tent any falsely made, forged, counterfeited, or altered obligation, 
 or other security of the United States, shall be punished fey a fine 
 of not more than five thousand dollars, and by imprisonment at 
 hard labor not more than fifteen years." 
 
 8 298. " .Every person who, without authority from the United Taking im- 
 
 " •' '^ ' . •' pressionsof. 
 
 States, takes, procures, or makes, upon lead, foil, wax, plaster, paper, tools. 
 or any other substance or material, an impression, stamp, or im- see 5433; 
 print of, from, or by the use of any bed-plate,bed-piece, die, roll, 
 plate, seal, type, or other tool, implement, instrument, or thing used 
 or fitted or intended to be used, in printing, stamping, or impress- 
 ing, or in making other tools, implenients, instruments, or things, 
 to be used, or fitted or intended to be used, in printing, stamping, 
 or impressing any kind or description of obligation or other 
 security of the United States, now authorized or hereafter to be 
 authorized by the United States, or circulating note or evidence 
 of debt of any banking association under the laws thereof, shall 
 be punished by imprisonment at hard labor not more than ten 
 years, or by a fine of not more than five thousand dollars, or 
 both." 
 
 § 299. " Every person who, with intent to defraud, has in his Having pos- 
 possession, keeping, custody, or control, without authority from impression 
 the United States, any imprint, stamp, or impression, taken or Kev. stat. 
 made upon any substance or material whatsoever, of any tool, im- 
 plement, instrument, or thing, used, or fitted or intended to be 
 used, for any of the purposes mentioned in the preceding section; 
 or who, with intent to defraud, sells, gives, or delivers any such 
 imprint, stamp, or impression to any other person, shall be pun- 
 ished by imprisonment at hard labor not more than ten years, or 
 by a fine of not more than five thousand dollars." 
 
 8 300. " Every person who buys, sells, exchanges, transfers. Buying, seu- 
 receives, or delivers, any false, forged, counterfeited, or altered ing in forged 
 
 •^ " or altered 
 
 obligation or other security of the United States, or circulating notes. 
 
 =" '' 7.0 jjgY. Stat. 
 
 note of any banking association organized or acting under the sec. 5434. 
 laws thereof, which has been or may hereafter be issued by virtue 
 of any act of Congress, with the intent that the same be passed, 
 published, or used as true and genuine, shall be imprisoned at 
 hard labor not more than ten years, or fined not more than five 
 thousand dollars, of both." 
 
186 NATIONAL BANK ACT. §301 
 
 Unlawfully 8 301. " In all cases where the charter of any corporation 
 
 olrculating «. /-i i • n 
 
 motes of which has been or may be created by act of Congress has expired 
 
 closed hank. ^ o i 
 
 Bev. Stat, or may hereafter expire, if any director, officer, or agent of the 
 corporation, or any trustee thereof, or any agent of such trustee, 
 or any person having in his possession, or under his control the 
 property of the corporation for the purpose of paying or redeem- 
 ing its notes and obligations, knowingly issues, re-issues, or utters 
 as money, or in any other way knowingly puts in circulation any 
 bill, note, check, draft, or other security purporting to have been 
 made by any such corporation whose charter has expired, or by 
 any officer thereof, or purporting to have been made under au- 
 thority derived therefrom, or if any person knowingly aids in any 
 such act,- he shall be punished by a fine of not more than ten thou- 
 sand dollars, or by imprisonment not less than one year nor more 
 than five years, or by both such fine and imprisonment. But 
 nothing herein shall be copstrued to make it unlawful for any 
 person, not being such director, officer, or agent of the corpora- 
 tion, or any trustee thereof, or any agent of such trustee, or any 
 person having in his possession or under his control the property 
 of the corporation for the purpose hereinbefore set forth, who has 
 received or may hereafter receive such bill, note, check, draft, 
 or other security, bona fide and in the ordinary transactions of busi- 
 ness, to utter as money or otherwise circulate the same." 
 
 § 302. United States currency includes national 
 bank notes. In construing these statutes national bank notes 
 are included by the phrase "United States currency." Larceny 
 of them, therefore, is larceny of United States currency.' 
 
 § 303. Evidence. If the counterfeit notes set out in an 
 indictment should not exhibit an imprint of the seal of the treas- 
 ury, while the notes put in evidence should exhibit it, this vari- 
 ance would not render their admission improper.^ Nor would 
 notes circulating as those of a national banking association be a 
 variance from notes in an indictment which should call them 
 "national bank currency notes." ' 
 
 § 304. Indictment. With respect to the indictment itself 
 this would not be bad if omitting to give a foe simile of the seal 
 to which it referred, or the, numbers on the notes described.* 
 
 ' State V. Gasting, 23 La. Ann., 609. 
 
 ' United States!;. Bennett, 17 Blatchf.. 357. ' Id. * Id. 
 
§305 CRIMINAL OFFENSES. 187 
 
 § 305. Mode of rendering sentence for several 
 terms. Concerning the sentence that may be rendered for 
 a violation of any of these sections, whenever it is for several 
 terms for difPerent offenses, it must state v?hen each term for each 
 offense is to begin and end. In New Jersey a person pleaded 
 guilty t'o three indictments, one for misapplying the funds of a 
 national bank when cashier, one for false entries to conceal the 
 misapplication, and a third for making a false statement with the 
 intent to deceive the examining officers. The court pronounced 
 the following sentence on him: "That the prisoner be confined 
 at hard labor in the state's prison of the state of New Jersey for 
 the term of five years upon each of the three indictments above 
 named, said te^ms not to run concurrently, and from and after the 
 expiration of said terms until the costs of this prosecution shall 
 have been paid." It was decided that the words "said terms not 
 to, run concurrently" were uncertain and incapable of application 
 and therefore void, and that the sentences began at once and ran 
 concurrently. Said Judge Bradley: "If the prisoner is to be de- 
 tained in prison for three successive terms, neither he, nor the 
 keeper of the prison, nor any other person, knows, or can possi- 
 bly know, under which indictment he has passed his first term, or 
 under which he will have to pass the second or the third. * * 
 A prisoner is entitled to know under what sentence he is impris- 
 oned. The vague words in question furnish no means of know- 
 ing. They must be regarded as without effect, and as insufficient 
 to alter the legal rule that each sentence is to commence at once, 
 unless otherwise specially ordered."' 
 
 § 306. State may punish for offenses not prescribed 
 by Congress. — A state may prescribe any law for the protection 
 of the property of national banks and for punishing their officers 
 which is not oonrtra:ry to congressional legislation. Says Judge But- 
 ler,^ speaking for the Supreme Court of Connecticut : "The business 
 of the bank is conducted within the jurisdiction of this state, with 
 OUT citizens, and in conformity to our laws, and it is competent 
 for the legislature to pass any law affecting that business, or pro- 
 tect the bank or its customers in the conduct of that business by 
 any penalty, and such law and penalty will not be predicated on 
 any law or offense created by Congress, or have any relation or 
 
 " United States v. Patterson, 29 Fed., K. 775 p. 777. 
 ^ States). Tuller, 34 Conn., 280 p. 297. 
 
188 NATIONAL BANK ACT. §307 
 
 be repugnant to the currency act, or in any .manner infringe the 
 jurisdiction of Congress or the federal courts. It is theft by our 
 law to steal from a national bank; it is burglary to break into one 
 for the purpose of stealing; and it is cheating to obtain money 
 from one by false pretenses. As a corporate being, located in 
 the state, its property and interests and business are protected by 
 state laws and subject to state leigislation, and so it is competent 
 for the legislature to protect its customers, the citizens of the 
 state, in their business dealings with it, whatever they may be." 
 A state, therefore, may punish a national bank officer for embez- 
 zling the property of its customers, because Congress has pre- 
 scribed no punishment for such an offense. 
 
 § 307. Offenses mentioned. So, too, a state criminal law 
 relating to national bank officers which in part is repugnant to a 
 law of Congress may be enforced so far as there is no repugnancy. 
 Thus a state statute which provides that a punishment for any 
 bank officer who shall take and purloin any of the moneys, choses 
 in action, etc., "belonging to or deposited in "a national bank 
 may be enforced against an officer who steals a special deposit of 
 government bonds, for example, because Congress has provided 
 no penalty for the offense.^ 
 
 The important question then is under this branch of the sub- 
 ject whether the federal government has prescribed any penalty 
 for the offense of which a person may be charged by state officers. 
 In Massachusetts the Supreme Court has decided that the fraud- 
 ulent conversion by an officer or person employed by a national 
 bank, and located there, of the property of individuals deposited in 
 such bank is not punjshable under any national law, and the local 
 courts have jurisdiction of the offense under the statutes of that 
 state.^ Said Foster, J. : " The further objection is made that the 
 courts of the United States are vested by the Judiciary Act of 
 September 24, 1789, with exclusive cognizance of all crimes cog- 
 nizable under the authority of the United States, except where it 
 is otherwise provided by the acts of Congress. But an examina- 
 tion of the statutes of the United States leads us to the conclu- 
 sion that the offense charged in this indictment has not been made 
 punishable by any act of Congress. The enactments cited on 
 behalf of the defendant punish the embezzlement of the property 
 
 ' State V. Tuller, 34 Conn., 280. 
 
 ' Commonweal th v. Tenny, 97 Mass., 50 p. 56. 
 
§308 CRIMINAL OFFENSES. , 189 
 
 of national banks, but not of the property of individuals, deposited 
 with and in the custody of such banks. 
 
 "As the federal courts have no criminal jurisdiction except that 
 conferred by Congress, no q-uestion can be made as to the consti- 
 tutionality of state legislation punishing such frauds, until they 
 have been made punishable by the federal lavi^s. There is no 
 ■view of the relative, or of the Concurrent powers of the two gov- 
 ernments, which affects the decision of the present case; for all 
 courts and jurists agree that state sovereignty remains unabridged 
 for the punishment of all crimes committed within the limits of a 
 state, except so far as they have been brought within the sphere 
 of federal jurisdiction by the penal laws of the United States." ' 
 
 Nor is a state prevented from trying a national bank o£&cer for 
 larceny, or the stealing of money. " The statute of the United 
 States does not purport to punish larceny as such. The obvious 
 inference is that Congress did not intend to interfere with the 
 jurisdiction of state laws and state courts over offenses of that 
 class against the property of national banks." ' 
 
 So, too, a teller of a national bank may be tried by a state court 
 for fraudulently making false entries on the bank books with the 
 intention of defrauding the bank. The offense is a crime at com 
 mon law; therefore, the state courts can take cognizance of it.^ 
 
 § 308. Cannot punish for passing counterfeit 
 notes, nor accessory to embezzlement. But a state cour- 
 has no jurisdiction over the offense of passing counterfeited na- 
 tional bank notes with knowledge of their counterfeit charac- 
 ter. And if a state court should convict one of such an offense, 
 he could be discharged on a motion in habeas corpus proceedings.* 
 Nor has a state court jurisdiction to try the cashier of a national 
 bank for embezzling its funds; ^ nor an accessory to an embezzle- 
 ment by a national bank officer, even though he could not be in- 
 dicted therefor in a federal court. ° 
 
 " Commonwealth v. Tenny, 97 Mass., 50 p. 56. 
 2 Commonwealth v. Barry, 116 Mass., 1 p. 5. 
 'Ltiherg v. Commonwealth, 37 Leg. Int., 339. 
 
 * Ex parte Houghton, 8 Fed. E., 897. 
 
 * Commonwealth v. Ketner, 37 Leg. Int., 339, S. C. 8 Week. Notes, 133. 
 
 * Commonwealth v. Felton, 101 Mass., 204. 
 
190 
 
 NATIONAL BANK ACT. 
 
 <!HAPTEKXVI. 
 
 PEEFEKENOES, DISSOLUTION AND HEOEIVEESHIP. 
 
 Preferences. 
 
 g 309. 
 310. 
 311. 
 Sl2. 
 
 313. 
 314. 
 315. 
 316. 
 
 323. 
 
 324. 
 
 325. 
 32G. 
 327. 
 328. 
 329. 
 
 330. 
 331. 
 
 332. 
 
 333. 
 334. 
 335. 
 
 336. 
 
 337. 
 338. 
 
 333. 
 340. 
 341. 
 342. 
 343. 
 344. 
 
 Preferences of insolvent banks void. 
 
 Last clause of section is in force. 
 
 "What is prohibited. 
 
 When does bank contemplate insol- 
 vency. 
 
 Meaning of "act of insolvency. " 
 
 What is a preference. 
 
 Presumption of intent. 
 
 Payment of some, but not all, cred- 
 itors would be a preference. 
 
 ^ 317. Transfer of property to avoid failure 
 is a preference. 
 
 318. Transfer of deposit after bank's fail- 
 
 ure. 
 
 319. Can bank's property be attached be- 
 
 fore final judgment. 
 
 320. Of insolvent bank cannot be. 
 
 321. How receiver can get dissolution. 
 
 322. When can pledgee of insolvent bank 
 
 hold his property. 
 
 Involuntary Dissolution and Receivership. 
 
 Failing to pay its notes bonds of 
 bank are forfeited. 
 
 And Comptroller may appoint re- 
 ceiver. 
 
 Intent of statute. 
 
 Eeceiver is agent of IT. S. 
 
 When appointed by court. 
 
 His powers. 
 
 Persons contract with receiver at 
 their peril. 
 
 Bank not thereby dissolved. 
 
 Eights of bank become fixed after 
 his appointment. 
 
 When judgment against bank after 
 appointment may be opened. 
 
 Can hold only bank property. 
 
 Eeceiver only can sue. 
 
 Comptroller's certificate i? evidence 
 
 ' of right to sue. 
 
 Can sue in and remove cases to fed- 
 eral court. 
 
 Ca:i make no motion in other cases. 
 
 When can sue without Comptroller's 
 Older. 
 
 May sell on order of court. 
 
 Agreement without order. 
 
 Nature or sale ordered by court. 
 
 Order to compromise debt. 
 
 Comptroller no authority to do this. 
 
 No bond for suits required. 
 
 § 345. Comptroller's notice to creditors. 
 
 346. How their claims may be proved. 
 
 347. Suing creditor has no special lien. 
 
 348. Setoff. 
 
 348(a). Debt from bank cannot be set off 
 
 against assessment. 
 348(5). Government may retain money 
 
 to pay debt. 
 
 349. What claims to be included. 
 
 350. Allowance of expense in establishing 
 
 claim. 
 
 351. Case v. Bank. 
 
 352. Claim must be against bank and not 
 
 officer. 
 
 353. Interest. 
 
 354. On what claims. 
 
 355. Suit for its recovery, how brought. 
 
 356. Interest during receivership. 
 
 357. Dividends. 
 
 358. How paid. 
 
 359. Priority of government. 
 
 360. Suit against receiver for misconduct 
 
 as director. 
 
 361. Cannot be attached in suit against 
 
 shareholders. 
 
 362. Expenses of receiver. 
 
 363. Appointment of agent to receive 
 
 assets from receiver and close 
 bank's affairs. 
 
§309 PREFERENCES, DISSOLUTION AND RECEIVERSHIP. 191 
 
 Proceedings for Dissolution of Charter. 
 
 I 367. Cannot he dissolved in collateral 
 proceeding. 
 
 § 364. Forfeiture of bank's charter. 
 365. Comptroller may appoint receiver. 
 3G6. Comptroller must bring suit. 
 
 Proceedings to Enjoin Receiver and Comptroller. 
 
 J 368. Eight "to enjoin appointment of re- i I 369. Proceedings to enjoin Comptroller, 
 celver. | 370. Meaning of statute. 
 
 Voluntary Liquidation. 
 
 § 371. Two-thirds of shareholders must 
 join. 
 372. Notice to be given. 
 
 373. Proceedings to enforce liability of 
 
 shareholders. 
 
 374. Meaning of statute. 
 
 8 309. "All traDsfers of the notes, bonds, bills of exchange, Preferences 
 
 "^ PI,. of insolvent 
 
 or other evidences of debt owing to any national banking associa- bank void. 
 
 ^ •> o Kev. Stat. 
 
 tion, or of deposits to its credit ; all assignments of mortgages, seo. 5343. 
 sureties on real estate, or of judgments or decrees in its favor; all 
 deposits of money, bullion, or other valuable thing for its use, or 
 for the use of any of its shareholders or creditors; and all pay- 
 ments of money to either, made after the commission of an act of 
 insolvency, or in contemplation thereof, made vpith a view to pre- 
 vent the application of its assets in the manner prescribed by 
 this chapter, or with a view to the preference of one creditor to 
 another, except in payment of its circulating notes, shall be ut- 
 terly null and void ; and no attachment, injunction or execution, 
 shall be issued against such association or its property before 
 final judgment in any suit, action, or proceeding, in any state, 
 county, or municipal court." ' 
 
 This section formed the fifty-second section of the Act of 18C4, 
 except the last clause, providing that no attachment shall be is- 
 sued against a 'bank in a state court before final judgment. That 
 clause was an amendment to the fifty- seventh section of the Act 
 of 1864, and was passed in 1873.^ 
 
 § 310. Last clause still in force. The last clause is not 
 repealed by the section in the Act of 1882, relating to suits 
 brought by or against national banking associations, "in the 
 first place," says Judge Eapallo, "the section referred to applies by 
 its express terms only to suits thereafter brought against national 
 banks. Secondly-, it provides merely that the jurisdiction for 
 such suits shall be the same as for suits against state banks." ^ 
 
 ' Act 1864, See. 52. M7 Stat, at Large, 42 C. 3 S. Ch. 269, Sec. 2. 
 ^ Raynor v. Pacific National Bank, 93 N. Y., 371. 
 
192 NATIONAL BANK ACT. §311 
 
 § 311. What is prohibited. This provision of the law, it 
 may be remarked, is general, and applies to all national banking 
 associations.' "It specifically prohibits," says Judge Finch,'' "all 
 transfers of the corporate property made with a view to prefer- 
 ences, and so protects the creditors from any voluntary act of the 
 bank which selects out favored individuals for payment. But the 
 bank may be passive, and such individuals gain a preference by a 
 suit against the corporation, preceded or accompanied by an attach- 
 ment or injunction, or, after judgment, enforced by an execution. 
 These three things, therefore, were specifically prohibited by 
 name; each being process well known and accurately defined in 
 the law ; and without any general words to carry the prohibition' 
 beyond them." 
 
 § 31 2. When a bank contemplates insolvency. "A 
 bank is in contemplation of insolvency when the fact becomes 
 reasonably apparent to its officers that the concern will presently 
 be unable to ineet its obligations, and will be obliged to suspend 
 its ordinary operations." ^ 
 
 § 313. Meaning of "act of insolvency." The phrase, 
 " act of insolvency," in this section, " is clearly an act which 
 would be an act of insolvency on the part of an individual bank- 
 er; that is, the closing of the doors, refusal to pay depositors on 
 demand, refusal to go on in the due course of business to trans- 
 act its business as a bank, and discharge its liabilities to its cred- 
 itors." * 
 
 § 314. What is a preference. What constitutes a pref- 
 erence? B, who was the executor and general manager of an 
 estate, and also the cashier of a national bank, purchased four 
 bills of exchange which had been accepted by the drawees, and 
 were payable to the drawers, and indorsed by them. To pay for. 
 the bills, B, as executor, drew money enough from a deposit to 
 the credit of the estate in his bank. He placed the bills in a box 
 containing the papers of the estate, and applied the money to the 
 drawer's indebtedness to the bank. The bank failed, and the re- 
 ceiver claimed the proceeds of the bills. It was held that B, in 
 purchasing the drafts, acted as the agent of the drawers and as 
 
 • McCracken v. Covington City Nat. Bank, 4 Fed. E., 602 p. 606. 
 
 2 Corn Exchange Bank v. Blye, 101 N. Y., 303 p. 305, affg 37 Hun, 473. 
 ' Wallace, J., Eoberts v. Hill, 24 Fed. R., p. 573. 
 
 * Blodgett, J., Irons v. Manufacturers' National Bank, 6 Biss., p. 306. 
 
§315 PEEFERENCJIS, DISSOLUTION AND KBCEIVEESHIP. 193 
 
 executor, and not as cashier, and though the bills were paid with 
 funds which the estate had on deposit in the bank, and though 
 B knew at the time that the bank was insolvent, yet as the pur- 
 chase was bona flde, and not to secure a preference for the estate 
 over other depositors, the transaction was not a violation of the 
 section. ' 
 
 § 315. Presumption of intent. "An intent to give a pre- 
 ference is presumed when a payment is made to a creditor by a 
 debtor who knows his own insolvency, and therefore knows that 
 he cannot pay all his creditors in full. A preference is the nat- 
 ural and probable consequence under such conditions." ^ 
 
 § 316. Payment of some, but not all, creditors 
 would be a preference. If the officers of a bank should 
 pay some creditors to the exclusion of others, such payments 
 would be preferences, and would justify " the intervention of a 
 court of equity." Says Judge Blodgett : "It was the plain in- 
 tention of the banking law that all creditors should share equally, 
 and that no preference should be allowed in favor of one creditor 
 as against others; that the United States government, as the 
 guarantor of the circulating notes of the bank, is the only party 
 that is entitled to any preference whatever; that all other cred- 
 itors are to share alike. And, therefore, it would seem to follow 
 that, if a bank is not in a condition to pay all its creditors, it can 
 only pay them pro rata — that it has no right to pay a part in full 
 and have others unpaid." ' So, too, if the directors should vote 
 to close their bank and liquidate its indebtedness, any transfer 
 of its assets to a creditor, for example, the payment of a certiii- 
 cate of deposit, thus securing to him a preference, would be re- 
 garded fraudulent, and would be void. * 
 
 § 317. Transfer of property to avoid failure is a 
 preference. When property is transferred by a bank to a 
 
 ' Tuttle V. Frelinghuysen, 38 N. J., Eq., 12. It was contended i^i Venango 
 National Bank v. Taylor, 56 Pa., 14, -that this section was "intended for no 
 more than to avoid all acts of the bank itself, all voluntary transfers by it of 
 its notes, bonds, deposits, etc., with a view to giving preferences." But 
 Strong, J., answered that "its language is general, as applicable to legal as 
 to voluntary transfers." 
 
 = Wallace, J., Roberts v. Hill, 24 Fed. E., p. 574. 
 
 ' Irons V. Manufacturers' National Bank, 6 Biss., 301 p. 306. 
 
 * National Security Bank v. Price, 22 Fed. E., 697. 
 
 13— B. 
 
194 NATIONAL BANK ACT. §318 
 
 creditor to avoid paying his debt, and thus postpone the failure 
 of the bank, the transfer is none the less fraudulent and void.' 
 
 § 318. Transfer of deposit after bank's failure. A de- 
 positor cannot transfer his deposit to a debtor of the bank after 
 its failure, for this would create a preference. Thus, T owed a 
 national bank $35,000, and E had a deposit there of $44,000. 
 The bank having failed, the next day E assigned ' his deposit to . 
 T. It was decided that T could not set off the deposit against 
 his indebtedness, as the act would give a preference to a creditor 
 after the bank's insolvency.^ 
 
 § 319. Can banker's property be attached before final 
 judgment. Whether an attachment before final judgment of 
 the property of a national bank is prohibited by the last clause 
 of the section under consideration is an unsettled question. In 
 New York the prohibition is regarded as applying only to an in-, 
 solvent corporation.^ Says Judge Danforth in Eobinson v. 
 National Bank: * "We concur with the general term in the opin- 
 ion that these words of prohibition must be deemed to have the 
 same relation as the other things prohibited, and apply only to 
 insolvent corporations, or one about to become so; and that the 
 object of the entire section is to prevent one creditor of a corpora- 
 tion, whose assets are insufficient to meet its liability, from ob- 
 taining a preference, whether it is sought through a voluntary 
 assignment or transfer, or payment, or the form of a legal pro- 
 ceeding." But in Massachusetts and elsewhere an attachment 
 cannot be issued against a national bank before final judgment 
 in any proceeding in a state, county, or municipal court.^ 
 
 1 Wallace, J., Roberts v. Hill, 24 Fed. R., 571. 
 
 ^ Venango National Bank v. Taylor, 56 Pa. ,14. 
 
 ' National Shoe & Leather Bank v. Mechanics' National Bank, 89 N. Y., 
 467; National Bank v. Colby, 21 Wall., 609. In New York it was decided, 
 in 1867, that a national bank was a foreign corporation, and liable to attach- 
 ment within the meaning of the code of that state. The court remarked that 
 a national bank was not a foreign corporation in popula* language, but was 
 in the sense in which words were used relating to the attachment of "coi^ 
 porations formed under the laws of any other state, government or country," 
 Boweni). First National Bank, 34 How. Pr., 408. 
 
 * 81 N. Y., 385 p. 393. 
 
 ' Crocker u. Marine National Bank, 101 Mass., 240 ; Chesapeake Bank v. 
 First National Bank, 40 Md., 269 ; Cadle v. Tracy, 11 Blatchf., 101 ; Central 
 National Bank v. Richland National Bank, 52 How. Pr., 136 ; see Farmers 
 & Mechanics' Nat. Bank v. Bearing, 91 U. S., 29. 
 
§320 PREFERENCES, DISSOLUTION AND RECEIVERSHIP. 195 
 
 In New York, not only may the property of a solvent bank lo- 
 cated in the state be attached before final judgment, but also the 
 property which may be there belonging to a bank located in an- 
 other state. In Robinson v. National Bank of New Berne ' the 
 property attached belonged to a national bank of North Carolina. 
 Judge Danforth declared that the proceeding was against the 
 property, and not against the bank, and was lawful. The attach- 
 ment was not to bring the bank into court, but to confirm Robin- 
 son's right to the property that had been attached.'' 
 
 § 320. Of insolvent bank cannot be. But if a bank is 
 insolvent when the attachment is made it is invalid, and remains 
 so, notwithstanding an increase of the bank's capital.' Nor 
 would the paying by a bank of a large amount of its debts after 
 the issuing of an attachment prevent any one from questioning 
 its validity.* 
 
 § 321. How receiver can get dissolution. If a bank 
 is insolvent at the time of making an attachment, and is after- 
 ward put under the control of a receiver, he can hold the prop- 
 erty.* In Harvey v. Allen' an attachment from a state court was 
 levied on the deposits of a bank which had failed to redeem its 
 circulating notes, which had been protested; but the receiver's 
 rightto them was established. The receiver cannot make a motion 
 in court ta dissolve an attachment ' unless having authority from 
 a state to do so.* 
 
 § 322. When can pledgee hold his property. If the 
 officers of a bank pledge- its assets to prevent it from failing, can 
 the pledgee hold them in the event of the bank's failure ? In 
 Roberts v. Hill," the officers of a bank pledged a note to 
 
 1 81 N. Y., 385. 
 
 ^ See Rhouei- v. First National Bank, 14 Hun, 126, overruling Southwick 
 V. First National Bank, 7 Hun, 96 ; People's Bank of New York v. Mechan- 
 ics' National Bank of Newark, 62 How. Pr., 422. 
 
 ' Eaynor v. Pacific National Bank, 93 N. Y., 371. 
 
 'Id., Market National Bank v. Pacific National Bank, 93 N. Y., 648, afig 
 SO.Hun, 50, first trial 89 N. Y. 397, affg 27 Hun, 465. 
 
 ' National Bank v. Colby, 21 Wall., 609. « 16 Blatchf , 29. 
 
 ' Tracy «. First National Bank, 37 N. Y., 523; Harvey ». Allen, 16 Blatchf ,29. 
 
 * Bowen v. First National Bank, 34 How. Pr. 408 ; National Shoe & 
 Leather Bank v. Mechanics' National Bank, 89 N. Y., 440 ; Allen v. Scan- 
 dinavian National Bank, 46 How. Pr., 71 ; In re Griswold, 13 !^arb., 412 ; 
 People's Bank v. Mechanics' National Bank, 62 How. Pr., 422. 
 
 » 23 Fed. K., 311. 
 
196 NATIONAL BANK ACT. §323 
 
 a depositor who had been allowing the institution to use his 
 money, and who feared that he should lose it. Afterward, the 
 bank did fail, and the receiver sought to set aside the pledge. 
 The bank continued to do busipcs's about six weeks after the 
 pledge was made. "Then," said Judge Wheeler, "the officers 
 saw that the efPort to maintain it was hopeless, and stopped busi- 
 ness. Their apprehension of the condition of the bank, and mo- 
 tive to prevent suitable distribution of the assets, ought to be 
 made to appear clearly, in order to justify going back so far as 
 to the time of this pledge, and opening all pledges and payments 
 on past debts; and their purposes and acts are to be considered 
 in view of what they could see looking forward, and • not wholly 
 > by what is apparent now, looking backward. If they saw at the 
 time of the pledge that the bank was approaching failure, and 
 made the pledge to keep the note out of the assets to be distrib- 
 uted, the pledge would be clearly void; but if they made it to 
 prevent failure, and expecting to prevent failure, it would appeal 
 to be good." As the evidence showed that "they were using their 
 assets to prevent failure," the pledge was sustained. At a sub- 
 sequent trial the court changed their opinion, and the pledgee 
 was obliged to surrender his security. ' 
 Failing to § 323. Section 5226 of the Revised Statutes provides that 
 
 pay it3 notes j • i i i 
 
 bonds of whenever the notes of a national bank are not paid m the man- 
 
 banb are for- 
 
 feited. ner described therein, they may be protested unless their pay- 
 
 seo.'58S!7." ment has been restrained by the order of a court of competent 
 jurisdiction. The next section provides that " on receiving no- 
 tice that any national banking association has faUed to redeem 
 any of its circulating notes, as specified in the preceding section, 
 the Comptroller of the Currency, with the concurrence of the 
 Secretary of the Treasury, may appoint a special agent, of whose 
 appointment immediate notice shall be given to such association, 
 who shall immediately proceed to ascertain whether it has refused 
 to pay its circulating notes in the lawful money of the United 
 States, when demanded, and shall report to the Comptroller the 
 fact so ascertained. If, from such protest, and the report so 
 made, the Comptroller is satisfied that such association has re- 
 fused to pay its circulating notes and is in default, he shall, with- 
 in thirty days after he has received notice of such failure, declare 
 
 '24 Feb. K.. 571. 
 
§324 PREFERENCES, DISSOLUTION AND RECEIVERSHIP. 197 
 
 the bonds deposited by such association forfeited to the United 
 States, and they shall thereupon be so forfeited. " ' 
 
 § 324. "On becoming satisfied, as specified in sections fifty- Andcomp- 
 two hundred and twenty-six and fifty-two hundred and twenty- appoint re- 
 
 ... oeiTor. 
 
 seven, that any association has refused to pay its circulating notes Rev. stat. 
 
 ■' ^ •' ° Sec. 5234. 
 
 as therein mentioned, and is in default, the Comptroller of the 
 Currency may forthwith appoint a receiver, and require of him 
 such bond and security as he deems proper. Such receiver, un- 
 der the direction of the Comptroller, shall take possession of the 
 books, records, and assets of every description of such associa- 
 tion, collect all debts, dues, and claims belonging to it, and, upon 
 the order of a court of record of' competent jurisdiction, may sell 
 or compound all bad or doubtful debts, and, on a like order, may 
 sell all the real and personal property of such association, on such 
 terms as the court shall direct ; and may, if necessary to pay the 
 debts of such association, enforce the individual liability of the 
 stockholders. Such receiver, shall pay over all money so made to 
 the Treasurer of the United States, subject to the order of the 
 Comptroller, and also make report to the Comptroller of all his 
 acts and proceedings." ^ 
 
 § 325. Intent of Statute. "The intent of this and 
 other sections of the Revised Statutes bearing upon insolvent 
 national banks is to throw the entire control into the hands of the 
 Comptroller of the Currency, to centralize the power and respon- 
 sibility for the purpose of facilitating the winding up of the 
 afPairs of the association and the payment-of its obligations." ' 
 
 § 326. Receiver is agent of United States. "The 
 receiver of a national bank * * is the agent of the United 
 States, and is limited as to his functions by the object of the re- 
 ceivership and the duties which it involves." * He is more es- 
 pecially, says Swaynfe, J., "the instrument of the Comptroller. 
 He is appointed by the Comptroller, and the power of appoint- 
 
 ' Act 1864, Sec. 47. 
 
 'Act 1864, Sec. 50. When the National Bankrupt Act was in force, the 
 question was raised whether a person could proceed on its authority against 
 anational bank. As the National Banking Act prescribed the mode of proceed- 
 ing against an insolvent institution, it was held that nothing could be done 
 under any other, In re Manufacturers' National Bank, .5 Biss., 499. 
 
 ^ Davis, J., Jackson v. United States, 20 Ct. of Claims, p. 305. 
 
 * Horton, J., C. J., Ellis v. Little, 27- Kansas, p. 719; Kennedys. Gibson, 
 8 Wall., 498. 
 
198 . NATIONAL BANK ACT §327 
 
 ment carries with it the power of removal."' And, "where the 
 Comptroller appoints a receiver, the concurrence or approval or 
 approbation of the Secretary of the Treasury is to be presumed 
 till the contrary appears, for the Comptroller is required to per- 
 form his duties under the general direction of the Secretary of 
 the Treasury." ^ 
 
 § 327. When appointed by court. Sometimes a re- 
 ceiver may be appointed by the court on the application of a cred- 
 itor for reasons that would not justify the Comptroller in appoint- 
 ing one. Says Judge Blodgett : " It would seem from an exami- 
 nation of the Banking Law that the Comptroller of, the Currency 
 ' has no authority to appoint a receiver except in certain contin- 
 gencies, such as the failure to make good a reserve, the failure to 
 redeem circulating notes on demand, the failure to make good 
 the capital stock, whenever the same becomes impaired, and the 
 failure to meet certain other requirements of the Banking Law. 
 * * There are many cases * * where the bank may 
 not have so violated any of the provisions of the Banking Law as 
 to call for the appointment of a receiver by the Comptroller." 
 In such cases, when a bank is delinquent, a court of equity may 
 " take hold of whatever assets a bank may have, aside from the 
 personal liability of the stockholders, and administer them as it 
 would the afPairs of any insolvent corporation." ' And the proper 
 remedy is by a proceeding in equity to marshal and distribute 
 the assets.* 
 
 § 328. His powers. The receiver is vested with all the as- 
 sets of the bank which are to be converted into money and dis- 
 tributed among the creditors. The object sought to be accom- 
 plished is their distribution fairly and without preferences.* As 
 he "represents the bank, its stockholders, its creditors, and does 
 not in any sense represent the government," the courts cannot sub- 
 ject him to their juisdiction. " 
 
 1 Kennedy v. Gibson, 8 Wall., 498 p. 505 ; Casey v. Galli, 94 TJ. S., 673. 
 
 ' Blatchford, J., Stanton v. Wilkeson, 8 Bened., 357 p. 361 ; see Cadle «; 
 Baker, 20 Wall., 650 ; Price v. Abbott, 17 Fed. R, 506^ 
 
 ^ Irons v. Manufacturers' National Bank, 6 Biss., 301 p. 303 ; Wrlgbt v. , 
 Merchants' National Bank, 1 Flippin, 568. * Id. 
 
 5 Corn Exchange Bank v. Blye, 101 N. Y., 303; Robinson v. National 
 Bank, 81 N. Y., 385; Rosenblatt v. Johnston, ,104 U. S., 462. 
 
 ^ Case V. Terrell, 11 Wall., 199. 
 
§329 PREFERENCES, DISSOLUTION AND RECEIVERSHIP. 199 
 
 § 329. Persons contract with receiver at their 
 
 peril. ' ' As the power of a receiver of a national bank appointed by 
 the Comptroller is limited, a person dealing with him in his official 
 capacity is bound as a matter of law to have knowledge of his 
 authority to act, and if contracts and agreements are entered into 
 with the receiver in excess of his authority as conferred by law, 
 the parties contract at their own peril, and the estate of the bank 
 cannot be charged for the default or inability of a receiver acting 
 outside of his functions as receiver and beyond the duties which 
 it involves." ' 
 
 § 330. Bank not thereby dissolved. "The act of ap- 
 pointing a receiver does not work a complete dissolution of the as- 
 sociation." " Beyond doubt," remarks Judge Clifford, " the ap- 
 pointment of a receiver supersedes the power of the directors to 
 exercise the incidental powers necessary to carry on the business 
 of banking, as the receiver is required to take possession of the 
 books, records and assets of every description of the association, 
 and from that moment the association is forbidden to pay out any 
 of its notes, discount any notes or bills, or otherwise prosecute 
 the business of banking, but the corporate franchise of the asso- 
 ciation is not dissolved, and the association, as a legal entity, con- 
 tinues to exist, as is shown to a demonstration by the fact that it 
 is required safely to keep the money on hand belonging to it, and 
 may deliver special deposits in its keeping to the rightful owners. 
 * * The association may sue and be sued, complain and defend, 
 in all cases where it may be necessary that the corporate name of 
 the association shall be ilsed for that purpose in closing its busi- 
 ness and winding up its affairs under the provisions of the act 
 which authorized its formation." ' None of- the proceedings re- 
 lating to the appointment of a receiver and the proving of claims 
 and the paying of dividends support the theory that a banking as- 
 sociation ceases to exist when the receiver is appointed, " nor at 
 any time before the assets of the association are fully adminis- 
 tered and the balance, if any, is paid to the owners of the stock or 
 their legal representatives." ' Moreover, in an action to establish 
 
 V 
 
 ' Horton, C. J., Ellis v. Little, 27 Kansas, p. 720. 
 ' Bank of Bethel v. Pahquioque Bank, 14 Wall.; 383 p. 400. 
 ' Id., p. 398; Green v. Walkill National Bank, 7 Hun, 63; National Bank 
 -». Insurance Company, 104 TJ. S., 54; Security Bank v. National Bank, 2 
 Hun, 287. 
 
200 NATIONAL BANK ACT. §331. 
 
 the claim of a creditor which has been rejected either by the 
 Comptroller or receiver, the bank and the reoeivpr may. both be 
 made parties defendant.' 
 
 § 331. Kights of bank become fixed, after appoint- 
 ment. After passing into the hands of a receiver, the rights 
 and liabilities of the bank become fixed. "All the property and 
 assets of the association," says Cornell, J., "then become a fund 
 legally dedicated, first, to the satisfaction of any claim of the 
 United States government for any deficiency in the proceeds of 
 the bonds pledged for the redemption of its notes to meet the 
 amount necessary to be expended for that purpose; and, second, 
 for a ratable distribution of the balance among its general cred- 
 itors, upon the principle of equality. No subsequent lien could be 
 created, or right or preference obtained, in respect to any of the 
 assets or property of the bank which did not exist at that time." ' 
 
 § 332 When judgment against bank after ap- 
 pointment may be opened. A judgment against a bank 
 after its insolvency may sometimes be opened on the application 
 of the receiver.. Thus, the president of such a bank, of which a 
 receiver had been appointed, was served with a summons in an 
 action against it. Instead of informing the receiver or any di- 
 rector, he permitted judgment to be entered against the bank by 
 default. The receiver, within a month after the entering of the 
 judgment, and less than that time after receiving notice of it, 
 obtained an order to show cause why the judgment should not 
 be opened. The application, having been supported by evidence 
 showing that the debt for which the judgment had been obtained 
 did not exist, was regarded with favor, and the judgment was 
 opened. ' 
 
 § 333 Can bold, only bank property. A receiver 
 can acquire no title to property in the custody of a bank which 
 it does not own, or which has been acquired by another through 
 attachment proceedings, or in other ways. Says Finch, J. : " The 
 receiver, by his appointment, acquires no right to property in 
 the custody of the bank which the latter does not own, as against the 
 real owner; and the [preference]* section was plainly not intended 
 
 ' Green v. Walkill National Bank, 7 Hun, fes. 
 
 ^ Balohu. Wilson, 25 Minn., 299 p. 302; National Banks. Colby, 21 Wall., 609. 
 ^ Security Bank v. National Bank, 4 Th. & C, 518, S. C. 2 Hun, 287. 
 *Sec. 5242. 
 
§334 PKEFERENCES, DISSOLUTION AND RECEIVERSHIP. 201 
 
 to protect the receiver's custody as against such owner. It aims 
 to protect the property of the bank in his hands, and not to give 
 him arbitrary control of what the bank does not own." His rights 
 are no greater if he dispute the title and claims to be the owner. 
 " He might make such claim in any case. No law makes him 
 the inevitable stakeholder pending the litigation. He may be- 
 come so by giving the needed security, and we can see no just 
 reason why he should be exempted from that obligation which 
 falls upon others." ' Accordingly, a process may be issued against 
 the receiver in favor of the true owner for the restoration of his 
 property to him. ' 
 
 So, too, if an insolvent bank should have a special deposit in 
 its possession, the receiver should return it to the owner.' If it 
 consist of bonds, for example, they must be demanded before an 
 action can be maintained to recover them, but if they have been " 
 wrongfully transferred by the bank, or its cashier, and put with 
 its funds, and reported and treated as a part of its assets, this is 
 a conversion, and consequently no demand and refusal are neces- 
 sary to maintain an action to recover them.* 
 
 § 334 Receiver only can sue. "The receiver and he 
 alone is authorized to sue, either in his own name or in the name 
 of the bank for his use, to collect the assets of the bank and to 
 enforce the individual liability of the stockholders. No such au- 
 thority is given to the Comptroller. No money can be made by 
 any collection of assets, or Jby any enforcement of the individual 
 liability of stockholders, unless it is made by the receiver, and 
 the statute qontemplates that he shall make it and does not con- 
 template that any one else bhall make it. * * The money 
 which the receiver is to pay over, so far as it is made by collec- 
 tions by suit and enforcement by suit of the individual liability 
 of stockholders, can come into the receiver's hands only through 
 suits brought by himself in his own name, or in the name of the 
 association for his use. He is, therefore, authorized to sue in his 
 own name. His right to sue to collect debts due to the bank, 
 and his right to sue to enforce the individual liability of stock- 
 
 ' Corn Exchange Bank o. Blye, 101 N. Y., 303 p. 306, affg 37 Hun, 473. 
 
 ' First National Bank v. Dunbar, 118 lU., 625, affg 19 Brad., 558. 
 *Id. 
 
202 NATIONAL BANK ACT. §335 
 
 holders, rest apon the same provisions of law, and both of those 
 rights have been sustained by abundant judicial authority." ' 
 
 § 335. Comptroller's certificate is evidence of right 
 to sue. The Comptroller's certificate, approved by the Secre- 
 tary of the Treasury, reciting all the facts of which the Comp- 
 troller must be satisfied to justify -him in appointing a receiver, is 
 sufficient evidence of the validity of the appointment to sustain 
 any action that he' may bring in his official capacity." Nor can 
 debtors, when sued by him, "inquire into the legality of his ap- 
 pointment. It is sufficient for the purposes of such a suit that 
 he has been appointed and is receiver in fact. As to debtors, 
 the action of the Comptroller in making the appointment is con- 
 clusive until set aside on the application of the bank. The bank 
 may move in that behalf, but the debtor cannot. Section fifty 
 makes express provision for a contest by the bank." ' 
 
 § 336. Can sue in and remove cases to federal 
 court. Have receivers the privilege in all cases of suing in the 
 United States courts and of removing cases thereto which may be 
 brought against them in the state tribunals ? Says Bradley, J. : 
 " I am not aware of any such prerogative which a receiver of a 
 national bank has over other persons." * But the opposite view 
 has recently been maintained, and with great force.^ 
 
 § 337. Can make no motion in other cases. A re- 
 ceiver can make no motion in a state court which has cognizance 
 of a proceeding, an attachment, for example, to dissolve it, because 
 he has no status there, as he is not a party to the suit.' So, if 
 a receiver should be appointed after the entering of a judgment 
 for costs against a national bank, the court that rendered it could 
 not order him to pay the costs because he was not a party to the 
 record, nor an officer of the court, and, furthermore, he is 
 bound to pay all moneys collected into the United States treasury.' 
 But he may become a party, and then his motion would be heard. 
 
 ' Blatohfbrd, J., Stanton v. Wilkeson, 8 Bened., SS,") p. 358 ; citing Ken- 
 nedy r. Gibson, 8 Wall^., 498 ; Bank v. Pahqnioque Bank, 14 Id., 383 ; Bank 
 V. Kennedy, 17 Id., 19 : Case v. Berwin, 22 La. Ann., 321. 
 
 2 Piatt v. Beebe, 57 N. Y., 339. 
 
 ' Waite, C. J., Cadle«. Baker, 20 Wall., 650 p. 651; revsg Cadle v. Tracy, 
 11 Blatchf., 101. * Bird's executors v. Cockrem, 2 Woods, 32. 
 
 5 li 239—245, 263, 264. « Harvey v. Allen, 16 Blatchf., 29. 
 
 ' Ocean National Bank v. Carll, 7 Hun, 237. 
 
§338 I'REFEKENOES, DISSOLUTION AND EECEIVEKSHIP. 203 
 
 The other way for him is to bring a proceeding for the recovery 
 of the property attached.' 
 
 § 338. When can sue without Comptroller's order. 
 In an ordinary case of a debt or claim due to a bank, the receiver 
 may sue therefor without an order from the Comptroller. Says 
 Judge Bradley: " The language of the statute authorizing the 
 appointment of a receiver to act under the direction of the Comp- 
 troller means no more than that the receiver shall be subject to the 
 direction of the Comptroller. It does not mean that he shall do 
 no act without special instructions. This very appointment makes 
 it his duty to collect the assets and debts of the association. 
 With regard to ordinary assets and debts no special direction is 
 needed; no unusual exercise of judgment is required. They are 
 to be collected of course; that is what the receiver is appointed 
 to do." ' 
 
 § 339. May sell on order of court. A receiver "may 
 sell the real and personal property of the bank on such terms as 
 the court shall direct, but he cannot sell in the absence of such an 
 order, nor sell upon terms in conflict with the order. " ' Consequent- 
 ly an order authorizing a receiver to sell all personal property and 
 real estate mentioned and described in his petition "on such terms 
 and in such manner as in his judgment may be for the best in- 
 terests of the creditors and all interested in said bank and its 
 assets," will not justify him in buying a judgment or in exchang- 
 ing, trading or bartering the property of the bank for other pro- 
 perty. Nor can a receiver charge the estate of the bank by an 
 executory contract unless duly authorized by the National Bank- 
 ing Law and the order of a court of competent jurisdiction based 
 thereon. * 
 
 § 340. Agreement "without order. And if a receiver 
 should make an agreement without authority to do so "the estate 
 cannot be charged for damages resulting from the failure or ina- 
 bility of the receiver to convey or> deliver property not belonging 
 to the bank, nor for his refusal to comply with covenants which 
 he was without power as the receiver to make." '* 
 
 ' Harvey v. Allen, ISBlatchf., 29; Tracy v. First National Bank, 37 N. Y., 
 523. ' Bank v. Kennedy, 17 Wall., 19 p. 22. 
 
 = Horton, C. J., Ellis «. Little, 37 Kansas, p. 719. 
 * Id., 707. ' ' Ud., p. 720. 
 
204 NATIONAL BANK ACT. §341 
 
 § 341. Nature of sale ordered by court. A receiver's 
 sale made by order of the court is a judicial sale.' When one 
 sale has not been confirmed for inadequacy of consideration, and 
 a second sale is well attended and the property brings a fair price, 
 it will not be set aside though afterward a somewhat higher offer 
 for the property may be made; nor is "this the proper way to make 
 judicial sales, nor will it tend to make parties come forward with 
 an assurance that if they bid in good faith for property offered 
 at a judicial sale they will be protected in their rights; nor will 
 it cause property to bring what it is actually worth." ^ 
 
 § 342. Order to compromise debt. A district court 
 of the United States is " a court of record of competent juris- 
 diction" to order the receiver to compromise a doubtful debt.' 
 But it has no right to compound the liability of a shareholder on 
 the application of the receiver. * 
 
 § 343. Com.ptroller no authority to do this. The 
 Comptroller has no authority to settle and compound suits brought 
 by the receiver without leave of the court in which they are pending. 
 In Case v. Small ^ the judge, in considering the authority of the 
 Comptroller over them, says: " Perhaps he might direct the re- 
 ceiver to discontinue, but to compound and settle claims requires 
 the authority of the court. To discontinue, the direction should be 
 positive." But if a receiver and counsel for the United States 
 should compromise a suit it could not be opened years afterward, 
 especially if no fraud was alleged." 
 
 § 344. No bond for suits required. No bond for 
 the prosecution of the suit, or to answer in damages or costs, is 
 required on writs of error or appeals issuing from or brought to 
 the United States Supreme Court by direction of the Comptrol- 
 ler in suits by or against insolvent banks, or their receivers.' 
 Notice to § 345. " The Comptroller shall, upon appointing a receiver, 
 
 comptroi- cause notice to be given, by advertisement in such newspapers as 
 Rev. Stat, he may direct, for three consecutive months, callina on all per- 
 sons who may have claims against such association to present the 
 same, and to make legal proof thereof." ' 
 
 • In re Third National Bank, 9 Biss., 535. 
 ^Blodgett, J., In re Third National Bank, 9 Biss. 535 p. 537. 
 ' In the matter of the petition of Piatt, 1 Bened., 534. 
 
 * Price V. Yates, 7 Week. Notes, 51. » 4 Woods, 78, S. C, 10 Fed. E., 722. 
 ^Henderson, Receiver of Venango National Bank v. Myers, 11 Phila., 616. 
 ' Pacific Bank v. Mixter, 114 U. S., 463. » Act 1864, Sec. 50. 
 
 Sec. 5235. 
 
§346 PREFERENCES, DISSOLUTION AND RECEIVERSHIP. 205 
 
 § 346. How their claims may be proved. " The claims 
 of creditors may be proved before the Comptroller, or estab- 
 lished by suit against the association. Creditors must seek their 
 remedy through the Comptroller in the mode prescribed by the 
 statute; they cannot proceed directly in their own names against 
 the stockholders or debtors of the bank. The receiver is the 
 statutory assignee of the association, and is the proper party to 
 institute all suits ; they may be brought, both at law and in equity, 
 in his name, or in the name of the association for his use. He 
 represents both the creditors and the association, and when he 
 sues in his own name it is not necessary to make either a party 
 to the suit." ' The word "debts" in section 5234 includes the 
 " contracts, debts and engagements" mentioned in section 5151, 
 and the word "liabilities" imports no broader obligation.^ 
 
 § 347. Suing creditor has no special lien. If a credi- 
 tor resorts to a suit and recovers judgment this will not give him 
 "any lien on the property of the delinquent association, nor secure 
 to the judgment creditor any preference over other creditors whose 
 claims are proven before the receiver. All alike must await the 
 action of the Comptroller of the Currency, and be content with a 
 just and legal distribution of the proceeds of the assets collected 
 by the receiver and liquidated by the Comptroller." ' 
 
 § 348. ' Set-off. In a suit against a depositor or other per- 
 son, he may set off the amount of his deposit or other claim 
 against the debt of the bank.* Says Boynton, J. : "A right of 
 set off, perfect and available against the bank at the time of his 
 appointment as receiver, is not affected by the bank's insolvency. 
 He succeeds only to the rights of the bank existing at the time it 
 goes into liquidation." °But a joint note of W and K, belong- 
 ing to a bank which is overdue at the time of its failure, cannot 
 be set off in their favor against notes not due when that event 
 happened which were held by K against the bank and other in- 
 solvent makers jointly. Had W and K paid their note when it 
 •matured, the proceeds would have gone to the receiver for distri- 
 bution. " Their failxire to pay it when due ought not to place 
 
 ' Swayne, J., Kennedy v. Gibson, 8 Wall., 498 p. 506. 
 ^ Stanton v. Wilkeson, 8 Bened., 357. 
 
 5 Bank of Bethel u. Pahquioque Bank, 14 Wall., 383 p. 402, affg 36 
 Conn., 325. ' Piatt v. Bentley. 11 Am. L. Reg. N. S., 171. 
 
 5 Hade «. McVay, 31 Ohio. 231 p. 238. 
 
206 NATIONAL BANK' ACT. §348(a) 
 
 them in any better position than they would have occupied had . 
 they faithfullj' discharged their own obligation at maturity, ac- 
 cording to its terms. It would be a strange principle in equity 
 which would enable a party to derive an advantage from his own 
 delinquency which he could not otherwise have enjoyed." ' 
 
 § 348(a). Debt from bank cannot be set off against 
 assessment. In Witters v. Sowles,^ the executor of B, who was 
 the owner of four hundred and fifty shares in a national bank, 
 delivered to it, while its failure was impending, securities belong- 
 ing to the estate, of a larger aggregate value than the shares. 
 These securities were used in paying and securing claims against 
 the bank. It was in a failing condition at the time of receiving 
 this assistance, and it was rendered, so the executor claimed, in 
 fulfillment o'f an agreement between himself and the directors and 
 bank examiner that in the event of the bank's survival the secu- 
 rities should be restored, and if it failed they should be applied 
 on the assesment against the shareholders if one should be made. 
 An assessment having^been made the question was, could these 
 securities, or their value, be applied in that way ? Said Judge 
 "Wheeler: ^ " This assessment is for the purpose of paying those 
 who were creditors of the bank at the time of its failure. That 
 property went to pay others not creditors at the time of the fail- 
 ure, so far as it did pay them. The delivery of the property may 
 have created a liability of the bank; if so, the assessment upon 
 this and the rest of the stock would go ratably upon that and the 
 other liabilties if proved and established. A set off cannot be 
 made without depriving others of their ratable proportion. Be- 
 sides this, the claims are not in any sense mutual. The claim of 
 the executor, if he has any, is against the bank. 'The assessment 
 never was due to the bank, and does not belong to it. The assess- 
 ment belongs to th« creditors of the bank, and is recoverable by the 
 receiver, only for the purpose of ratable distribution among them." * 
 
 § 348(6). Government may retain money to pay 
 debt. The government may retain from money under its con- 
 trol belonging to an insolvent bank enough to discharge any law- 
 ful debt that may be due, however it may have originated.* 
 
 ' Balch V. Wilson, 25 Minn., 299 p. 303. ' 32 Fed. E., 130. 
 
 ' Id., p. 138. •• Delano v. Butler, 118 U. S., 634. 
 
 * United States v. Cook County Nat. Bank, 9 Biss., 55. 
 
.§349 PREFERENCES, DISSOLUTION AND RECEIVERBHIP. 207 
 
 § 349. What claims to be included. " Claims provea 
 to the satisfactiou of tlie Comptroller are to be included in the 
 list, and lie is also to include in the list all claims adjudicated 
 in a court of competent jurisdiction, which shows conclusively 
 that claims disallowed by the Comptroller may be prosecuted in 
 a court having jurisdiction in such cases." ' 
 
 § 350. Allowance of expense in establishing claim. 
 If a claim is disallowed by the Comptroller, but afterward is estab- 
 lished before a competent tribunal, " no provision is made by law 
 for the payment of the expenses of the claimant in his litigation 
 beyond the taxable costs, and necessarily that loss must fall on 
 him as it does on every one who has the misfortune to be driven 
 to the courts for the judicial determination of his rights." ^ , 
 
 § 351. Case v. Bank.^ A, in order to secure the payment 
 of his note to B, pledged to him some national bank shares with 
 authority to sell them if he failed to pay his note at maturity. 
 Failing to do this, B sold the shares and applied to the cashier 
 of the bank to have them transferred. The cashier refused to do 
 so because A was indebted to the bank. Before the transfer could 
 be enforced the bank failed, and C was appointed a receiver. In 
 an action by B against him to recover damages for his loss, it 
 was heldjfchat the cashier's refusal to transfer the shares was the 
 refusal of the bank, inasmuch as he was intrusted with the power 
 to transfer stock by the directors, and further that the court had 
 power to order the receiver to pay the claim or certify it to the 
 Comptroller. 
 
 § 352. Claim must be against bank and not offi- 
 cer. Of course, a creditor cannot collect of a failed bank if 
 his loan be to the president or other officer of the bank as an 
 individual. In a recent case A, the president of a Vermont na- 
 tional bank, applied to a Canadian bank for a loan. The mana- 
 ger of the Canadian bank told him that his bank could not make 
 such a loan to an individual, but would put the amount desired 
 as a deposit in the Vermont bank, which should draw six per 
 cent, interest while it remained there, and that bonds should be 
 given as security. The Canadian bank drew drafts for the 
 amount on a Boston bank, delivered them to the other, and re- 
 
 ' Clifford, J., Bank of Bethel v. Pahquioque Bank, 14 Wall., p. 398; Ken- 
 nedy V. Gibson, 8 Wall., 506. 
 
 '' Waite, C. J., White v. Knox, 111 U. S., p. 788. ' 100 TJ> S., 446. 
 
208 NATIONAL BANK ACT. §353 
 
 ceived the security required. The Vermont bank indorsed the 
 drafts, sent them to the drawee, and received the avails. The 
 Vermont bank having failed, the receiver rejected the claim of the 
 Canadian bank on the ground that the loan was to the president 
 of the bank, who took the money to use in a railroad that he was 
 building. But the court held that the loan was to the bank, and 
 that the Canadian bank should be paid by the Comptroller from 
 the assets ratably with other claims.' 
 
 § 853. Interest. Concerning interest on deposits, this must 
 be paid from the time the deposit is demanded. Thus, on No- 
 vember 22d, 1873, a national bank in New York failed and a re- 
 ceiver was appointed. On the 24th of September previously, all 
 the depositors demanded payment. Nothing was paid. But in- 
 stallments were afterward paid until the 20th of November, 1874, 
 when the principal was extinguished. At each payment interest 
 on the amount from the 24th of September, 1873, was demanded 
 and refused. A suit was finally brought for the interest on all 
 the deposits from that date, and also on the aggregate from the 
 20th of Nqvember, 1874. It was recovered, the court holding 
 that though the Act was silent " concerning interest upon the 
 claims before or after proof or judgment," it ought to be in- 
 cluded in the same manner as a judgment would include interest 
 on a claim to the time of rendering it and bear interest after- 
 ward." 
 
 § 354. On what claims. On what claims may interest be 
 recovered? Says Judge Wallace,^ "upon all demands originating 
 in contracts conditioned for the payment of interest, and on all 
 demands for money due and unpaid by way of damages for the 
 non-payment after such demands became due." Also for a bal- 
 ance due on deposits made in the ordinary way with the 
 bank. 
 
 § 355. Suits for its recovery, how brought. If a le- 
 gal proceeding be needful to recover such interest, it cannot be 
 maintained against the receiver or Comptroller, but it can be 
 against the bank. "The corporation continues to exist for the 
 purpose of being sued, notwithstanding the Comptroller has in- 
 tervened pursuant to the provisions of the Act under which it 
 
 ' Eastern Townships 'Bank v. Vermont National Bank, 22 Fed. R., 186. 
 '' National Bank v. Mechanics' National Bank, 94 U. S.^ 437. 
 * Chemical National Bank v. Bailey, 12 Blatchf, 480 p. 483. 
 
356 PKEFBKENCES, DISSOLUTION AND EBCEIVERSHIP. 209 
 
 •was organized; and demands against it can be prosecuted to ad- 
 judication in any court of competent jurisdiction." ' 
 
 § 356. Interest during receivership. When the 
 assets are sufficient to pay all claims and leave a surplus, the 
 Comptroller ought to allow interest on them during the period of 
 administration before appropriating the surplus to the sharehold- 
 ers. "While the Comptroller is not directed," says Wallace, J., 
 " by express terms, to allow interest to creditors, the act contains 
 no language which, in terms or by implication, prohibits him from 
 doing so. * * The interest is an incident of the debt or 
 claim, and to be paid before distribution of the surplus." " 
 
 8 357. " From time to time, after full provision has been first Dividends to 
 
 , creditors 
 
 made for refunding to the United States any deficiency in redeem- "id re- 
 
 " »> *> mainder. 
 
 ing the notes of such association, the Comptroller shall make a R^v. stat. 
 ratable dividend of the money so paid over to him by such re- 
 ceiver on all such claims as may have been proved to his satisfac-. 
 tion or adjudicated in a court of competent jurisdiction, and, as 
 the proceeds of the assets of such association are paid over to 
 him, shall make further dividends on all claims previously proved 
 or adjudicated; and the remainder of the proceeds, if any, shall 
 be paid over to the shareholders of such association, or their legal 
 representatives, in proportion to the stock by them respectively 
 held." ' 
 
 § 358. How paid. " Dividends are to be paid to all cred- 
 itors ratably, that is to say, proportionally. To be proportionate 
 they must be made by some uniforni rule. They are to be paid 
 on all claims against the bank previously proved and adjudicated. 
 
 * * If the Comptroller declines to recognize the claim as valid, 
 it must be established by the adjudication of some competent court 
 before it can share in the distribution of assets. When adjudi- 
 cated in favor of the creditor it is established as a claim against 
 the bank and must be treated accordingly by the Comptroller. 
 
 * * Itisclearly his duty, therefore, in paying dividends to take 
 the value of the claim at [the time of the bank's insolvency] as the 
 basis of distribution. If interest is added on one claim after 
 that date before the percentage of dividend is calculated, it 
 
 'Wallace, J., Chemical National Bank u Bailey, 12 Blatchf. 480 p. 483; 
 Bank of Bethel v. Pahquioque Bank, 14 Wall., 383. 
 '^ Chemical National Bank v. Bailey, 12 Blatchf., 480 pp. 481, 482. 
 'Act 1864, Sec. 50. 
 14— B. 
 
210 NATIONAL BANK ACT. §359 
 
 should be upon all, otherwise the distribution would be according 
 to different rules, and not ratably as the law requires." ' 
 
 § 359. Priority of government. With • respect to 
 the "priority given by previous statutes to the United States 
 in the distribution of the estates of insolvent or deceased per- 
 sons, or of corporations, indebted ' to the government, " this has 
 not been affected by the National Banking Law.^ 
 
 § 360. Suit against receiver for misconduct as 
 director. When a national bank has become insolvent and a 
 director has been appointed a receiver, against whom an action, 
 has been brought by a stockholder for misconduct as a director 
 in common with the other directors, the Statute of Limitations 
 begins to run from the beginning of the action, and not from the 
 time of filing the petition by other stockholders to become parties 
 thereto. The Statute of Limitations must be treated as though 
 all the stockholders were originally plaintiffs.' Furthermore, the 
 original plaintiff can at any time before the other stockholders 
 are made parties and before judgment, settle his own claim 
 and execute a release and discontinue the action, but after 
 prosecuting it to judgment, this is for the benefit of all the 
 stockholders and he ceases to have control over it.' With regard 
 to the stockholders who do not unite in the action, having been 
 begun for, their benefit, their rights are not bound by any limita- 
 tion of time after the commencement.' 
 
 § 361. Cannot be attached in suit against share- 
 holders. If a receiver should intend to violate, or has violated 
 his duty in discharging the trust confided in him, he cannot be 
 attacked in an action brought by him against the shareholders to 
 enforce their individual liability." And if in such an action they 
 should plead that the Comptroller had decided to pay a large 
 amount of claims against the bank, for which it was not reponsi- 
 ble, and that, aside from these claims, there were means enough 
 in his hands to meet all liabilities, the plea would be bad be- 
 cause of its vagueness and uncertainty.' 
 
 ' Waite, C. J., White v. Knox, 111 U. S., 784 p. 786. 
 
 ' Harlan, J., United States v. Cook County Nat. Bank, 9 Biss., 55 p. 60. 
 
 = Brinckerhoflf u Bostwick, 99 N. Y., 185. 
 
 * Id. ' Id. 6 Casey ^ Qalli, 94 U. S., 673. 
 
 ' Id., p. 680. 
 
§362 PREFERENCES, DISSOLUTION AND EECEIVEKSHIP. 211 
 
 § 362. Expenses of receiver. With respect to the ex- 
 penses of a receivership these " shall be paid out of the assets of 
 such association before distribution of the proceeds thereof." ' 
 
 8 363. In 1876 Congress further provided for the election of when bank 
 
 "^ ° . '^ . may elect 
 
 an agent by the shareholders of an insolvent bank to take its as- agent to 
 
 , manage its 
 
 sets from the- receiver and close its affairs. The Act reads " that.aflairB. 
 whenever any association shall have been or shall be placed in 
 the hands of a receiver, as provided in section fifty-two hundred 
 and thirty -four and other sections of said statutes, and when, as 
 provided in section fifty-two' hundred and thirty six thereof, the 
 Comptroller shall have paid to each and every creditor of such 
 association, not including shareholders who are creditors of such 
 association, whose claim or claims as such creditor shall have been 
 proved, or allowed as therein prescribed, the full amount of such 
 claims and all expenses of the receivership, and the redemption 
 of the circulating notes of such association shall have been pro- 
 Tided for by depositing lawful money of the United States with 
 the Treasurer of the Unit'ed States, the Comptroller of the Cui-- 
 rency shall call a meeting of the shareholders of such association 
 by giving notice thereof for thirty days in a newspaper published 
 in the town, city, or county where the business of such associa- 
 tion was carried on, or if no newspaper is there published, in the 
 newspaper published nearest thereto, at which meeting the share- 
 holders shall elect an agent, voting by ballot, in person or by 
 proxy, each share of stock' entitling the holder to one vote ; and 
 when such agent shall have received votes representing at least a 
 majority of the stock in value and number of shares, and when 
 any of the shareholders of the association shall have executed 
 and filed a bond to the satisfaction of the Comptroller' of the Cur- 
 rency, conditioned for the payment and discharge in full of any 
 and every claim that may hereafter be proved and allowed 
 against such association by and before a competent court, and 
 for the faithful performance and discharge of all and singular 
 the duties of such trust, the Comptroller and the receiver shall when assets 
 thereupon transfer and deliver to such agent all the undivided or turn over to 
 uncollected or other assets and property of such association then 
 remaining in the hands. or subject to the order or control of said 
 Comptroller and said receiver, or either of them ; and for this 
 purpose, said Comptroller and said receiver are hereby severally 
 
 ' Eev. Stat., Sec. 5238. 
 
212 NATIONAL BANK ACT. §364 
 
 empowered to execute any deed, assignment, transfer, or other in- 
 strument in writing that may be necessary and proper ; whereupon 
 the said Comptroller and the said receiver shall, by virtue of 
 this Act, be discharged and released from any and all liabilities to 
 such association, and to each and all of the creditors and share- 
 holders thereof ; and such agent is hereby authorized to sell, 
 compromise, or compound the debts due to such association upon 
 the order of a competent court of record or of the United States 
 Circuit Court for the district where the business of the association 
 was carried on. Such agent shall hold, control, and dispose, of 
 the assets and property of any association which he may receive 
 as hereinbefore provided for the benefit of the shareholders of 
 such association as they, or a majority of them in value or num- 
 ber of shares, may direct, distributing such assets and property 
 among such shareholders in proportion to the shares held by 
 each; and he may, in his own name or in the name of such asso- 
 ciation, sue and be sued, and do all other lawful acts and things 
 necessary to finally settle and distribute the assets and property 
 in his hands. In selecting an agent as hereinbefore provided, ad- 
 ministrators or executors of deceased shareholders may act and 
 sign as the decedent might have done if living, and guardians 
 may so act and sign for their ward or wards." 
 Forfeiture § 364. " If the directors of any national banking association 
 charter. ^ shall knowingly violate, or knowingly permit any of the officers, 
 Sec' 5239. agents, or servants of the association to violate any of the provisions 
 of this Title, all the rights, privileges, and franchises of the asso- 
 ciation shall be thereby forfeited. Such violation shall, however, 
 be determined and adjudged by a proper circuit, district, or ter- 
 ritorial court of the United States, in a suit brought for that pur- 
 pose by the Comptroller of the Currency, in his own name, before 
 the association shall be declared dissolved." '^ 
 Comptroller § 365. In 1876 Congress further declared " that whenever 
 pointTe- any national banking association shall be dissolved, and its rights, 
 privileges, and franchises declared forfeited, as prescribed in sec- 
 tion fifty-two hundred and thirty-nine of the Revised Statutes of 
 the United States, or whenever any creditor of any national banking 
 association shall have obtained a judgment against it in any court 
 of record, and made application, accompanied by a certificate 
 
 ' 19 Stat, at Large, 44 C. 1 vS. Ch. 156, Sec. 3. 
 ' For entire section see 2 128. 
 
 ceiver. 
 
§366 PREFERENCES, DISSOLUTION AND • RECEIVERSHIP. 213 
 
 from the clerk of the courf stating that such judgmeat has been 
 rendered and has remained unpaid for the space of thirty days, or 
 whenever the Comptroller shall become satisfied of the insolvency 
 of the national banking association, he may, after due examination 
 of its affairs, in either case, appoint a receiver, who shall pro- 
 ceed to close up such association, and enforce the personal lia- 
 bility of the shareholders, as provided in section fifty-two hun- 
 dred and thirty-four of said statutes." ' 
 
 § 366. Comptroller must bring suit. Whenever sec- 
 tion 5239 is violated the Comptroller must bring the suit for dis- 
 solution, and not the receiver. " These provisions," s^id Mr. 
 Justice Kapallo, " are evidently intended to apply to violations 
 by these corporations of the law under which they are organized, 
 and to subject them to the forfeiture of their corporate franchises 
 upon such violations being established by the judgment of a court of 
 the United States. Being organized under an act of Congress, the 
 jurisdiction to declare a forfeiture of their franchises is very ap- 
 propriately vested exclusively in the courts of the United States, 
 and the Comptroller of the Currency is designated as the officer 
 who shall prosecute for the purpose of having such forfeiture ad- 
 judged. It would of course be very inappropriate that such a 
 proceeding should be instituted by a receiver who has only to 
 deal with the assets of the bank, and the requirement that the 
 violation should be adjudged by a court of the United States, at 
 the suit of the Comptroller, is, by the terms of the section, made 
 essential ' before the association shall be declared dissolved,' but 
 there is nothing in the act which renders it essential for any other 
 purpose; and it is further to be observed that this is the Only pro- 
 vision of the act which authorizes the Comptroller to institute 
 any action in relation to the affairs of a national bank." ^ 
 
 § 367. Cannot be dissolved in collateral proceeding. 
 No charter can be dissolved in a collateral proceeding, for exam- 
 ple, in a suit by the institution to recover money loaned. The 
 dissolution must be ordered in a suit begun by the Comptroller. ^ 
 
 § 368. "Whenever an association against which proceedings Eight to en- 
 have been instituted, on account of any alleged refusal to redeem mentof re- 
 its circulating notes as aforesaid, denies having failed to do so, Bev. stat. 
 
 • 19 Stat, at Large, 44 C. 1 S. Ch. 156, Sec. 1. 
 ' Brinokerhoff 1'. Bostwick, 88 N. Y., 52 p. 57. 
 ' Union Gold Mining Co. v. Rocky Mountain Nat. Bank, 1 Colo., 531. 
 
214 
 
 NATIONAL BANK ACT. 
 
 §369 
 
 Pi'oceedings 
 to enjoin 
 Comptrol- 
 ler. 
 
 Bev. Stat. 
 Sec. 736. 
 
 Voluntary 
 liquidation. 
 Rev. Stat. 
 Sec. saw. 
 
 Notice to be 
 given. 
 Bev. Stat. 
 Sec. 5221. 
 
 it may, at any time within ten days after it has been notified of 
 the appointment of an agent, as provided in section fifty-two 
 hundred aijd twenty-seven, apply to the nearest circuit, or dis- 
 trict, or territorial court of the United States to enjoin further 
 proceedings in the premises; and such court, after citing the 
 Comptroller of the Currency to show cause why further proceed- 
 ings should iQot be enjoined, and after the decision of the court 
 or finding of a jury that such association has not refused to re- 
 deem its circulating notes, when legally presented, in the lawful 
 money of the United States, shall make an order enjoining the 
 Comptroller, and any receiver acting under his direction, from all 
 further proceedings on account of such alleged refusal." 
 
 § 369. The Eevised Statutes also provide that " all proceed- 
 ings by any national banking association to enjoin the Comptroller 
 of the Currency, under the provisions of any law relating to na- 
 tional banking asBoeiations, shall be had in the district where 
 such association is located." 
 
 § 370. Meaning of Statute. The section last quoted 
 formed a part of the proviso to the fiftieth section of the Law of 
 1864 While it was in force Judge Woodruff said: " This proviso 
 contemplates a proceeding (not necessarily a formal suit or 
 action, but a proceeding summary in form) instituted by the 
 association, to eoatinue its own existence, preserve its property, 
 and avoid an ex parte receivership, ordered by the Comptroller to 
 have effect and operate upon the association and its property in 
 the very place where it is located. Such receiver might be -ap- 
 pointed upon erroneous information or mistaken evidence, and 
 considerations of convenience required that the association should 
 have speedy and convenient means T^ithin its own district, and 
 where the proofs must necessarily be, of rectifying a mistake and 
 disproving the allegations upon which such ex parte action of 
 the Comptroller had proceeded." ' 
 
 § 371. "Any association may go into liquidation and be closed 
 by the vote of its shareholders owning two-thirds of its stock." 
 
 § 372. " Whenever a vote is taken, to go into liquidation it 
 shall be the duty of the board of directors to cause notice of this 
 fact to be certified, under the seal of the associa,tion, by its pres- 
 ident or cashier, to the Comptroller of the Currency, and publica- 
 tion thereof to be made for a period of two months in a newspa- 
 
 ' Van Antwerp v. Hulburd, 7 Blatchf., p. 437. 
 
§373 PREFEEENCES, DISSOLUTION AND EECEIVEE8HIP. 215 
 
 per published in the city of New York, and also in a newspaper 
 published in the city or town in which the association is located, 
 or if no newspaper is there published, then in the newspaper pub- 
 lished nearest thereto, that the association is closing up its affairs, 
 and notifying the holders of its notes and other creditors to pre- 
 sent the notes and other claims against the association for payment." 
 
 8 373. While the National Banking Law provided for enforc- uawutyot 
 
 ... ... . sharehold- 
 
 ing the individual liability of a shareholder of a bank that passed ers. 
 
 into involuntary liquidation, it was silent concerning the method 
 of procedure whenever a bank should voluntarily liquidate. But 
 the omission was supplied by the Act of JUne 30, 1876. The sec- 
 ond section declares "that when any national banking association 
 shall have gone into liquidation under the provisions of section 
 five thousand two hundred and twenty of said statutes, the indi- 
 vidual liability of the shareholders provided for by section fifty- 
 one hundred and fifty-one of said statutes may be enforced by 
 any creditor of such association, by bill in equity in the nature of 
 a creditor's bill, brought by such creditor on behalf of himself 
 and of all other creditors of the association, against the sharehold- 
 ers thereof, in any court of the United States having original juris- 
 diction in equity for the district in which such association may 
 have been located or established." ' 
 
 § 374. Meaning of Statute. " In the o^se of involuntary 
 liquidation under the supervision of the Comptroller of the Cur- 
 rency, the receiver appointed by him is authorized and required, 
 not only to collect and apply the proper assets of the bank to the 
 payment of its debts, but also, so far as may be necessary, to en- 
 force the individual liability of the shareholders. It thus appears 
 that the enforcement of this liability is a part of the liquidation 
 of the affairs of the bank; at least, so closely connected with it as 
 to constitute but one continuous transaction. When in the case 
 of voluntary liquidation, the proceeding is instituted by one or 
 more creditors for the benefit of all, by means of the jurisdiction 
 of a court of equity, there seems to be no reason why the nature 
 of the proceeding should be considered as changed." " 
 
 '19 Stat, at Large, '44 C. 1 S. Ch. 156, Sec. 2. 
 
 ' Matthews, J., Richmond v. Irons, 121 V, S., p. 49. 
 
216 
 
 NATIONAL BANK ACT. 
 
 §375 
 
 CHAPTEE XVII. 
 
 BANK EXAMINATIONS AND REPOETS. 
 
 375. Appointment and powers of bank 
 
 examiner. 
 
 376. Compensation. 
 
 377. Visitorial powers. . 
 
 378. Comptroller to examine banks in Dis- 
 
 trict of Columbia. 
 
 379. Reports to Comptroller. 
 
 Apportion- 
 ment and 
 powers of 
 bank ex- . 
 aminer. 
 Rev. Stat. 
 Sec. 5340. 
 
 Compensa- 
 tion. 
 
 380. Oath to reports. 
 
 381. Meaning of section. 
 
 382. Dividends and earnings to be re- 
 ported. 
 
 383. Penalty for failure to report. 
 
 384. Savings banks and trust companies 
 must report. 
 
 § 375. " The Comptroller of, the Currency, with the approval ' 
 of the Secretary of the Treasury, shall, as often as shall be 
 deemed necessary or proper, appoint a suitable person or persons 
 to make an examination of the affairs of every banking associa- 
 tion, who shall have power to make a thorough examination into 
 all the affairs of the association, and, in doing so, to examine any 
 of the officers and agents thereof on oath; and shall make a full 
 and detailed report of the condition of the association to the 
 Comptroller. [Every person appointed to make such examina- 
 tion shall receive for his services at the rate of five dollars for 
 each day by him employed in such examination, and two dollars 
 for every twenty-five miles he shall necessarily travel in the per- 
 formance of his duty, which shall be paid by the association by 
 him examined.] But no person sJaall be appointed to examine 
 the affairs of any banking association of which he is a director 
 or other officer." 
 
 § 376. The sentence above bracketed relating to compensa- 
 tion was superseded by the law of 1875, which enacted " that all 
 persons appointed to be examiners of national banks not located in 
 the redemption cities specified in section five thousand one hun- 
 dred and ninety two of the Kevised Statutes of the United States, 
 or in any one of the states of Oregon, California, and Nevada, or 
 in the territories, shall receive compensation for such examina- 
 tion- as follows : For examining national banks having a capital 
 less than one hundred thousand dollars, twenty dollars ; those 
 having a capital of one hundred thousand dollars and less than 
 
§377 BANK EXAMINATIONS AND REPORTS. 317 
 
 three hundred thousand dollars, twenty-five dollars ; those having 
 a capital of three hundred thousand dollars and less than four 
 hundred thousand dollars, thirty-five dollars; those haviilg a cap- 
 ital of four hundred thousand dollars and less than five hundred 
 thousand dollars, forty dollars; those having a capital of five hun- 
 dred thousand dollars and less than six hundred thousand dollars, 
 fifty dollars; those having a capital of six hundred thousand dol- 
 lars and over, seventy-five dollars; which amounts shall be as- 
 sessed by the Comptroller of the Currency upon, and paid by, 
 the respective associations so examined, and shall be in lieu of 
 the compensation and mileage heretofore allowed for making said 
 examinations; and persons appointed to make examination of 
 national banks in the cities named in section five thousand one 
 hundred and ninety-two of the Revised Statutes of the United 
 States, or in any one of the states of Oregon, California, and Ne- 
 vada, or in the territories, shall receive such compensation as may . 
 be fixed by the Secretary of the Treasury upon the recommenda- 
 tion of the Comptroller of the Currency; and the same shall be 
 assessed and paid in the manner hereinbefore provided." ' 
 
 8 377. " No association shall be snbiecfc to any visitorial visitoriai ' 
 
 " J J power. 
 
 powers other than such as are authorized by this Title, or are Rev. stat. 
 
 ^ _ _ J ' . Sec. 5241. 
 
 vested in the courts of justice." 
 
 8 378. "The Comptroller' of the Currency, ia addition to the comptroller 
 
 " *■ ^ " , , to examine 
 
 powers conferred upon him by law for the examination of national ^P^. >? 
 banks, is further authorized, whenever he may deem it useful, to Columbia. 
 
 ' . Key. Stat. 
 
 cause examination to be made into the condition of any bank in sec. ssa. 
 the District of Columbia organized under act of Congress. The 
 Comptroller, at his discretion, may report to Congress the results 
 of such examination. The expense necessarily incurred in any 
 such examination shall be paid out of any appropriation made by 
 Congress for special bank examinatibns." 
 
 8 379. " Every association shall make to the Comptroller of Keports to 
 
 , ., ,. , ■, • 1 ■,- Comptrol- 
 
 the Currency not less than five reports during each year, according ler. 
 to the form which may be prescribed by him, verified by the oath see.' 5211.' 
 or affirmation of the president or cashier of such association, and 
 attested by the signature of at least three of the directors. Each 
 such report shall exhibit, in detail and under appropriate heads, 
 the resources and liabilities of the association at the close of busi- 
 ness on any past day by him specified; and shall be transmitted 
 
 ' 18 Stat, at Large, 43 C. 3 S. Ch. 89. 
 
218 NATIONAL BANK ACT. §380 
 
 to the Comptroller within five days after the receipt of a request 
 or requisition therefor from him, and in the same form in which 
 it is made to the Comptroller shall be published in a newspaper 
 published in the place where such association is established, or if 
 there i s no newspaper in the place, then in the one published nearest 
 thereto in the same county, at the expense of the association ; and 
 such proof of publication shall be furnished as may be required 
 by the Comptroller. The Comptroller shall also have power to 
 ^ call for special reports from any particular association whenever 
 in his judgment the same are necessary in order to a full and 
 complete knowledge of its condition." 
 oatbtore- • § 380., In 1881 Congress enacted "that the oath or afi&rma- 
 •"^ ^" tion required by section fifty-two hundred and eleven of the Ee- 
 
 vised Statutes, verifying the returns made by national banks to 
 the Comptroller of the Currency, when taken before a notary 
 . public properly authorized and commissioned by the state in 
 which such notary resides and the bank is located, or any other 
 officer having an official seal, authorized in such state to admin- 
 ister oaths, shall be a sufficient verification as contemplated by 
 said section fifty-two hundred and eleven: Provided, That the 
 officer administering the oath is not an officer of the bank.'" 
 
 § 381. Meaning of section. An indictment for perjury 
 against an officer of a national bank for a willfully false declara- 
 tion or statement in a report is bad if before the enactment of the 
 above law, his oath verifying the report was taken before a no- 
 tary public appointed by a state, as he had no authority at that 
 time under any national law to administer the oath.^ ' 
 Dividends § ^82. " In addition to ' the reports required by the pre- 
 
 tobe?™"'^'' ceding section, each association shall report to the Comptroller 
 R°ev.®stat. of the Currency, within ten days after declaring any dividend, 
 the amount of such dividend, and the amount of net earnings in 
 excess of such dividend. Such reports shall be attested by the 
 oath of the president or cashier of the association." 
 Penaityfor § 383. "Every association which fails to make and transmit 
 
 railure to re- 
 
 Rev.' Stat. ^"^^ report required under either of the two preceding sections 
 
 Sec. 521S. shall be subject to a penalty of one.hundred dollars for each day 
 
 after the periods, respectively, therein mentioned, that it delays 
 
 to make and transmit its report. "Whenever any association de- 
 
 ' 21 Stat, at Large, 46 C, 3 S. Ch. 82. 
 ' United States v. Curtis, 107 TJ. S., 671. 
 
 See. 5312. 
 
§384 BANK EXAMINATIONS AND REPORTS. 219 
 
 lays or refuses to pay the penalty herein imposed, after it has 
 been assessed by the Comptroller of the Currency, the amount 
 thereof may be retained by the Treasurer of the United States, 
 upon the order of the Comptroller of the Currency, out of the in- 
 terest, as it may become due to the association, on the bonds de- 
 posited with him to secure circulation. All sums of money col- 
 lected for penalties under this section shall be paid into the 
 Treasury of the United States." 
 
 § 384. In 1876 Congress further enacted " that all savings savings 
 banks or savings and trust compa;nies organized under au traetTOm- 
 thority of any act of Congress shall be, and are hereby, re- npon"^^ 
 quired to make, to the Comptroller of the Currency, and pub- 
 lish, all the reports which national banking associations are re- 
 quired to make and publish under the provisions of sections fifty- 
 two hundred and eleven, fifty-two hundred and twelve and fifty- 
 two hundred and thirteen, of the Eevised Statutes, and shall be 
 subject to the same penalties for failure to make or publish such 
 reports as are therein provided; which penalties maybe collected 
 by suit before any court of the United States in the district in 
 which said savings banks or savings and trust companies may be 
 located. And all savings or other banks now organized, or which 
 shall hereafter be organized, in the District of Columbia, under 
 any act of Congress, which shall have capital stock paid up in 
 whole or in part, shall be subject to all the provisions of the Ee- 
 vised Satutes, and of all afets of Congress applicable to national 
 banking associations, so far as the same may be applicable to such 
 savings or other banks: Provided, That such savings banks now 
 established shall hot be required to have a paid in capital exceed- 
 ing one hundred thousand dollars." ' 
 
 ' 19 Stat, at Large, 44 C. 1 S. Ch. 156, Sec. 6. 
 
220 
 
 NATIONAL BANK ACT. 
 
 CHAPTER XVIIL 
 
 TAXATION. 
 
 Rights Conferred on the States. 
 
 385. Legislation of 1864. 
 
 386. Remarks oa that Act. 
 
 387. Legislative construction of the Act. 
 387(a). Remarks of Harlan, J., on Act 
 
 of 1868. 
 
 388. Present law for taxing banks by 
 
 states. 
 
 389. jSTational act need not be embodied 
 
 in state act. 
 
 390. Territories included with states. 
 
 391. Only shares can be assessed. 
 
 392. Tax on capital not equivalent to tax 
 
 on shares. 
 
 393. Bank can be taxed by law taxing all 
 
 shares of moneyed corporations. 
 
 394. Personal property, safes, etc., not 
 
 taxable. 
 
 395. Assessment must be against share- 
 
 holder. 
 
 396. And js good though money paid for 
 
 shares has been assessed. 
 
 397. Bank may be required to pay share- 
 
 holder's tax. 
 397(a). If having money belonging to 
 him. 
 
 Restrictions — Equality and Place. 
 
 § 398. 
 
 399. 
 
 400. 
 
 Two limitations on power of state 
 
 to tax. 
 Davis, J., on second limitation of 
 
 equality. 
 Meaning of "moneyed capital " by 
 Wallace, J. 
 
 400(<x). Remarks of Matthew.?, J. 
 
 400(i). Mercantile Bank case. 
 
 400(c). Newark Banking Company v, 
 Newark. 
 
 401. General corporations are not mon- 
 eyed corporations. 
 
 A:)l(d). First National Bank ?'. "Waters. 
 
 401(6). Maguire 1). Board of Revenue. 
 
 40:2. Five forms of unfriendly discrimina- 
 tion. 
 
 403. A higher valuation is illegal. 
 
 403(f(). People r. "Weaver. 
 
 403(6). Davenport National Bank «. Board 
 
 of Equalization. 
 403(e\ City National Bank v. Paducah. 
 
 404. Illegal administration of the law in 
 
 valuing. 
 404(a). Pel ton v. National Bank. 
 404(5). Cummingsi'. Merchants" National 
 
 Bank. 
 
 405. Honest mistake of judgment. 
 
 406. Rule governing deductions. 
 Two kinda.direct and indirect, from 
 
 exemptions to other moneyed cap- 
 ital. 
 Intention of the law. 
 Substantial equality required. 
 409(a). Boyer v. Boyer. 
 410. Cases in which deductions were prop- 
 erly refused. 
 
 407. 
 
 408. 
 409. 
 
TAXATION. 
 
 221 
 
 410(a). First National Bank v. Township. 
 410(6). Mercantile Bank case. 
 410(c). Pea vey D. Town of Greenfield. 
 410{rf). MoVeagh v. City of Chicago. 
 410(e). Rosenburg v. Weekes. 
 410(f). Maguire D. Board of Revenue . 
 4]0(jr). McAden v. Commissioners. 
 
 411. Cases in which deductions should 
 
 have been made. Ruggles v. City 
 
 of Fond du Lac. 
 411(a). Pollard v. State. 
 411(S). Miller v. Heilhron. 
 411(c). Supervisors v. Stanley. 
 411(d). Evansville Bank v. Britton. 
 
 412. If shareholder has no debts no ine- 
 
 quality arises. 
 
 413. Assessment valid imtil deduction for 
 
 debts is demanded. 
 
 414. Deduction of valuation of real estat^e. 
 414((i). New York cases. 
 
 414(6). Bank building on leased lot. 
 414(e). When building cannot be taxed. 
 414((J). Kentucky case. 
 
 415. Deduction presumed to have been 
 
 made. 
 
 416. Deduction of national securities. 
 
 Bank notes. 
 416(a). National Bank «. Commonwealth. 
 
 417. Value of national bank securities 
 
 not to be deducted from valuation 
 of shares. 
 417(a). Exchange National Bank v. Mil- 
 ler. 
 
 418. When they can not be deducted 
 
 from capital of state bank. 
 418(a). When they can be. 
 
 419. Deduction of state bonds. 
 
 420. Deduction under charter older than 
 
 National Banking Law. 
 
 421. When deduction from municipal tax- 
 
 ation does not produce ineq uality. 
 
 422. Deduction of surplus fund. 
 
 423. When shares must be assessed. 
 423(a). Austin v. Aldermen. 
 423(5). McMahon v. Palmer. 
 423(e). New Jersey case. 
 
 423((f). Michigan case. 
 
 424. What may be required of sharehold- 
 
 ers concerning residence. 
 
 425. Bank not taxable in another state. 
 
 426. Taxation of non-residents. 
 426(a). Providence Institution r. City of 
 
 Boston. 
 426(6). Moore v. Mayor. 
 
 427. Cannot tax shares of bank in anothei 
 
 state. 
 
 Valuations^ Omitted Shares, Denial of Municipal Taxation, Converted and 
 Insolvent Banks, lAen. 
 
 § 431. How state bank converted into na- 
 tional, shall be taxed. 
 432. Taxation of insolvent bank. 
 
 ? 428. Shares may be assessed at market 
 value. 
 428(a). Hepburn v. School Directors. 
 
 429. Taxation of omitted shares. 
 429(a). New York cases. 
 
 430. Cannot be taxed by municipalities. 
 
 432(a). Collection of tax due national gov- 
 ernment. 
 433. Tax may be lieu. 
 
 Constitutional Questions, Rights to Bank Inspection, Remedies, Power cf 
 
 Tax Collector. 
 
 ? 434. Constitutionality of particular tax 
 laws. Cummings v. National 
 Bank. 
 434(a). Other cases. 
 
 435. State tax ofl&cers cannot inspect na- 
 
 tional banks. 
 
 436. When injunction may be issued to 
 
 restrain collection. 
 
 '? 437. Shareholder must have exhausted 
 prior remedy. 
 
 438. Must pay amount due before apply- 
 ing. 
 
 439. When national bank can have col- 
 lection enjoined. 
 
 440. Tax illegally collected may be ro- 
 • covered. 
 
 441. Powers of tax collector. 
 
222 
 
 NATIONAL BANK ACT. 
 
 §385 
 
 Circulation. 
 
 442. Capital of state bank converted into 
 1 national. 
 
 443. When circulation to be exempt from 
 
 tax. 
 
 444. Ta-x; on private or state bank notes. 
 
 445. Tax on municipal notes. 
 44G. Meaning of last two sections. 
 
 447. Notes of individual^ and companies. 
 
 448. Semi-annual retniu of circulation, 
 
 deposits, capital, etc. 
 
 ^ 449. When amounts shall be estimated. 
 
 450. Returns on circulation of state bank 
 
 converted. 
 
 451. What sections apply to national 
 
 banks. 
 
 452. U. S. tax on circulation, deposits, 
 
 and capital. 
 
 453. Semi-annual return. 
 
 454. How tax may be collected. 
 
 455. Refunding excess. 
 
 Checks. 
 
 456. Ta.x on bank checks. 
 
 457. What checks exempt. 
 
 458. Checks as evidence. 
 
 459. Penalty for issuing 
 
 checks. 
 
 unstamped 
 
 2 460. Cancellation and fraudulent use. 
 
 461. Other methods of cancelling. 
 
 462. Construction of law on subject. 
 
 Dividends. 
 
 463. Taxation of dividends. |§ 464. Liability for reduced tax. 
 
 § 385. Legislation of 1864. Previous to enacting the 
 Law of 1864, the states had no power to tax the sharefi of national 
 banks, whose capital was entirely invested in securities of the 
 United States. ' That Cotigress had tjie right to exempt the shares 
 from state taxation, so far as they represented capital invested in 
 national securities, was unquestioned ^ or, in the words of Chief 
 Justice Beasley, of New Jersey, " that to the extent in which 
 United States securities stand as the capital or property of such 
 banks, the shares of stock owned by private persons can be taxed 
 by state authority only, with the sanction of Congress and in the 
 mode prescribed by that body." ' In 1864, Congres:^, after pre- 
 scribing what taxes should be imposed and collected by the gen- 
 eral government " provided that nothing in this Act shall be con- 
 strued to prevent all the shares in any of the said associations, 
 
 ' Bank of Commerce v. New York City, 2 Black, 620: The Bank Tax Case,' 
 2 Wall., 200; Newark City Bank v. Assessor, 30 N. J. Law, 13; State v. 
 Haight, 31 Id., 399; Stetson v. City of Bangor, 56 Me., 274; Craft v. Tuttle, 
 27 Ind., 332; City of Evansville v. Bayard, 39 Id., 450; Commonwealths. 
 Girard Bank, 1 Pearson's Dec, 366; Hubbard v. Board of Supervisors, 23 
 Iowa, 130. , 
 
 ^ Flint V. Board of Aldermen, 99 Mass., 141. 
 
 « State V. Haight, 31 N. J. Law, 399 p. 413. 
 
§386 TAXATION. 223 
 
 held by any person or body corporate, from being incLuded in the 
 valuation of the personal property of such person or corporation 
 in the assessment of taxes imposed by or under state authority 
 at the place where such bank is located, and not elsewhere," but 
 not at a greater rate than is assessed upon other moneyed capital 
 in the hands of individual citizens of such state : Provided 
 further, That the tax so imposed under the laws of any state upon 
 the shares of any of the associations authorized by this act shall 
 not exceed the rate imposed upon the shares in any of the banks 
 organized under authority of the state where such association is 
 located: Provided, also, That nothing in this Act shall exempt 
 the real estate of associations from either state, counly, or munic- 
 ipal taxes to the same extent, according to its value, as other real 
 estate is taxed." ' 
 
 ' § 386. Remarks on above Act. This Act, said Judge 
 Nelson, did " not only recognize in express terms, the sovereign 
 right of the state to tax, but prescribe regulations and duties to 
 these associations with a view to disembarrass the officers of the 
 state engaged in the exercise of this right. Nothing, it would 
 seem, could be made plainer or more direct and comprehensive 
 on the subject." ^ J udge Hunt, another member of the same tribu- 
 nal, also remarked that it " was not intended to curtail the state 
 power on the subject of taxation. It simply required that capital 
 invested in national banks should not be taxed at a greater rate 
 than like property similarly invested. It was not intended to cut 
 ofP the power to exempt particular kinds of property if the legis' 
 lature chose to do so. Hoinesteads, to a specified value, a cer- 
 tain amount of household furniture, the property of clergymen to 
 some extent, school houses, academies, and libraries, are generally 
 exempt from taxation. The discretionary power of the legislature 
 of the states over all these subjects remains as it was before the 
 Act of Congress of June, 1864. The plain intention of that statute 
 was to protect the corporations formed under its authority from 
 unfriendly discrimination by the states in the exercise of their taxing 
 power. That particular persons or particular art,icles are relieved 
 from taxation is not a matter to which either class can object." ' 
 
 ' Act 1864, Sec. 41 
 
 ^ Van Allen v. The Assessors, 3 "Wall., 573 p. 586 ; Lionberger v. Rouse, 9 
 "Wall., 468; People v. The Commissioners, 4 "Wall., 244. 
 = Adams v. Nashville, 95 U. S., 19 p. 22. 
 
224 NATIONAL BANK ACT. §387 
 
 After the enacting of this Law the right of a state to tax the 
 shares of national banks was clearly conferred,' but a city, which 
 had previously enjoyed the right to levy and collect taxes on the 
 banking institutions within its limits, could not under the right 
 thus derived from the state impose a tax on national banks.^ 
 
 § 387. Legislative construction of Act of 1864. One 
 of the first questions that arose in administering this Statute was, 
 what did Congress mean when declaring that the assessment of 
 the shares of a national bank should be " at the place where such 
 bank is located?" The place might be either the state, county, 
 or municipal district having a right to impose taxes. In State v. 
 Hart ' the counsel for the prosecution contended that no taxes 
 could be imposed except in one district, which must be the small- 
 est established by the laws of the state. The defendant con- 
 tended that the place meant the district imposing a particular 
 tax, and the latter view was adopted by the court. Thus " the 
 place of location, with regard to county taxes, would be the 
 county; and with regard to state taxes, would be the state." * 
 
 To settle this question, in 1868 Congress enacted "that the 
 words 'place where the bank is located, and not elsewhere,' in 
 section forty-one of the 'Act to provide a national currency,' 
 approved June third, eighteen hundred and sixty-four, shall be 
 construed and held to mean, the state within which the bank is 
 located; and the legislature of each state may determine and di- 
 rect the manner and place of taxing all the shares of national 
 banks located within said state, subject to the restriction that the 
 taxation shall not be at a greater rate than is assessed upon any 
 other moneyed capital in the hands of individual citizens of such 
 state: And provided always, That the shares of any national 
 bank owned by non-residents of any state, shall be taxed in the 
 city or town where said bank is located, and not elsewhere." ' 
 
 § 387 (a). Remarks of Harlan, J., on Act of 1868. 
 In construing this Act Judge Harlan has remarked "that the va- 
 
 ' Mintzer r: County of Montgomery, 54 Pa. , 139. 
 
 ^ City of Pittsburgh v. First National Bank, 55 Id., 45. 
 
 ' 31 N. J. Law, 434. 
 
 * State II. Haight, 31 N. J. Law, 399 p. 415 ; Packard v. City of Lewiston, 
 55 Me., 456; Mayor v. Thomas, 5 Cold., 600. 
 
 " Act Feb. 10, 1868, 15 Stat, at Large, 40 C. 1 S. Ch. 7. This Act "had no 
 retroactive effect upon any proceedings previously had under" any state 
 statute, Abbott r. Inhabitants of Bangor, 56 Me., 310. 
 
§388 TAXATION. 225 
 
 lidity of such state taxation was thereafter to be determined by 
 the inquiry, whether it was at a greater rate than was assessed 
 upon other moneyed capital in the hands of individual citizens, 
 and not necessarily by a comparison with the particular rate im- 
 posed upon shares in state banks. The effect, if not the object, 
 of the latter act was to preclude the possibility of any such inter- 
 pretation of the Act of Congress as would justify states, while im- 
 posing the same taxation upon national bank shares as upon 
 shares in state banks, from discriminating against national bank 
 shares, in favor of moneyed capital not invested in state bank 
 stock." ' 
 
 8 388. These Acts have been incorporated into the Revised Stat- presentiaw 
 
 " *■ for taxing 
 
 utes in the following form: "Nothing herein shall prevent all banks by 
 the shares ^ in any association from being included in the valua ■ Kev. stat. 
 
 "' ^ Sec. 5219. 
 
 tion of the personal property of the owner or holder of such 
 shares, in assessing taxes imposed by authority of the state within 
 which the association is located; but the legislature of each state 
 may determine and direct the manner and place of taxing all the 
 shares of national banking associations located within the state, 
 subject only to the two restrictions, that the taxation shall not be 
 at a greater rate than is assessed upon other moneyed capital in 
 the hands of individual citizens of such state, and that the shares 
 of any national banking association owned by non-residents of 
 any state shall be taxed in the city or town where the bank is lo- 
 cated, and not elsewhere. Nothing herein shall be construed to 
 exempt the real property of associations from either state, county, 
 or municipal taxes, to the same extent, according to its value, 
 as other real property is taxed." 
 
 § 3^9. If atioual act need not be embodied in state 
 act. In enacting a state law to tax the shares of national bank- 
 ing associations, it is not needful to embody therein the above- 
 mentioned section. Says Judge Moore, speaking for the highest 
 court in Texas: " The act of Congress authorizing the assessment 
 does not contemplate nor require that the restrictions upon the 
 power given to the state to levy such tax shall be embodied or set 
 forth in the law making the assessment. It is the violation of 
 
 ' Boyer v. Boyer, 113 U. S. p. 691. 
 
 ^ The term share means "the entire interest of the shareholder," Nelson, 
 J., Van Allen v. The Assessors, .SWall., p. 588. "Share" and "stock" 
 are synonymous, Harrison v. Vines, 46 Texas, p. 21. 
 15— B. 
 
226 NATIONAL BANK ACT. , §390 
 
 the condition upon 'which the authority is given which invalidates 
 the levy, and not the mere failure to accompany the levy with a 
 declaration that the condition had not been and would not be 
 violated by the state." ' 
 
 § 390. Territories included with states. The right 
 to tax national bank shares includes the territories as well as 
 the states.^ In other language the' word " state " in the law and 
 amendments means also territory.' 
 
 § 391. Only shares can be assessed. The capital stock 
 cannot be assessed by the states, but only the shares and against 
 their owners, in the same way as other property.* Said Judge 
 Dillon: " Congress has limited the states to taxation upon the 
 shares in national banks as distinguished from taxation of the 
 banks eo nomine upon their property or capital, and if so, the 
 states could not evade the restrictions of the act of Congress by 
 requiring the value of the property of the bank to be added to 
 the value of the shares otherwise ascertained, and thus produce 
 an unfavorable discrimination in the taxation of bank shares."* 
 
 " The authority to tax shares in national banking associations,'' 
 said Stone, J., in Maguire v. Board of Revenue,' for "state purposes 
 is uniformly held to be derived from the act of Congress which 
 confers the power ' Without such statutory concession, no such 
 tax could be levied. The power is conferred, not in general 
 
 ' Harrison v. Vines, 46 Texas, 15 p. 22 ; Rosenberg b. Weekes, 4 S. W. 
 Eep., 899. 
 
 ^ Board of Commissioners v. Davis, 12 Pacific Rep. , 688 ; Salt Lake Cily 
 Nat. Bank v. Golding, 2 Utah, 1 ; People r. Moore, 1 Idaho, 504. 
 
 ' People V. Moore, 1 Idaho, 504. 
 
 * Bradley v. People, 4 Wall., 459; Tan Allen r. The Assessors, 3 Id., 573; 
 Lionberger ii. Rouse, 9 Id., 468, affg. 43 Mo., 67; National Bank v. Com- 
 monwealth, Id., 353; First National Bank v. Meredith, 44 Mo., 500; Curtis 
 V. Ward, 58 Id., 295; City of Springfield v. First National Bank, 87 Id., 441 
 Hubbard v. Board of Supervisors, 23 Iowa, 130; Craft v. Tuttle, 27 Ind., 332 
 Wright V. Stilz, 27 Id., 338; Smith v. First National Bank, 17 Mich., 479 
 City of Pittsburgh v. First National Bank, 55 Pa., 45 p. 51; Collins v. Chi- 
 cago, 4 Biss., 472. The Supreme Courts of Wisconsin and Ohio d'ecided 
 otherwise, Van Slyke ?;. State, 23 Wis., 655; Bagnall,«. State, 25 Id., 112; 
 Frazer v. Siebern, 16 Ohio,, 614. 
 
 * St. Louis National Bank •«. Papin, 4 Dill., 29. 
 « 71 Ala., p. 412. 
 
 ' Farmers & Mechanics' National Bank v. Bearing, 91 U. S., 29; Pollard 
 V. State, 65 Ala., 628. 
 
§392 , TAXATION. 227 
 
 terms, but with limitations. * * The leading policy of these 
 restrictions cannot be misunderstood. The first was intended to 
 prevent unfriendly discriminating assessments against invest- 
 ments in the stock of national banking associations, lest thereby 
 such investments should be discouraged and hindered by excess- 
 ive burdens. Hence, the burden should be no greater than that 
 levied by the state on other moneyed capital in the hands of in- 
 dividual citizens. You may tax the shares, said Congress, for 
 the support of your government, which protects them in common 
 with- all other material interests, but you cannot lay upon them 
 heavier burdens than you lay on other moneyed capital. The 
 act discriminates carefully between the capital stock of such bank- 
 ing associations, and the shares in such capital stock." 
 
 § 392. A tax on capital is not equivalent to a tax on 
 shares, and therefore if state banks are taxed only on their capi- 
 tal a statute imposing a tax on the shares of national banks is 
 void.' So is a law authorizing an assessment of them in gross. ^ 
 But a statute which imposes a tax " on bank stock of fifty cents 
 on each share thereof equal to one hundred dollars of stock there- 
 in owned by individuals, corporations, or societies," is a tax on the 
 shares of stockholders and is valid.^ 
 
 § 393. Bank can be taxed by law taxing all shares 
 of moneyed corporations. A statute which authorizes 
 " the taxation of all shares in moneyed corporations," will justify 
 the taxing of national bank shares.* But the laws of several 
 states at the time Congress permitted them to impose such a tax, 
 did not authorize the assessment and collection of a tax on the 
 bank shares of residents^ or non-residents of the state* or non- 
 residents, of the place where the bank was located.' 
 
 ' Van Allen v. Assessors, 3 Wall.. 57S, revsg 33 N. Y., 161; Bradley ». 
 People, 4 Wall., 459, revsg 39 111., 130. A state can tax the real estate or 
 the shares, but not the capital of a national bank. This would be double 
 taxation, which is not permitted by the national nor by some of the state 
 laws. County Commissioners v. Mechanics' National Bank, 48 Md., 117. 
 
 ^National Commercial Bank». Mayor, 62 Ala., 284; Sumter County o. 
 National Bank, Id., 464. 
 
 ' National Bank «. Commonwealth, 9 Wall., 353. 
 
 ' Stetson V. City, of Bangor, 56 Me., 274. 
 
 * Smith V. Webb, 11 Minn., 500; Maguire v Board of K6venue, 71 Ala. 
 401 « Abbott V. City of Bangor, 54 Me., 540. 
 
 ' Howell V. Village of Cassopolis, 35 Mich., 471. 
 
228 NATIONAL BANK ACT, §394 
 
 §394 Personal property, safes, etc., not taxable. 
 
 The personal property and assets of national banks, such as 
 safes, office furniture, etc., are not taxable/ 
 
 § 395. Assessment must be agaiilst shareholder. 
 As the assessment must be made against shareholders, the refusal 
 of a bank officer to give their names to an assessor will not jus- 
 tify him in making the assessment and enforcing the same against 
 the property of the bank.^ 
 
 § 396. And is good though money paid for shares 
 has been assessed. A shareholder may be assessed though 
 the money with which he has paid for his shares may have been 
 previously taxed the same year as money. Thus, a tax was levied 
 on money belonging to S on the first day of January. In March 
 he bought with this money national bank shares. It was decided 
 that these also could be assessed under a statute that provided for 
 assessing persons who should hold bank stock on April first of the 
 same year.' 
 
 § 397. Bank may be required to pay shareholders' 
 tax. Though a bank cannot be taxed on its capital, but only on 
 its real estate, it may be required to pay the taxes assessed on its 
 shareholders. This question arose in Kentucky, where a statute 
 had been passed requiring the cashier of a bank whose stock was 
 taxed to pay the amount of the tax. Judge Miller, speaking for 
 the court, said: " The most important agents for the federal govr 
 ernment are its officers, but no one will contend that when a man 
 becomes an officer of the government he ceases to be subject to 
 the laws of the state. * * The agencies of the federal 
 government are only exempted from state legislation so far as that 
 legislation may interfere with, or impair their efficiency in per- 
 forming the functions by which they are designed to serve that 
 government. * * We do not see the remotest probability of 
 this in their being required to pay the tax which their stockhold- 
 ers owe to the stp,te for the shares of their capital stock when the 
 law of the federal government authorizes the tax." * But if the- 
 
 ' National State Bank v. Young, 25 Iowa, 311; see Hubbard v. Board of 
 Supervisors, 23 Iowa, 130. 
 
 ' City of Springfield v. First National Bank, 87 Mo., 441; Lionberger «. 
 Eouse, 9 Wall., 468, affg 43 Mo,, 67; First National Bank v. Meredith, 44 
 Id., 500. ' City of Richmond v. Scott, 48 Ind., 568; Stilz n. Tutewiler, Id., 600. 
 
 * National Bank v. Commonwealth, 9 Wall., 353 p. 361; Waite v. Dowley, 
 94 U. S., 527; First National Bank v. Douglas County, 3 Dill., 330. 
 
§397(a) TAXATION. 229 
 
 law requiring a bank to pay the taxes assessed against its share- 
 holders should depend on an invalid law, for example, one taxing 
 their shares in gross, the bank could not be required to pay 
 them.' 
 
 § 397(a). If having money belonging to him. This 
 is a statutory requirement, however, consequently the bank is not 
 liable for the taxes, unless it has in its possession dividends or 
 other property belonging to its shareholders.^ Under the Ken 
 tucky statute, which was construed in National Bank v. Common- 
 wealth,' the banking association was made liable for the taxes 
 levied on the shares, and the court declared that such a statute 
 could be enacted. The Iowa decision does not announce a dif- 
 ferent rule, the court simply declares that the statute does not 
 authorize the iiational banks in that state to do this. The com- 
 petency of the state to enact such a statute as was passed by the 
 Kentucky legislature was not questioned. 
 
 § 398. Limitations on state's power to tax. While 
 the states are thus permitted to extend their taxing power over 
 national banks, Congress has imposed two limitations: one is that 
 the shares of a non-resident cannot be assessed only " where 
 such bank is located;" and the other is that the taxation by the 
 state shall not exceed the rate imposed on the shares of state or- 
 ,ganization. In many of the cases the national banks have claimed 
 that they were not liable under one or the other of these limita- 
 tions. In Van Allen v. The Assessors,* the state of New York had 
 enacted that the shares in national banks should be taxed " but 
 not at a greater rate than is assessed upon other moneyed capital 
 in the hands of individuals of this state." The state banks were 
 taxed on their capital, but not on their shares. It was held that 
 a tax on their capital was not equivalent to a tax on the shares of 
 stockholders, because as the capital of the state banks might con- 
 sist of the bonds of the United States. 
 
 § 399. Equality required. In construing this limitation 
 , four years afterward. Judge Davis, speaking for the United States 
 Supreme Court, said : "Congress meant no more by the second lim- 
 itation in the proviso to the forty-first section of the National Bank- 
 
 ■ Sumter County v. National Bank, 62 Ala., 464. 
 ^ Hershire v. First National Bank, 35 Iowa, 272. 
 
 * 9 Wall., 353. 
 
 * 3 Wall., 573, revsg City ofUtica'i'. Churchill, 33 N. Y., 161. 
 
230 NATIONAL BANK ACT. §400 
 
 ing Act than to require of each state, as a condition to the exercise 
 of the power to tax the shares in national banks, that it should, as 
 far as it had the capacity, tax in like manner the shares of banks 
 of issue of its own creation." ' This principle was applied in the 
 following case that arose in Missouri. The state bad two banks 
 of issue which could not be taxed beyond a certain figure without 
 infringing their charter; but the state had many other banks which 
 possessed much larger capital than the two first mentioned. A 
 tax was laid on all shares of stock in banks and incorporated com- 
 panies. It was held that the inability of the state to collect a tax 
 for a smaller amount on the two banks of issue, did not prevent it 
 from collecting a tax for a larger amount on the shares of the na- 
 tional banks. ^ 
 
 § 400. Meaning of moneyed capital. Before review- 
 ing the cases in which the question has been raised whether 
 national banks -were assessed at a greater rate than "other 
 moneyed capital," this phrase may be defined; and the cases re- 
 viewed in which the courts have decided that the corporations, 
 favoped by the taxing power were not moneyed corporations like 
 the national banks, and to which, therefore, the national statute 
 relating to the state taxing of national banks did not apply. 
 Judge Wallace has said that " the term ' moneyed capital in the 
 hands of individual citizens' more aptly describes ready money 
 , or capital invested in private banking than it does capital invested 
 in manufacturing corporations, insurance companies and the like. 
 As originally used in the National Banking Act of June 3d, 1864, 
 it signified something different from capital invested in state 
 banking corporations, because it was provided originally that 
 the taxation by the states should not exceed that imposed on 
 moneyed capital in the hands of individual citizens, or that im- 
 posed 'upon the shares in any of the banks organized under au- 
 thority of the state.' It is hardly appropriate to call shares in 
 manufacturing or insurance corporations 'moneyed capital in the 
 hands of individual citizens,' and, if it had been intended to ex- 
 clude all capital thus invested, it would have been easy to do so 
 under some such comprehensive term as ' personal property.' " ^ 
 
 ' Liouberger v. Eouse, 9 Wall., p. 476. ' Id., 468. 
 
 ' Wallace, J., First National Bank v. Waters, 19 Blatchf., p. 247. 
 
§400(a) TAXATION. 231 
 
 § 400(a). Remarks of Matthews, J. In the Mercan- 
 tile Bank case the terms "moneyed capital," says Matthews, J., "in- 
 clude shares of stock or other interests owned by individuals in 
 all enterprises in which the capital employed in carrying on its 
 business is money, where the object of the business is the mak- 
 ing of profit by its use as money. The moneyed capital thus 
 employed is invested for that purpose in securities by way of loan, 
 discount or otherwise, which are from time to time, according to 
 the rules of the business, reduced again to money and reinvested. 
 It includes money in the hands of individuals employed in a 
 similar way, invested in loans, or in securities for the payment of 
 money, either as an investment of a permanent character, or tem- 
 porarily with a view to, sale or repayment and reinvestment. In 
 this way the moneyed capital in the hands of individuals is dis- 
 tinguished from what is known generally as personal property." ' 
 §400(6). Mercantile Bank V. New York. In New York 
 the national and state banks were assessed and taxed on the value of 
 their shares, but in assessing them the shareholders were allowed 
 the same deductions and exceptions as were allowed in assessing 
 the value of other taxable personal property of citizens of the 
 state. In 1886 the national banks claimed that the taxes assessed 
 against them were illegal aind void, because they were at a greater 
 rate than those assessed on other moneyed capital belonging tp 
 the citizens of the state. The greater rate was established, not 
 formally, but by exempting from individual taxation a large 
 amount of moneyed capital aggregating $1,686,000,000. This 
 'claim of the national banks was not sustained for the reasons, 
 that all of the exempted capital, excluding that of trust compa- 
 nies and savings banks, was not moneyed capital, as meant by the 
 law.' 
 
 , Nor was the claim sustained with respect to the trust companies: 
 first, because they, too, "are not in any proper sense of the word 
 banking institutions." After enumerating their powers the court 
 adds, " that trust companies are not banks in the commercial 
 sense of that word, and do not perform the functions of banks in 
 carrying on the exchanges of commerce. They receive money on 
 deposit, it is true, and invest it in loans, and so deal, therefore, 
 in money and securities for money in such a way as properly ta 
 
 ' Mercantile Bank v: New York, 121 U. S., 138 p. 157; McMahou v. Pal- 
 mer, 102 N. Y., 176. 2 Id. 
 
232 NATIONAL BANK ACT. §400(S) 
 
 bring the shares of stock held by individuals therein within the 
 definition of moneyed capital in the hands of individuals, as 
 used in the act of Congress.' Second, the court failed "to find 
 in the record any sufficient ground to believe that the rate of 
 taxation, which in fact falls upon this form of investment of 
 n^oneyed capital, is less than that imposed upon shares of stock 
 in national banks." ^ 
 
 Nor was the claim sustained with respect to the savings banks, 
 because their deposits are not moneyed capital in the same sense 
 as national bank shares. Said the Court : " It cannot be denied 
 that these deposits constitute moneyed capital in the hands of in- 
 dividuals within the terms of any definition which can be given 
 to that phrase; but we are equally clear that they are not within 
 the meaning of the act of Congress in such a sense as to require 
 that, if they are exempted from taxation, shares of stock in na,- 
 tional banks must thereby also be exempted from taxation. No 
 one can suppose for a moment that savings banks come into any 
 possible competition with national banks of the United States. 
 They are what their name indicates, banks of deposit for the ac- 
 cumulation of small savings belonging to the industrious and 
 thrifty. * * However large, therefore, may be the amount of mon- 
 eyed capital in the hands of individuals, in the shape of deposits 
 in savings banks as now oi'ganized, which the policy of the state 
 exempts from taxation for its own purposes, that exemption cannot 
 affect the rule for the taxation of shares in national banks, pro- 
 vided they are taxed at a rate not greater than other moneyed 
 capital in the hands of individual citizens otherwise subject to 
 taxation." ' 
 
 The national banks also claimed that the exemption of bonds 
 of the city of New York and of shares owned by citizens of the 
 state in corporations of other states established a greater rate of 
 taxation for themselves than was established for other moneyed 
 capital. The first of these claims was set aside on the grounds: 
 first, that the amount exempted was not large enough " to make 
 a material difference in the rate assessed upon national bank 
 shares;" and, second, that as they "from their nature * * are not 
 ordinarily the subjects of taxation, they are not within the reason 
 of the rule established by Congress for the taxation of national 
 
 ' Mercantile Bank v. New York, p. 159. ' Id. 'Id., p. 160. 
 
§400(c) TAXATION. 233 
 
 bank shares." * The other claim was answered in the same man- 
 ner. The court added, that " it is not pretended, however, that 
 this exemption is based upon the mere will of the legislature of 
 the state. The courts of New York hold that they are not the 
 proper subjects of taxation in the state of New York, because 
 they have no situs within the territory for that purpose."^ 
 
 § 400(c). Ne'wark Banking Company v. Newark.' 
 The national banks in New Jersey claimed that the greater rate 
 of taxation assessed against them was occasioned by exempting 
 the shares of capital stock held by individuals in all private cor- 
 porations of the state " except banking institutions, and except 
 those which by virtue of any contract in their charters or other 
 contracts with this state are expressly exempted from taxation, 
 and except mutual life insurance specially taxed." This claim 
 was not favorably regarded by the United States Supreme Court 
 for the reasons given in the Mercantile Bank case. 
 
 § 401. General corporations are not moneyed cor- 
 porations. If general corporations are favored the national 
 banks cannot complain, because they are of a different character. 
 On several occasions the complaint by the national banks of un- 
 friendly discrimination has been declared, to be unfounded, be- 
 cause the favored corporations were not moneyed corporations 
 like themselves. Thus, it appeared that by the law of Montana 
 territory shares in any bank or company were subject to taxation 
 except that when the entire capital stock of any incorporated com- 
 pany was invested in assessable property in the territory, its stock 
 was not taxable. In the case in question, shares of stock in cor- 
 porations whose entire capital stock was invested in assessable 
 property in the territory were not taxed, mining claims not pat- 
 ented were not assessed at all, and when patented were assessed 
 at the government price of five dollars an acre without regard to 
 their market value. There were a large number of mining cor- 
 porations whose entire capital stock was invested in assessable 
 property, and that part of such property consisted of mining 
 claims. The defendant's shares were taxed at their market value. 
 It was held that the taxation imposed on national bank shares 
 was on a different kind of property than capital invested in mines, 
 
 ' Mercantile Bank v. New York, p. 162. 
 
 ' Id., p. 162. ' 121 U. S., 163. 
 
234 NATIONAL BANK ACT. §401 (a) 
 
 and therefore no discrimination against the former existed which 
 was forbidden by law.' 
 
 § 401(a). In the case of the First National Bank v. 
 Waters^ the institution sought to restrain the collection of 
 the tax assessed against its shareholders on the ground that the 
 state imposed one rule of assessment and taxation on sharehold- 
 ers incorporations, other than banking associations, and another 
 on banks, whereby a higher taxation incidentally rested on na- 
 tional bank shareholders than on other shareholders. But the 
 court decided that the laws of the state " for the taxation of gen- 
 eral corporations and the exemption of their shares, do not fur- 
 nish the rule for the taxation of moneyed corporations, or of cap- 
 ital invested in private banking or of personal property gener- 
 ally," so the com.plainant did not succeed in restraining the col- 
 lection of the tax. 
 
 § 401(6). Maguire V. Board of Revenue.' So in Ala- 
 bama a statute provided that the capital stock of domestic cor- 
 porations, except such portion as might be invested in other 
 property and taxed in that form, should be taxed without refer- 
 ence to the tax which might be imposed on their shares. In tax- 
 ing the shares of the national banks in the state the national law 
 was not violated, because the domestic corporations were of a 
 different nature, not having moneyed capital. 
 
 § 402. Five forms of unfriendly discriminations. 
 Having narrowed our inquiry to the taxing of " other moneyed 
 capital " which is regarded in the section under consideration 
 similar to national bank shares, an unfriendly discrimination in 
 taxing them may be shown in one of five ways: (1) in the law 
 whereby they are taxed at a higher rate than other moneyed capi- 
 tal; (2) in the illegal administration of a law taxing both kinds 
 alike whereby national banks are subjected to a heavier rate; (3) 
 the unfriendly discrimination may be shown in valuing national 
 bank shares nearer to or higher above their true value than other 
 bank shares; or (4) in the illegal administration of a law which 
 provides for valuing both kinds of shares alike; or (5) by not 
 permitting the same deductions to be made for debts or against 
 national bank shares, as against other moneyed capital. 
 
 1 Board of Commissioners v. Davis, 12 Pacific Eep., 686. 
 
 ' 19 Blatchf., 242. s 71 Ala., 401. 
 
§403 TAXATION. 235 
 
 § 403. A higher valuation is illegal. No attempt 
 has been made to tax national bank shares higher than other 
 moneyed capital, but some of the state laws have authorized an 
 unfriendly and illegal valuation of them. In defense of their 
 conduct state officials have contended that if the rate of the tax 
 was the same on both kinds of property ' they were not amenable 
 for valuing national bank shares higher than "other moneyed cap- 
 ital," or "at a greater rate.'' But this defense could not stand. 
 Said Judge Harlan in Boyer v. ■ Boyer : ^ " The words ' at a greater 
 rate than is assessed upon other moneyed capital in the hands of 
 individual citizens ' refer to the entire process of assessment, 
 which, in the case of national bank shares, includes both their 
 valuation and the rate of percentage on such valuation; conse- 
 quently, that the act of Congress is violated if, in connection with 
 a fixed percentage applicable to \he valuation alike of national 
 bank shares and of other moneyed investments or capital, the 
 state law establishes or permits a mpde of assessment by which 
 such shares are valued higher in proportion to their real value 
 than is other moneyed capital." ^ 
 
 § 403(a). So in the People v. Weaver* it was contended 
 that while Congress limited the state authorities in reference to 
 the ratio or percentage' levied on the value of national bank shares, 
 which could not be greater than on other moneyed capital in the 
 state, the relative valuation of the shares and of other moneyed 
 capital was left wholly to the control of state regulation. But 
 this contention failed. Says Miller, J., speaking for the United 
 States Supreme Court: " The section to be construed begins by 
 declaring that these shares may be included in the valuation of 
 the personal property of the owner, in assessing taxes iihposed 
 
 ' In Gorgas' Appeal, 79 Pa., 149, it was held that the National Banking ' 
 Act related only to the rate and did not prohihit the states from exempting 
 subjects from taxation. 
 
 ' 113 U. S., 689 p. 695. 
 
 ' People V. Weaver, 100 TJ. S., 539 ; Pelton v. National Bank, 101 Id, 
 143 ; Cummings v. National Bank, Id., 153 ; Supervisors v. Stanley, 105 Id.. 
 305 ; Evansville Bank o. Britton, Id., 323. In People v. Commissioners, 
 the court says ' ' that the rate of taxation upon the shares should be the same 
 or not greater than upon the moneyed capital of the individual citizen which 
 is subject or liable to taxation. That is, no greater proportion or percentage 
 of tax in the valuation of shares should be levied than upon other moneyed 
 taxable capital in the hands of the citizens, ' ' 4 Wall. ,256. 
 
 * 100 TJ. S., 539 p. 545. 
 
236 NATIONAL BANK ACT. §403(-J) 
 
 by authority of the state within -which the association is located. 
 This valuation, then, is part of the assessment of taxes. It is a 
 necessary part of every assessment of taxes which is governed by 
 a ratio or percentage. There can be no rate or percentage without 
 a valuation. This taxation, says the act, shall not be at a greater 
 rate than is assessed on other moneyed capital. "What is it that 
 shall be not greater ? The answer is, taxation. In what respect 
 shall it be not greater than the rate assessed upon other capital? 
 We see that Congress had in its mind an assessment, a rate of as- 
 sessment, and a valuation, and taking all these together the tax- 
 ation on these shares was not to be greater than on other moneyed 
 capital." 
 
 The principle therefore is clearly settled that a state statute 
 which establishes a mode of assessing national bank shares at 
 a higher valuation in proportion to their real value than other 
 moneyed capital is in conflict with the national law, though no 
 greater percentage is levied on that valuation than on the valua- 
 tion of other moneyed capital.' 
 
 § 403(6). In Davenport National Bank v. Board of 
 iEqualization it was contended that the law discriminated 
 against bank shares for the reason that the shares of saving banks 
 were not taxable, but merely their paid-up capital, while national 
 bank shares were; that the burdens of taxation cast on national 
 banks under the statute could never be less than that cast on sav- 
 ings banks and might be more. Judge Adams, answering for 
 the court said: "There is no pretense that the taxation is greater 
 than is assessed upon some other moneyed capital, and in fact, 
 upon moneyed capital generally. The appellant's position is 
 that, if any moneyed capital is favored, national bank capital 
 must be favored to the same extent. But in our opinion each 
 state may, as a general proposition, provide for the assessment 
 of savings bank capital, as well as other property, in such mode 
 as it may deem most convenient and effective for the collection 
 of its revenue; and so long as the legislature appears to have 
 been influenced solely by such consideration, any slight advan- 
 tage accruing as a mere incident to the mode of assessment should 
 not be deemed a discrimination in rates, of such a character that 
 national banks could properly claim that they should escape tax- 
 
 - People ex rcl. Williams v. Weaver, 100 U. S., 539 
 
§403(c) TAXATION. 237 
 
 ation, or be assessed by some mode different from that provided 
 in the National Banking Act. If any advantage accrues to savings 
 banks from the mode of assessment which has been provided, it 
 appears to us to be a mere incident of the mode, and evincing no 
 desire to favor savings bank capital." So the tax was declared 
 valid.' 
 
 § 403(c). City National Bank v. Paducah.' On the 
 contrary, in Kentucky the entire banking capital practically was 
 subject to a tax of hfty cents per share of one hundred doUais 
 in lieu of all other taxes. Among these was a state bank in Pa- 
 ducah whose capital was larger than that of all the national 
 banks locateid in the city. The national banks there were assessed 
 $1.05 per share. This assessment, in view of the much smaller 
 one assessed on the state banks, was regarded an unlawful dis- 
 crimination against the national banks, and invalid. 
 
 § 404. Illegal administration of the law in valu- 
 ing. Passing now to the cases of the illegal administration of 
 the law for valuing national bank shares and other moneyed cap- 
 ital, it has been held that when assessors deliberately determine, 
 in deference to the popular will, not only to violate the statute 
 authorizing the assessment, but the admonition of the courts, 
 and adopt a different valuation, and assess national bank shares 
 on a larger percentage than " other. moneyed capital," the collec- 
 ' tion of the tax can be enjoined or prevented. " There can be no 
 question of intention or design in such discrimination. In the 
 very nature of it, arithmetically considered, there is discrimina- 
 tion in- the operation ; and no reasonable man can be heard to 
 say that he did not intend to discriminate when he applies a 
 larger per centum of violation in one case than another." ' * * 
 
 ' 64 Iowa, 140 p. 142, affd 8 Sup. Ct. Rep., 73; DavenTport National Bank 
 V. Mittlebuscher, 15 Fed. E., 225; Richards i'. Incorporated Town. 31 Id., 505. 
 
 ^ 2 Flippin, 61. In this case Brown, J., said; "When by local legislation, 
 different rates are prescribed for different classes of moneyed capital, the rate 
 imposed npon shares in national banks should approximate as closely as may 
 be to the rate imposed upon other moneyed capital of the same or similar 
 class, viz., shares of state banks. While this rule might be subject to qual- 
 ifications in localities where the capital of state banks bore a very small 
 proportion to other moneyed capital, and the exemption was intended as a 
 bounty, I think it furnishes, as a general rule, a safe guide to the validity 
 of the tax. ' ' 
 
 ' First National Bank of Toledo v. Treasurer, 25 Fed. R., 749 p. 752. 
 
238 NATIONAL .BANK ACT. §404(a!) 
 
 "It is wholly immaterial upon what principal sum of value 
 you make these respective calculations of percentages. If it be 
 determined to assess all property at six-tenths of its ' true value,' 
 or of its ' market value,' or by whatever name you designate it, 
 and that value be reached in one case by taking the par or face 
 value of shares in a bank, let us say, and in another by taking a 
 value higher than the- par value, because the shares will sell for 
 more, and ou one you calculate six-tenths, and on the other seven- 
 tenths, the want of uniformity takes place, and results in a dis- 
 crimination just as much as if the principal sums had been 
 Gelected in exactly the same way. And it is no argument against 
 the illegality of the discrimination to say that either of these 
 principal sums was improperly taken as the basis of calculation, 
 or that one was too large and the other too small, or that neither 
 is just what it should have been. The vice does not consist of 
 discrimination at that point, but beyond it, — at the point where the 
 different modes of ascertaining the final taxable value are adopted." ' 
 § 404(a). So in Pelton v. National Bank,^ although 
 the statutes of the state provided for valuing all moneyed capital 
 for purposes of taxation at its true cash value including national 
 bank shares, the systematic and intentional valuation of all other 
 moneyed capital, by the taxing officers, far below its true value, 
 while national bank shares were assessed at their full value, was a 
 violation of the National Banking Law. On this occasion the tax- 
 ing board, remarked Judge Miller, " increased the valuation of 
 the shares of the [plaintiff bank] $250^000 above the sum of |912,- 
 000, at which it had been assessed by the county board, and it 
 increased the valuation of the shares of all the national banks 
 of Cleveland from the sum of $3,236,500 to $4,046,045. It is 
 thus seen that the auditor and the city board of equalization val- 
 ued these shares higher in proportion to other moneyed capital in 
 Cleveland to an extent which * * may be supposed to be thirty 
 per cent, as it is shown to be in comparison with real estate, and 
 the state board added about one-fourth to that, so that tlie tax on 
 the national bank shares; against which relief is sought in this 
 suit, is between fifty and sixty per cent, on its real value greater 
 than on other moneyed capital, and therefore to that extent for- 
 bidden by the act of Congress." 
 
 1 Hammond, J., First National Bank v. Treasurer, 25 Fed. E., p 752 
 ^ 101 U. S., 143 p. 148. 
 
§404(J) TAXATION. 239 
 
 § 404(&). Cummings v. National Bank.' In another 
 important case in the same state the assessors of real property, 
 and of personal property, and the auditor of Lucas county, in which 
 was the city of Toledo, concurred in establishing a rule of valua- 
 tion by which real and personal property, except money, was as- 
 sessed at one-third of its actual value, and money or invested cap- 
 ital at six-tenths of its value, while the shares of incorporated 
 banks were returned by the state board of equalization, at their 
 full value. This ,was such a glaring inequality that a federal court 
 interposed and restrained the collection of the tax. 
 
 § 405. Honest mistake of judgment. If, however, the 
 unequal valuation be an honest mistake of judgment a court will 
 not interfere. Thus in Ohio a national bank complained that its 
 shares were valued too high compared with other property on the 
 tax roll. The testimony revealed great inequalities in valuing 
 real and personal property, including national bank shares, but 
 as no assessor was governed by any other rule than his judgment 
 of the true value of the property assessed no relief was granted.^ 
 
 § 406. Kules governing deductions. In permitting or 
 refusing deductions or exemptions the rule is clear enough; the 
 difficulty is to apply it correctly. It has been stated on many oc- 
 casions; one of the most noteworthy is in the case of the The Peo- 
 ple ex rel. Williams v. Weaver.' On that occasion it was declared 
 that if a debtor is permitted by law to deduct the amount of his 
 debts in valuing his personal property, including his moneyed cap- 
 ital, he should also be permitted to deduct them from his national 
 bank shares. National bank shares are moneyed capital and inust 
 be included with it, to exclude them and permit no reduction for in - 
 debtedness therefrom, while it is perrditted against other moneyed 
 capital, produces an unequal and unjust valuation of such shares. 
 So, in Boyer v. Boyer, * Judge Harlan has said that " a state law 
 which permits individual citizens to deduct their just debts from 
 the valuation of their personal property of every kind, other than 
 national bank shares, or which permits the taxpayer to deduct 
 from the sum of his credits, money at interest or other demands 
 to the extent of his bona fide indebtedness, leaving the remainder 
 to be taxed, while it denies the same right of deduction from the 
 
 ' 101 TJ. S., 153. 
 
 ^ Exchange National Bank v. Miller, 19 Fed. E., 372. 
 
 » 100 U. S., 539. * 113 TJ. S., p. 695. 
 
240 NATIONAL BANK ACT. §407 
 
 cash value of bank shares, operates to tax the latter at a greater 
 rate than other moneyed capital." ' 
 
 § 407. Two kinds of deductions, direct and in- 
 direct, from exemptions to other moneyed capital. 
 
 We shall review the cases in which unfriendly discriminations 
 against national bank shareholders have been claimed from unfair 
 deductions or exemptions of personal property. These may be 
 divided into two kinds : (1) those which are direct or specifi- 
 cally authorized by law, for example, the deduction of one's per- 
 sonal indebtedness from the value of his shares; and (2) other 
 deductions or exemptions granted from time to time, which have 
 the effect to throw an unequal and unfair burden on the owners 
 of national bank shares. 
 
 § 408. Intention of the law. The exemptions that have 
 occurred are so unlike each other that it is not easy to establish 
 rules whereby national banks may know when to claim an exemp- 
 tion entirely or in part, and when not. Said Judge Harlan in 
 Boyer v. Boyer : ' " Capital invested in national bank shares was 
 intended to be placed upon the same footing of substantial equal- 
 ity in respect of taxation by state authority as the state estab- 
 lishes for other moneyed capital in the hands of individual citi- 
 zens, however invested, whether in state bank shares or other- 
 wise. As the act of Congress does not fix a definite limit as to 
 percentage of value, beyond whioh the states may not tax na- 
 tional bank shares, cases will arise in which it will be difficult to 
 determine whether the exemption of a particular part of moneyed 
 capital in individual hands is so serious or material as to infringe 
 the rule of substantial equality." 
 
 § 409. Substantial equality is required. "As sub- 
 stantial equality is attainable and is required by the supreme 
 law of the land, in respect of state taxation of national bank 
 sha,res, when the^ inequality is so palpable as to show that the 
 discrimination against capital invested in such shares is serious, 
 the courts have no discretion but to interfere." ' 
 
 ' People V. Weaver, 100 U. S., 539; Pelton v. National Bank, 101 Id., 143; 
 Cummings ti. National Bank, Id., 153; Supervisors v. Stanley, 105 Id., 305; 
 Evansville Bank v. Britton, Id., 322; People v. Dolan, 36 N. Y., 59. 
 
 ^ 113 U. S., p. 702. 
 
 ' Harlan, J., Boyer v. Boyer, 113 U. S. 689 p. 701. 
 
§409(«) TAXATION. ' 241 
 
 § 409(a). Boyer v. Boyer. ' In Pennsylvania a very 
 large amount of property which, in 1844, was subjected to gen- 
 eral taxation, was afterward relieved from- the burden of county 
 taxation. The property thus favored included " all bonds or certi- 
 ficates of loan issued by any railroad company incorporated by 
 the state; * * shares of stock in the hands of stockhold- 
 ers of any institution or company of the state which, in its cor- 
 porate capacity, is liable to pay a tax into the State Treasury, 
 * * mortgages, judgments and recognizances of every 
 kind; * * moneys due or owing upon articles of agree- 
 ment for the sale of real estate; * * all loans however 
 made by corporations which are taxable for state purposes when 
 such corporations pay into the State Treasury the required tax 
 on such indebtedness." National bank shares were subjected to 
 the heavier burden imposed by the law of 1844. The court de- 
 clared that it seemed difficult to avoid the conclusion that, in re- 
 spect of county taxation of national bank shares, there had been, 
 and was, " such a discrimination in favor of other moneyed capi- 
 tal against capital invested in such shares as is not consistent 
 with the legislation of Congress. The exemptions in favor of 
 other moneyed capital appear to be of such a substantial char- 
 acter in amount as to take the present case out of the operation 
 of the rule that it is not absolute equality that is contemplated 
 by the act of Congress." 
 
 § 410. Cases in which, deductions were properly 
 refused. In the following cases the courts have decided that 
 national bank shares were properly taxed, either because the de- 
 duction required by law was made, or that such a requirement 
 did not exist. 
 
 § 410(a). First National Bank v. Township. Thus 
 in Michigan the statute provided that the credits of all persons 
 should be taxed in excess of their debts. This was declared to 
 be in harmony with the National Banking Law even though in- 
 dividuals were taxed for. the full value of their bank shares with- 
 out deducting their indebtedness. Said Campbell, J. : " We can- 
 not perceive any conflict with the act of Congress in applying to 
 national banks the same rules which we apply to all other per- 
 sonal property, merely beaause in taxing credits we tax the bal- 
 
 ' 113 U. S., 689 pp. 699, 701, revsg 103 Pa., 387. 
 16— B. 
 
242 NATIONAL BANK ACT. §410(5) 
 
 ances and not the whole credits. Our legislature has put all 
 capital on the same footing." ' 
 
 § 410 (6). In the Mercantile Bank case ' the banks 
 claimed that other moneyed capital was exempted to such an ex- 
 tent that they bore an unjust share of the burden of the tax levied 
 in the state. But, as we have seen, the United States Supreme 
 Court decided that the capital of corporations to which a differ- 
 ent rule of taxation was applied than to national bank shares, in- 
 cluding trust companies and savings banks, was not moneyed 
 capital in the sense in which these words are used in this section. 
 
 § 410 (c). Peavey v. Town of Greenfield.' In New 
 Hampshire the excess only of the par value of national bank 
 shares over the amount of the owner's interest-bearing indebted- 
 ness is liable to taxa;tion. In the case involving this question P 
 "returned for taxation his shares of national bank stock, less the 
 amount of his interest-bearing indebtedness. The selectmen re- 
 fused to deduct the indebtedness and assessed taxes upon the full 
 amount of the bank stock. ' Money on hand, or at interest, more 
 than the owner pays interest for,' being a statutory limit of the 
 taxation of such moneyed capital, and shares of national banks 
 not being taxable ' at a greater rate than is assessed upon other 
 moneyed capital,' the plaintiff's return was correct." 
 
 § 410 (d). McVeagh v. City of Chicago.* In Illinois, 
 after the United States Supreme Court had decided that a tax 
 could not be laid on the capital of national banks, a new system 
 was devised of taxing national bank shareholders. By this a 
 deduction was made of the real estate owned by national banks, 
 but their shareholders were not permitted to deduct their debts 
 from the valuation of their shares. Nevertheless, the system was 
 declared to be valid. 
 
 § 410 (e). Rosenburg v. Weekes.^ In Texas a statute 
 provides for assessing national bank shares at their actual value, 
 and in ascertaining this, the liabilities of the bank are deducted 
 from its credits. The shareholders, therefore, are given the bene- 
 fit of the bank's indebtedness. If a shareholder should complaia 
 that his individual debts must also be deducted, he must show 
 
 ' 46 Mich., 526 p. 531. s 121 U. S., 138. 
 
 " 9 At. Rep., 722, the court citing Evansville Bank v. Britton, 105 U. S., 
 322; Pelton v. National Bank, 101 U. S., 143; "Weston v. Manchester, 62 N. H.— 
 < 49 111., 318. MS. W. Rep., 899. 
 
^ilO{f) TAXATION. 243 
 
 that he owes them, otherwise he can get no relief. By these 
 laws, says Willie, C. J., "having assessed the same percentage of 
 taxation against every description of property, excepting a few 
 articles exempted from public policy, and having provided means 
 for a just and fair assessment of all moneyed capital so as to ob- 
 tain as near as possible an equal rate of taxation upon all, have 
 complied,. as far as possible, with the true intent of the Act of 
 Congress." 
 
 § 410 (/). Maguire v. Board of Revenue.' Until 1880 
 Alabama did not authorize the assessment and collection of a tax 
 on national bank shares. The December Act of that year pro- 
 vides " that there shall be levied and collected on the value of 
 each share of every national banking association located within 
 this state, whether held by residents or non-residents, the- same 
 rate of taxation as is levied on other moneyed capital, the same 
 to be levied and collected in the county where each such associa- 
 tion is located, and not elsewhere, and to be paid by each such 
 association for the shareholders thereof." This is not a viola- 
 tion of the restriction contained in the national law permitting 
 the states to tax these associations, considered by itself, or in 
 connection with another state law .which provides only for the 
 taxation of the excess of all money loaned and solvent credits or 
 credits of value after deducting the taxpayer's indebtedness. 
 For this latter provision authorizes a deduction by the share- 
 holder of his debts from the value of the shares owned by him, 
 as can be done in the taxation of money loaned.' 
 
 § 410(er). McAdeu v. Coininissioners.'' In North Car- 
 olina a statute ' enumerates the several kinds of solvent credits 
 and provides that the person taxed "may deduct from the amount 
 of solvent credits owing to him the amount of collectible debts 
 owing by him as principal debtor." It was decided that the 
 holder of shares of a national bank which was located in the 
 state, could deduct his indebtedness from the valuation of his 
 shares, although these were not included in the list of "solvent 
 credits " enumerated in the statute. 
 
 § 411. Cases in which deductions should have been 
 made. Kuggles v. City of Fond du Lac* We will now 
 review the cases in which deductions were not made as the law 
 
 ' 71 Ala., 401. ^ 2 S. E.' Rep., 670. 
 
 = Act 1885, Ch. 177 (12) * 53 Wis., 436 p. 439. 
 
244 NATIONAL BANK ACT. §411 (a) 
 
 required. In WiBconsin a statute exempts from taxation "so 
 much of the debts due, or to become due, to any person as shall 
 equal the amount of bona fide and unconditional debts by him 
 owing."' So long, therefore, as this statute "exempts, for the 
 purposes of valuation, assessment, and taxation, from the credits 
 of an individual an amount equal to his bona fide and uncondi- 
 tional indebtedness, the same exemption must be made, from the 
 ascertained value of national bank stock, if the owner thereof 
 owns bona fide and unconditional debts." 
 
 § 411(a). Pollard v. State. ^ An Alabama statute 
 which authorizes a taxpayer to deduct his indebtedness from the 
 amount of "money loaned, and solvent credits, or credits of 
 value," taxing only the excess, and exempts from taxation 
 the "capital stock of incorporated companies created under 
 any law of the state, * * such portion thereof as may 
 be invested in property and taxed otherwise as property," and 
 limits municipal taxation on such corporations,' is an unfa- 
 vorable discrimination against national bank shareholders, and 
 therefore a violation of the national law. 
 
 § 411(6). Miller v. Heilbron. * In California an as- 
 sessment was declared invalid because the assessor could not, un- 
 der the law, deduct from the valuation of national bank shares 
 the debts due from their owner to citizens of the state, while he 
 could deduct from, credits all debts due by the person assessed to 
 bona fide residents of the state. This was held to be " a dis- 
 crimination against the owner of national bank shares and in 
 favor of the owner of credits. The former is assessed at a greater 
 rate than the latter.'' 
 
 § 411(c). Supervisors v. Stanley.^ In 1866 the New 
 York legislature enacted that "no tax shall hereafter be assessed 
 upon the capital of any bank or banking association organized 
 under the authority of this state or of the United States, but the 
 stockholders in such banks and banking associations shall be as- 
 sessed and taxed on the value of their shares of stock therein; 
 said shares shall be included in the valuation of the personal 
 property of such stockholder in the assessment of taxes at the 
 
 ' Eev. Stat., Sec. 1038. 
 
 ' 65 Ala., 628, overruling Mclver v. Eobinson, 53 Id., 456: Sumter Coun- 
 ty V. National Bank. 62 Id., 464. ' Code, I 362, subd 8, 10. 
 * 58 Cal., 133. » io5 U. S., 305, revsg 15 Fed. E,, 483. 
 
§ill{d} TAXATION. 245 
 
 place, town, or ward where such bank or banking association is 
 located, and not elsewhere; whether the said stockholder reside in 
 aaid place, town, or ward, or not, but not at a greater rate than is 
 assessed upon other moneyed capital in the hands of indivuals in 
 this state. And in making such assessment there shall also be 
 deducted from the value of such shares such sum as is in the 
 same proportion to such value as is the assessed value of the real 
 estate of the bank or banking association, and in which any por- 
 tion of their capital is invested in which said shares are held to 
 the whole amount of the capital stock of said bank or banking 
 association. And provided further, That nothing herein contained 
 shall be held or construed to exempt from taxation the real estate 
 held or owned by such bank or banking association; but the 
 same shall be subject to state, county, municipal, and other tax- 
 ation to the same extent and rate and in the same manner as 
 other real estate is taxed." ' This law was declared invalid so 
 far as it did not permit a national bank shareholder to deduct the 
 amount of his just debts from the assessed value of his shares 
 while the owner of all other personal property was permitted to 
 make such a deduction. 
 
 § 4] 1(d). Evansville Bank V. Britton.' The principles 
 announced in the Stanley case were approved in another which 
 involved the construction of an Indiana statute. In its schedule 
 the subjects of taxation, from which the taxpayer might deduct his 
 bona fide indebtedness, was placed under the following heads: 
 
 " 1st. Credits or money at interest, either within or without the 
 state at par value. 
 
 2d. All other demands against persons or bodies corporate, 
 either yithin or without the state. 
 
 Total amount of all credits." 
 
 In construing this statute Mr. Justice Miller said: '.' The act of 
 Congress does not make the tax on personal property the measure 
 of the tax on bank shares in the state, but the tax on moneyed cap- 
 ital in the hands of the individual citizens. Credits, money loaned 
 at interest, and demands against persons or corporations are more 
 purely representative of moneyed capital than personal property, so 
 far as they can be said to difFer. Undoubtedly there may be much 
 personal property exempt from taxation without giving bank shares 
 a right to similar exemption, because personal property is not nec- 
 
 • 1 Ch. 761, Sec. 1. M05 U. S., 322. 
 
246 NATIONAL BANK ACT. §413 
 
 essarily moneyed capital. But the rigMs, credits, demands, and 
 money at interest mentioned in the Indiana statute, from which 
 bona fide debts may be deducted, all mean moneyed capital in- 
 vested in that way." 
 
 § 412. If shareholder has no debts no equality arises. 
 If, however, the national bank shareholder has no debts to deduct 
 the prescribed mode of assessment is valid; but if he has debts an 
 assessment which excludes them from computation is voidable, 
 that is, the shareholder need not pay the tax assessed unless he 
 chooses to do so.' 
 
 § 413. Assessment valid until ' deduction for debts 
 is demanded. As the statute is not void in consequence of 
 the conflict between it and the National Law, the assessing offi- 
 cers act within their authority in making an assessment until they 
 are duly notified that a national bank shareholder who was as- 
 sessed demands a deduction of his debts.^ If they proceed after 
 such notice in violation of the National Law, he may take action 
 to secure the deduction, and when this is done .the remainder of 
 the statute is valid.' Such action may be taken by a bank on be- 
 half of "its stockholders, and the proper way is by an injunction.* 
 If a national bank shareholder should present to the proper board 
 of assessors his affidavit, showing that his personal property sub- 
 ject to taxation including his bank shares after deducting there- 
 from his just debts, was of no value, and they should refuse on his 
 demand to reduce the assessment of the shares, they can be re- 
 strained by an injunction from collecting the tax." Moreover, in 
 such a suit a bank or shareholder may show what deduction ought 
 to be made for shareholder debts. ° 
 
 § 414. Deduction of valuation of real estate. Hav- 
 ing considered what deductions must be made for debts, we 
 shall next consider how the real estate owned by banks has 
 been treated by the states in valuing national bank shares. The 
 National Banking Law authorizes the assessment of this against 
 the banks for " state, county, or municipal taxes, to the same ex- 
 tent, according to its value, as other real property." And we 
 may begin by remarking that in Alabama it has been decided 
 
 ' Supervisors v. Stanley, 105 U. S., 305. 
 " W- ' Id. 
 
 ' Hills V. Exchange Bank, Id., 319, revsg 18 Blatchf., 478. 
 ' Id. » Id. 
 
§414(a) TAXATION. 247 
 
 that the Act of December, 1880, which provided for levying aud 
 collecting on every national bank share the same tax as was levied 
 and collected on other moneyed capital was valid, even though no 
 deduction was allowed the shareholders for the taxes paid by the 
 bank on real estate owned by it aad assessed for taxation.' 
 
 But the United States Circuit Court has maintained a different 
 opinioii. In the case of the City National Bank v- Paducah,' 
 a law was declared invalid for the reason that it coptained no 
 provision for deducting the value of the real estate owned by the 
 bank from the aggregate value of the shares. "Without such 
 provision, a double tax is paid upon the value of the real estate 
 from which other moneyed capital is exempt." 
 
 § 414(a). New York cases. In 1866 the New York 
 legislature enacted a law for assessing national bank shares. In 
 assessing them the assessors were required to deduct from the 
 actual value of each share a sum bearing the same proportion 
 thereto as the asssessed value of the real estate of the bank bore 
 to the actual value of the capital stock. The words "whole 
 amount of the capital stock" used in the statute referred to its value, 
 and not to the nominal amount of capital.^ Thus, in the Trades- 
 men's National Bank case* its capital was 11,000,000. This was 
 represented by twenty- five thousand shares of forty dollars each, 
 which were assessed at fifty-six dollars. The aggregate assess- 
 ment therefore was $1,400,000 and the real estate was assessed at 
 $200,000. It was decided that the assessors must deduct eight 
 dollars from each share — one- seventh, or the proportion which 
 the real estate bore to the aggregate assessed value of the shares. 
 
 § 414 (6J. Bank building on leased lot. A bank held 
 a lot in New York city under a lease which contained a provision 
 giving the lessor an option at the expiration of the lease to pay 
 for a building erected on the lot by the lessee, or to renew the 
 lease for a further term, and, if thus renewed, the lessee had the 
 right at the expiration of the term to remove the building. The 
 building was erected by the bank and cost $65,000, and the capi 
 tal of the bank to this amount was invested therein. The prop- 
 erty was assessed to the bank as real estate at $70,000. The tax 
 commissioners, however, in assessing the shareholders, refused to 
 
 ' Magnire v. Board of Keveime, 71 Ala.-, 401. '2 Flippin, 61. 
 
 ' People V. Commissioners; 69 N. Y., 91, revsg 9 Hun, 650. * Id. 
 
248 NATIONAL BANK ACT. §414(e) 
 
 deduct anything from the assessed value of the shares notwith- 
 standing this investment. Their action was erroneous, the court 
 holding that the assessed value of the building should have been 
 deducted. But the court could not determine that " the lot was 
 assessed at only $5,000 and the building for 165,000. . The de- 
 duction should be made of such an amount as the building is as- 
 sessed at in connection with the lot, and this can only be deter- 
 mined by the officers making the investment." ' 
 
 § 414 (c). When building cannot be taxed. In Penn- 
 sylvania if a bank pays a state tax on the par value of its shares, 
 a building which it may own, that is used for banking, cannot be 
 taxed for county purposes, although the cashier occupies a part 
 of it as a residence.^ So, too, in Minnesota, if national bank 
 shares are taxed at their actual value without a reduction for real 
 estate, the office and lot of the bank itself cannot be taxed. ' 
 
 § 414 (d). Kentucky case. The city of Covington, Ken- 
 tucky, assessed a tax for municipal purposes on the surplus fund 
 and undivided profits, the real estate and improvement used as a 
 banking house, and also the real estate bought at judicial sales for 
 the purpose of recovering an indebtedness to a national bank, and 
 its office furniture. A statute of the state imposed an annual tax 
 of fifty cants on each national bank share, which was "equal to 
 1100, or on each $100 of stock therein owned by individuals, cor- 
 porations, or societies." A similar tax was imposed on state 
 banks and other moneyed corporations. These were assessed on 
 their corporate property, and shareholders' were exempted from 
 listing their shares in them. As the state courts had decided that 
 the corporate property of state banks was not taxable beyond fifty 
 cents per share of 1 100, so did a federal court decide that this 
 rule must be applied to the taxation of national banks, and there- 
 fore the real estate and furniture of the national bank in question 
 must be exempted from municipal taxation.* 
 
 1 The People v. Commissioners, 80 N. Y., 573; See People v. Commission- 
 ers, 52 N. Y., 659. 
 
 ^ County of Lancaster v. Lancaster County Nat. Bank, 7 Week. Notes, 29. 
 
 " Board of County Commissioners v. Citizens' National Bank, 23 Minn , 
 280. 
 
 * Covington City Nat. Bank v. City of Covington, 21 Fed E., 484; Farmers' 
 Bank v. Commonwealth, 6 Bush, 127; Johnson t'. Commonwealth, 7 Dana, 338; 
 Trustees v. Deposit Bank, 12 Bush, 538; Commonwealth v. First National 
 Bank, 4 Bush, 98; Louisville & Nashville R. v. Commonwealth, 1 Bush, 250. 
 
§415 TAXATION. 249 
 
 A national bank was assessed on both its shares of stock and 
 real estate, nor was the value of the latter deducted from that of 
 the shares. Nevertheless, as the valuation of both shares and 
 real estate was less than half their real value the court decided 
 that no injustice had been done. Others had been assessed too 
 low, while the the shareholders in this bank were "not yet as- 
 sessed as high as they should be." ' 
 
 In Texas, under the statute of that state, the real estate of na- 
 tional banks is not subject to taxation.^ 
 
 § 415. Deduction presumed to have been made. In 
 the absence of proof to the contrary the law will presume that 
 the assessors have deducted the value of the real estate of a bank 
 from the value of its shares, and the affidavit of the assessors at- 
 tached to the roll stating that it contains a true statement of the 
 taxable personal estate " at the full and true value thereof " is not 
 evidence that the deduction was not made.' 
 
 § 416. Deduction of national securities. Banknotes. 
 The exemption or deduction of national securities from taxation 
 is not an unfriendly discrimination for the law requires this to be 
 done. "All stocks, bonds, treasury notes, and other obligations of 
 the United States, shall be exempt from taxation by or under state 
 or municipal or local authority," is the language of the law.* 
 Whether national bank notes are also exempt has not been de- 
 cided by the highest judicial tribunal. In Indiana they are not 
 exempt from state taxation.^ In Mississippi they are.* In Euf- 
 fin V. Board of Commissioners' Reade, J., says: "It seems that 
 all that is to be inferred from the decision in Veazie Bank v. 
 Fenno ' is not that national bank bills are exempt, but that Con- 
 gress has the power to exempt them from state taxation." 
 
 § 416(a). National Bank v. Commonwealth.' But* 
 government securities are exempted. In the above-mentioned 
 case it was held that neither could the capital of a bank which 
 was invested in government securities be taxed, nor could the 
 bank itself as the owner of them. 
 
 ' Nickerson v. Kimball, 1 Chic. L. J., 42. 
 
 2 Eosenburg v. Weekes, 4 S. W. Rep., 899. 
 
 ' Matter of the Farmers' National Bank, 1 Th. &.C., 383. 
 
 * Rev. Stat., Sec. 3701. 
 
 * Board of Commissioners v. Elston, 32 Ind., 27. 
 
 * Home V. Green, 52 Miss., 452. 
 
 ' 69 N. Car., 498. « 8 "Wall., 53.'5. » 9 Wall., 353. 
 
250 NATIONAL BANK ACT. §417 
 
 § 417. Wo deduction of value of national bank se- 
 curities from value of shares. But a national bank share- 
 holder cannot claim that the value of the bank's national securities 
 should be deducted from the valuation of its shares. This claim 
 was made by a shareholder in New York during the early admin- 
 istration of the law. But the court answered that " the meaning 
 and intent of the lawmakers were that the rate of taxing the 
 shares should be- the same, or not greater, than upon the moneyed 
 capital of the individual citizen which is subject or liable to taxa- 
 tion. That is, no greater proportion or percentage of tax in the 
 valuation of the shares should be levied than upon other moneyed 
 taxable capital in the hands of the citizens." ' 
 
 § 417(a). Exchange National Bank v. Miller.^ A 
 bank complained that its assets consisted in part of United States 
 bonds, which were not subject to taxation, but which were in- 
 cluded in the valuation made by the auditor and placed in the du- 
 plicate. The court held that the elimination from the returns of 
 unincorporated banks and individual bankers of the United States 
 bonds was not a discrimination in their favor as against national 
 bank shareholders, whose shares were valued for taxation without 
 deducting such securities. Said Sage, J. : " In the case of an un- 
 incorporated bank, or of an individual banker in Ohio, the state 
 levies its taxes upon every dollar's worth of property which it has 
 power to tax, at the same rate and by the same method as in the 
 taxation on national bank shares, leaving untouched only the 
 property which it has not power to tax " 
 
 §• 418. When they cannot be deducted from capital 
 of state bank. A state bank which had over four millions 
 of assets — one item consisting of $200,000 of real estate and 
 another of' about $1,000,000 of legal tender notes — was assessed 
 in addition to its real estate for the sum of $700,000 as its 
 capital or money at interest. The bank refused to pay on the 
 ground that its capital, which was not invested in real estate, 
 consisted of legal tender notes' that were not taxable. Its 
 nominal capital was, in truth, one million dollars, but the court 
 declared that the tax was lawfully levied, Bradley J., saying that 
 " it is to be presumed that its original capital, not invested in 
 real estate, had been loaned out to its customers, and was rather 
 
 ' People V. The Commissioners, 4 'Wall., 244 p. 256. 
 2 19 Fed. E.i 372 p. 380. 
 
§418(a) TAXATION. 251 
 
 represented by its discounted bills than by the cash in its 
 drawer." Again, he asked: "Does it lie with the bank to put its 
 finger on a particular item of the assets — its money on hand, for 
 example (which appears to have consisted of legal tenders) — and 
 say that this item, and no other item, constituted its capital at 
 that time? * * It is difficult to see how any proof could 
 ■ have been offered to show that the cash exclusively constituted 
 the capital." ' 
 
 § 418(a). When they can be. In another case a bank- 
 er's capital consisted of 150,000, one-half of which was com- 
 posed of United States bonds, and one-fifth, or 110,000, of 
 treasury notes, beside $2,000 of real estate. The board for 
 equalizing taxes deducted the bonds and notes from his assess- 
 ment, and were sustained by the court in their action.^ 
 
 § 419. Deduction of state bonds. The exemption of 
 money invested in state bonds from taxation is not an unfriendly 
 discrimination against national bank shares. Said the Supreme 
 Court of Alabama: " We feel fully justified in concluding that 
 there was no intention on the part of Congress to require the 
 taxation of state bonds. The purpose of the law is accomplished 
 when the states conform, as far as practicable, their revenue sys 
 tern to its requirements substantially; and it must not be con- 
 strued to intend that any state shall do what the general govern- 
 ment has itself declined to do, as unsanctioned by the immemorial 
 custom of good faith, financial integrity and public honesty." ' 
 
 § 420. Deduction under charter older than national 
 bank act. Nor is the continued exemption of property which 
 had been exempted before the creation of the national banks an 
 unfriendly discrimination against them. To tax a corporation that 
 had been exempted would be a plain violation of a contract, and 
 no law demands the violation of another. This principle was ap- 
 plied in Indiana. The state bank and branches were exempted 
 from taxation by its charter which was granted in 1855. Not- 
 
 ' Canal & Banking Co. v. New Orleans, 99 U. S., 97, affg 29 La. Ann., 851. 
 
 ^ Campbell v. City of Centreville, 69 Iowa, 439. 
 
 " Pollard V. State, 65 Ala., p. 634; McLaughlin v. Chadwell, 7 Heisk, 389; 
 see Lionberger u. Rouse, 9 Wall., 468 ; Hepburn v. School Directors, 23 
 Wall.", 480 ; Adams v. Nashville, 95 U. S., 19 ; People v. Weaver, 100 XJ. S., 
 539; Everitt's Appeal, 71 Pa., 216. 
 
252 NATIONAL BANK ACT. §421 
 
 withstanding their exemption the shares of national banks were 
 taxed.' 
 
 § 421. When deduction from municipal taxation 
 does not produce inequality. Nor will the exemption from 
 "taxation except for state purposes, in the borough of a state, of 
 all mortgages, judgments, recognizances and moneys owing upon 
 articles of agreement for the sale of real estate," justify the 
 shareholders of a national bank in that borough from withholding 
 the payment of municipal or school taxes assessed on their shares.^ 
 And in Pennsylvania the judge of a lower court, whose opinion 
 was approved by the higher, said: " It was not intended that if a 
 state excepted some particular items of moneyed capital from tax- 
 ation, leaving every other imaginable sort and kind subject to taxa- 
 tion under the general laws taxing moneyed capital, that the shares 
 of national banks should come within the exception and not with- 
 in the general rule." ' 
 
 § 422. Deduction of surplus funds. No deduction of 
 the surplus fund, which a bank is required to accumulate, need 
 be made in valuing its shares.* In the First National Bank v. 
 Peterborough,^ Judge Smith said : " The accumulation of a sur- 
 plus in excess of the amount required by statute is a voluntary 
 matter on the part of the bank. * * Being then a matter 
 wholly outside the requirements of the statute, and in no way 
 impairing or defeating the object of establishing such agencies 
 of the national government, but having, on the contrary, rather 
 the opposite effect, and the surplus being the exclusive property 
 of the bank, subject to its unrestricted control, I see no reason 
 why the State, in the exercise of a power which it never surren- 
 dered to the national government, to wit, that of taxing the 
 polls and estates within its limits, cannot provide for the taxa- 
 tion of the surplus earnings of the national banks located within 
 its borders to the extent above named. It is only doing directly 
 what it has undoubtedly the right to do indirectly * * if it 
 
 ' City of Richmond K. Scott, 48 Ind., 568; Stilz v. Tutewiler, Id., 600; 
 see Lionberger v. Rouse, 9 "Wall., 468. 
 
 ■" Hepburn v. School Directors, 23 Wall., 480, aSg 79 Pa., 159. 
 
 • Gorgas' Appeal, 79 Pa., 149 p. 151. 
 
 * Strafford National Bank v. Dover, 58 N. H., 316; First National Banku. 
 Peterborough, 56 N. H., 38; National Bank v. Commonwealth, 9 Wall., 353; 
 People r. Commissioners, 67 N. Y., 516, affd 94 U. S., 415. 
 
 5 56N. H., p. 41. 
 
§423 TAXATION. 253 
 
 should see fit to enact that the shares of such banks should be 
 taxed at their market instead of at their par value." ' 
 
 Nor can. a tax assessed against a national bank for " money on 
 hand, at interest, or on deposit," be abated because the words 
 " surplus capital," used in the statute, were not employed by the 
 assessors. ^ 
 
 § 423. Where shares of residents must be assessed. 
 With respect to the place where national bank shares shall be 
 assessed "the legislature of each state may determine and direct 
 the manner and place of taxing all the shares of national bank- 
 ing associations located within the state, subject only to [two re- 
 strictions, one of which is] that the shares of any national bank- 
 ing association owned by non-residents of any state shall be taxed 
 in the city or town where the bank is located, and not elsewhere." 
 The taxing of them " in the city or town where the bank is 
 located, and not elsewhere," means the state where the bank is 
 located.' A statute, therefore, which enacted that national bank 
 shareholders should be taxed in the county, town, or district 
 within the state where the bank was located, whether they resided 
 in the town, county or district or not, but not at a greater rate 
 than the assessment on other moneyed capital belonging to indi- 
 viduals in the state, was valid.* Said Chase, 0. J., in Tappan v. 
 Merchants' National Bank,* " Shares of stock in national banks 
 are personal property. They are made so in express terms by 
 the act of Congress under which such banks are organized. * * 
 Every owner takes the property subject to this power of taxation 
 under state authority, and every non-resident, by becoming an 
 owner, voluntarily submits himself to the jurisdiction of the state 
 in which the bank is established for all the purposes of taxation 
 on account of his ownership. This money invested in the shares 
 is withdrawn from taxation under the authority of the state in 
 which he resides and submitted to the taxing power of the state 
 
 ' See Covington City Nat. Bank v. City of Covington, 21 Fed. R., 484. 
 " The shares of a national bank are taxable at their value, which is the value 
 of the whole capital, including the reserve and other surplus, whether in- 
 vested in United States bonds or not," Doe, C. J., First National Bank v. 
 Concord, 59 N. H., p. 77. 
 
 ' First National Bank v. Concord, 59 N. H., 75. 
 
 'People V. Moore, 1 Idaho, 504. 
 
 * Tappan v. Merchants' National Bank, 19 Wall., 490. 
 
 * Id., p. 499. 
 
254 NATIONAL BANK ACT. §423 (a) 
 
 where, in contemplation of the law, his investment is located. 
 The state, therefore, within which a national bank is situated has 
 jurisdiction, for the purposes of taxation, of all the shareholders 
 of the bank, both resident and non-resident, and of all its shares, 
 and may legislate accordingly." ' 
 
 In North Carolina national bank shares owned by residents 
 " may be assessed under the act of Congress, either at the place 
 where such owners reside or at the place where the bank, is loca- 
 ted, as the legislature of a state may elect; and that under exist- 
 ing laws such shares must be taxed, and can be taxed only at the 
 place where the owner or person who is required to test them re- 
 sides." ^ 
 
 § 423 (a). Austin v. Aldermen. In Massachusetts a stat- 
 ute required the assessors of each city and town in which any 
 national bank shareholder resided to include his shares in his as- 
 sessment. A resided in Boston and owned shares in several of 
 the national banks in the city and was assessed on them. He 
 refused to pay because the statute was in violation of the National 
 Law which permitted states to tax them " at the place where such' 
 bank is located and not elsewhere." It was decided that the as- 
 sessment was in conformity to the National Law, and that he had 
 no cause for complaint.^ 
 
 § 423(6). McMahon v. Palmer/ In New York the 
 legislature enacted that bank "shares shall be included in the 
 valuation of the personal property of such stockholders in the 
 assessment of taxes at the place, city, town or ward where such 
 bank, banking association or trust company is located and not 
 elsewhere, whether the stockholder resides in said place, city, 
 town or ward or not. " * And another law provides for the assessment 
 
 1 First National Bank v. Smith, 65 111., 44; Curtis v. Ward, 58 Mo., 295; 
 Strong V. O'Donnell, 31 Leg. Int., 269. " The states have the power to tax 
 the stock of any national banking association in such manner and at such 
 places as their legislatures may direct, subject to the restrictions" mentioned 
 in the section under consideration, Eunyon, Ch., State, North Ward National 
 Bank v. Newark, 40 N. J. Law, p. 561. Contrary authority, Union National 
 Bank v. City of Chicago, 3 Biss', 82. 
 
 ' Smith, C. J., Buie v. Commissioners, 79 N. Car. 267. 
 
 2 Austin V. The Aldermen, 7 Wall., 694, affg 14 Allen, 359; Clapp v. City 
 of Burlington, 42 Vt., 579. 
 
 * 102 N. Y. 176, affg 11 Daly, 214. 
 s Laws of 1880, Ch. 596, Sec. 3. 
 
§423 (c) TAXATION. 255 
 
 of personal property in the city of New York upon separate rolls 
 fi-om that of real estate.' "It must follow," says Ruger, C. J., 
 "as the necessary consequence of these requirements when the 
 individual assessed does not live in the same ward in which the 
 bank is located wherein he owns shares, and does not own real 
 estate therein, that his assessment for bank shares must be made 
 upon lists especially prepared for that purpose, in the ward where 
 it is located, or the property must altogether escape assessment 
 and taxation.^ But these requirements are not contrary to [sec- 
 tion 5219 of ] the Revised Statutes. " That section provides that 
 nothing contained in that act shall prevent the shares owned by 
 an individual in a national bank from being included in the valua- 
 tion of his personal property in assessing taxes imposed by the 
 authority of the state in which the bank is located. The mere 
 ministerial act of the officers in estimating and noting the result 
 of the judicial determination, as to the liability of the individual, 
 and the value and assessability of his personal property, provided 
 such act does not produce an inequality of assessment, are not 
 • affected by the provisions of the section." ' 
 
 § 423 (c). New Jersey case. In New Jersey the shares 
 of a national bank were taxed to the bank itself although some 
 of its shareholders resided in the state. The statute provided 
 that every person should be assessed in the township or ward 
 where he resided. It was decided that the assessment must be 
 made against the shareholders. Said the Chancellor: "Every 
 stockholder resident here is to be assessed for his shares in the 
 township or ward where he resides. * * It is enough to say that 
 it is right, under the law, to have the assessment of tax upon his 
 property, held in his own name, made against himself, and jt can- 
 not lawfully be made against any one else." * 
 
 § 423 (d)., MicMgan case. In Michigan a statute pro- 
 vided for taxing national bank shares in the township where the 
 bank was located, but if a shareholder resided in another town- 
 ship in the same county his shares should be taxed there. A vil- 
 lage charter authorized the taxation of " all property, real and 
 personal, within the limits of said village." This did not au- 
 
 ' Laws of 1867, Ch. 410, Sees. 4, 5. 
 
 ''McMahon v. Palmer, 102 N.Y., p. 183. ' Id., p. 184. 
 
 * State, North Ward Nat. Bank v. Newark, 40 N. J. Law, 561, revsg 39 
 N. J. Law, 380. 
 
256 NATIONAL BANK ACT. §424 
 
 thorize a tax on national bank shares of a bant located there 
 which were owned by a resident of another township in the same 
 county.' 
 
 § 424. What may be required of shareholders con- 
 cerning residence. The states may require national bank 
 shareholders to give notice to their respective institutions every 
 year of their residence, and tax them if they neglect to do so 
 where their banks are located, as well as where they themselves 
 reside. In Massachusetts, where such a law existed, it was de- 
 cided that a shareholder was rightfully taxed on his shares in the 
 town where he resided, although he had through an honest mis- 
 take notified the cashier that his residence was in another town. ^ 
 
 § 425. Bank not taxable in another state. A bank 
 does not become taxable in another state by opening an office 
 there to receive deposits for the convenience of customers. Thus 
 a New Jersey national bank for the convenience of persons in 
 Philadelphia kept a clerk in that city to receive deposits. By so 
 doing the bank did not become liable to taxation in Philadelphia.' 
 
 § 426. Taxation of non-residents. In taxing non-residents 
 by the constitution of North Carolina, which requires the taxa- 
 tion of all property not specifically exempt, assessors must tax nat- 
 ional bank shares belonging to -non-residents, whether named 
 or not, in the city or town where the bank is located, although 
 there is no state statute expressly authorizing such taxa- 
 tion. * So in Maine, W, a non-resident of Bangor, was duly as- 
 sessed on the shares he owned in a national bank of that city. 
 After legally. demanding the tax, which he refused to pay, he was 
 arrested by the sheriff of the county for the tax, which he then 
 paid under protest to the officer, who, in turn, paid to the city 
 treasurer. In an action to recover the. money it was held that 
 the tax could be collected under the general law of the state. ^ 
 
 § 426 (a). Provident Institution v. City of Boston.' 
 In Massachusetts the legislature enacted in June, 1868, that the 
 shares in national banks owned by non-residents of the state 
 
 ' Howell V. Village of Cassopolis, 35 Mich., 471. 
 
 ' Goldsbury v. Inhabitants of Warwick, 112 Mass., 384. 
 
 ^ National State Bank v. Pierce, 18 Alb. L. Jour., 16. 
 
 * Kyle V. Mayor, 75 N. Car., 445 ; Kyle v. Mayor, Id., 449. 
 
 s Weld r. City of Bangor, 59 Me., 416. 
 
 8 101 Mass., 575. 
 
§426(5) TAXATION. 257 
 
 should be assessed to the owners in the cities or towns where the 
 banks were located, that the rate of taxation should be the same 
 as on other moneyed capital; that the value of such shares should 
 be omitted from the valuation upon which the rate was to be 
 based and that the Act should " apply to tazes assessed and col- 
 lected for the present year in the same manner and to the same 
 effect as if it had been in force on the first day of May." This 
 was held to be no violation of the act of Congress, nor authoriz- 
 ing the levy of a tax in a disproportional manner, nor retro- 
 spective in its operation. 
 
 § 426(&). Moore v. Mayor.' A North Carolina statute 
 empowering the authorities of a town to impose the same taxes 
 for municipal purposes on all persons whose ordinary avocations 
 are pursued within the corporate limits of the town, as on the 
 inhabitants, with a proviso that non-residents thus taxed should 
 have the right to vote at municipal elections, is not set aside by 
 a change in the state constitution which deprives the non-resi- 
 dent tax-payer of his vote, and authorizes a tax on the shares in 
 a national bank, located in the town and held by one who con- 
 ducts his ordinary business therein but whose residence is in the 
 county outside the corporate limits. 
 
 § 427. Cannot tax shares of bank in another state. 
 A state cannot tax national bank shares of a bank in another 
 state which are owned by a non-resident. ^ 
 
 § 428. Shares may be assessed at market value. 
 The shares of national banks may be assessed at their market 
 value even if this exceeds their par value. It was contended 
 when this question arose that the term " moneyed capital " in the 
 statute signified money at interest, and that as such capital is 
 not taxed on more than its par or nominal value, the par value of 
 national bank shares was their maximum value for taxation. The 
 answer of the court was that " money invested in a bank is not 
 money put out at interest. The money of the bank is so put 
 out." ' 
 
 ' 80 N. Car., 154. 
 
 ^ Flint V. Board of Aldermen, 99 Mass., 141 ; Austin v. Board of Alder- 
 men, 14 Allen, 359, aflfd 7 Wall., 694. 
 
 ' Hepburn v. School Directors, 23 Wall., 480 ; People u Commissioners, 94 
 U. S , 415, aflfg 67 N. Y. 516, which aifd 8 Hun, 536. Contrary authority. 
 Union National Bank v. City of Chicago, 3 Biss., 82. 
 17— B. 
 
258 NATIONAL BANK ACT. §4r28(a;) 
 
 § 428(a). Hepburn v. School Directors.' The Penn- 
 sylvania legislature in March, 1870, enacted that national bank 
 shares " shall be taxable for county, school, municipal and local 
 purposes, at the same rate as now is or may hereafter be assessed 
 and imposed upon other moneyed capital in the hands of indi- 
 vidual citizens of the state." Under this statute national bank 
 shares may be valued above their par value in county, school, mu- 
 nicipal and local taxation. ^ 
 
 § 429. Taxation of omitted shares. If a particular 
 kind of property has been omitted from taxation for a year 
 the legislature has power to enact a law to cure the omission. 
 So, if a tax on national bank shares has not been equally assessed 
 for a year in consequence of a defective law under which this was 
 done, the legislature has power to enact a law to cure the defeci 
 Said Breeze, C. J., in such a case: "It is admitted, taxation of a 
 property owner should be by the operation of a general law af- 
 fecting all classes of people, but where a particular species of 
 property has been omitted from the taxation for a given year, 
 where is the inhibition upon the legislature to pass a special law 
 to cure the omission ? Such is the nature of the law in question. 
 The tax on bank shares was not properly assessed; they were not, 
 in fact, assessed by reason of the defective law under which it 
 was attempted. This act was designed only to supply that omis- 
 sion, and we must give it effect, not being convinced of the want 
 of constitutional power in the legislature to enact it." ^ But in 
 Alabama a Statute which was enacted in December, 1880, taxing the 
 shares of national banking associations for any preceding year 
 since 1874 " the same rate of taxation, state and county, as was 
 in each year assessed and collected upon other moneyed cap- 
 ital," was a violation of the constitution of that state which lim- 
 ited the rate of taxation in any one year for state and county pur- 
 poses.* 
 
 § 429 (a). New York cases. The assessors of the county 
 of Albany omitted to put the names of several stockholders of the 
 National Albany Exchange Bank on the assessment roll, and this 
 omission invalidated the tax,^' "because," in the language of 
 
 '23 Wall., 480. 'Id. 
 
 ' McVeagh v. City of Chicago, 49 111., 318 p. 322. 
 * Maguire v. Board of Revenue, 71 Ala., 401. 
 ' Albany City National Bank v. Maher, 6 Fed. R., 417. 
 
§429 (a) - TAXATION. 259 
 
 Wallace, J., " the requirement which was disregarded by the asses- 
 sors was designed to afford taxpayers an opportunity for the ex- 
 amination and revision of their assessments, and therefore should 
 not be deemed directory merely, but essential, and a condition pre- 
 cedent to the validity of the tax." ' The legislature then sought 
 to cure the proceedings by enacting that the amounts of all assess- 
 ments attempted to be levied and taxes imposed on the shareholders 
 in national and state baiiks in the city of Albany during the year 
 1880 should be assessed and levied on them, and fifteen days were 
 given after the A.ct became a law to review the assessment on the 
 ground of inequality.^ This Act was declared void " because it 
 was in efPect a legislative assessment of a tax upon a body of indi- 
 vidual's without apportionment or equality as between them and the 
 general body of the taxpayers." ' A second Act, therefore, was 
 passed in 1883 to validate the assessments made during the years 
 1876, '77 and '78. The second Act was " carefully framed to obviate 
 the objections which were fatal to the former act," and the only 
 objection worthy of consideration, so thought the court, was the 
 circumstance that the taxpayers had not been given an opportunity 
 to be heard until after they were compelled to pay their taxes. But 
 this could not prevail. " The general rule,'' says Judge Wallace, 
 " has often been declared that the legislature may validate retro- 
 spectively, any proceedings which they might have authorized in 
 advance. And it is immaterial that such legislation may operate 
 to divest an individual of a right of action existing in his favor, 
 or subject him to a liability which did not exist originally. In a 
 large class of cases this is the paramount object of such legis- 
 lation. If, therefore, it was within the competency of the legis- 
 lature to provide for the collection of a tax by a system which re- 
 quires the taxpayers to pay in advance of an opportunity to be 
 heard, but which permits them to have a subsequent hearing, and 
 to obtain restitution, if restitution ought to be made, the validating 
 act was constitutional." The operation of the Act was " to pre- 
 serve substantially to the taxpayers the right of which they were 
 originally deprived, to give them an opportunity to question the 
 justice of the assessment, and to restore to them the sums which 
 were illegeilly collected of them." In view of the large and almost 
 
 ' Williams i'. Board of Supervisors, 21 Fed. R. , p. 99. 
 
 ^ Ch. 271, Laws of 1881. 
 
 ' Albany City Nat Bank v. Maher, 9 Fed. R., 884; 9 Id., p. 100. 
 
260 NATIONAL BANK ACT. §430 
 
 unlimited discretion which resided in the legislature to reg- 
 ulate the mode and conditions of taxation it was believed to be 
 valid and effectual to legalize the proceedings in question. ' 
 
 § 430. Cannot be taxed by municipalities. A state 
 cannot authorize a city or other municipality to exact a license, 
 or other form of local tax, from a national baak which is doing 
 business within its limits. Says Norton, J., in a case in. "which 
 the question arose, the right of a national bank " to conduct its 
 business as a banking institution is in no way dependent on a 
 license to be obtained either :?rom the state or any of its munici- 
 palities." ^ 
 
 In Indiana by statute national bank shares were not taxable 
 for municipal purposes. Nevertheless a tax was imposed on them 
 for schools and for a donation by a township to aid in building 
 a railroad, on the ground that these taxes were not within the 
 restriction. ' 
 
 § 431. How state bank converted into national 
 sball be taxed. In changing from a state into a national bank, 
 it is subject to state taxation until the change is complete.* In 
 one case a national bank voted to increase its capital stock and 
 the requisite number of new shares were subscribed and paid for 
 before January 1, 1872, and a semi-annual dividend, declared 
 from that day, was paid on the new shares, as well as on the old. 
 The increase of capital, however, was not approved by the Comp- 
 troller, nor his certificate issued until the 5th of January, 1872. 
 The new shares were not subject to taxation under an ordinance 
 imposing a tax on bank shares "in the hands of the taxpayers on 
 the 1st of January, 1872." ' 
 
 § 432. Taxation of insolvent bank. The personal 
 property of an insolvent national bank in the control of a receiver 
 is exempt from state taxation. " If the shares have any value 
 they are taxable in the hands of the holders or owners, but the 
 property held by the receiver is exempt to the same extent it was 
 
 ' Williams v. Board of Supervisors, 24 Fed. E., 99 pp. 101, 102, affd 122 
 TJ. S., 154. 
 
 ^ City of Carthage v. First National Bank, 71 Mo., 508; Mayor r. First Na- 
 tional Bank, 59 Ga., 648; National Bank v. Mayor, 8 Heisk., 814. 
 
 " Eoot V. Erdelmeyer, 37 Ind., 225. 
 
 * Commonwealth v. Manufacturers & Mechanics' Bank, 2 Pearson's Dec, 
 386, affd 72 Pa., 70. 
 
 * Charleston v. People's National Bank, 5 Rich. 103. See § 443. 
 
§432(a) ' TAXATION. 261 
 
 before liis appointment." ' And if the taxis levied before his ap- 
 pointment, but after its insolvency, a court at the receiver's re- 
 quest will restrain the collector from selling thei personal prop- 
 erty of the bank to satisfy it. ' 
 
 § 432(a). Duty of United States Treasurer when 
 bank has failed. After a national bank has failed, the power 
 and duty of the United States Treasurer to collect the taxes that 
 may be due therefrom are subordinated to the general power of the 
 Comptroller. " The Treasurer represents the United States as a 
 creditor, while the Comptroller is the embodiment of their visi- 
 torial power over corporations created by the government." ' 
 
 § 433. Tax may be lien. A tax by statute may become 
 a lien on national bank shares, and their transfer while it exists, 
 but without mentioning it, would render the transferrer liable for 
 the amount of the tax. Thus in Wisconsin, where such a statute 
 had been enacted, A sold to S some shares on which the tax -had 
 not been paid. A gave S a written statement purporting to con- 
 tain all the.f acts affecting the value of the shares, but was silent con- 
 cerning the tax. It was paid by the bank. S recovered, in the 
 way of damage, the amount of the tax. * 
 
 § 434. Constitutionality of tax laws. Cummings 
 V. National Bank.^ The constitution of Ohio declares that 
 '' laws shall be passed taxing by a uniform rule all moneys, 
 credits, investment in bonds, stocks, joint-stock companies, or 
 otherwise," ° and that " the general assembly shall provide 
 by law for taxing the notes and bills discounted or purchased, 
 moneys loaned, and all other property, effects, or dues of every 
 description without deduction of all banks now existing, or here- 
 after created, and all bankers, so that all property employed in 
 banking shall bear a burden of taxation equal to that imposed on 
 the property of individuals." ' Instead of having the final esti- 
 mate of all taxable property determined by one commission or au- 
 thorized body, this was done by " at least four diflPerent bodies 
 acting independently of each other in regard to as many different 
 classes of property." 
 
 ' Rosenblatt v. Johnston, 104 TJ. S., 462. 
 
 ' Woodworth v. Ellsworth, 4 Colo., 580 
 
 ' Jackson v. United States, 20 Ct. of Claims, p. 305. 
 
 ' Simmons v. Aldrioh, 41 Wis., 241. 
 
 ' 101 U. S., 153. « Article XII, Sec. 2. ' Article XII, Sec. 3. 
 
262 NATIONAL BANK ACT. §434(a) 
 
 It was contended that the action of the final board for equaliz- 
 ing bank shares whose functions wei'e to equalize them, as among 
 themselves, throughout the state, with no power to consider the 
 valuations of real estate which came before another board only 
 once in ten years, or other personal property and invested capital 
 which never came before any state board, must necessarily produce 
 inequality in valuation as regarded other property and was there- 
 fore void because in conflict with the state constitutional rule' of 
 conformity. But the court held otherwise, and for two reasons. 
 First, " it might be that in every instance the result would be the 
 valuation of bank shares at a lower ratio in proportion to its real 
 value than that of any other property." Second, if the original 
 valuations and equalizations were based always, as the constitution 
 required, on the actual money value of the property assessed, the 
 result, except as it might be affected by honest mistakes of judg- 
 ment, would necessarily be equality and uniformity so far as these 
 were attainable. The system might give opportunity for mal- ad- 
 ministration of the law and violation of the principle of uniform- 
 ity of taxation and equality of burden, but this was not a neces- 
 sary result. "A law cannot be held unconstitutional because, while 
 its just interpretation is consistent with the constitution, it is un- 
 faithfully administered by those who are charged with its execu- 
 tion. Their doings may be unlawful while the statute is valid." 
 
 § 434(a). Other cases. A Pennsylvania statute — providing 
 that state and national banks on paying a tax of one per cent, an- 
 nually on all their capital stock at its par value shall be exempt 
 from all other taxation on their shares, capital and profits — is not a 
 law exempting property from taxation within a provision of the 
 constitution of that state.' " The tax which was thereby imposed 
 with the consent of the bank was a commutation for all other 
 taxes under the laws of the Commonwealth upon a class of prop- 
 erty entirely within the power of the legislature. It was in no 
 sense a merely nominal tax, and we need not consider what would 
 be the effect of such a tax amounting to an entire exemption. The 
 banking house was a part of the capital of the institution repre- 
 sented by its shares of stock, and a tax on the par value of the 
 shares was a tax upon it. We do not see that the use to which 
 the building was applied in this case should subject any portion 
 
 ' Sec. 2, Art. 9; County of Lackawanna v. First National Bank, 94 Pa., 221. 
 
§434(a) TAXATION. 263 
 
 of it to taxation for county purposes." ' By an Indiana statute 
 enacted in March, 1867, national bank shares of banks within the 
 state were taxed for that year, and their cashiers wei'e required to 
 represent each stockholder in listing and valuing his shares. It 
 was decided that the statute took effect from the first day of that 
 year, that it was a valid exercise of the taxing power and that it 
 did not conflict with the constitutional requirement of a uniform 
 and equal rate of assessment and taxation. '^ 
 
 A statute of Illinois provided that the stockholders in banks, 
 whether state or national, should be assessed on the value of their 
 shares in the county, town, village, district or city where the bank 
 was located, whether such stockholder resided there or not; but 
 not at a greater rate than was assessed on- other moneyed capital 
 where such bank was located; that each bank should keep a list 
 of the names, residences, and number of shares of each shareholder, 
 which should be open to the inspection of the revenue officers ; 
 that the assessors should ascertain and report to the county clerk 
 a correct list of the names and residences of all stockholders with 
 the number and assessed value of their shares; that .the county 
 clerk should enter the assessed valuation of such shares in the 
 tax list and compute and extend the taxes thereon; that such tax 
 should be a lien on the shares, and that the bank officers should 
 retain the dividends on such stock until the tax was paid. This law 
 was decided to be constitutional.^ A local statute providing a 
 special method of taxing national bank shares was rendered void 
 by a constitutional amendment which provided that " property 
 shall be asssessed for taxes under general laws and by uniform 
 rules." * 
 
 ' Sec. 2, Art. 9; County of Lackawanna v. First National Bank, 94 Pa., p 
 224. 
 
 2 Whitney v. Eagsdale, 33 Ind., 107. 
 
 " Nickerson v. Kimball, 1 Chic. L. J., 42. 
 
 * Id. An Iowa statute providing for the tSrxation of shares in national banks 
 having been declared invalid because the capital instead of the shares of state 
 banks were taxed, a new statute for taxing shares in national banks was 
 passed and which repealed "all acts and parts of acts inconsistent with its 
 provisions. ' ' It was decided that the repealing clause effected a repeal of the 
 provision of the law taxing the capital of tlie state banks, and as they could 
 be thereafter taxed, if any existed, under the general revenue law of the state 
 the new statute for taxing national banks was in harmony with the national 
 law on the subject. Morseman v. Yonnkin, 27 Iowa, 350. A Nebraska 
 
264 . NATIONAL BANK ACT. §435 
 
 § 435. State tax oflacers cannot inspect national 
 banks. Congress has declared that "no association shall be 
 subject to any visitorial powers other than such as are authorized 
 by this Title, or are vested in the courts of justice." ' This stat- 
 ute will protect national bank officers in withholding bank books 
 from state officials who may desire to inspect them for the pur- 
 pose of getting information relating to the deposits of taxable 
 persons. The officers may be restrained from making such an 
 examination by an injunction.'' 
 
 § 436. When injunction may be issued to restrain 
 collection. Having shown the meaning of this section, and the 
 limits of the taxing power of the states, we proceed to consider 
 what remedies may be enforced to prevent the collection of illegal 
 taxes or to recover them whenever they are paid. " When a rule 
 or system of valuation," says Judge Miller,' "is adopted by those 
 whose duty it is to make the assessment, which is designed to 
 operate unequally and to violate a fundamental principle of the 
 constitution, and when this rule is applied, not solely to one in- 
 dividual, but to a large class of individuals or corporations, equity 
 may properly interfere to restrain the operation of this unconsti- 
 tutional exercise of power." 
 
 statute enacted that " the stockholders of every national bank located in 
 this state, or of any bank incorporated under the laws of the state, shall 
 be assessed and taxed on the value of their shares of stock therein * * 
 subject to the restriction that taxation of such shares shall not be at a greater 
 rate than is assessed upon any other moneyed capital in the hands of indi- 
 vidual citizens of this state in the county or precinct where such bank is lo- " 
 cated. * * The taxes against such shares shall be levied against the holder of 
 the same, and shall be paid by the bank." It was held that a tax thus im- 
 posed on the shares of a national bank was valid, and that its payment could 
 be enforced by distraining or taking the property of the bank, First National 
 Bank v. Douglas County, 3 Dill., 330. 
 
 > Eev. Stat., Sec. 5241. 
 
 ^ First National Bank v. Hughes, 6 Fed. E., 737. 
 
 ' Cummings v. National Bank, 101 XJ. S., p. 157. In Alabama it has 
 been held that even if national bank shares were assessed under an invalid 
 law the person assessed should pay them and bring an action at law for their 
 recovery. An injunction would not be issued to restrain their collection, 
 though the municipal corporation collecting them was insolvent. National 
 Commercial Bank v. Mayor, 62 Ala., 284. This rule is opposed to the much 
 better one stated in the text, and is difldcult to support on grounds of reason 
 or fairness. 
 
§437 TAXATION. * 265 
 
 Their collection will not be restrained unless there is a statu- 
 tory discrimination agkinst national bank shares ; or unless un- 
 der any rule established 'by the assessing officers they are rated 
 higher in proportion to their actual value than other moneyed 
 capital.' But " when the inequality of valuation is the result of 
 a statute of the state designed to discriminate injuriously against 
 any class of persons or any species of property, a court of equity 
 will give appropriate relief; and also where, though the law itself 
 is unobjectionable, the officers who are appointed to make assess- 
 ments combine together and establish a rule or principle of valu- 
 ation, the necessary result of which is to tax one species of prop- 
 erty higher than others, and higher than the average rate, the 
 court will also give relief." ^ 
 
 If bank shares are taxable and are not excessively valued, 
 equity will not restrain their collection even though the assess- 
 ing officers may have arrived at a correct result by an erroneous 
 method.' Nor will equitj' afford relief to a complainant 'Who can- 
 not show that " the burden imposed on him is greater than it 
 would have been if the laws had been faithfully executed by tax- 
 ing all property by a uniform rule, and according to its true 
 value in money, and also, that the tribunals provided in the sys- 
 tem of taxation, for redress against inequalities, had been ap'- 
 pealed to in vain." * 
 
 § 437. Shareholder must have exhausted prior 
 remedy. In Wagoner v. Loomis,* " a gross, if not scandalous 
 inequality exists between the burden of taxation cast upon bank 
 shares and that imposed upon pthei: property in the county of 
 Seneca." Nevertheless no relief was afforded by the courts be- 
 cause the shareholders did not appear in due season before the 
 board for the equalizing of values and ask for a correction of 
 their assessment. " True," say the court, " the attention of the 
 auditor was called to the fact that the valuation of these bank 
 shares was higher in proportion to their true value than the val- 
 uations of other property in the county; but there is nothing in 
 
 ' National Bank v. Kimball, 103 V. S., 732. 
 
 ^ Miller, J., Id., p. 735 ; People v. Weaver, 100 TJ. S., 539 ; Pelton v. Na- 
 tional Bank, lOI U. S., 143. 
 ' St. Louis National Bank v. Papin, 3 Cent. L. J., 669, S. C. 4 Dill, 29. 
 * "Wagoner v. Loomis, 37 Ohio, 571 p. 582. 
 5 37 Ohio, 571 p. 582. 
 
266 NATIONAL BANK ACT. §438 
 
 the record to lead us to believe that the annual city and county- 
 boards of equalization would not, if complaint had been made, 
 have advanced the valuation of all other property, in the county 
 to its true value in money. * * We cannot correct it now." ' 
 But if, in consequence of a defect in the law, a person who has 
 been assessed has no opportunity to appear before a board of 
 equalization or correction to show wherein his assessment is erro- 
 neous, he may invoke the aid of a court of equity to prevent 
 the illegal excess of tax.^ 
 
 § 438. Must pay amount due before applying. " No 
 one can be permitted to go into a court of equity to enjoin the 
 collection of a tax until he has shown himself entitled to the aid 
 of the court by paying so much of the tax assessed against him 
 as it can be plainly seen he ought to pay. * * He shall not 
 be permitted, because his tax is in excess of what is just and law- 
 ful, to screen himself from paying any tax at all until the precise 
 amount vfhich he ought to pay is ascertained by a court of equity." ' 
 
 § 439. When national bank can have collection 
 enjoined. A national bank can bring a bill in equity to enjoin 
 the collection of a tax on its shares, which has been assepsed 
 against its shareholders, if able to show that it would be sub- 
 jected to a multiplicity of suits which would interfere with its 
 business and impair its credit, or that the law itself is invalid. 
 Said Brown, J., in a case involving this question: "I think the 
 bank is so far the trustee of the stockholders, and the custodian 
 of the dividends that it is entitled to maintain the bill. It 
 might be subjected to great annoyance by stockholders who de- 
 nied the legality of the tax, and gave the bank notice that it would 
 pay it at the peril of being sued by them. It is certainly no hard- 
 ship to permit the whole question to be litigated in a single ac- 
 tion." ■* In another case it was urged that the bank should pay 
 the tax and then sue for it in a court of law, but Miller, J., re- 
 plied that "the bank is not in a condition where the remedy is ad- 
 equate. In paying the money it is acting in a fiduciary capacity 
 
 ' See Stanley v. Supervisors, 121 U. S., 535 ; Williams v. Supervisors, 122 
 Id., 154. 
 
 ' Williams v. Supervisors, 122 TJ. S., 154. 
 
 ' Miller, J., National Bank v. Kimball, 103 TJ. S., p. 733; Williams v. 
 Supervisors, 122 TJ. S., p. 163. 
 
 * City National Bank v. Paducah, 1 Flippin 61 p. 64. 
 
§440 TAXATION. 267 
 
 as the agent of the stockholders — an agency created by the statute 
 of the state. If it pays an unlawful tax assessed against its stock- 
 holders, they may resist the right of the bank to collect it from 
 them. The bank, as a corporation, is not liable for the tax, and 
 occupies the position of stakeholder, on whom the cost and trou- 
 ble of the litigation should not fall. If it pays, it may be sub- 
 jected to a separate suit by each shareholder. If it refuses, it 
 must either withhold dividends, and subject itself to litigation by 
 doing so, or refuse to obey the laws and subject itself to suit by 
 the state. It holds a trust relation which authorizes a court of 
 equity to see that it is protected in the exercise of the duties ap- 
 pertaining to it. To prevent multiplicity of suits, equity may in- 
 terfere." ' . 
 
 § 440. Tax illegally collected may be recovered. 
 Turning now to the recovery of taxes illegally collected, in New 
 York a tax was assessed on the capital stock of a national bank 
 which was expressly prohibited by statute. The property of the 
 bank was seized by the tax collector and sold to pay the tax and 
 the proceeds were paid to the municipal treasurer. The assess- 
 ment was declared void, and the bank recovered the money.^ 
 
 § 441. Powers of collector. As a tax collector is a min- 
 isterial officer, the assessment roll and warrant are all the author- 
 ity he requires, unless the tax itself is illegal and void.' 
 
 A collector cannot seize the property of the bank to pay a tax 
 due from a shareholder. Thus a warrant to collect a tax which 
 was assessed on the owners of national bank shares directed the 
 collector "to levy the same of the goods and chattels of such per- 
 sons." It was held that the collector could not seize the property 
 of the bank to pay the tax.* Said Hunt, C. : " His authority was 
 limited to two precise acts : first, to receive a voluntary payment^ 
 second, if such payment was not made, to levy upon and sell the 
 goods of the persons named in the tax list." ^ 
 
 If a tax collector be compelled to sell national bank shares for 
 the non-payment of taxes and the bank refuses to transfer them 
 
 ' Cnmmings v. National Bank, 101 U. S., 156. 
 ' National Bank v. City of Elmira, 53 N. Y., 49. 
 
 ' First National Bank v. Waters, 19 Blatcjif-, 242; see Erskine ». Hohn- 
 bach, 14 Wall., 613. 
 
 * First National Bank v. Fancher, 48 N.Y., 524. 
 
 * Id., p. 526; First National Bank v. Hershire, 31 Iowa, 18. 
 
268 NATIONAL BANK ACT. §442 
 
 to the purchaser on its transfer book, it may be compelled to do 
 so by the court.' Or, if the taxes remain unpaid until dividends 
 on the shares are declared, the state, by a proper legal proceed- 
 ing, can compel the officers of the bank to' appropriate all or so 
 much of the dividends as may be needed to pay the tax to that 
 purpose.^ 
 Capital of § 442. "The capital of any state bank or banking association 
 converted which has ceased or shall cease to exist, or which has been or shall 
 
 intoDational. ■ i i i n t t t 
 
 Rev Stat, be Converted into a national bank, shall be assumed to be the cap- 
 
 Seo. .34.0 . ^ 
 
 ital as it existed immediately before such bank ceased to exist or 
 was converted as aforesaid." ' 
 When oircu- § 443. "Whenever the outstanding circulation of any bank, 
 
 lation to be ... - . . •it, 
 
 exempt trom association, corporation, company, or person is reduced to !^n 
 Eev. Stat, amount not exceeding five per centum of the chartered or declared 
 capital existing at the time the same was issued, said circulation 
 shall be free from taxation; and whenever any bank which has 
 ceased to issue notes for circulation deposits in the treasury of 
 the United States, in lawful money, the amount of its outstanding 
 circulation, to be redeemed at par, under such regulations as the 
 Secretary of the Treasury shall prescribe, it shall be exempt from 
 any tax upon such circulation.'' 
 Tax on pri- § 444. " Every national banking association, state bank, or 
 bank note'.* state banking association, shall pay a tax of ten per centum on the 
 aeo.Bm.' amount of notes of any person, or of any state bank or state bank- 
 ing association, used for circulation and paid out by them." 
 
 If a state bank uses its notes for circulation it must pay the 
 
 tax above mentioned. This does ijot apply simply to the notes of 
 
 other banks that are paid out.* 
 
 Taxonmu- § 445. "Every national banking association, state bank, or 
 
 tMtes. banker, or association, shall pay a tax of ten per centum on the 
 
 Sec' 3413.' amount of notes of any town, city, or municipal corporation, paid 
 
 out by them." 
 
 § 446. Meaning of last two sections. This tax is con- 
 stitutional. "Having," says Chief Justice Chase, "in the exer- 
 cise of undisputed constitutional powers, undertaken to provide 
 a currency for the whole country, it cannot be questioned that Con- 
 gress may, constitutionally, secure the benefit of it to the people 
 
 1 McVeagh v. City of Chicago, 49 111., 318. 
 
 ' Id ' Roe ;. 432. 
 
 * Deposit Savings A.ssociation i . Marks, 3 Woods, 553. 
 
§447 TAXATION. 269 
 
 by appropriate legislation. To this end, Congress has denied the 
 quality of legal tender to foreign coins, and has proTided by law 
 against the imposition of. counterfeit and base coin on the com- 
 munity. To the same end. Congress may restrain, by suitable en- 
 actments, the circulation as money of any notes not issued under ' 
 its own authority. Without this power, indeed, its attempts to se- 
 cure a sound and uniform currency for the country must be futile." ' 
 
 In a later case ^ Chief Justice Waite said : " The tax thus laid 
 is not on the obligation, but on its use in a particular way. As 
 against the United States, a state municipality has no right to put 
 its notes in circulation as money. It may execute its obligations, 
 but cannot, against the will of Congress, make them money! The 
 tax is on the notes paid out; that is, made use of as a circulating 
 medium. Such a use is against the policy of the United States. 
 Therefore the banker who helps to keep up the use by paying 
 them out, that is, employing them as the equivalent of money in 
 discharging his obligations, is taxed for what he does. The tax- 
 ation is no doubt intended to destroy the use; but that, as has just 
 been seen. Congress had the power to do." 
 
 § 447. Notes of individuals and companies. On 
 several occasions individuals have circulated their notes in small 
 denominations in payment of their indebtedness, and the govern- 
 ment has sought to impose this tax on them. In one .of these 
 cases two glass manufacturers, who were partners, and did busi- 
 ness at Glassboro.', in New Jersey, issued their notes in various 
 amounts from five cents to five dollars, each, in payment of wages 
 due to their workmen. They "were in printed form, except 
 the date, number and signature, were on bank paper and had 
 the appearance of notes intended for circulation from' hand to 
 hand." ' When redeemed they were received until the amount 
 
 ' Veazie Bank v. Fenno, 8 Wall., 533 p. 549. 
 ' National Bank v. United States, 101 U. S. 1. 
 ' The following is the form of note: 
 
 "Glassboeo, June 18, 1876. 
 Five years after date we promise to pay the hearer at our store in Glass- 
 horo, Gloucester county, N. J., 
 
 Five Cents, 
 in lawful money of the United States, for value received. This promissory 
 note will he taken hy us, at or hefore its maturity, for the amount named 
 herein, in payment or any debts due us. 
 
 [Signed] Warrick & Stangee." 
 
 No. . 
 
270 NATIONAL BANK ACT. §448 
 
 reached $67,474.31 ; while the average amount in circulation 
 ■was about $2,300. In charging the jury the judge told them 
 that in order to render the defendants liable it must be shown 
 that it was their purpose when paying oat the notes to put 
 them in circulation, and further that the paying out of the 
 notes knowing that they would be used and circulated as money, 
 was evidence from which the jury might infer the intention to 
 pay them out for that purpose. In reviewing the charge Judge 
 Bradley thought that the defendants could not have reasonably 
 asked for. anything more favorable; no error had been commit- 
 ted. ' In such an action the taxes may be recovered without an 
 assessment of them by the Commissioner of Internal Revenue. ' 
 Nor will the smallness of the denomination of the note prevent 
 the government from taxing it. ^ Moreover, every issue, whether 
 the original issue or a reissue, is a new issue, and can be taxed. * 
 By reissuing an old note "it becomes a new note to all intents 
 and purposes." ^ The tax, however, is limited to notes payable 
 in money ; otherwise all kinds of negotiable paper, such as grain, 
 receipts, fare tickets, and the like, might be subject to taxation.' 
 Semi-annual 8 448. As national banks might use the notes of state banks and 
 
 return of cir- . , ., ^ 
 
 cniation, de- municipalities, notwithstanding the requirement to pay a ten per 
 tai, etc. cent, tax thereon, Congress provided in the chapter relating 
 Sec. 3414. to Internal Eevenue, how these should be collected. " A 
 true and complete return of the monthly amount of circula- 
 tion, of deposits, and of capital, as aforesaid, and of the monthly 
 amount of notes of persons, town, city, or municipal corporation, 
 state banks, or state banking associations paid out as aforesaid 
 for the previous six months, shall be made and rendered in du- 
 plicate on the first day of December and the first day of June, 
 by each of such banks, associations, corporations, companies, or 
 persons, with a declaration annexed thereto, under the oath of 
 such person, or of the president or cashier of such bank, associa- 
 tion, corporation, or company, in such form and manner as may be 
 prescribed by the Coipmissioner of Internal Eevenue, that the 
 
 ' United States v. Warrick, 25 Fed. R., 138. 
 
 ^ Id. ; Dollar Savings Bank v. United States, 19 Wall., 227. 
 
 'Id. "Id. ' 5 Id. 
 
 « Matter of Aldrich, 16 Fed. E., 369. ' 
 
§449 TAXATION. 271 
 
 same contains a true and faithful statement of the amounts sub- 
 ject to tax, as aforesaid; and one copy shall be transmitted to the 
 collector of the district in which any such bank, association, cor- 
 poration, or company is situated, or in which such person has his 
 place of business, and one copy to the Commissioner of Internal 
 Eevenue." 
 
 § 449. " In default of the returns provided in the preceding sec- when 
 tion, the amount of circulation, deposit, capital, and notes of per- shall be esH- 
 sons, town, city, and municipal corporations, state banks, and state Bev. s'tat. 
 banking associations paid out, as aforesaid, shall be estimated by 
 the Commissioner of Internal Revenue, upon the best informa- 
 tion he can obtain. And for any refusal or neglect to make re- 
 turn and payment, any such bank, association, corporation, com- 
 pany, or person so in default shall pay a penalty of two hundred 
 dollars, besides the additional penalty and forfeitures provided 
 in other cases." 
 
 § 450. " Whenever any state bank or banking association has Betum on 
 been converted into a national banking association, and such na- of statebaaik 
 
 converted, 
 
 tional banking association has assumed the liabilities of such state Bev. stst. 
 
 ° Sec. 3416. 
 
 bank or banking association, including the redemption of its bills, 
 by any agreement or understanding whatever with the representa- 
 tives of such state bank or banking association, such national 
 banking association shall be held to make the required return 
 and payment on the circulation outstanding, so long as such cir- 
 culation shall exceed five per centum of the capital before such 
 conversion of such state bank or banking association." 
 
 § 451. " The provisions of this chapter, relating to the tax on what see- 
 the deposits, capital, and circulation of banks, and to their returns, to national 
 except as contained in sections thirty-four hundred and ten, thirty- Rev. stat. 
 four hundred and eleven, thirty-four hundred and twelve, [thirty- 
 four hundred and thirteen,]' and thirty- four hundred and sixteen, 
 and such parts of sections thirty-four hundred and fourteen, and 
 thirty-four hundred and fifteen as relates to the tax of ten per 
 centum on certain notes, shall not apply to associations which are 
 taxed under and by virtue of Title 'National Banks.' " 
 
 § 452. "In lieu of all existing taxes, every association shall pay tj. s. tax on 
 to the Treasurer of the United States, in the months of January deposits and 
 and July, a duty of one-half of one per centum each half year Kev. stat. 
 
 ' The bracketed words were added by Act of Feb. 18, 1875. 
 
272 NATIONAL BANK ACT. §453 
 
 upon the average amount of its notes in circulation, and a duty 
 of one-quarter of one per centum each half year upon the average 
 amount of its deposits, and a duty of one-quarter of one per centum 
 each half year on the average amount of its capital stock, beyond 
 the amount invested in United States bonds." In 18S3 Congress 
 repealed the tax on " capital and deposits of banks, bankers, and 
 national banking associations, except such taxes as are now due 
 and payable," ' consequently the' tax on circulation is the only one 
 now imposed on national banking associations, 
 retarn™""' § '^^^' "^^ Order to enable the Treasurer to assess the duties 
 Sees las' imposed by the preceding section, each association shall, within 
 5^'^- ten days from the first days of January and July of each yearj 
 
 make a return, under the oath of its president or cashier, to the 
 Treasurer of the United States, in such form as the Treasurer may 
 prespribe, of the average amount of its notes in circulation, and 
 of the average amount of its deposits, and the average amount of 
 its capital stock, beyond the amount invested in United States 
 bonds, for the six months next preceding the most recent first 
 day of January or July. Every assocation which fails so to make 
 such return shall be liable to a penalty of two hundred dollars, to 
 be collected either out of the interest as it may become due such 
 association on the bonds deposited with the Treasurer, or, at 
 his option, in the manner in which penalties are to be collected of 
 other corporations under the laws of the United Sates." 
 
 " Whenever any association fails to make the half yearly return 
 required by the preceding section, the duties to be paid by such 
 association shall be assessed upon the amount* of notes deliv- 
 ered to such association by the Comptroller of the Currency, and 
 upon the highest amount of its deposits and capital stock, to be 
 ascertained in such manner as the Treasurer may deem best." 
 Howtaxmay 8 454. " Whenever an association fails to pay the duties im- 
 
 be collected " ^ •' 
 
 if bank fails posed by the three preceding sections, the sums due may be col- 
 Jev. Stat, lected in the manner provided for the collection of United States 
 taxes from other corporations; or the Treasurer may reserve the 
 amount out of the interest, as it may become due, on the bonds de- 
 posited with him by such defaulting association." 
 Kefimding 8 455. " In all cases where an association has paid or may 
 seTslis'' P^y ^^ excess of what may be or has been found due from it, 
 
 1 Marcli 3,1883, Public Laws, 47 C. 2 S. Ch. 121, Sec. 1, p. 488. 
 
§456 TAXATION. ■ 273 
 
 on account of the duty required to be paid to the Treasurer of the 
 United States, the association may state an accouDt therefor, 
 which, on being certified by the Treasurer of the United States, 
 and found correct by the First Comptroller of the Treasury, shall 
 be refunded in the ordinary manner by warrant on the Treasury." 
 
 § 456. "There shall be levied, collected, and paid for and in Tex on bank 
 respect of every bank-check, draft, or order for the payment of Rev. stat. 
 money, dravrn upon any bank, banker, or trust company, at sight 
 or on demand, by any person who makes, signs, or issues the same, 
 or for whose use or benefit the same is made, signed, or issued, 
 two cents." 
 
 § 457. "All bank-checks, drafts, or orders, as aforesaid, is- whatohecis 
 sued by the officers of the United States government, or by offi- ?evf stkt.. 
 cers of any state, county, town, or other municipal corporation, 
 are exempt from taxation : Provided, That it is the intent hereby 
 to exempt from liability to taxation such state, county, town, or 
 other municipal corporations in the exercise only of functions 
 strictly belonging to them in their ordinary governmental and 
 municipal capacity." 
 
 § 458. "No bank-check, draft, or order, required by law to be checks as 
 stamped, which is issued without being duly stamped, nor any Eev. stat. 
 copy thereof, shall be admitted or used in evidence in any court 
 until a legal stamp, denoting the amount of tax, is affixed thereto, 
 as prescribed by law."" 
 
 § 459. ■' Any person or persons who shall make, sign, or issue, penalty for 
 or who shall cause to be made, signed, or issued, any instrument, stamped"" 
 document, or paper of any kind or description whatsoever, or ^v°^gtat. 
 shall accept, negotiate, or pay, or cause to be accepted, negotiated, ^''' ^*^' 
 or paid, any draft, or order, for the payment of money, without 
 the same being duly stamped, or having thereupon an adhesive 
 stamp for denoting the tax chargable thereon, and canceled in the 
 money required by law, with intent to evade the provisions of this 
 Title, shall, for every such offense, forfeit the sum of fifty dollars, 
 and such instrument, document, or paper, draft, order, not being 
 stamped according to law, shall be deemed invalid and of no effect: 
 Provided, That hereafter, in all cases where the party has not af- 
 fixed to any instrument the stamp required by law thereon, at the 
 time of making or. issuing the said instrument, and he or they, or 
 any party having an interest therein, shalJ be subsequently de- 
 sirous of affixing such stamp to said instrument, or if said instru- 
 
 18— B. 
 
274 ' NATIONAL BANK ACT. §460 
 
 ment be lost, to a copy thereof, he or they shall appear before the 
 collector of the revenue of the proper district, who shall, upon the 
 payment of the price of the proper stamp required by law, and 
 of a penalty of double the amount of tax remaining unpaid, but 
 in no case less than five dollars, and where the whole amount of 
 the tax denoted by the stamp required shall exceed the sum of fifty 
 dollars, on payment also of interest, at the rate of six per centum 
 on said tax from the day on which such stamp ought to have been 
 affixed, affix the proper stamp to such instrument or copy, and 
 note upon the margin thereof the date of his so doing, and the 
 fact that such penalty has been paid; and the same shall thereupon 
 be deemed and held to be as valid, to all intents and purposes, as 
 if stamped when made or issued." 
 Cancellation 8 460. " In all cases where an adhesive stamp is used for denot- 
 
 andfraudu- , " , . 
 
 lent use. ing any tax imposed under this chapter, except as hereinafter pro- 
 Part of vided,the person using or affixing the same shall write thereon the in- 
 itials of his name and the date on which such stamp is attached 
 or used, so that it may not again be used. And every person who 
 fraudulently makes use of an adhesive stamp to denote any tax 
 imposed by this chapter without so efifeotually canceling and ob- 
 literating such stamp, except as before mentioned, shall forfeit 
 the sum of fifty dollars, 
 other meth- 8 461. " The Commissioner of Internal Revenue is authorized 
 
 ode of can- . * 
 
 celling. to prescribe such method for the cancellation of stamps as sub- 
 
 Kev. Stat. ^ ... 
 
 Part of stitute for, or in addition to the method prescribed in this chap- 
 
 Sec. 3424. ' ^ *^ 
 
 ter, as he may deem expedient and efiPectual." 
 
 § 462. Construction of the la^r on subj ect. The Revised 
 
 Statutes provided that " any collector, deputy collector, or in- 
 spector may enter, in the day time, any building or place where 
 any articles or objects subject to tax are made, produced, or kept, 
 within his district, so far as it may be necessary, for the purpose 
 of examining said articles or objects. And any owner of such 
 building or place, or person having the agency or superintendence 
 of the same, who refuses to admit such officer, or to suffer him to 
 examine such article or articles, shall, for every such refusal, for- 
 feit five hundred dollars." ' Under this section the United States 
 brought a suit against the cashier of a national bank who refused 
 to permit the collector of the proper district to examine checks 
 which had been drawn on and paid by the bank. As the dec- 
 
 ' Part of Section 3177. 
 
§463 TAXATION. ■ 275 
 
 laiation contained no allegation that the checks were not duly 
 stamped at the time they were made, signed and issued, it was 
 regarded defective and the government failed to establish the 
 cashier's liability. ' Though a bank could be examined by a col- 
 lector, or his deputy, or an inspector, a clerk of either of these 
 officers had no authority to make an examination. 
 
 8 463. Formerly, there was " levied and collected a tax of five Taiationoi 
 
 "^ •". , . dividends. 
 
 per centum on all dividends in scrip or money thereafter declared 
 due." ^ A bank was sued for the five per cent, duty which it was 
 alleged was due on a dividend made by the institution. The 
 baok contended that at the time of making the dividend a loss 
 had been incurred from embezzlement which was unknown ; that 
 the amount exceeded the demand of the government ; that the 
 dividend was in truth paid from the capital' of the bank, and 
 from its surplus and contingent fund that had been collected in 
 other years. This defense was upheld. If the loss had been dis- 
 covered before making the dividend, none would have been de- 
 clared ; the court thought that the correction ought to be per- 
 mitted by way of defense " as the government officers must have 
 allowed, if opportunity had occurred,, for correction before 
 them." ' 
 § 464. Liability for reduced tax. In 1870 Congress fur- 
 "ther enacted " that there shall be levied and collected for and dur- 
 ing the year eighteen hundred and seventy -one a tax of two and 
 one-half per centum * * on the amount of all dividends of 
 earnings, income or gains hereafter declared by any bank, trust 
 company, savings institution," beside other companies mentioned 
 therein.* Under this law national banks were required to make 
 a return of dividends declared during the period between August 
 Ist and December 31st, 1870, and pay a tax of two and a half per 
 cent thereon.* And if a bank refused to pay such taxes as were 
 duly assessed, after notice and demand to pay the same, the col- 
 lector or deputy collector could destrain therefor.' 
 
 1 United States v. Mann., 95 Tj! S., 580. 
 
 2 United States ji. Ehawn, 33 Leg. Int., 258. 
 
 ,» Act .Tuly 13, 1866,. 14 Stat, at Large. 39 CIS., Sec. 120 p. 138. 
 
 * United States v. Central National Bank, 15 Fed. E., 222. 
 
 * 16 Stat, at Large, 41 C. 2 S. Sec. 15. 
 
 * United States v. State National Bank, 1 McCrary, 183. 
 ' State National Bankj). Morrison, 1 Id,, 204. 
 
276 
 
 NATIONAL BANK ACT. 
 
 §465 
 
 CHAPTEE XIX. 
 
 OONVEBSION or NATIONAL TO STATE BANKS. 
 
 465. Enabling Act of New York. 
 
 466. National bank not affected by state 
 
 legislation. 
 
 467. Effect of dissolving national bank. 
 
 468. What New York Statute can effect. 
 
 § 469. When dissolution of national bank 
 is complete. 
 470. What the Comptroller can do in such 
 a case. 
 
 § 465. Enabling Act of New York. In May," 1869, the 
 Attorney General of the United States ^ wrote a letter to the Comp- 
 troller of the Currency in reply to one asking his opinion on points 
 relating to the subject of this chapter. The Comptroller stated 
 in his letter, that he was informed, and had reason to believe, that 
 quite a number of national banks in the city and state of New 
 York, in order to avoid the restrictions and limitations imposed by 
 the act of Congress, contemplated a return to the state system, 
 under what they called the Enabling Act, passed by the legisla- 
 ture of that state for that purpose. And, in a previous letter, he 
 stated that the president and directors of the National Mechanics 
 and Farmers' Bank of Albany claimed to have converted their 
 bank into a state banking association, under the provisions of an 
 Act passed by the legislature of the state of New York, April 20, 
 
 May 15. 13 Opinions of Attorney Generals p. 56. 
 E. E. Hoar. 
 
§466 CONVERSION OF NATIONAL TO STATE BANKS. 277 
 
 1867, entitled "An Act enabling national banking associations 
 to become state banking associations," &c., and that, by Tirtue 
 of such conversion, they were absolved from all allegiance and 
 responsibility as a national bank to the office of the Comptroller 
 of the Currency, and to the requirements of the acts of Congress. 
 
 § 466 National bank not affected by New York 
 legislation. "I am of the opinion," replied the Attorney 
 General, " that it is not vrithin the power of the legislature of New 
 York to alter, modify, add to, or diminish the powers, duties, or lia- 
 bilities created in or conferred upon a banking association estab- 
 lished under an act of Congress. The powers, privileges, and duties 
 of a corporate body are wholly derived from the sovereignty which 
 gave it existence. The legislature of New York may undoubt- 
 edly incorporate or provide by law for the incorporation of bank- 
 ing associations in that state. But banking associations thus crea- 
 ted are new and distinct bodies corporate, with which corporations 
 deriving their existence from the United States cannot be merged, 
 or in any manner identified, without the authority of Congress. 
 Any lawful contract which a national banking association might 
 make with a private person, or with another corporation, may 
 undoubtedly be made with a corporation established by the state 
 of New York for banking purposes, and authorized by that state 
 to enter into such a contract. 
 
 § 467. Effect of dissolving national bank. " On the 
 dissolution of a national banking association in the manner pro- 
 vided by the laws of the United States, the property of such an 
 association may be disposed of by its owners to any other parties 
 competent by the local law to receive such transfer, so far as the 
 restrictions, liabilities, and duties imposed by act of Congress 
 upon the corporation winding up its afifairs will admit. But it 
 seems to me that it is a misuse of language to say that the nat- 
 ional banking association is in any sense changed into the bank- 
 ing corporation created by the laws of the state, or merged in 
 it; and I can perceive no power or authority existing in the legis- 
 lature of the state of New York by which the property of the 
 national corporation shall, 'by act of law and without any con- 
 veyance or transfer, be vested in and become the property of such 
 state banking association.' 
 
 §468. What New York statutes can effect. "The 
 statute of New York may, indeed, provide for the creation of a cor- 
 
278 NATIONAL BANK ACT. §469 
 
 poration clothed with the capacity to receive a transfer of prop- 
 erty in such manner as the legislature of that state may determine, 
 and, as far as its capacity to receive is concerned, the legislature 
 of that state has full control over the subject. But the creation of 
 the capacity in the new corporation is an entirely different thing 
 from the attempt to transfer from the national corporation its prop- 
 erty. The powers and mode of action of the national corporation 
 depend wholly upon the action of the national legislature. 
 
 § 469. When dissolution of national bank is com- 
 plete. " I am further of opinion that when a national banking 
 association has taken the proper measures for its own dissolution 
 in conformity with its articles of association, and under the pro- 
 visions of the Act of Congress of June 3, 1864, such dissolution is 
 not complete until the necessary action has been had for the re- 
 demption of its circulating notes, either by actually redeeming 
 them and surrendering them to the Comptroller of the Currency, 
 or by depositing an amount of treasury notes with him adequate 
 to their redemption, as provided by that Act; and that until these 
 acts are completed, the existence of the national banking associa- 
 tion continues under the law; that its capital cannot be lawfully 
 distributed among its shareholders, or transferred to any other per • 
 son or body corporate; that it remains under the supervision of the 
 Comptroller of the Currency in the manner and to the extent pre- 
 scribed by the Act of Congress to the same extent as before its 
 liquidation commenced; that it is still required to make regular 
 and proper reports and returns of its condition to the Comptrol- 
 ler in the manner prescribed by the statute; that it is subject to 
 the penalties which the statute provides for a failure to make such 
 returns ; that its obligation to keep its reserve of lawful money 
 still continues; that its directors must still be the owners of so 
 much of its capital stock as the statute directs, and that it is un- 
 lawful to impair -the lien of the United States upon its assets 
 by a transfer of them without other consideration than the for- 
 mation of a new Isanking asssociation by the same stcckholders. 
 
 § 470. What the Comptroller can do in such case. 
 "It follows as a consequence that whatever remedies the act of 
 Congress gives for a violation of its provisions may be pursued 
 by the Comptroller of the Currency. Whether such remedy is 
 to be found in obtaining a decree of forfeiture and appoint- 
 ment of a receiver by the exaction and collection of penalties, or 
 
§470 CONVERSION OF NATIONAL TO STATE BANKS. 279 
 
 by an injunction from a court of equity to restrain acts from 
 •which loss or danger to the rights of the United States may be 
 reasonably apprehended, will depend, of course, upon the special 
 facts of the case, and upon the nature and extent of the violations 
 of its corporate duty, which the national banking association un- 
 dertaking to dissolve its corporate existence and liquidate its af- 
 fairs may be found to commit." 
 
APPENDIX. 
 
INSTRUCTIONS AND SUGGESTIONS 
 
 IN REGARD TO THE 
 
 ORGANIZATION, EXTENSION AND MANAGEMENT 
 OF NATIONAL BANKS. 
 
 ORGANIZATION. 
 
 1. The initiatory step in the organization of a National bank is to 
 make a written application to the Comptroller of the Currency, 
 giving the desired title, the location and proposed capital, and the 
 names of at least five persons who contemplate being stockholders 
 of the organization (section 5133, Revised Statutes). This applica- 
 tion should be indorsed by the Representative in Congress from 
 the district in which the bank is to be established, or accompanied 
 by letters from other persons of prominence, vouching for the 
 character and responsibility of the parties, and the necessities of 
 the community where the bank is to be located. 
 
 2. If the application receives the approval of the Comptroller, he 
 will furnish all the necessary blank forms for completing the or- 
 ganization, with instructions for the proper execution of the same. 
 
 The title applied for will be held for the applicant for a period 
 not exceeding sixty days, during which the organization of the bank 
 must be completed. 
 
 3. After the stock is placed, the association should enter into ar- 
 ticles of association, as required by section 5133, Revised Statutes, 
 and the following is submitted as a general form for these articles, 
 to be modified in such proper manner as will meet the views of the 
 persons forming the association: 
 
 FORM OF ARTICLES OF ASSOCIATION. 
 For the purpose of organizing an association to carry on the .business of 
 banking, under the laws of the United States, the undersigned, subscribers for 
 the stock of the association hereinafter named, do enter into the following 
 articles of association : 
 
 First. — The name and title of this association shall be "The ." 
 
 Second. — The place where its banking-house or office shall be located, and 
 
284 INSTRUCTIONS AND SI GGESTIONS FOR THE 
 
 '■/.■i operations of discount and deposit carried on, and its general business con- 
 diicted, shall be . 
 
 '1 hird. — The board of directors shall consist of shareholders. The 
 
 first meeting of the shareholders for the election of directors shall be held 
 
 at . on the , or at such other place and time as a majority of 
 
 the undersigned shareholders may. direct. 
 
 Fotti-th. — The regular annual meetings of the shareholders for the election of 
 directors shall be held at the banking-house of this association on the second 
 Tuesday of January of each year ; but if no election shall be held on that 
 day, it may be held on any other day, according to the provisions of section 
 51^9 of the Revised Statutes ; and all elections shall be held according to such 
 regulations as may be prescribed by the board of directors, not inconsistent 
 with the aforesaid provisions of the said section 5149 of the Revised Statutes. 
 
 Fifth.^T:'h& capital stock of this association shall be — thousand dol- 
 lars, to be divided into shares of one hundred dollars each ; but the capital 
 may be increased, according to the provisions of section 5142 of the Revised 
 
 Statutes, to any sum not exceeding thousand dollars ; and in case of the 
 
 increase of the capital of the association, each shareholder shall have the 
 privilege of subscribing for such number of shares of the proposed increase 
 of the capital stock as he may be entitled to, according to the number of 
 shares owned by him before the stock is increased. 
 
 Sixth. — The board of directors, a majority of whom shall be a quorum to 
 do business, shall elect one of their number to be president of this associa- 
 tion, who shall hold his office (unless he shall be disqualified, or be sooner 
 removed by a two-thirds vote of all the members of the board) for the term 
 for which he was elected a director ; and they shall have the power to elect 
 a vice-president, who shall also be at member of the board of directors, and 
 who shall be authorized, in the absence or inability of the president from any 
 cause, to perform all acts and duties pertaining to the ofifice of president ex- 
 cept such as the president only is authorized by law to perform, and to 
 elect or appoint a cashier, and such other officers and clerks as may be re- 
 quired to transact the business of the association ; to fix the salaries to be 
 paid to them, and continue them in office, or to dismiss them, as, in the 
 opinion of a majority of the board, the interests of the association may demand. 
 
 They shall also have power to define the duties of the officers and clerks 
 ©f the association, to require bonds from them, and to fix the penalty there- 
 of ; to regulate the manner in which elections of directors shall be held, 
 and ' to appoint judges of the elections ; to provide for an increase of the 
 capital of the association, and to regulate the manner in which such increase 
 shall be made, and, generally, to do and perform all the acts that it may be 
 legal for a board of directors to do under Jhe Revised Statutes aforesaid ; 
 and they shall also have the power to make all by-laws that it inay be 
 proper and convenient for them to make, not inconsistent with law, for the 
 general regulation of the business of the association, and the management 
 and administration of its affairs. 
 
 Seventh. — This association shall continue for the period of twenty years 
 from the date of the execution of its organization certificate, unless sooner 
 placed in voluntary liquidation by the act of its sliareholders owning at least 
 two-thirds of its stock, or otherwise dissolved by authority of law. 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 285 
 
 Eighth. — These articles of association may be changed or amended at any 
 time, by shareholders owning a majority of the stock of the association, in 
 any manner not inconsistent with law ; and the board of directors, or any 
 three shareholders, may call a meeting of the shareholders for this or any 
 other purpose, not inconsistent with law, by publishing notice thereof for 
 thirty days in a newspaper published in the town, city or county where the 
 bank is located, or by notifying the shareholders in writing. 
 
 In witness whereof, we have hereunto set our hands this day of , 
 
 eighteen hundred and eighty . 
 
 I certify that the articles of association of the were executed 
 
 in duplicate, and that one of the instruments so executed is the foregoing ; and 
 that the other, in all respects like the foregoing, is on file with said bank. 
 
 — — , 188-. Cashier or President. 
 
 Instead of providing, as in the third article, for the election of the 
 first board of directors, the names of the directors might be given 
 in the article. This, when the stoclcholdcrs are agreed at the time 
 as to the persons who are to constitute .the directors, might be much 
 more convenient than to hold an election. In this event the third 
 article should read as follows : 
 
 The board of directors shall consist of stockholders, and the follow- 
 ing persons [here insert their names] are hereby appointed directors of this 
 association, to hold their offices as such until the regular annual election takes 
 place pursuant to the fourth article of these articles of association, and until 
 their successors are chosen and qualified. 
 
 INSTRUCTIONS. 
 
 The persons uniting to organize a National bank must be natural 
 persons' — that is, individuals who can legally hold and control prop- 
 erty in their own individual right, and not corporations, firms, or 
 associations of any kind. 
 
 The specific number of members of which the board of directors 
 shall consist must be named in article 3, 
 
 The proportion of paid-in capital (fifty per cent.) required for or- 
 ganization, must be paid in cash, and each subsequent installment 
 must be so paid until all the capital shall be paid in. Promissory 
 notes must not be taken, either in whole or in part, in payment of 
 subscriptions to capital. 
 
 The manual signature of each person taking part in the organiza- 
 tion is required to the "articles of association." 
 
 The "articles of association,'' "organization certificate," and "cer- 
 tificate of officers and directors," must be executed in duplicate, and 
 one copy filed in the Office of the Comptroller of the Currency and 
 one in the bank. 
 
 By strictly following these instructions the delay that a return of 
 the paper for correction would necessitate will be avoided. 
 
 After having executed the articles of association, the stockholders 
 
2Z6 
 
 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 should execute an organization certificate, which, should be substan- 
 tially as follows: 
 
 FORM OF ORGANIZATION CERTIFICATE. 
 
 We, the undersigned, whose names are specified in article fourth of this cer- 
 tificate, having associated ourselves for the purpose of organizing an association 
 for carrying on the business of banking, under the laws of the United States, 
 do make and execute the following organization certificate: 
 
 First. — The nartie of the association shall be the . 
 
 Second. — The said association shall be located in the of , county 
 
 of and State of , where its operations of discount and deposits are 
 
 to be carried on. 
 
 Third. — The capital stock of this association shall be dollars ($ ), 
 
 and the same shall be divided into - 
 
 • shares of one hundred dollars each. 
 
 Fourth. — The name and residence of each of the shareholders of this asso- 
 ciation with the number of shares held by each, are as follows : 
 
 Fifth. — This certificate is made in order that we may avail ourselves of the 
 advantages of the aforesaid laws of the United States. 
 
 In witness whereof we have hereunto set our hands this day of 188-. 
 
 (The signature in full of every shareholder must be appended to this certificate.) 
 
 State of . 
 
 Cotmty of • 
 
 On this, the — 
 personally came — 
 
 day of 
 
 A. D. 18 
 
 before me, a • 
 
 ■of 
 
 - , to me, well known, who severally acknowledged 
 
 that they executed the foregoing certificate for the purposes therein mentioned. 
 Witness my hand and seal of office the day and year aforesaid. 
 
 [seal of NOTARY OR COURT.] 
 
 INSTRUCTIONS. 
 
 Every association will have succession for the period of twenty 
 years from the date of the execution of this organization certificate. 
 (Section 5136, Revised Statutes.) 
 
 The persons uniting to organize a National bank must be natural 
 persons ; that is, individuals who can legally hold and control prop- 
 erty in their own individual right, and not corporations, firms, or 
 associations of any kind. 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 2S7 
 
 The " organization certificate " must be aclcnowledged before a judge 
 of a court of record or a notary public, and tiie names of all tlie 
 shareholders signing the articles of association must appear in such 
 acknowledgment. 
 
 The manual signature of each person taking part in the organ- 
 ization is required in the "organization certificate." A list of the 
 stockholders, but not their signatures, should be given in the fourth 
 section. 
 
 The " articles of association," " organization certificate,'' and " cer- 
 tificate of officers and directors" must be executed in duplicate, and 
 one copy of each filed in the Office of the Comptroller of the Cur- 
 rency and one in the bank. 
 
 Inasmuch as the laws of the several States differ greatly as to 
 the rights of married women in regard to their separate estates and 
 property, and as to the effect of . covenants and agreements made 
 by them, and as to the forms of acknowledgment of instruments 
 executed by them, they should not be made parties to the organiza- 
 tion papers o banks. 
 
 This will not prevent their becoming' stockholders by transfer of 
 stock after an association is fully organized, and may avoid serious 
 questions as to the legality of organizations founded upon papers 
 executed by them. 
 
 The foregoing instructions apply solely to entirely new organiza- 
 tions. If it be desired to convert a bank already in existence under 
 State laws, the method of precedure and the forms used will be 
 found on page 18. 
 
 From this point the proceedings for the conversion of a State 
 bank into a National association are the same as those for the or- 
 ganization of a new bank. 
 
 DIRECTORS. 
 After the execution of the organization certificate, if the directors 
 are not designated in the articles of association, the stockholders 
 should proceed to elect directors as provided in Section 5145, each 
 of whom should, after his election, take an oath of the following 
 form: 
 
 FORM OF director's OATH. 
 
 State of , 
 
 County of , ss : 
 
 I, the undersigned, director of the , of , of the State of 
 
 , do solemnly swear that I am a citizen of the United States, and resident 
 
 of the 'State of r, and that I will, so far as the duty devolves upon me, 
 
 diligently and honestly administer the affairs of said bank ; and that I will 
 not knowingly violate, or willingly permit to be violated, any of the provisions 
 of the Revised Statutes of the United States under which this bank has been 
 organized ; and that I am the dona fide owner, in my own right, of the num- 
 ber of shares of stock subscribed by me or standing in my name on the 
 
288 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 books of the said bank, and required by said Revised Statutes ; and that the 
 same is not hypothecated, or in any way pledged as security for any loan or 
 
 debt. . 
 
 Subscribed and sworn to, this ;- day of , 188-. before the under- 
 signed, a of said county. . 
 
 form of joint oath. 
 
 State of , 
 
 County of , jj .• 
 
 We, the undersigned, directors of the . , of , of the State 
 
 of , do each of us solemnly swear that we are citizens of the United 
 
 States, and residents of the State of , and that we will severally, so far as 
 
 the duty devolves upon us, diligently and honestly administer the affairs of said 
 bank ; and that we will not knowingly violate, or willingly permit to be vio- 
 lated, any of the provisions of the Revised Statutes of the United States under 
 which this bank has been organized ; and that each of us is the bona fide 
 owner, in his own right, of the number of shares of stock subscribed by him, 
 or standing in his name on the books of the said bank, and required by said 
 Revised Statutes ; and that the same is not hypothecated, or in any way pledged 
 as security for any loan or debt. , 
 
 Subscribed and sworn to, this day of , 188-, before-the under- 
 signed, a of said county. . 
 
 Every director, when elected, must at once take the oath in one or the other 
 of the above forms, and transmit the same immediately to the Comptroller of 
 the Currency. — (Sec. 5147, Revised Statutes.) 
 
 To enable a stockholder to be eligible as a director, he must be a 
 citizen of the United States, and own, in his own right, at least one 
 thousand dollars of the capital stock of the bank, which shall not 
 be hypothecated or in any way pledged for any debt; and the office 
 of any director will be vacated upon his ceasing to be the owner 
 of this amount of stock. 
 
 At least three-fourths of the directors must have resided in the 
 State, Territory, or District in which the association is located, for 
 a year or more immediately preceding their election, and must be 
 residents therein during their continuance in office. 
 
 In all elections of directors, and in deciding all questions at meet- 
 ings of shareholders, each shareholder shall be entitled to one vote 
 on each share of stock held by him. Shareholders may vote by 
 proxies duly authorized in writing, but no officer, clerk, teller, or 
 bookkeeper of the association can act as proxy; and no shareholder 
 whose liability is past due and unpaid shall be allowed to vote. 
 
 FORM OF PROXY. 
 
 Know all men by these presents, that I do hereby constitute 
 
 and appoint ■ attorney and agent for me, and in my name, place, 
 
 and stead, to vote as my proxy at any and all elections of directors of 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 
 
 289 
 
 according to the number of votes I should be entitled to vote if there 
 
 personally present. 
 
 In witness whereof, I have hereunto set my hand and seal this day of 
 
 , one thousand eight hundred and ■. . 
 
 Sealed and delivered in the presence of 
 
 The directors having been elected and qualified should, within a 
 reasonable time, proceed to the election of a president and vice- 
 president of the association, a cashier, and such other officers as 
 may be required (Section 5136, paragraph 4), and to call in the sub- 
 scriptions to the stock according to the terms of subscription and the 
 requirements of the law. As soon as 50 per cent, of the capital stock 
 of the association shall have been paid in, a certificate of, substan- 
 tially, the following form should be executed and sworn to by a 
 majority of the directors and by the president or cashier, and for- 
 warded to the Comptroller. 
 
 CERTIFICATE OF OFFICERS AND DIRECTORS. 
 The undersigned, , president, ■, cashier, and 
 
 , directors of the • , organized under the sections of the Re- 
 vised Statutes of the United States, approved June 22, 1874, which authorize 
 the organization of National banking associations, and of subsequent acts in 
 
 addition to and amendatory thereof, do hereby certify that dollars have 
 
 been paid into said bank, on account of its capital stock, as permanent capi- 
 tal ; that the residence of each director, and the amount of stock of which each 
 director is the iona fide owner, are as follows : 
 
 And that this bank has in good faith complied with all the provisions of said 
 act required to be complied with before receiving authority to commence the 
 
 business of banking. , 
 
 President. 
 
 Cashier. 
 
 Directors. 
 
 State of • 
 
 County of 
 
 On this day of 
 
 before the undersigned, a - 
 
 of 
 
ago INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 personally appeared . president, , cashier, 
 
 and , directors of the , and made oath that the fore- 
 going certificate and the matters and things therein set forth are true to the 
 best of their knowledge and belief. . 
 
 Subscribed and sworn to before me, this day of 
 
 The oath of a majority of the directors of an association is sufficient for this 
 purpose. 
 
 DEPOSIT OF BONDS. 
 At this point the organization of the bank is complete. The as- 
 sociation can be authorized to commence -the business of banking 
 upon the deposit of United States registered bonds with the Treas- 
 urer of the United States, as required by law. 
 
 Banks with a capital of one hundred and fifty thousand dollars or 
 less are required to deposit bonds equal to one-fourth their capital, 
 and a deposit of at least fifty thousand dollars must be made by a 
 bank with a capital in excess of one hundred and fifty thousand 
 dollars. 
 
 Whether a bank avails itself or not of the privilege of taking 
 out circulating notes, the law, in every case, requires the foregoing 
 deposits. 
 
 Coupon bonds can be exchanged for registered bonds by sending 
 them to the Comptroller of the Currency, with a letter requesting 
 the exchange to be made, and- that the registered bonds received in 
 exchange be issued to the Treasurer of the United States, in trust 
 for the association to whose credit they are to be deposited, and 
 that they be deposited with the Treasurer. 
 
 When registered bonds are sent for deposit, they should, unless 
 they are already so issued, be assigned (in the manner pre- 
 scribed in the note printed on the back of all registered bonds) to 
 the Treasurer of the United States, in trust for the association to 
 whose credit they are to be deposited. They can then be trans- 
 ferred upon the books of the Register of the Treasury, and new 
 bonds issued to the Treasurer, in trust for the bank, in accordance 
 with the assignment. Much care should be exercised that the cor- 
 porate names of banks may be correctly given in the assignments. 
 Authority of the board of directors must, in every case, accompany 
 the request for the transfer of bonds which stand in the name of 
 any National bank. 
 
 The most convenient^ method of making deposit of registered 
 bonds will be to send them to the Comptroller, assigned as above 
 directed, requesting him to have them transferred, and also request- 
 ing him to sign the memorandum required by Section 5162 of Re- 
 vised Statutes, and to deposit them with the Treasurer. 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 2pl 
 
 The Comptroller will authorize the payment of interest on bonds 
 to the bank depositing them ; and the Treasurer of the United 
 States will pay the interest on all bonds, except Pacific Railroad 
 bonds, by check, to the order of the bank, and payable at any 
 United States Assistant Treasury or United States depository. 
 
 CERTIFICATE OF AUTHORITY TO COMMENCE BUSINESS. 
 
 The necessary amount of bonds having been deposited with the 
 Treasurer, the Comptroller will, if he is satisfied (section 5168) that 
 the said association has properly complied with the requirements of 
 the law, and that the shareholders have in good faith organized it 
 for the 'legitimate objects contemplated by the bank act, give to the 
 association a certificate authorizing it to commence the business of 
 banking. This certificate, upon the receipt thereof, must be pub- 
 lished according to the requirements of section 5170 Revised Stat- 
 utes. A copy of this publication should be forwarded to the Comp- 
 troller. 
 
 COMMENCEMENT OF BUSINES.S. 
 
 The association is now ready to commence the regular business of 
 banking, for which it is presumed the proper preparation has been 
 made, viz. : that a suitable and safe banking-house or room has 
 been secured, with a good vault or safe (which ought to be both 
 burglar and fire proof), and the necessary books and papers, in re- 
 gard to all of which the Comptroller will require full and satisfac-^ 
 tory information. 
 
 CAPITAL REQUIRED. 
 
 No association can be organized, without especial authority of the 
 Secretary of the Treasury, with a less capital than one hundred 
 thousand dollars, and then only in places of less than six thousand 
 inhabitants; and in cities with a population exceeding fifty thousand, 
 no bank can be organized with less capital than two hundred thou- 
 sand dollars. 
 
 PAYMENT OF CAPITAL. 
 
 The certificate of olficers and directors, a form for which is given 
 on page 1 1, is the certificate of the payment of the first installment 
 of the capital. The five remaining installments must be paid in and 
 certified to the Comptroller, one on each successive thirty days 
 from the date of the Comptroller' s certificate of authority to com- 
 mence business. 
 
 The form usual for these certificates is as follows: 
 
 CERTIFICATE OF PAYMENT OF CAPITAL STOCK. 
 
 Bank, , i88— . 
 
 Sir : It is hereby certified that the installment, amounting to dollars 
 
 ($ ), has been paid in on account of the capital stock of the ■_ — , 
 
 making the total amount paid in on the capital stock of this bank % . 
 
 [seal of bank.] , 
 
 To the Comptroller of the Currency, Cashier. 
 
 Washington, D, C. 
 
292 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 State of , 
 
 County of , ss : 
 
 Subscribed and sworn to, before the undersigned of the said county, 
 
 this day of , i8a— . . 
 
 N. B. — Banks are requested not to report the payment of any one installment 
 twice, except as included in total amount paid in. 
 
 In reference to the legal method of enforcing the payment of 
 subscriptions to capital stock, see section 5141, Revised .Statutes. 
 
 INCREASE OF CAPITAL. 
 
 As section 5142 Revised Statutes provides that no increase of 
 capital shall be valid until the whole amount of such increase is 
 paid in, and the approval of the Comptroller obtained, it will be 
 proper for the officers of banks, whose stockholders may propose to 
 increase their capital stock, to advise the Comptroller of their de- 
 sire to do so, and obtain his consent before making the increase. 
 When an increase of .capital is made, and before its validity can be 
 recognized, notice thereof must be transmitted to the Comptroller, 
 which notice should be in the following form : 
 
 certificate of inxrease of capital. 
 
 National Bank of , 
 
 To the Comptroller of the Currency, 
 
 Washington^ D. C. : 
 
 It is hereby certified that the capital stock of " The National Bank of 
 
 - ' " has been increased, pursuant to the articles of association of said bank, 
 
 in the sum of — dollars, all of which has been paid in, and that the paid- 
 up capital stock of said bank now amounts to dollars. 
 
 [seal of bank.] Cashier. 
 
 State of , 
 
 County of j/ .' 
 
 I, , cashier of " The National Bank of ," in the 
 
 State of , do solemnly swear that the foregoing certificate by me sub- 
 
 SL-ribed is true. • 
 
 Subscribed and sworn to before me this day of , 188 — . 
 
 REDUCTION OF CAPITAL. 
 
 Any association may, by a vote of stockholders owning two-thirds 
 <.t its stock, reduce its capital within certain limits, but, before any 
 1 eduction is valid, it must be certified to the Comptroller and his 
 ipproval obtained. 
 
 Before approval can be given, however, the circulation of the bank_ 
 ciust be reduced to an amount not in excess of the limit fixed by 
 law on the capital after reduction. This may be done by a deposit 
 of lawful money with the United States Treasurer, to retire the cir- 
 culation outstanding in excess of this limit. 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 293 
 
 The certificate of reduction should be in the following form : 
 
 National Bank of , 
 
 • — , 188—. 
 
 To the Comptroller of the Currency, 
 
 Washington^ D. C. . 
 
 It is hereby certified that the capital stock of "The National Bank of 
 
 " has been reduced by a vote of the shareholders owning two-thirds of 
 
 the stock of the association, in accordance with the provisions of section 5143 
 
 of the Revised Statutes of the United States, in the sum of dollars, and 
 
 that the paid-up capital stock of said bank since said reduction is dollars. 
 
 [bank SEAL.] , 
 
 Cashier. 
 
 State of • 
 
 County of - 
 
 I, -:— ■ , cashier of " The National Bank of ," in the 
 
 State of , do solemnly swear that the foregoing certificate, by me sub- 
 scribed, is true. , 
 
 Subscribed and sworn to before me this day of - 
 
 Cashier. 
 
 Note. — A record o{ the vote of stockholders should be kept and forwarded 
 with this notice. 
 
 Before the amount of the reduction of capital is returned to 
 stockholders, all bad and worthless assets must be chairged to the 
 same. The whole amount of such reduction after worthless assets, 
 if any, have been charged off, must be returned f>ro rata to share- 
 holders. No part of it can be carried to surplus or to undivided 
 profits without the unanimous consent of stockholders. In making 
 the reduction the shareholders should be required to return their 
 old certificates and receive their pro rata of the reduction, to- 
 gether with new certificates for the reduced amount. It will, of 
 course, often be necessary to issue the new certificates for fractional 
 shares. 
 
 Banks located in towns with more than six thousand, or in cities 
 of more than fifty thousand inhabitants, cannot reduce their' capi- 
 tal below one hundred thousand dollars in the one case, aud two 
 hundred thousand dollars in the other. Banks in towns of less 
 than six thousand inhabitants can reduce their capital to fifty thou- 
 sand dollars. 
 
 BY-LAWS. 
 
 When a bank is organized, the board of directors should adopt 
 by-laws (section 5136, Revised Statutes, paragraph 6), of which the 
 following is submitted as a general form, to -be modified in such 
 manner as will make them suitable for the circumstances of the 
 respective banks and the views of their directors: 
 
294 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 GENERAL FORM OF B Y-LA WS OF NA TIONAL BANKS. 
 
 By-laws of the [here insert the title of the banlc\ organized under the National 
 banking laws of the U^iited States. 
 
 ELECTIONS. 
 
 Section i. The regular annual meetings of the stockholders of this bank for 
 the election of directors shall be held at its banking-house on the second Tues- 
 day of January of each year, between the hours of ten and four of said day, 
 thirty days' notice of. the time and object of which meeting shall be given by 
 the cashier of this bank, by publication in [here insert the name of the news- 
 paper in which the notice is to be published]. And it shall be the duty of the 
 board of directors, within one month previous to the time of said election, to 
 appoint three stockholders to be judges of said election, who shall hold and 
 conduct the same, and who shall, after the election has been held, notify under 
 their hands the cashier of this bank of the result thereof, and the names of the 
 directors-elect. 
 
 Sec. 2. The cashier, upon receiving the returns of the judges of the election 
 as aforesaid, shall cause the same to be recorded upon the minute-book of the 
 bank, and shall notify the directors-elect of their election, and of the time at 
 which they are required to meet at the banking-house of the bank for the 
 purpose of organizing the new board. If at the time fixed for the meeting of 
 the directors-elect there should not be a quorum in attendance, the members 
 present may adjourn from time to time until a quorum is secured ; and no busi- 
 ness shall be transacted prior to qualifying by taking the oath of office as pre- 
 scribed by law. 
 
 Sec. 3. If, for any cause, the annual election of directors should not be 
 held on the date fixed in the articles of association, the directors in office shall 
 order an election to be held on some other day, of wliich special election no- 
 tice shall be given in accordance with the requirements of section 5149 Revised 
 Statutes, judges appointed, returns made and recorded, and the directors-elect 
 notified according to the provisions of sections one and two of these by-laws. 
 
 OFFICERS. 
 
 Sec. 4. The officers of this bank shall be a president, vice-president, cashier, 
 teller, bookkeeper, and such other officers as may be from time to time required 
 for the prompt and orderly transaction of its business, to be elected or appointed 
 by the board of directors by whom their several duties may be prescribed. 
 
 Sec. 5. The president shall hold his office for the current year for which 
 the board of which he shall be a member was elected, unless he shall resign, 
 become disqualified, or be removed ; and any vacancy occurring in the office of 
 president or in the board of directors shall be .filled by the remaining members. 
 
 Sec. 6. The cashier and the subordinate officers and clerks shall be appointed 
 to hold their offices respectively during the pleasure of the board of directors. 
 
 Sec. 7. The cashier of this bank shall be responsible for all the moneys, 
 funds, and valuables of the bank, and shall give bond, with security to be ap- 
 proved by the board, in the penal sum of dollars, conditioned for the 
 
 faithful and honest discharge of his duties as such cashier, and that he will 
 faithfully apply and account for all such moneys, funds and valuables, and 
 deliver the same to the order of the board of directors of this bank, or to the 
 person or persons authorized to receive them. 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 295 
 
 Sec. 8. The president of this bank shall be responsible for all such sums of 
 money and property of every kind as may be intrusted to his care or placed in 
 his hands by the board of directors or by the cashier, or otherwise come into 
 his hands as president, and shall give bond, with security to be approved by 
 the board, in the penal sum of dollars, conditioned for -the faithful dis- 
 charge of his duties as such president, and that he will faithfully and honestly 
 apply and account for all sums of money and other property of this bank that 
 may come into his hands as such president, and pay over and deliver the same 
 to the order of the board of directors, or to any other person or persons au- 
 thorized by the board to receive the same. 
 
 Sec. 9. The teller shall be responsible for all such sums of money, property, 
 and funds of every description as may, from time to time, be placed iu his 
 hands by the cashier, or otherwise come into his possession as teller ; and shall 
 
 give "bond, with security to be approved by the board, in the penalty of 
 
 dollars, conditioned for the honest and faithful discharge of his duties as teller, 
 and that he will faithfully apply! account for, and pay over all moneys, prop- 
 erty, and funds of every description that may come into his hands by virtue of 
 his office as teller, to the order of the board of directors aforesaid, or to such 
 person or persons as may be authorized to demand and receive the same. 
 
 SEAL. 
 Sec. 10. The following is an impression of the seal adopted by the board 
 of directors of this bank. 
 
 ( Impression ) 
 j of seal. ) 
 
 conveyance of real ESTATE. 
 
 Sec. II. All transfers and conveyances of real estate shall be made by the 
 bank, and under the seal thereof, in accordance with the orders of the board, 
 and shall be signed by the president or cashier. 
 increase of stock. 
 
 Sec. 12. Whenever an increase of stock shall be determined upon, in ac- 
 cordance with the provisions of the articles of association of this bank, it shall 
 be the duty of the board to notify all the stockholders of the same, and to cause 
 a subscription to be opened for such increase of capital. In the increase of 
 capital each stockholder shall have the privilege of subscribing for such number 
 of shares of the new stock as he may be entitled to subscribe for, according 
 to his existing stock in the bank. If any stockholder should fail to subscribe 
 for the amount of ' stock to which he may be entitled, the board of directors 
 may determine what disposition shall be made of the privilege of subscribing 
 for the unsubscribed stock. 
 
 business of the bank. 
 
 Sec. 13. This bank shall be opened for business from o'clock a.m. to 
 
 o'clock P.M. of each day. of the year, excepting Sundays and days recog- 
 nized by the laws of this State as national and religious holidays. When any 
 regular weekly meeting of the board of directors falls upon a holiday, the meet- 
 ing shall be held 'inon such other day as the board may previously designate. 
 
 Sec. 14. The regular meetings of the board of directors shall be held on 
 the [here insert time of meetings]. Special meetings mny be called by the 
 president, cashier, or at the request of three or more directors, and should there 
 
256 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 be no quorum at any regular or special meeting, the members present may ad- 
 journ from day to day until a quorum is in attendance. Any meeting may be 
 adjourned by a -vote of a majority of a quorum, but in the absence of a quo- 
 rum no business shall be transacted. 
 
 Sec. 15. There shall be a committee, to be known as the_exchange com- 
 mittee, consisting of the president, cashier, and directors, appointed by the 
 
 board every months, to'continue to act until succeeded, who shall have 
 
 power to discount and purchase bills, notes, and other evidences of debt, and 
 to buy and sell bills of exchange ; and who shall, at each regular meeting of 
 the board of directors, make a report of all bills, notes, and other evidences of 
 debt discounted and purchased by them for the bank since their last previous 
 report. 
 
 MINUTES. 
 Sec. 16. The organization papers of this bank, the returns of the judges of 
 the elections, the proceedings of all regular and special meetings of the direc- 
 tors, the by-laws and any amendments thereto, and reports of the examining 
 committees of directors shall be recorded in the minute-book ; and the minutes 
 of each meeting shall be signed by the president and attested by the cashier. 
 
 TRANSFERS OF STOCK. 
 
 Sec. 17. The stock of this bank shall be assignable and transferable only 
 on the books of this bank, subject to the restriction and provisions of the 
 banking laws ; and a. tranfer-book shall be provided in which all assignments 
 and transfers of stock shall be made. 
 
 Sec. 18. Transfers of stock shall not be suspended preparatory to the dec- 
 laration of dividends ; and, unless an agreement to the contrary shall be ex- 
 pressed in the assignments, dividends shall be paid to the stockholders in whose 
 name the stock shall stand at the date of the declaration of dividends. 
 
 Sec. 19. Certificates of stock signed by the president and cashier may be 
 issued to stockholders, and the certificate shall state upon the face thereof 
 tnat the stock is transferable only upon the books of the bank ; and when 
 stock is transferred, the certificates thereof shall be returned to the bank and 
 canceled, and new certificates issued. 
 
 EXPENSES. ' 
 
 Sec. zo. All the current expenses of the bank shall be paid by the cashier, 
 vvho shall, every six months, or oftener, if required to do so, make to the board 
 a detailed statement thereof. 
 
 contracts. 
 
 Sec. 21. All contracts, checks, drafts, &c., and all receipts for circulating 
 notes received from the Comptroller of the Currency, sball be signed by the 
 president or cashier. 
 
 EXAMINATIONS. 
 
 Sec. 22. There shall be appointed by the board of directors a committee of 
 
 ■ members, whose duty it shall be to exercise a supervision of the business 
 
 of the bank, and to examine every three months the affairs of this bank, count 
 its cash, and compare its assets and liabilities with the accounts of the gen- 
 eral ledger, ascertain whether the accounts are correctly kept and the' condition 
 of the bank corresponds therewith, and whether the bank is in a sound and 
 solvent condition ; and to recommend to the board such changes in the man- 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 257- 
 
 ner of doing business, &c., as shall seem to be desirable ; the result of which 
 examination shall be reported to the board at the next regular meeting thereafter. 
 
 Sec. 23. The board of directors shall have power to change the form of the 
 books and accounts when deemed expedient and define the manner in which 
 the affairs of the bank shall be conducted. 
 
 QUORUMS. 
 
 Sec. 24. A majority of the directors, including the president or vice-presi- 
 dent, shall be a quorum to do business. 
 
 Sec. 25. These by-laws may be changsii or amended by the vote of two- 
 thirds of the directors. 
 
 CONVERSION OF STATE BANKS. 
 
 Section 5154 of the Revised Statutes provides for the conversion 
 of banks existing under State laws into National banking associa- 
 tions, but the Comptroller recommends in all cases the organi- 
 zation of an entirely new association in preference to conversion. 
 The provisions of' the section referred to are as follows : 
 
 Any bank incorporated by special law, or any banking institution c(rganized 
 under a general law of any State, may become a National association under 
 this title by the- name prescribed in its organization certificate ; and in such 
 case the articles of association and the organization certificate may be executed 
 by a majority of the directors of the bank or banking institution ; and the 
 certificate shall declare that the owners of two-thirds of the capital stock have 
 authorized the directors to make such certificate, and to change and convert 
 the bank or banking institution into a National association. A majority of the 
 directors, after executing the articles of association and organization certificate, 
 shall have power to execute all other papers, and to do whatever may be re- 
 quired to make its organization perfect and complete as a National association. 
 
 As an indication and evidence of this assent, it would be well, 
 although it may not be absolutely necessary, for the stockholders 
 to execute a paper similar to the following: 
 
 AUTHORITY OF STOCKHOLDERS TO DIRECTORS FOR THE -CONVERSION OF A STATE 
 INTO A NATIONAL BANK. 
 
 We, the undersigned, stockholders of the [here insert the name of the bank], 
 
 located in the of county of , and State of , having a 
 
 capital of dollars, do hereby authorize and empower the directors thereof 
 
 to change and convert said bank into a National banking association, under the 
 general banking laws of the United States, and according to the provisions of 
 section 5154, Revised Statutes of the United States, and we do also authorize 
 the said directors, or a majority thereof, to make and execute the articles of as- 
 sociation and organization certificate required to be made or contemplated by 
 said laws, and also to make and execute all other papers and certificates, 
 and to do all acts necessary to be done to convert said into a Na- 
 tional association, and also to do and perform all such acts as may be nec- 
 essary to transfer the assets of every description and character of said 
 
 to the National banking association into which it is to be converted, so that 
 the said conversion may be absolute and complete. 
 
zpS INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 And we do hereby assume, and authorize the said directors to assume, as 
 
 the name of the National banking association into which the said is to 
 
 be converted, "The [here insert the name of the association];" and we do 
 hereby appoint [here insert the names of the directors], who are now the di- 
 rectors of the said [here insert the name of the State bank about to be con- 
 verted], to be directors of the said [here insert the name of the association], 
 to hold their offices as such directors until the regular annual election of di- 
 rectors is held, pursuant to the provisions of said laws, and until their suc- 
 cessors are chosen and qualified. 
 
 And we do hereby authorize the said directors to continue in office the offi- 
 cers of the said [here insert the name of the State bank about to be con- 
 verted], or to appoint or select others, as to them may seem test. 
 
 In witness whereof, we have hereunto set our hands, and written against 
 
 our names the number of shares owned by us respectively, this day of 
 
 , A. D.-, l8— . 
 
 Nantes of Stockholders. 
 
 Stock Owned by Each. 
 
 This paper, being the authority for the action of the directors in 
 converting the State bank into a National bank, should be carefully 
 preserved, aiid a copy thereof entered upon the minutes of the Na- 
 tional banking association. A certified copy, under the seal of the 
 State bank, should also accompany the organization certificate sent 
 to the Comptroller of the Currency. 
 
 The directors, being thus authorized by the stockholders to change 
 their bank into a National association, should proceed to execute 
 articles of association and an organization certificate. 
 
 The following is submitted as a general form for such articles: 
 
 ARTICLES OF ASSOCIATION. 
 
 We, the undersigned, directors of the , having been authorized 
 
 by the owners of two-thirds of the capital stock of said bank to change and 
 convert the said bank into "a National banking association, under section 5154 
 of the Kcvised Statutes of the United States, approved June 22, 1874, and 
 of subsequent acts in addition to or amendatory thereof, and to execute ar- 
 ticles of association, do hereby, in our own behalf, and in behalf of Ibe 
 stockholders whom we represent, make and execute the following articles of 
 association : 
 
 First. — The name and title of the association into which the said 
 
 is to be changed and converted shall be the . 
 
 Second. — The place where its banking-house or office shall be located, and 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 
 
 299 
 
 its operations of discount and deposit carried on, and its general business 
 conducted, shall be the , in the county of and State of . 
 
 Third. — The board of directors shall consist of stockholders. 
 
 Fourth. — The regular annual election of- directors shall be held on the sec- 
 ond Tuesday of January of each year; but if no election shall be held on 
 that day it may be held on any other day, according to the provisions of the 
 tenth section of the act ; and all elections shall be held according to such 
 regulations as may be prescribed by the board of directors of the association, 
 not inconsistent with the provisions of the aforesaid act. 
 
 Fifth. — The capital stock of this association shall be thousand dol- 
 lars, to be divided into shares of each ; but the capital may be in- 
 creased, according to the provisions of section 5142 of the Revised Statutes, 
 
 to any sum not exceeding thousand dollars ; and in case of the increase 
 
 of the capital of the association, each stockholder shall have the privilege of ' 
 subscribing for such number of shares of the proposed increase of the capi- 
 tal stock as he may be entitled to according to the number of shares owned 
 by him before the stock is increased. 
 
 Sixth. — The board of directors (a majority of whom shall be a quorum to 
 do business) shall elect one of their number to be president of this associa- 
 tion, who shall hold his office (unless he shall become disqualified, or be sooner 
 removed by a two-thirds vote of all the members of the board) for the term 
 for which he was elected a director ; and they shall have power to elect a 
 vice-president, who shall also be a member of the board of directors, and to 
 elect or appoint a cashier, and such other officers and clerks as may be re- 
 quired to transact the business of the association ; to fix the salaries to be 
 paid to them, and to continue them in office, or to dismiss them, as, in the 
 opinion of a majority of the board, the interests of the association may demand. 
 
 They shall also have power to define the duties of the officers and clerks 
 of the association, to require bonds from them, and to fix the penalty there- 
 of ; to regulate the manner in which elections of directors shall be held, and 
 to appoint judges of the elections ; to provide for an increase in the capital 
 of the association, and to regulate the manner in which such increase shall 
 be made ; and, generally, to do and perform all the acts that it may be 
 legal for a board of directors to do under the statute aforesaid ; and they 
 shall also have the power to make all by-laws that it may be proper and 
 convenient for them to make, under said statute, for the general regulation 
 of the business of the association and the entire management and administra- 
 tion of its affairs ; which by-laws may prohibit, if the directors shall so de- 
 termine, the transfer of stock owned by any stockholder who may be liable to 
 this association, either as principal debtor, or otherwise, without the consent 
 of the board. 
 
 Seventh. — This association shall continue for the period of twenty years 
 from the date of the organization certificate, unless sooner dissolved by the act 
 of its stockholders owning at least two-thirds of its stock, who may dissolve 
 and close up the association in such a manner as they may deem to be for 
 the interest of the stockholders and -creditors of the association, but subject 
 to the restrictions, requirements, and provisions of the act. 
 
 Eighth. — These articles of association may be changed or amended at any 
 time by stockholders owning a majority of the stock of the association, in any 
 
30O 
 
 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 manner not inconsistent with the provisions of the Revised Statutes ; and the 
 board of directors, or any tliree stockholders, may call a meeting of stock- 
 holders for this purpose. 
 
 In witness whereof, we, the direetors aforesaid, for ourselves as such direct- 
 ors, and in behalf of the stockholders of the , have hereunto set 
 
 our hands this day of , eighteen hundred and -- — . 
 
 This paper to be executed in duplicate. 
 
 I certify"that the articles of association of the 
 
 were executed 
 
 in duplicate, and that one of the instruments so executed is the foregoing ; and 
 that the other, in all respects like the foregoing, is on file with said bank. 
 
 -, 18—. 
 
 Cashier or President. 
 
 Articles of association having been executed, the directors should 
 proceed to execute an organization certificate, of which the following 
 is a form. 
 
 ORGANIZATION CERTIFICATE 
 We, the undersigned, directors of the , having been duly author- 
 ized by the owners of two-thirds of the capital stock of said bank to change 
 said bank into an association, and to -make the necessary organization certifi- 
 cate, under the sections of the Revised Statutes which authorize the conver- 
 sion of State banks into National associations, approved June 22, 1874, and 
 of subsequent acts in addition to or amendatory thereof, do sign and execute 
 the following organization certificate, which we do hereby declare we are au- 
 thorized to make by the owners of two-thirds of the capital stock of said 
 
 First. — The name and title of this association shall be " The - 
 
 Second. — The said association shall be located and continued in the 
 
 of , county of , and State of . where its operations of dis- 
 count and deposit are to be carried on. 
 
 Third. — The capital stock of this association shall be dollars (| ), 
 
 and the same shall be divided into shares of dollars each, as it 
 
 is now divided in the said " The ." 
 
 Fourth. — The name and residence of each of the stockholders of the said 
 
 , which is to becogie a National bank under the provisions of 
 
 the Revised Statutes aforesaid, and the number of shares of • — dollars 
 
 each, held by each stockholder, are as follows : 
 
 Residence. 
 
 No. of Shares. 
 
 and 
 
 Fifth — This certificate is made in order that the said - 
 
 the stockholders thereof may avail themselves of the advantages of the afore- 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 301 
 
 said Revised Statutes, and that the said may be changed and 
 
 converted into a National banking association under the name and title of 
 
 the -^ — . 
 
 In witness whereof, we have hereunto set our hands this day of , 
 
 eighteen hundred and . . 
 
 State of 
 
 County of . ss . 
 
 On this the day of , A. D. 18 — , personally came before me, a 
 
 , of said county, , , directors of the 
 
 , to me well known, who severally acknowledged that they exe- 
 
 cuted the foregoing certificate for the purposes therein mentioned. 
 Witness my hand and seal of office the day and year aforesaid. 
 
 All Other papers and proceedings will be similar to those required 
 of nevy associations organized under the National banking laws. 
 
 EXTENSION OF CORPORATE EXISTENCE. 
 
 The act of July 12, 1882, provides for the extension of the cor- 
 porate existence of National banking associations whose periods of 
 succession are about to expire. AH National banks now in existence 
 which have not already extended under this act, were originally or- 
 ganized under the provisions of the act of June 3, 1864. Section 8 
 of the last-named act, now section 5136 of the Revised Statutes of 
 the United States, provides that all associations organized under it 
 shall have sucession for twenty years from the date of the execution 
 of their organization certificates. The officers of a National bank 
 can therefore tell the date of expiration of their association by tak- 
 ing that of the execution of its organization certificate and adding 
 twenty years thereto. If the paper is lost, or the date in any way 
 uncertain, information can be obtained on application to the Comp- 
 troller of the Currency. Under the act of July 12, 1882, and the 
 regulations of the Comptroller's office, banks are permitted to file 
 their application for extension, with the proper papers, at any time 
 within six months prior to their expiration, and the necessary 
 blank will be sent from that office a sufficient time in advance to 
 enable them to do so. 
 
 The following are copies of the forms : 
 
 Office of the Comptroller of the Currency, I 
 Form 201. i 
 
 amendment to articles of association. 
 
 National Bank . 
 
 In accordance with and in pursuance of the provisions of " An Act to en. 
 able National banking associations to extend their corporate existence, and 
 for other purposes,'' approved July 12, 1882, we, the undersigned, sharehold- 
 ers of " The ," located at in the county of and 
 
 State of , owning the shares of the capital stock of said association set 
 
 opposite our respective names, aggregating not less than two-thirds of the stock 
 
li'jai Ku^^iiuna Avtu ouvjiju-oAn-zi-to 
 
 :\-/l^ J- ±^AU 
 
 of said association, the total- number of shares representing the capital stock of 
 
 said National banking association being shares, do hereby consent and 
 
 agree that the article of the articles of association of said National bank- 
 ing association be, and is hereby,^ amended to read as follows : 
 
 ' ' This association shall continue until , 19 — , unless sooner placed in 
 
 voluntary liquidation by the act of its shareholders owning at least two-thirds 
 of its stock, or otherwise dissolved by authority of law." 
 
 In witness whereof, we, the undersigned, have hereto set our hands. 
 
 Date of Sisning. 
 
 Name, 
 
 Address, 
 
 No o/Shares. 
 
 ■ National Bank • 
 
 1S8- 
 
 SlR : I do hereby certify, in pursuance of the provisioni of "An act to 
 enable National banking associations to extend their corporate existence, and 
 for other purposes,'' approved July 12, 1882, that the amendment of the articles 
 
 of association to which this certificate is attached of "The ," and the 
 
 consent to the same in writing, was executed in dupHcate by shareholders 
 owning not less than two-thirds of the stock of said bank ; and I do further 
 certify that the signatures of the shareholders to said consent and said 
 amendment of the articles of association are the true and correct signatures 
 of said, shareholders or of their lawfully-appointed attorneys; and that one of 
 the instruments so executed is the foregoing, and that the other, in all re- 
 spects like the foregoing, is on file in said bank. , 
 
 [seal of bank.] President or Cashier. 
 
 To the Comptroller of the Currency, 
 
 Washingion, D. C. . 
 
 Sir : I certify that the said amendment to the articles of association of 
 
 " Xhe " was duly recorded upon the minute-book of said association on 
 
 the day of , 18 — , and that the above certificate was certified 
 
 under the seal of the association in accordance with a resolution of its board 
 
 of directors, duly adopted at a meeting of said directors on the — day of 
 
 , 18-. . 
 
 [seal of bank.] 
 To the Comptroller of the Currency, 
 
 Washington, D. C. 
 application of president or cashier. 
 
 [Section 2, Act July 12, 1882.J 
 
 ' . • National Bank ■ 
 
 Cashier. 
 
 Sir: I hereby request the Comptroller of the Currency to approve the in- 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 
 
 3°3 
 
 closed amendment of the articles of association of this bank, extending its 
 corporate existence for twenty years, pursuant to the provisions of the act of 
 Congress entitled "An act to enaBIe National banking associations to extend 
 their corporate existence, and for other purposes," approved July 12, 1882 
 The amendment is accompanied by the certificate required by law. 
 
 Very respectfully, , 
 
 President or Cashier. 
 To the Comptroller of the Currency, 
 
 Washington, D. C. 
 
 The law does not require that a meeting of the stockholders 
 shall be held ; it is sufficient to secure the consent of those repre- 
 senting two-thirds of the stock, and this may be done by sending 
 in advance to each stockholder a power of attorney to be signed 
 and returned by him, some person other than an officer of the 
 bank being empowered to act as attorney. The following form 
 may be used for this purpose : 
 
 form for power of attorney. 
 
 Know all men by these presents, that I, , of , hereby con- 
 stitute and appoint irrevocably my true and lawful attorney for 
 
 me and in my name and stead to sign all necessary papers in connection 
 
 with the extension of the corporate existence of the : under the 
 
 act of Congress approved July 12, 1882 ; and I hereby consent that the 
 
 article of the articles of the association of the be so amended 
 
 as to read as follows : "This - association shall continue until close of busi- 
 ness on — , unless sooner placed in voluntary liquidation by the act 
 
 of its shareholders, owning at least two-thirds of its stock, or otherwise dis- 
 solved by authority of law." Hereby granting unto ray said attorney full power 
 and authority to act in and concerning the premises as fully and effectually 
 as I might do if personally present. 
 
 In witness whereof, I have hereunto set my hand and seal, this day of 
 
 , in the year one thousand eight hundred and eighty-two. 
 
 Signed and sealed in presence of — 
 
 These powers of attorney, signed by the stockholders should be 
 sent to the Comptroller, with the amendment to the articles of as- 
 sociation, on which their names, signed by their authorized attorney, 
 appear. 
 
 If preferred, a stockholders' meeting may be called for a conve- 
 nient date, in order to vote for the extension and to sign the nec- 
 essary papers. 
 
 Notice of the meeting should be sent by mail to each stock- 
 holder, and may also be announced by publication. At this meet- 
 ing the stockholders may appear in person or by attorney, the power 
 given to the latter being similar ii} form to that inserted above. 
 In executing and forwarding the papers, the following instructions 
 must be strictly observed: 
 
304 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 INSTRUCTIONS. 
 
 The certificate of the president or cashier, certifying that stoclcholders own- 
 ing at least two-thirds of the stock have consented, in writing, to the amend- 
 ment, should be executed in duplicate, and one copy transmitted to this 
 Office, together with the letter applying for approval of the Comptroller, at 
 least one month previous to the expiration of the corporate existence of the 
 bank, in order that the Comptroller may have sufficient time to cause the 
 fecial examination to be made, as required by section 3 of the act. 
 
 If any shares of the bank stand in the name of administrators, executors, 
 trustees, or guardians, and it becomes necessary to have the vote of these 
 shares to make up the majority required to authorize the amendment, duly 
 certified copies of the legal appointment of such administrators, executors, 
 trustees, or guardians should be sent to the Comptroller. 
 
 When stock voting for an amendment stands in the name of an assignee, 
 there must be evidence showing that the shares of stock have been regularly 
 transferred to him, as such assignee, on the books of the bank. When the 
 amendment is signed by an attorney acting for shareholders, properly executed 
 powers of attorney must be furnished. 
 
 Soon after the papers, satisfactorily executed, have been filed in 
 his office, the Comptroller will order the special examination re- 
 quired by section 3 of the act. 
 
 This examination must be paid for by the bank, and if the report 
 is favorable, the Comptroller will then issue his certificate of exten- 
 sion. After the extension has been granted, the law requires that 
 all circulating notes issued to the bank after the date at which 
 the new period of succession begins, shall be of different devices from 
 those issued before, arid this necessitates the procuring of new 
 plates, which will be prepared at the expense of the bank, which 
 will be $50 for each plate of two impressions, and $75 for each 
 plate of four. 
 
 A blank to enable banks to order the preparation of plates for 
 and the printing of new circulation will be furnished, and the order 
 should be made out and sent with the application for extension. 
 
 The only plates now prepared are as follows : 
 
 1. Four impressions of $5, costing $75. 
 
 2. Three impressions of $10, and one impression of $20, costing $75. 
 
 3. One impression of $ 50, and one of $ 100, costing 1 50. 
 
 No transfers of bonds are necessary, as the extended association 
 is, in all respects, identically the same as before extension, and is 
 merely placed in the same position as if the law had allowed it, at 
 the outset, forty years from the date of its organization, of which 
 twenty have expired. The new circulating notes will be issued as 
 the old come in, by the usua,l course of redemption, until the end 
 of three years from the date of extension, when the law requires the 
 bank to deposit lawful money for the redemption of such portion 
 of the old circulation as may then remain outstanding. As new 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 305 
 
 circulation may be immediately issued in lieu of tliat for which 
 lawful money is thus deposited, there need be little inconvenience 
 on this account. All that is necessary is to see that the printing 
 of circulation in blank is ordered in advance, so that it may be 
 ready when wanted. 
 
 officers' bonds. 
 Although the bank is the same bank after extension as before, 
 it is necessary to renew the bonds of the officers, tellers, &c., as, if 
 not done, it would be difficult to hold the sureties, as bondsmen 
 signing before the extension could not be held to have contem- 
 plated the existence of the bank for a longer term than twenty 
 years. 
 
 STOCKHOLDERS NOT DESIRING TO EXTEND THE ASSOCIATION. 
 
 Some stockholders may not vote for the extension, and some may 
 wish to withdraw the amount of their stock. Section 5 of the act 
 of July 12, 1882, provides what shall be done in such cases, as follows: 
 That, when any National banking association has amended its articles of 
 association as provided in this act, and the Comptroller has granted his cer- 
 tificate of approval, any shareholder not assenting to such amendment may 
 give notice in writing to the directors, within thirty days from the date of 
 the certificate. of approval, of his desire to withdraw from said association, in 
 which case he shall be entitled to receive from said banking association . the 
 value of the shares so held by him, to be ascertained by an appraisal made 
 by a committee of three persons, one to" be selected by such shareholder, one 
 .by the directors, and the third by the first two ; and in case the value so 
 fixed shall not be satisfactory to any such shareholder, he may appeal to the 
 Comptroller of the Currency, who shall cause a reappraisal to be made, 
 which shall be final and binding ; and if said reappraisal shall exceed the 
 value fixed by said committee, the bank shall pay the expenses of said reap- 
 praisal, and otherwise the appellant shall pay said expenses ; and the yalue 
 so ascertained and determined shall be deemed to be a debt due, and be 
 forthwith paid, to said shareholder, from said bank ; and the shares so sur- 
 rendered and appraised shall, after due notice, be sold at public sale, within 
 thirty days after the final appraisal provided in this section. 
 
 The attention of bank officers is called to the following: 
 
 SUMMARY OF THE PRINCIPAL RESTRICTIONS AND REQUIREMENTS OF 
 THE NATIONAL BANK ACT. 
 
 I. The corporate powers possessed by the National banking asso- 
 ciations, and which they cannot exceed, are limited by the organic 
 act which governs them, and are very carefully enumerated therein. 
 They are, briefly, as follows : 
 
 First. — To adopt and use a corporate seal. 
 
 Second. — To have succession for twenty years, unless sooner vol- 
 untarily dissolved, or their franchise becomes forfeited by some vio- 
 lation of law. 
 
 Third. — To make contracts. 
 
306 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 Fourth. — To sue and be sued, as fully as natural persons. 
 
 Fifth. — To elect and appoinj; directors, and by the directors to ap- 
 point a president, cashier, and other officers, and define their duties. 
 
 Sixth. — To adopt all necessary by-laws, not inconsistent with law. 
 
 Sei'enth. — To exercise by their boards of directors, or officers, sub- 
 ject to law, such incidental powers as are necessary to carry on the 
 business of banking; by discounting and negotiating promissory 
 notes and other evidences of debt ; by receiving deposits ; by buy- 
 ing and selling exchange, coin, and bullion; by loaning money on 
 personal security ; and by obtaining and issuing circulating notes. 
 
 These are the entire powers possessed by the National banks, 
 and it has been judicially held that all powers not here enumer- 
 ated are withheld. These enumerated powers, therefore, operate also 
 as restrictions upon the banks. (Sec. 5136.) 
 
 2. One of the provisions appearing in the above grant of powers 
 is that the National banks may loan money upon personal security 
 only — ^that is, real estate may not be taken by them, directly or in- 
 directly, as original security for any loan; the effect of which is to 
 make them commercial institutions, and to discourage the loaning 
 of money upon securities not readily convertible. (Sec. 5137.) 
 
 3. Mortgages on real estate may be taken, or real estate be con- 
 veyed to them by way of security for, or in satisfaction of debts 
 previously contracted in good faith; or they may purchase the same 
 at sales under judgments, decrees, or mortgages held by them. But 
 all possession by them of such real estate, whether under mortgage, 
 by purchase, or otherwise, is limited to five years. 
 
 4. They are required to have a paid-up capital of not less than 
 $100,000 each, and in cities of 50,000 inhabitants their capital must 
 be not less than $200,000 each. In the discretion of the Secretary 
 of the Treasury, however, banks with not less than $50,000 capital 
 may be organized in places having less than 6,000 inhabitants. The 
 design and effect of these provisions is to prevent, as far as possi- 
 ble, the establishment of feeble organizations, unequal to the wants 
 of the communities in which they are located. (Sec, 5138.) 
 
 5. At least one-half of the authorized capital must be paid in 
 before commencing business, and the remaining portion must be paid 
 in at the rate of not less than one-fifth monthly from the time the 
 association is authorized to commence busmess. (Sec. 5140.) Proper 
 provision is made for enforcing payment of installments of capital 
 stock subscribed, or, for making good any impairment of capital 
 which may occur in the course of business. (Sec. 5141.) 
 
 6. The Comptroller is also authorized and required, before issuing 
 his certiiicate of authority to any association to commence business, 
 to ascertain if such association has in good faith complied with all 
 the requirements of law, preliminary to its organization, and he may 
 appoint a special commission for this purpose if thought necessary. 
 
ORGANIZATION AND, MANAGEMENT. OF NATIONAL BANKS. 307 
 
 He must also obtain a sworn statement of the president and 
 casliier and of a majority of the directors of the proposed associ- 
 ation, setting forth all the facts properly bearing on this inquiry. 
 (Sec. 5168.) 
 
 7. No increase or reduction of the authorized capital of an asso- 
 ciation can be made without the approval of the Comptroller being 
 first obtained, and no increase is valid until the whole amount is 
 actually paid and certified to under oath. (Sees. 5142 and 5143.) 
 
 8. Every,- director must be a citizen of the United States, and 
 three-fourths of the directors of any association must be residents 
 of the State, Territory, or District in which it is located. Each 
 director must also, during his whole continuance in office, be the 
 bona-flde owner of not less than ten shares of the capital stock of 
 the association of which he is a director, which shares must not 
 be hypothecated, or in any way pledged as security for any loan or 
 debt. To all of which he must take oath. (Sec. 5146.) 
 
 9. Every director must also, immediately upon his election or 
 appointment, make and transmit to the Comptroller an oath that 
 he will faithfully administer the affairs of his association, and will 
 not knowingly violate', or permit to be violated, any of the pro- 
 visions of the National bank act. (Sec. 5147.) 
 
 10. The shareholders of every National bank are each made indi- 
 vidually responsible, equally and ratably, and not one for another, 
 for all contracts, debts, and engagements of such association, to the 
 extent of their stock therein, at its par value, in addition to the 
 amount invested in such shares; thus giving double security to the 
 general creditors of these associations. (Sec. 5151.) 
 
 11. Each National bank having a capital of $150,000 or less, before 
 it is authorized to commence business, must have first deposited 
 with the Treasurer of the United States an amount of interest-bear- 
 ing, registered United States bonds, not less in any case than one- 
 fourth of the paid-in capital of the bank (Sec. 8, act July 12, 1882), 
 except that, by act of June 20, 1874, the maximum deposit of bonds 
 required for any bank is $50,000. These bonds are primarily held 
 as security for the redemption of the circulating notes of the bank; 
 but any excess in the value of the bonds above the amount of cir- 
 culation to be redeemed becomes an added security, in the posses- 
 sion of the Government, applicable to the payment of claims of the 
 general creditors of the association depositing them, should it 
 become insolvent. 
 
 12. National banks are forbidden to make transfers or assignments 
 of any of their assets or credits after an act of insolvency, or in 
 contemplation thereof, with a view to the preference of one creditor 
 to another; and any transfer or assignment so made is null and 
 void. (Sec. 5242.) 
 
 13. Every association in the National system is required to receive 
 
3o8 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 at par, for any debt or liability to it, the circulating notes of any 
 and all other banks in the system, and these notes are also re- 
 ceivable by the Government for all taxes or other dues, except 
 duties on imports, and are payable for all debts or demands owing 
 by the Government, except interest on the public debt. These 
 features give to the notes an additional value beyond that which 
 they possess through a deposit of United States bonds. (Sec. 5196.) 
 
 14. One of the most invaluable features of the National banking 
 Srystem is that requiring each association to have at all times on 
 hand an available cash reserve of specified proportions as compared 
 with its deposits and circulation. The proportion required for 
 banks located- in the financial centers of the country is 25 per cent. 
 of their deposits. For all other banks the required proportion is 
 115 per cent, of their deposits. The proportion of reserve to circu- 
 lation is the same for all banks, namely, five per cent., which 
 ftmount is to be at all times on deposit with the Treasurer of the 
 United States, to be held and used by him in the redemption of their 
 notes. This sum is also permitted to be counted as part of the 
 required reserve on deposits. Most stringent means are placed at 
 the disposal of the Comptroller for enforcing compliance by the 
 banks with the requirements of the law relating to the mainten- 
 (ince of a cash reserve. (Sec. 5191.) 
 
 15. Equal in importance with the requirements as to a cash 
 reserve are the provisions which compel the accumulation by each 
 National bank of a surplus fund, to be set apart by it from time 
 to time out of the profits of its business, and which fund may 
 not be used by the bank for any purpose other than to meet and 
 charge off losses in excess of its current earnings. These provisions 
 require that each association shall, before making any dividend, 
 carry to its surplus fund one-tenth part of its net profits since its 
 last preceding dividend, until the same shall amount to 20 per 
 cent, of its capital stock. It is further provided that no dividend 
 ihall ever be declared by any association to an amount greater 
 than its undivided profits (not surplus) then on hand, deducting 
 therefrom its losses and bad debts, and that if such losses shall 
 equal or exceed its profits on hand other than surplus, no dividend 
 shall be made. Careful provision is thus made for the steady 
 growth of the surplus fund of each National bank, until its sura 
 shall equal one-fifth of the capital of the association, thereby estab- 
 lishing a reserve fund against which it may charge any excess of 
 losses over and above its other profits on hand, and thus preserve 
 its capital stock unimpaired. (Sec. 5199.) 
 
 16. Another very important feature of the law is the requirement 
 that detailed statements of the condition of each National bank, 
 verified by the oath of its president or cashier, and attested by not 
 less than three of its directors, shall, not less than five times in 
 
ORGANIZATION AND MANAGEMKNT OF NATIONAL BANKS. 309 
 
 each year, be made to the Comptroller, and also be published in 
 the city or town where the bank is established ; and to guard 
 against the possibility of any bank fortifying itself, in advance of a 
 known day for making a report, so as to make a good showing on 
 that particular day, it is further provided that each report shall 
 be for some past day, to be specified by the Comptroller, who, 
 under the law, makes annually a report to Congress, containing a 
 great number and variety of statistical tables compiled from the 
 various reports of the banks, through the wide distribution of 
 which full information concerning the banks and the working of 
 the system is annually placed before the public. (Sec. 5211.) 
 
 17. The National banks are also required to make semi-annual 
 reports to the Comptroller of their dividends declared, and the 
 amount of their profits in excess of such dividends, which returns 
 are also tabulated by him and the results presented to Congress 
 and the country in his annual reports. Full means are provided 
 for enforcing compliance by the banks with the provisions of law 
 concerning both classes of reports here named, by authorizing a 
 severe penalty for any failure or neglect to make and transmit 
 the same. (Sec. 5212.) 
 
 18. In addition to the means for acquiring a knowledge of the 
 condition of the banks furnished by the reports already mentioned, 
 the law provides for their examination periodically by disinterested 
 persons to 'be appointed by the Comptroller. These persons visit 
 the banks, inspect their books of account, securities, and assets and 
 liabilities generally, have power to examine their officers and direct- 
 ors under oath and inquire into all matters necessary to a full 
 understanding of their actual, existing condition, and then make 
 immediate and full report in writing of the results of such exam- 
 ination. This feature of the law is an invaluable one, operating 
 not only as a restraint against irregular practices by any banks so 
 disposed, but as a means of detecting them and preventing their 
 recurrence. These examinations may be as frequent as is thought 
 necessary, and their expense is borne by the banks themselves. 
 (Sec. 5240.) 
 
 19. All necessary publicity as to the ownership of shares in any 
 National banking association is secured by a provision requiring 
 that a list of the names and residences of all its shareholders, and 
 the number of shares held by each, shall be kept in the office 
 where its business is transacted, and shall, during business hours, 
 be subject to the inspection of any shareholder or creditor of the 
 association, and of the officers authorized to assess taxes under 
 State authority. A copy. of such list, verified by oath, must also 
 be transmitted to the Comptroller annually. (Sec. 5210.) 
 
 20. The National banks serve a very useful purpose, both to the 
 Government and the public, more especially in localities where there 
 
3IO INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 is not a sub-treasury, by acting, when so authorized by the Secre- 
 tary of the Treasury, as depositories of public moneys and financial 
 agents of the United States. For their services in this regard they 
 receive no direct compensation, and are, moreover, required to give 
 satisfactory security for the faithful performance of their duties and 
 the safe custody and prompt payment of all public moneys intrusted 
 to them, by a deposit with the Treasurer of a sufficient amount of 
 United States bonds. (Sec. 5153.) 
 
 21. The National banks are prohibited from loaning to any person, 
 company, corporation, or firm, an amount exceeding one-tenth part 
 of their capital ; and in estimating the liabilities of a company or 
 firm the liabilities of its several members are to be included. They 
 are thus, by law, ""made conservative in their management, and 
 restrained from granting excessive loans, which would at least lessen 
 their general usefulness to the communities in which they are situ- 
 ated, and perhaps impair their safety. (Sec. 5200.) 
 
 22. They are further prohibited from making any loan or discount 
 whatever, on the security of the shares of their own capital stock, or 
 from purchasing or holding the same unless to prevent loss upon a 
 debt previously contracted in good faith. And, even in the latter 
 case, they are not permitted permanently to hold or to cancel shares 
 so obtained, but must, within six months from the date of their 
 acquirement, sell or dispose of them at public or private sale. (Sec. 
 5201.) 
 
 23. They are also prohibited from becoming indebted or in any 
 way liable to an amount exceeding that of their capital stock actu- 
 ally paid in, except on account (i) of their circulating notes; (2) 
 their deposits or collections; (3) bills of exchange or drafts drawn 
 against money actually on deposit to their credit or due to them; 
 and (4) liabilities to their own stockholders for reserved profits. 
 The purpose and effect of these provisions are to make the National 
 banks lenders, and not borrowers of money. (Sec. 5202.) 
 
 24. They are further forbidden, either directly or indirectly, to 
 pledge or hypothecate any of their circulating notes for the purpose 
 of procuring money with which to pay in or increase their capital 
 stock, or for use in their banking operations, or otherwise. This re- 
 striction effectually precludes the practice, which was common in 
 some former State systems, of employing the circulating notes of an 
 association in the increase of its own capital, or in furnishing capi- 
 tal for a new association, which practice has at times been carried to 
 an extreme limit. (Sec. 5203.) 
 
 25. The National banks are restricted in the rate of interest which 
 they may take, receive, or reserve, to the rate allowed by the laws 
 of the State, Territory, or District in which they are located. (Sec. 
 
 5197-) 
 
 26. A system of redemption of the circulating notes of the National 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 311 
 
 banks is provided, whereby not only may they be' readily converted 
 into lawful money, but the mass of the circulation may be kept clean 
 through the retirement of such portion as becomes worn or muti- 
 lated and the issue of new notes by the Comptroller, in their stead. 
 This redemption is accomplished and compelled by requiring, first, 
 that each National bank shall redeem its circulating notes at its 
 own counter, at par, in lawful money, on demand ; second, that the 
 notes of all closed banks shall be redeemed by the Treasurer; third, 
 that all worn, mutilated, or defaced National bank notes which are 
 received by any assistant treasurer or designated depository of the 
 United States shall be forwarded to the Treasury for redemption; 
 and, fourth, by providing that when the notes of any associations, 
 assorted or unassorted, are presented in sums of $ 1,000, or any 
 multiple thereof, to the Treasurer they shall be redeemed by that 
 officer. The Government is indemnified for all redemptions made 
 by it, either by the bonds which it holds, as in the case of insol- 
 vent banks, or by a deposit of lawful money which is required to 
 be previously made by all other banks. (Sec. 3, act June 20, 1874.) 
 
 27. If a National bank fails to pay its circulating notes, the Comp- 
 troller is authorized to sell its bonds and provide for their payment. 
 The Government is indemnified against any possible loss from its 
 guaranty of the payment of such circulating notes, by having re- 
 served to it by law a paramount lien upon all the assets of any 
 association which defaults in the redemption of its notes, to make 
 good any deficiency arising from the sale of its bonds. (Sec. 5230.) 
 
 28. The destruction of all mutilated notes and of notes of closed 
 banks, redeemed by the Treasurer, is regulated by instructions of 
 the Secretary, given in pursuance of law. All notes destroyed are 
 previously counted by separate agents or representatives of the Sec- 
 retary, the Treasurer, the Comptroller of the Currency, and the 
 banks which issued the notes; they are effectually mutilated by clip- 
 ping, and punching, to prevent their possible circulation should they 
 by any remote chance pass out of the possession of the Treasury 
 before destruction ; they are, in the presence of each of the agents 
 mentioned, placed in a triple-locked macerating machine, where they 
 are immediately ground into pulp; and their destruction is, certified 
 to by all the agents, both upon proper books in the Treasury De- 
 partment and in certificates sent to the banks of issue. 
 
 29. The banks are prohibited, under a severe penalty, from certify- 
 ing any check drawn upon them, unless the person or company 
 drawing the check has at the time on deposit with them an amount 
 of money equal to that specified in the check. (Sec. 5308.) 
 
 30. They are also prohibited from making any loan on the security 
 of United States or National bank notes, or from agreeing, for a 
 consideration, to withhold the same from use, the purpose of the 
 prohibition being to prevent the "locking up" of money by the 
 National banks, in the interests of speculators. (Sec. 5207.) 
 
312 INSTRUCTIONS AND SUGGESTIONS FOR THE 
 
 31. The officers of National banks are required to make returns 
 under oath to the Treasurer of the United States and to pay to 
 him in semi-annual installments an annual duty of one per cent, 
 upon the average amount of their circulating notes. This duty is 
 in lieu of all other United Slates taxes; 
 
 32. National banks are liable to taxation by State authority, as it 
 is expressly provided that nothing in the act shall prevent the 
 shares of these associations from being taxed by the States as is 
 other similar property, Or shall exempt their real property from 
 State, county, or municipal taxation, to the same extent as other 
 real property. (Sec. 5219.) 
 
 33. Should the capital stock of any association become impaired 
 in the course of business, by losses or otherwise, it must, within 
 three months after the association shall have received notice from 
 the Comptroller, be made good by assessment upon the shareholders 
 pro rata for the amount of stock held by them ; and during^ such 
 impairment the Treasurer is required, upon notification from the 
 Comptroller, to withhold the interest on all bonds held by him in 
 trust for such association. The authorized capital of the banks is 
 thus by law compelled to be kept always intact for the protection 
 of their creditors. (Sec. 5205.) 
 
 34. When a National bank goes into voluntary liquidation, it must, 
 within six months thereafter, deposit in the Treasury an amount of 
 lawful money equal to its entire outstanding circulation, which cir- 
 culation is thereafter redeemed by the Treasurer. Thus the banks, 
 under existing law, derive no benefit from the accidental loss or 
 destruction of any portion of their notes, such benefit inuring solely 
 to the Government. .(Sec. 5222, and sec. 6, act July 12, 1882.) 
 
 35. Should any bank become insolvent, the most ample powers 
 are possessed by the Comptroller to take possession of such asso- 
 ciation, through a receiver to be appointed by him, and to proceed 
 to collect its assets, and pay off, by dividends from time to time, 
 the claims of its creditors. The note-holders are in such cases as 
 secure as though the bank had remained solvent, the notes being 
 protected by the bonds held by the Government; while the other 
 creditors have as a protection, in addition to the assets of the 
 bank, the individual liability of the shareholders before mentioned, 
 together with the capital paid in, no part of which can be returned 
 to the shareholders until all approved claims against the association 
 shall have been paid. (Sec. 5234.) 
 
 36. Mention has several times been made herein of the ample 
 means provided in the National bank act for enforcing compliance 
 with its provisions, by the infliction of penalties for their violation 
 or non-observance. All of these penalties are severe, and many of 
 them summary, the principal ones being here enumerated: 
 
 I. For charging or exacting a usurious rate of interest, the whole 
 
ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 313 
 
 /nterest agreed to be paid is forfeited ; or, if actually paid, twice its 
 amount may be recovered back by the person paying the same. 
 (Sec. 5198.) 
 
 n. For certifying any check, unless the person by whom the check 
 is drawn has on deposit with the association an amount of money 
 equal to that represented by the check, the bank may be immedi- 
 ately closed by the appointment of a receiver. (Sec. 5208.) 
 
 III. For every day, after five days, in which a National bank shall 
 fail to make and transmit to the Comptroller any report of its con- 
 dition called for by him, and for similar delay in transmitting to 
 him the required proof of publication of such report, and also for 
 every day, after ten days, in which a bank shall fail to transmit its 
 semi annual report of dividends and earnings, a penalty of one hun- 
 dred dollars is imposed. And if any association fails or refuses to 
 pay the amount of such penalty when assessed and demanded, the 
 Treasurer of the United States is authorized to retain it, upon the 
 order of the Comptroller, out of the interest, as it may become due 
 to the association,- upon the bonds deposited to secure its circula- 
 tion. (Sec. 5213.) 
 
 IV. If 'an association fails to pay the duties assessed upon its 
 circulation, such duties may be reserved by the Treasurer out of 
 the interest falling due upon its bonds. (Sec. 5217.) 
 
 V. The making of any loan upon the security of United States 
 or National bank notes, or agreeing for a consideration to withhold 
 the same from use — in other words, the "locking up" of money — is 
 made a misdemeanour, punishable by a fine of $ 1,000 and a further 
 sum of one-third of the money so loaned ; and the officers making 
 the loan are subject to the further penalty of one-quarter of the 
 money loaned. (Sec. 5207.) 
 
 VI. Embezzlement of the funds of an association by any of its 
 officers, directors, or agents, or any false entry by any of them, in 
 any book, statement, or report, with intent to injure or defraud the 
 association or any other company or person, is punishable by im- 
 prisonment of not less than five nor more than ten years. (Sec. 
 
 5209.) 
 
 VII. If any officer or agent of an association whose charter has 
 expired, knowingly reissues or puts into circulation any note, draft, 
 check, or other security of such association, he is punishable by a 
 fine of $ 10,000 or by imprisonment of from one to five years, or 
 by both such fine and imprisonment. (Sec. 5437.) 
 
 VIII. If the capital stock of any National bank falls below the 
 minimum amount required by law, through the failure of any share- 
 holder to pay the whole or any part of the amount of his subscrip- 
 tion for such stock, and the deficiency in capital shall not be made 
 good within thirty days thereafter, a receiver may be appointed to 
 close up the .affairs of the association. (Sec. 5 141.) 
 
3^4 ORGANIZATION AND MANAGEMENT OF NATIONAL BANKS. 
 
 IX. Whenever the lawful money reserve of a National bank falls 
 below the limit required by law, and remains below such limit for 
 thirty days after receiving notice from the Comptroller to make its 
 reserve good, a receiver may be appointed and the bank closed. 
 (Sec. 5191.) 
 
 X. A receiver may also be appointed for any association which 
 fails to redeem its circulating notes at its own counter or at the 
 Treasury, at par, on demand. (Sec. 5234.) 
 
 XL If an association which accepts any shares of its own capital 
 stock in order to prevent a loss upon a debt previously contracted 
 in good faith (which is the only way in which such stock can be 
 legally acquired by it) shall fail to sell such stock, at public or pri- 
 vate sale, within six months thereafter, it may be closed by the 
 appointment of a receiver. (Sec. 5201.) 
 
 XII. Whenever, an association fails to pay up its capital stock as 
 required by law, or an impairment of its capital occurs by losses or 
 otherwiste, and it shall not, within three months after receiving no- 
 tice from the Comptroller, make good the deficiency by an assess- 
 ment upon its shareholders, it may, unless it consents to go into 
 liquidation, be placed in the possession of a receiver and its business 
 closed. (Sec. 5205.) 
 
 37. If the directors of any National banking association knowingly 
 violate, or knowingly permit any of its officers, agents or servants 
 to violate, any of the provisions of the National bank act, all the 
 rights, privileges, and franchises of the association become thereby 
 forfeited ; in addition to which, every director who participates in 
 or assents to such violation is held personally and individually re- 
 sponsible for all damages- sustained by any person in consequence 
 thereof. (Sec. 5239.) 
 
 38. The act of February 26, 1881, requires that the reports of 
 condition and dividend reports made 'to the Comptroller of the 
 Currency shall be sworn to before a notary properly authorized and 
 commissioned by the State in which such notary resides and the 
 bank is located, or any other officer having an official seal, author- 
 ^zed in such State to administer oaths. Such officer administering 
 ?:he oath must not be an officer of the bank. 
 
 39. The act of July 12, 1882, in the 13th section provides a pen- 
 alty for certifying checks before the amount of such checks shall 
 have been entered to the credit of the drawer. Any officer, clerk, 
 or agent of a National bank so certifying checks is made guilty of 
 a misdemeanor, and is subject on conviction to a fine of not more 
 than % 5,000 or imprisonment for not more than five years . or both 
 in the discretion of the court. 
 
INDEX 
 
 ORGANIZATION, EXTENSION v^ MANAGEMENT 
 
 NATIONAL BANKS. 
 
 Application to organize bank : Page 
 
 To whom made 283 
 
 Should be indorsed by - , 283 
 
 Should state 283 
 
 Appointment : 
 
 Of officers of association 306 
 
 Of directors 306 
 
 Of receiver 312 
 
 Articles of association : 
 
 How made 283 
 
 How signed -. 2S6 
 
 Form of 2S3 
 
 Copy of, to be transmitted to Comptroller 286 
 
 Of converted State banks 237 
 
 Of converted banks, form 297 
 
 How amended .• 301 
 
 Form of, application for approval of 300 
 
 Assignment of assets : 
 
 After act of insolvency, void 3^7 
 
 Bond of officers : 
 
 Should be renewed 3^5 
 
 Bonds : 
 
 Deposited with Treasurer before commencing business 289 
 
 By public depositaries 309 
 
 Need not exceed one-fourth of capital 307 
 
 Minimum amount of, required 307 
 
 Coupons may be exchanged 291 
 
 Must be assigned to Treasurer in trust 7 291 
 
 Request for exchange of, must be accompanied by vote of board of directors. 291 
 
 Interest on, how paid 291 
 
 May be ^old for failure to pay notes 3^^ 
 
 In case of extension of charter, need not be transferred 3^4 
 
3l6 INDEX TO 
 
 By-Laws : Page 
 
 Of association 294 
 
 Form of *. 296 
 
 Capital stock : 
 
 Required for organization, how paid 285 
 
 Minimum amount of, for associations 305 
 
 First installment of , 280 
 
 Form of certificate of paym.ent of first installment 280 
 
 Payment of installments of 292 
 
 Form of certificate of payment of 201 
 
 Enforcing payment of subscriptions to 202 
 
 Increase of, how made 202 
 
 Form of certificate of increase 202 
 
 Reduction of, how effected 203 
 
 Form of certificate of reduction 293 
 
 Amount of reduction of, how returned to shareholders 253 - 
 
 Limit of reduction 1 293 
 
 Increase or reduction of, must be approved by Comptroller before valid 307 
 
 Loans on, and purcheise by association forbidden. , 310 
 
 If fakea for debt, to be sold . 3^'> 
 
 Indebtedness of association not to exceed .', . . 3^*> 
 
 If impaired, must be made good 3'^ 
 
 Of shareholders not assenting to extension of charter must be paid for by 
 bank and sold at public sale 305 
 
 Certificate : 
 
 Of installments of capital stock paid in 289 
 
 Of officers and directors before commencing business 289 
 
 Of payment of capital, form of 291 
 
 Of reduction of capital, form of 292 
 
 Of authority to commence business 291 
 
 When granted by Comptroller 291 
 
 Must be published and copy of publication transmitted to Comptroller 291 
 
 Certification of checks : 
 
 Forbidden 311 
 
 Circulating notes : 
 
 New design for extended charters 3^4 
 
 Cost of plates for new design of 304 
 
 New design of, how issued 304 
 
 Of association to be received by other associations 307 
 
 Not receivable by Government for duties on imports 3™ 
 
 Not payable by Government for interest on public debt 3°* 
 
 Use of, to pay in or increase capital stock forbidden 3™ 
 
 Loans on security of, forbidden 3^° 
 
 Where redeemable at par 3^0 
 
 For failure to redeem, bonds may be sold 3" 
 
 Mutilated, how destroyed 3" 
 
 Average amount of, to be reported to Treasurer 3'^ 
 
 Rate of tax upon ^'^ 
 
 Lost or destroyed, profit on, to inure to benefit of Government 3^^ 
 
 Commencement of business : 
 
 Requisites for ' 3^' 
 
ORGANIZATION OF NATIONAL BANKS. 317 
 
 Commission, special : Page 
 May examine bank before commencing business 306 
 
 Contracts : 
 
 Banlcs may make 3qc 
 
 Conversion of State banks : 
 
 Provisions for ^aS 
 
 Authority of sharetiolders tor 205 
 
 Corporate existence : 
 
 How extended ^qj 
 
 Corporate rights and povreis : 
 
 Of association ,q- 
 
 Deposit with Treasurer : 
 
 Of five per cent, on circulation as redemption fund 308 
 
 May count as reserve on deposit. ', ,28 
 
 Depositaries of public money ; 
 
 Regulations concerning. 309 
 
 Deposits ; 
 
 Lawful money reserve required upon 308 
 
 Directors : 
 
 First board of, may be named in articles of association 285 
 
 Specified number of, must be named in articles 285 
 
 How elected 287 
 
 Must take an oath agy 
 
 Form of oath of ., 287 
 
 Must transmit oath to Comptroller 289 
 
 Qualifications of 289 
 
 Liability of, for damages, by violation of law 314 
 
 At least three-fourths of, must be residents of the State, Territory, or Dis- 
 trict in which bank is located 288 
 
 Votes of shareholders in election of 288 
 
 Of State banks, powers and duties of, in conversion 297 
 
 Dividends : 
 
 , May be declared 308 
 
 Limited to net profits on hand after deducting losses 308 
 
 Reports of .' 309 
 
 Election : 
 
 Of directors by association 287 
 
 Embezzlement ; 
 
 By officers of association, penalty for 313 
 
 Examination : 
 
 Of association, before granting certificate of authority 306 
 
 Before extension of corporate existence 304 
 
 To be at expense of association 3O4 
 
 Examiner : 
 
 Appointment, powers, and duties of '. 309 
 
 Expense : 
 
 Of special examination 304 
 
 Of plates 304 
 
 Extension of corporate existence : . 
 
 Application for 302 
 
 Shareholders may by power of attorney authorize •. 3Q3 
 
 Form of power of attorney for 303 
 
3l8 INDEX TO 
 
 Extension- of corporate existence : Page 
 
 Shareholders owning at lesist two-thirds of stock must vote for 304 
 
 Shareholders not assenting to, shall be paid for their stock 305 
 
 Administrators, executors, trustees, or guardians voting for 304 
 
 Examination before. 
 
 304 
 
 New design of notes for 304 
 
 Transfer of bonds not necessary in case of 304 
 
 Officer's bond should be renewed in case of 305 
 
 Fine : 
 
 For certifying checks unlawfully. 3H 
 
 Impairment of capital : 
 ' To be made good, or receiver appointed 313 
 
 Incidental powers : 
 
 Of association 3^ 
 
 Increase of capital : 
 
 How made 291 
 
 Not valid until approved by Comptroller 3°? 
 
 Indebtedness : 
 
 Of association not to exceed its capital, except 3^o 
 
 Interest : 
 
 On bonds deposited, how paid ^^ 
 
 Rate of, which may be taken on loans and discounts 3™ 
 
 If usurious, penalty 3^2 
 
 Withheld on bonds, for failure to make reports , 3^3 
 
 Withheld on bonds, for failure to pay tax on circulation 3^3 
 
 Lawful money to be deposited : 
 
 By extended associations - 305 
 
 By closed associations 312 
 
 Liabilities : 
 
 Of association not to exceed its capital, except 310 
 
 Of any person for money borrowed, limitation .of 310 
 
 Liability : 
 
 Individual, of shareholders 307 
 
 Of directors for damages, by violation of law 314 
 
 List of shareholders : 
 
 To be kept, subject to inspection 309 
 
 Verified and transmitted to Comptroller annually 309 
 
 Loans : 
 
 To be made on personal security 3°^ 
 
 Rate of interest which may be charged upon _ 3'° 
 
 Upon shares of its own stock, forbidden to association 310 
 
 Upon security of United States or National bank notes forbidden 310 
 
 Limit of, to one person or firm 3'° 
 
 Lost or destroyed notes : 
 
 Profit on, to inure to benefit of Government 312 
 
 Minimum : 
 
 Amount of capital stock for an association 306 
 
 Deposit of bonds ". ; 3°? 
 
ORGANIZATION OF NATIONAL BANKS. 319 
 
 Mutilated notes : Page 
 
 To be fotwaided to Treasurer for redemption 311 
 
 How destroyed 311 
 
 Oaths of banl£ officers : 
 
 By wliom administered 3'4 
 
 Must be taken in State whiere banic is located 3^4 
 
 Shall not be administered by bank officers 3'4 
 
 Oilicers of association : 
 
 Election of 289 
 
 Certificate of, before being authorized to commence business 280 
 
 Form of certificate of 280 
 
 Cannot act as proxy ^gg 
 
 Bond of, should be renewed in case of extension of charter 
 
 Organization ; 
 
 Blank forms for, furnished by Comptroller ^g 
 
 Married women should not be parties to 287 
 
 Parties to, must be natural persons 28c 
 
 Organization Certificate : 
 
 When executed . 
 
 28s 
 
 Form of 2S5 
 
 To be executed in duplicate and one copy transmitted to Comptroller 288 
 
 How acknowledged 288 
 
 Association to have succession for twenty years from date of 288 
 
 Of converted State bank 300 
 
 Form of 300 
 
 Penalties : ^ 
 
 How collected 313 
 
 For -certifying checks unlawfully 314 
 
 Penalty : 
 
 For taking usurious interest 312 
 
 For falsely certifying checks 312 
 
 For failure to make reports to Comptroller 312 
 
 For loaning money on security of United States or National bank notes... 314 
 
 For embezzlement of funds by officers, directors, or agents^ 314 
 
 For reissuing any note, draft, or check of a closed bank 314 
 
 For violation by directors of provisions of law 314 
 
 Plates : 
 
 Cost of 3Qr 
 
 Powers of associations : 
 
 Enumerated ■ ^05 
 
 Profits : 
 
 Dividends limited to amount of, after deducting losses '. 309 
 
 Proxy : 
 
 Shareholders may vote by 288 
 
 Form of 288 
 
 No officer, clerk, teller, or book-keeper competent to act as 288 
 
 Publication : 
 
 Of certificate of authority to commence business 251 
 
 Qualifications : 
 
 Of directors of association * 288 
 
320 INDEX TO 
 
 Rate of interest : Page 
 Authorized on loans and discounts ^^q 
 
 Real estate : 
 
 May not be taken as original security for a loan ,Qg 
 
 May be held, for what purposes... ^pb 
 
 Receiver : 
 
 Appointment and duties of ,12 
 
 Appointed for failure to restore diminished capital 2,, 
 
 Appointed for failure to make good reserve ,j. 
 
 Appointed for failure to sell stock taken for debt ^j. 
 
 Appointed for failure to pay up capital or to restore it vthen impaired .... ,£, 
 
 Appointed for unlawfully certifying checks , j2 
 
 Appointed for failure to redeem circulating notes ji. 
 
 Redemption of circulating notes : 
 
 Regulations concerning ^. 2io 
 
 Reduction of capital : 
 
 How effected ' 2^2 
 
 Must be approved by Comptroller 307 
 
 Amount of, how returned to shareholders zg^j 
 
 Reports : 
 
 Of name and residence of shareholders 309 
 
 Of condition of association 308 
 
 Dividends and earnings, semi-annual 309 
 
 Average amount of circulation > 311 
 
 Verified, before whom 314 
 
 Of bank examiner 311 
 
 Reserve of lawful money : , 
 
 Amount of, required 310 
 
 For failure to make good, receiver appointed 313 
 
 Deposit with Treasurer of 5 per cent, on circulation may count as 310 
 
 Seal: 
 
 Association may adopt and use 30s 
 
 Security : 
 
 For loans to be personal 3P^ 
 
 Shares of stock : 
 
 Taxation of, by State and local authority • 3" 
 
 Shareholders : 
 
 Married women should become, only after organization 287 
 
 Votes of, in elections and meetings 288 
 
 May vote by proxy 2S8 
 
 Not competent to vote, when 28S 
 
 Individual liability of 3°? 
 
 List of, to be kept subject to inspection 309 
 
 Copy of list of, to be transmitted to Comptroller 309 
 
 May extend corporate existence 3°^ 
 
 Not assenting to extension, may give notice 305 
 
 Shares of dissenting, to be paid for 30S 
 
 Special Commission : 
 
 May examine bank before commencing business 3°^ 
 
 Succession : 
 
 Period of, for associations 3°5 
 
 Suits : 
 
 May be brought by or against association 3^ 
 
ORGANIZATION OF NATIONAL BANKS. 32I 
 
 Surplus fund: Page 
 
 Amount of, required 308 
 
 Proportion of net earnings to be carried to 308 
 
 Tax on circulation : 
 
 Rate of, and wlien paid 311 
 
 Return of, by association, to Treasurer 311 
 
 How collected, if association fails to pay _ 313 
 
 Taxation : 
 
 State and local, of association 311 
 
 Title : 
 
 Will be retained sixty days for applicant • 283 
 
 Transfer of assets : 
 
 After act of insolvency, void 307 
 
 Usury : 
 
 Penalty for taking , . 313 
 
 Verification : 
 
 Of reports 314 
 
 Must b: before otficer in State.... .'. 314 
 
 Cannot be before officer of bank 314 
 
 Votes of shareholders : 
 
 In elections and meetings 288 
 
OFFICIAL REGULATIONS 
 
 BEGAEDING 
 
 UNITED STATES BONDS. 
 
OFFICIAL REGULATIONS 
 
 REGARDING 
 
 UNITED STATES BONDS. 
 
 The following are the bonds which have matured and ceased to 
 bear interest : 
 
 Title of Loan and Date of 
 
 Denominations. 
 
 
 W/ien Redeemable or 
 
 Authorizing Act. 
 
 
 Per 
 ct. 
 
 Payable. 
 
 Loan of 1858 : 
 
 
 
 June 14, 1858— Coupon 
 
 $i.°oo 
 
 S 
 
 Redeemable after fifteen 
 
 Registered.. 
 
 $S,ooo 
 
 
 years from January r, 1859. 
 
 Fives of 1880 : 
 
 
 
 
 June 22, i860 — Coupon 
 
 $1,000, $s,ooo 
 
 5 
 
 Redeemable after ten years 
 
 Registered. . 
 
 $1,000, $5,oco 
 
 
 from January i, 1861. 
 
 Sixes of 1880 : 
 
 
 
 
 Feb. 8, 1861— Coupon 
 
 Registered.. 
 
 $1,000 
 
 6 
 
 Payable after December 31, 
 i88o. 
 
 $1,000, $s,ooo, $10,000 
 
 
 Oregon-War Loan : 
 
 
 
 
 March 2, iS6i — Coupon 
 
 $So, $100, $500 
 
 6 
 
 Redeemable twenty year? 
 from July i, 1861. 
 
 Sixes of 1881 \, 
 
 
 
 
 July 17, and August s, 1861 — 
 
 
 
 
 Coupon 
 
 $50, $100, $500, $1,000 
 
 6 
 
 Redeemable after June 30, 
 
 Registered . , 
 
 $50, $100, $500, $1,000, 
 $S,ooo, $10,000. 
 
 
 1881. 
 
 Five-twenties of 1862 : 
 
 
 
 
 Feb. 25, 1862— Coupon 
 
 $50, $100, $500, $1,000 
 
 6 
 
 Redeemable after five and 
 
 Registered . . 
 
 $50, $100, $500, $1,000, 
 
 
 payable twenty years from 
 
 
 $5,000, $10,000. 
 
 
 May I, 1862. 
 
 Sixes of 1S81 : 
 
 
 
 
 Marcii 3, 1863— Coupon 
 
 $50, $100, $5co, Si,ooo 
 
 6 
 
 Redeemable after June 30, 
 
 Registered.. 
 
 $50, $100, $500, $1,000, 
 $5,000, $10,000. 
 
 
 1881. " 
 
 Five-twenties of 1864 : 
 
 
 
 
 March 3, 1864 — Registered . . 
 
 $100, $500, $1,000, 
 
 6 
 
 Redeemable after five and 
 
 
 $5000. 
 
 
 payable twenty years from 
 November i, 1864. 
 
 Ten-forties : 
 
 
 
 
 March 3, 1864 — Coupon 
 
 $50, $100, $500, $1,000 
 
 5 
 
 Redeemable after ten and 
 
 Registered.. 
 
 $50, $100, $500, $1,000, 
 
 
 payable forty years from 
 
 
 $5,000, $10,000. 
 
 
 March i, 1864. 
 
 Five-twenties of 1864 : 
 
 
 
 
 June 30, 1864 — Coupon 
 
 $50, $100, $500, $1,000 
 
 6 
 
 Redeemable after five and 
 
 Registered . . 
 
 $50, $100, $500, $1,000, 
 
 
 payable twenty years from 
 
 - 
 
 $5,000, $10,000. 
 
 
 November i, 1864. 
 
 Five-twenties of 1865 : 
 
 
 
 
 March 3, 1865 — Coupon 
 
 $50, $100, $500, $1,000 
 
 6 
 
 Redeemable after five and 
 
 Registered.. 
 
 $5o,,$ioo, $500, $1,000, 
 
 
 payable twenty years from 
 
 
 $5,000, $10,000. 
 
 
 November 1, 1865. 
 
324 
 
 OFFICIAL REGULATIONS REGARDING 
 
 Title of Loan and Date 
 of Authorizing Act. 
 
 Consols of 1865 : 
 March 3, 1865 — Coupon . . . . 
 Registered.. 
 
 Consols of 1867 : 
 March 3, 1865 — Coupon , . . 
 Registered.. 
 
 Consols of 1868 : 
 March 3, 1865 — Coupon . . . , 
 Roistered.. 
 
 Funded Loan of 1881 : 
 July 14, 1870, and January 
 20, 1871 — Coupon 
 
 Registered.. 
 
 Sixes of 1881 : 
 July 17 and August s, 1861, 
 (continued under Depart- 
 ment Circular No. 42, dat- 
 ed April II, 1881) 
 
 Registered 
 
 Sixes of 1881 : 
 March 3, i86j, (continued 
 under Department Circu- 
 lar No. 42, dated April 11, 
 1881)— Registered 
 
 Funded Loan of 1881 : 
 July 14, 1870, and Jan. 20, 
 1871, (continued under De- 
 partment Circular No. 52, 
 dated May 12, 1881) 
 
 Registered 
 
 $50, $100, $500, $1,000 
 $50, $100, $500, $1,000, 
 $5,000, $10,000. 
 
 $50, $100, $500, $1,000 
 $50, $100, $500, $1,000, 
 $5,000, $10,000. 
 
 $50, $100, $500, $1,000 
 $500, $1,000, $s,ooo, 
 $10,000. 
 
 $50, $100, $500, $1,000 
 $5,000, $io,ooo._ 
 
 $50, $100, $500, $1,000, 
 $S,ooo, $10,000, 
 
 $20,000, $50,000. 
 
 $50, $100, $500, $1,000, 
 $5,000, $10,000. 
 
 $50, $100, $500, $1,000, 
 $5,000, $10,000. 
 
 $50, $100, $500, $1,000, 
 $5,000, $10,000, 
 
 $20,000, $50,000. 
 
 When Redeemable or 
 Payable. 
 
 Redeemable after iive and 
 payable twenty years from 
 July I, 1865. 
 
 Redeemable after live and 
 payable twenty years from 
 July I, 1867. 
 
 Redeemable after five and 
 payable twenty years from 
 July I, 1868. 
 
 Redeemable after May 
 1881. 
 
 3M 
 
 Redeemable at the pleasure 
 of the Government. 
 
 3^ Redeemable at the pleasure 
 of the Government. 
 
 3% 
 
 Redeemable at the pleasure 
 of the Government. 
 
 COUPON BONDS. 
 
 Coupon bonds of the United States are payable to bearer, and 
 pass by delivery, without indorsement. They are convertible into 
 registered bonds of the same loan, but the law does not authorize 
 the conversion of registered into coupon bonds. 
 
 Coupon bonds forwarded to the Department for exchange into 
 registered bonds should be addressed to the Secretary of the 
 Treasury, Division of Loans and Currency. 
 
 There is no expense attending the exchange at the Department; 
 but when bonds are sent by express the charges must be paid by 
 the party transmitting them. 
 
UNITED STATES BONDS. 325 
 
 FORM OF LETTER FOR CONVBRSION OF COUPON BONDS INTO REGIS- 
 TERED BONDS. 
 
 , , . 18—. 
 
 Hon. Secretary of the Treasury, 
 
 Washington, D. C. 
 
 Sir: Herewith I send $ U. S: coupon bonds of the act of 
 
 July 14, 1870, per cent, loan of ; which please exchange 
 
 into registered bonds in the name of — . 
 
 Please send the new bonds to the subscribed address. 
 
 Mail checks for the interest to . , . 
 
 Very respectfully, 
 
 registered bonds. 
 
 Registered bonds of the United States differ from coupon bonds 
 in the following respects, namely : ( i ) They have inscribed or ex- 
 pressed upon their face the names of the parties who own them, 
 denominated payees ; (2) they are payable only to such payees or 
 their assigns ; and ( 3 ) the property or ownership in them can be 
 transferred only by assignment. For the purpose of assigning 
 them, there are forms printed on the backs of the bonds, together 
 with directions to be followed in the execution of such assign- 
 ments. 
 
 A ledger account is opened in the Department with each holder 
 of one or mqre registered bonds ; and in this account each bond is 
 fully described. All recognized transfers must be made upon the 
 loan-books in the Office of the Register of the Treasury. 
 
 ASSIGNMENT OF BONDS. 
 
 The directions printed on the backs of the bonds should be 
 carefully followed in the execution of assignments, and the name 
 of the assignee should be written plainly in the space left for 
 that purpose. Assignments must be -dated and properly acknowl- 
 edged. 
 
 If a bond is to be divided among two or more parties, their 
 names and the amount to each should be stated in the assign- 
 ment. If only a part of a bond is assigned, a new issue for the 
 remainder will be made to the former payee of the whole bond : 
 Provided, however. That the amount assigned shall correspond with 
 one or more of the denominations in which the bonds are is- 
 sued. 
 
 Registered bonds should not be assigned in blank, as such assign- 
 ment would make them payable to bearer and render them available 
 to any holder thereof ; in other words, under an assignment in blank 
 the title to the bonds would pass by delivery. 
 
 A detached assignment should never be resorted to, except when 
 
326 OFFICIAL REGULATIONS REGARDING 
 
 the blank form for an assignment which is printed on the bond 
 shall have been already used ; and in this case only when there 
 shall not be sufficient space on the back of the bond for another 
 assignment. 
 
 The payee should sign his name to the assignment as the name is 
 written on the face of the bond. If the bond be issued to a firm, 
 the assignment must be subscribed in the name of the firm by a 
 member thereof who shall be possessed of authority to sign for the 
 firm, of which authority the officer witnessing the signature must be 
 satisfied ; if issued to joint owners, co-srustees, executors, adminis- 
 trators, or guardians, each person must sign for himself; if to a cor- 
 poration or company, the official character of the person executing 
 the assignment, and the authority of such person to -dispose of the 
 bond or bonds in question, should be duly verified by vote or reso- 
 lution of the board of directors of the corporation or company, cer- 
 tified under its seal. Where such officer is authorized by virtue of 
 his office to execute the assignment, a certificate, under seal, of this 
 fact and of his election to the office, and that he still holds and ex- 
 ercises such office, must be furnished, together with a certified copy 
 of the charter or by-laws of such corporation or company, showing 
 the authority claimed thereunder. 
 
 All such evidence of authority will be placed on file in the De- 
 partment, and if general and permanent in its character, need not be 
 reproduced in subsequent transactions under the same power, if proper 
 reference be made thereto. 
 
 ASSIGNMENTS BY REPRESENTATIVES AND SUCCESSORS. 
 
 In case of death or successorship, the representative of the de- 
 ceased person, or the successor, must furnish official evidence of 
 such decease or successorship, and of his own appointment, author- 
 ity or power. An executor or administrator may assign bonds stand- 
 ing in the name of the deceased person in whose stead such ex- 
 ecutor or administrator shall be acting. Where there are two or 
 more legal representatives, all must unite in the assignment, unless 
 by a decree of court or testamentary provision some one or more of 
 them is or are designated and empowered to dispose of the bonds. 
 If the bonds had been held by the deceased in the capacity of a 
 fiduciary or trustee, a court having jurisdiction must appoint a suc- 
 cessor, who should execute the assignment in order to secure the 
 transfer or payment of the bonds. 
 
 An executor, administrator, trustee, guardian, or attorney, cannot 
 assign bonds to himself, unless he be specially authorized to do so 
 by a court possessing jurisdiction of the matter. 
 
 FOREIGN SUCCESSORSHIP ASSIGNMENTS. 
 
 Where a payee, at the time of his death, was a resident of a for- 
 
UNITED STATES BONDS. 327 
 
 eign country, the party claiming to direct and execute the transfer 
 must furnish an exemplified copy of the will or other instrument 
 conveying the requisite authority, duly certified under the hand anii 
 seal of the proper officer, attested by the certificate of a United 
 States minister, charge, consul, vice-consul, or commercial agent, or, 
 if there be none such accessible (which fact shall, in such case, be 
 certified), by that of a notary public, to the effect that such ex- 
 emplified copy is executed and granted by the proper tribunal 
 or officer, and is in due form and according to the laws of that 
 country. The assignment should be executed as hereinbefore di- 
 rected. 
 
 ASSIGNMENTS BY ATTORNEY. 
 
 Persons entitled to assign bonds may appoint for that purpose 
 an attorney, who, by virtue of the authority so conferred, can exe- 
 cute the assignment in the same manner as provided for the con- 
 stituent. 
 
 No officer of the Treasury of the United States should be selected 
 as such attorney. 
 
 Powers of attorney authorizing the assignment of bonds should be 
 sent, for record, to the Register of the Treasury. 
 
 form of power of attorney. 
 ■Know all men by these presents : 
 
 That I, , do hereby appoint my attor« 
 
 ney to assign any and all United States bonds now standing {or 
 which may hereafter stand') in my name on the books of the Treas- 
 ury Department, granting to said attorney full power to appoint 
 one or more substitutes for that purpose, hereby ratifying and con- 
 firming all that may be lawfully done by virtue hereof. 
 
 Witness my hand and seal this the d^y of —. , A. D-, 
 
 18—. . [SEAL.;i 
 
 Executed before me this the day of , A. D. i8 — . 
 
 [Official Seal.] , . 
 
 Note. — To be verified in accordance with instructions contained under head 
 «f acknowledgments. 
 
 FORM OF AUTHORITY BY RESOLUTION. 
 
 At a regular meeting of the board of directors of the •• 
 
 , of , . held , 18 — , it was, on mo- 
 
 tion, 
 
 " Resolved, That A. B., president, and C. D., cashier, are, or either 
 of them is, hereby authorized and empowered to assign any and all 
 United States bonds now standing {or which may hereafter stand) 
 in the name of this bank \^or institution]." 
 
 I certify that the above is a true copy from the minutes. 
 
 [Corporate Seal. ] ' Secretary of the Board. 
 
328 OFFICIAL REGULATIONS REGARDING 
 
 Note. — This resolution should be certified by some officer of the institu- 
 tion other than the one empowered to assign the bonds. 
 
 It is recommended that resolutions be adopted only at regular 
 meetings. But when passed at a special meeting the certificate may 
 be as follows : 
 
 We certify that at a special meeting of the board of directors of 
 
 . duly held at , on the day of , at — o'clock 
 
 — M., 18 — . the foregoing resolution was adopted, and is now in 
 full force. 
 
 And we certify that notice was duly given, personally, to all the 
 members of the said board of directors of the time and place of 
 
 said meeting, and of the object thereof for more than days 
 
 prior thereto, and in time to enable all to attend said meeting ; 
 and that at such meeting so held a quorum of all the members of 
 said board was present and voted for the adoption of said resolu- 
 tion. 
 
 FORM OF AUTHORITY UNDER BY-LAWS. 
 
 At the annual meeting of the stockholders of the 
 
 , of , . held , 18 — , was duly 
 
 elected president, and ^ was duly elected cashier; and 
 
 as such they are jointly or severally empowered by the by-laws 
 (a certified copy of which is hereto annexed) to sell and assign 
 any and all United States bonds now standing {or which may here- 
 after standi in the name of this bank [or institution], 
 
 , Secretary. 
 
 [ Seal of bank or institution. ] 
 
 ACKNOWLEDGMENTS 
 
 Of assignments, when not made at this Department, must be made 
 either before an Assistant Treasurer of the United States, a United 
 States judge or district attorney, clerk of a United States Court, 
 collector of customs or internal revenue, or president or cashier of 
 a National bank. 
 
 A notary public is authorized to take acknowledgments only on 
 the Pacific Railroad bonds and on the three-per-cent. bonds of 
 1882. The witnessing officer should append his official title' and 
 affix his seal of office; if he have one; if he have no seal of office, 
 he should certify such to be the fact. The president or cashier of 
 a National bank must append the title and affix the seal of the 
 bank. The impress of the seal must in every case be made upon 
 the bond. 
 
 FOREIGN ACKNOWLEDGMENTS 
 
 May be made before a United States minister, charge, consul, vice- 
 consul, or commercial agent. A notary public, or other competent 
 officer, in a foreign country may take acknowledgments; but his 
 
UNITED STATES BONDS. 3^9 
 
 official character and jurisdiction must be properly verified.* The 
 official seal, where there is one, should in all cases be affixed, as 
 p"er foregoing direction ; and where there is none, this fact should 
 be made known and attested. 
 
 EXECUTION OF POWERS. 
 
 Powers of attorney for the transfer of bonds must be acknowl- 
 edged in the presence of some of the officers authorized to take 
 acknowledgments of assignments ; and where such officer has an 
 official seal, it must be affixed ; where he has none, he should so 
 state. 
 
 POWERS' OF SUBSTITUTION 
 
 Must be executed and acknowledged in the same manner as 
 powers of attorney, and should likewise follow the same general form. 
 
 TRANSMISSION OF BONDS. 
 
 When registered bonds are properly assigned, they should be 
 transmitted to the Register of the Treasury for re-issue, and should 
 be accompanied by a letter of explicit instructions, stating the amount 
 enclosed, the loan to which the bonds belong, the denominations of 
 the bonds desired in exchange therefor, the name and residence of 
 each assignee and the post-office address to which it is desired the 
 interest-checks shall be mailed. 
 
 When bonds of different loans are forwarded in one remittance 
 a separate letter of instructions should accompany the bonds of 
 each loan. 
 
 When coupon and registered bonds are transmitted at the same 
 time, the former should be sent to the Secretary of the Treasury 
 and the latter to the Register of the Treasury. 
 
 FORM OF LETTER TRANSMITTING REGISTERED BONDS FOR 
 TRANSFER. 
 
 Hon. Register of the" Treasury, , , , i8 — . 
 
 Washington, D. C. 
 
 Sir : Herewith you will receive % U. S. registered bonds of 
 
 the per cent, loan of , which please transfer, as per as- 
 signment, to ; , of . -. 
 
 Please send the new bonds to the subscribed address. 
 
 Mail checks for the interest to , , . 
 
 Very respectfully, . 
 
 NEW bonds. 
 Registered bonds received for transfer are canceled, and new bonds 
 in their stead are issued in the name of the assignee. These bear 
 interest from the first day of the quarter or half-year (as their in- 
 terest term may run ) in which the transfer shall have been made. 
 
 * See under head " Foreign successorship assignments." 
 
33° OFFICIAL REGULATIONS REGARDING 
 
 As a rule returns are made on the same day that the bonds are 
 received, and made invariably by registered mail, unless otherwise 
 instructed. When bonds are sent, or returned, by express, the en- 
 tire expense thus incurred must be borne by the party desiring the 
 transfer. 
 
 NO FEES 
 
 Will be charged by a United States minister, charge, consul, vice- 
 consul,, or commercial agent, for witnessing and certifying an assign- 
 ment of, or power to assign, bonds or collect interest thereon. 
 No charge is made by the Department for transferring registered 
 bonds. 
 
 INTEREST ON REGISTERED BONDS. 
 
 The interest on registered bonds of the existing loans falls due 
 upon the following dates respectively : 
 
 Currency sixes. Pacific Railroad January i ; July i. 
 
 Four-and-a-half-per-cent. funded loan of 1891.. March i ; June i ; Sept. i ; Dec. i. 
 
 Four-per-cent. consols of 1907 January I ; April i ; July i ; Oclober i. 
 
 TJiree-per-cent. funded loan of 1882.. Feb. i; May I ; Aug. I ; Nov. i. 
 
 Interest on registered bonds of the above-described loans is paid 
 by checks drawn at this Department. These checks will be sent by 
 mail when the post-office address is known ; when this is not known, 
 they will be held by the Treasurer of the United States until called 
 for by the payees thereof. 
 
 The checks are payable, when properly indorsed, on presentation 
 at the United States Treasury or at the office of any Assistant Treas- 
 urer of the United States. 
 
 Holders of these bonds should notify the Register of the Treas- 
 ury of any change in their post-office address at least fifteen days 
 before the interest falls due; and in case of the appointment of an 
 attorney to indorse the interest-checks, notice of this fact should 
 likewise be given to the Register. Such holders should also trans- 
 mit to the First Auditor of the Treasury, all powers of attorney 
 authorizing the indorsement of interest-checks, and advise him, spe- 
 cifically, at :which of the offices referred to above it is desired that 
 the interest-checks, under such powers, shall be paid. 
 
 CLOSING OF TRANSFER-BOOKS. 
 
 For the purpose of preparing the interest-schedules, the transfer- 
 books are closed during the month immediately preceding the date 
 of payment of the interest. 
 
 If bonds forwarded for transfer be not received prior .to or upon 
 the day fixed for closing the transfer book^ the transfer wiil not be 
 effected until after the reopenmg of the books; and consequently 
 the interest for that quarter or half-year (as the interest terra may 
 be) will be declared in favor of the parties whose names appear 
 upon the face of the old bonds, and to them the assignees must look 
 for any interest claimed. 
 
UNITED STATES BONDS. 33I 
 
 FORM OF POWER OF ATTORNEY TO COLLECT INTEREST-CHECKS. 
 
 Know all men by these presents, that , of , do 
 
 appoint , attorney to receive from the proper officer 
 
 and to indorse checks for interest* in name on the books of 
 
 ihe Treasury Departmerit of the United States; granting to said at- 
 torney power to appoint onr. or more substitutes for the purposes 
 herein expressed; hereby ratifying and confirming all that may law- 
 fully be done in virtue hereof. 
 
 Witness 'hand- and seal- this day of , 18 — , 
 
 • [L-S.] 
 
 [L. S.] 
 
 Signed, sealed and acknowledged in the presence of- 
 
 (To be acknowledged as directed below.) 
 
 EXECUTION OF POWERS OF ATTORNEY TO INDORSE INTEREST- 
 CHECKS. 
 
 Powers of attorney must be acknowledged either before the 
 Treasurer or an Assistant Treasurer of the United States, a United 
 States judge. United States District Attorney, clerk of United States 
 Court, collector of customs, collector of internal revenue, president 
 or cashier of a National bank, or a notary public. If in a foreign 
 country, powers must be acknowledged either before a United States 
 minister, charge, consul, vice-consul, commercial agent or notary 
 public. If before the latter, his official character and the genuine- 
 ness of his signature must be properly verified. 
 
 The acknowledging officer must add his official designation, resi- 
 dence, and seal, if he have one: if he" have no seal of office, he 
 should certify such to be the fact. 
 
 Powers of attorney and testamentary evidence designed as author- 
 ity to collect interest-checks should be filed with the First Auditor 
 of the Treasury., 
 
 FORM OF AUTHORITY BY RESOLUTION FOR THE INDORSEMENT OF 
 INTEREST-CHECKS. 
 
 At a regular meeting of , held at , in the State of 
 
 , on the day of , 18^. a quorum being present, it 
 
 was, on motion. 
 
 Resolved, That be, and is hereby, authorized to re- 
 ceipt for and to indorse checks for interest due, or to become 
 
 due, on all Uni.tcd States bonds registered in the name of 
 
 on the books of the Treasury Department, with power to 
 
 * When intended to be special, insert [ due on tlie day of , iS — , on all bonds 
 
 standing in ,] 
 
 • When intended to be general, insert [ now due and which may hereafter accrue on all 
 bonds standing, or which may hereafter stand, in . ] 
 
332 Official regulations regarding 
 
 appoint one or more substitutes for the purposes herein expressed, 
 uniil such authority is officially revolted, and notice of revocation 
 is properly given to the Treasury department. 
 
 A true copy of the minutes. 
 
 ( Signed ) , PresidenL 
 
 [ SEAL. ] Attest : 
 
 ; . Secretary, 
 
 Note.— Where the society or institution has no seal, it will be requisite 
 to acknowledge the instrument before a notary or some ' other competent 
 officer having an official seal. If the president, cashier, secretary, or treas- 
 urer be authorized to indorse the checks, the instrument must be certified 
 by an officer other than the one empowered to make the indorsement. 
 
 The First Auditor of the Treasury should be advised where interest-checks 
 indorsed by attorneys will be presented for payment. 
 
 INTEREST TO JOINT HOLDERS OF REGISTERED BONDS. 
 
 Interest will be paid to any one of several joint holders, or co- 
 trustees, executors, administrators, or guardians ; but in the execu- 
 tion to a third party of a power to collect interest-checks all must 
 join. In case of tiie death of any of such joint, holders, co- 
 trustees, &c., the survivor or survivors will be recognised as hav^ 
 ing full authority, upon due proof of such death and survivor- 
 ship. 
 
 PAYMENT OF INTEREST ON UNITED STATES REGISTERED BONDS IN- 
 SCRIBED IN THE NAMES OF MINORS. 
 
 The following synopsis of the decision of the First Comptroller 
 of the Treasury, of February 4, 1881, respecting the payment of in- 
 terest on United States registered bonds inscribed in the names 
 of minors, is published for the information and guidance of the 
 officers of this Department : 
 
 1. When Government .bonds are registered in the names of in- 
 fants, interest-checks issued in payment of interest thereon will be 
 delivered and paid only to the proper guardian of such infants, 
 when the Secretary of the Treasury has been notified of such in- 
 fancy. 
 
 2. Neither the father nor mother of an infant has the right, as 
 a general rule, to indorse or collect such interest-checks. 
 
 3. The guardian of an infant, in order to indorse and collect 
 interest-checks in favor of his ward, is required to file with the 
 first Auditor evidence (i) of guardianship, (2) of his authority 
 being in force, and ( 3 ) of the identity of his ward as the payee in 
 the bonds. 
 
 4. The Government- is not liable to refund to an infant, on his 
 arriving at the age of majority, money paid to him on his indorse- 
 
UNITED STATES BONDS. 333 
 
 inent of interest-checks during minority, when the Secretary of the 
 Treasury, had not been notified of the fact of infancy. 
 (Department Circular No. 6, dated February 7, 1881.) 
 
 UNCLAIMED INTEREST. 
 
 The interest on registered bonds of the loans authorized previ- 
 ously to the funded loans (Act of July 14, 1870) which has been 
 returned to the Treasury as unclaimed. Can be collected only in 
 person or by attorney at the office of the Treasurer of the United 
 States, in Washington. 
 
 For the convenience of the public, and to save charges, powers 
 to collect specified unclaimed interest may be made in favor of the 
 Chief of the Division of Loans and Currency of the Secre- 
 tary's OlBce, under authority of the following order: 
 
 , "Treasury Department. 
 " Office of the Secretary, May i, 1879. 
 " Ordered : That from and after this date, the pro forma re- 
 ceipt on the books of this Department for interest on registered 
 bonds of the United States, due claimants who do not desire to 
 employ resident attorneys, may be signed by the Chief of the Di- 
 vision OF Loans and Currency of this office, or, in his absence, 
 by the Acting Chief of said Division, as attorney for the claimants- 
 " That chec.ks in payment of such interest drawn by the Treas- 
 urer of the United States in' favor of the claimants be transmitted 
 to their address by the officer acting as attorney. 
 
 "John B. Hawley, 
 
 "Acting Secretary.'' 
 translations. 
 Powers of attorney, and all other legal documents executed in the 
 United States must be in the English language. If executed abroad 
 in any other language, such powers must be accompanied by an 
 accurate translation into English, and by a sworn certificate of the 
 person who made such translaiion, properly acknowledged before a 
 notary public or other competent officer having a seal, to the effect 
 that the translation is correct and complete. 
 
 lost registered bonds. 
 In case of the loss of registered bonds, the Secretary of the 
 Treasury should be promptly notified, in order that a caveat may 
 be entered against the transfer of the missing bonds, on the books 
 of the Department. 
 
 form of request for caveat. 
 
 , . , i8— . 
 
 Hon. Secretary of the Treasury, 
 
 Washington, D. C. 
 Sir: The registered bonds described below, standing in my name, 
 
334 OFFICIAL REGULATIONS REGARDING 
 
 were stolen from the undersigned on or about the of last. 
 
 Please enter a caveat against their transfer : 
 
 No. , for $ , Act of . 1 8 — . per cent., and No. 
 
 , for % — : , Act of , i8 — . per cent. 
 
 Very respectfully. 
 
 LOST COUPON BONDS, NOTES. AND COUPONS. 
 
 In consequence of the increasing trouble, wholly without practi- 
 cal benefit, arising from notices which are constantly received at 
 the Department, respecting the loss of coupon bonds, which are 
 payable to bearer, and of Treasury notes issued and remaining in 
 blank at the time of loss, it becomes necessary to give this pub- 
 lic notice, that the Government cannot protect, and will not un- 
 dertake to protect, the owners of such bonds and notes against the 
 consequences of their own fault or misfortune. 
 
 Hereafter all bonds, notes, and coupons, payable to bearer, and 
 Treasury notes issued and remaining in blank, will be paid to the 
 party preseating them in pursuance of the regulations of the De- 
 partment, in the course of regular business ; and no attention will 
 be paid to caveats which may be filed for the purpose of preventing 
 such payment. 
 
 (Department Circular of April 27, 1867.) ' 
 
 RELIEF IN CASES OF DESTROYED AND DEFACED BONDS AND LOST 
 REGISTERED BONDS OF THE UNITED STATES. 
 
 The following are the provisions of the Revised Statutes of the 
 United States, and the regulations thereunder, concerning relief in 
 cases of bonds of the United States which have been defaced, de- 
 stroyed or lost : 
 
 DUPLICATES FOR DESTROYED OR DEFACED BONDS. 
 
 Sec. 3702. Whenever it appears to the Secretary of the Treasurj-, 
 by clear and unequivocal proof, that any interest-bearing bond of 
 the United States has, without bad faith upon the part of the owner, 
 been destroyed, wholly, or in part, or so defaced as to impair us 
 value to the owner, and such bond is identified by number and de- 
 scription, the Secretary of the Treasury shall, under such re^uia- 
 tions and with such restrictions as to time and retention for secu- 
 rity or otherwise as he may prescribe, issue a duplicate thereof, hav- 
 the same time to run, bearing like interest as the bond so proved 
 to have been destroyed or defaced, and so marked as to show the 
 original number of the bond destroyed, and the date thereof. But 
 when such destroyed or defaced bonds appear to have been of 
 such a class or series as has Seen or may, before such application, 
 be called in for redemption, instead of issuing duplicates thereof, 
 
UNITED STATES BONDS. 335 
 
 they shall be paid, with such interest only as would have been paid 
 if they had been presented in accordance with such call. 
 
 Sec. 3703. The owner of such destroyed or defaced bond shall sur- 
 render the same, or so much thereof as may remain, and shall file 
 in the Treasury a bond in a penal sum of double the amount oif 
 the destroyed or defaced bond, and the Interest which would accrue 
 thereon until the principal becomes due and payable, with two 
 good and sufficient sureties, residents of the United States, to be ap- 
 proved by the Secretary of the Treasury, with condition to. indem- 
 nity and save harmless the United States from any claim upon such 
 destroyed or defaced bond. 
 
 DUPLICATES FOR LOST REGISTERED BONDS. 
 
 Sec. 3704. Whenever it is proved to the Secretary of the Treas- 
 ury, by clear and satisfactory evidence, that any duly registered 
 bond of the United States, bearing interest, issued for valuable con- 
 sideration in pursuance of law, has been lost or destroyed, so that 
 the same is not held by any person as his own property, the Sec- 
 retary shall issue a duplicate of such registered bond, of like 
 amount, and bearmg like interest, and marked in the like manner 
 as the bond so proved to be lost or destroyed. 
 
 Sec. 3705. The owner of such missing bond shall first file in the 
 Treasury a bond in the penal sum equal to the amount of such 
 missing bond, and the interest which would accrue thereon until 
 the principal thereof becomes due and payable, with two good and 
 sufficient sureties, residents of the United States, to be approved by 
 the Secretary of the Treasury, with condition to indemnify and save 
 harmless the United States from any claim because of the lost or 
 destroyed bond. 
 
 Parties presenting claims on account of a coupon or registered 
 bond of the United States which has been destroyed, wholly or in 
 part, or on account of a registered bond which has been lost, will 
 be required to present evidence showing : 
 
 1st. The number, denomination, date of authorizing Act, and rate 
 of interest of such bond, whether coupon or registered, and, if regis- 
 tered, the name of the payee. In the case of a registered bond, it 
 should also be stated whether it had been assigned or not previous 
 to, or since, the alleged loss or destruction, and, if assigned, by 
 whom, and whether assigned in blank or to some person specifi- 
 cally by name ; and if assigned in the latter manner, the name of 
 the assignee should be given. 
 
 2d. The time and place of purchase, of whom purchased, and the 
 consideration paid. 
 
 3d. The place of deposit of the missing bond ; whether or not 
 any person or persons, other than the owner, had access thereto ; 
 and in the event of its having been accessible to other parties. 
 
336 OFFICIAL REGULATIONS REGARDING 
 
 their affidavits, in addition to that of the owner, should be tur- 
 nished, showing their knowledge of the existence of the bond, and 
 of the fact of its loss or destruction. 
 
 4th. The material facts and circumstances connected with the loss 
 or destruction of the bond. 
 
 5th. It should be shown by the affidavits of credible persons, if 
 practicable by United States officers, that the statements of the ■ 
 claimant, as set forth in his affidavit, are worthy of the confidence 
 of this Department, and that he is the identical person named in 
 the application. 
 
 In all cases the evidence should be as full and clear as possible, 
 that there may be no doubt of the good faith of the claimant. 
 Proofs may be made by affidavits duly authenticated, and by such 
 other competent evidence as may be' in the possession of the claim- 
 ant. 
 
 GENERAL FORM OF AFFIDAVIT. 
 
 Personally appeared before me, a notary public in and for the 
 
 city of , county of , and State of . the subscriber, 
 
 , of , county of , and State of , who, 
 
 being duly sworn according to law, deposes and says, that is 
 
 the • lawful owner of the following-described registered bonds of the 
 United States, viz. : 
 
 No. , for $ , Act of , 18 — , per cent. ; and No. . 
 
 for $ , Act of . 18 — . per cent. ; registered in name 
 
 on the books of the Treasury Department , 18 — ; that no assign- 
 ment or transfer of said bonds [or either of them] has been made 
 or authorized by or attorney, either in blank or by a spe- 
 cific assignment, or in any manner whatever; that said bonds have 
 not, nor has either of them, by hypothecation, pledge, loan, or other- 
 wise, passed from the custody or control of said with [his or 
 
 her] knowledge or consent; that the said bonds were stolen from 
 
 . the said , at , on the , by some person 
 
 or persons unknown to ; and that due diligence has been exer- 
 cised in endeavoring to recover the said bonds, without success- 
 [State what has been done.] 
 
 of- 
 
 Sworn to and subscribed before me, this the day of , 
 
 A. D., 18 — ; and I certify that said is personally well 
 
 known to me to be the identical person mentioned in the foregoing 
 affidavit. , Notary Publi:. 
 
 [NOTARIAL SEAL.] 
 
 Affidavits and other evidence pertaining to the claim should be 
 transmitted to the Secretary of the Treasury. Upon, receipt of 
 such documentary evidence it will be referred to the First Comp- 
 troller of the Treasury for his opinion as to its sufficiency. The ap- 
 
UNITED STATES BONDS. 337 
 
 plicant will be advised of the decision as soon as it is reached ; if 
 IT BE FAVORABLE TO SUCH APPLICANT, a blank indemnity bond will 
 be forwarded to him for execution ; and when this indemnity bond 
 shall have been duly executed, returned to the Department, and ap- 
 proved by the First Comptroller and the Secretary, the relief desired 
 will be granted. , 
 
 A duplicate in lieu of a lost registered bond will not be issued 
 within six months from the time of the alleged loss. 
 
 The interest on an uncalled registered bond will be paid to the 
 payee thereof, even though the bond has been lost or destroyed. 
 
 These regulations do not apply in any way to coupon bonds 
 which have been lost, or to coupons lost or destroyed which have 
 been detached from the bonds to which they belonged, as no relief, 
 in such cases can be granted under existing laws. 
 
 DESTROYED COUPONS. 
 
 In reply to an inquiry whether Section 3702 of the Revised Stat- 
 utes, above cited,* authorizes the Secretary of the Treasury to give 
 relief in cases where coupons previously detatched from bonds have 
 been destroyed, the Attorney-General of the United States has given 
 the following opinion : 
 
 Department of Justice, 
 
 January 29, 1878. 
 Hon. John Sherman, 
 
 Secretary of the Treasury. 
 
 Sir: Referring to your letter of the ist ultimo, in which is pre- 
 sented for my consideration the question whether section 3702 of 
 the Revised Statutes authorizes the Secretary of the Treasury to 
 give relief in cases where coupons, previously detached from the 
 bonds, have been destroyed, I have the honor to reply : 
 
 The provisions of that section do not, in my opinion, extend to 
 coupons which have been destroyed or defaced after their separation 
 from the bonds to which they were attached. 
 
 By the first clause of the section, in case of the total or partial 
 destruction of an interest-bearing bond of the United States, or in 
 case such a bond has been so defaced as to impair its value to the 
 owner, the Secretary of the Treasury is authorized, under certain 
 conditions, to "issue a duplicate thereof," &c. The language of this 
 clause limits the authority thereby conferred to the mere issuing of 
 duplicate bonds in the cases mentioned. 
 
 So long as coupons remain attached to the bonds with which 
 they were issued, they must be deemed to constitute parts thereof; 
 and, therefore, if one or more coupons, whilst attached to a bond 
 of the above description, become destroyed or defaced, this would 
 be a case of partial destruction or defacement of the bond and fall 
 
 * See page 334 " Destroyed and Defaced Bonds," &c. 
 
33^ OFFICIAL REGULATIONS REGARDING 
 
 within the statute. But after the severance of the coupons from 
 the bonds, they can no longer be regarded as forming parts thereof. 
 They then cease to be incidents even of the bonds, and become, in 
 fact, independent claims, possessing the essential attributes of com- 
 mercial paper. {Clark v. Iowa City, 20 Wall. 589.) 
 
 Accordingly; should coupons, after having been • detached by the 
 holder of the bonds, be transferred to another person in whose 
 hands they afterwards become destroyed or defaced, the latter would 
 clearly have no right to any relief which the Secretary is by the 
 said clause authorized to give, since the authority of the Secretary, 
 except in cases falling within the second or last clause of section 
 3703 is confined to the issuing of duplicate bonds, which the de- 
 tached coupons thus destroyed or defaced are not. Yet the result 
 would be the same should such detached coupons not be trans- 
 ferred by the holder of the bonds, but become destroyed or de- 
 faced while both they and the bonds are still owned by him ; as it 
 is by the severance of the coupons from the bonds that the for- 
 mer cease to be parts of the latter, not by any change of owner- 
 ship which may subsequently ensue. 
 
 By the second or last clause, to which I have above adverted, 
 when any such destroyed or defaced bond belongs to a class or series 
 that has been or . may, before the application, be called in for re- 
 demption, in this case the Secretary is authorized, instead of issu- 
 ing a duplicate thereof, to pay ■ the bond, with such interest as 
 would have been paid if it had been presented in accordance with 
 the call. This clause is not more comprehensive than the other, 
 but has precisely the same scope in respect to the subject matter 
 of relief; in other words, it extends solely to destroyed or defaced 
 interest-bearing bonds. The mode of relief only is varied thereby in 
 cases where such bonds are of a class or series already called in 
 for redemption. 
 
 While the provisions of section 3702 were enacted with a view 
 to enable persons who may sustain loss by the destruction or dam- 
 age of Government securities to obtain relief without resorting to 
 Congress for special legislation, the authority conferred upon the 
 Secretary of the Treasury by that section to. afford relief must, 
 nevertheless, be exercised in strict conformity with those provisions. 
 He is not at liberty to give relief, in either of the modes provided, 
 in cases which do not fairly come within the terms of the statute. 
 I am, sir, very respectfully, 
 
 Chas. Devens, 
 
 Attorney-General. 
 
 CALLED BONDS. 
 
 All United States called bonds, forwarded for redemption, should 
 be addressed to the Secretary of the Treasury, Division of 
 
UNITED STATES BONDS. 339 
 
 Loans and Currency. When registered bonds are so forwarded, 
 they should be assigned to "the Secretary of the Treasury, for 
 redemption." Assignments must be dated and pro;perly acknowledged as 
 prescribed in the note printed on the back of each bond. 
 
 Where checks in payment of registered bonds are desired in fa- 
 vor of any one but the payee, the bonds should be assigned to 
 the " Secretary of the Treasury for redemption for account of " — 
 (here insert the name of the person or persons to whose order the 
 check should be made payable). ' 
 
 regulations in regard to coupons detached from called 
 
 BONDS. 
 
 When coupons, detached from bonds that have been called in for 
 redemption, are presented for pkyment, the Department will pay 
 such portion of the interest specified in such coupons as had ac- 
 crued at the day fixed in the call for the redemption of the bonds, 
 and no more, unless the party presenting them claims payment of 
 their nominal value, in which case the Department will retain the 
 coupons until the bonds from which they were detached shall have 
 been presented, and the conflicting claims adjusted. 
 
 When a called bond is presented for redemption, from which a 
 coupon maturing after the day fixed in the call for such redemp- 
 tion, shall have been detached, the nominal value of such coupon 
 shall be deducted from the sum due upon the bond, unless the 
 coupon shall have been paid as above; the sum thus deducted 
 to be retained to await the presentation of the coupon and a set- 
 tlement. 
 
 All correspondence in relation to bonds that have been called in fol 
 redemption, or coupons belonging thereto, should be addressed to the 
 " Loan Division," Secretary's Office. 
 
 (Department Circular No. 48, dated May 9, 1872.) 
 
 EXEMPTION OF UNITED STATES BONDS FROM TAXATION. 
 
 Section 3701 of the Revised Statute provides as follows : •' All 
 stocks, bonds, Treasury notes, and other obligations of the United 
 States, shall be exempt from taxation by or under State or munici- 
 pal or local authority." This section makes the exemption from tax- 
 ation binding only upon " State or municipal or local authority " ; 
 but according to the express terms of the Act of Congress of July 
 14, 1870, the bonds and the interest thereon of the funded loans 
 which are thereby authorized— namely, the loan of 1881, the loan of 
 1891, and the four-per-cent. consols of 1907 — " shall be exempt from 
 the payment of all taxes or duties of the United States, as well as 
 from taxation in any form by or under State, municipal, or local au- 
 thority ; and the said bonds shall have set forth and expressed upon 
 their face the above specified conditions." 
 
iiT3DE5:x: 
 
 OFFICIAL REGULATIONS 
 
 REGARDING 
 
 UNITED STATES BONDS. 
 
 Assignment of — : Page 
 
 Acknowledgments, foreign and domestic, of — , before whom made 162 
 
 No fees are charged for witnessing and certifying — or power to assign 
 or collect, by a United States Minister, charge, consul, vice-consul, or 
 commercial agent 161 
 
 CaUed— : 
 
 Provisions concerning — T72 
 
 Coupon — : 
 
 Definition of — ; how convertible ; how addressed ; no expense for ex- 
 change except expressage 158 
 
 (See Forms.) 
 Destroyed coupons — : 
 
 Opinion concerning relief in cases 01 — 168-171 
 
 Destroyed and defaced — : 
 
 Provisions conceriking relief in cases of— 168-171 
 
 Detached coupons : 
 
 Regulations in regard to — from called bonds 173 
 
 Exemption from taxation : 
 
 Laws creating an — 173 
 
 Fees for assignment and transfer of — : 
 
 Not charged, when 163 
 
 Interest on — : , 164-166 
 
 How paid to joint holders of registered bonds 166 
 
 Payment of interest on United States registered bonds inscribed in the 
 names of minors ! 166 
 
 Unclaimed — and regulation on the subject 167 
 
 Lost — : 
 
 Registered and coupon bonds, notes and coupons 167-168 
 
 New bonds : 
 
 Issued when ana now 16^ 
 
INDEX TO BOND REGUEATIONS. 341 
 
 Powers of attorney : Page 
 
 Execution of — for- transfer of bonds i6i 
 
 Must be in English when made in United States, and, when made 
 abroad, must be accompanied bj accurate translation into English. 
 
 Verified, how 167 
 
 Powers of substitution : 
 
 For the transfer of bonds , 163 
 
 Registered — : 
 
 Description of — ; account of — ; transfer of — ; assignment of — 159 
 
 Regulations concerning — : 173 
 
 Table of matured — : 157 
 
 Transfer of — : 
 
 Closing of transfer-books 164 
 
 Execution of powers of attorney and powers of substitution for — 163 
 
 No fees for — are charged by the Department 164 
 
 Transmission of — : 
 
 How made 163 
 
TREASURY REGULATIONS 
 
 GOVERNING THE ISSUE AND REDEMPTION OF THE 
 
 CURRENCY AND COINS OF THE UNITED STATES, 
 
 AND THE REDEMPTION OF NATIONAL 
 
 BANK NOTES. 
 
 The following regulations govern the issue and redemption of 
 the currencyj and the gold, silver, and minor coins of the United 
 States, and the redemption of National Bank notes by the Treas- 
 urer of the United States.* 
 
 I. — ISSUE OF UNITED STATES NOTES. 
 
 1. The Treasurer will forward new United States notes to 
 Assistant Treasurers of the United States upon their making 
 requisitions, which are to be approved by him, for such denomina- 
 tions as may be needed in the current business of their offices. 
 
 2. Upon receiving United States notes unfit for circulation. 
 National Bank notes, fractional silver coin, or minor coin, the 
 Treasurer will forward new United States notes by express, at the 
 expense of the consignee, or by registered mail, .free of charge, at 
 the risk of the consignee. 
 
 II. — ISSUE OF GOLD COIN. 
 
 3. Upon receiving an original certificate of the Assistant Treas- 
 urer in New York for a deposit of $100 or any multiple of $100, 
 in United States notes, made for the credit of the Treasurer in 
 general account, the Treasuirer will cause a like amount in gold 
 coin to be sent from the Mint at Philadelphia, at the consignee's 
 expense. 
 
 III.— ISSUE OF STANDARD SILVER DOLLARS. 
 
 4. Upon the receipt of currency or gold coin, the Treasurer or 
 an Assistant Treasurer will cause to be paid to applicants, in cities 
 where their respective offices may be situated, standard silver 
 dollars in any desired amount. 
 
 5. Standard silver dollars are forwarded to applicants outside of 
 
 * These regulations were made by C. N. Jordan, United States Treasurer, July i, 1885, 
 and approved by the Secretary of the Treasury. 
 
344 TREASURY REGULATIONS FOR 
 
 cities in which the Treasurer or an Assistant Treasurer may be 
 situated, at the expense of the Government, in sums or multiples 
 of $500 — 
 
 I. Upon the receipt by the Treasurer of an original certificate, 
 issued by any Assistant • Treasurer or National Bank depositary, 
 that a deposit of currency or gold coin has been made to the 
 credit of the Treasurer in general account. Deposits with the 
 Assistant Treasurer in New York may be made by drafts payable 
 to his order, and collectible through the Clearing-House, forwarded 
 directly to . him, with instructions to deposit the amounts on 
 account of standard silver dollars, and to forward the certificates 
 therefor to the Treasurer, upon the receipt by the Treasurer of 
 gold coin. United States notes, silver certificates, or National Bank 
 notes. 
 
 II. By the Treasurer or any Assistant Treasurer, by registered 
 mail, fsee of charge, in sums or multiples of $65, at the risk of 
 the party to whom sent, upon receipt of gold coin, United States 
 notes, silver certificates, or National Bank notes. 
 
 IV. — ISSUE OF FRACTIONAL SILVER COIN. 
 
 6. The Treasurer and Assistant Treasurers of the United States 
 will pay out fractional silver coin, in any sum desired, for lawful 
 money of the United States. 
 
 7. Fractional silver coin will be forwarded from the office nearest 
 to the place of its destination, by express, at. the expense of the 
 Government, in sums or multiples of $5°° — ' 
 
 I. Upon receipt of an original certificate issued by the Treasurer, 
 an Assistant Treasurer, or National Bank depositary, that a deposit 
 of currency or gold coin has been made to the credit of the 
 Treasurer in general account. Deposits with the Assistant Treasurer 
 in New York may be made by drafts payable to his order, and 
 collectible through the Clearing-House, forwarded directly to him, 
 with instructions to deposit the amounts on account of fractional 
 silver coin, and to forward the certificates to the ofiice nearest 
 the destination of the coin. 
 
 II. By the Treasurer or any Assistant Treasurer, by registered 
 mail, free of charge, in sums or multiples of $70, at the risk of 
 the party to whom sent, upon the receipt of currency or gold coin. 
 
 v. — ISSUE OF MINOR COIN. 
 
 8. The Treasurer and Assistant Treasurers will pay out, for 
 lawful money, any minor coin not needed in the current business 
 of their offices. 
 
 VI. — ISSUE OF THE TREASURER'S TRANSFER CHECKS. 
 
 9. The Treasurer will issue transfer checks, in payment for 
 redemptions, on such Assistant Treasurer as may suit the con- 
 venience of the Treasury, payable to the order of the sender or 
 his correspondent — 
 
REDEMPTION OF THE CURRENCY. 345 
 
 I. For United States notes sent to the Treasurer, with the 
 express charges prepaid at private rates, or by mail, in sums of 
 $S or more. 
 
 II. For National Bank notes sent to the Treasurer. For notes 
 sent from a city where there is an Assistant Treasurer, checks will 
 be issued only on the Assistant Treasurer in that city. 
 
 III. For fractional silver coins sent iri multiples of $20 to the 
 Treasurer, and for minor coin sent the Treasurer or an Assistant 
 Treasurer. 
 
 VII.— REDEMPTION OF UNITED STATES NOTES, GOLD CERTIFICATES 
 
 (SERIES OF 1882), SILVER CERTIFICATES, AND 
 
 FRACTIONAL CURRENCY. 
 
 10. United States notes, each exceeding nine-tenths of its original 
 proportions in one piece, are redeemable at their full face value 
 in other United States notes by the Treasurer and the several 
 Assistant Treasurers of the United States, and are redeemable in 
 coin, in sums not less than $50, by the Assistant Treasurer in 
 New York. 
 
 11. Fractional notes, each exceeding four-fifths of its original 
 proportions in one piece, are redeemable at their full face value 
 in United States notes, in sums not less than $3, by the Treas- 
 urer and the several Assistant Treasurers of the United States. 
 
 12. Gold certificates, each exceeding nine-tenths of its original 
 proportions in one 'piece, are redeemable at their full face value 
 by the Treasurer and the several Assistant Treasurers of the 
 United States. 
 
 13. Silver certificates, each exceeding nine-tenths of its original 
 proportions in one piece, are redeemable at their full face value 
 in standard silver dollars, by the Treasurer and the several 
 Assistant Treasurers of the United States. 
 
 14. United States notes, gold certificates, and silver certificates 
 are redeemable, by the Treasurer only, when mutilated to the 
 extent of one-tenth, but not two-tenths, at nine tenths of their 
 face value ; two-tenths, but not three-tenths, at eight-tenths of their 
 face value ; three-tenths, but not four-tenths, at seven-tenths of 
 their face value ; four-tenths, but not one-half, at six-tenths of 
 their face value. Fragments of notes, each conitiluting clearly 
 one-half, are redeemable at one-half the full face value of such 
 whole notes. 
 
 15. Fractional currency notes are redeemable, by the Treasurer 
 only, when mutilated to the extent of one-fifth, but not two-fifths, 
 at four-fifths of their full face value ; two-fifths, but not one- 
 half, at three-fifths of their face value. 
 
 16. Fragments less than one-half are redeemed only when accom- 
 panied by an affidavit executed in accordance with the require- 
 ments of the following paragraph. 
 
346 TREASURY REGULATIONS FOR 
 
 17. Notes and Certificates mutilated as described in the preceding 
 paragraphs, acconipanied by an affidavit from the owner, or from 
 such other persons as have knowledge of the facts, that the 
 missing portions have been totally destroyed, are, if the proof 
 furnished is satisfactory, redeemed at their full face value. The 
 affidavit must state the cause and manner of the mutilation, and 
 must be sworn and subscribed before an officer qualified to 
 administer oaths, who must affix his official seal thereto, and the 
 character of the affiants must be certified to be good by such 
 officer or some other having an official seal. The Treasurer will 
 exercise such a discretion under this regulation as may seem to 
 him needful to protect the United States from fraud. 
 
 18. Fragments not redeemable are rejected and returned ; coun- 
 terfeit notes are branded and returned. 
 
 VIII.^REDEMPTION OF NATIONAL BANK NOTES. 
 
 19. National Bank notes are redeemable by the Treasurer of the 
 United States, in sums " of $1,000 or any multiple thereof. 
 
 20. Notes equaling or exceeding three-fifths of their original 
 proportions, and bearing the name of the bank and the signature 
 of one of its officers, are redeemable at their full face value. 
 
 21. Notes of which less than three-fifths remains, or from which 
 both signatures are lacking, are not redeemed by the Treasurer, 
 but should be presented for redemption to the bank of issue. 
 Fragments less than three-fifths are accepted from the bank of 
 issue for face value by the Treasurer, only when accompanied 
 by evidence, as required by paragraph 17, that the missing portions 
 have been entirely destroyed. 
 
 22. Fragments redeemed by the bank of issue for less than face 
 value, are accepted by the Treasurer, only when their valuation 
 is equal to the face value of a note of some denomination issued 
 by the bank, or some multiple thereof. The required valuation 
 may be made up of several fragments of notes of the same or 
 different denominations, provided the total valuation of the 
 fragments of each denomination be $1, or some multiple thereof. 
 Fragments not clearly more than two-fifths are exceptable, only 
 when accompanied by evidence, as required by paragraph 17, that 
 the missing portions have been entirely destroyed. 
 
 ' 23. It having been decided that National Bank notes stolen 
 when unsigned, and put in circulation with forged signatures, are 
 not obligatory promissory notes of the banks under section 5182 
 of the Revised Statutes, they are not redeemed by the Treasurer. 
 
 24. Notes of National Banks that have failed, are redeemed in 
 the same manner and on the same terms as United States notes. 
 
 IX. — REDEMPTION OF FRACTIONAL SILVER COIN AND MINOR COIN. 
 
 25. Fractional silver coin and minor coin may be presented, in 
 
REDEMPTION OF THE CURRENCY. 347 
 
 separate packages, in sums or multiples of $20, assorted by 
 denominations, to the Treasurer or any Assistant Treasurer, for 
 exchange into lawful money. 
 
 26. No mutilated coin will be redeemed. Reduction by natural 
 abrasion is not considered mutilation. 
 
 X. — TRANSMISSION TO THE TREASURER. 
 
 27. The several kinds of paper currency should be forwarded 
 separately. Remittances should be made up into packages of not 
 more than 8,000 notes each. The notes in a package should be 
 assorted by denominations, and inclosed in paper straps containing 
 not more than 100 notes each, and the straps should be marked 
 with the amount of the contents. 
 
 28. A letter of advice, giving the amount of each denomination 
 of notes, the total amount in the package, the address of the party 
 sending, and the disposition to be made of the proceeds, should 
 be inclosed with each package, and a copy of the letter sent by 
 mail. 
 
 29. The package, if it be sent by express, should be sealed up in 
 stout paper and addressed to the Treasurer of the United States, 
 Washington, D. C. There should be plainly marked on the outside 
 the owner's name and address, the amount and kind of currency 
 inclosed, the disposition to be madfe of the proceeds, and the 
 statement that th'e package is forwarded under the Government 
 contract, if such be the case. 
 
 30. It is the duty of postmasters to register, free of charge, all 
 letters on which the postage has been fully prepaid, ^addressed to 
 the Treasurer, containing currency of the United States for 
 redemption. It is recommended that all such letters be registered, 
 as • a protection against loss. 
 
 31. Remittances of money by ^ mail should be addressed to the 
 Treasurer of the United States, Washington, D. C. Such remit- 
 tances and returns therefor by mail are invariably at the risk of 
 the owners. All communications to the Treasurer, in regard to 
 packages lost in the mail, are referred for investigation to the 
 Chief Post-Office Inspector, Post-Office Department, Washington, 
 D. C, to whom any subsequent inquiry on the subject should be 
 addressed, 
 
 XI. — EXPRESS CHARGES. 
 
 EXPRESS CHARGES PAID BY THE GOVERNMENT. 
 
 32. Express charges are paid by the Government — 
 
 I. On standard silver dollars and fractional silver coin sent 
 from the Mint, the Treasury, or the Sub-Treasuries, in sums or 
 multiples of $500. 
 
 II. On National Bank notes sent to the Treasurer for redemp- 
 tion, in sums or multiples of $1,000. 
 
348 TREASURY REGULATIONS FOR 
 
 EXPRESS CHARGES NOT PAID BY THE GOVERNMES ^ 
 
 33. On lawful money of the United States sent for redemption 
 or for credit of the five-per-cent. redemption fund, and on 
 National Bank notes sent for redemption in other amounts than 
 multiples of $1,000, the charges, if not prepaid, are deducted from 
 the proceeds at contract rates. 
 
 34. On fractional silver coin and minor coin sent for redemption, 
 the charges must be prepaid by the sender. 
 
 35. On United States notes returned for United States notes or 
 National Bank notes redeemed, the charges are deducted at 
 contract rates. 
 
 36. On gold coin sent from the Mint on orders from the 
 Treasurer in return for deposits with the Assistant Treasurer in 
 New York, the charges are deducted at contract rates. 
 
 37. On transfers of funds from National Bank Depositaries, under 
 letters of instruction, the charges must be paid by the depositaries. 
 
 THE GOVERNMENT CONTRACT WITH THE ADAMS EXPRESS COMPANY. 
 
 38. The Government contract extends to all points accessible 
 through established express lines, reached by continuous railway 
 communication, but does not embrace sea or river transportation 
 of any kind, and does not extend westward beyond Omaha and 
 Nebraska City, Nebraska, and Atchison and Leavenworth, Kansas. 
 
 39. The contract rates for the transportation of United States 
 notes to the Treasurer for redemption, arid United States notes 
 sent in return, are 25 cents per $1,000 to or from points within 
 the territory of the Adams Express Company, and 60 cents per 
 $1,000 to or from points within the territory of any other express 
 company, except points in Kansas west of Atchison and Leaven- 
 worth, in Nebraska west of Omaha and Nebraska City, in Arkansas 
 and Texas, to or, from which the rate is 85 cents per $1,000. 
 When the remittance does not exceed $500, the rate is half of 
 that for $1,000. 
 
 40. The rates for the transportation of National Bank notes to 
 the Treasurer for redemption are 27 }4 cents per $1,000 to each 
 express company over whose lines the remittances pass, and for 
 United States notes sent in return, 25 cents per $1,000 to points 
 within the territory of the Adams Express Company, and 60 cents 
 per $1,000 to points within the territory of any other express com- 
 pany except points in Kansas west of Atchison and Leavenworth; 
 in Nebraska, west of Omaha and Nebraska City; in Arkansas and 
 Texas, for which the rate for both classes of shipments is $1.50 
 per $1,000. Sums less than $1,000 are paid for as $i,ooo. 
 
 41. The contract rate for the transportation of gold coin is 
 17-100 of a cent per mile per $1,000, with a minimum rate of 50 
 cents per $1,000 to each express carrying, when the distance at the 
 
REDEMPTION OF THE CURRENCY. 349 
 
 prescribed rate does not equal that sum. Parts of $1,000, not 
 exceeding $500, are charged half the price for $i,oco, with a 
 minimum rate of 25 cents to each express carrying. 
 
 42. The contract rate for the transportation of silver coin is 40- 
 100 of a cent per mile per $1,000, with a minimum rate of ^$1 
 per $1,000 to each express carrying, when the distance at the 
 prescribed rate does not equal that sum. Parts of $1,000, not 
 exceeding $500, are charged half the price for $1,000, with a 
 minimum rate of 50 cents to each express carrying. 
 
 43. The Treasurer has no control over rates exacted when the 
 charges are prepaid, or when remittances come from points with- 
 out the limits of the contract. 
 
 44. No charge is made for the amount of express charges inclosed 
 with a remittance of even thousands of dollars, when separately 
 noted on the wrapper. Packages should always be marked with the 
 exact amount of the contents. 
 
 XII. — GENERAL INFORMATION. 
 
 45. Assistant' Treasurers elsewhere than in New York are not 
 authorized to receive drafts of- banks and bankers under this 
 Circular. 
 
 46. The act of June 30, 1876 (19 Statutes, 64), requires "that all 
 United States officers charged with the receipt or disbursement of 
 pubhc moneys, and all officers of National Banks, shall stamp or 
 write in plain letters the word ' counterfeit', ' altered', or ' worth- 
 less' upon all fraudulent notes issued in the form of, and intended 
 to circulate as money, which shall be presented at their places of 
 business ; and if such officers shall wrongfully stamp any genuine 
 note of the United States, or of the National Banks, they shall, 
 upon presentation, redeem such notes at the face value thereof." 
 
 47. When the total amount of dues, in any one payment to the 
 Government, cannot be paid entirely in lawful money of denomina- 
 tions of one dollar or greater, because involving a fractional part 
 of a dollar, such fractional part may be paid in silver coins of 
 denominations of less than one dollar ; but when the total amount 
 of such dues does not exceed ten dollars, such total amount may 
 be paid in the silver coins of denominations of less than one 
 dollar. 
 
 48. In case of the loss or destruction of one of the Treasurer's 
 checks, and upon application for a duplicate, payment of the 
 original check is stopped, and the applicant is furnished with a 
 form of bond of indemnity, upon return of which, properly executed, 
 a duplicate is issued. 
 
 Compliance with the foregoing regulations is enjoined on all 
 officers of the Department, and observance of them will be expected 
 of all making remittances to this office. 
 
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INDEX. 
 
 IThe figures after the linen refer to the ^ of the 6oo/cJ 
 
 ACTIVE BANKS. . • 
 
 Mode of redeeming notes af, 269-272. 
 
 ACTION. See Suit. 
 
 AGENT. 
 
 To receive assets from receiver and close bank, 363. 
 
 ASSESSMENT. See Shaebholdbes, 33-61. 
 
 ATTACHMENT. 
 
 1. Can bank's property be attached before final judgment, 319. 
 
 2. Of insolvent bank cannot be, 320. 
 
 3. Eeceiver cannot be attached in suit against shareholders, 190. 
 
 how he can get a dissolution, 321. 
 
 AUTHORITY. 
 
 To begin business, 38. 
 
 BANE. 
 
 1. Eight to sue, for misappropriation, 147. 
 
 2. When it can be enjoined, 148. 
 
 3. As public depositary, 215. 
 
 its character not changed, 216. 
 government is not liable if bank fails, 217. 
 identical deposit is not retained, 218. 
 
 4. Powers of. See Powers of National Banks. 
 
 5. Kight to sue and be sued. See Sdit by AND against National Bank. 
 See Extension op Banks ; Organization. 
 
 BANK EXAMINATIONS. 
 
 1. Appointment and powers of bank examiner, 375. 
 
 2. Compensation, 376. 
 
 3. Visitorial powers, 377. 
 
 4. Comptroller to examine banks in District of Columbia, 378. 
 
 5. Reports to Comptroller, 379. 
 
 6. Oath to reports, 380. 
 
 7. Meaning of section, 381. 
 
 8. Dividends and earnings to be reported, 382. 
 
 9. Penalty for failure to report, 383; 
 
 10. Savings banks and trust companies must report, 384. 
 
 BANKING ASSOCIATION. See Bank. 
 23— B. 
 
354 INDEX. 
 
 [The figwes after the lines refer to the % of the hook,} 
 BEANCH: BANK. See CONVBESION, 14. 
 
 BEQUEST. 
 
 Of stock in converted bank, 26. 
 
 BILL OF REVIVOR. 
 
 Can be brought in federal court, 244. 
 
 BOND. 
 
 Of Comptroller, 5. 
 
 BONDS. 
 
 1. Meaning of U. S. bonds, 225. 
 
 2. Must be deposited before beginning business, 226. 
 
 3. Must be increased or decreased with change in capital, 223, 267. 
 
 4. Exchange of coupon bonds for registered, 228. 
 
 5. Amount that must be deposited and withdrawal of circulation, 229. 
 
 6. Mode for retiring part of circulation and bonds, 230. 
 
 7. Monthly restriction on bonds that may be withdrawn and exclusion of calle 
 
 bonds, 231. 
 
 8. Annual examination of bonds, 232. 
 
 9. Bonds to secure circulation are held exclusively for that purpose, 233. 
 
 10. Are transferred to Treasurer in trust, 234. 
 
 11. Transfers are "recorded, 235. 
 
 12. And advice of transfer is given, 236. 
 
 13. Comptroller to have access to bonds and books, 237. 
 
 BY-LAWS. 
 
 Law concerning, 61. 
 
 CAPITAL. 
 
 1. Minimum of, to form a bank, 16. 
 
 2. Increase of, 219. 
 
 3. Meaning of statute, 220. 
 
 4. Reduction, 221. 
 
 5. Capital set free must be returned, 222. 
 
 6. Bonds deposited must conespond with change in capital, 223. 
 
 7. Withdrawal of, forbidden, 125, 224. 
 
 CASHIER. 
 
 1. Cannot give up a debt, 56. 
 
 2. Nor receive in exchange inferior security, 57. 
 
 CERTIFICATE OF DEPOSIT. 
 Is not a bank note, 261. 
 
 CERTIFICATE OF ORGANIZATION. 
 
 1. What it shall specify, 14. 
 
 2. How acknowledged, 15. 
 
 3. Of extension, 44. 
 
 4. Of stock. See Shaeeholdees. 
 
INDEX. 355 
 
 [The figures after the lines refer to the % of the book.'} 
 CEETIFYING. 
 
 1. Of what checks prohibited, 109. 
 
 2. Verbal promise to pay when drawer has funds, 109{a). 
 
 CHARTER. 
 
 Dissolution of, 364-367. 
 
 CIRCULATION. 
 
 1. Amount of notes that may be issued, 238. 
 
 2. Mode for retiring pan of, 229, 230. 
 
 3. Reduction of circulation by banks having $150,000 capital or less, 239. 
 
 4. Engraving and printing, 252. 
 
 5. Effect of omitting seal, 253. 
 
 6. Charter numbers, 254. 
 
 7. Control of plates and dies, 255. 
 
 8. Examination of plates, 256. 
 
 9. None to be issued below five dollars, 257. 
 
 10. When a legal-tender, 258. 
 
 11. Shall be received by all except gold banks, 259. 
 
 12. Prohibition of other issues, 260. 
 
 13. Certificate of deposit is not a bank note, 261. 
 
 14. Shall not be used to create a capital, 262. 
 
 15. Banks must not pay uncurrent notes, 108, 263. 
 
 16. Fraudulent notes to be marked, 264. 
 
 17. Unlawful delivery to banks, 265. 
 
 18. Imitations prohibited, 266. 
 
 19. Penalty for mutilating, 267. 
 
 20. Destruction and replacing of worn out notes, 268. 
 Former restrictions on the amount of issues. 
 
 21. Early mode of proportioning notes among banks, 240. 
 
 22. Limitation of a bank's circulation, 241. 
 
 23. Former limit to aggregate amount, 242. 
 
 24. Repeal of limit, 243. 
 
 25. Limitation in amount of legal-tender notes, 244. 
 
 26. How notes were apportioned, 245. 
 
 27. Surplus circulation was withdrawn from states having excess, 246. 
 
 28. How Comptroller should proceed to get excess, 247. 
 
 29. Later mode of procedure, 248. 
 
 30. Mode of issuing notes thereunder, 249. 
 
 31. Sections of Revised Statutes repealed by Resumption Act, 250. 
 
 32. So was section relating to removal of banks, 251. 
 Bedemption of notes of active banks. 
 
 33. Selection of reserve agents, 269. 
 
 34. Redemption by U. S. Treasurer and expense, 270. 
 
 35. Expense modified by law of 1882, 271. 
 
 36. Regulations concerning reserve and places of redemption, 272. 
 Bedennpiion of notes of liquidating hanks. 
 
 37. Voluntary liquidation, 47, 273. 
 
356 INDEX. 
 
 [The figwes after the lines reien- to tTie § of the book.'] 
 
 CIRCULATION— coBiwaed. 
 
 38. How board shall proceed, 274. 
 
 39. Deposit of lawful money to redeem notes, 275. 
 
 40. Consolida,ting banks need not redeem, 276. 
 
 41. Bonds to be assigned to closed banks, 277. 
 
 42. Notes to be destroyed, 278. 
 
 43. Proceedings if bank fail to take up bonds, 279. 
 
 44. Mode of protesting notes unpaid on demand, 280. 
 
 45. Examination by special agent after protest, 281. 
 
 46. After protest bank shall not continue business, 282. 
 
 47. Holders to be notified to present notes at treasury for payment, 283. 
 
 48. Sale of bonds at auction and lien of U. S., 284. 
 
 49. Government has first lien, 285. 
 
 50. Sale of bonds privately, 286. 
 
 51. Disposition of notes redeemed by Treasurer, 287. 
 
 52. Cancellation of notes, 288. 
 
 53. Fees for protesting, examinations and receivership, 289. 
 See Criminal Offenses, 15-25. 
 
 CITIZENSHIP. 
 Of bank, 240. 
 
 CLAIMS. 
 
 Proving and payment of. See Dissolution and Eeceivkeship, 24-35. 
 
 CLERK. See Compteollee, 7. 
 
 COMPTROLLER. 
 
 1. Bureau of national currency, 1. 
 
 2. Cannot submit to jurisdiction of court, 2. 
 
 3. Canriot be sued by assignee, 3. 
 
 4. Appointment and term of oflfice, 4. 
 
 5. Oath and bond, 5. 
 
 6. Deputy Comptroller, 6. 
 
 7. Clerks, 7. 
 
 8. Must not be interested in national banks, 8. 
 
 9. Seal, 9. 
 
 10. Rooms, etc., for Bureau, 10. 
 
 11. Annual report, 11. 
 
 12. When it may be printed, 12. 
 
 13. Preliminary examination by, 37. 
 
 14. To have access to bonds and books, 237. 
 
 CONTRACT. 
 
 1. Power of bank to contract for service of employees, 85(o). 
 
 2. Court will not enforce contract whereby one person can get- control, 149. 
 
 3. Persons contract with receiver at their peril, 329. 
 
 CONVERSION OF STATE BANK. 
 
 1. State bank may become national, 21. 
 
INDEX. 357 
 
 [TTie ffiurea after the Hnes refer to the | of ttte hook.] 
 CONVERSION OF STATE 'BANK— continued. 
 
 2. Utility of the statute, 22. 
 
 3. Legal relations not changed by conversion, 23. 
 
 4. Its right to sue, 24. 
 
 5. Its liability for debts of state bank, 25. 
 
 6. Bequest of stock in converted bank, 26. 
 
 7. Operation of enabling laws, 27. 
 
 8. Action by tvro-thirds of stockholders, but not all, 28, 
 
 9. New stock book, 29. 
 
 10. Consent of married woman to conversion, 30. 
 
 11. Qulification of directors in converted bank, 31. 
 
 12. Eegularity of, 32. 
 
 13. Eight to share in surplus of converted bank, 33. 
 
 14. Conversion of state bank with branches, 34. 
 
 15. Eights of bank converted under Act of 1863, 35. 
 
 16. Conversion by savings banks, 36. 
 Of national to state banks. 
 
 17. Enabling act in New York, 465. 
 
 18. National bank not affected by state legislation, 466. 
 
 19. Effect of dissolving national bank, 467. 
 80. What New York Statute can effect, 468. 
 
 21. When dissolution of national bank is complete, 469 
 
 22. What Comptroller can do in such a case, 470. 
 
 CONVERTED BANK. 
 
 Liable for deposits of the other, 77. 
 
 See PowEES OF National Banks, 64; Convebsion op State Bank. 
 
 COURT. 
 
 1. Comptroller cannot submit to jurisdiction of, 2. 
 
 2. Federal, has jurisdiction of receiver's suit regardless of amount, 177. 
 
 CREDITOR. 
 
 See Dissolution and Eecbivbkship; Shaeeholdees, 33-44. 
 
 CRIMINAL OFFENSES, 
 i. Embezzlement, 281. 
 
 2. Meaning of "embezzle," 282. 
 
 3. Prosecution must be by indictment, 283. 
 
 4. What is a good indictment. Illustrations, 284. 
 
 5. Essentials in indictment for aiding and abetting, 285. 
 
 6. Intention, 286. 
 
 7. United States v. Taintor, 287. 
 
 8. Jurisdiction, 287(a). 
 
 9. Is a loan a criminal misapplication, 288. 
 10 When overdraft is misapplication, 289. 
 
 11. Liability for exercise of official discretion, 290. 
 
 12. Purchase of stock in trust discount of worthless notes, withdrawal of deposits 
 
 by debtor, 291. 
 
358 INDEX. 
 
 IThe figures after the lines refer to the % of the book.'] 
 
 CRIMINAL OFFENSES— eo»«inMe<i. 
 
 13. False entries of loans, 292. 
 
 14. False entries in reports to Comptroller, 293. 
 Circulating notes. 
 
 15. Securities of U. S. defined, 294. 
 
 16. Counterfeiting national bank notes, 295. 
 
 17. Using plates to print notes without authority, or for having bank-note paper, 29f 
 
 18. Passing, selling, etc., counterfeit notes, 297. 
 
 19. Taking impressions of tools, etc., 298. 
 
 20. Having impressions of tools, etc., 299. 
 
 21. Buying, selling or dealing in forged or altered notes, 300. 
 
 22. Unlawfully circulating notes of closed bank, 301. 
 
 23. U. S. currency includes national bank notes, 302. 
 
 24. Evidence, 303. 
 
 25. Indictment, 304. 
 
 Sentences and state prosecutions.' 
 
 26. Mode of rendering sentence for several terms, 305. 
 
 27. State may punish for offenses not prescribed by Congress, 306. 
 
 28. Offenses mentioned, 307. 
 
 29. Cannot punish for passing counterfeit notes, nor accessary to embezzlemen 
 
 308. 
 
 CUERENCY. 
 
 Establishment of bureau of national, 1. 
 See Circulation. 
 
 DEFICIENCY IN STOCK. 
 
 Enforcement of payment of, 41. 
 
 DEPOSIT. 
 
 See Powers of National Banks, 75-78, 81, 82, 85. 
 Of bonds with treasury. See Bonds. 
 
 DEPOSITARY. 
 
 1. Duties of bank as public, 215. 
 
 3. Character of bank not changed, 216. 
 
 3. Government is not liable if bank fails, 217. 
 
 4. Identical deposit is not retained, 218. 
 
 DEPUTY COMPTROLLER. 
 
 Appointment and duties, 6. 
 
 DIRECTORS. 
 
 1. Power of directors. 111 . 
 
 2. Notice to director is not notice to bank, 112. 
 
 3. Number and election, 113. 
 
 4. They can resign, 114. 
 
 5. Votes of shareholders, 115. 
 
 6. Their qualificntions, 116. 
 
INDEX. 359 
 
 IThe figwes after the lines refer to the § of the book.] 
 
 DIEECTORS— coniTOtted. 
 
 7. Qualification of, in converted bank, 31. 
 
 8. Their oath, 117. 
 
 9. Meaning of section, 118. 
 
 10. Liability for representations about ownership of stock, 119. 
 
 11. How vacancy is filled, 120. 
 
 12. Adjourned election, 121. 
 
 13. How president is chosen, 122. 
 
 14. Declaring of dividends, 123. 
 
 15. When declared must be paid, 124. 
 
 16. Cannot withdraw capital in form of dividend, 125. 
 
 17. Not liable for erroneous judgment in making dividend, 126. 
 
 18. Liability for unearned dividend, 127. 
 
 19. Penalty for violating title, 128. 
 
 20. Liability tor borrowing more than one-tenth of capital, 103. 
 
 21. When shareholder can recover of, 203. 
 
 22. When they must sell stock of delinquent owners, 129. 
 
 23. 'Not liable for loans made in good faith, 130. 
 
 24. For what liable independently of statute, 131. 
 
 25. Opinion of New Jersey courts, 132. 
 
 26. Opinion of Wheeler, J., 133. 
 
 27. Liability of absent director, 134. 
 
 28. When not liable after resignation, 135. 
 
 29. Bank may bring the action, 136. 
 
 30. So can receiver, 137. 
 
 31. If he refuse, stockholder can, 138. 
 
 32. Action can be brought in state court, 139. 
 
 33. Other duties and liabilities, 140. 
 
 DISSOLUTION. 
 
 Of charter, 364-367. 
 
 DISSOLUTION AND EECEIVEESHIP. 
 
 1.. Failing to pay its notes, bonds of bank are forfeited, 323. 
 
 2. And Comptroller may appoint receiver, 324. 
 
 3. Intent of statute, 325. 
 
 4. Receiver is agent of U. S., 326. 
 
 5. When appointed by court, 327. 
 
 6. His powers, 328. 
 
 7. Persons contract with receiver at their peril, 329. 
 
 8. Bank not thereby dissolved, 330. 
 
 9. Eights of bank become fixed after his appointment, 331. 
 
 10. When judgment against bank after appointment maybe opened, 332. 
 
 11. Can hold only bank property, 333. 
 
 12. Eeceiver only can sue, 334. 
 
 13. Comptroller's certificate is evidence of right to sue, 335. 
 
 14. Can sue in and remove cases to federal court, 336. 
 
 15. Can make no motion in other cases, 337. 
 
360 INDEX. 
 
 [ThefigweB after the lines refer to the % of the book.'] 
 
 DISSOLUTION AND KECElVERSniF— continued. 
 
 16. When can sue without Comptroller's order, 338. 
 
 17. May sell on order of court, 339. 
 
 18. Agreement without order, 340. 
 
 20. Nature of sale ordered by court, 341. 
 
 21 . Order to compromise debt, 342. 
 
 22. Comptroller no authority to do this, 343. 
 
 23. No bond for suits required, 344. 
 
 ■24. Comptroller's notice to creditors, 345. 
 
 25. How their claims may be proved, 346. 
 
 26. Suing creditor has no special lien, 347. 
 
 27. Set off, 348, 348(o). 
 
 28. Government may retain money to pay debt, 348(J). 
 
 29. "What claims to be included, 349. - 
 
 30. Allowance of expense in establishing claim, 350, 351. 
 
 31. Claim must be against bank and not officer, 352. 
 
 32. Interest, 353. 
 
 33. On what claims, 354. 
 
 34. Suit for its recovery, how brought, 355. 
 
 35. Interest during receivership, 356. 
 
 36. Dividends, 357. 
 
 37. How paid, 358. 
 
 38. Priority of government, 359. 
 
 39. Suit against receiver for misconduct as director, 360. 
 
 41. Cannot be attached to suit against shareholders, 361. 
 
 42. Expenses of receiver, 362. 
 
 43. Appointment of agent to receive assets from receiver and close bank's affairs, 36! 
 See Peefeebnces, 13. 
 
 DIVIDEND. 
 
 1. When cannot be declared, 107. 
 
 2. Bank can hold cash dividend for debt, 84. 
 
 See DiKECTOES, 123-128; Dissolution and Eeceiveeship, 36-38. 
 
 ELECTION. 
 
 1. Of directors, 113. 
 
 2. Adjourned election of shareholders, 121. 
 
 EMBEZZLING. See Criminal Offenses. 
 ESTATE. 
 
 1. Liability of estate of deceased 'shareholder, 206. 
 
 2. How long estates may be held, 207, 208. 
 
 fcVIDENCE. 
 
 1. Certified and sealed copies of Comptroller, 269. 
 
 2. Certified copie of organization, 270. 
 
 3. Who can question validity of organization, 271. 
 
 4. How bank's existence may be proved, 272. 
 
INDEX. 361 
 
 [The figv/rea after the lines refer to the § of the hodli.\ 
 EVIDENCE— cojiMMMcd. 
 
 5. What must be proved, 273. 
 
 6. How it must describe itself, 274. 
 
 7. Proof of existence in various cases, 275-279. 
 
 8. Effect of doing business before date of certificate, 280. 
 See Cbiminal Offenses, 24. 
 
 EXAMINATION. 
 
 1. Of bonds, 232. 
 
 2. Preliminary examination by Comptroller, 37. 
 See Bank Examinations. 
 
 EXECUTOR. 
 
 Transfer of stock by foreign, 144. 
 
 EXTENSION OF NATIONAL BANKS. 
 
 1 . Period of extension, 42. 
 
 2. Mode of effecting it, 43. 
 
 3. Examination and granting of certificate, 44. 
 
 4. Suits by and against banks, 45. 
 
 5. Proceedings when shareholder does not assent to extension, 46. 
 
 6. Redemption of notes and issue of new ones, 47. 
 
 7. Liquidation of expiring banks, 48. 
 
 For instructions of Comptroller in regard to extending banks, see Index 316. 
 
 FALSE ENTRIES. 
 
 See Criminal Offenses. 
 
 FOREIGN EXECUTOR. 
 
 Transfer of stock by, 144. 
 
 FORFEITURE. 
 
 1. Of bank's charter, 364. 
 
 2. Of interest. See Interest. 
 
 GOLD NOTE BANKS. 
 
 1. How organized, 20, 290. 
 
 2. Mode of issuing notes, 291, 295. 
 
 3. For what receivable, 296. 
 
 4. Reserve on, 292. 
 
 GOLD NOTES. 
 
 1. Repeal of limit on amount of their circulation, 291. 
 
 2. Reserve on gold-note circulation, 292. 
 See Reserve, 2. 
 
 INCREASE OF CAPITAL. 
 
 How this can be done, 219, 220. 
 
 INDORSEMENT. 
 
 See Interest, 32-37 ; Powers of National Banks, 79, 80. 
 
362 INDEX. 
 
 IThe figures after the lines refer to the % of the booHJ] 
 
 INDORSEE. 
 
 See Interest. 
 
 INJUNCTION. 
 
 1. When bank can be enjoined, 148. 
 
 2. Against appointment of receiver, 368. 
 
 Comptroller, 369, 70. 
 
 INSOLVENCY. 
 
 1. When bank is insolvent cannot receive deposits, 82. 
 
 2. Of shareholder does not affect liability of others, 188. 
 See Pebfeeences. 
 
 INSPECTION. See List. 
 
 INSTALLMENT. 
 
 Proceedings vehen shareholder fails to pay, 19. 
 
 INSTRUCTIONS CONCERNING BANK ORGANIZATIONS. 
 See Index on page 316. 
 
 INTEREST. 
 
 1. On debts of bank, 186. 
 
 2. On assessment, 187. 
 
 3. On claim against insolvent bank, 32-35. 
 Usury and consequences of taking it. 
 
 1. Rate of interest permitted, 303. 
 
 2. Consequences of taking illegal interest, 304. 
 
 3. Analysis of statutes, 305. 
 
 4. To what notes do statutes apply, 306. 
 
 5. Individuals but not other banks may receive more than national, 307. 
 
 6. Clause uniformly interpreted, 308. 
 
 7. In re Wild, 309. 
 
 8. Opinion of Supreme Court of California, 310. 
 
 9. Rates of a few chartered banks does not fix rate for all, 311. 
 
 10. Interest on note made in one state and discounted in another, 312. 
 
 11. Usurious interest cannot be cured by crediting illegal portion, 313. 
 
 12. If part of discount is not to be drawn is transaction usurious, 314. 
 
 13. Nature of the two offences, 315. 
 
 14. How usury must be pleaded, 338, 338 (a). 
 
 15. Can other than usury cases be brought under section 5198. 
 Forfeiture of interest. 
 
 16. Remarks of court on forfeiture, 316. 
 
 17. Subsequent interest is forfeited, 317. 
 
 18. Excess must be proved to work forfeiture, 318. 
 
 19. Usurious interest on overdraft, 319. 
 
 20. Bank director can plead usury, 320. 
 
 21. Forfeiture recovered only in actions for principal, 321. 
 32. Borrower may interpose defense in state court, 322. 
 
INDEX. 363 
 
 [The figures after the lines refer to the § of the book.] 
 INTEREST— Continued. 
 
 23. Time when defense must be made, 32,3. 
 Seeoverg of twice the amount of interest paid. 
 
 24. Can action for twice the amount he brought in state court, 324 
 
 25. Remarks of Boynton, J. , 325. 
 
 26. Contrary opinions, 326. 
 
 27. Eight of legal representative to recover, 327. 
 
 28. Action must be brought within two years, 328. 
 Usury on a series of notes. 
 
 29. How usury affects last note of a series, 329. 
 
 30. Borrower cannot set-off illegal interest on former notes. 330. 
 
 31. Nor can bank se1>off principal on last one in action on others, 331. 
 Bights of indarsers. 
 
 32. Any party to contract can avail of forfeiture, 332. 
 
 33. Indorser cannot use this defense to escape paying, 333. 
 
 34. Nor can antecedent parties, 334. 
 
 ■ 35.. Indorser of valid note used as collateral to usurious, cannot interpose this 
 defense, 335. 
 
 36. If indorser pay he cannot recover only legal sum of borrower, 336. 
 
 37. Nor can he recover twice the amount of lender, 337. 
 
 INVOLUNTARY DISSOLUTION. 
 
 See Dissolution and Eeoeiveeship. 
 
 ISSUE. 
 
 Of notes. See Cieculation. 
 
 JUDGMENT. 
 
 When judgment may be opened, 332. 
 
 LIEN. 
 
 Tax may be, 433. 
 
 See Shareholdees, 150-159; Cieoulation, 48, 4&. • 
 
 LIQUIDATION. 
 
 Of expiring banks, 48. 
 . See CiKCULATioN, 37-53; Dissolution and Receivership. 
 
 LIQUIDATING BANKS. 
 
 Mode of redeeming notes of.' See Cieculation, 37-53. 
 
 LIST. 
 
 Of .shareholders must be kept for inspection, 213. 
 
 LOAN. 
 
 Shall not exceed one-tenth of capital to one person, 98. 
 See PowEES of National Banks, 60-68. 
 
 MANAGEMENT OF NATIONAL BANKS. 
 
 For instructions and suggestions of Comptroller in regard to, see lNJ)EX, p. 316. 
 
364 INDEX. 
 
 [The Hgures after the lines refer to the § of the book.] 
 
 MARRIED WOMAN. 
 
 1. Liability of, as shareholder, 171. 
 
 2. Consent of, to conversion of bank, 30. 
 
 MORTGAGE. See Powbes op National Banks, 48-5§. 
 NATIONAL BANK. See Bank. 
 NOTES. See Circulation. 
 
 NOTICE. 
 
 1. To director is not notice to bank, 112. 
 
 2. Of Comptroller to creditors, 345. 
 See Circulation, 47. 
 
 OATH. 
 
 1. Of Comptroller, 5. 
 
 2. Of directors, 117. 
 
 3. To report to Comptroller, 379. 
 
 OFF-SET. 
 
 Shareholder cannot offset claim due from bank, 185. 
 See Dissolution and Receivership, 27. 
 
 OFFENSES. 
 
 See Criminal Offenses. 
 
 ORDER. 
 
 Publication of order of bank to begin, 39. 
 
 See Dissolution and Receivership, 17, 20, 21. 
 
 ORGANIZATION OF NATIONAL BANK. 
 
 1. Who may form national bank, 13. 
 
 2. What its certificate shall specify, 14. 
 
 3. How acknowledged, 15. 
 
 4. Minimum capital, 16. 
 
 5. Transfer of shares; rights and liabilities of shareholders, 17. 
 
 6. Payment of stock, 18. 
 
 7. Proceedings when shareholder fails to pay installments, 19. 
 
 8. Organization of gold note banks, 20. See Gold Note Banks. 
 
 9. For instructions of Comptroller in regard to organizing bank, see Indes 
 
 page 316. 
 
 PERSONAL REPRESENTATIVE. 
 Liability of, as shareholder, 172. 
 
 PLACE. 
 
 Of business of a bank, 40. 
 
 PLEADING. 
 
 How usury must be pleaded, 338, 338 (a). 
 
 See Criminal Offences, 4, 5, 25; Evidence; Interest, 14. 
 
INDEX. 365 
 
 iThe figures after the lines refer to the % of the book.'] 
 PLEDGEE. 
 
 1. When liable, 165, 167. 
 
 2. When he can hold property of insolvent bank, 322. 
 See Shakeholdees, 37, 38. 
 
 PLEDGOR. See Shaeeholdek, 31. 
 
 POWEES. 
 
 1. Of the Comptroller. See Compteollee. 
 
 2. Of directors. See Dieectoes. 
 
 POWERS OF NATIONAL BANKS. 
 
 General and those relating to personal property . 
 
 1. Powers, 49. 
 
 2. Are private corporations, 50. 
 
 3. But created to aid the government, 51. 
 
 4. Have not the same rights in all the states, 52. 
 
 5. Power of the president, 53. 
 
 6. When his knowledge cannot be imputed to bank, 54. 
 
 7. His only powers incident to his ofSce, 55. 
 
 8. Neither he nor cashier can give up a debt, 56. 
 
 9. Nor receive in exchange inferior security, 57. 
 
 10. Nor make an unusual agreement, 58. 
 
 11. Exceptions to above rule, 58 (a-e). 
 
 12. President and cashier can borrow from their bank, 59. 
 
 13. Who can remove the president, 60. 
 
 14. By-laws, 61. 
 
 15. Five grants of power in seventh clause of 5136th section, 62. 
 
 16. Eight to purchase notes and bills, 63. 
 
 17. Cannot discount note containing unusual stipulation, 63 (a). 
 
 18. Can collect notes, 64. 
 
 19. Can buy and sell government bonds, 65. 
 
 20. And coupons on state bonds, 65 (a). 
 
 21. Right to deal in other securities, 66. ^ 
 23. Consequence of exceeding its authority, 67. 
 
 23. Can lend on collateral security, 68. 
 
 24. Including warehouse receipt,* 69. 
 
 25. But cannot lend its credit, 70. 
 
 26. Can borrow on its own notes, 71. 
 
 27. Can sell or assign its interest in pledged coin, 72. 
 
 28. Can compromise a debt, 73. 
 
 89. And pay money to effect a favorable settlement, 74. 
 
 30. Converted bank is liable for deposits of the other, 75. 
 
 31. Liability for special deposits, 76. 
 
 32. Liability of converted bank for special deposits, 77. 
 
 33. Power to make agreement to recover stolen property, 78. 
 
 34. Cannot indorse a note for compensation, 79. 
 
 35. When bank can guarantee note, 80. 
 
 36. Can hold deposit for benefit of other contracting parties, 81. 
 
366 INDEX. 
 
 [The figures after the lines refer to the I of the hook.'] 
 POWEES OF .NATIONAL BA'NKS— continued. 
 
 37. Cannot receive deposits wien insolvent, 83. 
 
 38. Cannot deny its liability for wrongful use of another's property. 
 
 39. Can hold cash dividend for shareholder's. debt, 84. 
 
 40. Cannot be garnished for deposit, 85. 
 
 41. Employment of bank officers, 85(a). 
 
 42. When dividends cannot be declared, 107. 
 
 43. Must not pay uncurrent notes, 108. 
 
 44. Certification o£ what checks prohibited, 109. 
 
 45. Verbal promise to pay check when drawer has funds, 109 (a). 
 
 46. What associations are governed by Chapters 2, 3, 4 of Title LXU, of Revise 
 
 Statutes, 110. 
 47.- When "National" is prohibited, 110(a). 
 Power to hold real estate. 
 
 48. Power to hold real estate, 86. 
 
 49. Meaning of the section, 87. 
 
 50. National Bank v. Whitney, 88. 
 
 51. National interpretation followed by state courts, 89. 
 
 52. Transfer of real estate to secure previous debt, 90. 
 
 53. Validity of mortgage to secure usurious note, 91. 
 
 54. Purchase of additional real estate to secure debt, 92. 
 
 55. Also prior mortgage, 93. 
 
 56. Converted bank can take real estate of state bank, 94. 
 
 57. Real estate may be taken as security in the form of stock, 95. 
 
 58. Eight to cut timber on real estate taken for debt, 96. 
 
 59. No restriction on bank's power to sell, 97. 
 Loans. 
 
 60. Loans to any person shall not exceed one-tenth of capital, 98. 
 
 61. Object and meaning of section, 99. 
 
 62. Violation ol section is no defense to borrower, 100. 
 
 63. Eight to transfer securities for such a loan, 101. 
 
 64. Note held by converted bank is not within the meaning of section, 102. 
 
 65. Director is liable if borrowing beyond legal limit, 103. 
 
 66. Loans on its own stock prohibited, 104. 
 
 67. Loans on circulation prohibited, 105. 
 
 68. Limitation of bank's indebtedness, 106. 
 
 PREFERENCES. 
 
 « 
 
 1. Of insolvent bank void, 309. 
 
 2. Last clause of statute still in force, 310. 
 
 3. What is prohibited, 311. 
 
 4. When does bank contemplate insolvency, 312. 
 
 5. Meaning of "act of insolvency," 313. 
 
 6. What is a preference, 314. 
 
 7. Presumption of intent, 315. 
 
 8. Payment of some but not all creditors would be a preference, 316. 
 
 9. Transfer of property to avoid failure is a preference, 317. 
 
INDEX. 367 
 
 [The figures after the lines refer to the § of the book.'] 
 F'KEFEKEiHGES— continued. 
 
 10. Transfer of deposit after bank's failure, 318. 
 
 11. Can bank's property be attached before final judgment, 319. 
 
 12. Of insolvent bank cannot be, 320. 
 
 13. How receiver can get dissolution, 321. 
 
 14. When can pledgee of insolvent bank hold his property. 
 
 PRELIMINARY EXAMINATION. 
 By Comptroller, 37. 
 
 PRESIDENT. 
 
 1. Power of, 53. 
 
 2. When his knowledge cannot be imputed to bank, 54. 
 
 3. Has only power incident to oflice, 55. 
 
 4. Cannot give up a debt, 56. 
 
 5. Nor receive in exchange an inferior security, 57. 
 
 6. Nor make an unusual agreement, 58. 
 
 exceptions to the rule, 58 (or-c). 
 
 7. Can borrow from his bank, 59. 
 
 8. How chosen, 122. 
 
 9. How removed, 60. 
 
 PROTESTING. 
 
 Notes of banks, 280. 
 See Circulation, 44-46. 
 
 PUBLIC DEPOSITARY. See Depositary. 
 
 • PUBLICATION. 
 
 Of order to begin business, 39. 
 
 QUO WARRANTO. 
 
 In what court proceedings can be brought, 246. 
 
 REAL ESTATE. See Powers op National Banks, 48-59. 
 
 RECEIVER. 
 
 1. How he can get attachment dissolved, 321. 
 
 2. When he can bring an action against directors, 137. 
 
 3. Whejj he can sue shareholders. See Shareholders, 176-191, 197, 202. 
 
 4. Suit by, 246, 258. 
 
 See Dissolution and Receivership; Suit by and against National Bank, 
 ^ 9, 22, 24-27, 29. 
 
 RECEIVERSHIP. See Receiver; Dissolution and Receivership. 
 
 REDEMPTION OF NOTES. 
 
 Of expiring banks, 47. See Circulation, 2, 33-53. See Reserve. 
 
 REDUCTION OF CAPITAL. See Capital, 3. 
 
368 INDEX. 
 
 lUie figures after the Hne« refer to the % of the hook.'] 
 EEGULATIONS. 
 
 1. Concerning United States bonds. See Index page, 340. 
 
 issue of circulating notes. See Ciecdlation. 
 reserve. See Eeseevb. 
 redemption of notes. See Eesekve. 
 
 organization, extension and management of national banks, se 
 Index, p. 316. 
 For issuing and redeeming coins and currency, made by the U. 8. Treasurer. 
 
 2. The forwarding of United States notes, 343. 
 
 gold coins, 34S. 
 
 standard silver dollars, 343, 344. 
 
 fractional silver coins, 344. 
 
 3. Paying out minor coin, 344. 
 
 4. Issue of Treasurer's transfer checks, 344, 345. 
 
 5. Eedemption of United States notes, 345, sees. 10, 14-18. 
 
 fractional notes, 345, sees. 11, 15-18. 
 
 gold certificates, 345, sees. 12. 14-18. 
 
 silver certificates, 345, sees. 13, 14-48. 
 
 national bank notes, 345. 
 
 fractional silver coin and minor coin, 346, 347. 
 
 6. Mode of transmitting kinds of paper currency to Treasurer, 347. 
 
 7. Express charges, 347, 34S. 
 
 8. Eates for transportation, 348, 349. 
 
 9. General information, 349. 
 
 EELIGIOUS SOCIETY. 
 Liability of, 209. 
 
 EEMOVAL OF CASES. 
 
 1. To federal court, 261-263. 
 
 2. By receiter. See Suit by and against National Bank, 9, 25-27. 
 
 EEPOET. 
 
 1. What Comptroller's annual report shall contain, 11. 
 
 2. When printed, 12. 
 
 See Bank Examinations. 
 
 EESEEVE. 
 
 1. Amount required, 293. • 
 
 2. On circulation abolished except on gold-note banks, 292, 294. 
 
 3. Issue of gold certificates, 295. 
 
 4. Eeceivable for taxes and bank reserve, 296. 
 
 5. U. S. treasury certificates may be issued and counted as reserve, 297. 
 
 6. Certificates held as special deposit, 298. 
 
 7. Eemarks on the section by Davis, J., 299. 
 
 8. Eedemption cities and proportion of reserve allowed in them, 300. 
 
 9. Extension of reserve cities, 301, 302. 
 See U. S. Treasury Certificates. 
 
INDEX. 369 
 
 [The figures after the lines refer to the % of the booh.] 
 RESERVE AGENTS. 
 
 Mode of selecting, 269. 
 
 RESUMPTION ACT. 
 
 Statutes repealed by, 250. 
 
 SAVINGS BANK. 
 ConveTsiou of, 36. 
 
 SEAL. 
 
 Of Comptroller's office, 9. 
 
 SET-OFF. See Opp-skt. 
 
 SHARE. 
 
 How transferred, 17. 
 See Shaeeholdbbs. 
 
 SHAREHOLDERS. 
 
 1. Rights and liabilities of, 17. 
 
 2. Sale of stock of delinquent, 129. 
 
 3. Payment of stock, 18. 
 
 4. When can bring action against director, 138, 139. 
 
 5. Proceedings when failing to pay installment, 19. 
 
 shareholder does not assent to extension, 46. 
 
 6. Action of, in converting bank, 28. 
 
 7. Bank can hold cash dividend of, for debt, 84. 
 
 8. Votes of, H5. 
 
 9. If a trustee this should appear on book, 211. 
 
 10. Cannot be shown by evidence contrary to book, 212. 
 
 11. Two-thirds must join in voluntary liquidation, 371. 
 
 notice to be given, 372. 
 
 12. Proceedings to enforce liability of, 373, 374. 
 
 13. Right to share in surplus of converted bank, 33. 
 Sow stock is transferred, and rights of transferee. 
 
 14. How stock is transferred, 141. 
 
 15. Effect of delivering certificate, 142. 
 
 16. Passing of title on sharehol(Jer's death, 143. 
 
 17. Bank should recognize transfer by foreign executor 144. 
 
 18. Shareholder has absolute right to transfer, 145. 
 
 19. Effect of unrecorded transfer, 146. 
 
 20. Stock sold by tax collector, but not transferred, 146 (o). 
 
 21. Right to sue bank for misappropriation, 147. 
 
 22. When he can have bank enjoined, 148. 
 
 23. Court will not enforce contract whereby one person can get control, 149. 
 Prohibition of hank stock as security for loans. 
 
 24. Loans on its stock prohibited, 150. 
 
 25. Meaning of the section, 151. 
 
370 INDEX. 
 
 [The figures after tlie lines refer to the % of the boofc.] 
 SHAEEHOLDEES— con<mMe(i. 
 
 26. Bank can have no lien on its own stock, 152, 153. 
 
 27. Eeasons for changing the law, 154. 
 
 28. Bank can purchase to escape loss, 155. 
 
 29. Applies to bank as well as individual, 156. 
 
 30. Eight of bank to take stock for past debt, 157. 
 
 31. If taken as security and sold pledgor cannot recover, 458. 
 
 32. Meaning of second clause of section, 159. 
 Liability of shareholders. 
 
 33. Liability of shareholders, 160. 
 
 34. Liable until transfer is made on books, 161. 
 
 35. Shareholder until then, 162, 163. 
 
 36. When shareholder cannot escape liability by transfer, 164. 
 
 37. Pledgee is usually liable, 165. 
 
 ' 38. Until the re-tran3fer is made on the books, 166. 
 
 39. But not if held inname of irresponsible trustee, 167. 
 
 40. Transfer by owner to escape liability is not valid, 168. 
 41.- Effect of secret trust, 169. 
 
 42. The owner on stock book is prima facie owner, 170. 
 
 43. Married woman is liable, 171. 
 
 44. So are personal representatives, 172. 
 
 , 45. Liability ceases when bank liquidates, 17,3. 
 
 46. Also after Statute of Limitations has nm, 174. 
 
 47. Liabflity is several and equal, 175. 
 
 48. Eeceiver is authorized to' sue shareholders, 176. 
 
 49. Federal courts have jurisdiction regardless of amount, 177. 
 
 50. Mode of proceeding, 178. 
 
 51. How liability is fixed, l79. 
 
 52. Until Comptroller's order assessment is contingent, 180. • 
 
 53. Eeceiver must aver that proceeding is' necessary, 181. 
 
 54. He cannot maintain suit against shareholders who sold in good faith. 182. 
 
 55. Stock certificates are basis of assessments, 183. 
 
 56. Shareholder cannot deny validity of bank, 184. 
 
 57. He cannot off set claim due from bank, 185. 
 
 58. Liability for interest on bank's debts, 186. 
 
 59. Interest on assessment, 187. 
 
 60. Insolvency of one shareholder does not increase liabilty of the others, 188. 
 
 61. Eeceiver'? power to ascertain whether transfer is valid, 189, 190, 191. 
 Proceedings by creditors against shareholders. 
 
 33. How they can proceed by statute, 192. 
 
 34. Meaning of statute, 193. 
 
 35. Proceedings before statute was passed, 194. 
 
 36. Eequirements of bill. Amendments, 195. 
 
 37. "When creditor can fill a bill, 196. 
 
 38. Eeceiver cannot maintain an action at same time, 197. 
 
 39. Creditor must prove insolvency of bank, 198. 
 
 40. Only creditors who have proved claims can recover, 199. 
 
IHDKX. 371 
 
 [The fiffwres after the limes refer to the % of the book.] 
 SKAREKOhDERS— continued. 
 
 41. Decree flxiDg shareholder's liability, 200. 
 
 42. Creditor can also sue bank for claim due himself, 201. 
 
 43. Payment of receiver, 202. 
 
 44. When shareholders can recover of directors, 203. 
 Non-liability of trustees. 
 
 45. Trustees are not personally liable, 204. 
 
 46. Meaning of section, 205. 
 
 47. Liability of deceased shareholder's estate, 206 
 
 48. How long may estate be held, 207, 208. . 
 
 49. Liability of religibus society, 209: 
 
 50. Of ward, '210. 
 
 51. If shareholder is trustee this should appear on book, 211. 
 
 52. This cannot be shown iy evidence contrary to book, 212. 
 
 53. List of shareholders to be kept for inspection, 213. 
 
 54. Other rights of shareholders, 214. 
 
 SPECIAL DEPOSITS. 
 
 Liability of bank for, 76. 
 
 converted bank for, 77. 
 
 STATE BANK. 
 
 See CONVBESIOW. 
 
 STATUTE OF LIMITATIONS. See Shaeeholdees, 46. 
 
 STOCK. See Shakeholdee. 
 
 STOCK BOOK. See Conversion of State Bank, 9. 
 
 SUIT. 
 
 1. Against receiver for misconduct as director, 360. 
 
 2. When can be brought in state court, 138, 139. 
 
 3. Eight of converted state bank to bring, 24. 
 
 4. Against directors. See Dieectoes, 20-37. 
 See Suit by and against National Bank. 
 
 SUIT- BY AND AGAINST NATIONAL BANK. 
 
 1. How to be brought, 45. 
 
 2. In what court, 239. 
 
 3. Citizenship of banks, 240. 
 
 4. Suit by government may be in federal court, 241. 
 
 5. Meaning of Acts of 1882 and '87, 242. 
 
 6. When foreign bank may be sued in state court, 242(a). 
 
 7. Tax suit may be in federal court, 243. 
 
 8. Bill of revivor, 244. 
 
 9. Suit by receiver, 245. 
 
 10. Quo warranto proceeding, 246. 
 Jurisdiction iefore Act o/1882. 
 
 11. Acts of 1863 and '64, 247. 
 
372 INDEX. 
 
 [The flgvres after tJie Unes refer to the § of Vie 6ooft.] 
 SUIT BY AND AGAINST NATIONAL BANK— continued. 
 
 12. Provisions of Heviaed Statutes, 248. 
 
 13. Bank's right to sue was by National Banking Act, 349. 
 
 14. Suits limited to federal court, by McKennan, J., 250. 
 
 15. His construction wrong, 251. 
 
 16. Opinions of N. Y. and 111. courts, 252. 
 
 17. Bank is citizen of state and could be sued in state court, 253. 
 
 18. Remarks of Barnard, P. J., 254. 
 
 19. When state court had no jurisdiction, 255. 
 
 ' 20. Bank could sue in federal court within or outside its district, 256. 
 
 21. Could not be sued outside its district, 257. 
 
 22. Receiver's right to sue in federal court, 258. 
 
 23. Can other than usury cases be brought under section 5198, 259. 
 
 24. Cannot sue for less tjian $500 in federal court. .Exception, 260. 
 
 25. Removal of cases from state court, 261, 262. 
 
 26. Remarks of Harlan, J., 263. 
 
 27. Removal in case of receiver, 264. 
 
 28. Eight to sue in state court bank in voluntary liq[uidation, 265. 
 
 29. Can be sued though having a receiver, -266. 
 
 30. U. S. district attorney to conduct them, 267. 
 
 31. Meaning of the statute, 268. 
 
 SURPLUS. 
 
 Eight of shareholders to share in, of converted bank, 33. 
 
 TAXATION. 
 
 Bights conferred on the states. 
 
 1. Legislation of 1864, 385. 
 
 2. Eemarks on that Act, 386. 
 
 3. Legislative construction of the Act, 387. 
 
 4. Eemarks of Harlan, J., on Act of 1868, 387(ffl). 
 
 5. Present law for taxing banks by states, 388. 
 
 6. National act need not be embodied in state act, 389. 
 
 7. Territories included with states, 390. 
 
 8. Only shares can be assessed, 391. 
 
 9. Tax on capital not equivalent to tax on shares, 399. 
 
 10. Bank can be taxed by law taxing all shares of m.nieyed corporations, 
 
 11. Personal property, safes, etc., not taxable, 394. 
 
 12. Assessment must be against shareholder, 395. 
 
 13. And is good though money paid for shares has been assessed, liHC. 
 
 14. Bank may be required to pay shareholder's tax, 397. 
 
 15. If having money belonging to him, 397(o). 
 Bestrietions — equality and place. 
 
 16. Two limitations on power of state to tax, 398. 
 
 17. Davis, J., on second limitation of equality, 399. 
 
 IS. Meaning of "moneyed capital" by Wallace, J., 400. 
 
 19. Eemarks of Matthews, J., 400(a). 
 
 20. Mercantile Bank case and other cases, 4(10(6, c). 
 
INDEX. 373 
 
 IThefiffwres after the lines refer to the % of the book.] 
 
 TAXATION— eoBimMcd. 
 
 21. General corporations are not moneyed corporations, 401(a, 6) 
 
 22. Five forms of unfriendly discrimination, 402. 
 
 23. A higher valuation is illegal. Cases, 403-403(c). 
 
 24. Illegal administration of the law in valuing, 404-404(6) 
 2.5. Honest mistake of judgment, 405. 
 
 26. Eule governing deductions, 406. 
 
 27. Two kinds direct, and indirect, from exemptions to other moneyed capital, 407. 
 
 28. Intention of the law, 408. 
 
 29. Substantial equality required, 409, 409(a). 
 
 30. Cases in which deductions were properly refused, 410, 410(g). 
 
 31. Cases in which deductions should have been made. 411-411(d). 
 
 32. If shareholder has no debts no inequality arises, 412. , 
 
 33. Assessment valid until deduction for debts is demanded, 413. 
 
 34. Deduction of valuation of real estate, 414. 
 
 35. New York cases, 414(a). 
 
 36. Bank building on leased lot, 414(6). 
 
 37. When building cannot be taxed, 414(c/. 
 
 38. Kentucky case, 414(d). 
 
 39. Deduction presumed to have been made, 415. 
 
 40. Deduction of national securities. Bank notes, 416, 416(a). 
 
 41. Value of national bank securities not to be deducted from valuation of shares, 
 
 417, 417(a). 
 
 42. When they can not be deducted from capital of state bank, 418. 
 
 43. When thgy can be, 418(a). 
 
 44. Deduction of state bonds, 419. 
 
 45. Deduction under charter older than National Banking Law, 420. 
 
 46. When deduction from municipal taxation does not produce inequality, 421. 
 
 47. Deduction ot surplus fund, 422. 
 
 48. When shares must be assessed, 423, i23{d). 
 
 49. What may be required of shareholders concerning residence, 424. 
 
 50. Bank not taxable in another state, 425. 
 
 51. Taxation of non-residents, 426, 426(6). 
 
 52. Cannot tax shares of bank in another state, 427. 
 OirculcUion. 
 
 53. Capital of state bank converted into national, 442. 
 
 54. When circulation to be exempt from tax, 443. 
 
 55. Tax on private or state bank notes, 444. 
 
 56. Tax on municipal notes, 445. 
 
 57. Meaning of last two sections, 446. 
 
 58. Notes of individuals and companies, 447. 
 
 59. Semi-annual return of circulation, deposits, capital, etc. , 448. 
 
 60. When amounts shall be estimated, 449. 
 
 61. Returns on circulation of state bank converted, 450. 
 
 62. What sections apply to national banks, 451. 
 
 63. U. S. tax on circulation, deposits, and capital, 452. 
 
 64. Semi-annual return, 453. 
 
374 INDEX. 
 
 YThefigwres after the Unes refer to the § of the hook.] 
 TAXATIOTS— continued. 
 
 65. How tax may be collected, 454. 
 
 66. Refunding excess, 455. 
 Checks. 
 
 67. Tax on bank checks, 456. 
 
 68. What" checks exempt, 457. 
 
 69. Checks as evidence, 458. 
 
 70. Penalty for issuing unstamped checks, 459. 
 
 71. Cancellation and fraudulent use, 460. 
 
 72. Other methods of cancelling, 461. 
 
 73. Construction of law on subject, 462. 
 
 74. Shares may be assessed at market value, 428, 428(a). 
 
 75. Omitted shares, 429, 429(ffl). 
 
 76. Cannot be taxed by municipalities, 430. 
 
 77. How state bank converted into national, shall be taxed, 431. 
 
 78. Taxation of insolveiit bank, 432. 
 
 79. Collection of tax due national government, 432(a). 
 
 80. Tax may be lien, 433. 
 
 81. Constitutionality of particular tax laws, 434^ 4:;4(a). 
 
 82. State tax officers cannot inspect national banks, 435. 
 
 83. When injunction may be issued to restrain collection, 436. 
 
 84. Shareholder must have exhausted prior remedy, 437. 
 
 85. Must pay amount due before applying, 438. 
 
 86. When national bank can have collection enjoined, 439. 
 
 87. Tax illegally collected may be recovered, 440. 
 
 88. Powers of tax collector, 441. 
 
 89. Taxation of dividends, 463. 
 
 90. Liability for reduced tax, 464. 
 
 TAX COLLECTOR. 
 
 Sale of stock by, 146(a). 
 See Taxation. 
 
 TRUST. 
 
 Effect of secret trust, 169. 
 
 ^ TRUSTEES. See Shakeholdeks, 45-53. 
 
 UNITED STATES BONDS. 
 
 Regulations for keeping. See Index, page 353. 
 
 U. S. DISTRICT ATTORNEY. 
 
 To conduct government suits, 267, 268. 
 
 U. S. TREASURY CERTIFICATES. 
 
 1. May be issued and counted as reserve, 297. 
 
 2. Held as special deposit, 298. 
 
INDEX. 
 
 ^ [The fiovres after the lines refer to the % of the t)00li.'\ 
 
 VOLUNTARY LIQUIDATION. 
 
 Eight to sue in state covirt bank in, 265. 
 See Circulation, 37-53. 
 
 WARD. 
 
 Liability ot, 210. 
 
 375 
 
KF 999 B69 
 
 Author 
 
 Bolies, Albert Sidney 
 
 Vol.5 
 
 I 
 
 Title Copy'! 
 
 The National bank Act and its 
 iudioiji